ArchiveOctober 2011

Reversal of FDI Policy on Options

Exactly a month ago, the Government announced its updated FDI policy which treated foreign investments in Indian securities as external commercial borrowings (ECB) in case such investments conferred options on the foreign investors. The wide amplitude of the restriction on options gave rise to significant concern among the corporate and investment community, and it has been the subject matter of...

Limits to the ICS Approach and the Implication of Terms into a Contract

Sir Guenter Treitel has said that Diplock LJ’s judgment in Hongkong Fir Shipping v Kawasaki Kisen “has a fair claim to being the most important judicial contribution to English contract law in the past century.” Perhaps not too far behind is Lord Hoffmann’s speech in Investor Compensation Schemes v West Bromwich Building Society [“ICS”], where the “modern” approach to the construction of...

‘Matter which is the subject of an arbitration agreement’

The English High Court, in August this year, has decided an important point on the scope of an arbitration agreement, which, given the similarities in language between section 9 of the English Arbitration Act and section 8 of the Indian Act, is of significance in the Indian context too. The claimant in Deutsche Bank v Tongkah Harbour had provide a financing arrangement to the Tungkum Limited...

SAT Order in the Sahara Case

(This post has been contributed by Amit Agrawal, a legal practitioner practicing before Rajasthan High Court, Jaipur and an alumnus of the National Law School of India University, Bangalore) The Securities Appellate Tribunal (SAT) delivered its judgment yesterday in the case involving issue of securities by certain companies within the Sahara group. The judgment has come after many rounds of...

Hostile Takeovers under the New Code

The new SEBI Takeover Code is set to come into force on October 22, 2011. One of the issues that has received great attention is the ability (or otherwise) of acquirers to carry out a hostile acquisition of an Indian listed company under the new Code. A recent press report has the background. As far as the Takeover Code of 1997 is concerned, we have previously seen (here and here) that the...

Power of Arbitrator to Punish for Contempt

(In the following post, Ms Renu Gupta, Advocate, considers the law on the power of an arbitral Tribunal to enforce its orders and punish for contempt) The more popular legal understanding is that the orders of an arbitrator are toothless since the arbitrator has no power to enforce them. Accordingly, intervention of a Court to obtain enforceable orders, even in a pending arbitration, becomes...

The Role of the Seat of Arbitration in Implied Exclusion

It is becoming increasingly difficult to state with confidence the prevailing position of law in India on a question that should, in principle, have a straightforward answer: in what circumstances will the Indian courts decline to exercise jurisdiction under the Arbitration and Conciliation Act, 1996 [“A and C Act”] and what must a contracting party which wishes to achieve this result insert in...

Revised FDI Policy: Options Outlawed

In the comments section to my previous post on the new FDI policy, reader Menaka highlights another important clarificatory change regarding the policy stance of the Government that now clearly outlaws options in securities held by foreign investors in Indian companies. The relevant clause in Circular No 2 of 2011 is as follows: 3.3.2.1 Only equity shares, fully, compulsorily and mandatorily...

Papers on Corporate Governance in India

The following recent papers contribute to the empirical literature on corporate governance in India, and deal with issues that have hitherto received less attention. 1. Executive Compensation in India by Rajesh Chakrabarti, Krishnamurthy Subramanian, Pradeep K. Yadav & Yesha Yadav. The abstract is as follows: We present an introductory regulatory and empirical analysis of executive...

Revised FDI Policy

It is that time of the year when the Government conducts its bi-annual review of the policy on foreign direct investment (FDI). Consistent with the previous trend over the last couple of years, it yesterday announced the Consolidated FDI Policy in the form of Circular No. 2 of 2011, which comes into effect from October 1, 2011. The key changes announced are as follows: 1. Construction development...

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