Notifications and Circulars

Streamlining the process of public issue:

Amendments have been made in the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013, SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 and SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015 to ensure that the process of issue of debt securities becomes more simplified for both the body corporate issuing the securities and the investor(s). It becomes applicable from October 1, 2018 and covers public issues of debt securities, nonconvertible preference shares and securitized debt instruments.

The process of submitting the application form has also been modified and it ensures that there are less chances of any unscrupulous transactions, and it is mirrored with the obligation on part of the party receiving the application or the payment to provide a counterfoil receipt to the investor. In case a self-certified syndicate bank handles such transactions, they must ensure that the information is uploaded in the electronic bidding system as provided for by stock exchange(s) and the specified amount is only blocked. The concerned stock exchange also has to validate such electronic bid details and may request for re-submission based on the information not provided correctly.

Role of Sub-Broker vis-a-vis Authorized Person:

SEBI has removed sub-brokers as a category of market intermediaries. As noted by the regulator themselves, there was no practical need to have two separate classes of intermediaries, i.e. sub-broker and authorized persons since both fulfil the same role.

It has provided that no new registrations for subbrokers would be entertained by the regulator and for persons already registered, a deadline of March 31, 2019 has been accorded to such persons to change into either authorized persons or trading members. In case they fail to make the shift, such persons would be considered to have surrendered their registration from the effective date.

For those persons who had applied to be subbrokers, the regulator provided that such application amount would be refunded. Similarly, for the existing sub-brokers who had paid for the fees for years beyond 2018-2019, such renewal fees would be refunded based on the recommendations received from the relevant Stock Exchange(s).

Extension of Trading hours of Securities Lending and Borrowing Segment:

SEBI in the month of May already extended the trading hours of equity derivatives, operational from October 1 2018, which used to close at 3:30 pm, to 1 1:55 pm so as to bring parity between commodity trading and equity trading. In line with the same, SEBI has extended the trading hours for the SLB segment, but only till 5 pm.

SLB introduced in April is only available for shares trading in the derivative segment and is the process of physical settlement of equity derivative contract wherein shares are exchanged instead of cash.

Draft Companies (Cost Records and Audit) Amendment Rules, 2018:

The CentralGovernment has proposed to introduce the Companies (Cost Records and Audit) Amendment Rules of 2018 to amend the Companies (Cost Records and Audit) Rules, 2014. The draft rules expressly provide that those companies who had already filed their cost audit report in form CRA-4 for the financial year 20172018 with the Central Government prior to issue of these rules such companies are not required to file their cost audit report for the said financial year once again.

The draft rules classify overheads according to functions, viz., works, administration, selling and distribution, head office, corporate etc. and define each category. The rules also elaborate upon preparation of 'Cost Statements' providing that cost statements (monthly, quarterly and annually) showing quantitative information in respect of each goods or service under reference shall be prepared showing details of available capacity, actual production, production as per excise records, production as per GST records, capacity utilization (in-house), stock purchased for trading, stock and other adjustments, quantity available for sale, wastage and actual sale, total quantity of outward supplies as per cost records and total outward supplies as per GST records during current financial year and previous year.

Solar rooftop projects facing hurdles:

India is the world's third-largest energy consumer after the US and China. India is running the world's largest clean energy programme as part of its global climate change commitments. Under the clean energy program, India aims to achieve clean energy capacity of 175 GW by 2022. Out of this, India plans to add 100 GW of solar capacity by 2022 including 40 GW from rooftop projects. As against the target of adding 1,000 MW from rooftop projects in 2017-18, India managed only 500 MW.

Recently, Ministry of Finance imposed a safeguard duty of 25% on solar panels imported into India on the recommendation of the Directorate General of Trade Remedies. The levy was opposed by the renewable energy industry and petitions challenging the levy are pending before the Orissa High Court. The High Court has granted a conditional stay on the levy. In view of the orders of the High Court, the Ministry of Finance subsequently announced that the government will not insist on the payment of safeguard duty for the time being, but, imported solar cells and modules will be assessed provisionally on furnishing a letter of undertaking or bond.

Now, the recent proposals of the Maharashtra State Electricity Distribution Company Limited (MSEDCL) are being seen as factors that will discourage prosumers, i.e. producers who also consume, from investing in solar rooftop projects and hinder the achievement of the already ambitious targets. Last month, MSEDCL had proposed the levy of a surcharge of Rs. 1.26/per unit on solar rooftop prosumers. Presumably, the surcharge was necessitated due to a large number of consumers switching over to solar power.

