Link to OUP site.
30 September 2016
01 September 2016
I have a short piece on class actions under the new Companies Act and its dysfunctionality linked here and copied below:
After the Satyam fraud, India, as a country, realized that shareholders, of Indian companies, who have faced fraud, could not be made whole. In contrast, the international shareholders could obtain US $125 million by filing a class action suit at a US court. The Irani Committee proposed the inclusion of class action law suits in the then proposed Companies Act.
Section 245 of the Companies Act provides a right to members and depositors to bring an action against the company, its directors, auditors, experts, or consultants, for any fraudulent act or omission committed or likely to be committed by them. This has so far remained a dead letter since we have not yet seen a single class action law suit since 2014. This is primarily because of what economists call the tragedy of the commons. An investor must fight alone bearing the costs of, and delays in, litigation, but the benefits are enjoyed by all investors. In addition, the provision is clumsily drafted, complete with a glaring typo, provides barely any benefit, puts an onus of collecting a sufficient number of investors or depositors, and even has a provision for imposing costs in some cases.
For class actions to be effective, the right place to introduce a beneficial provision is in the Civil Procedure Code and the provisions should have clear benefits, deal with the tragedy of commons, reduce the burden on the litigating investor/depositor and finally, for this to really succeed, there will need to be an introduction of contingent fees payable to lawyers.
23 August 2016
I have a piece in today's Economic Times analysing SEBI's circular seeking to impose particular disclosure norms which are intended to dis-intermediate distributors. While disclosures and expense caps both have existed, the new development will hurt investors rather than help them. Please read the full piece below to see why or click here for the original piece on ET's website:
01 August 2016
I have a piece in today's Business Standard on the Tata-Docomo dispute. Here is the link and below is the full piece:
The Tata Docomo deal poses one of the most interesting conundrums from a legal perspective. This piece is based on the broad contours of the arguments in public domain. And as a lawyer, I may disclaim my views on seeing the definitive agreement between the two. Broadly the issue is that Tata and Docomo entered into an agreement where Docomo invested in Tata’s telecom business. The agreement was signed with a clause guaranteeing at least 50% return of (rather than on) capital in case the company did not do well. While ordinarily, contracts are enforceable, this one had two legal issues.
The first was that for a foreign investor, RBI permits investment in Indian companies through equity or debt route. The debt route is quite restrictive and the equity rather liberal. The foreign exchange Act, FEMA, and RBI’s position on FEMA is that if you make an equity investment, you cannot get a guaranteed return on or of capital. In fact, if you so choose, the equity investment must come as debt and relevant regulations with respect to lending by a foreign entity would kick in. Tata and Docomo did not term it a debt issuance and therefore the investment was valid, but the condition guaranteeing return of capital was not.
The second issue is an old circular under the Securities Contracts (Regulations) Act which prohibits puts and calls in contracts in public companies. The rigour of the circular is now diluted, but it was a broader prohibition then.
While the Supreme Court has in case after case reduced the possibility of court intervention where an arbitral tribunal has passed an order, this may well be a case where courts may hold the clause in the agreement as being invalid. The twist in the tale is that Tata seems to support the payment while RBI is opposing the same. Ultimately, the case will likely take many twists and turns before finally getting decided in the Supreme Court.
02 June 2016
I was interviewed by the Dalal Street Investment Journal on the performance of SEBI till now and the future of the regulatory framework of the securities markets.
Below is the full interview:
Below is the full interview:
01 June 2016
Really excited to see (I don't have a copy with me yet) the 2nd Edition of my book "Fraud, Manipulation and Insider Trading in the Indian Securities Markets". It is now in hardcover and available online.
Thanks due to Mr. Damodaran for his foreward and kind words of praise for the 1st Edition from Mr. Fali Nariman, Senior Counsel, Mr. Ashish Chauhan, CEO of BSE, Mr. Janak Dwarkadas, Senior Counsel and Prof. Umakanth, National University of Singapore. Special thanks also to Monika Halan and PR Ramesh for reviewing the previous book in magazines.
You can buy a copy or review the contents by clicking here.