Lexscripta Options Selected - Kotak Mahindra Bankenactment like the Deter Cyber Theft Act will give...

“We need to call out those who are responsible for cyber theft and empower the

president to hit the thieves where it hurts most — in their wallets…….”

- Carl Levin, US Senator and co-sponsor of the Deter Cyber Theft Act

In the 20th edition of the Lex Scripta we had quoted General Keith Alexander's warning to

American legislators that cyber theft of intellectual property was leading to the 'greatest

transfer of wealth in history'. With global cyber theft amounting to around $388 billion and an

additional one trillion USD spent on remediation the General's warning is not exaggerated. In

fact the US Congress has paid heed to this warning, and with a view to protect business and

innovation from cyber theft, has enacted the Deter Cyber Theft Act.

A landmark legislation, the Deter Cyber Theft Act aims legislative wrath at foreign

governments, corporations and individual hackers who acquire trade secrets and other

valuable intellectual property from American entities through cybercrime. The Act

recognizes that American companies that invest billions in innovation and research and

development are falling victim to theft of their valuable intellectual property to foreign

entities. These entities then use this stolen technology to sell products cheaply which puts

such American companies at a severe competitive disadvantage. The Act penalizes

corporations and governments that sponsor or benefit from cyber crime by blocking their

products from accessing the lucrative US market and also placing other economic sanctions.

Individual hackers are also not spared as they can have their US assets frozen or their and their

families' visas revoked.

EDITORIAL - Bhargesh Ojha

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Team Lex Scripta : Akhil Kumar| Amrita Shetty | Anirban Ghosh

Vol-XXV-2013-2nd | July 2013

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In This Issue

EDITORIAL ..............................

Predatory Pricing ......................

Law and Practice ......................

Legal Potpourri ........................

Did You Know ? .......................

In House News !! .....................

Gowns And Robes-The Funny Side !!! ....................

Lex Scripta Recommends !!!.......

Disclaimer

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India too must elevate combating cyber theft as a national security priority and Indian lawmakers need to enact a similar legislation

before disaster strikes. India is growing as an innovation hub with several corporations setting up their R&D centres in the country and an

enactment like the Deter Cyber Theft Act will give a boost to innovation and give India Inc. the confidence that its valuable intellectual

property is protected.

Moving on from issues of national security in the cyber world, we welcome you to the 25th edition of the Lex Scripta. Our feature article

takes an analytical look at predatory pricing and its effects on competition, an important focus of competition law in the country. In our

new section titled 'law and practice' we bring you a write up on court procedures that explores the interesting question of whether marking

a document as an exhibit in a civil suit amounts to judicial opinion as to its proof. This new section also provides an update on an

important amendment to stamp laws in the state of Maharashtra.

Of course we have our other regular features- Did You Know- explaining various legal doctrines and principles and our recommendations

of movies and books to fuel your interest in the law.

We once again remind you of our Learning the Law feature through which we invite your suggestions on topics/legal issues on which you

would like to read an article. Do write in with your topics and we shall endeavour to present an article on a topic of your choice. As always,

we invite and look forward to your comments, suggestions and feedback on this edition of the Lex Scripta. Please do write in to us at

[email protected]. We greatly appreciate your feed back.

Happy Reading !!!

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The Competition Act, 2002 (“the Act”) defines

a predatory price as the sale of goods or

provision of services, at a price which is below

the cost, as may be determined by regulations,

of production of the goods or provision of

services, with a view to reduce competition or

eliminate the competitors. In other words,

predatory pricing is the sale of goods or

services at a price that is lesser than its cost in

order to reduce, eliminate or purge

competition.

The Act primarily governs three broad

categories - (i) Anti-competitive agreements;

(ii) Abuse of dominant position; and (iii)

Combinations. Predatory pricing is a form of

abuse of dominance falling within the purview

of Section 4 of the Act. Section 4 has been

reproduced below for your reference:

“Abuse of dominant position

4. (1) No enterprise or group shall abuse its

dominant position.

