source Business standard *Sebi to clear milder version of draft insider trading norms* JAYSHREE P UPADHYAY Mumbai, 9 November The Securities and Exchange Board of India (Sebi) is set to overhaul the insider trading norms, first framed two decades ago. The regulator is expected to approve the new norms at its board meeting on November 19. Sources in the know said the new rules would be far more stringent than the regulations currently in place but not as strict as those mentioned in the draft document circulated in December last year. For example, in the definition of “connected persons”, public servants might not be specifically mentioned as insiders. Also, disclosing due-diligence procedures by companies to stock exchanges might not be part of the regulations. “In the final guidelines, the market regulator has taken into consideration the feedback received from various intermediaries. Their concerns have been ironed out,” the sources said. The insider trading norms will define connected persons on the basis of the duty they perform for a company and the legal relation they have with the listed entity and its promoters. In the draft regulations formulated by the insider trading committee, led by judge N K Sodhi, a connected person was defined as someone connected with a company in any capacity (including people who had frequent communications with company officers) in the six months prior to the trade. The draft regulations had made headlines for their inclusion of public servants in the definition of connected persons. But in the final guidelines, public servants and ministers might not find a specific mention.. “If public servant or the media act on any insider information, they will be examined. However, there would not be any specific provision to deal with them,” said a source. In the draft regulations, any due-diligence that companies engaged in needed to be declared to stock exchanges two days before any trading activity was undertaken in the stock. But the final norms might not find mention of due-diligence aspects. “Dealing with situations where there is no intent to conduct a mala fide transaction needs clarity. Just declaring due-diligence two days before trade does not solve the problem and is not practical,” said Raja Lahiri, partner, Grant Thornton. However, there is another section of market that believes any form of pricesensitive information should be available to all types of investors. “The due-diligence aspect is the heart and soul of the regulations. Every investor has the right to access the information, whether positive or negative, about a company” said J N Gupta, chief executive officer, SES proxy advisors. In December last year, the prohibition of insider trading (PIT) committee had given its report to the market regulator. Sebi later invited comments on the draft regulations. Turn to Page 4 >Board meets on November 19GOING SOFT | Connected persons defined on the basis of association and responsibility to a company | Connected persons include public servants | Due-diligence required to be declared to bourses 2 trading days before proposed trade New norms | Connected person is someone who is related to a firm in any capacity | No specific mention of public servants as connected persons | Due-diligence aspects will not be mentioned ------------------------------ *Click here to read more...TurntoPage4* Click: Article continued from…Sebitoclear ------------------------------ Sebi to clear milder... So far, the market had been operating under the PIT regulations of 1992. Legal experts say persons with fiduciary duty to shareholders are supposed to put shareholders’ interest ahead of their own and, thus, should be labelled as insiders. Gupta says it is difficult to pinpoint an insider and charge him or her for it. “ Before charging an insider, it needs to be proved without a doubt that the person has acted on unpublished price- sensitive information,” said Gupta. Sebi is also thinking about introducing a “trade plan” for companies that want to deal in their own shares. Under the plan, companies and promoters will be required to declare their intent of trading in their own shares and mandatorily conduct such trades six months later. Experts say trade plan will aid in removing the hassles companies earlier faced in trading in their securities. “India currently needs a mature structured way of trading as suggested in the trade plan. And, we believe a six- month time is a reasonable cool- off period for companies to execute trades in their own scrips,” said Lahiri. *Govt eases green laws for biz push* SOMESH JHA The Union environment ministry has been working overtime ever since the National Democratic Alliance ( NDA) government came to power at the Centre, to ease the investment climate. The initiatives have made environmentalists wary but the industry is slowly securing changes that it had asked for. The Narendra Modi- led government has issued around 50 fresh guidelines easing conditions for industry in about six months, beside launching an online system for applying environment clearances. In short, it has set the ball rolling for ushering in industry- friendly reforms. The Bharatiya Janata Party ( BJP) often blamed the United Progressive Alliance ( UPA) regime for delay in projects, policy paralysis and stringent green norms, which it claimed, acted as a block to economic growth. Union Environment Minister Prakash Javadekar, while stating the ministrys 100 days’ progress, had said, We are doing what the UPA government didnt do. To deal with the power crisis that happened soon after it took charge, the government did away with the primary requirement of holding a public consultation in case of expansion of output for coal projects. The Union environment ministry also allowed group clearances for Coal India mines rather than examining individual project proposals in the vicinity. The government explained that these moves were a step towards enhancing coal production for boosting power supply in the country. The Centre has also been quick to react to changing circumstances. For instance, with the latest