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About Securities Appellate Tribunal (SAT)

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About Securities Appellate Tribunal (SAT):

SAT is a statutory body established under the provisions of Section 15K of the Securities and Exchange Board of India Act, 1992 to hear and dispose of appeals against orders passed by the SEBI or by an adjudicating officer under the Act and to exercise jurisdiction, powers and authority conferred on the Tribunal by or under this Act or any other law for the time being in force.


CCI nod for Jet-Etihad deal challenged

Former Air India Executive Director Jitender Bhargava has challenged the CCI (Competition Commission of India) clearance to the Rs.2,060-crore Jet-Eithad deal in the Competition Appellate Tribunal (Compact).

The CCI has sought explanations from the two carriers in this regard to ascertain whether they failed to provide information on certain commercial pacts, which could raise anti-competition concerns.

Related information:

The Competition Act

The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

Goal: is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers.

Competition Commission of India (CCI)

The objectives of the Act are sought to be achieved through the Competition Commission of India (CCI), which has been established by the Central Government with effect from 14th October 2003. CCI consists of a Chairperson and 6 Members appointed by the Central Government.

It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.

The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.


Mind -mapping

  • Purpose and Objective of setting up CCI? Need of such a commission? Consequences, in absence of such a regulatory body.

  • Recent examples- cartelisation among traders in determining Cement prices, Onion prices, etc.

  • Other regulatory bodies in India; Role and significance of such bodies.

CCI suggests more players in coal sector

In a recent order, the Competition Commission of India (CCI) has recommended to the government that the coal mining sector be restructured by introducing more players. Due to Coal India’ monopoly, electricity consumers are paying higher user charges.

According to the order, the effects of various anti-competitive factors identified in the coal sector on the rest of the economy are widespread and create systemic risk. And inefficiencies in any one segment are felt in the entire value chain with a cascading impact on the end-consumers of electricity.

(The order passed on December 9, 2013 had penalised Coal India Rs.1,773 crore for abuse of market dominance.)

India’s trade deficit with China nears record $30 billion

According to a newly released trade data, India’s trade deficit with China in this year (till November, 2013) has reached a record $29.5 billion, exceeding last year’s annual figure,

The numbers underline the sharp decline in once-burgeoning trade, which reached $74 billion in 2011 when China became India’s biggest trading partner.

In 2012, there was a 20 % slump in India’s exports, largely on account of iron ore mining bans, coupled with the global slowdown, resulted in a 10 % decline as trade fell to $66.50 billion, even as both countries announced an ambitious $100 billion target for 2015.

The latest figures have cast doubt on whether that target may be achieved. During the period under reference, even as China’s trade with the rest of Asia as well as with its major Western trading partners has picked up, trade with India has remained in a slump, suggesting that causes were more structural rather than a reflection of global trends.

After 11 months of this year, India’s exports to China reached only $14.87 billion out of total bilateral trade of $59.24 billion.

Trade has grown more than 50 times since 2006, when the Nathu La pass, between Sikkim and the Shigatse prefecture in Tibet, was reopened. Most of the trade is made up of imports of Indian goods into Tibet, which reached $12 million in 2012. (The border market is open for only six months of the year)


  • India – China’s trade relationship over the years.

  • Why does India have a huge trade deficit with China? How can this deficit be overcome?

  • What steps are taken by Indian Government in this regard?

  • Does the trade deficit have an impact on the security issues between the two countries?


A mission to secure currency for bitcoin

With India’s first bitcoin exchange gearing up to start operations hopefully by March,2014 hundreds of investors, enthusiasts and banking officials have come on a mission to convince the government that the virtual currency is enduring and serious.

Started in 2008, bitcoin is the most prominent amongst a group of digital currencies – money that exists in the form of computer code, that do not have a central issuing authority. These virtual currencies are stored in electronic wallets and can be traded on online exchanges and converted into cash.

At India’s first bitcoin conference organised by digital currency awareness organisation CoinMonk – the top issue was how to convince the government and regulators that the bitcoin ecosystem would be a valuable economic innovation and not the currency of choice for money laundering and illegal drug purchases.

According to the Director of Business Development at Buttercoin, bitcoin can help solve the problems of the unbanked rural population. And also it can be used as a potential remittance tool.


  • What is Bitcoin? What implications would it have if Indian Govt. accepts Bitcoin?

  • What is the stand taken by RBI with regard to bitcoin?

