Circular No. SEBI/HO/DDHS/DDHS-PoD-3/P/CIR/2024/16, Dated 18.11.2024

SEBI has notified amendment in Para 15 of the Master Circular for Credit Rating Agencies, removing the term ‘technical default’ from Para 15.3 & providing clarity on treatment of specific non-payment scenarios caused by factors beyond the issuer’s control, such as incorrect investor account details or government-instructions. CRAs shall confirm & verify the availability of adequate funds with the issuer and must also verify issuer funds, reasons for non-payment, and escrow account deposits.

Further, the CRAs shall furnish the following details to the Stock Exchanges, Depositories and Debenture Trustee on the same day as the dissemination of the rating Press Release on the CRA’s website:

• Name of the security
• ISIN
• Amount to be paid
• Due date of payment
• Amount of payment made
• Amount of payment failed
• Reasons for failure of payment

Also, CRAs shall sensitise their clients, i.e. the issuers, to avail of the penny-drop verification facility offered by banks to avoid occurrence of failure to remit the required payments of debt (principal and/ or interest) and/or other suitable measures to prevent such occurrence.

The circular shall be applicable with immediate effect.

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Circular No. SEBI/LAD-NRO/GN/2024/209, Dated 18.11.2024

SEBI has notified amendment in SEBI (Alternative Investment Funds) Regulations, 2012, by introducing a new Sub-Regulation 21 to Regulation 20. As per the amended norms, the investors of a scheme of an Alternative Investment Fund shall have rights, pro-rata to their commitment to the scheme, in each investment of the scheme and in the distribution of proceeds of such investment. Further, the rights of investors of a scheme of an Alternative Investment Fund, shall be pari-passu in all aspects.

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Rajat Sethi, Aakanksha Joshi, Apurv Sharma & Ameesha Tripathi – [2024] 168 taxmann.com 338 (Article)

India is a strategically important location for global trade. With its 7,500 kms coastline, 12 ‘major ports’ (notified as such by the Government), 200+ ‘non-major ports’ (ports that have not been notified as ‘major ports’) and a vast network of inland waterways, India has a significant maritime presence that accounts for 95% of the country’s international trade volume.

In the last decade, the Indian government has attempted to address various market concerns, including in relation to competitive bidding processes, tariff, operational efficiencies and dispute resolution mechanisms. The ‘Maritime Vision India 2030’ (“MIV 2030”) issued by the Government provides a blueprint for improvement of the maritime sector in India and creation of world class safe, green and sustainable ports. With an envisioned overall investment of INR 3 – 3.5 trillion (~USD 35.54 – USD 41.46 billion), the MIV 2030 aims to unlock an estimated INR 2+ trillion (~USD 23.69+ billion) of potential annual revenue for Indian ports.

The Indian maritime sector has seen an increased participation from private players. The first public private partnership (“PPP”) in the ports sector was formed in July 1997, where the Jawaharlal Nehru Port Trust entered into an agreement with the Nhava-Sheva International Container Terminal. Since then, there has been substantial development of port projects on a PPP basis bolstered by favorable policy changes through the years. As of April 2022, 123 PPP projects have been recognized with an estimated investment of INR 2.63 trillion (~USD 31.16 billion).

The Indian government has permitted 100% foreign direct investment under the automatic route (i.e., without requiring government approval) for port development projects. However, all investments (whether by subscription or transfer) by entities incorporated in a country sharing land borders with India or whose beneficial owners are situated in or are citizens of such a country require prior government approval.

This note sets forth certain recent developments in the ports sector to enable further private participation and highlights key regulatory and contractual considerations relevant for mergers and acquisitions in the ports sector.

1. Key Regulatory Developments

1.1 Public-private partnership

The Indian government continues to award projects on a PPP basis by adopting a ‘landlord’ model under which port operations and maintenance is undertaken by private players and the government acts as a landlord and a regulator. This practice has provided flexibility to private players to operate port assets without undue regulatory oversight. In addition, certain state governments have been enthusiastic adopters of PPP for the development of non-major ports, strengthening their trade and economies.

