The bulls should keep the last week’s low as a stop loss on longs and keep on booking profits in rallies close to the recent highs or around 5,400
S&P Nifty close: 5,227
Short Term: Up Medium Term: Down Long Term: Down
After a slightly lower opening the Nifty recovered to a recent new high in the current rise before profit taking saw it give up its gains. The Nifty finally closed near the lows down 89 points (-1.69%) in the red. The volumes were however lower than last week implying that it is not a serious cause for concern as yet despite the Nifty having risen for five weeks in succession. We have to see whether the Nifty is able to take out the trendline hurdle (in black) pegged around 5,400 points in any further rise.
The sectoral indices which outperformed were CNX PSE (+0.07%), CNX FMCG (-0.20%) and CNX Pharma (-0.23%) while the gross underperformers were CNX IT (-5.20%), CNX Metal (-3.19%) and CNX Service (-2.25%). The histogram MACD has moved lower marginally but is still above the median line. One has to watch this closely especially when it drops below the median line as the bulls will then be under pressure.
Here are some key levels to watch out for this week
• As long as the S&P Nifty stays below 5,264 points (pivot) the bears can breathe a bit easily. However, the trend is still up.
• Support levels in declines are pegged at 5,180 and 5,132 points.
•Resistance levels on the upside are pegged at 5,312 and 5,396 points.
The Nifty did dip as expected but there was a lack of follow through support below the 5,263 points level. This implies that the bears have not been able to assert themselves as yet and are required to work a lot harder than they thought. As was mentioned last week that we might see a top on the 16th-17th after which another period of dullness might follow. Unless and until the 5,400 level is taken out decisively it will continue to be a bottleneck in the current recovery. After a firm start this week the Nifty is likely to become sluggish for a few days before making one more serious attempt to rally. If this too fails then one should sit up and take notice. As of now the bulls should keep the last week’s low as a stop loss on longs and keep on booking profits in rallies close to the recent highs or around 5,400.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com.)
A staggering Rs2 lakh crore stuck in the Debt Recovery Tribunals reveals the failure of this well-intentioned legislation. The is the third part of a four-part series
Let us now examine the fate of one other well-intentioned legislation, “Recovery of Debts Due to Banks & Financial Institutions Act, 1993” (RDDB&FI Act). This Act has its origin in the recommendations made by Narasimham Committee I, 1992 but it was also influenced by the foreign exchange crisis and the Harshad Mehta securities scam.
The Act covered all debts owed to banks and FIs (financial institutions) in excess of Rs10 lakh and with it, the jurisdiction of civil courts on such debts ceased. The civil courts were asked to hand over the cases to Debt Recovery Tribunals (DRTs); the Act also provided for Debt Recovery Appellate Tribunals (DRATs).
These tribunals are under the ministry of finance of the central government which would appoint presiding officers, registrars, recovery officers, etc. Initially the presiding officers were either of the rank of district judge or qualified to be one but later legal officers from the ministries and banks were also considered fit to be appointed as presiding officers. Quite a few of the presiding officers and other staff were posted on deputation basis from their permanent jobs. As of a recent date, there were 33 DRTs and five DRATs across the country.
As per the Act, DRTs are required to endeavour to decide on the cases filed by banks within180 days and if the verdict is appealed in DRAT, within another six months.
Experience of the banks in DRTs shows that the deadline of 180 days is but rarely observed. The borrowers or their lawyers could get adjournments fairly easily, a practice they were adept at in civil courts. Perhaps at no time all the courts had presiding officers or the requisite number of recovery officers; posts remained vacant for months.
Recovery certificates to be issued after the verdict or interim orders, just got accumulated for want of signing authorities, forget about actual recovery. Those who came on deputation did not have the requisite level of commitment.
Quite a few of the presiding officers who were from the ministries having had no prior experience seemed incapable of the job or issued ambiguous orders or just agreed to adjourn hearing which was the easier option. Add to these the banks faced another problem: the banks cannot proceed with DRT cases where the borrower's case is already within the purview of BIFR/AAIFR.
Obtention of BIFR consent to proceed in DRT needed a marathon effort. Furthermore occasionally DRAT or a high court issues a stay order against DRT proceedings. The only party to suffer in this legal melee is the banks—indeed the country.
The number of cases pending in various DRTs, as per a report in Mint (dated 28 March 2012), is 63,669, i.e. an average of 1,930 cases per DRT. In a DO letter sent in October 2011 addressed to all PSU banks, the ministry of finance indicated the total claims of banks and financial institutions pending in DRT cases is a staggering amount of Rs2 lakh crore. No further comments are needed on the efficacy of this Act and its creature DRT.
