News Letter

JAYA sHArMA & AssOCIAtes

PrACtCING COMPANY seCretArIes

Issue for the month of September 2016 – II

Our office is presently situated at - Our email address is 2101, 21st Floor, Sai Akashdeep CHSL, jaya@jsa-cs.com, Saibaba Park, Evershine Nagar, jaya.jscs@gmail.com Malad (West), Mumbai – 400 064. Contacts: +91 9819501557 Tele Fax: +91 22 28818135

DIsCLAIMer This News Letter provides general information available at the time of preparation. The News Letter is intended as a news update and Jaya Sharma & Associates neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this News Letter. It is recommended that professional advice be taken based on the specific facts and circumstances. This News Letter does not substitute the need to refer to the original pronouncements.

Legal Updates Links of important Notification & Circulars:

Authority Dated Notification & Circulars Name of Link MCA Notification G.S.R. 908(E)

September 23 , 2016

Companies (Management and Administration) Amendment Rules, 2016

www.mca.gov.in

SEBI/HO/CDMRD/DMP/CIR/P/2016/105

September 28, 2016

List of Commodities Notified under SCRA www.sebi.gov.in

SEBI/HO/CDMRD/DMP/CIR/P/104

September 28, 2016

Introduction of Options in Commodity Derivatives Market www.sebi.gov.in

SEBI/HO/CDMRD/DMP/CIR/P/2016/103

September 27, 2016

Revised Warehousing Norms in the Commodity Derivatives Market for Agricultural and Agri-processed Commodities Traded on the National Commodity Derivatives Exchanges

www.sebi.gov.in

SEBI/HO/CDMRD/DMP/CIR/P/2016/102

September 27, 2016

Sharing of Information in case of Declaration of Member as Defaulter in case of Multiple Membership

www.sebi.gov.in

SEBI/HO/CDMRD/DMP/CIR/P/2016/97

September 27, 2016

Broad Guidelines on Algorithmic Trading for National Commodity Derivatives Exchanges

www.sebi.gov.in

SEBI/HO/CDMRD/DEICE/CIR/P/2016/94

September 26, 2016

Investor Protection Fund (IPF) and its related matters www.sebi.gov.in

SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/92

September 23, 2016

Regulatory Framework for Commodity Derivatives Brokers www.sebi.gov.in

SEBI/HO/IMD/DF2/CIR/P/2016/89

September 20, 2016 Consolidated Account Statement www.sebi.gov.in

SEBI/HO/CDMRD/DMP/CIR/P/2016/87

September 16, 2016

Unique Client Code (UCC) and Mandatory requirement of Permanent Account Number (PAN)

www.sebi.gov.in

SEBI/HO/CDMRD/DRMP/CIR/P/2016/86

September 16, 2016

Settlement Guarantee Fund, Stress Testing and Base Minimum Capital

www.sebi.gov.in

RBI/2016-17/72 September 30, 2016

Investment by Foreign Portfolio Investors (FPI) in Government Securities

www.rbi.org.in

RBI/DNBS/2016-17/49 & Master Direction DNBS. PPD.01/66.15.001/2016-17

September 29, 2016

Master Direction - Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016.

www.rbi.org.in

RBI/DNBS/2016-17/48 & Master Direction DNBS. PPD.03/66.15.001/2016-17

September 29, 2016

Master Direction - Non-Banking Financial Companies Auditor’s Report (Reserve Bank)

www.rbi.org.in

Directions, 2016 RBI/DNBS/2016-17/47 & Master Direction DNBS.PPD.02/66.15.001/2016-17

September 29, 2016

Master Direction - Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016

www.rbi.org.in

RBI/2016-17/63 September 15, 2016

Security and Risk Mitigation Measures for Card Present and Electronic Payment Transactions – Issuance of EMV Chip and PIN Cards

www.rbi.org.in

Case Laws:

