04 - 10 Sept 2023 Volume 1, No.

18

CORPORATE LAW DISPATCH

MCA IBC

SEBI Competition Law

BFSI Cases

M&A NFRA

CS Ashutosh Shukla
[email protected]
Click here
Welcome to Corporate Law Dispatch,
your comprehensive weekly newsletter
bringing you the latest updates,
insights, and analysis in the world of
Indian corporate law, banking, financial
services, insurance, and more.
From the intricacies of mergers and
acquisitions to the complexities of
taxation and competition law, we
cover a wide range of topics that are
essential to understanding the dynamic
corporate environment.
 MCA

Multiple Companies Penalised for Non-Filing of e-Form INC-20A Results in

Registered Office Violations Penalties for Multiple Companies
The Registrar of Companies (RoC) Chhattisgarh The Adjudicating Officer of the RoC, Chhattisgarh
penalised twenty-four companies for contravention penalised seventeen companies for contravention
of Section 12(1) of the Companies Act 2013, which of Section 10A(1)(a) of the Companies Act 2013,
requires a company to have a registered office which read together with Rule 23 of the Companies
within thirty days of its incorporation and at all (Incorporation) Rules 2014 requires a company to
times thereafter. The penalties of up to five lakh file a declaration in e-Form INC-20A within one
rupees were imposed by the RoC for the said hundred and eighty days that every subscriber to
contravention. the memorandum has paid the value of the shares
agreed to be taken by him on the date of making of
RoC Ahmedabad also penalised a company for the such declaration. Penalties of up to Rupees three
violation of Section 12(1) and imposed a penalty of lakh were imposed on the companies for the
Rupees six lakh, double the actual penalty, under contravention.
the provisions of Section 454A, as the company had
committed the same default within a period of
three years from the imposition of the penalties on
first violations.

In another case, the Adjudicating Officer, RoC

Chhattisgarh, penalised a company for the
violations of Section 12(3)(c), which requires,
among others, a company to print its name,
address of its registered office, CIN, email address,
and phone number on all its notices and official
publications.

Company Fails to Spend CSR Amount: Ends

Up Paying Double the Amount as Penalty
In the matter of Smith and Smith Chemicals
Limited, the RoC found that the company’s net
profits had exceeded five crore in the financial year
2019-20, which means that the company was
required to spend Rupees six lakh eighty-six
thousand (approx) in the financial year 2021-22.
However, the company failed to either spend or
transfer the required amount, either to an Unspent
CSR Account or to a fund specified under Schedule
VII of the Companies Act 2013, as the case may be,
within the stipulated time period. The expenditure
was incurred by the company at a much later date
on February 07, 2023.

The company requested leniency on the grounds

that the default took place because of the
unawareness of the directors with respect to the
applicability of the CSR provisions and that it
occurred during the COVID period. Further, it also
argued that only the executive director, being the
officer-in-default, should be held accountable for
the contravention. However, the RoC rejected the
arguments and imposed a penalty twice the CSR
liability. The members of the board were also
directed to pay Rupees sixty-eight thousand
(approx) each. Additionally, a penalty of Rupees 3
lakh on the company and Rupees fifty thousand
each on two of its directors was imposed for the
contravention of Section 134(3)(o) of the
Companies Act 2013.

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 SEBI

SEBI Circular on Investment Clarification for or specific email IDs/URLs provided by DTs for this
Mutual Funds in Corporate Debt Market purpose.
Development Fund
This circular will come into effect on October 1,
The Securities and Exchange Board of India (SEBI) 2023. CRAs are obligated to report their compliance
has issued a clarification regarding the investment with this circular, as ratified by their respective
of Mutual Fund schemes in units of the Corporate board of directors, to SEBI within one quarter from
Debt Market Development Fund (CDMDF). This the circular's applicability date. Monitoring of this
clarification, detailed in Circular SEBI/HO/IMD/ circular's implementation will be carried out
PoD2/P/CIR/2023/152, addresses concerns raised through the half-yearly internal audit process for
by Asset Management Companies (AMCs), Trustee CRAs, as mandated under Regulation 22 of the CRA
Companies, and the Association of Mutual Funds in Regulations and related circulars.
India (AMFI) regarding asset allocation limits and
the inclusion of CDMDF investments. Change in Mode of Payment for SEBI
Investor Protection and Education Fund
SEBI has issued a circular dated September 4, 2023,
providing for a change in the mode of payment
concerning the SEBI Investor Protection and
Education Fund (SEBI IPEF). In the past, SEBI had
prescribed that payments to the SEBI IPEF should
be made through online mode or by using a
demand draft (DD) payable to the Board (i.e., SEBI
IPEF). However, the recent circular introduces a
new method for making payments to SEBI IPEF.

