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Rajashri Seal

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Associate in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Rajashri can be reached at rajashri.seal@cyrilshroff.com

Revised threshold of Rs. 1000 Crore for ‘material’ RPTs under LODR – Does it pass the Article 14 test

Background

SEBI[1] has recently revised the materiality threshold for obtaining shareholder approval for related party transactions (“RPTs”) under Regulation 23(1) of the SEBI (LODR) Regulations, 2015 (“LODR”), to cover RPTs that exceed INR 1000 crore or 10% of a listed entity’s annual consolidated turnover (as per the last audited financial statements), whichever is lower.

The revised materiality threshold has come into effect on April 1, 2022, and this change assumes significance, as prior to April 1, 2022, there was no absolute numerical threshold for RPTs that require shareholders’ approval.

This also raises the question as to whether an absolute numerical threshold of INR 1000 crore could potentially be considered as violative of Article 14 of the Indian Constitution.

In this post, the authors aim to probe deeper into this constitutional aspect and examine some of the arguments that can be made from both sides of the spectrum.Continue Reading Revised threshold of Rs. 1000 Crore for ‘material’ RPTs under LODR – Does it pass the Article 14 test?

Invesco v Zee

In a recent judgment pronounced in Invesco Developing Markets Fund v. Zee Entertainment Enterprises Limited[1] (“Judgment”), on March 22, 2022, a Division Bench of the Bombay High Court (“BHC”) allowed Invesco’s appeal against a judgment dated October 26, 2021[2]. The October 26 judgment was passed by a Single Judge of the BHC (referred to hereinafter as the “Impugned Order”), which had granted an injunction restraining Invesco from calling for and holding an extraordinary general meeting (“EGM”) of Zee.Continue Reading Bombay High Court’s Judgment in Invesco v Zee– A major boost for shareholders’ rights in India

Information Rights of a Company Director

Background

The fiduciary duties of the directors of a company under the Companies Act, 2013 (“Act”) have been well-recognised in multiple landmark judgments, and in Section 166 of the Act.  Under Section 166(3), a director is required to exercise his duties with reasonable care, skill and diligence, and exercise “independent judgement”.Continue Reading Information Rights of a Company Director- Does our company law need a relook in the post-pandemic world?

JV Company’s Board

Background

The fiduciary relationship between a director and the company is among the foremost principles of company law, which was first enshrined by common law courts of equity. The Supreme Court of India (“SC”) first recognised this common law principle in its celebrated judgment in the Nanalal Zaver case[1], which noted that directors can be considered as “trustees” of the company, and “must exercise their powers for the benefit of the company and for that alone”.[2]Continue Reading Dilemma of a Nominee Director on the JV Company’s Board – Is there a conflict in his fiduciary duties?

Devas Antrix Case

Background

The recent judgment of the Supreme Court (“SC”) in Devas Multimedia Private Limited v. Antrix Corporation Limited[1] (“the Antrix case”) has many interesting facets. It brings to light some interesting questions of law on the enforcement of foreign arbitral awards and the Bilateral Investment Treaties when the claimant company (Decree holder) is ordered to be wound up (for the first time in India)  on the grounds of fraud, which is against the public policy of India and most jurisdictions that are signatories to the New York Convention.Continue Reading SC’s decision in the Devas Antrix Case: Does it dilute evidentiary value of the Auditor’s Report under the Companies Act?

Company Law

Background

The law on minority squeeze-out has not been a glorious chapter in the history of India’s company law. The Parliament, as a matter of legislative policy, appears to be uncomfortable with enacting a law that forces minority shareholders to compulsory sell their shares. The government perceives it as a kind of ‘expropriation’. Hence, despite Dr. JJ Irani Committee’s specific recommendation, our Parliament has adopted a conservative approach while providing majority shareholders with the mechanism to ‘buyout’ the shares held by the minority shareholders. Even after the ‘right to property’ was abolished as a fundamental right under our Constitution, law makers seem uncomfortable in giving such right to majority shareholders, and half-hearted attempts have been made to provide majority shareholders with the ability to fully own a company.Continue Reading Minority squeeze-out under our Company Law – Is it a legislative policy dilemma?