Bonds, Currencies & Commodities
Cheaper potash due to rupee appreciation and cartel break-up!

Following the breakup of a JV between Uralkali and Belaruskarli, China managed to secure potash at $305 per tonne. India too followed the suit and clinched a deal at $322 per tonne from Uralkali for 8 lakh tonnes of potash

For the first nine months of fiscal year, 2013-14, covering April to January, India imported about 2.5 million tonnes of potash at $427 per tonne and the balance requirement of 600,000 tonnes was acquired by Coromandel Fertilisers $369 per tonne. A few months ago, it may be recalled that Belarus Potash Company (BPC), a joint venture marketing arm of Russian OAO Uralkali and Belarussian Belaruskarli cartel broke up, reason and details of which are still unknown to public. Uralkali is the world's largest potash producer. In January this year, they concluded a contract to supply 700,000 tonnes of potash to China $305 a tonne for supply during the first six months of 2014 (January to June), after having bought the previous lot at $400 a tonne!

 

Potash, being a soil nutrient, is regularly imported by Indian Potash Ltd, and India began to negotiate for a lower rate soon after this break-up. In fact, after knowing the Chinese rate, India was hoping to secure the order in the region of $320 to $325, which would bring about considerable saving in the cost considering the level of $427 paid earlier for supplies! Indian requirements, annually, are about 3.5 million tonnes.

 

Press reports indicate that Indian Potash Ltd has been successful in concluding a new contract for getting 800,000 tonnes of potash $322 a tonne from Uralkali. The fact that the rupee has appreciated in the last few days makes the deal sweeter and cheaper. It may be remembered that government gives a subsidy of Rs11,300 per tonne of muriate of potash, which is a widely used fertilizer that improves root strength and disease resistance of crops. Technically, this soil nutrient is also used in different ratios with other nutrients like nitrogen, phosphate, sulphur and zinc to make suitable fertiliser for various needs.

 

According to PS Gahalaut, managing director of Indian Potash, the retail price of muriate of potash is likely to remain unchanged at Rs16,000 per tonne "as rising costs and reduction in subsidy has offset the lower price" obtained.

 

The rate of subsidy may be revised once the new government takes over at the centre!

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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Prithvi Info Solution founder’s assets auctioned to recover $17 million penalty

A Court in the US held Prithvi Information Solution and its associates guilty for $17 million fraud to Kyko Global Inc. On failure of payment, the Sheriff seized and auctioned personal assets of the company founder Madhavi Vuppalapati

Following directions from a US District Court to recover money, the Sheriff from King County auctioned personal assets of Madhavi Vuppalapati, founder of Prithvi Information Solutions Ltd to recover $17 million.
 

Canada based Kyko Global Inc had filed a fraud case against the Indian company in the Washington Court. In its petition, Kyko Global had alleged that Prithvi and its affiliates created fictitious, counterfeit customers to get an advance payment of $17 million from them.
 

In its Judgment on 6 September 2013, the Court said, “Judgment should be entered against Prithvi Information Solutions Ltd, Prithvi Information Solutions International LLC, Prithvi Catalytic Inc, Prithvi Solutions Inc, Madhavi Vuppalapati, DCGS Inc, Inalytix Inc, Avani Investments Inc, Ananya Capital Inc, EPP Inc, Financial Oxygen Inc, Huawei Latin American Solutions Inc and L3C Inc in the amount of $1,75,68,854 plus prejudgment interest accruing at the rate agreed to between the parties at 2.45% per month in the total amount of $7,96,776, as confessed to by the Defendants.”
 


However, Prithvi and its associates including Vuppalapati failed to pay $17 million along with penalty charges. This lead to the Sheriff auctioning personal assets like Lexus car, jewellery and household good belonging to Vuppalapati on 20 March 2014.
 

In November 2011, Kyko said it entered into an agreement with Prithvi for certain factoring services. As per their agreement, Prithvi had to identify certain of its customer account receivable for IT services and authorize direct payment to be made to Kyko. Prithvi Information Solutions offered account receivables of few major customers to Kyko. However, none of the customers Prithvi offered had any business relationship with it.
 

When Kyko tried to acknowledge that these clients will make payments directly to Kyko, they got verifications, but in reality, it was the associates of Prithvi that had posed as clients and created and executed the verifications. When Kyko requested Madhvi Vuppalapati to be put in touch directly with the representatives of the five clients, she turned down the request saying that it will be detrimental to their relationships with these clients.
 

Over a next two years, Vuppalapati and her associates continuously deceived the unsuspecting Kyko, in the process and kept them in the dark, Kyko alleged. Finally, while attempting to collect outstanding dues, Kyko came to know, through its own internal investigation that Prithvi had created fictitious customers to deceive Kyko and extract more monies from it.
 