SEBI has established a new bank account to

facilitate payments to SEBI IPEF, and a link has been
The SEBI directive stipulates that for the purpose of provided on the SEBI website for this purpose.
calculating asset allocation limits of mutual fund Through this link, remitters can make payments
schemes, investments in units of CDMDF should be through various means, including net banking,
excluded from the base of net assets. This NEFT/RTGS, debit cards, and UPI. When making
clarification is in line with the guidelines provided in online remittances through the provided link,
the Master Circular for Mutual Funds, dated May remitters are required to provide specific
19, 2023, specifically focusing on 'Categorization information such as the payer's name, PAN
and Rationalization of Mutual Fund Schemes.' (Permanent Account Number), mobile number,
email ID, the purpose of the payment, and the
Mechanism for Sharing of Information from payment amount.
Credit Rating Agencies (CRAs) to Debenture
Trustees (DTs) Summary of SEBI Circular on New Format of
Abridged Prospectus for Public Issues of
In accordance with SEBI (Credit Rating Agencies) Non-Convertible Debt Securities and
Regulations, 1999, and related circulars, SEBI’s Redeemable Preference Shares
circular dated September 04, 2023, addresses the
mechanism for sharing essential information from SEBI (Securities and Exchange Board of India) has
Credit Rating Agencies (CRAs) to Debenture issued a circular dated September 4, 2023, to
Trustees (DTs). Due to the substantial volume of issuers who have listed or plan to list debt securities
information submitted by CRAs to DTs on a daily and non-convertible redeemable preference shares.
basis, and the tight disclosure timelines mandated The circular addresses the requirements of an
for DTs, a structured format for data sharing is abridged prospectus as outlined in the Companies
deemed necessary to facilitate accessibility and Act, 2013, and SEBI (Issue and Listing of Non-
analysis of this data. Convertible Securities) Regulations, 2021 (NCS
Regulations).
Following discussions with both CRAs and DTs, an
Excel template (provided as an annexure) has been The format for disclosures in the abridged
introduced. CRAs are required to utilize this prospectus has been revised to enhance clarity,
template for their daily submissions of rating consistency, and the provision of essential
revisions to DTs. These submissions must be information. The new format is detailed in
forwarded by CRAs to DTs on the same day as the Annex-I of the circular.
rating revisions occur. They can be sent to either Instructions for investors on completing
the generic email ID used for regulatory purposes application forms are provided in Annex-II.