1. Where the information sought is just unwarranted invasion of privacy of individual

and its disclosure serves no public interest, the request for disclosure is to be dis-allowed: Central Information Commission, in case of “Arun Kumar Agrawal Vs. SEBI, Mumbai” decided on June 09, 2016. Gist of the Case: Where the information sought is just unwarranted invasion of privacy of individual and its disclosure serves no public interest, the request for disclosure is to be dis-allowed. The details of assets and liabilities of an individual constitute personal information and is exempted from disclosure under clause (j) of sub-section (1) of section 8 and such personal information can only be divulged if the Commission reaches a conclusion that it would be in larger public interest to reveal such information. Since the right to privacy has been recognised as a fundamental right to which a citizen is entitled to, unless the condition mentioned in clause (j) of that section is satisfied, the information cannot be provided. The mere leveling of unsubstantiated allegation can hardly be said to satisfy the condition of disclosure being made in larger public interest. The Central Information Commission has refused to allow of the requested information dismissing the appeal on the ground that disclosure of information sought is likely to cause unwarranted invasion of privacy of the individual concerned.

2. Where the petitioner has sold his shares for consideration and is no longer a

shareholder, he cannot file petition under section 397/398: Company Law Board, Chennai Bench, in case of “Yerramaneni Rama Krishna Vs. Peddi Venkata Koteswara Rao” decided on April 21, 2016. Gist of the Case:

Where the petitioner has sold his shares for consideration and is no longer a shareholder, he cannot file petition under section 397/398. Where the transfer of shares in favour of the applicant and another respondent is found to be legal and valid, and after the said transfer, the petitioner ceases to be a shareholder of the company, the petitioner has no locus to file a petition by invoking the jurisdiction of the Company Law Board under section 397/398. While holding that the petitioner has no locus to file petition under section 397/398, the Company Law Board has observed that even the petition under section 111A and section 59 of the Companies Act, 2013 seeking for rectification of register of members cannot be maintained for the reason that the petitioner had legally and validly transferred his entire shares in the respondent-company and thereby he ceases to be a shareholder of the respondent-company.

3. Acts of creation of new majority in management which is detrimental to the interest of others in a company incorporated on the principles of quasi-partnership tantamount to oppression: Company Law Board, Chennai Bench, in case “Khatim K and another Vs. Astrix Techonologies Pvt. Ltd. and others” decided on March 10, 2016. Gist of the Case: Acts of creation of new majority in management which is detrimental to the interest of others in a company incorporated on the principles of quasi-partnership tantamount to oppression. Creation of a new majority within the management by appointing respondent-directors by the respondents group, and making similar appointments in retaliation by the petitioners accompanied by removal of some directors from directorship, clearly shows that principles of quasi-partnership on which the company was incorporated were not adhered to where the acts of creation of majority in the management is clearly detrimental to the interest of others, this tantamounts to oppression. The Company Law Board disposed of a company petition giving appropriate directions. Considering that the management of the company was required to be regulated under the principles of quasi-partnership based on which the company was initially incorporated, and that the relations between the petitioners group and the respondents group had spoiled to such an extent that there were cross-allegations of siphoning of funds, forgery and coercion, etc., the Company Law Board directed that the management and affairs of the company be run under the principles of quasi-partnership by following the statutory provision of law. The Company Law Board accordingly gave a number of specific directions disposing of the company petition under section 397.

NEWS HIGHLIGHTS: 1. DISCLOSURE BY COMMODITY DERIVATIVE EXCHANGES ON THEIR WEBSITES:

As per Section 131(B) of Finance Act, 2015 all rules, directions, guidelines, instructions, circulars, or any like instruments, made by the erstwhile FMC or the Central Government applicable to

recognized associations under the FCRA would continue to remain in force for a period of one year from the date on which FCRA was repealed, or till such time as notified by SEBI, whichever is earlier. In the past the erstwhile FMC had issued various directives regarding disclosures by Commodity Derivative Exchanges on website. This circular is being issued to consolidate and update such norms. To promote transparency in the markets Exchanges shall disclose List of information given in SEBI circular No. SEBI/HO/CDMRD/DMP/2016/101 dated September 27, 2016 on their website. This circular is available on SEBI website at www.sebi.gov.in under the category “Circulars” and “Info for Commodity Derivatives”. These disclosure requirements are in addition to those disclosure mandated in various circular issued by SEBI wherein the exchanges are required to make requisite disclosures. The provisions of this circular shall come into effect from September 29, 2016 in supersession of all earlier directives issued by erstwhile FMC with regard to matters related to disclosures by Exchanges on their website.