In order to get money back, Kyko filed a lawsuit on 16 June 2013 against Prithvi Information Solutions at the US District Court. On 8 August 2013, Kyko moved the court for issuance of judgment in amount against defendants in pursuant to confession of judgment and the motion was granted by the court.
 


In September 2013, Kyko filed a Writ of Garnishment against Prithvi Information Solutions. Kyko claimed damages of $18,431,765.90 ($18.43 million) inclusive of balance of judgment, prejudgment  interest and interest of judgment from 9 June 2013 to 23 September 2013.
 


As Madhvi Vuppalapati failed to make the payment to Kyko, on 12 February 2014, the court sent notice directing sheriff to do auction and sell her personal assets including her Lexus car, jewellery and miscellaneous household items. The Sherif auctioned her assets on 20 March 2014.

 

Moneylife earlier wrote about scandalous saga of Prithvi Information Solution as it was involved in all kinds of financial manoeuvrings read; Prithvi Info Solutions: Why regulators are silent over the scandalous saga?
 

Read more stories about Prithvi Information Solution and its frauds here,
 

Prithvi’s recent acquisition despite multiple scandals and losses raises a stink
 

Scam: SEBI Finally Wakes Up
 

Prithvi: No Disclosures
 

No Questions Asked

 

 

 

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COMMENTS

Dayananda Kamath k

3 years ago

on listing there was huge rigging in the price of the share of this company. but our regulators slept. it may be the reason for indian companies being caught in foriegn lands. they become habitual to do business in illegal way and get courage to hoodwink the authorities in india and suceed and adopt the same process there. here even if you complaint they are least bothered to initiate action. action is also initiated to satisfy some vested interests.

REPLY

shadi katyal

In Reply to Dayananda Kamath k 3 years ago

We carry our baggage to foreign land with the idea that we are immune as were in India to any Law. After what is Law in India??
There are Laws on the books but for whom.? It is mind set that if they got away in India why not in USA. Most of these companies are honest but those like this did not come to do business but to collect as much money as possible.
They have no loyalty to India or USA but money and thus morals donot play any role.
After all look at all the SCAMS in Bombay stock exchange.
Only way such firms with such mentality can learn to spend few years in a jail before deported.

Dayananda Kamath k

In Reply to shadi katyal 3 years ago

may be that isthe reason rahul gandhi is interested in brining more rights through law than action. so that you have to litigate upto supreme court at huge cost and time to enforce these rights. which ordinary people can not afford.

R Balakrishnan

3 years ago

I recall an aggressive investment banker who was hand in glove with the promoter- helped to sell the issue, helped him with Promoter funding for shares-- then apparently they split the proceeds after the lending co wrote off the loan!!

R Balakrishnan

3 years ago

HyderaBAD.
Just ignoring cos from this city helps you save money. Wonder if SEBI has anything to say to the India listed company..

shadi katyal

3 years ago

It is a shame that so many NRI families have suffered due to such greed and lack of any ethics.
What is if GOI is going to take any action for giving such black mark to the nation

Guy Fawkes

3 years ago

I worked for Mrs. Vuppalapati in the United States for her highest-performing subsidiary. Her criminal and fraudulent behaviors have put the careers and livelihoods of hundreds in jeopardy.

I cannot express how gleefully joyous I was to discover this article, and the fact that her personal assets have been seized. I can only hope that this action followed an arrest by the King County Sheriff's department, as she deserves to be in jail

shadi katyal

3 years ago

There are many such companies who are successful but many others have shown similar corrupt practices and blame lies mainly on our greed and baggage we bring along from our culture.
Why have we failed to understand that world is very different when it comes to hard work, ethics Law and Order. We are giving a black eye to our nation. Yes we might not be alone but number of cases against our people high and low are more than others WHY????

All charges, pledges require registration under new Rules

The entire list of charges requiring registration has been done away with the issuance of final Rules on Chapter VI of the Companies Act. In the absence of the list, all charges and pledges would now require registration with the Registrar

With 283 sections of the Companies Act, 2013 getting notified and due to be enforced with effect from 1 April 2014, all minds are overflowing with probable effects it will have on the affairs of the company, the compliances required under the new regime, the new prohibitions and exemptions granted and the like. Every now and then corporates and company law enthusiasts are coming up with something new to keep our senses excited and moving.

One such impact which drew our attention is Chapter VI pertaining to charges, the definition of which has been left open ended. This has led to the requirement for registration of all types to charges. This might prove to be an additional compliance burden that companies have to bear.

Definition of 'charge' under Companies Act, 1956

Section 124 of the Companies Act, 1956 ('Act, 1956') provides that the expression "charge" includes a mortgage.

