Dumy the 14th Surana and Surana National Corporate Law

8/19/2019 Dumy the 14th Surana and Surana National Corporate Law

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THE 14th SURANA AND SURANA NATIONAL CORPORATE LAW

MOOT COURT COMPETITION 2016

12TH – 14TH FEBRUARY 2016

BEFORE THE HON’BLE HIGH COURT OF KARNATAKA

WP N! 100000 !" 201#

F$%&' ()'&* A*t 226 !" Th& C!)+t$t(t$!) !" I)'$,- 1.#0

HASSLETON IN/ESTMENT LIMITED- SINGAPORE

PETITIONER

THE AUTHORITY FOR AD/ANCE RULING INCOME TA3- NEW DELHI

DIRECTOR OF INCOME – TA3 INTERNATIONAL TA3ATION- BENGALURU

RESPONDENTS

ON THE SUBMISSION TO THE REGISTRY OF

THE HON’BLE HIGH COURT OF KARNATAKA

MEMORIAL FOR RESPONDENTS

MMEMORIAL FOR RESPONDENT


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Table of Contents

LIST OF ABBREVIATIONS..............................................................................3

INDEX OF AUTORITIES...............................................................................!

I. Cases..................................................................................................!

II. Stat"tes..............................................................................................!

III. Re#"lat$ons......................................................................................!

IV. %"$&el$nes........................................................................................!

V. C$'("la's..............................................................................................!

STATEMENT OF )URISDICTION......................................................................*

STATEMENT OF FACTS..................................................................................+

STATEMENT OF ISSUES................................................................................,

SUMMAR- OF AR%UMENTS........................................................................1

I. TE APPELLANTS AVE NOT MADE TRUE AND ADE/UATE

DISCLOSURE...........................................................................................1

II. TE APPELLANTS 0NOIN%L- SUPPRESSED MATERIAL INFORMATION

AND FAILED TO DISCLOSE IN TIMEL- MANNER.......................................1

III. TE APPELLANTS ACTED IN VIOLATION OF SEBI ORDERS..............1

IV. TE APPELLANTS ERE INVOLVED IN INSIDER TRADIN%...............11

AR%UMENTS ADVANCED...........................................................................12

I. TE APPELLANTS AVE NOT MADE TRUE ADE/UATE DISCLOSURE

12

A. A44ellant 5as fa$le& to t'"l6 an& a&e7"atel6 &$s(lose abo"t

(o"nte'fe$t$n#......................................................................................12

B. A44ellant 5as fa$le& to &$s(lose 8ate'$al $nfo'8at$on on fo'e$#n

$n9est8ents........................................................................................13

II. TE APPELLANT 0NOIN%L- SUPPRESSED MATERIAL INFORMATION

AND FAILED IN TIMEL- DISCLOSURE.......................................................1:

A. Fa$l"'e to $nfo'8 NSE 'e#a'&$n# a s"$t ;$t5$n t$8ef'a8e............1:



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B. Fa$l"'e to &$s(lose le#al not$(e ;$t5 (la$8 of 4otent$al l$t$#at$on.1!

III. TE APPELLANTS ACTED IN VIOLATION OF SEBI ORDER

RE%ULATIONS.........................................................................................1*

A. T5e Co84an6 9$olate& t5e o'&e'.................................................1*

B. M'. 0an;a' 9$olate& t5e o'&e'.....................................................1+

C. NF 9$olate& SEBI


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LIST OF ABBREVIATIONS

??????????????????????????????????..An&

@?????????????????????????????????

Pa'a#'a45

...................................................................................................................

..............Pe'(enta#e

9??????????????????????????????????.Ve's

"s

ADR..............................................................................................A8e'$(an

De4os$ta'6 Re(e$4t

AIR????????????????????????????..All In&$a

Re4o'te'

An'????????????????????????????????..Anot5

e'

B2C??????????????????????????...B"s$ness to

Cons"8e'

Cas?????????????????????????????????..Cas

es

CIT...............................................................................................Co88$ss$o

ne' of In(o8e Ta

CMD????????????????????????.C5$ef Mana#$n#

D$'e(to'

Co84???????????????????????????????.Co84

an6



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C'$L)??????????????????????????C'$8$nal La;

)o"'nal

DIP......................................................................................D$s(los"'e an&

In9esto's P'ote(t$on

DIPP..................................................................De4a't8ent of In&"st'$al

Pol$(6 an& P'o8ot$on

DRP.........................................................................................D'aft Rea&

ea'$n# P'os4e(t"s

ED.........................................................................................................Enfo'

(e8ent D$'e(to'ate

FDI.....................................................................................................Fo'e$#n

D$'e(t In9est8ent

FEMA.......................................................................Fo'e$#n E(5an#e

Mana#e8ent A(t 1,,,

FFSL?????????????????????F$nL$ne F$nan($al Se'9$(es

Lt&.FPO.........................................................................................................Foll

o; on P"bl$( Oe'

%o9t?...........................................................................................................

