SC holds Anil Ambani and Two Directors Guilty of Contempt, Orders To Pay Rs453 Crore to Ericsson within 4 Weeks
The Supreme Court on Wednesday held Reliance Communication Ltd (RCom) chairman Anil Ambani and two directors of the group companies guilty of contempt of court. While directing Reliance Anil Dhirubhai Ambani group (ADAG) to pay Rs453 crore along with interest to Ericsson within four weeks, the apex court had also imposed a fine of Rs1 crore each on three companies of ADA group (ADAG).
 
This case was related with a contempt plea filed by Ericsson India over its pending dues of Rs550 crore from ADAG.
 
A two-judge bench comprising Justices Rohinton F Nariman and Vineet Saran also asked Reliance ADAG to purge contempt by paying Rs453 crore with interest to Ericsson within four weeks. If not paid, three months' jail term will follow, the bench said.
 
The bench directed the Court's registry to give Ericsson Rs118 crore that were earlier deposited by RCom. The apex court said the entire amount that RCom has to pay to Ericsson is Rs550 crore plus the interest that was generated.
 
The Court also imposed a fine of Rs1 crore each on RCom, Reliance Telecommunication and Reliance Infratel that would be deposited with the Supreme Court Legal Services Committee (SCLSC).

The two directors held guilty of contempt of the court are: Reliance Telecom chairman Satish Seth and Reliance Infratel chairperson Chhaya Virani. In case of default, chairpersons of all the three companies, including Mr Ambani, Mr Seth and Ms Virani, would have to undergo a sentence of one month each.

The bench ordered this as it did not accept the 'unconditional apology' tendered to the court by the RCom chairman.

Mr Ambani was present in the Court when the order was announced.
 
Last month, the Swedish telecom equipment maker has petitioned the apex court to punish Mr Ambani over recurring delays in payment of its dues worth Rs550 crore. Ericsson had accused the embattled businessman of engaging in 'gross and wilful contempt' of the apex court. 
 
The company had said that insolvency proceedings should be initiated against RCom and its spectrum and tower sale deal with Reliance Jio should be stopped 'with immediate effect'. 
 
In its second contempt plea, the Swedish company had also requested the apex court to bar Mr Ambani from leaving India for defaulting on payments.
 
Earlier in October 2018, Ericsson had filed its first contempt petition in the Supreme Court. At that time, RCom had stated that it sought another 60 days for the repayment of Rs550 to the Swedish company. 
 
Last week, the Supreme Court dismissed two court masters Manav Sharma and Tapan Kumar Chakaraborty for tampering with its order in Ericsson’s contempt plea against RCom and personal appearance of the company chief Mr Ambani.
 
According to reports, on 7th January, the apex court had directed Mr Ambani to make personal appearance through a notice. However, when the order was uploaded on the SC website, it read: “personal appearance of the alleged contemnor(s) dispensed with.”
 
More details soon...  
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    COMMENTS

    Praveen Sakhuja

    7 months ago

    will government be able to punish Anil? NO not the least. Anil will be scot free with some legal applications, public will find theiur oeyes wide spread tp know what happened.

    K V RAO

    7 months ago

    Judiciary's activism is quite welcome. In fact, the business world is observing how the matter is getting unfolded. How come the judiciary is not that active with regard to bank borrowers? Very much needed. I also appreciate Ericsson' s efforts to conclude the issue with great perseverance.

    VASANT KULKARNI

    7 months ago

    POOR ANIL . HE COULD HAVE GONE WITH NIRAV, MALLYA.

    kpushkar

    7 months ago

    Real fun starts now...Welcome to real world..
    Hope the steel company promoters also get to enjoy free meals ..You know where

    Veeresh Malik

    7 months ago

    Body language is everything. All over Delhi there is a re-alignment of thinking on how everything could be gamed going on right now.

    What Are the Practical Difficulties in Identifying SBOs for GDRs
    The Ministry of Corporate Affairs (MCA) on 8 February 2019 issued the Companies (Significant Beneficial Owners) (Amendment) Rules, 2019 amending the Companies (Significant Beneficial Owners) Rules, 2018 (the SBO Rules), thereby drastically amending the definition of SBO. 
     
    However, there are certain practical difficulties in identifying the SBOs, especially in case of global depository receipts (GDRs).
     
    As per the SBO Rules notified by MCA, GDR holders will get covered within the ambit of the SBO, if any individual through GDR is able to:
     
    • get more than 10% of distributable dividend; or 
    • exercise 10% of voting rights based on the instruction given to the depository or on conversion of GDRs into shares;
    • hold 10% of the equity shares in the company on conversion.
     
    There is a legal right for the GDR holders in Euroclear and Clearstream to remain anonymous if they wish to do so. In many cases the GDR holders choose to withhold their identity. GDR holders with shares held in Euroclear and Clearstream have their anonymity protected by the laws of Brussels and Luxembourg respectively.
     
     
    Therefore, reporting company cannot identify the GDR holders, especially the ones issued under the erstwhile scheme i.e. FCCBs and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993.  It was also suggested in the Sahoo Committee Report that issuances should be made in FATF complaint jurisdictions as FATF recommendations prohibit financial institutions from keeping anonymous accounts. (https://www.finmin.nic.in/sites/default/files/Sahoo_Committee_Report.pdf)
     
    Accordingly, reporting companies will be required to seek information in Form BEN 4 through the depository bank in order to comply with SBO Rules if the quantum of GDR is 10% or more of the shares of the reporting company.
     