  • What is the global scenario? Does legalizing/ accepting Bitcoin has more disadvantages than advantages, if so how?

Bitcoin crashes in China

Virtual currency Bitcoin, has crashed in China, falling almost 50 % after the country’s biggest trading platform BTC China banned deposits in yuan, following new restrictions imposed by the People’s Bank of China.

Bitcoin, invented in the wake of the global financial crisis by a mysterious computer guru using the pseudonym Satoshi Nakamoto, is a form of cryptography-based e-money. It can be stored either virtually or on a user’s hard drive, and offers a largely anonymous payment system.

Reserve Bank warns against Bitcoin use

The RBI has warned the public against the use of virtual currencies such as Bitcoin, pointing out that users expose themselves to potential financial, legal and security related risks.

The advisory comes after the borderless digital currency has begun to gain widespread acceptance in India, despite poor Internet penetration and a natural scepticism to assets not backed by tangible entities such as land.

The RBI also said that it had been examining the issues associated with the usage of virtual currencies under the legal and regulatory framework of the country. In its list of potential risks, the RBI has highlighted problems such as losses arising out of hacking, no sources of customer recourse and the general financial volatility surrounding Bitcoins.

According to RBI, ‘the creation, trading or usage of virtual currencies including Bitcoins are not authorised by any central bank or monetary authority. As such, there is no established framework for recourse to customer problems’. Also as Bitcoins are being traded on exchange platforms, whose legal status is unclear, the traders of virtual currencies are exposed to legal as well as financial risks.

Bitcoins, and other virtual currencies, have been gaining currency quickly in India. According to SourceForge, an online platform that connects consumers to open-source projects such as Bitcoin and facilitates client downloads, there have been more than 35,000 downloads in India since the launch of Bitcoin in November, 2008.

A number of India-based trading platforms and exchanges have sprung up over the last six months, catering to Indian users by allowing them to purchase Bitcoin in rupees. The RBI, however, has pointed out that no regulatory approval has been obtained by any entities that carry out such activities.

Also there have been several media reports on the usage of Bitcoins for illicit and illegal activities. Hence the RBI has warned that, the absence of information of counterparties could subject users to unintentional breaches of anti-money laundering.

Bitcoin exchanges shut shop in India

India’s biggest Bitcoin trading platform,, has suspended its operations, citing a recent RBI public advisory that highlighted the risks involved in dealing with virtual currencies.

The closure of, which sees about 12 million rupees of Bitcoin transactions every month, has caused panic among other operators and users with a number of other trading platforms such as INBRTC suspending services indefinitely.

Earlier, RBI had issued a notice, warning the public of the risks involved with virtual currencies while claiming that it could be used for money laundering and funding anti-terrorism activities. It stopped short, however, of issuing a ban or any other restrictions.

Bitcoin and other virtual currencies have begun to gain widespread acceptance in India, despite poor Internet penetration and a natural scepticism to assets not backed by tangible entities such as land.

While countries such as China have banned financial companies from Bitcoin transactions, various U.S government agencies have said that Bitcoins offer legitimate benefits.

To know more about Bitcoins refer our “Insights Current Events Magazine, NOVEMBER 2013” and

RBI outlines action plan to tackle NPAs

The RBI has outlined a corrective action plan to minimise rising non-performing assets (NPAs). The plan would include incentivizing early identification of problem cases, timely restructuring of accounts, which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts.

Action Plan:

The RBI has said that, it would set up a Central Repository of Information on Large Credits (CRILC) to collect, store, and disseminate credit data to lenders.

Banks will have to furnish credit information to CRILC on all their borrowers having aggregate fund-based and non-fund based exposure of Rs.5 crore and above.

While all scheduled commercial banks will mandatorily contribute their credit information on their borrowers/customers as proposed, the RBI said that systemically important non-banking financial companies (NBFC-SI) would also be asked to furnish such information.

In addition, banks would have to furnish details of all current accounts of their customers with outstanding balance (debit or credit) of Rs.1 crore and above.

The RBI said that before a loan account turns into an NPA, banks should identify incipient stress in the account by creating a new sub-asset category, ‘Special Mention Accounts’ (SMA). Within the SMA category, there should be three sub-categories: SMA-NF non-financial (NF) signals of incipient stress; SMA-1 principal or interest payment overdue between 31-60 days; SMA-2 principal or interest payment overdue between 61-90 days.