...........%o9e'n8ent

NF?.........................................................................................................$

#5Net;o't5 F"n&

INDEX OF AUTHORITIES

I. Cases

C5a$'8an Seb$ 9. S5'$'a8 M"t"al F"n& an& An'. AIR 2* SC 22>+................................1,

D$'e(to' of Enfo'(e8ent 9. MCTM Co'4o'at$on P9t. Lt&. an& O's. 1,,* C'$L) 1*23..........1,%l"(ste$n 9. Ba'nes


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%"a'at T'an9an(o'e A#en(6 Co(5$n 9. CIT ,= 1++ ITR :!!


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22. o% The Constitution o% ndi#, 1950+ t sets %orth the %#ts, ontentions, #ruments #nd the

!#s on hih the !#ims #re #sed+

STATE"ENT OF FACTS

1 teh entrepreneur, Mr+ Roin #n#r returned to ndi# in 2002 #nd setup #n on!ine

m#r*et p!#e " the n#me Tr#dE3 throuh his ne!" inorpor#ted omp#n",

Tr#dEh#ne 4imited (herein#%ter the omp#n")+ Comp#n" #!so proided #ddition#!



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series throuh its #%%i!i#tes+ The omp#n" did not ot#in tit!e oer the oods+

Customers en6o"ed the se#m!ess eperiene+

2 The omp#n" #s !isted in 7SE #%ter P8 in 200.+ n 200, Tr#dEh#ne #rried out

# sponsored o%%erin o% DRs th#t ere then !isted in 7SD:+ Mr #n#r, he!d

;2< sh#res in the omp#n" throuh #n inestment omp#n"+ The Comp#n" #ppointed

=in4ine =in#ni#! Series 4td (==S4) %or # =P8+ 8n pri! 15, 201> the Comp#n"

%i!ed the DR&P ith SE?+ SE? ommuni#ted its omments #nd #s*ed %or

dis!osure o% ounter%eit produts+ ddition#! ris* %#tor on ounter%eit !#ims #s

#dded in DR&P+

5 8n @u!" 1, 201>, Cr#nerr" =#shion n+ noti%ied on # suit e%ore the &on'!e De!hi

&ih Court #!!ein in%rinement o% inte!!etu#! propert" rihts+ The s#me #s

dis!osed to 7SE on @u!" 2>, 201>+ t #!so omp!#ined to SE? on misst#tement in

prospetus %or the =P8 #nd reAuested %or !#unh o% inesti#tions+ t #!!eed th#t it

h#d sered !e#! notie on pri! 25, 201> #nd the s#me #s not dis!osed in the

prospetus+

4 SE? initi#ted inesti#tion #nd p#ssed #n interim order d#te uust 1., 201> #rrin

Tr#dEh#ne #nd Mr #n#r %rom #essin the #pit#! m#r*et or %rom otherise

tr#din in seurities on # sto* eh#ne+ ==S4 #s de#rred %rom proidin #n"

inestment #n*in series to its !ients, pendin inesti#tion+ ED h#d initi#ted

proeedins ##inst the omp#n" %or =EM io!#tions re#d ith =D po!i" o%

Boernment+ The prospetus did not ont#in #n" spei%i re%erene to omp!i#ne in

%orein inestment po!iies, hih #s #sed on !e#! #die+

# SE? on%irmed the order on Deemer 21, 201> %or in#deAu#te dis!osure in DR&P,

ineus#!e de!#" in dis!osin Cr#nerr"'s !#suit to 7SE #nd imposed pen#!t" o%

Rs+ 5 Crores #nd p#ssed #n order to disore i!!-otten #ins m#de on #ount o% non-

dis!osure+

6 n M#rh 2015, &ih 7etorth =und, 4P (&7=), # PE #sed in Sin#pore #nted to

#Auire sini%i#nt st#*e in Tr#dEh#ne+ %ter some disussions, it #reed to

susrie to 2+5< o% sh#res " Pre%erenti#! !!otment, #nd th#t it ou!d purh#se

#nother 2+>< sh#res %rom Mr+ #n#r+ 8n pri! 12, 2015 neess#r" #ppro#!s ere

ot#ined %rom sh#reho!ders+ &7= proeeded ith due di!iene #nd #s pri" to,

m#n#ement #nd un#udited #ounts o% the omp#n" %or the %in#ni#! "e#r 201>-15+



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&7= disoered th#t on M#rh 15,2015 $#!tener, # sini%i#nt supp!ier o%

