Photo of Ramgovind Kuruppath

Partner in the General Corporate Practice at the Mumbai Office of Cyril Amarchand Mangaldas. Ramgovind specializes in mergers and acquisitions, general corporate and regulatory work. He routinely advises on corporate law, securities law and foreign exchange related issues and has acted for various Indian and overseas companies and funds on acquisition transactions. He can be reached at ramgovind.kuruppath@cyrilshroff.com

The Securities and Exchange Board of India (SEBI) recently issued an informal guidance in response to a request for an interpretive letter from Kotak Mahindra Bank Limited (KMBL) on the continual disclosure requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations).

Regulation 7(2) of the PIT Regulations prescribes a two-step disclosure mechanism wherein:

  1. Promoters/ employees/ directors of listed companies are required to disclose to the company, within two days of the occurrence of a transaction, the number of securities acquired or disposed, where the value of such securities in the transaction (or a series of transactions in any calendar quarter) amounts to a traded value in excess of Rs. 10 lakh.
  2. The company in turn is required to disclose such trades to the stock exchanges, on which the traded securities are listed, within two days of receipt of the disclosure or upon becoming aware of such information.

Continue Reading SEBI’s Informal Guidance on Continual Disclosures under the Prevention of Insider Trading Regulations

Foreign investors into India have often found that when they seek to enforce customary contractual rights in investment agreements, such as option rights, guarantees and indemnities, they have been hamstrung by the ability of the Indian counterparty to contend that such rights are in contravention of the Foreign Exchange Management Act, 1999 (FEMA) and the regulations issued by the Reserve Bank of India (RBI).

It is in this context that the recent Delhi High Court judgment in the case of Cruz City I Mauritius Holdings v. Unitech Limited, MANU/DE/0965/2017, is relevant, in that it categorically strikes down the defence that an arbitral award is not enforceable on the ground that certain provisions of the contract pursuant to which the award was issued were allegedly in contravention of the FEMA regulations.

Cruz City 1 Mauritius Holdings (Cruz City) filed a petition in the Delhi High Court for enforcement of an arbitral award rendered under the rules of the London Court of International Arbitration (Award). This required Unitech Limited (Unitech) and Burley Holding Limited (Burley), a wholly owned subsidiary of Unitech, to pay Cruz City the pre-determined purchase price of all of Cruz City’s equity shares in a joint venture (incorporated in Mauritius) pursuant to:

  1. A “put option” exercised by Cruz City against Burley.
  2. A keepwell agreement (which was in the nature of a guarantee) whereby Unitech was to make the necessary financial contribution in Burley to enable it to meet its obligations.

Continue Reading Alleged Violation of FEMA now a Dwindling Defence against Enforcement of Contractual Rights