(2) There shall be an abuse of dominant

position under sub-section (1), if an

enterprise or a group.—

PREDATORY PRICING

- Aditi Shroff

(a) directly or indirectly, imposes unfair or discriminatory -

(i) condition in purchase or sale of goods or service; or

(ii) price in purchase or sale (including predatory price) of goods

or service.

Explanation. - For the purposes of this clause, the unfair or discriminatory condition in

purchase or sale of goods or service referred to in sub-clause (i) and unfair or

discriminatory price in purchase or sale of goods (including predatory price) or

service referred to in sub-clause (ii) shall not include such discriminatory condition or

price which may be adopted to meet the competition; or

(b) limits or restricts -

(i) production of goods or provision of services or market therefor; or

(ii) technical or scientific development relating to goods or services to the

prejudice of consumers; or

(c) indulges in practice or practices resulting in denial of market access in any

manner; or

(d) makes conclusion of contracts subject to acceptance by other parties of

supplementary obligations which, by their nature or according to

commercial usage, have no connection with the subject of such contracts; or

(e) uses its dominant position in one relevant market to enter into, or protect,

other relevant market.

Explanation.—For the purposes of this section, the expression—

(a) "dominant position" means a position of strength, enjoyed by an enterprise,

in the relevant market, in India, which enables it to—

(i) operate independently of competitive forces prevailing in the relevant

market; or

(ii) affect its competitors or consumers or the relevant market in its favour.

(b) "predatory price" means the sale of goods or provision of services, at a. price

which is below the cost, as may be determined by regulations, of production

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of the goods or provision of services,

with a view to reduce competition or

eliminate the competitors.

(c) “group” shall have the same meaning

as assigned to it in clause (b) of the

Explanation to section 5.”

An enterprise is said to be in a dominant

position when it has a strong economic hold in

the market and is unaffected by other players in

the market. The Act states that an enterprise is

said to abuse its dominant position when it

directly or indirectly imposes any unfair or

discriminatory condition or price, in purchase

or sale of goods or services. The legislature

seeks to prohibit any such behaviour of an

undertaking whereby it attempts to abuse its

dominant position, in turn affecting the

harmonious functioning of the market.

However, it may be worthwhile to note that the

Act does not seek to prohibit an enterprise from

attaining a dominant position; it only seeks to

prohibit the abuse of such dominant position.

The European Court of Justice in United iBrands v. Commission has stated the key

elements of dominance: “The dominant

position ... relates to a position of economic

strength enjoyed by an undertaking which

enables it to prevent effective competition

being maintained on the relevant market by

affording it the power to behave to an

appreciable extent independently of its

competitors, customers, and ultimately of its

consumers.”

The question to ponder is why do enterprises indulge in predatory pricing? The answer

to the question is enterprises resort to predatory pricing to strengthen their position in

the market. An enterprise, particularly a dominant one, first reduces its prices to a level

much below the market price which in turn has a hostile effect on the other contenders

in the market. When the other contenders are expelled from the market, the dominant

enterprise raises its price again. In the United States, position of predatory pricing is iidetermined by the ratio in Brook's case. As per the decision, a plaintiff is required to

satisfy two tests – a plaintiff must prove that the alleged predatory price is below the

appropriate measure of defendant's cost and that the defendant would be able to

recoup its investment in below cost price. In reality, the fact of predation is only

established once the rival has left the market and the predator has acquired a monopoly iiiposition in the market.

Determination of Cost under Competition Commission of India (Determination

of Cost of Production) Regulations 2009 (“the Regulations”)

Selling below the cost is the primary factor taken into consideration when determining

predatory behaviour of an enterprise. However, it is extremely difficult to make a

distinction between predatory pricing and pro-competitive pricing. The Regulations

lay down the various types of cost in order to ascertain a predatory price:

“Average Variable Cost” means total variable cost divided by total output during the ivreferred period; “Total Cost” means the actual cost of production including items,

such as cost of material consumed, direct wages and salaries, direct expenses, work

overheads, quality control cost, research and development cost, packaging cost,

finance and administrative overheads attributable to the product during the referred vperiod;

“Total Variable Cost” means the total cost minus the fixed cost and share of fixed vioverheads, if any, during the referred period;

