[aaykarbhavan] Source Business standard updates and legal digest.

E- voting will democratise shareholder participation

PRIYA NAIR Shareholders of Tata Motors rejected a proposal on the pay plan of the companys managing director and executive directors. Institutional shareholders opposed the compensation, citing the companys poor financial results. In addition to postal ballot, the company also offered an e- voting facility, it said in the notice sent to exchanges. This may not have happened afew years ago. While shareholders are becoming more aware of their rights, steps like e- voting have made it easier for them to participate in the decision- making process of companies in which they own shares. The new Companies Act, which came into effect from April, has made e- voting mandatory for listed firms and those with at least 1,000 shareholders. Companies have to offer a platform so that shareholders can log on, see the resolution proposed and vote. This was widely expected to enhance the participation of minority shareholders, especially institutions. Instances like the Tata Motors one could become more common now. There was some confusion over when companies should make the facility available, as the corporate affairs ministry had said e- voting would not be mandatory till December 31 this year. However, the Securities Exchange Board of India (Sebi) had later clarified that companies could not wait till December for providing the facility. Companies can choose to conduct the voting process either online, that is, e- voting, or through physical voting. So far, among big companies, Reliance Industries (which held its annual general meeting or AGM on April 18) and HDFC Bank ( which held its AGM on June 25) have chosen e- voting. While Reliance Industries had tied up with Karvy Computershare, HDFC Bank had tied up with Datamatics Financial Services. Both depositories NSDL and CDSL offer the e- voting platform and customers can directly visit Some brokerages like Karvy and ICICI Securities have tied up with depositories to offer this facility to their customers. Customers who have demat accounts can vote online on resolutions of companies on the brokerages websites. Vishal Gulechha, executive vicepresident and head of equities at ICICIdirect. com, says, " Retail shareholders in India hardly participate or express their views at shareholders meeting. Though it is the most important right of a shareholder, most investors refrain from voting largely due to the inconvenience of either being present, or posting the ballot. E- voting has been introduced in order to secure wider participation of shareholders in the important decisions of the company. This will bring about transparency and greater corporate governance." Many a time, the board of directors takes decisions that are not in AGM, which is held in Gujarat, where it has its registered office. Even if small investors wanted to oppose the proposal, until now access was an issue. Rakesh Goyal, senior vice- president, Bonanza Portfolio, says, " Retail shareholders may not have the time or resources to travel to other cities to participate in AGMs. That is why at most AGMs, we find only a handful of shareholders are called. These investors are hand- picked by the promoters. In some cases, they are even rewarded. Now e- voting will democratise the entire process." Cases of proxy voting will also reduce, since shareholders need not be physically present at the AGM to cast their votes. Institutional investors are also likely to participate more actively. But while exercising their right to vote, shareholders must look beyond short- term objectives, Goyal warns. For instance, retail shareholders may oppose expansion or capital expenditure plans because they feel it is not worth waiting for five to 10 years to see the results. Such decisions could work against the company and hamper growth plans. "It is important to understand the significance of the matter which has been put for voting. Shareholders' objective must be to support management in decisions which would add value in companys performance and also make their voice heard in decisions which are not in the best interest of the company and shareholders," Gulechha points out. Canara Bank July 21 HDFC Bank July 21 Ranbaxy July 28 Tata Motors July 31 L& T August22 BPCL September 18 PROCEDURE FOR VOTING BY SHAREHOLDERS Online voting |A few days before the AGM, the company announces the days and the timing when the online voting process will be available |You will receive e- mails from the company with details such as user ID and password |During the voting period, you have to go to the e- voting website, www. evotingindia. com, and log in with the user ID and password |Then the system will prompt you to select the e- voting event number for the company |You can view the detailed resolutions on the website and cast your vote available for voting. |Members holding multiple folios/ demat accounts shall choose the voting process separately for each of the folios/ demat accounts |Voting has to be done for each item of the notice separately. In case you do not desire to cast your vote on any specific item it will be treated as abstained |The results on resolutions shall be declared at or after the AGM of the company and the resolutions will be deemed to be passed on the AGM date subject to receipt of the requisite number of votes in favour of the resolutions |Once the resolutions are passed, the reports will be available on the companys website and on the stock exchanges Physical voting |A company can also choose to pass aresolution in the form of physical voting through postal ballot |Companies first send a notice to all the shareholders, requesting them to send their assent or dissent in writing on a postal ballot |Then ballot forms are sent to shareholders |Shareholders can choose the option and provide their assent or dissent on the resolution |They then send the physical postal ballot form back to the registrar Voting on companies resolutions will no longer be restricted to a handful of investors or promoters