Section 125 (4) of the Act, 1956 provides a list of charges requiring registration. The same is reproduced below:

"(a) a charge for the purpose of securing any issue of debentures;
(b) a charge on uncalled share capital of the company;
(c) a charge on any immovable property, wherever situate, or any interest therein;
(d) a charge on any book debts of the company;
(e) a charge, not being a pledge, on any movable property of the company;
(f) a floating charge on the undertaking or any property of the company including stock-in-trade;
(g) a charge on calls made but not paid;
(h) a charge on a ship or any share in a ship;
(i) a charge on goodwill, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under a copyright."

A reading of the above section makes it clear that a pledge did not require registration by the companies as is brought out under sub-clause (e) above.

Definition of Pledge

Section 172 of the Indian Contracts Act, 1872 defines a pledge as:

"The bailment of goods as security for payment of a debt or performance of a promise is called "pledge"."

In simple terms a pledge is a security created on movable goods of the borrower or pledgor for the payment of a debt wherein the lender or pledgee takes actual possession of the goods until the entire debt amount is repaid by the borrower. The pledgee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interests of the debt, and all necessary expenses incurred by him in respect to the possession or for the preservation of the goods pledged.

Stance under the Companies Act, 2013

Unlike the Act, 1956, the Companies Act, 2013 ('Act, 2013') does not go on to define the term 'charge' or the charges that required registration under the Act. Section 77 (1) of the Act, 2013 provides that:

"It shall be the duty of every company creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the particulars of the charge signed by the company and the charge-holder together with the instruments, if any, creating such charge in such form, on payment of such fees and in such manner as may be prescribed, with the Registrar within thirty days of its creation"

As per Draft Rules

It was expected that the Ministry of Corporate Affairs ('MCA') would come out with such a list by way of Rules to the Act. And the MCA did not disappoint. The draft rules on charges laid down the charges requiring registration, as follows:

"(a) a charge created for the purpose of securing any issue of debentures or deposits;
(b) a charge on uncalled share capital of the company;
(c) a charge on any immovable property, wherever situate, or any interest therein;
(d) a charge on any book debt of the company;
(e) a charge, not being a pledge, on any movable property of the company;
(f) a floating charge on the undertaking or any property of the company including stock-in-trade;
(g) a charge on calls made but not paid;
(h) a charge on a ship or any share in a ship;
(i) a charge on intangible assets, including goodwill, patent, a licence under a patent, trade mark, copyright or a licence under a copyright.

The list was the same as provided under the Act, 1956. Additionally the draft rules also provided that a charge by way of hypothecation of a motor vehicle shall not require registration unless the financier so required. The text of the rule is given below:

(4) No charge by way of hypothecation of a motor vehicle shall require registration unless the financier, so requires. Provided the disclosures shall be given in the Balance Sheet regarding all such charges created by way of hypothecation of motor vehicles and the fact that charge has not been registered and the financiers have not required so."

This was a new proposed exemption to the registration requirement in addition to pledges, which provides that hypothecated motor vehicles of a company would no longer require registration unless forced upon by the financier, provided that the same was disclosed in the balance sheet.

The trend of hypothecation of motor vehicles with the financier for the repayment of the loan taken was common and the requirement of registration of each such charge was a cumbersome burden on the company. Though the not many corporates were into the practice of registering such charges, it was a welcome relief as their acts would no longer be non-compliant.

Definition of Hypothecation

Section 3 (n) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) defines 'hypothecation as:

"Hypothecation" means a charge in or upon any movable property, existing  or future, created by a borrower in favour of a secured creditor without  delivery of possession of the movable property to such creditor, as a security  for financial assistance and includes floating charge and crystallisation of  such charge into fixed charge on movable property;

As per the Final Rules

However the final Rules on Chapter VI of the Act, 2013 notified by the MCA on 28 March 2014 tells another story. The entire list of charges requiring registration, as provided under the draft rules has been done away with. In the absence of the list, all charges would now require registration with the Registrar.

This means that now pledges, which were earlier exempted from registration requirements under the Act, 1956, would now be required to be registered with the Registrar. All procedures thereafter relating to entry in the register of charges and modification and / or satisfaction of charges would also need to be complied.

Also the proposed exemption to hypothecated motor vehicles from registration under the draft rules as above, has also been withdrawn under these Final Rules. Form CHG. 1 for creation or modification of charges explicitly provides for the registration of hypothecated motor vehicles.

Accordingly, all NBFCs should now ensure that their corporate clients register the hypothecation of motor vehicles with the Registrar of Companies in addition to the registration under the Motor Vehicles Act, 1988.

(Shampita Das  works as an Associate in Corporate Law Group at Vinod Kothari & Company)
 

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COMMENTS

Dev

3 years ago

Definition of 'Charge' under Transfer of Property Act

Section 100: Charges:-

Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to mortgage, the latter person is said to have a charge on the property; and all provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.

Important decision regarding ‘charge’ - 1997 AIR SC 2905

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