adjudication order in respect of kotak mahindra capital company limited, edelweiss financial...
TRANSCRIPT
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8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID
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______________________________________________________________________________________AdjudicationOrderinthematterofInitialPublicOfferofCreditAnalysisandResearchLimited(CARE)Page1of86
BEFORETHEADJUDICATINGOFFICER
SECURITIESANDEXCHANGEBOARDOFINDIA
[ADJUDICATIONORDERNO.AK/AO/221226/2014]
________________________________________________________________________
UNDERSECTION15IOFSECURITIESANDEXCHANGEBOARDOFINDIAACT,1992READWITH
RULE5OF
SEBI
(PROCEDURE
FOR
HOLDING
INQUIRY
AND
IMPOSING
PENALTIES
BY
ADJUDICATINGOFFICER)RULES,1995
Inrespectof
M/s.KotakMahindraCapitalCompanyLimited (PAN:AAACK5577D);M/s.DSPMerrillLynch
Limited (PAN:AAACD0535G);M/s. Edelweiss Financial Services Limited (PAN:AAACE1461E);
M/s. ICICI Securities Limited (PAN: AAACI0996E);M/s. IDBICapitalMarket Services Limited
(PAN:AAACI1268F);M/s.SBICapitalMarketServicesLimited(PAN:AAACS7914E)
Inthematterof
InitialPublicOfferofCreditAnalysisandResearchLimited(CARE)
________________________________________________________________________
FACTSOFTHECASE
1. M/s. Kotak Mahindra Capital Company Limited, M/s. DSP Merrill Lynch Limited, M/s
EdelweissFinancialServicesLimited,M/s.ICICISecuritiesLimited,M/s.IDBICapitalMarket
ServicesLimitedandM/s.SBICapitalMarketsLimited (hereinaftercollectivelyreferredto
asBookRunningLeadManagersBRLMs/theNoticees)hadfiledRedHerringProspectus
(hereinafterreferredtoasRHP)fortheInitialPublicOffer ofCreditAnalysisandResearch
Limited(hereinafterreferredtoasCARE/Issuer/Company)withSecuritiesandExchange
Boardof India (hereinafter referred to as SEBI)on November 27, 2012 for initialpublic
offer(hereinafterreferredtoasIPO)of71,99,700equitysharesofafacevalueofRs.10/
eachofthecompanythroughanOfferforSale(hereinafterreferredtoastheOffer).
2.
TheOffer
opened
for
subscription
by
anchor
investors
on
December
06,
2012
and
closed
on
thesameday.TheOfferopenedforpublicsubscriptiononDecember07,2012andclosed
onDecember11,2012.
3.
ItwasobservedthatCAREhadreceivedaletterdatedSeptember26,2012fromtheReserve
BankofIndia(hereinafterreferredtoasRBI),inresponsetoCAREsletterdatedAugust31,
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8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID
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2012,agreeingtoexemptnonresidentinvestorsparticipatingintheOfferforSale,fromthe
requirementofobtainingaNoObjectionCertificate(hereinafterreferredtoasNoC)from
their respective regulators in relation to theirparticipation intheOffer,subject tocertain
conditions. OneoftheconditionsstipulatedbyRBIwhileexemptingnonresidentinvestors
participatingin
the
Offer
from
obtaining
NoCs
from
the
respective
regulators
was
that
minimumcapitalizationnormsapplicabletoNonBankingFinancialCompanies (NBFCs)are
strictlyadheredtobyCARE.Subsequenttothesame,itwasobservedthatCAREhadwritten
toRBIvideletterdatedOctober05,2012 interaliastatingthereinthat(a)investmentby
ForeignInstitutionalInvestors(hereinafterreferredtoasFIIs)andsubaccountsregistered
with SEBI and investing in the Offer under the Portfolio Investment Scheme (hereinafter
referredtoasPIS)inaccordancewithRegulation5(2)andSchedule2ofForeignExchange
Management(TransferofIssueofSecuritybyaPersonResidentOutsideIndia)Regulations,
2000,asamended(hereinafterreferredtoasFEMARegulations);(b)NonResidentIndians
(hereinafter referred to as NRIs) investing in theOfferonnonrepatriationbasisunder
Regulation5(3)(ii)andSchedule4ofFEMARegulations; and(c)QualifiedForeignInvestors
(hereinafterreferredtoasQFIs)investingintheOfferinaccordancewiththeprovisionsof
theMasterCircularonForeign Investments in IndiadatedJuly02,2012 issuedbyRBI,will
notbea foreigndirect investment,and thatRegulation5(1) readwithSchedule1of the
FEMA Regulations and the conditions applicable for foreign direct investments including
minimum
capitalization
norms
prescribed
in
the
Consolidated
Foreign
Direct
Investment
(hereinafter referred toas FDI)Policyand theMasterCircularonForeign Investments in
NonBanking Financial Companies engaged in nonfund based activities, shall not be
applicabletothecompanyinrespectoftheOffer.Itwasfurtherobservedthatthecompany
andBRLMshadproceededwiththeissueintheabsenceofanyresponsefromRBI.
4.
Itwas furtherobserved thatas regards theaforesaid, limiteddisclosurewasmade in the
RHPonpage228and322bystatingthat"RBIbyletterdatedSeptember26,2012exempted
eligibleNon
Residents,
in
their
capacity
as
transferee
entities,
from
the
requirement
to
obtainanoobjectioncertificatefromtheirrespectiveregulatorsinrelationtoparticipating
intheOffer."FurtherPage116oftheRHPunderRegulationsandPoliciesprovidinggeneral
informationtotheinvestors,thefollowingstatementwasincorporatedunderthesubpara
Consolidated FDI Policy In case of nonbankingfinancial companies undertaking non
fundbasedactivities,whichincludecreditratingagencies,USD0.5millionshouldbebrought
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8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID
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inupfrontbytheforeigninvestorirrespectiveofthelevelofforeigninvestment.Itwas,thus,
observed that the disclosure in the RHP did not mention the conditional nature of the
exemption granted by RBI to the nonresident investors while exempting them from
obtainingaNoCfromtheirrespectiveregulators inrelationtoparticipating intheOffer. It
wasalso
observed
that
even
the
factual
aspect
of
filing
of
letter
dated
October
05,
2012
withRBI subsequent to receiptofRBIs letterdatedSeptember26,2012,wherein itwas
broughtoutthatinvestmentsbyFIIs,NRIsandQFIsparticipatingintheOffershallnotbeFDI
and the conditionsapplicable toFDI includingminimum capitalizationnorms shallnotbe
applicabletotheOffer,wasalsonotdisclosedintheRHP.
5. The issueopenedforanchor investorsonDecember06,2012andclosedonthesameday.
Onthesamedayi.e.December06,2012,thecompanyreceivedaletterfromRBIinreplyto
companysletterdatedOctober05,2012clarifyingthat:
i.
FIIscanacquiresharesundertheproposedofferforsaleprovidedtotalshareholdingof
FII in the company shall not exceed 10% at any point of time and minimum
capitalizationnormsareadheredto;
ii. QFIscanacquiresharesundertheproposedofferforsaleprovidedtotalshareholdingof
QFIinthecompanyshallnotexceed5%atanypointoftimeandminimumcapitalization
normsareadheredto.
6.
CARE vide its letter dated December 07, 2012 again represented to RBI by inter alia
reiterating that no foreign direct investment (by any nonresident investors under
Regulation5(1) readwithSchedule Iof theFEMARegulations)willbepermitted into the
company under the Offer and that they have specifically prohibited investmentsby non
resident investors. ItwasfurthersubmittedthereintoRBIthat in lightofthesame, itwas
the companys understanding that the minimum capitalization norms set forth in clause
6.2.24oftheConsolidatedFDIPolicydatedApril10,2012(CircularIof2012)andtheMaster
Circularwill
not
be
required
to
be
met
with
respect
to
investment
by
Eligible
FIIs
and
Eligible
QFIsintheOffer.Videtheaforesaidletter,itwasalsobroughttothenoticeofRBIthatthe
offeropenedforsubscriptionforanchorinvestorsonDecember06,2012andthattheoffer
wouldopen for subscription forother categoriesof investorsonDecember07,2012and
wouldcloseonDecember11,2012.
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8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID
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7. However,itisobservedfromsubsequentletterdatedDecember10,2012fromCAREtoRBI
thatfurthertodiscussionswithRBI inthematter,thecompanyunderstoodthatminimum
capitalizationnormsmust be satisfied in relation to the Offer. Accordingly, vide the said
letterCAREinteraliaapproachedRBIseekingninemonthstimefromthedateofallotment
inthe
Offer
to
comply
with
the
minimum
capitalisation
norms.
RBI
vide
its
letter
of
the
same
datei.e.December10,2012allowedCAREsixmonthstimefromthedateoftheissueofthe
lettertocomplywiththeminimumcapitalisationnormsofUS$0.5millionapplicabletonon
fundbasedNBFCs.AccordinglyacorrigendumwasissuedbyCAREonDecember11,2012.
APPOINTMENTOFADJUDICATINGOFFICER
8. The undersigned was appointed as the Adjudicating Officer vide order dated August 13,
2013 under rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by
AdjudicatingOfficer)Rules,1995(hereinafterreferredtoasRules)readwithSection15Iof
SEBI Act to inquire into and adjudge under Section 15HB of the SEBI Act, the alleged
violations of the provisions of SEBI (Issue of Capital and Disclosure Requirement)
Regulations, 2009 (hereinafter referred to as ICDR Regulations) and SEBI (Merchant
Bankers)Regulations,1992(hereinafterreferredtoasMerchantBankers Regulations).