1.2 Tariff

One of the primary challenges earlier faced by major ports was the regulatory oversight on tariff imposed by the Tariff Authority for Major Ports (the “TAMP”). The TAMP had the statutory authority to regulate the rates and charges imposed by major ports, thereby subjecting them to price controls, unlike non-major ports that could set and charge market rates. This led to relatively quicker growth of non-major ports. With the introduction of the Major Ports Authorities Act, 2021, the Board of the Major Port Authority (for each major port) has been authorized to frame its own scale of rates in accordance with market conditions, dissolving the power of the TAMP.

1.3 Model Concession Agreement

In 2021, the Indian government issued changes to the model concession agreement (the “MCA”) for private sector projects in major ports. One key change is that terminal operators are now eligible to apply for renewal of the concession after the expiry of the initial concession period (generally, 30 years). For this purpose, the concessionaire will be provided with the right to match the highest bid obtained in an international competitive bidding process if the concessionaire’s bid is within 10% of the highest bid. The concessionaire will be deemed to be qualified to bid and will not be required to participate in the pre-qualification process. Another significant change is the introduction of a provision for relief through the adoption of a business revival plan where unforeseen circumstances lead to a reduction in cargo handling.

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Case Details: Vyapar Mandir Palarivattom (P.) Ltd. vs. Usha O.K. - [2024] 168 taxmann.com 282 (NCLAT - Chennai)

Judiciary and Counsel Details

• Justice Sharad Kumar Sharma, Judicial Member & Jatindranath Swain, Technical Member
• Ms. Pallavi Parmar, Adv. for the Appellant. 
• Arshdeep Singh, Adv., Rony Oommen John & Piyush Swami, Advs. for the Respondent.

Facts of the Case

In the instant case, the respondents/petitioners had filed company petitions under section 59 of the Companies Act, 2013, principally praying for rectification of Register of Members of appellant company.

Respondents contended that they were entitled to hold certain equity shares which stood duly registered and transferred in their name. Further, a petition was filed with regard to the controversy pertaining to the transfer of shares, held by the Respondents in the Appellant Company.

NCLT by impugned order directed rectification of Register of Members of appellant company by re-entering total number of equity shares belonging to respondents in share register of company and further ordered to restore total shareholding of respondents.

Later, the appellant company filed Interlocutory Applications under rule 154 of NCLT Rules for rectification of respective orders. NCLT held that said rectification applications took shape of review and, thus, could not be entertained under the garb of rectification applications.

NCLAT Held

The NCLAT observed that since relief prayed against the order of rectification of the Register of Members of the appellant company, by re-entering names and configuration of shares, held by shareholders, under respective folio, could have been possible only when the company was contesting proceedings and in event of company itself having chosen not to contest company appeal, no such relief could be pressed for by company’s managing director i.e. another appellant, in absence of an effective contest by appellant company.

Therefore, the NCLAT held that the instant appeal would stand dismissed, but, it would be open for the managing director (appellant) to resort to appropriate proceedings, under section 59(2) of the Companies Act, 2013.

List of Cases Reviewed

• K.G.Lekha v Vyapar Mandir Palarivattom Pvt Ltd [2024] 168 taxmann.com 113 (NCLT- Kochi) [Para 23] affirmed

The post MD’s Appeal Against AA’s Direction for Rectification of Register Dismissed as Company Itself Chose Not to Contest appeared first on Taxmann Blog.

Case Details: ABANS Enterprises Ltd. v. Securities and Exchange Board of India - [2024] 168 taxmann.com 279 (Bombay)

Judiciary and Counsel Details

• Jitendra Jain & M.S. Sonak, JJ.
• Gaurav Joshi, Janak Dwarkadas, Sr. Advs., Ravichandra Hegde, Paras Parekh, Saurabh Pakale, Ms Mitravinda Chunduru, Samyak Pati, Ashok Pandey for the Petitioner.
• Hormaz C. Daruwalla, Sr. Adv., Suraj Choudhary, Ms Hubab Sayyed, Nishin Shrikhande, & Ms Komal Shah for the Respondent.