2. PERMISSION FOR TRADING IN FUTURES CONTRACTS AND MODIFICATION IN CONTRACT SPECIFICATIONS AT EXCHANGE LEVEL: As per Section 131 (4) of the Finance Act, 2015 all rules, directions, guidelines, instructions, circulars, or any like instruments, made by the erstwhile Forward Markets Commission (FMC) or the Central Government applicable to recognized associations under the Forward Contracts Regulation Act, 1952 (FCRA) would continue to remain in force for a period of one year from the date on which FCRA was repealed (September 29, 2015), or till such time as notified by SEBI, whichever is earlier. Erstwhile FMC, from time to time, had issued various norms for National Commodity Derivatives Exchanges related to permission for trading in futures contracts and modification in contract specifications at exchange level. This circular is being issued to consolidate and update such norms prescribed for National Commodity Derivatives Exchanges by the erstwhile FMC. Accordingly, the following are prescribed: • Check-list of information/details to be submitted along with proposal for launch of new

contract or/and for renewal of existing/earlier contracts. • Approval for futures contracts on continuous basis.

• Permission to allow modification in futures contract specifications at the exchange level.

3. STANDARDIZATION AND SIMPLIFICATION OF PROCEDURES FOR TRANSMISSION

OF SECURITIES: • With a view to make the process of transmission of securities more efficient and investor

friendly, Securities and Exchange Board of India had issued a circular no. CIR/MIRSD/10/2013 dated October 28, 2013.

• Pursuant to various investors requests and complaints from the investors with regard to the

clarification of certain points mentioned in clause 2 of the Annexure- A to the aforesaid circular dated October 28, 2013, SEBI decided to modify clause 2 of the said Annexure - A.The modified Annexure is enclosed with this circular.

• All the stock exchanges are directed to make necessary amendments, wherever applicable, to the listing agreements for listing of various securities.

• The depositories are directed to make necessary amendments, wherever applicable, to the relevant byelaws/ rules and regulations/circulars in this regard.

• The circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets and shall be complied with at the earliest and not later than 45 days from the date of issue of the circular.

• This circular is available on SEBI website (www.sebi.gov.in) under the categories“Legal Framework” and “Circulars”.

4. PUBLISHING OF PHOTOGRAPHS OF WILFUL DEFAULTERS: As per RBI Master Circular on Wilful Defaulters DBR.CID.BC.No.22 /20.16.003/2015-16 dated July 1, 2015 inter alia outlining the penal measures that should be taken by lending institutions against the borrowers declared as wilful defaulters.

In this context, it has been observed that some lending institutions have been publishing the photographs of defaulters/ guarantors in newspapers. In view of the sensitivity involved and need to prevent the publishing of photographs of defaulting borrower/ guarantor in an indiscriminate manner, it has been decided as under:

i. A lending institution can consider publication of the photographs of only those borrowers,

including proprietors/ partners /directors / guarantors of borrower firms/ companies, who have been declared as wilful defaulters following the mechanism set out in the RBI instructions referred to above. This shall not apply to the non-whole time directors who are exempted from being considered as wilful defaulters unless the special conditions, in accordance with these instructions, are satisfied.

ii. The lending institutions shall formulate a policy with the approval of their Board of Directors

which clearly sets out the criteria based on which the decision to publish the photographs of a person covered in paragraph (i) above will be taken by them so that the approach is neither discriminatory nor inconsistent.

The lending institutions shall not publish photographs of any other defaulting borrowers.