“Total Avoidable Cost” means the cost that could have been avoided if the enterprise viihad not produced the quantity of extra output during the referred period;

“Average Avoidable Cost” is the total avoidable cost divided by the total output viiiconsidered for estimating 'total avoidable cost';

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“Long Run Average Incremental Cost” is the

increment to long run average cost on account

of an additional unit of product, where long run ixcost includes both capital and operating costs;

“Market Value” means the consideration

which the customer pays or agrees to pay for a

product which is sold or provided or can be xsold or provided, as the case may be;

The CCI in MCX Stock Exchange Ltd. Vs. xiNational Stock Exchange of India Ltd. has

discussed the appropriate methods to

determine cost. It states, “…..Based on

documents such as the 2008 report of US

Department of Justice on Single Firm Conduct

under section 2 of the Sherman Act and Review

of Article 82 EC and the publication by DG

Competition (European Commission) of 2005

Discussion Paper on EC Exclusionary Abuses,

the DG report observes that average variable

cost (AVC) is not taken as a reliable method of

costing. More reliance is placed on average

avoidable cost (AAC) which represents losses

that could have been avoided by not producing

that output which was charged lower during

the referred period….. As yet, there is no

complete unanimity in international

jurisdictions over what may be the best cost

measure to evaluation predation claims. The

limitations of AVC and AAC forced an

inclination towards long run average

incremental cost (LAIC or LRAIC) as an

appropriate cost measure for assessing

predation. Unlike AVC, LAIC includes all products specific fixed costs whether

recoverable or sunk. It also includes costs incurred before predation period.”

Legal Position - Predatory Pricing in India

xiiIn H.L.S. Asia Limited vs. Schlumberger Asia Services Ltd., it was alleged that the

Opposite Party was indulging in predatory pricing. The brief facts are that Oil &

Natural Gas Corporation Limited floated an e-tender in respect of wireline logging

and perforation services required for Oil & Natural Gas exploration. The allegation of

the Informant was that Opposite Party quoted unreasonably low rates for the standard

services which were to be the basis for evaluation of tender while considering the

financial bid of the parties. The CCI held “….in order to make out a case for predatory

pricing, it is necessary for a party to show as to what was the cost of providing services

to the party who resorted to predatory pricing and how the cost at which service was

being provided to the customer was lower than the cost to the party…..

……A party bidding for the provision of a service takes into account cost of his

equipment, the life of equipment, the maintenance requirements of equipment, the

operational cost and some reasonable returns on the capital invested. A party will bid

at a price which is equal to the minimum of its' average variable cost to exploit scale

economies. It will be not prudent for abiding firm to keep its capacity idle and bid at a

price higher than its minimum average variable cost. Hence, the aspect of predatory

pricing has to be looked from an appropriate cost benchmark.”

The case against the Opposite Party was dismissed as the Opposing Party was able to

prove that over a period of time, the prices of standard services had been falling from

2008 onwards (owing to recession and discovery of shale gas in USA and

development of technology to extract shale gas economically, which had considerably

reduced dependence of US on conventional fuel and had brought pressure for

reduction of price in normal exploration of offshore and onshore oil and gasses) and

even the price quoted by the Informant had been lower than the price quoted by

Informant in the previous tender. The decrease in the price of different players has

been up to 36%. The Informant also reduced its quoted price by 21% from the

estimates given by ONGC. Another factor stated was that on the last occasion when

tender was floated, there were only 4 bidding parties and this time there were 10

competing parties. Thus it was the increase in competition and global market scenario

that lead to reduction in prices.

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In another case MCX Stock Exchange Ltd. Vs. xiiiNational Stock Exchange of India Ltd., the

CCI concluded that NSE had was behaving in a

predatory manner on basis of its acts such as

fee waivers, denial of Application Programme

Interface Code (APIC) and distribution of a

software namely NOW for free were clear acts

of protecting its position in the currency

derivatives (CD) segment and was possible

due to its position of strength in the non CD

segment. CCI held that “…..Had NSE and

MCX-SX been on equal footing in terms of

resources directly available, spectrum and

scale of operation, nationwide presence,

length of existence etc. perhaps perception of

unfairness would not have been so blatant and

impossible to ignore, but in this case, the sense

of the two being equal or even almost equal

does not exist. Therefore, this Commission

concludes that the zero price policy of NSE in

the relevant market is unfair. In this case, the

conduct of zero pricing by the NSE is beyond

the parameters of promotional or penetrative

pricing. It can, in fact, be termed as

annihilating or destructive pricing……..

