SEBI order on listed company for non redressal of investor complaints

This is an interesting case passed by SEBI and put up at their website here regarding an order passed against a listed company viz. Vakrangee Softwares Limited. This company had some 10 investor complaints pending against it in the SCORES system when the show cause notice was issued to it. Subsequently one after another the company started redressing one complaint after another. By the time there was a hearing on 22nd January, 2014 there were only five complaints pending against it, though the company has said that there were no complaints pending. After going through the records SEBI came to the conclusion that all the complaints were resolved albeit with a delay.

SEBI relied on section 15-C of the SEBI Act which stated as under:

Penalty for failure to redress investors’ grievances. 
15C. If any listed company or any person who is registered as an intermediary, after having been called upon by the Board in writing, to redress the grievances of investors, fails to redress such grievances within the time specified by the Board, such company or intermediary shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.

Further section 15J gives guidelines on the quantum of penalty.

“15J - Factors to be taken into account by the adjudicating officer 
While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely:-
a. the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
b. the amount of loss caused to an investor or group of investors as a result of the default;
c. the repetitive nature of the default.”

SEBI came to the conclusion that it was unable to quantify the amount of disproportionate gain or unfair advantage or loss to investors and therefore levied a token penalty of Rs.2 lakhs on the company.

I don't know whether the company is going in for appeal against this decision of SEBI.

But for listed company and its intermediaries i.e. the Registrars and Share Transfer Agents this is a wake up call that they should not treat investor complaints lightly. I hope similar penalties are levied against the Mutual Funds who are notorious in their customer service. 

Securitisation/ Reconstruction Companies - amendments in regulatory framework

RBI has issued notification dated 5th August, 2014 wherein certain amendments to the regulatory framework involving securitisation/ reconstruction companies have been carried out in order to check the sale of bad loans to SRCs/ARCs and making them i.e. the SRCs/ ARCs more accountable according to this Economic Times news report here

The salient features of the new guidelines are briefly summarised as under

1. Investment of SCs / RCs in Security Receipts (SRs) - At present, SCs/RCs have to mandatorily invest and hold minimum 5% of the SRs issued by them against the assets acquired on an ongoing basis. Henceforth, SCs/RCs shall, by transferring funds, invest a minimum of 15% of the SRs of each class issued by them under each scheme on an ongoing basis till the redemption of all the SRs issued under such scheme.
2. More time for due diligence - Before bidding for the stressed assets, SCs/RCs may seek the auctioning banks to give adequate time, not less than 2 weeks, to conduct a meaningful due diligence of the account by verifying the underlying assets.
3. Change in definition of Planning period - Planning period will mean a period not exceeding six months (instead of twelve months as at present) allowed for SCs / RCs to formulate a plan for realization of non-performing assets of the selling bank acquired for the purpose of reconstruction.
4. Valuation of SRs -The initial valuation of SRs should be done within a period not exceeding six months of acquiring the underlying asset (instead of one year as at present) to enable all the stake holders to realistically assess the value of SRs at an earlier date.
5. Management fees - Management fees should be calculated and charged as percentage of the net asset value (NAV) at the lower end of the range of the NAV specified by the Credit Rating Agency (CRA) (rather than on the outstanding value of SRs as at present), provided that the same is not more than the acquisition value of the underlying asset. However, management fees are to be reckoned as a percentage of the actual outstanding value of SRs, before the availability of NAV of SRs.
6. Membership in Joint Lenders’ Forum (JLF) - In terms of Circular DBOD.BP.BC.No.97/21.04.132/2013-14 dated Feb. 26, 2014 on ‘Framework for Revitalising Distressed Assets in the Economy – Guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP)’, the banks have been advised that as soon as an account is reported by any of the lenders to ‘Central Repository of Information on Large Credits’ (CRILC) as SMA-2, they should mandatorily form a committee to be called JLF if the aggregate exposure (AE) [fund based and non-fund based taken together] of lenders in that account is Rs 100 crore and above. SCs/RCs also should be members of JLF and should be a part of the process involving the JLF with reference to such stressed assets.
7. Reporting to Indian Banks’ Association (IBA) - In terms of the same circular, banks are to report to IBA the details of the recalcitrant CAs, Advocates and Valuers who have committed serious irregularities in course of rendering their professional services. Likewise, the SCs / RCs are to report to IBA the details of such CAs, Advocates and Valuers for placing it on the IBA database of Third Party Entities involved in fraud. However, the SCs/RCs will have to ensure that they follow meticulously the procedural guidelines issued by IBA (Circ. No. RB-II/Fr./Gen/3/1331 dated August 27, 2009) and also give the parties a fair opportunity to explain their position and justify their action before reporting to IBA. If no reply / satisfactory clarification is received from them within one month, the SCs/RCs may report their names to IBA. SCs / RCs should consider this aspect before assigning any work to such parties in future.
8. Additional disclosure