Tr#dEh#ne h#d issued notie o% termin#tion #nd on #nnounement o% !#st Au#rter

resu!ts o% =in#ni#! e#r 201>-15 ith o#rd report, the omp#n"'s sh#res %e!! 2


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ISSUE III8 $hether the petitioner is reAuired to prep#re %in#ni#!s #s per Comp#nies

t, 201; or hether it is oerned " SE? Reu!#tions+

ISSUE I/8 $hether the =in#ne t, 2015 #mendment on imposition o% MT on

%orein omp#n" is prospetie or retrospetie #s #rued " oth p#rties+

ISSUE /8 $hether #pit#! #ins eemption #s per ndi# F Sin#pore t# tre#t"

i!! e #pp!i#!e to the petitioner #nd hether imposition o% MT i!! e io!#tie

o% the t# tre#t"+

ISSUE /I8 $hether the petitioner #n herr" pi* the proision o% nome T# t

#nd t# tre#t" %or the purpose o% de%inition o% PE under the t #nd #pit#! #ins

eemption under the t# tre#t"+

ISSUE /II8 $hether 115@? is eAu#!!" #pp!i#!e to =s / =Ps #nd =orein Diret

nestors (=D) #nd the sope #nd n#ture o% %untionin o% =s / =Ps #nd =Ds to

underst#nd the inestments into ndi#+

SU""AR$ OF ARGU"ENTS



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ARGU"ENTS ADVANCED

I THE A%%ELLANTS HAVE NOT "ADE TRUE & ADE'UATE

DISCLOSURE

()*.+ T5e A44ellants 5a9e fa$le& to &o a&e7"ate an& t'"e &$s(los"'e $n

'e#a'& to (o"nte'fe$t 8ate'$al (A+ an& s4e($K( &$s(los"'es on fo'e$#n

$n9est8ents ;5$(5 ;o"l& 5a9e 8ate'$al $84a(t on t5e o4e'at$ons an&

Knan($al ;ellbe$n# of t5e K'8(B+

.

A. A,,ellant -as ailed to tul/ and ade0uatel/ dis!lose a1out

!ounteeiting

()2.+ A44ellants a'e an onl$ne 8a'et4la(e f"n(t$on$n# f'o8 22 an&

be(o8e a 4"bl$(l6 t'a&e& (o84an6 $n 2*1. F"'t5e' t5e6 &e($&e& to #o

fo' an FPO an& $t en&e& s"((essf"ll6 $n )"ne 21:2. T5e Res4on&e& ;5$le

$ss"$n# stat"to'6 (o88ents on t5e FPO $nfo'8e& t5e lea& $n9est8ent

bane' to &$s(lose on (o"nte'fe$t 4'o&"(ts sol& $n t5e T'a&E 4latfo'8 on

'e(e$4t of a (o84la$nt b6 an E84lo6ee of T'a&E(5an#e &"'$n# t5e FPO

4'o(ess.

1 Moot P'oble8 @3.

2 Ib$&. @!.



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()3.+ It $s 4e't$nent t5at s"(5 (o"nte'fe$t 4'o&"(ts a'e l$el6 to 5a9e

8ate'$al $84a(t on t5e o4e'at$ons an& Knan($al ;ellbe$n# of t5e K'8 an&

$t $s l$el6 to ae(t t5e $n9est8ents of $n9esto's. T5e (o84an6 s5o"l&

&$s(lose $nfo'8at$on $n 'e#a'& to DRP as 4e' Se(t$ons 2* 2>

3

'ea& ;$t5 T5e Co84an$es . M' 0an;a' $s l$able $n l$#5t of 8$sstate8ents $n t5e

4'os4e(t"s s$n(e 5e $s t5e Mana#$n# D$'e(to' of t5e (o84an6,. T5e

A44ellants 5a& $ntent$on to &ef'a"& t5e 4"bl$( fo' 4e("n$a'6 #a$n1 b6 not

3 T5e Co84an$es A(t 213.

: SEBI


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f"ll6 &$s(los$n# t5e 9ol"8e of sales of (o"nte'fe$t 4'o&"(ts s$n(e $t ;$ll

$n('ease t5e$' botto8 l$ne of Knan(e.