Facts of the Case

The petitioner was a publicly listed company trading in shares, currencies, and derivatives, with the second petitioner as its promoter holding a 74.56% stake. The Securities and Exchange Board of India (SEBI) issued a Show Cause Notice (SCN) to the petitioners and seven others, alleging violations, including manipulative trading practices and non-disclosure of acquisitions under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations (SAST).

The petitioners sought to enter into the settlement proceedings. However the petitioner raised procedural objections, filing applications to resolve these before advancing SCN proceedings.

The Petitioners refused to provide required disclosures under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations (SAST), citing potential prejudice to their defence.

The SEBI rejected the settlement application, finding the petitioners’ actions aimed at delaying SCN proceedings. The petitioners challenged the SEBI’s rejection and certain Settlement Regulations, claiming they were ultra vires and unconstitutional.

High Court Held

The Court upheld the SEBI’s rejection of the settlement application. The Court concluded that the settlement application was not made in good faith but rather as a strategy to stall SCN adjudication. The petitioners could not insist on terms they deemed fit or reject counter-proposals from SEBI. The Court found that the settlement application was filed to exploit Regulation 8, which pauses the SCN’s final order.

List of Cases Referred to

• Binny Limited v. SEBI 2023 SCC OnLine Bom 2881 (para 28)
• Shipa Stockbroker Pvt. Ltd. and Anr. v. SEBI 2012 SCC OnLine Bom 58 (para 31)
• Vivek Narayan Sharma (Demonetisation Case-5 J.) v. Union of India 2023 3 SCC 1 (para 53)
• Democratic Reforms (Electoral Bond Scheme) v. Union of India 2024 (5) SCC 1 (para 56)
• Franklin Templeton Trustee Services (P) Ltd. v. Amruta Garg And Ors. 2021 9 SCC 606 (para 60)
• Pioneer Urban Land and Infrastructure v. Union Of India 2019 8 SCC 416 (para 63)
• Swiss Ribbons Pvt. Ltd. v. Union Of India 2019 4 SCC 17 (para 64).

The post SEBI Rightly Rejected Petitioner’s Settlement Application as SCN Proceedings Were Stalled for Undue Benefit appeared first on Taxmann Blog.

1. Background

The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013, also known as the POSH Act was introduced in response to growing public concern over the safety of women in workplaces and the need for comprehensive legislation. Before its enactment, India lacked a formal legal framework for addressing sexual harassment at the workplace. The Act applies to all workplaces, including private, government, and informal sectors. It defines sexual harassment to include unwelcome physical contact, demands for sexual favors, sexually colored remarks, or other verbal, physical, or non-verbal conduct of a sexual nature.

POSH Act was enacted to safeguard women from sexual harassment in workplaces. It was a direct result of the Supreme Court’s Vishakha Guidelines issued in 1997, which followed the Vishakha v. State of Rajasthan case. This case arose after Bhanwari Devi, a social worker in Rajasthan, was gang-raped for trying to prevent child marriage. The guidelines served as interim protection for women at workplaces, but the lack of specific legal provisions for addressing workplace harassment remained.

2. Global trends

Recent global trends in POSH (Prevention of Sexual Harassment) highlight a significant shift towards comprehensive and proactive approaches to addressing workplace harassment. According to a 2023 survey by Gartner, 62% of organizations worldwide have implemented enhanced harassment prevention training programs, reflecting a growing commitment to education and awareness. Additionally, 57% of companies now use digital platforms for anonymous reporting, which has led to a 40% increase in reported incidents, underscoring the importance of accessible reporting mechanisms. The #MeToo movement has spurred legislative changes globally, with 30 countries enacting stricter laws on sexual harassment in the past five years. Moreover, a 2024 report by McKinsey indicates that organizations with comprehensive harassment prevention and response policies experience a 25% decrease in employee turnover and a 20% increase in overall employee satisfaction. These statistics demonstrate a growing emphasis on creating safer, more inclusive workplaces through proactive measures and robust support systems.