The Narasimham Committee II 1998, called for special statute powers to banks to take possession of assets charged to them without the intervention of the courts and to sell them to Asset Reconstruction Companies (ARCs) which might be set up by the lenders or by others with full powers to dispose of the assets over a period of time. Such powers are already with state financial corporations.
The matter was examined in depth by the TR Andhyarujina (former solicitor general of India) Committee in 2000 based on which an Act called “Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002” (SARFAESI Act) was passed by Parliament. Some of the provisions of this were amended to meet the objections raised by the Supreme Court in response to some cases challenging the Act even as it upheld its constitutional validity. We will examine what happened to that Act in the next part.
(A Banker is the pseudonym for a very senior banker who retired at the highest level in the profession.)
As per the amendment to the Listing Agreement by SEBI, effective 1st October, e-voting will be mandatory for all such resolutions for which postal ballots are prescribed as per the Companies Act or other relevant regulations. What are the implications?
Effective 1 October 2012, e-voting becomes mandatory for all such resolutions for which postal ballots are prescribed as per the Companies Act or other relevant regulations.
The Securities and Exchange Board of India (SEBI) has brought about this significant change by amending the Listing Agreement, vide a notification of 13 July 2012. A new clause 35A has been inserted in the listing agreement which provides that in case of all resolutions which are transacted using postal ballots. Postal ballots are currently required in terms of section 192A of the Companies Act. There are several other regulations also that mandatorily require resolutions to be passed by postal ballots—ICDR Regulations, Takeover Code, etc.
It is notable that the postal ballot rules already include electronic voting as one of the modes of postal ballots—hence, effectively, an e-voting is also a form of postal ballot in terms of section 192A.
What is e-voting:
E-voting will be carried out under technological platforms to be provided by agencies that meet the requirements of the Standardization Testing and Quality Certification (STQC) Directorate. The ministry of corporate affairs has vide circular dated 27 December 2011 has clarified the requirements for e-voting. Currently, both the depositories—Central Depository Services (India) and National Securities Depository—are providing e-voting platform.
Under e-voting, shareholders receive the ballots electronically, and vote from their own computer screens after logging into a secure system using the unique IDs.
As compared to postal ballots, electronic voting is tremendously cost-effective and environment friendly. Consider the cost of postal ballot—on an estimated basis, the cost per shareholder works out to nothing less than Rs50, taking into account the cost of printing, stamping, dispatching, return mailing, certification, and administrative cost. Compared to this, the cost of e-voting may be in fraction of the above number.
Cost to companies apart, electronic voting is hugely environment-friendly, as we are not wasting tonnes of paper which ultimately ends up in letter boxes that no one cares to open. Large part of the postal ballots are either never read, or never returned. This colossal waste of earth’s resources would be saved with e-voting.
What does the circular do?
E-voting was optional already; the SEBI amendment above makes e-voting as a mandatory option in case of all resolutions being routed through postal ballots effective 1 October 2012. In case of shareholders who do not have access to e-voting, they will still continue to receive postal ballots.
• Is e-voting the same as video conferencing: Not at all. Video-conferencing is still a physical meeting of the shareholders, though at remote locations. In case of e-voting there is no physical meeting at all.
• How do we count quorum in case of e-voting: Technically, it may be argued that postal ballot is a way of seeking shareholders’ assent without any meeting. However, the concept of ‘meeting’ as envisaged in age-old laws has undergone a massive change. Shareholder assent can be obtained by postal ballot—which would be deemed to be a resolution passed in a shareholders’ meeting. The number of shareholders participating in an e-vote will be counted as number of members present—hence, the requirement of quorum will be read as number of members voting.
• Can proxies e-vote: The very concept of a proxy is a person participating in a meeting instead of a member personally. In view of the author, the concept of proxy voting does not apply at all in case of e-voting, particularly because the shareholder may well vote from where he is. However, holders of power of attorney will qualify as members’ representatives. In addition, as long as a member is logging in using the assigned unique ID, the member may be taken as voting personally.
• Can a member split votes for and against: It is perfectly possible for a member to split his votes for and against a resolution. A member may do so both in physical voting and in postal voting.
• Will a scrutineer be required: Assuming all votes are electronic only, will a scrutineer still be required? In the opinion of the author, a scrutineer will still be required.
Lots of questions may continue to arise over time as the e-voting system gets learned.
(Vinod Kothari is a CA, trainer and author with offices in Mumbai and Kolkata. He is an expert in securitisation, asset-based finance, credit derivatives, accounting for derivatives and microfinance. He authored “Securitisation, Asset Reconstruction and Enforcement of Security Interests”. He can be contacted at [email protected].)