SHOW
CAUSE
NOTICE,
HEARING
AND
REPLY
9. Show Cause Notice No. EAD6/AK/VS/25633/2013, EAD6/AK/VS/25634/2013, EAD
6/AK/VS/25635/2013, EAD6/AK/VS/25636/2013, EAD6/AK/VS/25637/2013 and EAD
6/AK/VS/25638/2013datedOctober07,2013(hereinafterreferredtoasSCN)wereissued
totheBRLMs/theNoticeesunder rule4oftheRules toshowcauseas towhyan inquiry
should not be held and penalty be not imposed under Section 15HB of SEBI Act for the
allegedviolationspecifiedinthesaidSCN.ThesaidSCNsweredeliveredandacknowledged
bythe
BRLMs/
Noticees.
The
BRLMs/
Noticees
vide
letter
dated
October
18,
2013
sought
additionaltimeoffourweekstosubmittheirresponsetotheSCN,whichwasaccededto.
TheBRLMs/Noticeeswere informedvideemaildatedOctober22,2013tofilereplytothe
SCN latest by November 20, 2013. Vide individual letters dated October 28, 2013/
November11,2013,asapplicable,theBRLMs/Noticeessubmittedcopiesofvakalatnamas
appointingM/s.Amarchand&Mangaldas&SureshA.Shroff&Co.(hereinafterreferredto
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8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID
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astheAuthorisedLegalRepresentativesALR)toact,appearandpleadontheirbehalf.Vide
letterdatedNovember11,2013,theALRonbehalfoftheBRLMs/Noticeesinteraliasought
fortheinspectionofdocumentswhichwasrelieduponintheSCNtoframetheallegations/
findings in the notices issued.Videemaildated November13,2013,ALRwas advised to
specifythe
documents
sought
for
inspection.
Vide
letter
dated
November
15,
2013,
ALR
interaliasubmitted the following listofdocuments that they intended toexamineat the
inspection:
a) Order of theWholeTimeMemberof SEBI (herein after referred to as WTM) dated
August13,2013appointingtheAdjudicatingOfficer;
b) CommunicationofappointmentoftheAdjudicatingOfficerdatedOctober4,2013;
c) DocumentarybasisfortheWTMtobesatisfiedof(i)primafacie inadequatedisclosure
of theconditionalexemptiongrantedby the letter from theRBIdatedSeptember26,
2012andconsequentviolationoftheprovisionsoftheICDRRegulationsandMerchant
Bankers Regulations; and (ii) sufficiency of grounds to enquire into the affairs and
adjudicateuponallegedviolationsinrelationtotheOffer;
d) Documentarybasisforallegation inparagraph3oftheSCNsthattheBRLMs/Noticees
went by the Companys understanding in relation to the applicability of minimum
capitalization norms, without exercising necessary due diligence and satisfying
themselvesthatfullandcompletedisclosureshavebeenmade;
e)
Documentary
basis
for
allegation
in
paragraph
3
of
the
SCNs
stating
that
the
BRLMs/
Noticees failed toensure inclusionof fullandcompletedisclosure in theRHPsoasto
enableapplicantstotakeaninformedinvestmentdecision;
f) Documentson thebasisofwhichSEBIhasalleged inparagraph3of theSCNs stating
thattheBRLMs/NoticeessuppressedmaterialfactsintheRHP;
g)
Documentarybasisforallegation inparagraph3oftheSCNsthattheBRLMs/Noticees
attempted tomislead investors intobelieving that RBI hadunconditionallyexempted
eligible nonresident transferees from the requirement of obtaining NoC from their
respectiveregulators;
h) Documentary basis for the allegation in paragraph 4 of the SCNs that the non
disclosuresofmaterial information in theRHPmakes theBRLMs/Noticeesjointlyand
severally liable for failing toexerciseproperduediligenceon theirpart inviolationof
theprovisionsoftheICDRRegulationsandMerchantBankersRegulations;
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8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID
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i) AllcorrespondencebetweenSEBIandtheRBIandanyinformationandlettersreceived
fromRBIinrelationtothepresentmatter;
j)
AllcorrespondencebetweentheBRLMs/NoticeesandSEBI,whichmayhavebeenrelied
uponbySEBI;
k)
Allcorrespondence
between
the
Company
and
RBI
in
relation
to
the
Offer,
which
may
havebeenrelieduponbySEBI;
l)
AllcorrespondencebetweenSEBIandtheCompanyinrelationtotheOffer,whichmay
havebeenrelieduponbySEBI;
m)
Anyadditional information,documentsorcorrespondencewhichSEBIhas reliedupon
whileissuingtheSCN.
10.OnDecember19,2013followingdocumentsalongwiththecopiesweremadeavailablefor
inspectionandwereinspectedbytheBRLMs/NoticeesandtheirALRs:
a)
Originalorder communicatingappointmentof theAdjudicatingOfficerdatedOctober
04,2013;
b) OriginalcopiesofPageno.228ofRHPofCAREandPageNo.228and229ofProspectus
ofCARE;
c) Original copy of letter dated December 28, 2012 received from BRLMs interalia
containing copy of RBI letter dated September 26, 2012 at Annexure H, letter dated
October
05,
2012
submitted
by
CARE
to
RBI
at
Annexure
I
and
RBI
letter
dated
December06,2012atAnnexureL;
d) OriginalcopyofletterdatedSeptember30,2011referringtoAnnexureIII;
e) OriginalcopyletterdatedDecember21,2012submittedbyBRLMs;
f) With respect to documents requested under Point 1 of Annexure 1 of letter dated
November15,2013,thesamewasnotprovidedstatingconfidential.
11.Videtheir individuallettersdatedDecember6,2013,theBRLMs/Noticeessubmittedtheir
intentionto
apply
for
settlement
through
consent
mechanism
and
inter
alia
sought
for
four
weeks time from the receiptof the letter to file the same.Subsequent to the same,vide
individual letters dated January 03, 2014, the BRLMs/ Noticees inter alia requested for
further threeweeks time i.e.upto January24,2014 toconclude their internaldiscussions
and convey their decision to avail of the consent route for settlement in the matter.
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However,itisobservedthattheBRLMs/Noticeesdidnotfileanyapplicationforsettlement
throughconsentmechanism.
12.Vide individualhearingnoticedatedDecember30,2013,theBRLMs/Noticeesweregiven
anopportunity
for
personal
hearing
on
January
09,
2014.
In
response
vide
letter
dated
January02,2014,theALRsoftheBRLMs/NoticeessoughttimetillJanuary16,2014tofilea
jointwrittenresponsetotheSCNissuedtothemandfurtherrequestedtofixthedateofthe
personalhearingpostthesubmissionofwrittenresponse.Thesaidrequestwasaccededto.
VideemaildatedJanuary03,2014,theBRLMs/NoticeesweregiventimeuptoJanuary16,
2014toreplytotheSCNandanopportunitytoappearforpersonalhearingonJanuary21,
2014. SubsequentlyonJanuary16,2014,ALRssubmittedreplytotheSCNonbehalfofthe
BRLMs/Noticees.Thesubmissions interaliamadevidethesaid letterhavebeendiscussed
inthelaterpartofthisOrder.
13.PersonalhearinginthematterwasheldonJanuary21,2014whereinMs.IpsitaDutta,Ms.
GazalRawal,Ms.GarimaJoshifromAmarchand&Mangaldas&SureshA.Shroff&Co.,the
ALRs of the BRLMs/ Noticees, Shri Ajay Vaidya from Kotak Mahindra Capital Company
Limited, Shri Nishith Mehta from DSP Merrill Lynch Limited, Shri B Renganathan from
Edelweiss Financial Services Limited, Shri Subir Saha from ICICI Securities Limited, Ms.
Monica
Nagpal
from
IDBI
Capital
Market
Services
Limited,
Shri
Bhaskar
Chakraborty
from
SBI Capital Markets Limited, (hereinafter collectively referred to as Authorised
Representatives(ARs))appearedonbehalfoftheBRLMs/Noticees. TheARsreiteratedin
detail the submissions made vide letter dated January 16, 2014. During the hearing,ARs
submittedfollowingdocuments:
a.
Copy of Foreign Exchange Management (Transfer of Issue of Security by a person
ResidentOutsideIndia)Regulations,2000(FEMARegulations);
b. Copyof theconsolidatedFDIPolicy issuedby theDepartmentof IndustrialPolicyand
Promotiondated
April
10,
2012;
c. CopyofMasterCircularonForeignInvestmentinIndia;
d. Copiesoffollowingcaselaws:
o ImperialCorporateFinance&Service(P.)Ltd.VsSEBI;
o AdjudicationOrderagainstSBICapitalMarketsLimiteddatedApril17,2009;
o BurrenEnergyIndiaLtd.&Anr.VsSEBI;
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8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID
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o TATACumminsLtdVsStateofJharkhand&Others;
o Extractsof redlineversionof theRHPwhichwasenclosedaspartof letterdated
November05,2012filedwithSEBI inresponsetofinalobservations issuedbySEBI
inrespectoftheoffer.
Duringthe
hearing
ARs
were
inter
alia
advised
to
submit
past
non
compliance,
if
any,
of
SEBI
ActandRegulationsmadethereunder,byanyoftheBRLMs/Noticees,and,actiontakenby
SEBI inthepast, ifany,againstanyoftheBRLMs/Noticeesduringthe lastfiveyears.ALRs
undertooktosubmitfurthersubmissionsbyJanuary31,2014.
14.Vide letterdated January31,2014,ALRs submitted a summaryof the submissionsmade
during thehearing. The summaryof submissions interaliamade vide the said letterhas
beendiscussedinthelaterpartofthisOrder.
