ArchiveDecember 2009

The Year That Was: A Round-up of 2009

The year began amid serious efforts by governments across the world to battle the fallout of the financial crisis. Although India escaped relatively unscathed from the direct effects of the crisis, it had experienced flight of capital from the country. While 2009 saw investors flocking back and aiding the recovery of the stock markets, India experienced its own crisis of sorts in the form of the...

Voluntary Guidelines on Governance and Social Responsibility

Corporate Governance Earlier this month, we had highlighted the recommendations of the CII Task Force and the Institute of Companies Secretaries of India seeking reforms to the existing regime for corporate governance in India. Shortly thereafter, and based on various other suggestions received, the Ministry of Corporate Affairs has published the Corporate Governance Voluntary Guidelines 2009...

Compensating Investors: IPO Irregularities

SEBI has recently published a report by the Justice D.P. Wadhwa Committee in connection with irregularities in various IPOs in 2005. The report itself was, however, submitted by the Committee to SEBI as early as December 2007. In those IPOs, certain applications were made by certain persons using fictitious demat and bank accounts in the retail quota “so as to corner shares by using the...

DIPP issues draft “Master Press Note”

The Department of Industrial Policy and Promotion has issued a draft Press Note dated 24th December 2010 (“PN”) that is similar to the Master Circulars that we have on FEMA issued by the Reserve Bank of India. This 66 page Press Note is only a draft and comments are invited by 31st January 2010 after which a final Press Note would be issued. A couple of quick and preliminary comments...

The RTI and Income Tax Returns

The recent decision of the Central Information Commission in the Escorts case, has led to many raised eyebrows. In sum, the CIC held in Mr. Rakesh Gupta v. Public Information Officers (Decision No. CIC/LS/A/2009/000647/SG/5887, available here), that the information submitted to the Income Tax Department by a company cannot be personal information, and even personal information submitted by the...

Bad Debts, Commercial Judgment and Taxation

We have discussed the controversy in Indian law surrounding the treatment of bad debts. In short, it has traditionally revolved around two questions. The first pertained to the extent to which commercial reality could influence the determination of taxable income. In particular, banks began to account interest on non-performing assets [“NPA”] or “loans” in a “Suspense account”, without, however...

Bombay High Court on the Entry of Foreign Law Firms

The Bombay High Court (Swatanter Kumar C.J. and J.P. Devdhar J.) has held that foreign law firms are not eligible to practice law in India even in a non-litigation context. Foreign law firms are also not entitled to open liaison offices in India. The case is Lawyers Collective v. Bar Council of India and Others, Writ Petition No. 1526/1995, judgment dated 16th December 2009 (per Devdhar J.). It...

Foreign Collaboration and Royalty Payments

Hitherto, Indian companies were allowed to make royalty payments to their foreign collaborators under the automatic route within certain limits. These involved payment for technology transfers of a lump sum fee of US$ 2 million and royalty of 5% on domestic sales and 2% for exports. Where no technology transfer was involved, royalty of up to 1% for domestic sales and 2% for exports was allowed...

More Suggestions for Governance Reforms

When the financial fraud at Satyam occurred nearly a year ago, there was tremendous anticipation of swiftly regulatory activity to follow in terms of reforms to corporate governance norms. But, that was not to be. Any hopes were only dampened when it was announced that the Companies Bill (drafted in the previous year) would be presented in Parliament without any change whatsoever. More recently...

Changes to ECB Policy

The Reserve Bank of India (RBI) last week announced changes to the policy governing external commercial borrowings (ECBs). This represents a reversal on two counts: 1. The all-in-cost ceilings, which were withdrawn about a year ago, have been reintroduced “in view of the improvement in the credit market conditions and narrowing credit spreads in the international markets”. 2. The buyback facility...

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