B. A,,ellant -as ailed to dis!lose 5ateial ino5ation on oeign

in6est5ents.

()7.+ A((o'&$n# to Re#"lat$on !+


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A. Failue to ino5 NSE egading a suit >it-in ti5ea5e

()*?.+ T5$s 8$#5t be (ons$&e'e& an o'&$na'6 an& 'easonable &ela6 $n (ase

of ot5e' &$s(los"'es. B"t t5e s"$t 5as (la$8s ;5$(5 a'e et'ao'&$na'6 an& $t

$s (la$8e& b6 one of t5e s5a'e5ol&e' of t5e (o84an6.

()**.+ As 4e' Cla"se 3* l$st$n# a#'ee8ent of NSE t5e (o84an6 $s bo"n&

to $88e&$atel6 &$s(lose $nfo'8at$on ;5$(5 $s 8ate'$al $n nat"'e an& $s

l$el6 to ae(ts $ts o4e'at$ons an& Knan(es. T5e 8ate'$al $nfo'8at$on $s

(lea'l6 s4e($Ke& "n&e' $t ;5$(5 $n(l"&es l$t$#at$on an& &$s4"te of 8ate'$al

nat"'e. In t5$s (ase $88e&$ate $s (ons$&e'e& to be ;$t5$n 2: 5o"'s of t5e

not$K(at$on s$n(e $t $s l$el6 to ae(t t5e s5a'e 4'$(es of t5e (o84an6 on

s"(5 &e9elo48ents.

()*2.+ S"(5 9$olat$ons a'e $n('eas$n# $n n"8be' &"e to ;ea enfo'(e8ent

b6 sto( e(5an#es t5e'eb6 SEBI 5a& to ste4 $n "n&e' Se(t$on 11 11A

'ea& ;$t5 Se(t$on 1 of T5e Se("'$t$es Cont'a(ts


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'e8ote (5an(e of 4otent$al l$t$#at$on t5en s"(5 $nfo'8at$on be &$s(lose $n

DRP as 4e' C5a4te' V VI1! an& Re#"lat$on !+


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()*9.+ SEBI 5as 4asse& t5e 4'esent (5allen#e& o'&e' &ate De(e8be' 21

21: ba''$n# t5e (o84an6 an& M'. 0an;a' f'o8 a((ess$n# t5e (a4$tal

8a'et o' f'o8 ot5e';$se t'a&$n# $n se("'$t$es on a sto( e(5an#e. T5e

(o84an6 5as 9$olate& t5e o'&e' (A+ an& M' 0an;a' 5as fa$le& to (o84l6(B+ ;$t5 t5e o'&e' of t5e Res4on&ent ;5$(5 ;as $ss"e& "n&e' 4o;e's

ens5'$ne& $n SEBI A(t 1,,2. NF 5as 9$olate& SEBI


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$84ose& ;$t5 &"e 'e#a'& to t5e 7"ant"8 of 9$olat$on (o88$tte& an& t5e

Res4on&ent 5as &"l6 a44l$e& 5$s 8$n& $n&e4en&entl6 an& 'easonabl6 to

$84ose s"(5 no8$nal 4enalt6. T5e onble t'$b"nal s5all tae not$(e of t5e

#'a9$t6 of 9$olat$ons (o88$tte& b6 t5e A44ellants be$n# t5e la'#est4"bl$(l6 t'a&e& onl$ne 8a'et4la(e 5a9$n# $nte'nat$onal e4os"'e s5o"l&

5a9e a(te& $n (o84l$an(e ;$t5 t5e la;s. B"t $t 5as fa$le& to a&5e'e to

se9e'al stat"tes an& $s a (ont$n"o"s an& 'e4eat 9$olato'.

B ". ;an>a 6iolated t-e ode.

()23.+ M' 0an;a' 5as (on&"(te& blo( t'a&es on NSE 4latfo'8 ;$t5 NF

bet;een Ma6 1 21! an& Ma6 2 21!. Blo( t'a&es a'e e4la$ne&

"n&e' #"$&el$ne 31> an& Se(t$on 1


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4"n$s58ent $s ;ell ;$t5$n t5e 4a'a8ete' to 4ass t5e Test "n&e'

e&nesb"'6 '"le to be (ons$&e'e& 'easonable. T5e Res4on&ent 5as

4'o4e'l6 $ss"e& not$(e 5ea'& t5e a44ellants an& 4asse& t5e se(on&

$84"#ne& o'&e' afte' follo;$n# all stat"to'6 no'8s an& 4'$n($4les of nat"'al "st$(e.