15.
Thereafter, vide supplementary SCN No. EAD6/AK/VS/8924/2013, EAD
6/AK/VS/8927/2014, EAD6/AK/VS/8934/2014, EAD6/AK/VS/8939/2014, EAD
6/AK/VS/8944/2014 and EAD6/AK/VS/8967/2014 dated March 24, 2014, the BRLMs/
NoticeeswereclarifiedthattheBRLMs/NoticeeshaveviolatedRegulation13ofMerchant
Bankers Regulations read with the following clauses of Code of Conduct for Merchant
BankersasspecifiedinScheduleIII:
a.
Clause
1
A
merchant
banker
shall
make
all
efforts
to
protect
the
interests
of
investors;
b. Clause4 Amerchantbanker shallatall timesexerciseduediligence,ensureproper
careandexerciseindependentprofessionaljudgment;
c. Clause6 Amerchantbankershallensure thatadequatedisclosuresaremade to the
investors in a timely manner in accordance with the applicable regulations and
guidelinessoastoenablethemtomakeabalancedandinformeddecision;
d. Clause7 Amerchantbankershallendeavourtoensurethattheinvestorsareprovided
with true and adequate information without making any misleading or exaggerated
claimsor
any
misrepresentation
and
are
made
aware
of
the
attendant
risks
before
takinganyinvestmentdecision;
e. Clause 20 A merchant banker shall not make untrue statement or suppress any
materialfactinanydocuments,reportsorinformationfurnishedtotheBoard.
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NoticeeswerealsoadvisedtoinformthepresentstatusofcomplianceofRBIsletterdated
December 10, 2012 regarding compliance with minimum capitalization norms of US$0.5
millionapplicable tononfundbasedNBFCsby thecompany/CARE.TheBRLMs/Noticees
wereadvised tooffer commentson theaforesaidwithin15days from the receiptof the
Notice.
16.
VideemaildatedApril07,2014,ALRssoughtgrantofadditionaltimeoftwoweeksi.eupto
April21,2014tosubmittheresponse.Byreturnemailonthesamedatei.e.April07,2014,
it was communicated to the ALRs that the request for additional time to submit the
responsehasbeenaccededto.VideletterdatedApril21,2014,theALRssubmittedspecific
responsestothepointsmentionedinthesupplementarySCNdatedMarch24,2014which
isdiscussedinthelaterpartofthisOrder.
17.
Thesaid replydatedApril21,2014 interalia indicated thatRBIhadextended thedateof
compliancewiththeminimumcapitalizationrequirementbythecompany/CAREfromJune
09,2013 toSeptember30,2013. Thesaid reply furtheralso informed that thecorporate
announcementsmadebythecompany/CAREthroughthewebsitesoftheNSEandBSEon
September27,2013,indicatethattheBoardofDirectorsinthemeetingheldonSeptember
27,2013hadgiventheconsentfortheissueandallotmentof4,46,310equitysharesofRs.
10/
each
to
Ascent
India
Fund
III
managed
by
Ascent
Capital
Advisors
India
Private
Limited
atapriceofRs.560.15perequityshareaggregatingtoanissuesizeofRs.25,00,00,547to
complywiththeminimumcapitalisationnorms.
18. Inthe interestofnaturaljustice,theBRLMs/Noticeesweregivenanotheropportunity for
personal hearing on April 30, 2014 vide hearing notice dated April 22, 2014. Vide email
datedApril28,2014,theALRsrequestedforashortextensiontoMay07orMay08,2014or
asuitabledatethereafter.Videreturnemailofthesamedatei.e.April28,2014,itwasinter
aliacommunicated
to
the
ALRs
that
their
request
for
short
extension
has
been
acceded
to
andthatthefreshdateandtimewillbeintimatedsubsequently.
19.Under thepowersconferredupon theAdjudicatingOfficerunderSubsection2ofSection
15IofSEBIAct,informationwassoughtfromRBIwithrespecttotheongoingadjudication
proceedings against the BRLMs/ Noticees vide letter dated April 30, 2014, to which RBI
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repliedvideletterdatedMay21,2014.TheaforesaidletterdatedApril30,2014toRBIand
RBIsresponsedatedMay21,2014wereprovidedtotheBRLMs/Noticeesforseekingtheir
commentsvideletterdatedMay27,2014.TheBRLMs/Noticeeswereadvisedtogivetheir
comments,ifany,byJune11,2014.VideletterdatedJune10,2014,theALRsacknowledged
thereceipt
of
the
letter
dated
May
27,
2014
and
sought
additional
time
of
four
weeks
i.e.
upto July 09, 2014 to submit thejoint response on behalf of the BRLMs/ Noticees. Vide
emaildated June11,2014, itwascommunicated to theALRs thatextensionof timeupto
June30,2014tofiletheresponsehasbeengranted.
20.Vide letter dated June 18, 2014, ALRs inter alia raised queries in consideration of the
principles of natural justice in the matter and sought for the inspection of the
communication between Adjudicating Officer and RBI and clarification on the specific
inferences,if
any,
drawn
by
the
Adjudicating
Officer
in
relation
to
the
purported
RBI
communicationandtheextentandthemannerinwhichitwouldaltertheconclusionsand
allegations set out in the Notices. In the said letter, ALRs inter alia also referred to the
inspectionheldonDecember19,2013andstatedthattheRBIcommunicationwasneithera
partoftheNoticenorwasitprovidedtotheNoticeesduringthesaidinspection.
21.Vide letterdatedJune19,2014, itwasclarifiedtotheALRsthatthesaidRBI'sresponseto
letterdatedMay21,2014came intoexistenceafterthe inspectionconductedbythemon
December19,
2013,
as
such,
same
could
not
form
part
of
documents/
information/
evidencerelieduponbySEBIduringinspectiononDecember19,2013.OnJune23,2014,in
the interest of naturaljustice, ALRs were given opportunity to inspect: (i) copy of letter
datedApril30,2014issuedbytheAdjudicatingofficertoRBIalongwithannexuresA,Band
C thereto,with thenameof theaddresseeandconcerneddepartmentofRBI towhich it
wasmarkedredacted;and(ii)RBI'sletterdatedMay21,2014inoriginalwiththenameand
designation of the RBI Officer who had responded and reference number of the letter
redacted.Thereaftervideemaildated June26,2014,ALRs soughtadditional timeof two
weeks from June 30, 2014 to submit their response. Vide letter Ref: EAD
6/AK/VS/18481/2014datedJune27,2014,itwasinteraliafurtherclarifiedtotheALRsthat
the precedents submitted by them in their reply in respect of M/s. National Building
CorporationLimitedandM/s.DLFLimitedcannotsupporttheBRLMs/Noticeesclaimthat
they proceeded with abundant caution and concluded on the nonapplicability of the
minimum capitalization norms in a reasoned manner, considering the past precedents
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where a similar precedent was made, to conclude the nonapplicability of minimum
capitalizationnorms to investmentmadebyFIIs in the IPOofCARE.Further,theNoticees
videthesaid letterweregiventimetillJuly11,2014formakingfurthersubmission, ifany.
Vide letterdated July03,2014, theALRs recorded the inspectionundertakenon June23,
2014by
the
ALRs
on
behalf
of
the
Noticees.
Vide
letter
dated
July
11,
2014,
ALRs
on
behalf
of the BRLMs/ Noticees submitted their reply to letter dated May 27, 2014 which is
discussedinthelaterpartofthisOrder.
22.
ItwasobservedfromaperusalofthereplydatedJuly11,2014filedbytheALRsonbehalfof
the BRLMs/ Noticees that the ALRs while replying had inter alia categorised RBIs reply
datedMay21,2014intoView1,2and3asfollows:
(a) View1:acquisitionofsharesbyFIIsunderPISincaseofanofferforsalewillbetreated
asFDIandminimumcapitalisationnormswillapplytosuchinvestmentsinceacquisition
isnotmadeintermsofRBICircularA.P.(DIRSeries)CircularNo.53datedDecember17,
2003 at the ruling market price and the entire process does not take place on the
normalwindowofthestockexchangewheresecondarymarkettransactionstakeplace;
(b) View2:thePastPrecedentsare inthenatureof letterswhichare issuedonacaseto
casebasisandcannotbemadeapplicableuniformly.Onlythosecommunicationsissued
by way of A. P. (DIR Series) Circulars or Notifications or Press Releases under the
provisionsof theForeignExchangeManagementAct,1999 (hereinafter referred toas
FEMA)whichareinthepublicdomaincanbemadeapplicableacrosstheboard;and
(c) View 3: that pursuant to communication between the Company and the RBI with
respecttocompliancewithminimumcapitalisationnorms,RBIby its letterdatedApril
21,2014totheCompanyhasadvisedthatcertainreportingbemodifiedtocomplywith
therelevantguidelinestoenabletheinvestmenttoqualifyasFDI.
23.VidehearingNoticedated July21,2014,pursuant to receiptof replydated July11,2014,
another opportunity of personal hearing on August 5, 2014 was granted to the BRLMs/
Noticees.Ms.IpsitaDutta,Ms.GazalRawal,Ms.GarimaJoshifromAmarchand&Mangaldas
&SureshA.Shroff&Co.,theALRsonbehalfoftheBRLMs/Noticees,ShriAjayVaidyaand
ShriVishalBandekar fromKotakMahindraCapitalCompanyLimited,ShriAbhiAbhimanyu
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from DSP Merrill Lynch Limited, Shri B Renganathan from Edelweiss Financial Services
Limited,ShriSubirSahafromICICISecuritiesLimited,ShriSubodhMallyafrom IDBICapital
Market Services Limited, Shri Bhaskar Chakraborty from SBI Capital Markets Limited,
AuthorisedRepresentatives(ARs)appearedonbehalfoftheBRLMs/Noticees.
