[aaykarbhavan] source Business Standard

Farewell listing agreement, welcome new regulation

JAYSHREE P UPADHYAY Starting December 1, listing agreements between listed entities and exchanges will become redundant, as the contractual agreements between the two will be replaced by a listing regulation. The Securities and Exchange Board of India ( Sebi) had in November last year cleared the listing regulation and companies would need to be compliant with these from the beginning of next month. These regulations propose to give more power to shareholders and converts contractual obligations into statutory requirements. "Not only does this increases the legal force behind provisions, prescribing post- listing obligations and disclosure requirements, but also opens up new avenues for shareholders to enforce post- listing requirements," said Sandeep Parekh, founder, Finsec Law Advisors. This, say legal experts, is a major step towards bringing up the quality of postlisting disclosures to match primary market disclosures, and will lead to better corporate governance practice. The regulation will consolidate all securities — equity, debt, non- convertible debt securities and preferential shares, depository receipts and mutual fund units — under one regulation that lays emphasis on corporate governance and enhanced disclosures. In the set of regulations what really stands out for corporate India and the legal fraternity is the policy on disclosure of material information. There are certain aspects that Sebi expects companies to disclose to stock exchanges without exception. However, for certain other items, the regulator has left it to the companies to determine whether these are material or not. The new listing regulations require listed companies to make disclosures of material events and information based on the policy framed by them for determination of materiality. The policy has to be based on the two criteria for materiality provided in the regulations. " The new regulations, therefore, only provide policy around those criteria," said Lalit Kumar, partner, JSagar Associates. "In cases where the criteria specified in the regulations do not apply, any information which is material in the opinion of the board of directors will have to be disclosed," he added. Sebi rather than spelling out for the companies what should be the policy has rather provided a guidance note. "Given the principle- based approach, materiality standards and subjective disclosure requirements are bound to oscillate for a while after the regulations corporate, however, moving away from bright line tests is a necessary move," said Parekh. According to experts, majority of companies have replicated Sebi's guidance principle as their policy on disclosures, as they want to avoid uncertainty. "Adopting a materiality standard is a globally accepted practice and does away with dumping on investors hundreds of irrelevant disclosures, in effect hiding the most material ones. Thus this will in fact enhance the quality and readability of disclosures to the investors," said Parekh. According to the Sebi regulation, the material nature of the information can be determined by key managerial personnel and need to be disclosed within 24 hours of the event. However, certain board outcomes would need to be disclosed within 30 minutes of the conclusion of the board meeting. This information needs to remain on the company website for at least five years. Lawyers advising corporates on drafting the policy on disclosure are considering aspects which will impact the revenue of the company, its share price and the company performance. "Any information which will have an impact on the credit worthiness of a company, will affect its goodwill. The cash flow position would need to be disclosed to stock exchanges and be part of company's policy of disclosure," said Kumar. With the new regulations, companies would also need to draft a policy on preservation of documents. Among these documents, there would be some that would need to be preserved for eight years, while others will be required to be kept for the entire lifetime. These documents would typically include the ones related to financial statements, tax and legal matters. From December 1, companies will have to deal with disclosure of material information

 