C HNF 6iolated SEBI (SAST+ Regulations 2?**.

()28.+ NF 4"'(5ase& 2.: s5a'es f'o8 M'. 0an;a' .2 s5a'es f'o8

o4en 8a'et bet;een Ma6 1 21: an& Ma6 2 21:. NF also a(7"$'e&

2.! s5a'es f'o8 t5e (o84an6. As 4e' Re#"lat$on 2


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()2:.+ NF 5as bo"#5t 2.! s5a'es f'o8 t5e (o84an6 b6 ;a6 of $ss"e of

s5a'es 2.: f'o8 t5e M'. 0an;a' an& .2 of s5a'es f'o8 o4en 8a'et.

NF ;as $n9ol9e& $n $ns$&e' t'a&$n# (A+. M'. 0an;a' ;as $n9ol9e& $n

$ns$&e' t'a&$n# (B+.

A HNF >as in6ol6ed in Inside Tading o Se!uities.

()2=.+ NF ;as #$9en a((ess to MOU s$#ne& b6 t5e (o84an6 ;$t5

$Set(5. $Set(5 be$n# a ;o'l& fa8o"s l""'6 b'an& ;$ll b'$n# $n 8o'e

'e9en"e fo' t5e (o84an6. T5$s $nfo'8at$on falls "n&e' a8b$t of Se(t$on 2

C5a$'8an Seb$ 9. S5'$'a8 M"t"al F"n& an& An'. AIR 2* SC22>+.



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essent$al3. T5e (lass$(al 9$e; of no 8ens 'ea no ('$8eQ 5as lon# #one

es4e($all6 $n e(ono8$( ('$8es an& &e4a't8ental 4enalt$es 5a9e ('eate&

se9e'e 4"n$s58ents e9en ;5e'e t5e oen(e 5a9e been &eKne& to e(l"&e

8ens 'ea

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.

B ". ;an>a >as in6ol6ed in Inside Tading.

()32.+ M'. 0an;a' 5a& a((ess to 4'$(e sens$t$9e $nfo'8at$on al;a6s 5e

be$n# t5e C5a$'8an an& CMD of t5e (o84an6. In 'e#a'& to T5e SEBI


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s"J($ent to s5o; &efa"lt3:. T5e Boa'& &oesnt 5a9e &$s('et$on $n (ase of

4enalt6 $84ose& fo' &efa"lt of 4'o9$s$ons of SEBI A(t 1,,23!. Mens 'ea $s

an essent$al o' s$ne 7"a non fo' ('$8$nal oen(e an& $t (annot be a st'a$t

a(et fo'8"la fo' all (ases

3*

.

()37.+ Base& on all t5e abo9e ($'("8stan(es M'. 0an;a' 5as a(te& $n

9$olat$on of T5e SEBI


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%RA$ER

In l$#5t of t5e $ss"es 'a$se& a'#"8ents a&9an(e& an& a"t5o'$t$es ($te&

t5e (o"nsel fo' t5e Res4on&ent 5"8bl6 4'a6s t5at t5e onble T'$b"nal be

4lease& to a&"e 5ol& an& &e(la'e

1. T5at A44ellants 5a9e fa$le& to t'"l6 an& a&e7"atel6 &$s(lose abo"t

(o"nte'fe$t$n#.

2. T5at A44ellants 5a9e fa$le& to &$s(lose a&e7"atel6 $n DRP.3. T5at A44ellants no;$n#l6 s"44'esse& 8ate'$al $nfo'8at$on.:. T5at A44ellants "n&"l6 &ela6e& $n &$s(los$n# 8ate'$al $nfo'8at$on.!. T5at A44ellants 9$olate& t5e o'&e's of SEBI.*. T5at A44ellants ;e'e $n9ol9e& $n Ins$&e' T'a&$n#.+. T5at bot5 t5e a44eals be &$s8$sse&.

An& 4ass an6 o'&e' t5at t5$s onble T'$b"nal 8a6 &ee8 Kt $n t5e $nte'est

of e7"$t6 "st$(e an& #oo& (ons($en(e. An& fo' t5$s a(t of $n&ness t5e

(o"nsel fo' t5e Res4on&ent s5all &"t6 bo"n& fo'e9e' 4'a6.

S&

Dumy the 14th Surana and Surana National Corporate Law

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Transcript of Dumy the 14th Surana and Surana National Corporate Law