24.Duringthehearing,thefollowingwasclarifiedbasedonthecategorizationofRBIsresponse
datedMay21,2014intoview1,2and3,asabove,madebytheALRs:
(a) View1: Itwasclarifiedthatprima facie it ispartoftheallegations intheShowCause
NoticedatedOctober07,2013;
(b) View2:ItwasclarifiedthattheprecedentsreferredbytheBLRMscannotsupporttheir
claim
that
they
proceeded
with
abundant
caution
and
concluded
on
the
non
applicabilityoftheminimumcapitalizationnormsinareasonedmanner, byconsidering
the past precedents where a similar distinction was made, to conclude the non
applicabilityoftheminimumcapitalizationnormstoinvestmentsmadebyFIIsintheIPO
ofCARE;
(c) View3: Itwasnoted thatRBI vide letterdated July09,2014had advisedCARE that
CAREs Offer for Sale was in compliance with the minimum capitalization norms as
applicableto
non
fund
based
NBFCs.
25.Further,duringthehearingARsreiteratedindetailthesubmissionsmadevideletterdated
July 11, 2014 read with submissions made on April 21, 2014 and January 16, 2014 and
furthersubmittedcopiesofthefollowingPressReleasesissuedbyRBI datedFebruary05,
2010 in the matter of M/s. Sobha Developers Limited, dated December 20, 2011 in the
matterofM/seClerxServicesLimitedandM/sPolarisFinancialTechnologyLimited,dated
May 24, 2012 in the matter of M/s. Housing Development Finance Corporation Limited.,
datedSeptember
26,
2012
in
the
matter
of
M/s.
Voltamp
Transformers
Limited,
dated
March19,2013 inthematterofM/s.IndiabullsHousingFinanceLimited,datedMarch07,
2014 in thematterofM/s.Manappuram Finance Limitedanddated July03,2014 in the
matterofM/s.BhartiAirtelLimited.
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26.Further, certain queries raised at the hearing by the Adjudicating Officer and the
summarisedresponseoftheARstothesaidquerieshavebeenbroughtoutbelow:
(a) Query: Itwaspointedoutthat fromthedocumentsavailableonrecord,theredidnot
appearany
documental
proof
provided
to
RBI
indicating
the
date
of
opening
of
the
Offer. The ARs were advised to provide documentary evidence available, if any,
intimatingRBIaboutthedateofopeningoftheOffer.
ResponseoftheARs:
As theBRLMshadalready restricted the issueonly tononresident investing through
thePISrouteassetoutunderFEMARegulations,theywereofthebonafidebeliefthat
theminimum capitalization normswere inapplicable to the current issuer and there
wasno
further
requirement
to
engage
with
the
RBI
or
seek
any
approvals.
It
is
also
not
marketpractice towrite to theRBIoranyother regulator (other thanSEBI)notifying
them of the date of the issue opening. In any event, information about the issue
openingdatewasalreadyavailable/announcedinthepublicdomain.
(b) Query: Itwaspointedout that letterdatedDecember21,2012claimed thatwith the
submissionof letterdatedOctober05,2012,thematterwiththeregulatorwasclosed
in view of the claimed recognized legal position. However, from CAREs letter dated
December 10, 2012 to RBI, it was observed that after the opening of the Offer,
discussions were held with RBI after which it was understood that minimum
capitalization norms must be satisfied in relation to the Offer and accordingly an
addendumwas issuedonDecember11,2012.Clarificationwassoughtastowhysuch
measures such as formal discussions to understand RBIs interpretation on the
applicabilityofminimumcapitalizationnorms to theOffer,or,a letterseekingspecific
clarificationfromRBIcouldnotbeadoptedbeforetheopeningoftheoffer,especiallyin
view
of
the
fact
that
RBI
had
vide
letter
dated
September
26,
2012
communicated
that
minimumcapitalizationnormsapplicabletoNBFCsshouldbestrictlyadheredto.
ResponseoftheARs:
TheALRsreiteratedthesubmissionsmadebythematpara72oftheJanuary16,2014
submission.TheARsalso reiterated thefact thata strictadherence to theminimum
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capitalization normswould arise only if the issue was open to FDI investors under
Schedule1ofFEMA20.
TheARsfurther submitted that since FEMARegulationsandAPDIR SeriesCirculars/
MasterCirculars
issued
by
RBI
from
time
to
time
were
clear
(as
regards
non
applicability of the conditions applicable to FDI including minimum capitalization
norms)totheoffermadetoEligibleFIIsunderSchedule2ofFEMARegulations,Eligible
NRIsunderSchedule4ofFEMARegulationsandEligibleQFIsundertheSchedule8of
theFEMARegulations,theOctober05,2012letterwasfiledasamatterofrecordand
good order only to clarify the aforesaid nonapplicability, instead of seeking any
approvalsfromRBI.Hence, nofollowupwas requiredwithRBI subsequent to letter
datedOctober 05, 2012. In this regard, theARs reiterated the detailed submissions
madeontheapplicableregulatoryframeworkassetoutunderpara2028ofJanuary
16, 2014 submissions, para 3040 of the submission datedJanuary 31, 2014, reply
datedJuly11,2014andAnnexure14enclosinglegalopinionfromFormerChiefJustice
of the High Courts of Kerala and Karnataka and a Former Presiding Officer of the
SecuritiesAppellateTribunal.,ShriN.K.Sodhi.
ItwasfurthersubmittedthattheRBIletterdatedSeptember26,2012didnotmakeany
specific
mention
to
FIIs,
NRIs
or
QFIs.
The
specific
applicability
of
minimum
capitalizationnormstoFIIsandQFIwasmentionedforthefirsttimeinRBIletterdated
December06,2012.DiscussionswereheldwithRBIonlysubsequenttoreceiptofthis
letter,whichnecessitatedsuchdiscussions.Adetailed letterdatedDecember07,2012
was also filed with RBI clarifying that minimum capitalization norms were not
applicable.TheunderstandingoftheBRLMsthattheminimumcapitalizationissuewas
closedwiththeRBIafterfilingofletterdatedOctober5,2012wasfurthercorroborated
by thefact thatpostfiling of this letter, the company received a RBI letter dated
October18,
2012
granting
an
NOC
for
sale
of
share
by
the
selling
shareholders,
who
werebanks.CompanyalsoreceivedletterdatedOctober25,2012fromRBIstatingthat
sellingshareholderswhowereNBFCswerenotrequiredtoobtainNOC.
(c) Query: Clarification was sought in the matter as to if RBIs view vide letter dated
December06,2012wasfoundtobenot inconsonancewithFEMARegulationsandAP
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DIRSeriesCirculars/MasterCirculars issuedbyRBI from time to time, inwhich case,
whythematterwasnottakenupwithRBIforrevieworbeforetheappropriateforum,
after issuing of the addendum on December 11, 2012, especially when adjudication
proceedingswereinitiatedbySEBIontheissue.
ResponseoftheARs:
TheARssubmittedthatuponreceiptoftheRBIs letterdatedDecember06,2012,the
companyinconsultationwiththeBRLMs/Noticeesfiledadetailed letteronDecember
07, 2012, explaining why the minimum capitalization norms as applicable to FDI
investors investingunderschedule1ofFEMA20was inapplicable inthepresentcase.
However,giventhattheRBIdidnotchangeitsstandandtheissuehadalreadyopened,
having regard to theofferand interestof the investors, thecompany in consultation
withthe
BRLMs/
Noticees
agreed
to
comply
with
the
RBIs
instructions.
Further,
as
a
matterofpractice, it iscustomaryfor the issuer toengagewith theRBI (aswasalso
doneinotheroffersincludingNBCCL/DLFetc)andthemerchantbankersappointedas
theBRLMsdoesnotleadthediscussionswiththeregulatorsinmattersofgovernment/
regulatoryapprovals.Theunderlyingapproachisalsolinkedtothefactthatunderlaw,
the obligation to apply and seek government approval is on the issuer and not the
MerchantBankers.
Itwasfurther submitted that In thepresent case, since theRBIhadalready takena
stand regarding applicability ofminimum capitalization norms to the offer after the
openingoftheissue,theBRLMs/Noticeesfelt itwasappropriateto immediatelyissue
theaddendumwhichwasissuedbywayofapublicadvertisementpriortotheclosure
oftheOffertokeepthe investors informedandtheprospectuswasdulyupdatedwith
alltherelevantRBIrelatedcorrespondence.
Further,
ARs
submitted
that
in
terms
of
the
extant
framework
within
which
RBI
operates,thereisnorecognizedmechanismthatiscurrentlyavailabletoappealfroma
directiongivenbytheRBI(suchasonerendered inthepresentcase)orseekareview.
Also,bythetimetheAOproceedingswere initiated,almostayearaftertheclosureof
the offer, the company had already received the FDI investmentfor complyingwith
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minimumcapitalizationnormsintermsofRBImandate.Assuch,therewasnobasisto
engagewiththeRBIastotheapplicabilityofthesenormstotheissuercompany.