BRIEF CASEN [1] M J ANTONY Three excise rules declared unconstitutional The Supreme Court last week granted relief to manufacturers in various sectors, when it dismissed nearly hundred appeals of the excise authorities and ruled that the demand for interest and penalty under Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules was illegal. Several high courts had held the rules were arbitrary and violated constitutional guarantees. Therefore, the revenue authorities appealed to the Supreme Court. These rules prescribed imposition of a penalty equal to the amount of duty outstanding without any discretion to reduce it. The court stated in its common judgment in the appeals, Shree Bhagwati Steel Rolling Mills vs CCE, that " a delay of even one day would straightaway, without more, attract a penalty of an equivalent amount of duty, which might be in crores of rupees… The direct and immediate impact upon the fundamental right of the citizen is that he is exposed to a huge liability by way of penalty for reasons which may in given circumstances be beyond his control and/ or for delay which may be minimal. The possibility of achieving the object of deterrence in such cases can be achieved by imposing a less drastic restraint." >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Contractor cannot get add- on benefits While awarding a tender to a firm, a new benefit cannot be slid into the original, the Supreme Court stated while examining the work contract for setting up LED street lighting in Aurangabad city. After awarding the contract for street lighting, the corporation granted the contractor advertising rights on the electric poles. The court stated that advertising rights should be offered in another public tender instead of adding on to the original lighting work. Ruling thus, the court set aside the Bombay High Court order in the case, Elektron Lighting Systems Ltd vs Shah Investments Financial Developments Ltd. Aurangabad Municipal Corporation invited tenders for street lighting in which Elektron became successful. The disqualified firms moved the high court alleging breach of the conditions by the corporation. The high court rejected the arguments, but it also quashed the selection of Elektron on the ground that the corporation showed undue hurry in awarding the contract and the firm was shown extraordinary favour. It was given exclusive advertising rights on the poles which was not in the original tender. Striking down part of the high court judgment which quashed the contract, the Supreme Court stated that "the matter regarding advertising rights was separate, and the municipal corporation which is a statutory body and instrumentality of the state should have acted fairly by making it open for all eligible persons to submit their offers." obe to restart after two decades After more than two decades, the Supreme Court last week asked the disciplinary authority of the Bihar State Financial Corporation to restart enquiry against a manager who was dismissed on corruption charges in 1994. The managing director who was the disciplinary authority did not take the decision but referred the case to the board of directors of the corporation, which ordered the dismissal of Brij Bihari Singh. His petitions before the high court were not successful. In the Supreme Court, he argued that the action against him was without following the established procedure and giving him an opportunity to justify himself or giving a chance to appeal. The Supreme Court accepted his contentions and stated that the order of the board of directors " suffers from serious discrimination and bias… The enquiry is also vitiated in law."  Blacklisting of Hyundai firm quashed The Delhi High Court last week struck down the blacklisting of Hyundai Rotem Company by Delhi Metro Rail Corporation for five years as the latter did not give any reason for taking such action. " Even if the decision is right, the person against whom it was made should be told why the decision has been made. The absence of reasons leads to denial of justice," the judgment said. Hyundai was heard by the metro authorities extensively but the order did not touch upon its arguments against blacklisting. Metro's charge against Hyundai was that it had suppressed the fact that Airports Authority of India ( AAI) had blacklisted it for three years. Hyundai's defence was that AAI had blacklisted another of its divisions and its officers did not inform the rolling stock division about it. The officers were also dismissed for this fault. Though these defences were put before Metro, it passed an order without discussing the issues. Moreover, the judgment pointed out, the procedure adopted by Metro, namely, one authority hearing the party and another passing the order, "defeats the very purpose of personal hearing."  Research hospital to get tax benefit The Bombay High Court has stated fairness in law demanded that if it is not very clear from the provisions of a statute whether a particular tax is to be levied on a particular class of persons or not, the subject should not be fastened with any liability. The observation was made while allowing the writ petition of Central Institute of Medical Sciences, Nagpur, against the revenue authorities which took away the recognition of the charitable trust on the ground that it was not primarily engaged in educational and research activities but providing hospital facilities. The authorities withdrew the benefits earlier given under Section 35 of the Income Tax Act. The provision allows deductions in respect of expenditure on scientific research spent by a "university, college or other institutions". The trust argued that it could be included in " other institutions" as it facilitated research degrees for scholars of universities. It has also four patents for medicines. The high court pointed out that beneficial rules must be interpreted liberally and directed the authorities to reconsider the case of the trust with full facts and take a decision within six months.  Consumer court to keep out of crime probe When there is an allegation of fraud or forgery involving bank guarantee, consumer forums cannot adjudicate the issue invoking ' deficiency in service'. It can hear the complaint only after the criminality has been established by investigation, the National Consumer Commission stated last week in the judgment, UTI Bank vs Spec Computers. A computer engineer entered into a contract with aconsultancy service. A bank guarantee was given in the deal. When it was presented to the bank, it was dishonoured as the bank found that the documents were not proper and there was suspicion of forgery. The engineer moved the Andhra Pradesh consumer commission, which allowed his complaint. The bank appealed to the national commission. It allowed the appeal and stated that the state commission had no power to decide issues when criminal investigation was going on. A weekly selection of key court orders

 

--

A.Rengarajan
Practising  Company  Secretary
Chennai

Mobile 93810  11200

"

LET  US  SUPPORT  COMPANY  SECRETARY  BENEVOLENT  FUND  FOR  COMMON  CAUSE

__._,_.___

---

Posted by: CS A Rengarajan <csarengarajan@gmail.com>

---

receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan"
[COST FREE]
SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE.

To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.com

Visit Your Group

• Privacy • Unsubscribe • Terms of Use