 

 

GST rollout could take till start of FY17

INDIVJAL DHASMANA New Delhi, 6 July The proposed Goods and Services Tax ( GST) might be introduced only from 2016- 17, even as the Centre has agreed to sort out states concerns over compensation for a cut in Central Sales Tax ( CST), a long- pending issue obstructing progress in indirect tax reforms. "The agreement resolves a major hurdle but does not mean GST will come into effect from this October or November. It will take time," said Prashant Deshpande, partner, Deloitte India. At a meeting with state counterparts last week, Union Finance Minister Arun Jaitley had said, " Fixing the compensation issue is critical to roll out GST." CST, a tax on inter- state movement of goods, was cut from four per cent to two per cent, in phases. In late 2012, states had reached an understanding with the Centre for full compensation for 201011, 75 per cent for 2011- 12 and 50 per cent for 2012- 13. This would require the Centre to shell out ₹ 34,000 crore. However, in Budget 201314, then finance minister PChidambaram provided only ₹ 9,000 crore, of which only ₹ 1,900 crore was released. States complained they hadnt been given compensation since 2011- 12. CST is one of the problems in the way of GST. Issues concerning the Constitution Amendment Bill, an enabling provision to allow the Centre to tax goods beyond manufacturing and states to impose services tax, are also taking time to resolve. "I think introduction of GST might come from April 2016. It is unlikely from next year," said Pratik Jain, partner, indirect tax, KPMG in India. States also want the Centre to give a binding commitment in the Constitution Amendment Bill for compensating their revenue loses due to GST for three years. The Centre has agreed to the compensation but states want the Bill to say so. Then comes the issue of keeping petroleum out of GST. The Centre wanted this to be mentioned in the Bill but not states. States also wanted a portion of the central pool of tax on inter- state movement of goods and services. They also demanded that entry tax not be subsumed in GST, as it is a major source of revenue for local bodies. Even if agreement is reached on rolling out a distorted GST, without petroleum and without subsuming entry tax, passage of the Constitution amendment will require much party coordination by the government. The ruling coalition is short of the two- thirds majority needed for the amendment in the Lok Sabha. In the Rajya Sabha, the ruling alliance has 62 seats but needs 160 to pass the Bill. Then, half the state Assemblies need to okay the Bill; the central government's supporters rule in only seven of 29 states. The Centre will also have to enact a model GST law. Then, states will frame their own Bills and get these passed in their respective Assemblies. These then will have to be sent to the Centre for the President's assent. Contentious issues still await consensus to get needed votes for amending Constitution, apart from lengthy procedures HURDLES STILL |GST might not come before April 2016 |Centre now agreeable to sort contentious issue of CST compensation |States also want petroleum out of GST, entry tax not to be subsumed in it |They demand portion of central share in integrated GST |Constitution Amendment Bill needs to be passed with a two- thirds majority in each House of Parliament |A model GST Bill also to be passed in Parliament |States will have to get their own GST Bills passed and send for central approval Health policy claim can't be rejected for delay in lodging Insurance companies take their own time to process claims, ignoring the time frame stipulated under the Protection of Policyholders Interest Regulations. But when there is a delay on the part of the insured in making the claim, the insurance company promptly rejects the claim for not having been lodged in time. This is unfair and detrimental to consumer interest. Rita was insured with New India Assurance under its Mediclaim policy. The policy commenced on January 16, 1999, and was renewed without break. In the ninth year of the policy, Rita was hospitalised for vaginal hysterectomy from September 29, 2010, to October 2, 2010. The intimation about the hospitalisation was given to the insurance company on September 30, 2010. After discharge, Rita felt weak for some time. Later, on November 17, 2010 she lodged a claim for ₹ 1.27 lakh incurred towards the surgery, hospitalisation and treatment. The claim was rejected on the sole ground that it had not been lodged within one month of discharge from the hospital but after a delay of 17 days. Alleging the rejection of the claim was not