27.TheARsfurthersoughtanadditionalweekstimetofileadetailedrecordofthehearingand
detailedresponses
to
the
aforesaid
queries
and
stated
that
the
same
should
be
read
in
conjunctionwiththeearliersubmissionsandthesesummaryresponses.Thisadditionaltime
tofiletherecordofhearingandwrittenresponsestothequerieswasgranted.Vide letter
datedAugust14,2014,ALRssubmittedtherecordofthesecondhearingwhichisdiscussed
inthe laterpartoftheOrder.Detailsoftheanchor investorswhoapplied intheOfferand
wereallocatedsharesandthepriceatwhichtheshareswereallocated,asalsodetailsofFIIs
andQFIswhoapplied in theOfferandwereallocatedshares,togetherwiththedetailsof
thedailysubscriptionreceived fromallcategoriesof investorswere interaliasoughtvide
emaildatedSeptember12,2014.Further,thedetailsofallocationmadecategorywisevisa
vis the subscription receivedwas soughtvideemaildatedSeptember30,2014. The said
details were received from the ALRs on behalf of the BRLMs/ Noticees vide their letters
datedSeptember24,2014,October07,2014andOctober13,2014.
28. It was further noted that it was submitted by the ALRs that based on the review of
applicable regulatory framework at the time and the legal advice sought, the BRLMs/
Noticees
firmly
and
independently
believed
that
if
the
Offer
was
limited
to
eligible
FIIs
(investing under Schedule 2 of the FEMA Regulations), eligible NRIs (applying on a non
repatriationbasisinaccordancewithSchedule4oftheFEMARegulations)andeligibleQFIs,
the condition in respect of the minimum capitalisation norms would not apply to the
Company. However, no such legal advice received by the BRLMs/ Noticees had been
submittedbeforetheAdjudicatingOfficer.Hence,videemaildatedSeptember30,2014,the
BRLMs/Noticeeswererequestedtoproducesuch legaladvicereceived, ifany,byOctober
01,2014.
29. InresponsevideletterdatedOctober01,2014,theALRsonbehalfoftheBRLMs/Noticees
have interalia submitted that theBRLMs/Noticeesengaged indiscussionswith the legal
advisors on the Offer i.e. Luthra & Luthra Law Offices (domestic legal counsel to the
Noticees)andAmarchand&Mangaldas&SureshA.Shroff&Co.(domesticlegalcounselto
thecompany).Itwasfurtherstatedthattheviewprovidedbythelegalcounselswasinline
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withthecollectiveunderstandingformedbytheBRLMs/Noticeesonthematter.Tosupport
the fact that thediscussions in relation to theapplicabilityof theminimum capitalization
normdidtakeplacebeforethefilingofletterdatedOctober05,2012withRBI,theBRLMs/
Noticees requested the legalCounsels toprovideaconfirmation in this regard from their
end.Accordingly,
Luthra
&
Luthra
Law
Offices
vide
their
letter
dated
October
01,
2014
addressed to the BRLMs/ Noticees inter alia confirmed that post receipt of letter dated
September26,2012fromRBI,theywereinvolvedinvariousdiscussionswiththecompany,
theBRLMsaswellas the IndianLegalCounsel to thecompanyon theapplicabilityof the
provisionsofandvariousinvestmentroutesundertheFEMARegulations,MasterCircularon
Foreign Investments in Indiadated July02,2012 issuedbyRBI and theConsolidated FDI
PolicydatedApril10,2012 issuedby theDepartmentof IndustrialPolicy andPromotion,
MinistryofCommerceand Industry,Governmentof India. Itwas interalia furtheradded
thereinthatthecompanyhadfiledletterdatedOctober05,2012withRBI,inlinewiththese
discussions,andthatrelevantchangeswerealsomadetotheOfferdocument.Similarletter
datedOctober01,2014wasalso issuedbyAmarchand&Mangaldas&SureshA.Shroff&
Co.totheBRLMs/Noticeesinthematter.Theseletters,inturn,wereforwardedbytheALRs
alongwiththeiraforesaidreplydatedOctober01,2014.
CONSIDERATIONOFISSUESANDFINDINGS
30.
IhavecarefullyperusedthewrittensubmissionswhereversubmittedbytheNoticees,the
factsput forthduring thehearingsand thedocumentsavailableon record.Theallegation
against theBRLMs/Noticees is that thenondisclosureof thematerial information in the
RHPmakesBRLMsjointlyandseverely liableforfailingtoexerciseproperduediligenceon
theirpart,whichisinviolationofClause1ofFormCofScheduleVIofRegulation8(2)(b)of
ICDR Regulations, Regulation 57(1), Regulation 57(2)(a)(ii), Regulation 64(1) of ICDR
RegulationsandRegulation13ofMerchantBankersRegulationswhichreadasfollows:
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Regulation8(2)(b),57(1),57(2)(a)(ii)and64(1)oftheICDRRegulations
Documentstobesubmittedbeforeopeningoftheissue
8 (2) The leadmerchant banker shall submit thefollowing documents to theBoardafter
issuance of observations by the Board or after expiry of the period stipulated in sub
regulation(2)
of
regulation
6if
the
Board
has
not
issued
observation:
(b) aduediligencecertificateasperFormCofScheduleVI,at the timeofregistering the
prospectuswiththeRegistraroftheCompanies.
Mannerofdisclosuresintheofferdocument
57(1)Theofferdocumentshallcontainallmaterialdisclosureswhicharetrueandadequate
soastoenabletheapplicantstotakeaninformedinvestmentdecision.
(2)Withoutprejudicetothegeneralityofsubregulation(1):
(a)theredherringprospectus,shelfprospectusandprospectusshallcontain:
(ii)thedisclosuresspecifiedinPartAofScheduleVIII,subjecttotheprovisionsofPartsBand
Cthereof.
Duediligence.
64 (1) the leadmerchantbankersshallexerciseduediligenceandsatisfyhimselfaboutall
the aspects of the issue including the veracity and adequacy of disclosure in the offer
documents.
Regulation13oftheMerchantBankersRegulations
Code
of
conduct.
13EverymerchantbankershallabidebytheCodeofConductasspecifiedinScheduleIII.
Readwiththefollowingclauses:
Clause1Amerchantbankershallmakealleffortstoprotecttheinterestsofinvestors.
Clause4 Amerchantbanker shallatall timesexerciseduediligence,ensurepropercare
andexerciseindependentprofessionaljudgment.
Clause 6 A merchant banker shall ensure that adequate disclosures are made to the
investorsinatimelymannerinaccordancewiththeapplicableregulationsandguidelinesso
asto
enable
them
to
make
abalanced
and
informed
decision.
Clause7 Amerchantbankershallendeavourtoensurethattheinvestorsareprovidedwith
trueandadequateinformationwithoutmakinganymisleadingorexaggeratedclaimsorany
misrepresentationandaremadeawareoftheattendantrisksbeforetakinganyinvestment
decision.
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Clause20 Amerchantbankershallnotmakeuntrue statementorsuppressanymaterial
factinanydocuments,reportsorinformationfurnishedtotheBoard.
31.TheALRsonbehalfoftheBRLMS/Noticeeshaveinteraliasubmittedasfollows:
Thatpost
deliberations
among
the
BRLMs/
Noticees
themselves
as
well
as
with
the
Companyandbasedon careful considerationof theapplicable regulatoryframework,
theBRLMs/Noticeeswereoftheview thattheapproachbeingtaken intheOfferwas
correctandreasonableanddidnotanticipateanyfurtherregulatoryconcern inrespect
oftheOffer;
Thatfrom theplainreadingoftheFEMARegulations, itwasclearthat incaseofnon
bankingfinancial companies, theminimum capitalisationnormsapplywith respect to
investmentbywayofFDIRouteonly;
That PIS Route set out under Regulation 5(2) read with Schedule 2 of the FEMA
Regulations,permitsFIIstosubscribetosharesofan Indiancompany in publicoffers.
Since public offers include offerfor sale by existing shareholders of a company, FII
participationinsuchpublicoffersisunderthePISRoute;
That in terms of Schedule 2 of the FEMARegulations as introduced onMay 3, 2000,
under paragraphs 1(2) and 1(5), FIIs were permitted to purchase shares through
registeredstockbrokersandalsothroughprivateplacement.However,paragraph1(5)
which
provides
for
private
placements
was
substituted
via
an
amendment
dated
June
18,
2003(JuneAmendment),withthecurrentparagraph1(5)bringingpublicofferswithin
thescopeofSchedule2;
Thatsubsequently,inacirculardatedDecember3,2003(A.P.(DIRSeries)CircularNo.38)
(CircularNo.38),RBIelaboratedontheJuneAmendmentstating interaliathataFII
may invest in a particular issue of an Indian company either under Schedule 1 or
Schedule2. Itcannot,however,availofboththeroutessimultaneouslyforaparticular
issue;
Thatsubsequently,
in
terms
of
Circular
No.