i. At present it is mandatory for the SCs / RCs to disclose in their balance sheet the value of financial assets acquired during the financial year either on its own books or in the books of the trust. In addition, SCs / RCs will have to mandatorily disclose the basis of their valuation if the acquisition value of the assets is more than the Book Value (the value of the assets as declared by the seller bank in the auction). Similarly, SCs / RCs will have to disclose the details of the assets disposed off (either by write off or by realisation) during the year at substantial discount (say more than 20% of valuation as on the previous year end) and the reasons therefor. SCs / RCs are, also, to declare upfront the details of the assets where the value of the SRs has declined substantially below the acquisition value.
ii. SCs / RCs should put up in their website the list of wilful defaulters, (by adopting the process as defined in DBOD Master Circ. No. CID.BC.3/20.16.003/2014-15 dated July 1, 2014) at quarterly intervals. Further, in terms of DNBS (PD-SC/RC).CC.No.23/26.03.001/2010-11 November 25, 2010, each SC / RC is required to become a member of at least one credit information company (CIC) and provide to the CIC periodically accurate data/history of the borrowers. In this case, also, they should furnish the data of wilful defaulters to the CIC in which they are members.

Indirect Tax Ombudsman Guidelines

Came across the Indirect Tax Ombudsman Guidelines 2011 which office has been set up primarily to deal with public grievances against the offices of customs, central excise and service tax department and to facilitate satisfaction and settlement of such complaints.

The offices of the Indirect Tax Ombudsman will be set up at 7 cities i.e. Delhi, Mumbai, Chennai, Kolkata, Lucknow, Bangalore and Ahmedabad.

The matters that can be complained against are :

(a) delay in the issue of refunds or rebate beyond time limits
prescribed by law or under the relevant instructions issued from
time to time by the Central Board of Excise and Customs;
(b) delay in adjudication;
(c) delay in registration of tax payers;
(d) delay in giving effect to Appellate orders;
(e) non adherence to the principle of “ First Come First Served” in sending refunds;
(f) non adherence to the rules prescribed for disbursement of drawback;
(g) non acknowledgement of letters or documents sent to the department;
(h) delay in release of seized books of account and assets, after the proceedings under the Customs, Central Excise and Service Tax statutes in respect of the years for which the books of account or other documents are relevant are completed;
(i) non adherence to prescribed working hours by Customs, Central Excise and Service Tax officials;
(j) unwarranted rude behaviour of Customs, Central Excise and Service Tax officials with assessees;
(k) any other matter relating to violation of the administrative instructions and circulars issued by the Central Board of Excise and Customs in relation to Customs, Central Excise and Service Tax administration.
The procedure for filing the complaint is as follows:

I. Any person, who has a grievance against the Customs, Central Excise & Service Tax Department under the Government of India‟s Department of Revenue, may, himself or through his authorized
representative, if any, make a complaint against the concerned Customs, Central Excise and Service Tax official in writing to the Ombudsman having jurisdiction over that office.

II.
a. The complaint shall be duly signed by the complainant or his authorized representative, if any, and shall clearly state the complainant‟s name and address, the name of the office and official
of the Customs, Central Excise and Service Tax office against whom the complaint is made, the facts giving rise to the complaint supported by documents, if any, relied on by the complainant and the
relief sought from the Ombudsman;
b. A complaint made through electronic means shall also be accepted by the Ombudsman and a print out of such complaint shall be taken on the record of the Ombudsman;

III No complaint to the Ombudsman shall lie unless:-
(a) the complainant had, before making a complaint to the Ombudsman, made a written representation to the Grievance Cell of the concerned Customs, Central Excise and Service Tax office and did not receive any reply within one month from the date of its receipt by the Grievance Cell.
(b) where the complainant had made a complaint in writing to the Grievance Cell of the concerned indirect tax office and he is not satisfied with the reply given to him.
(c) where the complainant had before making a complaint to the Ombudsman, made a written representation to the Customs, Central Excise and Service Tax authority superior to the one complained against and either such authority had rejected the complaint or the complainant had not received any reply within a period of one month after such authority had received his representation or the complainant is not satisfied with the reply given to him by such authority;
(d) the complaint is made not later than one year after the complainant has received the reply of the concerned Customs, Central Excise and Service Tax office to his representation or, in case, where no reply is received, not later than one year and one month after the representation to the Customs, Central Excise and Service Tax Authority;
(e) the complaint is not in respect of the same subject matter which was settled through the Office of the Ombudsman in any previous proceedings whether or not received from the same complainant or
any one or more of the parties concerned with the subject matter; and
(f) the complaint is not frivolous or vexatious in nature.