Therefore, it is concluded that NSE has used its

position of strength in the non CD segment to

protect its position in the CD segment.”

Conclusion

All prices that are below the cost may not be a result of predatory pricing. The

Supreme Court in Haridas Exports vs. All India Floating Glass Mfrs. Association and xivOrs held that in all situations, availability of goods outside India at prices lower than

those that are indigenously produced would encourage and would not necessarily per

se eliminate competition in India, as long as buyers benefit from such a situation. To

conclude, predatory pricing acts as an entry barrier. It prevents new firms from

accessing the market due to the unfair prices charged by the enterprise, thus having a

detrimental effect on consumers as well.

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i Case 27/76 United Brands Company and United Brands Continental BV vs. Commission of the EuropeanCountries [1978] ECR 207

ii Brooke Group Ltd. vs. Brown & Williansom Tobacco Corp.; 509 U.S 209 (1993)

iii Raghavan High Level Committee on Competition Law and Policy, 2000

iv Regulation 2 (b) of Competition Commission of India (Determination of Cost of Production) Regulations 2009

v Regulation 2 (c) (i) of Competition Commission of India (Determination of Cost of Production) Regulations 2009

vi Regulation 2 (c) (ii) of Competition Commission of India (Determination of Cost of Production) Regulations 2009

vii Regulation 2 (c) (iii) of Competition Commission of India (Determination of Cost of Production) Regulations 2009

viii Regulation 2 (c) (iv) of Competition Commission of India (Determination of Cost of Production) Regulations 2009

ix Regulation 2 (c) (v) of Competition Commission of India (Determination of Cost of Production) Regulations 2009

x Regulation 2 (c) (vi) of Competition Commission of India (Determination of Cost of Production) Regulations 2009

xi Case no. 13/2009

xii Case no. 80/2012

xiii Case no. 13/2009

xiv AIR 2002 SC 2728


7

Marking Exhibits on documents in Civil

Suits

We have found advocates in courts generally

taking objections (document is not proved,

document in original has not been filed, only a

copy has been filed, witness does not have

personal knowledge of the contents of the

documents etc.) at the time of tendering the

documents in evidence on the point of marking

such documents as exhibits. During my

practice in Delhi courts I asked several lawyers

about the provisions relating to marking

documents as exhibits but could not find any

satisfactory explanation. I have not come

across any statutory provisions on point. The

questions, which are often posed before courts

having original jurisdiction in civil suits, are

relevant for the purpose of this article. Can a

document be marked as an exhibit only when it

has been proved? Does mere endorsing of an

exhibit mark on a document amount to

expression of judicial opinion on its proof?

Delhi High Court in Sudhir Engineering Co.

Vs. Roadways Ltd. has dealt with the matter at

length. At the request of the court members of

the Bar stated that a document cannot be

LAW AND PRACTICE

-Yogesh singh Rohilla

marked until it is proved. Once the document is marked exhibit, the other party cannot

contend at final hearing that the document was not duly proved. Members of the Bar

further stated that (i) the documents admitted by opposite parties at the stage of

Admission-Denial are marked EX.P-1, P-2 (documents filed by Plaintiff) or D-1, D-2

(documents filed by Defendant)and so on. (ii)Documents which are tendered during

examination of witnesses of Plaintiff are marked as PW1/1 PW1/2, PW2/1, PW2/2,

and those tendered by witnesses of Defendant as DW1/1, DW1/2, DW2/1 and so on;

the earlier part denoting the number of witness and latter part denoting number of

document. (iii) The documents insisted to be marked exhibit by one party and opposed

by other party are marked as Ex. A, Ex. B and so on i.e. by using alphabet and not a

number.