53,
RBI
permitted,
SEBI
registered
FIIs/
sub
accountsofFIIstobuy/sellequityshares/debenturesofIndiancompanies...throughstock
exchanges in India at the ruling market price,... and also to buy/sell shares and
debenturesetc.oflisted/unlistedcompaniesotherwisethanonstockexchangeataprice
approved by SEBI/ Reserve Bank as per terms and conditions prescribed in the
Annexure. (emphasissupplied). In relation topricing, theAnnexure toCircularNo.53
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statedthatinthecaseofpublicoffer,thepriceofsharestobeissuedshouldnotbeless
thanthepriceatwhichsharesareissuedtoresidents;
That at View 1 of the RBI Communication, while citing Circular No. 53, it has been
mentionedthatwhereanacquisitionofsharesisnotmadeattherulingmarketpriceon
thefloor
of
the
stock
exchange,
it
will
not
be
treated
as
investment
under
the
PIS
Route;
That theRBICommunication selectivelymentionsonly thepart in theCircularNo.53
whichgrantsgeneralpermissiontoFIIsforundertakingtradesonthefloorofthestock
exchange,andneithermentions,norexplainsthewording inrelationtobuying/selling
sharesotherthanonastockexchange,i.e.,andalsotobuy/sellsharesanddebentures
etc.of listed/unlistedcompaniesotherwisethanonstockexchangeatapriceapproved
bySEBI/ReserveBankaspertermsandconditionsprescribedintheAnnexure;
That, aplain reading of Circular No. 53 makes is abundantly clear that the extant
regulatoryframeworkalsocontemplatesacquisitionsotherwisethanonstockexchange
atapriceapprovedbySEBI/RBIasperthetermsandconditionsprescribedtherein;
Further, that at View 1 of RBI Communication, it is clearly mentioned that such
acquisitionistreatedasinvestmentundertheFDIpolicyandalltheFDIconditionalities,
includingminimum capitalization norms, aremade applicablefor the same.Aplain
readingofthesamesuggeststhatminimumcapitalizationnormsareapplicableonlyto
FDItransactions.Giventhat investmentsundertheFDIRoutewerenotpermittedtobe
made
in
the
Offer,
there
was
no
reason
for
the
FDI
conditions,
including
that
in
relation
tominimumcapitalisationnorms,toapply;
That specifically, conditions with respect tominimum capitalisation do notfind any
mentioninRegulation5(2)andSchedule2oftheFEMARegulationswhichsetsoutlimits
andconditionsapplicableto investmentsbyFIIsunderthePISRoute.Schedule4ofthe
FEMARegulationsdealingwithinvestmentsbyNRIsonanonrepatriationbasisdoesnot
imposeanyminimumcapitalisation requirements. In termsofSchedule8of theFEMA
Regulations,QFIshavealsobeenaccordedageneralpermissiontoinvestinpublicoffers
withoutany
stipulation
of
ensuring
compliance
with
minimum
capitalisation
norms
applicabletoFDI;
Further,thatfromtheplainreadingoftheschematicrepresentationassetoutunderthe
MasterCircularreadwiththeFEMARegulations, it isclearthatFIIs,NRIsandQFIsfall
underthePISRoute;
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Thatany interpretationofCircularNo.53cannotoverride theprovisionsof theFEMA
Regulations which make it abundantly clear that participation in public offers is
permittedforFIIsunder thePISRoute.Thus, theapplicabilityofFDIconditionalities to
FIIs investingunderthePISRoute intheOffer (assetout intheRBICommunication) is
not,explicitly
or
implicitly,
supported
by
any
legislation,
regulation,
notification,
circular
orpress release inthepublicdomain.Aplain readingof theapplicable laws, including
theFEMARegulationsaswellasCircularNo.53,doesnotwarrantsuchaninterpretation
either;
That theNoticeeshave sincealsoobtainedan independent legalopinionfromFormer
ChiefJusticeoftheHighCourtsofKeralaandKarnatakaandaFormerPresidingOfficer
of the SecuritiesAppellate TribunalMr. N.K. Sodhi (hereinafter referred to as Legal
Opinion);
That theNoticeesfirmly believe that the disclosure in respect of theRBI letterdated
September26,2012, inthesection GovernmentandOtherApprovalsof theRHPwas
complete and adequate as the disclosurewasmade in light of the BRLMs/Noticees
understandingthatminimumcapitalisationnormswerenotapplicabletotheCompany
inthepresentcase;
ThatasthekeyapprovalinthisregardwasthegrantofexemptionbytheRBItoobtain
requisiteNoC (since theCompanys letters datedMay 15, 2012 andAugust 31, 2012
specifically
sought
that
approval)
it
was
spelt
out
in
the
Government
and
Other
Approvals section of the RHP in amanner that is consistentwithpastpracticesfor
disclosuresmadeunder this section.TheSeptember Letterwasaccordinglyalsomade
availableforpublic inspection to all investorsparticipating in theOfferwho had the
opportunitytoreviewanyconditionalitiesimposedbytheRBI;
That theBRLMs/Noticeesbasedon the reviewofapplicable regulatoryframeworkat
thetimeand legaladvicesought,firmlyand independentlybelievedthat iftheOffer is
limitedtoFIIs(investingunderSchedule2oftheFEMARegulations),NRIs(applyingona
nonrepatriation
basis
in
accordance
with
Schedule
4of
the
FEMA
Regulations)
and
QFIs
(Schedule 8 of the FEMA Regulations), the condition in respect of the minimum
capitalisationnormswouldnotapplytotheCompany.Accordingly,theNoticeesbelieved
withgood reason that conditionswith respect tominimum capitalizationnormswere
notrelevanttobedisclosedintheRHPasthesewerenotapplicableanddisclosurewith
respecttoexemptiontoeligiblenonresidentinvestorshavingtoobtainaNoCassetout
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intheletterdatedSeptember26,2012ofRBIwasasufficientandrelevantdisclosurefor
investorstotakeaninformedinvestmentdecision;
Furtherthat, inrelationtotheCompanys lettertotheRBIdatedOctober5,2012,the
BRLMs/NoticeeshadnoreasonstobelievethattheOctober05,2012letterwasindeed
relevantto
be
disclosed
in
the
RHP
as
it
was
neither
in
the
nature
of
an
application
for
an
approval,nor, wasitinthenatureofanapprovalitself;
ThattheOctober05,2012letterwaswrittentotheRBIonlyasanacknowledgementof
theSeptember26,2012 lettersincetheNoticeeshadreasonablebasistoconcludethat
ifnoFDIwasbeingpermitted in theOffer, thequestionofcompliancewithminimum
capitalisationnormsdidnotarise.Hence,theCompanyfiledtheletterdatedOctober05,
2012 only as amatter of goodpractice,without seeking anyfurther clarifications or
approvalsfromtheRBIandinviewofthestepsthatwereundertakentoensurethatthe
DraftRedHerringProspectus (hereinafterreferred toas DRHP) wasupdatedto limit
thecategoriesofforeigninvestorsparticipatingintheOffer,theBRLMs/Noticeesfirmly
believed that all issues with respect to the nonapplicability of the minimum
capitalisationnorms to theCompany, in thepresent casewereadequatelyaddressed
andclosedwiththeRBI;
ThattheNoticeeshadnoreasontobelievethatdisclosureoftheconditionssetoutinthe
letterdatedSeptember26,2012wasinadequate/misleadingorthattheinclusionofthe
letter
dated
October
05,
2012
in
the
RHP
prior
to
the
issue
opening
would
have
assisted
theinvestorswhowereparticipatingintheOfferinanymanner;
That theNoticeeshadsatisfied themselvesaboutalltheaspectsoftheOffer including
theveracityandadequacyofthedisclosuresandarenotinviolationofanyprovisionsof
theICDRRegulations,asalleged;
That inaddition toallof theabove,upon receiptof theRBIs letteronDecember10,
2012 to comply with minimum capitalisation norms post the Offer, the Noticees
promptlypreparedanaddendumand submitted the samewithSEBIonDecember10,
2012itself.
This
Addendum
was
published
in
the
newspapers
with
wide
circulation
on
December 11, 2012prior to closure of theOffer in the interest of the investors, and,
updatedandsupplementedtheRHPwithdetailsofallrelevantcorrespondencewiththe
RBI to explain the entire discussion that took place in relation to compliance with
minimum capitalisation norms. Further, the prospectus filed with the Registrar of
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Companies on December 15, 2012 was also duly updated with the details in the
Addendum;
That thefiling of theAddendumwas not an aberration or an anomaly as the ICDR
Regulationsthemselvescontemplateandallowforthepublicationofadvertisements in
theevent
there
are
material
developments
post
filing
of
the
RHP
that
are
required
to
be
disseminated to the investors. It is also noteworthy that theformats of duediligence
certificatesprovided under FormD and E of ScheduleVI of ICDR Regulations require
submissionofsubsequentadvertisementsrelatingtoamendments,ifanymadetoRHP.
Assuch,SEBIalsorecognizesthattheremaybeinstanceswhichmayrequirechangesto
be included toaRHPpostfiling theRHPwith theRegistrarofCompanies (hereinafter
referredtoasROC)bywayofissuanceofadvertisements.AstheAddendumconstitutes
an integralpart of the RHP, theNoticees ensured that true, complete and adequate
disclosures were provided to the investors to enable them to take an informed
investmentdecisionbeforetheclosureoftheOffer;
ThatwhilsttheBRLMs/Noticeeshadexercisedcareanddiligencewhilearrivingattheir
conclusions in relation to thenonapplicabilityofminimumcapitalisationnorms to the
presentmatter,theconditionswereacceptedbytheCompanyintheinterestoftheoffer
processandtheinvestors;
ThattheNoticeesproceededona reasonableandwelldeliberatedunderstanding that
given
the
nature
of
the
Offer
and
the
changes
made
to
restrict
FDI,
the
requirement
to
ensurecompliancewithminimumcapitalisationnormswasinapplicable.Themannerin
whichtheNoticeesarrivedattheirconclusionsisdemonstrativeoftheirbonafideswhile
carryingouttheirfunctionsasmerchantbankers;
Thatfurther inthepresentcase (i)no losswascausedto the investors; (ii)no investor
grievances were received by the Noticees in relation to the Addendumpursuant to
publicationofthesame;(iii)theOfferwasinfactoversubscribedover30times;and(iv)
theprice discovered in the book building issue did notmove adversely in subsequent
tradingin
the
scrip
upon
listing.
No
such
allegations
have
been
made
in
the
Notices
either.
ThatthetermduediligencehasnotbeendefinedintheMerchantBankersRegulations
ortheICDRRegulations.However,itisabundantlyclearthatthelawdoesnotimposean
obligation to meet with, extraordinary or detective standards.When a person is
required to exercise due diligence the only requirement is that usual ordinary and
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reasonableeffortsbeexercisedhavingregardtothefactsandcircumstancesofthecase.
