COMPANY CASES (CC) HIGHLIGHTS ISSUE DATED 28-5-2010 Volume 156 Part 1
*HIGH COURT JUDGMENTS***
->->->Where company referred to BIFR but not ordered to be wound up and
workmen's dues not quantified, invocation of section 529A does not arise :
Chennai Yetrumathi Valaga Uzhiyargal Matrum Pothu Thozhilalar Sangam v.
Development Commissioner, MEPZ Special Economic Zone & HEOUS (Mad) p. 1
->->->Inability of company to pay debts must be shown to exist in favour of
petitioner, who should sue on his own account : Brothers Gas Agency v.
Hemkunt Gases P. Ltd. (P & H) p. 17
->->->Where company's money not shown to be in custody of that company or
its directors, application under section 468 does not lie : Official
Liquidator, High Court of A. P. v. Dantuluri Raju (AP) p. 27
->->->Suit by creditor and counter-claim by company does not preclude
petition for winding up : Varinder Sahni v. MGRM Net Ltd. (Delhi) p. 36
->->->Jurisdiction of civil court impliedly barred on matters that can be
adjudicated by Company Law Board : HB Stockholdings Ltd. v. DCM Shriram
Industries Ltd. (Delhi) p. 54
->->->Karnataka Co-operative Textiles Mills Limited (Acquisition and
Transfer) (Amendment) Act, 2004 providing for acquisition of lands held on
lease by sick textile mills with retrospective effect cannot efface order of
winding up court permitting land lords to repossess such land and is null
and void : K. K. Kathare v. State of Karnataka (Karn) p. 78
->->->Where receipt of loan and issuance of cheques for repayment admitted
and claim of novation of loan agreement not substantiated, winding up order
justified : Vasu Tech Ltd. v. Ratna Commercial Enterprises Ltd. (P & H) p.
89
->->->Person neither original allotee nor borne on register of members is
not a contributory : Cavendish Shipping Limited v. Polaris Marine Management
Pvt. Ltd. (Bom) p. 108
->->->Requirement of service of statutory notice arises only when deeming
fiction created by section 434(1)(a) is pressed in aid : Cavendish Shipping
Limited v. Polaris Marine Management Pvt. Ltd. (Bom) p. 108
->->->Failure by company to commence business and loss of substratum,
petition for winding up admitted : Cavendish Shipping Limited v. Polaris
Marine Management Pvt. Ltd. (Bom) p. 108
->->->Failure to publish notice in official gazette and send it by
registered post to company ; mandatory requirements under section 560 not
complied with and name of company restored in Register of Companies :
Sitaram Singh Construction P. Ltd. v. Union of India (Patna) p. 127
* Circulars :*
* SEBI Circulars :*
->->->Establishment of Connectivity with both depositories NSDL and
CDSL-Companies eligible for shifting from Trade for Trade Settlement (TFTS)
to normal Rolling Settlement-CIR/MRD/DP/16/2010, dated 3rd May, 2010 : p. 2
->->->Guidelines for Credit Rating Agencies-CIR/MIRSD/CRA/6/2010, dated 3rd
May, 2010 : p. 3
->->->Introduction of Index options with tenure up to 5
years-CIR/DNPD/2/2010, dated 4th May, 2010 : p. 13
->->->Margining of institutional trades in the cash
market-CIR/MRD/DP/15/2010, dated 28th April, 2010 : p. 1
* Press Notes/Releases :*
->->->Press Note No. 4 (2010 Series) : p. 14
* NEWS-BRIEFS*
->->->SEBI seeks fresh mandate on the rollout of new norms
Market regulator SEBI has asked stock brokers to provide the exchanges
with a status report on the implementation of new client-broker agreement,
which will become effective from June 30.
The deadline has been extended a couple of times, as brokers sought time
to prepare for the proposed changes, and also due to ambiguity over some of
the rules. SEBI had announced the guidelines in December last year.
The new rules require brokers to keep records of the people introducing
new clients, and regulatory actions against them (clients), detail the
systems for settling client funds and securities once a calendar
quarter/month, among other things.
For existing clients, the broker has to inform the exchanges if he has
obtained a signed confirmation letter for the e-mail id to which
transactions details will be sent, and the necessary consents for running
accounts, annual renewal, among other things.
The regulator is reviewing the rule that makes it mandatory for the
broking firm to settle the funds and securities at the end of the calendar
quarter/month, said a person familiar with the development.
"In the new format, trading in derivatives will become difficult for
clients as in case of any outstanding positions at the end of the
quarter/month, the client will have to square-off his positions. This is
because the broker will not be left with any margins since he has to make
the balance zero by issuing a cheque," said the head of compliance of a
domestic brokerage.
Every client has to keep a certain amount as margins if he has any
outstanding positions in the derivatives as a protection against any adverse
movement in the stock price.
According to brokers, the regulator is proposing that brokers keep a
certain amount as balance estimated for the next three to five days, if the
client has to meet his obligations on open positions. But that would be a
difficult task to do, say brokers.
The alleged misuse of these funds by broking firms was one of the major
causes for disputes and litigation between brokers and their clients.