3. Relevance of POSH in changing times

The POSH Act holds significant relevance in today’s world due to the growing emphasis on gender equality, workplace safety, and the professional empowerment of women, mainly due to:

• Rising participation of women in the workforce: With increasing numbers of women joining diverse fields, including corporate, healthcare, education, and the gig economy, it is vital to ensure a safe and secure work environment for them. The POSH Act helps create structures to protect women from harassment.
• Changing workplace dynamics: Workplaces today are more dynamic, with interactions happening both in physical and virtual environments. The POSH Act applies to all forms of workplace interactions, including digital communications, making it critical for addressing harassment in hybrid or remote setups.
• Cultural shifts and #MeToo movement: Movements like #MeToo have brought global attention to the prevalence of sexual harassment across industries. The POSH Act provides a legal framework that empowers women to speak up and seek justice without fear of retaliation.
• Legal safeguards and accountability: The POSH Act mandates the formation of Internal Complaints Committees (ICC) and makes it compulsory for organizations to handle harassment cases with accountability. This enforces a systematic approach to addressing grievances and protects both employees and organizations.
• Encouraging gender-sensitive workplaces: The Act promotes gender sensitivity through mandatory training and awareness programs. This helps in creating inclusive work environments where respect and equality are upheld, reducing instances of gender-based discrimination.
• Global competitiveness: Organizations aiming to be globally competitive must ensure compliance with ethical standards, including workplace safety. The POSH Act enables Indian businesses to align with international labor laws and corporate governance standards.
• Psychological well-being and productivity: A harassment-free environment is essential for the mental well-being of employees. The POSH Act fosters a secure space where women can focus on their careers without fear, leading to higher productivity and morale.
• Corporate social responsibility (CSR): Ensuring a safe and respectful workplace under the POSH Act reflects an organization’s commitment to CSR, as it focuses on employee welfare and ethical business practices.

Click Here To Read The Full Article

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Dr. Sudheendhra Putty – [2024] 168 taxmann.com 291 (Article)

Key Points from Paragraph 4.25 of the Cadbury Committee Report

1. Source of Advice: The company secretary is described as a reliable source of advice on legal and governance matters. This ensures that boards act in compliance with both the law and the principles of good governance. The secretary advises particularly on implementing the Code of Best Practice.
2. Support for the Chair and Directors: The company secretary supports the board in conducting meetings effectively, providing advice that helps in navigating complex governance issues. The report stresses that directors should have access to the secretary’s advice, ensuring they are equipped to fulfill their responsibilities.
3. Governance Best Practices: The paragraph places importance on the company’s governance frameworks being upheld, with the company secretary playing a crucial role in the practical application of best governance practices.

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The recent amendment to the definition of Unpublished Price Sensitive Information (UPSI) by the Securities and Exchange Board of India (SEBI) aims to clarify and expand the events covered under the SEBI (Prohibition of Insider Trading) Regulations, 2015. SEBI's proposed changes align the UPSI definition with significant events and thresholds listed in Schedule III of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), covering aspects like changes in ratings, fundraising, management control agreements, fraud or defaults by key personnel, forensic audits, and significant regulatory actions. This broader definition seeks to standardize compliance for listed entities, enhance transparency, and protect investor interests by ensuring timely disclosure of price-sensitive information.

Table of Contents

1. Introduction
2. Background and Rationale
3. Current Definition of UPSI
4. Key Proposals from SEBI
5. Conclusion

1. Introduction

On November 9, 2024, the Securities and Exchange Board of India (SEBI) released a consultation paper proposing a review of the definition of Unpublished Price Sensitive Information (UPSI) under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations). The proposals aim to enhance clarity, certainty, and uniformity in compliance for listed companies by aligning the UPSI definition with key events and thresholds outlined in Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

2. Background and Rationale

According to SEBI’s observations, listed entities inconsistently classified events as UPSI. Many companies adhered strictly to Regulation 2(1)(n) of PIT Regulations, omitting potentially sensitive events outlined in Regulation 30 of the LODR Regulations that impact market prices. SEBI’s study noted various gaps in defining UPSI, which affected uniform compliance and transparency. Therefore, the consultation paper proposes amendments to ensure compliance that aligns with PIT and LODR regulations.