InthecaseofImperialCorporateFinance1,theSecuritiesAppellateTribunal(SAT)has
heldthat,ALeadManagerisrequiredtoemployreasonableskillandcarebutheisnot
requiredtobeginwithsuspicionandtoproceedinamanneroftryingtodetectafraud
orlie
unless
such
information
excites
his
suspicion
or
ought
to
excite
his
suspicion
as
a
professionalmanofreasonablecompetence.2
Thatinthepresentsituationaswell,theBRLMs/Noticeeshadappliedtheirindependent
professional judgement at all times and exercised reasonable skill and care in
determiningwhetherminimumcapitalisationnormswereapplicable in relation to the
Offer.Once anassessmentof the relevantfactorswasmadeby theBRLMsbasedon
their independent evaluationandadvicefrom legal counsel, thenecessarydisclosures
were included in theofferdocuments incompliancewithRegulation64(1)of the ICDR
Regulations;
Thatastherewasnoviolationofanyofthesubstantiveprovisionsoflaw,asapplicable,
noviolationoftheCodeofConductsetout intermsofRegulation13oftheMerchant
BankersRegulationscanbeestablished.IntheSEBIorderdatedApril17,2009issuedin
theadjudicationproceedingsagainstSBICapitalMarketsLimited(inthepublic issueof
SyndicateBankLtd.) ithasbeenstatedthattheviolationofthesubstantive law isnot
established, the allegations of violation of the provisions of the Code of Conduct
prescribed
under
the
Merchant
Bankers
Regulations
is
not
sustainable.;
Thatwhilearrivingat their conclusion in relation tononapplicabilityof theminimum
capitalisationnorms,theBRLMs/Noticeesreliedontheplainreadingoftheapplicable
legalframework,further corroborated by the collective experience of theNoticees as
wellas, specifically, thePastPrecedents,and the legaladvice receivedfrom the legal
counsel;
To substantiate the above submission, the Noticees provided SEBI with the Past
Precedents (M/s. National Building Corporation Limited and M/s. DLF Ltd.), where
approvalswere
granted
by
RBI/
Department
of
Industrial
Policy
and
Promotion
(DIPP),
wherein the regulator/ relevant authority distinguished between investments made
underSchedule1andthosemadeunderSchedule2oftheFEMARegulations.Thatthe
Noticeesconsideredtheapplicablelegalframeworkaswellasthepastregulatorystance
1Imperial Corporate Finance and Services Pvt Ltd v SEBI, SAT Order dated July 7, 20042Id; see also, Samir C. Arora v SEBI, SAT Order dated October 15, 2004
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is indeeddemonstrativeofthefactthattheNoticeesproceededwithabundantcaution
inthepresentmatter;
Thatany lettersfrom regulatoryauthoritiesare indicativeof themanner inwhich the
authorities read and interpret the applicable law. The Past Precedents were not
consideredby
the
Noticees
in
isolation,
but
with
regard
to
their
relevance
to
the
Offer.
In
terms of the Past Precedents, RBI had clarified that the FDI linked conditions for
investment inconstructionanddevelopmentsector likecapitalisationnormswouldnot
beapplicabletoFIIasFII investment inpublicoffers iscoveredunderSchedule2ofthe
FEMARegulationsunderthePISRoute.TheBRLMs/Noticeesconsideredexamplesinthe
construction and development sector since it also has minimum capitalisation
conditionalitiesundertheFDIRoute,as inthecaseofnonbankingfinancialcompanies
andhadreasonablebasistobelievethatthelawwouldbesimilarlyinterpretedinother
cases.ForinvestmentsintheconstructionanddevelopmentsectorthroughPISRoute,no
suchconditionsareapplicable.Inaddition,thePastPrecedentsalsodealtwithoffersfor
sale;
Further, that theNoticees did notmerely rely on the Past Precedents and did infact
consider regulations, notifications, circulars andpress releases in thepublic domain,
none ofwhich state thatminimum capitalisations norms apply to investmentsmade
under the PIS Route. The Noticees, based on their plain reading of the applicable
regulatory
framework,
together
with
the
collective
experience
of
the
Noticees
from
the
Past Precedents, and the legal advice receivedfrom the legal counsel, came to the
conclusionthatminimumcapitalizationnormswereindeednotapplicabletotheOffer;
ThatRBIsviewsvidereplydatedMay21,2014in thisregarddonothavetheeffectof
rendering void the efforts undertaken by the BRLMs/ Noticees in arriving at their
conclusions. The allegations raised in theNotices and the ClarificatoryNotices are in
relationtotheconductoftheBRLMs/Noticees.Assetoutinthisreplyandalsoinearlier
submissionsmadeinthisregard,theBRLMs/ Noticeesproceededwithdeliberationand
onlyafter
evaluating
of
all
relevant
considerations;
ThattheallegationbySEBIthattheRBIsview(i.e.thatitisnotopenforanentitytorely
onregulatoryguidanceprovidedbytheRBIinformalcommunicationstosimilarcasesin
thefuture) impliesthattheBRLMs/Noticeesdidnotproceedwithabundantcaution, is
misplaced.TheRBIsviewshouldnothavetheeffectofcastingaspersionsonthebona
fides of the conduct of the Noticees.Whilst the Past Precedents supplemented the
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Noticeess understanding, theNoticees had a strong basis to conclude thatminimum
capitalisationnormsdidnotapplyinthepresentcase;
ThatinrelationtotheviewssetoutbytheRBI,itwassubmittedthat:
a. View1:TheRBICommunication selectively refersonly toapart inCircularNo.53
andneither
mentions,
nor
explains
the
wordings
in
the
same
Circular
No.
53
which
does infactprovideforbuying/sellingofsharesbyFIIsotherwise thanonastock
exchangeunder thePISRoute,whichwould cover the FII investmentmade in the
Offer.Thus, such investments,beingwithin the scopeofCircularNo.53 (andalso
Schedule2oftheFEMARegulations)clearlyfallwithinthePISRouteandaccordingly
not subject to anyminimum capitalization norms.As substantiated by the Legal
Opinion obtained, a plain reading of the applicable law is consistent with the
conclusionsdrawnbytheBRLMs/Noticees;
b.View2:WhilsttheBRLMs/Noticeesconsideredtheapplicable legalframeworkand
legaladvicewhileconsideringtheapplicabilityoftheminimumcapitalisationnorms,
thePastPrecedentsonlysubstantiatedtheBRLMs/Noticeesconclusionsfurtherand
was, in no way, the sole basis for determining the applicability of minimum
capitalisationnorms.Specially, theconclusiondrawnbySEBIthat theNoticeesdid
notactinareasonablemanner,inlightofView2ismisplacedsincetheNoticeesdid,
infact,relyonareadingoftheFEMA,theFEMARegulations,aswellasthecirculars
issued
by
the
RBI
in
furtherance
of
the
same.
Therefore,
the
Noticees
based
their
conclusiononacombinedconsiderationoftheapplicablelegalframework,whichis
demonstrativeofthebonafidesoftheirconductandthemeasurestakenbythemto
ensurethatadequateduediligencewasexercised;
c. View3:TheRBIsviewsare consistentwith the submissionsmadeby theBRLMs/
Noticees. The BRLMs/Noticees have alsoprovided an update on the Companys
compliancewiththeminimumcapitalisationnorms.
Thataccordingly,theBRLMs/Noticeesconducthasbeeninlinewiththeapplicablelegal
frameworkand
specifically,
not
in
violation
of
either
Clause
1of
Form
Cof
Schedule
VI
read with Regulations 8 (2) (b), Regulation 57 (1), Regulation 57 (2) (a) (ii) and
Regulation64 (1)of the ICDRRegulations,orClauses1,4,6,7and20of theCodeof
ConductandRegulation13oftheMerchantBankersRegulations.
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32. Theissuesthat,therefore,ariseforconsiderationinthepresentcaseare:
A. Whatisthesignificanceofmaterial,trueandadequatedisclosuresasperRegulation57(1),
Regulation57(2)(a)(ii),
Regulation
64(1),
Clause
1of
Form
Cof
Schedule
VI
of
Regulation
8(2)(b)of ICDRRegulationsandRegulation13ofMerchantBankersRegulationsreadwith
clauses1,4,6,7and20ofCodeofConductforMerchantBankersasspecifiedinSchedule
III?
B.
In light of the above, whether RBI letter dated September 26, 2012 and the status of
complianceof the samewasamaterialdisclosure required tobedisclosed in theRHPof
CARE so that the foreign investors/ NonResident investors {i.e. including FIIs, QFIs}
investingintheIPOofCAREcouldtakeaninformedinvestmentdecision?
C. Ifso,whetherthedisclosuremadeintheRHPofCAREwithrespecttotheRBIsletterdated
September26,2012andthestatusofitscomplianceweretrueandadequateasperClause
1ofFormCofScheduleVIofRegulation8(2)(b),Regulation57(1),Regulation57(2)(a)(ii)
and Regulation 64(1) of ICDR Regulations and Regulation 13 of Merchant Bankers
Regulationsreadwithclauses1,4,6,7and20ofCodeofConductforMerchantBankersas
specifiedinScheduleIII?
D.
Ifnot,whethertheBRLMs/theNoticeessuppressedmaterialfactsintheRHPofCAREand
attempted
to
mislead
the
investors
into
believing
that
RBI
had
unconditionally
exempted
eligiblenonresidentinvestors,intheircapacityastransfereeentities,fromtherequirement
toobtainaNoCfromtheirrespectiveregulatorsinrelationtoparticipatingintheOffer?