IV. No Complainant shall be made to the Indirect tax Ombudsman on an issue which has been or is the subject matter of any proceeding in an appeal, revision, reference or writ before any Customs, Central Excise and Service Tax Authority or Appellate Authority or Court.


The proceedings by the Ombudsman shall be summary in nature and the Ombudsman shall not be bound to follow any legal rules of evidence

The Ombudsman shall cause a settlement to be arrived at between the complainant and the official by conciliation or mediation

If the complaint is not settled between the parties by conciliation or mediation within one month of the receipt of the complaint, then the Ombudsman shall pass an award after giving both parties a reasonable opportunity of being heard. The award shall be binding on both the parties but the complainant is required to accept the award within 15 days of passing thereof. It shall be a speaking award. The Ombudsman is authorised to grant a token compensation not exceeding Rs.5,000/- to the complainant.

The department shall within one month from the date of the award comply with the award and intimate compliance with the ombudsman.



 

Stamps on affidavits in Maharashtra

Unable to locate the particular notification on the Maharahstra Government website, it is very difficult to locate notifications on government websites, first thing that NaMo government should do is to make it easy for people to locate their notifications, circulars, etc. for common man. However as per newspaper reports it seems that in Maharashtra stamp papers are not apparently needed for many certificates. I wonder why this was never publicised for 10 long years. Anyway in absence of a copy of the government circular have to rely on the newspaper clipping as per link given here

Apparently stamp papers not needed on affidavits or declarations made for obtaining caste certificate, income certificate, domicile certificate or nationality certificate.

The amendments have been made in the Bombay Stamps Act, 1958. The amendments must have been made via the Mah. Tax Laws (Levy, Amendment and Validation) Act, 2004, but the link here which is a 2004 amendment does not show any amendment for Bombay Stamp act, 1958 unless there has been another amendment in the same year 2004 or the amendments has been made in another year.

Looking at the Bombay Stamp Act Schedule as per this link here again one does not find any amendment in the Schedule in article 4 pertaining to affidavits.

So proceed with caution on this one.

Free 3rd party ATM transactions down to 2 per month

I have not been able to find out any RBI notification or circular or press release in this regard, but it seems RBI has restricted free third party ATM transactions to only two per month down from five per month. The five free 3rd party ATM transactions were reasonable considering that one can never find your home bank ATMs near your residence. Anyway withdrawing money from your bank account need not cost anything, but considering the costs incurred by banks, five free 3rd party ATMs was completely reasonable and RBI should not have tinkered with that limit. It shows that RBI barely cares for customers and customer service and I don't understand how they are going to meet their mantra of financial inclusion if they go on imposing unreasonable costs on the customers. And then there is a limit of maximum withdrawal of Rs.10,000/- at any one time, which means that if you withdraw more than Rs.20,000/- in a month, you are liable to pay charges on such withdrawals. What nonsense. As it is banks impose huge costs on the customer by way of cheque book charges, maintenance charges, debit card fees and what not for which they don't even write proper entries in the pass book.

http://www.deccanchronicle.com/140802/business-latest/article/third-party-atm-transactions-limit-go-down-five-two

Related Party - clarifications

The Ministry of corporate affairs has vide its clarification letter dated 17th july 2014 clarified a few aspects on the intriguing aspect of related party transactions and the compliances thereof. Really had the Ministry taken a little trouble in drafting the original provisions correctly, the spate of clarifications that they are issuing would not have been necessary.

The clarifications that they have issued vide the above circular are briefly summarised as under :

1) The shareholder who is the related party will not be allowed to vote on the resolution laid before the general meeting only in respect of such contracts/ transactions in respect of which he is the related party. If he is a related party within the general definition of "related party" under the Companies Act, 2013 but he is not concerned or interested in the contract or arrangement which has been put up for approval at the general meeting, then he will be allowed to vote;

2) Corporate restructuring or amalgamations will not be covered under the definition of related party transactions;

3) Related party contracts which have already been approved under the old provisions of Companies Act, 1956 will not need fresh approval until the term of the contract is over. However any alteration or variation in the contracts will need fresh compliances under the Companies act, 2013.

Stay tuned for more such compliance news

Online copyright applications

Effective from 1st August 2014 onwards copyright applications can be made only online on www.copyright.gov.in. or offline by post.

The online facility was launched on 17th February 2014 onwards and since then both online and offline facility was available. However the government has decided to close the copyright counter from 1st August, 2014 in order to promote the online filings.

The applicants can also send applications by speed post/ registered post in the prescribed format.

Dr. Suresh Chand, the Dy. Registrar of Copyrights has issued a notification to that effect on 22nd July 2014