 3. Current Definition of UPSI

PIT Regulations define UPSI as follows:

As per Regulation 2(1)(n) of SEBI (PIT) Regulations, 2015, unpublished price sensitive information” means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to affect the price of the securities materially and shall, ordinarily including but not restricted to, information relating to the following:

• financial results;
• dividends;
• change in capital structure;
• mergers, de-mergers, acquisitions, delistings, disposals and expansion of business and such other transactions;
• changes in key managerial personnel.

4. Key Proposals from SEBI

The proposals put forth by SEBI’s Working Group (WG) and informed by public feedback aim to update the UPSI list to include specific events and information types. These proposals cover material events categorized under Schedule III of LODR, ensuring they are addressed in the UPSI framework.

 5. Conclusion

The proposed amendments to the UPSI definition under SEBI’s PIT Regulations represent a proactive step toward achieving greater clarity and consistency in regulatory compliance for listed entities. By aligning UPSI events with the material events outlined in Schedule III of the LODR, SEBI aims to enhance transparency, protect investor interests, and establish a standardized compliance framework across industries.

The post [Analysis] SEBI’s New UPSI Definition – Key Amendments for Transparency in Insider Trading appeared first on Taxmann Blog.

Case Details: Kochar Sungup Acrylic Ltd. v. Sunny Kochar - [2024] 168 taxmann.com 171 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Yogesh Khanna, Judicial Member & Ajai Das Mehrotra, Technical Member

Facts of the Case

In the instant case, the respondent filed the Company Petition under Sections 241 and 242 of the Companies Act 2013, alleging oppression and mismanagement in the affairs of the appellant company.

The Respondent filed an application seeking to place on record an amended petition directly. The NCLT vide the impugned order allowed the said application. The appellant vide instant appeal alleged that the impugned order was passed contrary to principles of law relating to the amendment of pleadings contained in Order VI Rule 17 of CPC applicable to proceedings before the NCLT.

According to the appellant, the amended petition was filed by completely redrafting the original petition with additional grounds, and thus, it was a fresh petition in the guise of an amendment. Further, no opportunity was granted to the appellant to respond to the amended petition.

It was noted that amendments were substantial in nature. Admittedly, new reliefs had been added in the amended petition as also a new party being impleaded. For such substantial amendments, an application ought to have been moved with such proposed amendments and with liberty to appellants to rebut such proposed amendments and only thereafter, amended petition ought to have been brought on record.

NCLAT Held

The NCLAT held that since the impugned order did not adhere to principles of natural justice, it did not give an opportunity of being heard to the appellant. Thus, the impugned order was to be set aside. One more opportunity be given to the respondent to move an application for amendment, inclusive of proposed amendments with liberty to the appellant to respond to such application and thereafter the NCLT to decide it as per law. Thus, the instant appeal was to be allowed.

List of Cases Reviewed

• Judgement and order dated 07.06.2024 passed by National Company Law Tribunal, Chandigarh Bench II in CP/24(24(CH)2024 [2024] 167 taxmann.com 616 (Chad.) (Para 13) reversed

The post AA’s Order Allowing Amended Petition on Oppression & Mismanagement Without Giving Chance to Be Heard Was to Be Overturned | NCLAT appeared first on Taxmann Blog.

SEBI Report 3; Dated: 13.11.2024

SEBI has released a Consultation Paper on the review of Custodian Regulations, 1996, and operational guidelines for Custodians. SEBI has proposed increasing the net worth requirement for custodians from Rs 50 crore to Rs 100 crore. Existing custodians who do not meet the revised net worth requirement must be given a period of 3 years to comply with the revised net worth requirement. Comments may be submitted by Nov 28, 2024.

Click Here To Read The Full Update

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