Banks will be required to report, among others, the SMA status of the borrower to the CRILC. Individual banks will have to closely monitor the accounts reported as SMA-1 or SMA-NF as these are the early warning signs of weaknesses in the account. “They should take up the issue with the borrower with a view to rectifying the deficiencies at the earliest.”

The RBI also said that reporting of an account as SMA-2 by one or more lending banks/NBFC-SIs will trigger the mandatory formation of a joint lenders’ forum (JLF) and formulation of corrective action plan (CAP). Further, with a view to limiting the number of JLFs to be formed, it is proposed that JLF formation would be made mandatory for distressed corporate borrowers, engaged in any type of activity, with aggregate fund based and non-fund based exposure of Rs.100 crore and above.

Regarding NPA, Basel-III norms, asset quality refer to our ‘INSIGHTS CURRENT EVENTS ANALYSIS OCTOBER – 2013’ MAGAZINE)


  • What is Non-Performing Asset? Impact of NPA on the Banking sector and the economy?

  • Measures/Steps taken by RBI in this regard?

  • What are Basel norms? Why have these norms been suggested? Has the Basel-III norm implemented in India? What are the pre-requisites to its implementation?

India, Japan raise currency swap limit

India and Japan, has tripled the limit for the currency swap arrangement to $50 billion.

The Government of India has approved the enhancement of the bilateral currency swap arrangement between the RBI and the Bank of Japan from $15 billion to $50 billion.

This measure will further strengthen the bilateral financial cooperation between Japan and India.

To know more about Currency Swap, refer our “Insights Current Events Magazine, OCTOBER 2013”

SEBI makes IPO grading mechanism voluntary

The Securities and Exchange Board of India (SEBI) has approved the SEBI (Procedure for Search and Seizure) Regulations, 2013, made on the lines of the provisions in the Income Tax Act, 1961’. This would provide detailed procedures for search and seizure by the regulator.

This would also help the market regulator execute search operations and ensure safe custody of any books of accounts or other documents that are seized, as per the Securities Laws (Amendment) Second Ordinance, 2013.

The Ordinance has conferred direct powers on SEBI Chairman to authorise the investigating authority or any other SEBI officer to search any premises where incriminating documents are lying and seize such documents for the purpose of investigation.

The board has also decided to allow public financial institutions and scheduled banks, issuers authorised to make public issue tax free secured bonds, infrastructure debt funds non-banking financial companies (NBFC) to file shelf prospectus.

Earlier, the Companies Act, 1956, had allowed only banks and public financial institutions to file shelf prospectus. However, the Companies Act, 2013, enables SEBI to specify the companies, which can be allowed to file shelf prospectus.

SEBI also approved the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2013, which includes guidelines for determining the settlement terms.

However, SEBI has excluded serious offences such as insider trading, from the scope of settlement. In order to impart transparency in the process, the roles of internal committees and high powered advisory committee are specifically defined and the regulations also provide for terms of settlement in monetary as well as non-monetary terms or combination of both.

SEBI also made IPO grading mechanism ‘voluntary’ instead of ‘mandatory’, amending SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. And to align with the principles laid down by Financial Stability Board (FSB) on reducing the reliance on Credit Rating Agencies, the SEBI Board has approved the proposal to make the IPO grading mechanism ‘voluntary’ as against the current provision of the same being ‘mandatory’.

New rules for foreign investors

The government has agreed to provide similar tax treatment to foreign portfolio investors (FPIs), as available to FIIs now. The three categories of foreign portfolio investors – FIIs (foreign institutional investors), sub-accounts and qualified foreign investors (QFIs) would be given similar tax treatment as available to FIIs now.

The new rules aim to bring all foreign investors under a common framework called the SEBI (Foreign Portfolio Investors) Regulations, 2013. These measures come at a time when the rupee has weakened considerably against the dollar and recently hit its all-time low levels of 60 against the U.S. currency. Also, FIIs have been pulling out money from the Indian debt market, which has resulted in lower yields on government bonds.

Related information:

Foreign portfolio investment (FPI):

FPI is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets, sometimes for speculation.

It is a usually short term investment (sometimes less than a year, or with involvement in the management of the company), as opposed to the longer term Foreign Direct Investment partnership (possibly through joint venture), involving transfer of technology and “know-how”.

For example, Ford Motor Company may invest in a manufacturing plant in Mexico, yet not be in direct control of its affairs. Foreign Portfolio Investment (FPI): passive holdings of securities and other financial assets, which do NOT entail active management or control of the securities’s issuer.