The court requested the members of the Bar to show the source of this practice but no

one could show any such source and the court presumed that there was none. The court

analyzed the law on the point and observed that a document passes through three

stages before it is held as proved or disproved.

1. When a document is filed in the court. The document though is on file but does

not make part of the judicial record.

2. When a document is tendered in evidence by a party and the court admits the

document in evidence. Such document becomes part of the judicial record.

3. When the court is called upon to apply its judicial mind to hold it proved, not

proved or disproved as per section 3 of the Indian Evidence Act. This stage

generally arrives at final hearing of suit.

The court further quoted Order XIII Rule (4) sub rule (1) which provides for

endorsement on every document which has been admitted in evidence in a suit by

writing on it number and title of the suit, name of the person who produced the

document, date of its being so produced, a statement of its being so admitted in

evidence. The endorsement needs to be signed by the Judge.

The court observed that mere admission of document in evidence does not amount to

its proof. The right of a party to argue that the document was not duly proved cannot be

taken away just because the party did not object to its admissibility. For example a

party cannot be excluded from arguing at final hearing that the Will was not duly

proved although the Will is exhibited. Supreme Court in Sait Taraji Khimechand Vs.

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Yelamarti Satvan laid down that mere marking

of exhibit does not dispense with the proof of

document. Two Division Benches of Lahore

High court have held that admission of

documents under Order XIII Rule (4) does not

bind the parties and unproved documents

cannot be regarded as proved nor they become

evidence in the case without formal proof.

The court analyzed Delhi High Court (Original

Side) Rules1967and Original Side Practice

Direction (No. 3 of 1974) and observed that

marking of exhibit by court master on a

document is 'admission in evidence' and not

proof of a document. Admission of document

and proof of a document are two different

stages and not to be confused with each other.

The marking of a document as an exhibit, be it

in any manner either by use of alphabets or

numbers, is only for the purpose of

identification. So, when documents admitted

in evidence an endorsement as exhibit may be

marked on it and the document would be held

proved or not proved or disproved at a later

stage by the court. Endorsement of exhibit

number is not expression of judicial opinion on

its proof.

Amendment in Maharashtra Stamp Duty

Laws

Section 30 of the Bombay Stamp Act fixes the

responsibility of payment of stamp duty on

certain instruments (Agreement relating to

deposit of title deeds, mortgage deed,

conveyance, lease etc.) on the persons executing the instruments e.g. mortgagor,

purchaser, lessee etc. in the absence of any contract to the contrary.

Instruments executed on or after 1st May 2013: Now a new section 30A has been

inserted by the Maharashtra Tax Laws (Levy and Amendment) Act 2013vide

Notification dated 25th April 2013 which shifts the responsibility of payment of stamp

duty on the instruments executed in favour of Financial Institution (including banks,

NBFCs, HFCs and the like) on or after 1st May 2013 and creating any right in favour

of such Financial Institutions; from persons as mentioned in Section 30 to such

Financial Institutions. The new section 30A has been given overriding effect over

section 30. Financial Institutions may collect amount of stamp duty from the other

party (borrower, mortgagor etc.) if they have any such right to collect such amount of

stamp duty from the other party. Financial Institutions should incorporate in security

documents or financial documents or any other agreement a covenant to this effect in

order to create a right to collect or recover the amount of stamp duty paid or to be paid.

Instruments executed before 1st May 2013: Section 33 of Bombay Stamp Act fixes

the responsibility of every person having by law or consent of the parties, authority to

receive evidence and every person in charge of a public office of impounding any

documents which are not duly stamped. Now by virtue of new sub section (2) of

section 30 A, Financial Institutions have also been given the responsibility to impound

such instruments as mentioned in sub section (1) of section 30 A (as mentioned in

preceding para) which were executed before 1st may 2013 and forward the same to

collector for recovery of stamp duty.

Penalty: Sub section (3) of section 30 A provides for a penalty to be imposed on the

Financial Institution which fails to impound the instruments as mention in sub section

(2) of section 30 A. Amount of penalty shall be equal to the amount of stamp duty

payable.