E. If so, did the BRLMs/ Noticees failed to exercise proper duediligence on their part in
violation of Clause 1 of Form C of Schedule VI of Regulation 8(2)(b), Regulation 57(1),
Regulation 57(2)(a)(ii) and Regulation 64(1) of ICDR Regulations and Regulation 13 of
MerchantBankersRegulations readwithclauses1,4,6,7and20ofCodeofConduct for
MerchantBankersasspecifiedinScheduleIII?
F.
Doesthe
violation,
ifany,
on
the
part
of
the
BRLMs/
the
Noticees
attract
monetary
penalty
underSection15HBoftheSEBIAct?
G. If so, what would be the monetary penalty under Section 15HB of SEBI Act against the
BRLMs/theNoticeestaking intoconsiderationthefactorsmentioned inSection15Jofthe
SEBIAct?
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FINDINGS
33. Beforewemoveaheadtoexaminetheaforesaidissues,weneedtolookatthebackground
behindissue
of
letter
dated
September
26,
2012
by
RBI.
However,
even
before
we
delve
intothisaspect,wefirstneedtohaveanoverviewofthefollowing:
(A)
theForeignDirectInvestment(FDI)frameworkinIndia;
(B) theapplicableForeignInvestmentFrameworkasattherelevantpointoftime;and
(C) thebroaddetailsabouttheIPOofCARE
(A) ForeignDirectInvestment(FDI)FrameworkinIndia:AnOverview
TheFDIframework inIndia isgovernedbytheForeignExchangeManagementAct,1999along
withitsRegulations,theConsolidatedFDIPolicyandtheCircularsissuedtoAuthorisedPersons
byRBI from time to time.The ForeignExchange Management Act, 1999 (FEMA) is aCentral
StatuteoftheParliamentand istheSupremeActandwasenactedtoconsolidateandamend
the law relating to foreign exchange with the objective of facilitating external trade and
payments and forpromoting theorderly development and maintenanceof foreign exchange
market in India. The Parliament had enacted the FEMA to replace the Foreign Exchange
Regulation
Act,
1973
and
came
into
force
on
the
1st
day
of
June,
2000.
FEMA
and
the
Rules
and
Regulations issued under the FEMA regulate foreign investment in India. The relevant
Regulations for FDI are the Foreign Exchange Management (Transfer or Issue of Security by
Persons Resident Outside India) Regulations, 2000 (Notification No. FEMA 20/2000RB dated
May3,2000)(FEMARegulations).RBIisthenodalregulatoryauthorityforallmattersconnected
withforeignexchangetransactionsinIndia.Further,underSection10(4)and11(1)oftheFEMA,
RBIhasthepowertoissuegeneralorspecialdirectionsororderstoAuthorisedPersonsasthe
RBImay,fromtimetotime,thinkfitforthepurposeofsecuringcompliancewiththeprovisions
ofthe
FEMA
and
of
any
rules,
regulations,
notifications
or
directions
made
thereunder
Authorised Persons are the Authorised Dealers, Money Changers, Banks, etc., who are
authorisedbytheRBItodeal in foreignexchange.TheseCircularsareoperational instructions
fromtheRBItoBanks,etc.andaregenerallyknownasA.P.(DIRSeries)Circulars.Onceayear
on1stJulyofeveryyear,RBIissuesaMasterCircularwhichconsolidatesalltheexistingCirculars
atoneplace.MasterCircularsare issuedwithasunsetclauseofoneyear.TheDepartmentof
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Industrial Policy and Promotion (hereinafter referred to as DIPP), Ministry of Commerce &
IndustryframestheForeignDirectInvestment(FDI)Policy inIndiawhichlaysdownthesectors
inwhich FDI is allowed, the conditions attached and the sectoral caps. It also laysdown the
sectorsinwhichFDIisAutomaticandthoseinwhichitrequiresApprovaloftheGovernmentof
India.The
FDI
Policy
is
prepared
in
the
form
of
the
Consolidated
FDI
Policy.
The
Policy
defines
FDI to mean investment by nonresident entities in the capital of an Indian company under
Schedule1ofFEMARegulations.TheForeignInvestmentPromotionBoard(hereinafterreferred
to as FIPB), Department of Economic Affairs, Ministry of Finance is a nodal authority for
approvingallFDIproposalswhichrequirepriorApprovaloftheGovernmentofIndia.TheFIPB
providesasinglewindowmechanismforallsuchFDIproposals,whicharenotpermissibleunder
the automatic route. The FDI Policy is notified by the RBI as amendments to the FEMA
Regulations.
(B) Foreign ExchangeManagement (Transfer or Issue of Security by Persons Resident
Outside India) Regulations, 2000 (NotificationNo. FEMA 20/2000RB datedMay 3,
2000)(FEMARegulations)
Withtheabove inplace,wewillnowmoveontohaveacloserviewoftheFEMARegulations.
The FEMA Regulations have from time to time on a progressive basis been liberalizing the
exchangecontrolregimeofIndia.Regulation5oftheFEMARegulations,inparticular,laysdown
the
terms
and
conditions
subject
to
which
foreign
investors
would
be
permitted
to
invest
into
Indiansecurities.Regulation5hasbeenclassifiedintoitssubcomponentsasfollows:
Regulation5ofFEMARegulations
Sub
Regulation
Dealswith Applicable
schedule
5(1) InvestmentsbypersonsorentitiesresidentoutsideIndia(other
than citizens of/ entity incorporated in Bangladesh and
Pakistan) under the Foreign Direct Investment Scheme (FDI
Scheme)
Schedule1
5(2) InvestmentsbyregisteredForeignInstitutionalInvestors(FIIs)
underthePortfolioInvestmentScheme(PISScheme)
Schedule2
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Regulation5ofFEMARegulations
Sub
Regulation
Dealswith Applicable
schedule
5(3)(i) Investments by Non Resident Indians (NRIs) in shares and
debenturesof
an
Indian
Company
under
Portfolio
Investment
Scheme(PISScheme)
Schedule3
5(3)(ii) Investments by NRIs in shares and debentures of an Indian
Company on nonrepatriation basis other than under PIS
Scheme
Schedule4
5(4) Investments insecuritiesother thansharesanddebenturesof
an Indian Company by NRIs or registered FIIs or QFIs or any
otherpersonresidentoutsideIndiaincludedinSchedule5
Schedule5
5(5) Investments by registered Foreign Venture Capital Investors
(FVCI)
Schedule6
5(6) Trades of Registered FIIs in exchange traded derivative
contracts approved by RBI/ SEBI to be subject to limits and
margin requirements prescribed by RBI/ SEBI, as well as
stipulations regarding collateral securities as directed by RBI
fromtimetotime
5(7)
Investmentby
NRIs
in
exchange
traded
derivative
contracts
approvedby SEBI from time to timeoutof INR fundsheld in
India on nonrepatriable basis subject to limits prescribed by
SEBI
5(7A) InvestmentbyQFIsinsharesofIndiaCompany Schedule8
5(8) Topurchase,holdor sell IndianDepositoryReceipts (IDRs)of
eligible companies residentoutside Indiaand issued in Indian
CapitalMarketbyregisteredFIIs includingsubaccountsofFIIs
orNRIs
Para 2 of
Schedule7
FIIs can invest in aparticular issueof an Indian companyeitherunder Schedule 1or
Schedule2.Itcannot,however,availofboththeroutessimultaneouslyforaparticular
issue.
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(C) InitialPublicOffer(IPO)ofCARE:ABroadOverview
As per the RHP of CARE dated November24,2012, the IPO ofCAREwas to open forpublic
subscription on December 07, 2012 and close on December 11, 2012. The Anchor Investor
Bid/OfferPeriodisoneWorkingDaypriortotheBid/OfferOpeningDate,inaccordancewiththe
ICDRRegulations.
The
Offer
opened
for
subscription
by
anchor
investors
on
December
06,
2012
and closed on the same day. An Anchor Investor in a public issue refers to a Qualified
InstitutionalBuyer(hereinafterreferredtoasQIBs)makinganapplicationforavalueofRs.10
croreormore.QIBsinteraliaincludeFIIsandsubaccountsregisteredwithSEBI.Theissuewas
bywayofanPublicOfferof71,99,700equitysharesoffacevalueofRs.10/ each forSaleby
thesellingshareholdersviz.IDBIBankLimited,CanaraBank,StateBankofIndia,IL&FSFinancial
ServicesLimited,TheFederalBankLimited,IL&FSTrustCompanyLimited(forequitysharesheld
onbehalfofMilestonePrivateEquityFund),MilestoneTrusteeshipServicesPrivateLimited(for
equity shares held on behalf of Milestone Army Trust), ING Vysya Bank Limited and Tata
InvestmentCorporationLimited.TheOfferPriceofCAREsequitysharesweretobedetermined
through the 100% bookbuilding process. Thus, the sale of equity shares by the Selling
ShareholdersundertheOffertobiddersincludingEligibleNonResidentInvestorswasataprice
discovered through theBookBuildingProcessprescribedunder theSEBIRegulationsandnot
throughthestockexchangesettlementmechanism.TheNoticeeswereappointedastheBRLMs
in respectof theOffer.M/s.Amarchand&Mangaldas&SureshA.Shroff&Co. (AMSS)were
appointed
the
domestic
legal
counsel
to
the
company/
CARE
and
M/s.
Luthra
&
Luthra
Law
Offices(togetherwithAMSS)wereappointedasthelegalcounseltotheBRLMs/Noticees.The
BidsbytheAnchorInvestorsaresubmittedandallocationtoAnchorInvestorsiscompletedone
WorkingDaypriortotheBid/OfferOpeningDate.TheQIBportionoftheOffer(includingthe
Anchor InvestorPortion)amountedtonotmorethan5