Birbal’s Update
December 2018
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Key Updates


Recent Judgements


MARKING THE BEGINNING OF CROSS-ENTITY MERGER ERA IN INDIA


The National Company Law Tribunal, Chennai has paved a way for merger of LLPs with a private company in a landmark order in the matter of scheme of amalgamation between M/s. Real Image LLP with M/s. Qube Cinema Technologies Private Limited. Thereby marking the beginning of cross-entity mergers era in India. The tribunal noted that “If the intention of Parliament is to permit a foreign LLP to merge with an Indian company, then it would be wrong to presume that the Act prohibits a merger of an Indian LLP with an Indian company.” It further went upon to state “…the legislative intent behind enacting both the LLP Act, 2008 and the Companies Act, 2013 is to facilitate the ease of doing business and create a desirable business atmosphere for companies and LLPs.” to finally conclude that there does not appear any express legal bar to allow/ sanction merger of an Indian LLP with an Indian company.



SC AND HC ON CARTELISATION

Reliance Jio in November 2016 filed a complaint with the CCI alleging that the incumbents i.e. Bharti Airtel and Vodafone Idea, were abusing their dominant position to prevent it from accessing points of interconnection. Such points connect users of one operator with subscribers of another mobile phone services provider. The CCI in May 2017 had ordered an investigation into allegations of cartelisation and abuse of dominance by telecom companies.

The Supreme Court has dismissed Reliance Jio and CCI’s plea to probe cartelisation charges against incumbent telecom service providers. The Competition Commission of India (CCI) and Reliance Jio Infocomm had moved the Supreme Court against a Bombay High Court order.

The Bombay HC order had quashed the investigation ordered by fair trade regulator CCI into charges of cartelisation against Bharti Airtel and Vodafone Idea in 2017. The CCI had challenged Bombay High Court’s order with respect to its jurisdiction before the Supreme Court. The Bombay High Court had said that the CCI had “no jurisdiction” to interpret contract conditions or policies of the telecom sector, which was governed by the Telecom Regulatory Authority of India (TRAI) Act, and hence, to order a probe in the case.

A Supreme Court bench, headed by Justice A K Sikri, which heard the appeals said “we are upholding the order of the (Bombay) High Court on the aspect that the CCI could exercise jurisdiction only after proceedings under the TRAI Act had concluded/attained finality, i.e. only after TRAI returns its findings on the jurisdictional aspects”. Further, the apex court bench said the “ultimate direction given by the high court, quashing the order passed by CCI, “is not liable to be interfered with” as such an exercise carried out by the antitrust watchdog “was premature”.


Policy Updates



Delisting Regulations – Amendment: No more subject to market speculations


The Securities and Exchange Board of India (SEBI) has issued regulations dated 14 November, 2018 further amending the SEBI (Delisting of Equity Shares) Regulations, 2009. A clarification incorporated in the Amended Delisting Regulations is that the reference date for computing the floor price will be the date on which the recognized stock exchanges were required to be notified of the board meeting in which the delisting proposal would be considered. This move will ensure that the floor price is based on the prevailing stock prices and not market speculations. Prior to the amendment, there was a long gap between the date of intimation to the stock exchange and the date of public announcement as the Delisting Regulations provided for computation of the offer price through the book building process after fixing the floor price which shall be determined as per the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations). The Amendment Regulation will prevent inflation in price due to market speculations.

Another major amendment introduces the concept of counter offer pursuant to price discovery through reverse book building process. Previously if the offer price determined through reverse book building was not acceptable to the acquirer, he could only reject the offer price and decline to acquire the equity shares from public shareholders. Pursuant to the Amendment Regulations, the Acquirer now has a right to make a counter offer to the public shareholders within two days, provided that the price in the counter offer must not be less than the book value of the company as certified by the merchant banker. This positive step will prevent certain shareholders from quoting unreasonably high prices and thus, protecting the interest of small shareholders.



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