If the issuer does not receive minimum subscription of its base issue size of 75%, then the entire application money would be refunded within 12 days from the date of the closure of the issue, SEBI says
Market regulator Securities and Exchange Board of India (SEBI) has issued new norms for public issuance of debt securities under which such offers have to be of minimum Rs100 crore, while issuers would need to make additional disclosures and attain at least 75% subscription.
SEBI said entities coming out with public issue of non-convertible debentures (NCDs) would have to provide granular disclosures in their offer document, with regards to the 'object of the issue'.
Also, an entity has to make additional disclosures in the offer document about details of money utilised from the previous issues of the issuer as well as the group companies.
The new norms would be applicable for the draft offer document for issuance of debt securities filed with the stock exchanges on or after 16th July, SEBI said.
Market watchdog said that the minimum subscription for public issue of debt securities has to be 75% of the base issue size for both non-banking finance companies (NBFCs) and non-NBFC issuers.
Further, if the issuer does not receive minimum subscription of its base issue size (75%), then the entire application money would be refunded within 12 days from the date of the closure of the issue.
In the event, there is a delay, by the issuer in making the refund, then the issuer would have to refund the subscription amount along with annual interest of 15% for the delayed period.
However, the issuers issuing tax-free bonds would be exempted from the proposed minimum subscription limit.
SEBI has fixed a base issue size of at least Rs100 crore.
Besides, SEBI said issuers would be allowed to retain the over-subscription money up to the maximum of 100%of the base issue size or any lower limit as specified in the offer document. However, for the issuers filing a shelf prospectus, they can retain over subscription up to the rated size, as specified in their shelf prospectus.
"The issuers of tax free bonds, who have not filed shelf prospectus, the limit for retaining the over subscription shall be the amount, which they are authorised by CBDT to raise in a year or any lower limit, subject to the same being specified in the offer document," SEBI said in a circular.
SEBI said, "entities coming out with public issue of NCDs shall provide granular disclosures in their offer document, with regards to the 'object of the issue' including the percentage of the issue proceeds earmarked for each of the 'object of the issue'.”
Further, the regulator said that amount earmarked for 'general corporate purposes' would not exceed 25% of the amount raised by the issuer in the proposed issue.
Rajat Gupta began his prison sentence after fighting a protracted legal battle to clear his name in one of the biggest insider trading schemes in the US history
Rajat Gupta, the former director of Goldman Sachs and a one-time poster boy of Indians in the US, has begun his two-year jail term for insider trading while losing his appeal against paying nearly $14 million in civil penalties and ban on serving as a public company officer.
India-born Gupta will now have to pay $13.9 million as penalty in the US Securities and Exchange Commission’s parallel insider trading case against him, in addition to the $5 million fine in the criminal case and $6.2 million restitution to Goldman Sachs.
A three-judge Bench of the US Court of Appeals for the 2nd Circuit denied Gupta’s plea to overturn the decision of the district court that had imposed a permanent injunction prohibiting the former McKinsey head from serving as an officer or director of a public company, associating with brokers, dealers or investment advisors, and further violating securities laws.
The district court had also ordered Gupta to pay the $13.9 million civil penalty, equal to three times the profits gained and losses avoided by one-time billionaire hedge fund founder Raj Rajaratnam.
The setback for Gupta came the same day he reported to the Federal Medical Center-Devens in Ayer, Massachusetts, to begin his two-year prison sentence on insider trading charges.
Gupta had “surrendered” to the prison and was undergoing routine medical tests, which could take a day to be completed.
Following the tests, Gupta will be lodged in the satellite camp near the centre.
According to initial information available on the facility’s website, Gupta has been described as a 65-year-old “Asian male”.
Gupta’s appeal was denied by the appeals court, a day after hearing arguments from his lawyer Seth Waxman and the SEC.
The judges Barrington Parker, Denny Chin and William Sessions said in their order that “we find no abuse of discretion in the imposition of injunctive relief and civil penalties on Gupta by the district court. We have considered Gupta’s remaining arguments and find them to be without merit.”
“Accordingly, we affirm the judgement of the district court,” the judges said in their six-page order.
Gupta began his prison sentence after fighting a protracted legal battle to clear his name in one of the biggest insider trading schemes in US history.