    As per the recent simplified definition, an SBO is described as follows:
     
    “Significant Beneficial Owner in relation to a reporting company means an individual referred to in sub-section (1) of section 90, who, acting alone or, together, or through one or more persons or trust, who possesses one or more of the following rights or entitlements in such company, namely:-
     
    • Holds indirectly, or together with any direct holdings, not less than ten per cent of the shares;
    • Holds indirectly, or together with any direct holdings, not less than ten per cent of the voting rights in the shares;
    • Has the right to receive or participate in not less than ten per cent of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings;
    • Has the right to exercise or actually exercises, directly or indirectly, significant influence or control, in any manner other than through direct holdings alone.”
    • Meaning of Shares as per the SBO Rules
     
    As per the simplified SBO Rules, apart from the equity shares, instruments in the form of global depository receipts -GDRs, compulsorily convertible preference shares or compulsorily convertible debentures shall also be treated as ‘shares’.
     
    Meaning of Depository Receipt
     
     
    “Depository Receipt means a foreign currency denominated instrument, whether listed on an international exchange or not, issued by a foreign depository in a permissible jurisdiction on the back of eligible securities issued or transferred to that foreign depository and deposited with a domestic custodian and includes ‘global depository receipt’ as defined in section 2(44) of the Companies Act, 2013.”
     
    Meaning of Global Depository Receipts
     
    As per Section 2(44) of the Companies Act, 2013, a global depository receipt (GDR) means any instrument in the form of a depository receipt, by whatever name called or created by a foreign depository outside India and authorised by a company making an issue of such depository receipts.
     
    Process of issuing GDRs by Indian companies:
     
    The process of issuing GDRs by Indian company involves:
     
    1. Issuance of its equity shares (in Indian currency) to an overseas depository bank, through a domestic custodian bank.
    2. The domestic custodian bank acts as the agent of overseas depository bank, and keeps the equity shares in its custody.
    3. The overseas depository bank issues GDRs against the said equity shares to the overseas investors (in foreign currency). 
     
     
    Voting rights of GDR Holders
     
    Companies Act, 2013
     
    As per the Rule 6 of the Companies (Issue of Global Depository Receipts) Rules, 2014:
     
    (1) A holder of depository receipts may become a member of the company and shall be entitled to vote as such only on conversion of the depository receipts into underlying shares after following the procedure provided in the scheme and the provisions of the Companies Act, 2013. 
     
    (2) Until the conversion of depository receipts, the overseas depository shall be entitled to vote on behalf of the holders of depository receipts in accordance with the provisions of the agreement entered into between the depository, holders of depository receipts and the company in this regard.
     
    Depository Receipts Scheme, 2014
     
    As per para 7 of the depository scheme, 2014, issued by the department of economic affairs, the following are the rights and duties of the GDR holders and the foreign depositories:
     
    1. The foreign depository shall be entitled to exercise voting rights, if any, associated with the permissible securities, whether pursuant to voting instructions from the holder of depository receipts or otherwise;
     
    2. The shares of a company underlying the depository receipts shall form part of the public shareholding of the company under the Securities Contracts (Regulations) Rules 1957, if:
     
    • the holder of such depository receipts has the right to issue voting instructions; and
    • such depository receipts are listed on an international exchange.
     
    3. In the cases not covered under sub-paragraph 2, shares of the company underlying depository receipts shall not be included in the total shareholding and in the public shareholding for the purpose of computing the public shareholding of the company.
     
    4. A holder of depository receipts issued on the back of equity shares of a company shall have the same obligations as if it is the holder of the underlying equity shares if it has the right to issue voting instruction.
     
    RBI Master Directions for Private Sector Banks 
     
    Para 10 of RBI master direction – ownership in private sector banks, directions, 2016 provides that banks shall enter into an agreement with the depository to the effect that the depository shall not exercise voting rights in respect of the shares held by them or they shall exercise voting rights as directed by the board of directors of the bank.
     
    In a nutshell
     
    In case of private sector banks, the voting rights shall be exercised by the depositories depending upon the instructions received by the board of directors of the bank.
     
    In case of non-banks, on the collective reading of the aforesaid requirements, it is evident that when the GDR holders exercise their right to exchange with equity shares, then only the GDR holder becomes the shareholder of the issuer company. Till then, the name of the depository bank reflects in the register of members of the issuer company. 
     
    Therefore, until conversion, the voting right is not exercised by the GDR holder but by the overseas depository, pursuant to the agreement between the depository and the issuer.
     
    In case of GDR issued under the Companies Act, 2013, the voting right shall be as per the agreement between the GDR holder, depository and the issuer company.
     
    Right to receive dividend by the GDR holders
     
    Until conversion of the GDR into equity shares, the dividend is paid by the company to the depository bank which further distributes it to the GDR holders.
     
    (The authors are consultants with Vinod Kothari & Company
     
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    Vedanta Says No Discussion with JSW Steel for Joint Bid for Essar Steel
    Vedanta Ltd has termed as 'speculative and baseless' news reports about alleged discussion between the company and JSW Steel Ltd for a possible last minute bid for Essar Steel.
     
    In a regulatory filing, Vedanta says, "The Company confirms categorically that it is not in the process of submitting any revised bid for Essar Steel under the IBC process as mentioned in the articles."
     
    According to reports, Sajjan Jindal’s JSW Steel was believed to be in talks with Anil Agarwal’s Vedanta to mount a late bid for Essar Steel. 
     
    The committee of creditors of bankrupt Essar Steel had chosen ArcelorMittal as the highest bidder and submitted the Rs42,000-crore plan of the world’s largest steel maker before the National Company Law Tribunal, Ahmedabad, for approval.
     
    Vedanta, which made a low-ball offer of Rs 35,000 crore for the 8-million-tonne plant at Hazira, may now raise the bid to Rs 45,000-48,000 crore, with the backing of the Jindals, a report from The Telegraph says.
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