2
 SEBI

Issuers, merchant bankers, and syndicate Subsequently, an inter-se connection was found
members such as brokers involved in public between the members of these two groups and an
issues must disclose these instructions on their SCN was issued to one hundred and two entities.
websites during the period when a public issue These entities had bought 57,884 shares (93.03% of
is open. market volume) and sold 33, 629 shares (54.05% of
The circular is applicable to all public issues market volume) of the Company during this patch.
opening on or after October 1, 2023. A copy of These entities also traded 31,391, shares (50.46% of
the abridged prospectus must be made market volume) amongst themselves during this
available on the issuer's website, merchant period.
bankers' websites, and registrar to an issuer's
website. Links to download the abridged In the SCN it was alleged that the entities traded in
prospectus must be provided in issue the scrip during the investigation period and
advertisements. provided exit at an inflated price to certain
Quick Response (QR) codes must be inserted on shareholders who were allotted shares as part of a
the last page of the abridged prospectus and scheme of amalgamation between Yamini, Anax
other relevant documents. Scanning the QR Com Trade Limited, and Fidelo Power and
code will lead to the full prospectus or abridged Infrastructure Limited, sanctioned by the Hon’ble
prospectus. Bombay High Court. SEBI found in para 91 of its
Issuers and merchant bankers are responsible order that the connected entities acted in concert
for ensuring that the disclosures in the to provide an exit to the twenty preferential
abridged prospectus are accurate, adequate, allottees. Additionally, in relation to two of the
and not misleading. noticees, SEBI also found the contraventions of the
Qualitative statements in the abridged provisions of Regulation 13 of SEBI (PIT) Regulations
prospectus must be supported by quantitative 1992 and Regulation 29 of the SEBI (SAST)
factors, and no qualitative statement can be Regulations 2011.
made without substantiation.
Stock Exchanges are instructed to disseminate Based on the findings, SEBI restrained sixty-five
this circular to listed entities and publish it on entities from accessing the securities market for a
their websites. period of two years. It also ordered twenty-seven
The circular's contents will be included in noticees who had made unlawful gains to disgorge
Chapter II (Application form and Abridged the amount within forty-five days of the order.
Prospectus) of the Master Circular dated Further, a penalty of Rupees five lakh and three
August 10, 2021, for issue and listing of non- lakh was imposed on two of the notices for the
convertible securities, securitized debt contravention of Regulation 13 of SEBI (PIT)
instruments, security receipts, municipal debt Regulations 1992 and Regulation 29 of the SEBI
securities, and commercial paper. (SAST) Regulations 2011.

Entities Act in Concert to Provide Exit to the

Shareholders Who were Allotted Shares
under a Scheme of Amalgamation: SEBI
Asks to Disgorge Unlawful Gains
In the matter of Yamini Investment Company
Limited, unusual fluctuations in price and volume of
the scrips of the company were noticed during the
period September 10, 2013, to September 30, 2015.
The average volume of shares traded in the scrip
also saw a steep rise during this period.
Accordingly, SEBI conducted an investigation to
determine if the price movement was the result of
normal trades or any act of price manipulation.

Based on an analysis of the trading in the scrip on

BSE during the investigation period, it was found
that certain entities who had traded in the scrips
were connected to each other on the basis of the
KYC, off-market transfers, fund transfers and
common directors. Eventually, two groups - the
Madhur Group consisting of eighty-eight entities
and the PCB Group consisting of fourteen entities.

3
 BFSI

Reserve Bank of India Modifies Incremental

Cash Reserve Ratio (I-CRR) Requirements

In a recent circular (RBI/2023-24/59) dated

September 08, 2023, the Reserve Bank of India (RBI)
announced a modification in the incremental Cash
Reserve Ratio (I-CRR). The previous notification,
issued on August 10, 2023, mandated all Scheduled
Banks to maintain an I-CRR of 10 per cent on the
increase in Net Demand and Time Liabilities (NDTL)
between May 19, 2023, and July 28, 2023. However,
the recent update, as per DOR.RET.REC.35/
12.01.001/2023-24, has phased out the I-CRR and
will release the impounded amounts in stages.
Effective September 09, 2023, 25 percent of the I-
CRR will be released, followed by an additional 25
percent on September 23, 2023, and the remaining
50 percent on October 07, 2023. This phased
approach aims to prevent sudden liquidity shocks
and ensure orderly money market operations.
RBI Expands UPI Scope to Include Pre-
Sanctioned Credit Lines for Transactions
In a circular (RBI/2023-24/58) dated September 04,
2023, the Reserve Bank of India (RBI) has
introduced a significant development in the Unified
Payments Interface (UPI) system. Building on the
Statement on Developmental and Regulatory
Policies released on April 06, 2023, the RBI has
expanded the scope of UPI to include pre-
sanctioned credit lines issued by Scheduled
Commercial Banks. This enhancement enables
individuals to conduct transactions using their pre-
approved credit lines through the UPI system,
subject to the customer's prior consent. Banks are
now empowered to define the terms and conditions
governing the use of these credit lines,
encompassing aspects such as credit limits, credit
periods, and interest rates, based on their board-
approved policies.