Experts say that the new norms will significantly curb the misuse of client
money by brokers.
According to brokers, SEBI is considering making trade confirmation
through SMS mandatory in order to overcome the problem of unauthorised
trading in clients' account. While large brokerages follow this practice,
most of the smaller brokerages do not do so. [Source :
www.economictimes.comdated May 19, 2010]
->->->SEBI issues new guideline for SME platform
The Securities and Exchange Board of India (SEBI) has relaxed
share-listing norms for small and medium enterprises (SMEs) by allowing them
to disclose their financial results every six months instead of three
months, as is the norm for bigger companies.
Companies listed on the SME exchange will not be required to send a full
annual report to their shareholders and also need not publish their
financial results as required in the main stock exchange.
"Companies listed on the SME exchange may send to their shareholders a
statement containing the salient features of all the documents," the
regulator said in its circular.
But these companies will have to maintain a public shareholding of at
least 25 per cent. of the total number of issued shares at all times. In
other words, the promoters' stake cannot exceed 75 per cent.
A company listed on the SME exchange, having post-issue capital between
Rs. 10 crores and Rs. 25 crores can migrate to the main exchange provided it
meets the listing requirements of the stock exchange. For this purpose, the
company must first make a proposal to list the specified securities and
obtain the prior approval of its shareholders.
"The issue shall be 100 per cent. underwritten and the merchant bankers
shall underwrite 15 per cent. in their own account. Merchant bankers can
also enter into an agreement with nominated investors to subscribe to the
unsubcribed portion of the issue," the SEBI circular said.
A stock broker of the main exchange need not seek fresh registration for
trading on the SME platform. Similarly, a sub-broker also need not seek
fresh registration, where she/he is affiliated to stock broker who is
eligible to trade on SME platform.
SEBI has also decided to grant approvals to only corporatised and
demutualised entities for operating as an SME exchange, unlike earlier when
it had decided to give time to entities to comply with the regulations.
The exchange must also have an on-line surveillance capability which
monitors positions, and shall possess adequate arbitration and investor
grievances redressal mechanism operative from all over the country," the
regulator said. The risk management system and surveillance system should be
the same as it is currently for the cash market segment, the SEBI circular
said. [Source : www.economictimes.com dated May 19, 2010]
->->->More insurance companies under CBI scanner for fraudulent activities
The Central Bureau of Investigation (CBI) will initiate a probe against
three insurance companies in connection with alleged financial
irregularities and forgery in the Universal Health Insurance Scheme (UHIS),
sources said.
During its raids at the Lucknow and Varanasi offices of a prominent
public sector insurance company, CBI's anti-corruption wing had seized over
100 fake medical insurance certificates and detected financial anomalies
over Rs. 30 lakhs. It is now going to investigate three more companies,
officials said.
The UHIS scheme is meant to provide medical benefits strictly to the
below poverty line population. While the person opting for the scheme has to
provide Rs. 100 per year, the Central Government provides Rs. 300 and the
insurance company offers free medical treatment up to Rs. 30,000.
Preliminary investigation indicates other insurance companies entrusted
with the task of running the Central Government's scheme may also be
involved in embezzlement of Government funds. The several health cards were
issued to those above the poverty line, sources added. According to
officials, the irregularities are an intentional misstatement or omission of
information related to charges. [Source : www.economictimes.com dated May
13, 2010]
->->->IRDA's new norms to provide greater fillip for ULIP holders
New norms by the Insurance Regulatory and Development Authority (IRDA)
now provide very strong incentive to insurers to ensure that policies do not
lapse.
The regulator unveiled new regulations on unit-linked insurance plans,
capping the surrender charge on policies that are returned after a year at
15 per cent.
This is a huge benefit for the customer as today there are several plans
where the customer gets nothing if she/he surrenders her/his long-term
policy after paying the first year premium.
The maximum surrender charges, which is 15 per cent. for first year
surrenders, reduces year after year and comes down to 5 per cent. for the
fourth year and 2.5 per cent. for the fifth year.
Some insurers say the only way they can adhere to these surrender
charges is by either reducing the allocation for the customer-which will
make their products unattractive-or by reducing their own expenses.
The only way insurers would be able to reduce the charges is by bringing
down the commissions they pay on the first year premium.
Henceforth, insurers can hope for a profit only if most policies are
renewed. Under the new norms, insurers have to refund the amount under a
lapsed policy through a cheque or demand draft to the last known address.
Although these regulations benefit policyholders, they will hit the
bottomlines of life insurers. New life insurance companies, which do not
have a distribution network of their own, will be hit the worst. By fixing a
ceiling on the surrender charges, IRDA has also taken steps against
mis-selling.
Henceforth, if an agent mis-sells a regular premium policy by
positioning it as a single premium plan, the life insurance company will
stand to lose. If the second year premium does not come in, the life company
will have to give back money in the policyholder's account to the customer
(after the five year lock-in).
The new norms called "Standardisation of terms and condition of ULIP and
treatment of lapsed policies" issued by IRDA are a part of the new
guidelines as an adjunct to the IRDA Act. The regulator has said these
regulations supersede earlier ones. [Source : www.economictimes.com dated
May 19, 2010]
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