Law is on the side of students who want to leave an institute or course mid-way and are seeking refund of fees. This also means, education institutes should not be charging upfront fees for the entire course and refuse refund, in case the student wants it
Consider a typical scenario: A student takes admission to a coaching institute for a two year course, broken into four semesters. The student signs the enrollment /admission form containing various conditions. The institute collects upfront fees for the entire course. After attending classes for a few days/weeks, the student is dissatisfied and wants to opt out, but the institute refuses to refund the fees. It cites a clause in the admissions form that says, "Fees once paid shall not be refunded under any circumstances."
When the student persists with the demand, the institute cites another clause in the form: "In case of any dispute, matter shall be referred to arbitration and institute shall appoint the Arbitrator. The decision of the arbitrator shall be final and binding on the parties."
What is the solution? Here are two real life resolutions.
In one case, Dr Minathi Rath, a student’s father, dragged the coaching institute to the Consumer Forum. The State Commission held in 2006, that the clause "fees once paid is not refundable" was "unconscionable and voidable”. It further directed all educational institutes not to charge fees for the whole duration of the course in advance by way of lumpsum payment. The judgement was reported in the media as well. FIIT-JEE challenged this in the National Consumer Disputes Redressal Commission (NCDRC), but more about that later.
In another case, a student paid an upfront fee of Rs1.8 lakh for a two-year coaching programme for the IIT-JEE entrance test. After a few classes, he wanted to opt out and sought a refund. As expected, FIIT-JEE (the coaching institute) refused, citing the non-refund clause which he had signed.
When the student’s father persisted with the request to refund the fee (after deducting a portion for the duration he attended the classes) FIIT-JEE initiated arbitration proceedings. The Arbitrator declined to grant the refund and agreed with FIIT-JEE’s submisison that once the student signed the admission form, he was bound by its clauses.
I entered the scene after the arbitration proceedings and filed an objection in the District Court against the order of the Arbitrator. The District Judge reversed the order of the Arbitrator with detailed reasons. The judge specifically noted that when a student signs the admission form, he has no bargaining power to negotiate, or refuse to sign any particular clause in the admission form. Hence, these clauses should not be held against the student. The District Judge also directed the Arbitrator to refund the proportionate fee to the student.
The matter did not end there. FIIT-JEE hired a big law firm and challenged the order in the High Court, although the amount involved was only Rs2 lakh. The matter came up before the High Court on 21 November 2011.
At the hearing, FIIT-JEE conceded that the non-refundable fee clause can be challenged as unconscionable under Section 23 of the Indian Contract Act, 1872, besides being in violation of the principles of public policy. The High Court agreed with the District Judge's view and remanded the matter to the Arbitrator for a decision after taking into account all the recent precedents on the point of law. The order is available here.
Now, in another development just a week prior to the High Court hearing, the NCDRC decided on FIIT-JEE’s appeal in Dr Minathi Rath’s case that we mentioned earlier. It is pertinent to mention here that the Supreme Court had settled the fee issue in the case of Islamic Academy of Education Vs. State of Karnataka (2003) 6 SCC 696. The Apex Court had expressed unhappiness with educational institutes charging the entire fees upfront and had said that students should only be asked to pay fees for a semester/ year to begin with.
But FIIT-JEE argued before the NCDRC that the ruling of Islamic Academy was not applicable to it since it is not an educational institute but only a coaching institute. The NCDRC was not impressed and upheld the order of the State Commission, directing FIIT-JEE to refund the fees. The order is available here.
We now began a second round of arbitration in the second FIIT-JEE case as directed by the High Court, by providing all the rulings on the dispute. This time the Arbitrator awarded the refund of fees for one year after deduction of statutory fees like Service Tax, etc.
In situations like these, students who want to leave an institute or course mid-way, usually hesitate to appoint a lawyer to argue their case. On the other hand, institutes have the resources for good legal representation. My advice to students is that the law is on your side if you want to fight. And educational institutes should be prudent, desist from charge upfront fees for the entire course, and if they do, should not refuse a refund.
(Dushyant K Mahant, is Founding Partner of Mahant & Mahant
and Intellectual Property Lawyer. He did his Masters in IP Law from Brisbane. Does pro bono work as well. Mr Mahant is active on social media to exchange views and news about politics, law and common sense)