Evidentiary value of the documents after payment of penalty under sub section

(3) of Section 30 A: It appears from sub section (3) of Section 30 A that provision of

penalty has been incorporated in order to ensure compliance of sub section (1) and (2)

of new section 30 A only. So, payment of penalty would not make the document

admissible in evidence. In order to make a document admissible in law the stamp duty

along with penalty as mentioned in section 34 has to be paid.

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Supreme Court passes historic judgment

for wildlife conservation in the matter of

Centre for Environmental Law WWF-1 v.

Union of India and others

The Supreme Court in a landmark judgment

dated 15th April 2013 has upheld the nation's

right to have a second habitat for lions by

directing the state of Gujarat to shift some

lions to Kuno-Palpur wildlife sanctuary at

Madhya Pradesh, in a matter where the Court

had to decide the issue of the necessity of a

second home for Asiatic Lion (Panthera leo

persica), an endangered species, for the

purposes of its long term conservation.

The Court passed directions as under-

1. To the Ministry of Environment and

Forests (MOEF) to take urgent steps and

start species recovery plans for

threatened species such as the Bengal

Florican, Manipur Brow-antlered deer,

Great Indian Bustard, dugong and

wild buffalo.

2. To the Government of India and MOEF

for operationalizing the National Wildlife

Action Plan (2002-2016) and to identify

Legal Potpourri

-Lex Scripta Team

all the endangered species of flora and fauna, study their needs and survey

environments, followed subsequently by regular reviews that correlated the data

with the Red List published by the International Union for Conservation of

Natgure (IUCN) every three years.

The Court observed that there was a necessity for an exclusive parliamentary

legislation for the preservation and protection of endangered species as Wildlife

Protection Act, 1972, the existing law that guides any work pertaining to conservation

of species had failed in its implementation to protect the endangered species.

The Court also observed that the eco-centric approach envisaging conservation

planning based on what is best for the species must be undertaken and rejected the

prevailing principles of human-centricism or anthropocentric that focused solely on

people's profitability, further noting even principles of sustainable development were

anthropocentric in nature. The Court held that anthropocentrism is always human

interest focussed thinking that non-human has only instrumental value to humans, i.e.

humans take precedence and human responsibilities to non-human are based benefits

to humans.

The Court was of the view that the cardinal issue was not whether the Asiatic lion is a

“family member” or is part of the “Indian culture and civilization”, or the pride of a

State but for the preservation of an endangered species, the “species best interest

standard had to be applied and that the overall approach had to be eco-centric.”

The Court also outlined the concept of intrinsic worth and emphasised that all species

have the right to exist, whether humans deemed them worthy or not. The Court

observed that typically conservation attention had gone only to a few charismatic

species deemed worthy of this attention and that we had chosen who to save. The

intrinsic worth and eco-centrism approach meant that the government ought to protect

and save all the species that are endangered and not target only those species which

having instrumental value for humans or those species considered beautiful, or those

adding to human industry like tourism.

Courts in India have no jurisdiction to set aside interim awards passed under

Singapore International Arbitration Centre Rules, 2007

The High Court of Madhya Pradesh in the matter of Yograj Infrastructure Limited

versus Ssangyong Engineering and Construction Co Limited, dismissing the appeal

by an order dated May 9, 2013, held that the Indian Courts had no power to set aside an

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interim award passed under arbitration

proceedings governed by the Singapore

International Arbitration Centre Rules, 2007

("SIAC Rules") and the only recourse was to

challenge the award in the courts of Singapore.

The Court arrived at the said conclusion upon a

conjoined reading of the SIAC Rules and the

International Arbitration Act ("IA Act").

Ssangyong had sub-contracted a project from

the National Highways Authority of India to

Yograj but subsequently terminated it on

various grounds relating to performance of the

agreement. The Supreme Court in 2011 in a

previous matter contested between the parties

held that the rule laid down in the matter of

Bhatia International v Bulk Trading regarding

the applicability of Part - I of the Arbitration

and Conciliation Act, 1996 ("Act") was not

applicable in the present matter since the

parties had agreed to the arbitration

proceedings to be referred to arbitration in

Singapore under the SIAC Rules ("2011

Matter").