FPI is positively influenced by high rates of return and reduction of risk through geographic diversification. The return on FPI is normally in the form of interest payments or non-voting dividends.

Courtesy- Wikipedia

To know more about Financial Stability Board (FSB):

The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies.

It brings together national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

As obligations of membership, members of the FSB commit to pursue the maintenance of financial stability, maintain the openness and transparency of the financial sector, implement international financial standards, and agree to undergo periodic peer reviews, using among other evidence IMF/World Bank public Financial Sector Assessment Program reports.


To know more about IPO, refer our ‘Insights Current Events Analysis Magazine’ (NOVEMBER, 2013)

Mauritius tightens norms to check proxy tag

Long accused of being a route for avoiding taxes for foreign investments into India, Mauritius has put additional safeguards in place to thwart such wrong perceptions and to boost its image as a preferred global financial centre.

Mauritius’ integrated financial sector regulator Financial Services Commission (FSC) has put in place ‘greater substance requirements’ for global business companies operating from its jurisdiction to ensure their substantial presence there, and not just a ‘proxy address’ to benefit from tax treaties with India and other countries.

These additional requirements being imposed on Global Business Category (GBC) 1 companies will lead to the creation of more economic nexus between those companies and the economy of the island.

Most global investors use GBC-1 route to make investments into India and other countries through Mauritius.

In its attempt to stop round-tripping and money laundering activities, Mauritius has agreed to include a ‘limitation of benefits (LoB)’ clause in its revised tax treaty with India.

Significance of LoB clause:

While specific details of this clause in India-Mauritius tax treaty are being ironed out, LoB clauses are typically aimed at preventing ‘treaty shopping’ or inappropriate use of tax pacts by third-country investors.

The LoB clause limits treaty benefits to those who meet certain conditions, including those related to business, residency and investment commitments of the entity seeking benefit of a Double Taxation Avoidance Agreement (DTAA).

Besides, a Tax Information and Exchange Agreement (TIEA) between India and Mauritius has been finalised.

There has been cooperation from both sides on information exchange and with this  India’s share in the number of investments made by global companies through Mauritius has almost been halved in the past two years even as Africa’s share has surged significantly, amid uncertainties over the bilateral tax treaty.

The share in the number of investments made by global business companies into India has slumped to almost 16% in 2012. In 2010, India’s share was as high as 32%, before declining to 23% in 2011.

To know more about Tax Information Exchange Agreements (TIEAs):

The purpose of this Agreement is to promote international co-operation in tax matters through exchange of information.  It was developed by the OECD Global Forum Working Group on Effective Exchange of Information

The Agreement grew out of the work undertaken by the OECD to address harmful tax practices. The lack of effective exchange of information is one of the key criteria in determining harmful tax practices. The mandate of the Working Group was to develop a legal instrument that could be used to establish effective exchange of information. The Agreement represents the standard of effective exchange of information for the purposes of the OECD’s initiative on harmful tax practices.

This Agreement, which was released in April 2002, is not a binding instrument but contains two models for bilateral agreements.  A number of bilateral agreements have been based on this Agreement.


Commodity exchange boards made more powerful

Forward Markets Commission (FMC) is tightening corporate governance norms for commodity exchanges following NSEL scam. It has asked its boards to scrutinise all major business decisions, as also financial powers of CEOs and transactions involving promoters and top management personnel.

The boards of the exchanges would also have to ensure that appropriate checks and balances are in place with regard to costs incurred for donations, publicity, media and public relations, legal and other professional charges, among others.

In a directive issued to six national exchanges, including MCX, the FMC has stipulated the minimum requirement for sharing of information relating to functioning of the exchange with the board of directors.

It also directed that the decisions relating to certain matters should be taken with the approval of the board of directors or the board committees.

The regulator said that prior approval of the board would be required in matter related to expenditure items such as capital expenditure, agreement/contract giving rise to recurring obligation for a period of more than three years, and loan/advances/guarantee/financial commitments.

A prior approval of the board is required for all financial transactions, loans, guarantees, deposits or financial commitment of any kind. Following the Rs.5,500-crore payment crisis at NSEL, the FMC has been taking several measures to ensure accountability and transparency in the commodity futures market.

As per the new norms, the Board of exchange will execute, with the approval of the board, the liability insurance for directors to safeguard the professional liability of the board members arising from the performance of their duties for the exchange. The regulator has also directed the exchanges to constitute a committee of the board on risk management.

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