4
 M&A, Competition & IBC
Overview of Draft CCI (Combinations) Insolvency Professional Charges Excess
Regulations, 2023 Fees: Disciplinary Committee Imposes
Penalty
The recently enacted Competition (Amendment)
Act, 2023, introduced significant changes to the In the matter of Mr Vishal Pawankumar Bidawatjika,
provisions governing combinations in the IP, it was found in the course of an investigation
Competition Act. These changes encompassed conducted by IBBI under Section 218 of the
various aspects, including the introduction of a deal Insolvency and Bankruptcy Code 2016 that the IP
value threshold for mergers and acquisitions had charged excess fees in the CIRP and subsequent
exceeding INR 2000 crore, modifications to the liquidation of three corporate debtors namely
timeline for combination assessment, and Bluplast Industries Limited, Anil Printers Limited,
alterations to the review process for combinations. Today’s Writing Instruments Limited. The excess fee
charged amounted to Rupees Seventeen Lakh Sixty
To align with these substantial amendments, the Thousand and Eighty Six. However, the IP had
Competition Commission of India (CCI) has drafted received only seven lakh forty-three thousand and
the Competition Commission of India two hundred thirty-five.
(Combinations) Regulations, 2023, which will
supersede the existing Competition Commission of
India (Procedure in regard to the transaction of
business relating to combinations) Regulations,
2011. The Draft CCI Combinations Regulations,
2023, outline several key aspects such as
transaction value criteria, notice formats,
procedures for open offers and stock exchange
acquisitions, fee structures, filing processes, and
modification procedures for proposed
combinations.

The CCI invites stakeholders to provide their written

comments on the draft regulations, soliciting
feedback and insights from concerned parties. The excess fee was collected on account of an error
Stakeholders have a 21-day window, from in the application of the correct rate of fee to be
September 5, 2023, to September 25, 2023, to charged in terms of Regulation 4(2) of the IBBI
submit their comments using the form available on (Liquidation Process) Regulations 2016. Regulation
the CCI's official website: 4(2) of the IBBI (Liquidation Process) Regulations
https://cci.gov.in/stakeholders-topics- 2016 prescribes the rate at which the fee shall be
consultations. paid to the liquidator in the event the fee has not
been decided by the committee of creditors before
CCI Greenlights Acquisition of Up to 29.9% the commencement of liquidation. Different rates
Equity Shares of RHI Magnesita N.V. by have been prescribed based on factors such as the
Ignite Luxembourg Holdings S.à r.l. time taken in the completion of the liquidation and
the sum realised.
CCI has approved the acquisition of up to 29.9% of
RHI Magnesita N.V. by Ignite Luxembourg Holdings. The IP admitted that he had charged excess fees
This acquisition results in an indirect impact on RHI based on an erroneous interpretation of the
Magnesita India Limited (RHIM India), as no shares provisions of Regulation 4(2). Instead of calculating
of the Indian company were directly involved in the the “first six months” as provided under Regulation
transaction. Ignite Luxembourg Holdings is a newly 4(2) from the date of commencement of the
formed company based in Luxembourg, owned by liquidation, the IP had considered the date of
investment funds indirectly sponsored and receipt of the first tranche of sale proceeds of
controlled by Rhône Capital L.L.C., a private equity assets. The IP also submitted that the fees received
investment firm with a global presence. RHIM India in excess were refunded as soon he became aware
specializes in providing refractory products and of the same after receiving a communication from
services across various industries in India, including the Inspecting Authority. Based on the findings, the
steel, cement, metals, glass, environment and DC imposed a penalty of Rupees one lakh on the IP
energy, foundry, and paper and pulp. and cautioned him to be more careful and diligent.

While we have tried our best to update this newsletter in line with the regulatory changes, the possibility of errors of omissions
and commissions or failure to include key developments when this newsletter was being edited cannot be ruled out. This
newsletter is only for information purposes. You are advised to check the websites of the regulators to get a detailed insight
into the regulatory changes. The authors or the editors of this newsletter shall not be liable for your failure to do so.