The Court perused the SIAC Rules and

observed that rule 32 laid down that the

applicable law for any arbitration conducted in

Singapore under the SIAC Rules is the IA Act

and would also apply for setting aside an award

of any proceedings. These provisions had to be

read with article 34(2) of the First Schedule (an

award can only be set aside by courts under

article 6 of Chapter I of the same schedule) and

article 6 of Chapter I of the First Schedule

(only states which have enacted the

UNCITRAL Model law can perform the functions under article 34(2) of setting aside

an award). The IA Act was enacted for this purpose. The Court therefore arrived at this

view that procedurally the aforesaid rules had to be conformed to while setting aside

an award.

The Court further held that the Bhatia International judgment did not apply in the

instant case as the parties in terms of their agreement had clearly submitted to the

proceedings being held as per the SIAC Rules.

This judgment has again has upheld the well settled proposition of law in respect of the

courts in India not having jurisdiction to decide matters pertaining to setting aside of

foreign awards.

Issue and Listing of Non-Convertible Redeemable Preference Shares

Regulations, 2013, notified by SEBI

SEBI has notified Issue and Listing of Non-Convertible Redeemable Preference

Shares Regulations, 2013 w.e.f 12th June 2013, putting in place a comprehensive

regulatory framework for public issuance of non-convertible redeemable preference

shares and for listing of privately placed redeemable preference shares. The objective

of these regulations is to ensure transparency in raising funds through such securities

and to safeguard the interest of small investors from such high-risk securities.

The highlights of the regulations are as under

- Listing of privately placed non-convertible redeemable preference shares would

require a minimum application size of Rs. 1 (one) million for each investor.

- Public issuance of non-convertible redeemable preference shares would require

minimum 3 (three) year tenure of these instruments as well as a minimum rating

of “AA-” or equivalent.

- In case of public issuance of non-convertible redeemable preference shares, an

issuer is required to make an application for approval to a recognized stock

exchange for listing of such securities along with the last three years audited

annual reports, disclosure of details of any outstanding loans, of any defaults

committed and other financial indebtedness including corporate guarantee given

by the company in the past five years. Approval from the stock exchange is

required.

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- In case of delay in listing of such shares

beyond 20 days from the deemed date of

allotment, the company would have to

pay penal amount of at least 1% per

annum over the dividend rate from the

expiry of 30-day from the deemed date of

allotment till the listing.

- Regulations shall also applicable to

non-equity instruments issued by banks

such as perpetual non-cumulative

preference shares and innovative

perpetual debt instruments which are in

compliance with the specified criteria for

inclusion in Additional Tier I Capital, as

per Basel III norms.

The regulations have clarified the process of

generating capital through non-convertible

redeemable preference shares and will result in

major changes in capital generation by

corporate entities and banks through various

instruments.

RBI issues circular mandating regular legal

audit of title documents relating to large

value loan accounts

RBI in 2011 had issued guidelines that the

concurrent auditors were required to look into

and report on the genuineness of the title

documents especially for large value loans.

RBI has now decided upon a further review of

these directives that the banks should also

subject the title deeds and other documents in

respect of all credit exposures of rupees five

crores and above to periodic legal audit and re-verify the title deeds with relevant

authorities as part of regular audit exercise till the full repayment of the loan.

The banks in terms of this circular may furnish a review note to its Board/ Audit

Committee of the Board at quarterly intervals on an ongoing basis giving therein the

information in respect of such legal audits which should cover details such as number

of loan accounts due for legal audit for the quarter, how many accounts covered, list of

deficiencies observed by the auditors, steps taken to rectify the deficiencies, number

of accounts in which the rectification could not take place, course of action to

safeguard the interest of bank in such cases and action taken on issues pending from

earlier quarters.

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The 'Tipsy Coachman' doctrine is a rule of

law that upholds a correct conclusion despite

flawed reasoning by the judge in a lower court.

