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This judgement could turn the tide in favour of consumers and end-users
For decades now, we have been listening to the automobile industry moan and groan about the supposed high taxes and duties slowing sales. All this while, the same automobile industry has been happily notching up 100% to 1,000% margins on sales of spare parts and services. In addition to locking customers in with high repair costs simply because spares are not available anywhere else.
Moneylife first wrote about this in 2010, again in 2011 and then in 2012. There have been more than a few exchanges between this writer and the authorities as well as the automobile companies in India on this subject. This outright theft was not always the case, and in an era ‘before Maruti’, it was like this:
• Warranties were short, six months or a year at best, and difficult to implement.
• Motor vehicles were simpler and could be fixed with parts that had multiple usage or across different brands.
• Spare parts from original equipment manufacturers were available at nominal mark-ups of 25% or so in the open market.
• All garages would repair all vehicles and, soon enough, you learnt who was good with which kind of repair or brand.
As a result, small enterprises flourished in India and maintenance as well as repair skill-sets went across a broad spectrum of people, from owner-operator-drivers to workshop staff and owners. To some extent, this also provided a core of people who were real engineers, who knew what to do with their hands and tool-kits.
The full Competition Commission of India (CCI) judgement can be read at http://www.cci.gov.in/May2011/OrderOfCommission/27/032011.pdf, but there are some additional points this column would like to raise in the appropriate forums as well as with the automobile manufacturers, dealers and their associations.
• Motor vehicles have more computing power built-in now than powerful computers. So, software upgrades for these onboard computers and the hardware therein need to be free of charge on single-user per-vehicle basis for the life of the vehicle. The reasons are obvious—safety is directly impacted, if upgrades are not provided.
• The CCI decision does not appear to include two-wheelers, three-wheelers, trucks and buses. There should have been a parallel enquiry, investigation and decision on them, as well.
• Some manufacturers have started introducing proprietary technologies on batteries and tyres too, like electronic controllers and software-based modules for resetting the controllers if you change them and charge huge extras for this locked-in service.
• In other cases, manufacturers refuse to supply spare parts soon after a model is discontinued or replaced with a newer version in India, while in other countries, they continue to provide support for decades after production has ceased.
• Automobile manufacturers claiming intellectual property rights (IPR) were informed that in a technology transfer, transfer of IPR is not automatic, as IPR is territorial in nature.
• Likewise, copyright abroad is not automatic in India; it needs to be registered in India. And, if not registered, then copyright ceases to exist once the design in question is applied more than 50 times in an industrial process by the owner of the copyright or a licencee.
• Confidentiality protection is not ‘automatic’ from manufacturer to supplier, and ‘trade secrets’ are not protected under IPR.
In addition, it seems that the dealers are organising themselves to come out against these cartels and gouging tactics by manufacturers. It is this writer’s submission that automobile manufacturers should provide Indian customers with the same, or better, facilities than they do in other countries. As of now, that is not happening and customers are getting ripped off left, right and centre.
(Veeresh Malik started and sold a couple of companies, is now back to his first love—writing. He is also involved in helping small and midsize family-run businesses re-invent themselves.)
Kolkata-based Weird Industries collected money from thousands of investors through NCDs, SEBI said
Market regulator Securities and Exchange Board of India (SEBI), has Kolkata-based Weird Industries Ltd from mobilising public funds. SEBI also restricted the company as well as its directors from accessing the securities market.
The market regulator found that Weird Industries had raised funds from thousands of investors through the issue of preference shares as well as non convertible debentures (NCDs) and as a result had "prima facie violated" various norms.
SEBI observed that the company had issued shares to over 50 persons, which under the rules made it a public issue of securities, requiring a compulsory listing on a recognised stock exchange. It was also required to file a prospectus, among others, which it failed to do.
"Steps...have to be taken in the instant matter to ensure only legitimate fund raising activities are carried on by Weird Industries and no investors are defrauded," SEBI said in its order.
Consequently, the market regulator has directed the company not to mobilise funds from investors through issuance of equity shares or any other securities, till further orders.
The company and its directors have also been "prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, till further orders".
SEBI observed that Weird Industries had issued and allotted preference shares to more than 2,000 investors.
Further, the SEBI order has asked the company and its directors not to divert any funds raised from public at large.
It has also been asked to provide a full inventory of all its assets and properties as well as furnish complete and relevant information sought by the regulator relating to the matter.
Besides, SEBI has prohibited Hari Pada Seth from "continuing with his present assignment as a debenture trustee in respect of the offer of NCDs of the company and also from taking up any new assignment or involvement in any new issue of debentures, etc in a similar capacity, from the date of this order till further directions".
Seth had prima facie failed to meet the eligibility criteria specified under the provisions of the Debenture Trustees Regulations, SEBI said.
The persons barred by SEBI include two present directors and six past directors of Weird Industries.