Supreme Court order, cancelling coal block allocations, the fate of more than 200 mines was left hanging, as it wasn’t clear whether the companies would have to re- apply for green nod. However, the ministry has decided to transfer all existing environmental clearances of cancelled coal blocks to new allottees once the auction is completed. Changing clearance dynamics To increase transparency through Modi’s e- governance model, MoEF has launched an online monitoring system for project developers. Thus, a project proponent will not have to visit the ministry office to apply for green clearance. Javadekar, in fact, once said, his ministry is not playing Office Office ( a satirical TV serial) anymore and has simplified the procedure of applying for environment and forest clearances. It gave yet another pro- industry signal and allowed project developers to be present at the Forest Advisory Committee meetings to present their case while their projects are appraised. Chandrajit Banerjee, director- general at Confederation of Indian Industry (CII), says, “ Some of these changes can potentially reduce the delays in grant of clearances and we hope that the implementation of these changes will be fast and effective.” The tinkering with norms, rules and regulations has its limit. The government has also established a highlevel commission to look into amending six green laws. The committee is expected to come up with its suggestions by November- end. No land hassle The Centre has relaxed all rules from aproject’s primary phase to the last one. For instance, land acquisition used to be a big hindrance for any project developer and it used to take years to complete the process. After this, the file comes to the ministry for clearance. The Centre relaxed the rules by allowing project proponents to give proof of initiation of land acquisition instead of going for full acquisition, which included, in some cases, a letter of consent from the land owner. To facilitate easier land acquisition in forest areas, the government is also contemplating doing away with the need for consent of gram sabhas entirely. It has already done so for prospecting of minerals and some other activities such as linear projects. This, however, could have a negative impact, according to environment activist Aruna Chandrasekhar, Business and human rights researcher at Amnesty International India cautioned, “Some of the amended laws fall short of international standards on consultation and consent, and could further marginalise vulnerable communities who seldom have a voice in decisions taken around their lands and resources,” she said. Easier public dealing Once a project developer acquires land, he sends relevant information about his proposal to set up a factory to the Centre. The first stage for green clearances starts with screening, which determines if a project requires further environmental studies for preparation of an Environment Impact Assessment. Environment study is a mandatory exercise, which takes into account all concerns and becomes the basis for a green nod. The government has curtailed powers of the expert committee and told them not to ask for additional studies to review sitespecific impacts of the projects on environment. After screening, public consultation is done with the locally affected people. A project developer convinces the stakeholders about the need to take away the land and about rehabilitation. However, in many cases, this process has been done away with, too. During appraisal of a project, the expert panel reviewing it, stipulates several conditions on the developers while giving the green nod. The non- fulfilment of these conditions might attract heavy penalty or even cancellation of the project. However, the government has made life easier for industries as it has told its Expert Appraisal Committee not to impose conditions “ beyond the control” of the project proponent. The Centre has also moved towards decentralising the process of environment clearance. In wildlife areas, it has allowed project proponents to carry out preliminary surveys after securing the approval of the forest officer ( chief wildlife warden), instead of approaching the Centre, and, subsequently, seeking the nod of the National Board for Wildlife (NBWL). Similarly, the lower- level forest bureaucrats can give forest land to miners if the project is “ temporary in nature” and does not require felling of trees. Commercial projects ( in and around wildlife sanctuaries, national parks and eco- sensitive zones) will need an environment clearance from the state environment impact assessment authority alone and a nod from the Centre under the Environment Protection Act, 1986, wont be required. A high- level commission set up to review six laws is expected to come up with suggestions by November- end |Around 50 fresh guidelines issued, easing conditions for industry |Online system for applying environment clearances launched |Primary requirement of holding public consultation in case of expansion of coal projects done away with |Project proponent will not have to visit ministry to apply for green clearance |Consent of gram sabhas done away with for prospecting of minerals |Process of environment clearance decentralised to authorise states and forest bureaucrats to give green nod in certain commercial and prospecting cases KEY DECISIONS *BRIEF CASEN M J ANTONY A weekly selection of key court orders* SC unveils dark side of auction sales The Supreme Court last week unveiled a“ sad, sad and shocking” story of auction sale of a liquidated company in Gujarat, in which the official liquidator and bidders played unsavory roles. The price fixed at ₹ 6.25 crore for 291 plots of the company fetched ₹ 70 crore for 113 freehold plots alone; the others were not free for sale. The drastic change was due to the intervention of the court. The judgment in the case, Manoj Naik & Associates vs Official Liquidator, noted the unconditional apology rendered by the liquidator of Vitta Mazda Ltd for issuing misleading statements. It also stated that a judge of the high court breached “ judicial discipline” by passing orders at the request of the liquidator. The Supreme Court, narrating the sordid story of auctions, pointed out that when the Gujarat Industrial and Technical Consultancy Organisation Ltd estimated the price of the113 plots at ₹ 66.15 lakh, the bids went up and the winner offered ₹ 70 crore. The court remarked: “ There can be no speck of doubt that the properties of a company under liquidation when sold, there has to be a proper auction, afair one. It must fetch the maximum price. It takes care of statutory dues, dues of workmen and creditors. It has its own public character. In any case, it cannot be allowed to be sold for a song.” >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Forest land for non- existent campus The Supreme Court has dismissed the appeal of Raunaq Eductional Foundation, which was allotted 76 acres of forest land for an educational complex which was not built, with stinging remarks about “abuse of its position to its advantage and to the disadvantage of the public”. The court stated that it has not been able to discern “ why forestland was acquired, if such land was already vested in the government. There is nothing to show that the requisite permission was taken for converting forest land for non- forest purposes,” the judgment said. The land was acquired in 1974 with a specific deadline to build the complex. But it was not done. So the village panchayat wanted the land back. The Haryana government therefore took back the land in 1998, which was challenged by the Raunaq Foundation. The high court had dismissed its petition. On appeal, the Supreme Court said that though the proclaimed objective of the educational complex was advancement of the poor, the conduct of the foundation was suspect. “ The people of the village were deprived of the benefit of the common land due to false promise of the foundation,” the judgment emphasised. It reiterated that “ allocation of public land to a private entity requires fair, transparent and non- arbitrary exercise of power.” >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Changing goalposts in arbitration The Supreme Court has stated that once consent has been given to appoint an arbitrator, it cannot be withdrawn pointing out the terms of the contract. In this case, Ashoka Tubewell & Engineering Corporation vs Union of India, a works contract was given to a firm by railways with a provision that any dispute will be decided by an arbitrator who will be a gazetted railway officer or none at all. When disputes arose, the railway did not appoint any arbitrator. Therefore, the contracting firm moved the Calcutta High Court for appointment of an arbitrator under the Arbitration and Conciliation Act. The high court appointed a former judge as arbitrator with the consent of both parties. In the arbitration proceedings, the railway argued that the appointment of arbitrator was not valid in view of the above clause, but he rejected the objection and gave an award in favour of the firm. The railway moved the high court against the appointment of the arbitrator, which was rejected by a single judge bench. But on appeal, the division bench set aside the award on the ground that the arbitrator was not appointed validly. The firm appealed to the Supreme Court, arguing that since it did not appoint an arbitrator, the firm must move a civil suit and not seek arbitration. The Supreme Court rejected the argument stating that since the consent had been given by railway, the award against it cannot be set aside on the ground that the arbitrator was not validly appointed. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Double whammy for cheque offender A person who issues a cheque, which is dishonoured by the bank can be ordered to pay a fine under the Negotiable Instruments Act or compensation in addition, under the Criminal Procedure Code, the Delhi High Court has ruled in the case of Haryana Petrochemicals Ltd vs Indian Petrochemicals Ltd. “ The purpose of fine and compensation is the same; i. e. to assuage the grievance of the complainant,” the high court said. The two companies were dealing in sale and purchase of chemicals. A few cheques issued by the Haryana firm bounced leading to complaints before the magistrate. He imposed fine of various amounts from ₹ 5,000 to ₹ 50 lakh depending upon the value of the cheques. The sessions judge on appeal enhanced the amounts as compensation, amounting in some cases to ₹ 50 - 70 lakh. This was challenged by the Haryana firm in the high court. It argued, among other things, that a sentence of compensation could not be passed under the Negotiable Instruments Act which provide for fine. The provision for compensation is found in Section 357 of CrPC, which could not be applicable in cheque cases, it was argued. Rejecting the argument, the high court emphasised that an appellate court has the power to order compensation under the code. It said: “ This power has a message — a measure of responding properly to the crime as also reconciling the victim with the offender.” >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Peanut compensation will not do The National Consumer Commission last week dismissed a batch of 227 appeals moved by the Agricultural Insurance Co Ltd against village level agricultural cooperative societies in Rajkot, which had processed the cases of their members for agricultural loans under the ‘comprehensive crop insurance’ scheme. There was a drought in Gujarat around 2000 and the groundnut crop suffered badly, leading to claims for compensation. However, the claims were substantially denied describing the crop failure as ‘ shortfall in yields’ and several other deductions were made. The cooperatives moved the state consumer commission. It held that the deductions were not permissible and the claims amounting to ₹ 33 lakh must be paid. -- *A.RengarajanPractising Company SecretaryChennai * *Mobile 93810 11200* “ *LET US SUPPORT COMPANY SECRETARY BENEVOLENT FUND FOR COMMON CAUSE*
Posted on: Mon, 10 Nov 2014 01:20:10 +0000
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