In other words, the lower judgment was right,

but for the wrong reason. The colorful "tipsy

coachman" label comes from a 19th century

case in which the Georgia Supreme Court

noted that the human mind is so constituted

that in many instances it finds the truth when

wholly unable to find the way that leads to it.

'Cuius est solum, eius est usque ad coelum et

ad inferos' (Latin for whoever owns the soil, it

is theirs all the way up to Heaven and down to

Hell) is a principle of property law, stating that

property holders have rights not only to the

plot of land itself, but also to the air above and

the ground below. In modern law, this principle

is still accepted in limited form and the rights

are divided into air rights above and sub-

surface rights below. Property holders

generally have a right to the space immediately

Did You Know?

above and below the ground – preventing overhanging parts of neighboring buildings-

but do not have rights to control flights far above their property, or subway

construction below.

A 'donatio mortis causa' is a gift made during the lifetime of the donor which is

conditional upon, and takes effect upon, death. It is separate and distinct from both a

normal inter vivos gift, under which title passes immediately to the transferee, and

from a testamentary gift, which takes effect under the provisions of a properly

executed will. The donor, contemplating imminent death, declares words of present

gifting and delivers the gift to the donee or someone who clearly takes possession on

behalf of the donee. The gift becomes effective at death but remains revocable until

that time.

Jurisdictional arbitrage is the practice of taking advantage of the discrepancies

between competing legal jurisdictions. It takes its name from arbitrage, the practice in

finance of purchasing a good at a lower price in one market and selling it at a higher

price in another. Just as in financial arbitrage, the attractiveness of jurisdiction

arbitrage depends largely on its transaction costs — in this case the costs of switching

legal service providers from one government to another.

Diplomatic immunity is a form of legal immunity and a policy held between

governments that ensures that diplomats are given safe passage and are considered not

susceptible to lawsuit or prosecution under the host country's laws, although they can

still be extradited. The concept of diplomatic immunity can be found in ancient Indian

epics like Ramayana and Mahabharata where messengers and diplomats were given

immunity from capital punishment. Originally, these privileges and immunities were

granted on a bilateral, ad hoc basis, which led to misunderstandings and conflict. An

international agreement known as the Vienna Conventions codified the rules and

agreements, providing standards and privileges to all states. Abuse of diplomatic

immunity and violation of the law by diplomats has included espionage, smuggling,

child custody law violations, and even murder.

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We welcome Ms. Raisa Contractor who is doing an internship for one month with the corporate legal team at Mumbai. She is a 5th year

student at ILS Law College, Pune.

We welcome Ms. Manali Patil who is doing an internship for one month with the corporate legal team at Mumbai. She is a 3rd year student

at the Pravin Gandhi College of Law, Mumbai.

We welcome Mr. Akshat Swaroop who is doing an internship for one month with the corporate legal team at Mumbai. He is a 4th year

student at Amity University, Noida.

In - House News !!

Two men were lost on a hot air balloon journey. The only way to determine their location was to maneuver the balloon close enough to the

ground so that they could yell down, and ask someone. They came across a man walking his dog. "Where are we," they shouted? The

man looked up . . . and yelled back, "In a Hot Air Balloon." One balloonist then turned to the other and shrugged. "Isn't that our luck, to

only come across a lawyer." "How do you know he was a lawyer?" "Because the information, as usual, was accurate, but useless."

"Well," said the other, at least he didn't charge us.”

Questions during a trial

Q: What is your relationship with the plaintiff?

A: She is my daughter.

Q: And was she your daughter on February 13, 1979?

Gowns and Robes- The Funny Side !!

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The Court Martial of Billy Mitchell (*ing Gary Cooper, a legal drama involving the army)

High Crimes (*ing Morgan Freeman and Ashley Judd, a wife defends her husband in a murder case)

Narrow Margin (*ing Gene Hackman, a lawyer goes all out to protect his witness)

From the Hip (A comedy about a young lawyer's first trial)

Find Me Guilty (A courtroom drama involving the mafia)

Lex Scripta Recommends !!!

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way using information contained in this issue of Lex Scripta and in no event shall be liable for any damage or loss resulting from reliance

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