justified and constituted a deficiency in service, Rita filed a complaint before the Additional Consumer Forum for Mumbai Suburban District against Health India TPA Services as well as New India Assurance. The TPA did not care to appear, but the insurance company contested the complaint. It argued the terms of the insurance contract provided that a claim must be lodged within 30 days, and since Rita had not done so, she had forfeited her right to make a claim. The Forum observed the delay of 17 days caused due to weakness and Ritas health condition could be condoned. The stipulation to lodge a claim within 30 days of discharge is not mandatory but to facilitate expeditious settlement. So this clause cannot be used against the insured to repudiate the claim. The Forum relied on the decisions of the Maharashtra State Commission in the case of New India Assurance versus Nanasaheb Jadhav, and also of the National Commission in the case of State of Maharashtra versus ICICI Lombard, where it was observed that the claim should not be rejected on the basis of such technicalities. The Forum concluded the claim was payable. The TPA and the insurance company were jointly and severally directed to pay Rita ₹ 1.27 lakh along with 10 per cent interest from the date of filing the complaint. Additionally ₹ 10,000 was awarded towards compensation for mental harassment and ₹ 5,000 as costs. Rita had also sought restoration of the no- claim bonus. The Forum refused to grant this relief, as it had become time- barred since the bonus had been withdrawn in 2007 while the complaint was filed in 2011. It is to be noted that a Mediclaim policy provides for reimbursement of pre- hospitalisation, hospitalisation and post- hospitalisation expenses upto 60 days. So, if a claim is to be lodged within 30 days of discharge, the entire claim cannot be lodged at one ago, and the insured would have to lodge a second claim for the remaining 30 days post- hospitalisation treatment. This amount is comparatively less and there are several instances where this amount is not paid, yet the insured does not consider it worth fighting for, as the amount is comparatively negligible. To simplify matters, the insurance company must encourage the lodging of only one claim for the entire treatment. The writer is a consumer activist CONSUMER IS KING JEHANGIR GAI The stipulation to lodge a claim within 30 days of discharge is not mandatory but to facilitate expeditious settlement   BRIEF CASEN [1] M J ANTONY Discretion forwealth tax officer If the assessing officer under the Wealth Tax Act is of the opinion that the value of a property shown by the owner under self- assessment is absurd or has no correlation to the fair market value or otherwise not practical, he has the discretion to invoke Rule 8 of Schedule III and proceed with other methods of evaluation of the assets. However, the discretion must be judicially exercised and it must be reasonable, based on subjective satisfaction; " the power must be shown to be objectively exercised and is open to judicial scrutiny." The Supreme Court stated so while dismissing an appeal titled, Amrit Vanaspati vs Commissioner of Wealth Tax, against the judgment of the Allahabad High Court. The court rejected the arguments of the company because there was wide variation between the market value and valuation done for municipal taxes. The value of the building was grossly understated as evidenced in the sale agreement, the judgment noted. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Arbitration even without clause The Supreme Court last week approved of the appointment of an arbitrator in the dispute between Kaikara Construction Company and the Kerala government, though earlier the high court had rejected the request of the company to appoint an arbitrator under the Arbitration and Conciliation Act. There was a term in the contract that "arbitration shall not be a means of settlement of dispute or claims or anything on account of the contract." Instead, there was a provision for appointing a' dispute review expert'. When disputes arose over payment and completion of road construction, the company sought appointment of the expert, but it got no response. So it moved the high court for arbitration. The high court dismissed it on the ground that there was no arbitration clause in the agreement. In the appeal, the Supreme Court noted that in the bidding document, astandard arbitration clause was included. After the court reserved its judgment, the parties agreed to arbitration. Therefore, the high court order was quashed and a retired high court judge was appointed the sole arbitrator. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Compensation for accidental death The Supreme Court last week laid down that for purposes of compensation a person continued to be in employment even if he takes a break for some reason. In this case, Manju Sarkar vs Mabish Miah, a young driver was taking grains from Agartala to Dharmanagar. During night he left the truck, entrusting it to the helper, telling him that he would return. However, the driver met with a fatal accident. His wife and minor daughter approached the commissioner under the Workmen's Compensation Act. He dismissed their application. They moved the Guwahati High Court, which also dismissed the appeal. However, the Supreme Court awarded ₹ 5 lakh with 9 per cent interest. It rejected the argument of the truck owner that the driver died while he had left the vehicle for his own personal errand. The court stated that the employment can be deemed to have extended till his assignment was over. The insurance company, which had to pay, argued that it was obliged to pay only the award amount but not the interest on it. The court rejected the contention. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Director's college fees not deductible The Bombay High Court last week ruled that the expenditure on remuneration and training of a working director is not allowable under the Income Tax Act unless it directly benefits the business. The high court thus dismissed two appeal cases, Shreenath Motors Ltd vs Commissioner of Income Tax, moved against the decision of the Income Tax Appellate Tribunal. The company had paid fees for an advanced course in management to SP Jain Institute of Management and Research on behalf of one of the directors, who was himself the son of another director. Salary was also paid to him who was a 26- year- old commerce graduate. In the returns, the company deducted these expenses, which was not approved by the tax authorities. They maintained that the boy with little business experience was taken on the board only to finance his education with company funds. No other director or employee had that benefit. Moreover, he could not be a director and student at the same time. The company argued that the expense was incurred legitimately for the efficient management and conduct of its business and for further expansion. Therefore, the expenditure had a direct nexus with its business and therefore allowable as a deduction under section 37. The Supreme Court rejected these contentions and upheld the view of the appellate tribunal. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Legal scrap overwhisky name The Delhi High Court last week passed a permanent injunction against the use of the trade mark, " Collector's Choice" for Indian Made Foreign Liqour as it could be confused with the popular whisky brand " Officer's Choice". The injunction was passed on a petition by Allied Blenders and Distillers, makers of Officer's Choice, against Shree Nath Heritage Liquor Ltd, which manufactured Collector's Choice. The court stated that the names were likely to confuse or fool the consumers. Collector and officer are high officers for an ordinary person. Even the mother of Rajendra Prasad blessed him and wished he would one day become a ' Collector' when she was told that he was raised as the first President of India. The judgment recalled this legend to point out the possibility of confusion in the market. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Shampoo that wiped out girl's hair The National Consumer Commission last week dismissed the appeal of Procter & Gamble Home Products Ltd against the award of compensation to a girl who lost her hair after using a shampoo manufactured by the cosmetics company. It also indicted the company for dragging the girl up to the apex commission for five years instead of paying ₹ 25,000 in compensation. The shampoo could not undergo lab test as during the five years, it had crossed the expiry date. The damage to the hair was total and it " certainly caused cosmetic embarrassment to the complainant who is a girl." The judgment further stated that the company had failed to prove why there was such extensive damage to the hair and the product was of good quality. A weekly selection of key court orders

 

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A.Rengarajan

Company  Secretary

Chennai

93810  11200

"Positive belief in yourself will give you the energy needed to conquer the world and this belief is the power behind all creation." 
― Stephen Richards, Think Your way to Success: Let Your Dreams Run Free

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