Now, MSEDCL has proposed to replace the present system of 'net metering' for solar rooftop prosumers with a system of 'gross metering'. Under the present system of net metering, if a prosumer uses 500 units supplied by MSEDCL and generates 450 units from its rooftop panels, the prosumer will only be billed for 50 units at the prevailing MSEDCL tariff. However, under the proposed gross metering system, the same prosumer will be billed for all 500 units supplied by MSEDCL at the prevailing MSEDCL tariff and MSEDCL will buy the 450 units generated by the prosumer at the average cost of renewable energy purchased by MSEDCL.

The decisions with regard to the levy of the proposed surcharge and the introduction of the gross metering system are presently pending before the Maharashtra Electricity Regulatory Commission (MERC).

Ratio Decidendi

Direction for constitution of a fresh Committee of Creditors justified as home buyers in real estate projects come within the purview of 'financial creditors'

Key Point:

In view of that fact home buyers in real estate projects have now been instilled within the definition of 'financial creditors', it is warranted to direct fresh constitution of Committee of Creditors ("COC") in accordance with the provisions of the law.

Brief Facts:

A writ was filed under Article 32 of the Constitution of India for protection of the interests of home buyers in projects floated by Jaypee Infratech Limited ("JIL"), a special purpose vehicle created by its holding company Jaiprakash Associates Limited ("JAL"), to the order dated August 9, 2017 ("Order") of the National Company Law Tribunal at its Bench at Allahabad ("NCLT"), initiating the Corporate Insolvency Resolution Process ("CIRP") and asserting that home buyers could not be treated at par with financial and operational creditors.

Home buyers had invested in high-tech residential projects of JIL and JAL. However, these townships failed to be ready for possession within a period of thirty-six months. The Supreme Court ("the Court") granted the Insolvency Resolution Professional ("IRP") to file an action plan before the Court vide order dated October 23, 2017. The Court also directed JAL to deposit various sums of money through its orders.

Thereafter, home buyers were directed to approach the amicus curiae, who was to open a web portal with the details of all home buyers. Consequently, 8% of the home buyers desire a refund of the amount invested and the remaining 92% want possession of the flats.

Afterwards, applications were invited for the submission of resolution plans, considering the interest of the home buyers. JAL had also furnished its resolution plan which was rejected due to the statutory bar contained in section 29A of the Insolvency and Bankruptcy Code ("IBC"). Hence, no resolution plan was approved by the COC. However, liquidation proceedings were not begun in order to safeguard the interests of the home buyers.


  1. Whether when home buyers in real estate projects are now brought within the definition of 'financial creditors', it is justified to direct fresh constitution of COC in accordance with the provisions of the Laws?
  2. Whether preferential disbursement will also not be in the overall interest of a composite plan being formulated under the provisions of the IBC?


The original enactment of IBC did not comprise of adequate recognition of interests of home buyers and unswervingly impacted them. However, these concerns have been assuaged by the Insolvency and Bankruptcy (Amendment) Ordinance, 2018, which has brought these home buyers within the meaning of 'financial creditors' under IBC. Further, amounts raised from allottees under real estate projects are deemed to amounts having a commercial effect of a borrowing and included within the purview of a 'financial debt'. Thus, the outstanding amount to allottees is statutorily regarded as a financial debt.

Further, the home buyers who seek refund, have sought for the issuance of interim orders for the facilitation of pro-rata disbursement of the amount deposited by JAL. However, the Court acceded to it as directing disbursement of the amount such home buyers would be palpably improper thereby causing injustice to the secured creditors, since this would amount to preferential disbursement to a class of creditors. Correspondingly, the same would not be in the overall interest of the provisions under IBC. The Court kept the question of home buyers as secured or unsecured creditors open. [Chitra Sharma and ors. v. Union of India and ors. - Writ Petition (Civil) No. 744 of 2017 (Supreme Court of India)]

No Civil Court has jurisdiction in respect of any matter under IBC when NCI-T empowered for same

Key Point:

A civil court while dealing with any matters shall have no jurisdiction under IBC as the NCI-T has been provided with such jurisdiction.

Brief Facts:

The appellant had claimed an outstanding amount along with interest in respect of unpaid invoices for the goods supplied to the respondent. A reference was made to the Board of Industrial and Financial Reconstruction ("BIFR"); and since the Sick Industrial Companies Act (Special Provisions), Act, 1985 ("SICA") was repealed, IBC brought into force.

Thereafter, the respondent filed an application before NCI-T enclosing the pending company petition, and subsequently, the appellant filed a company application requesting the appointment of a provisional liquidator, in furtherance of which, the NCI-T proceedings were restrained.

The present case is an appeal challenging the order of the company judge dated January 5, 2018 whereby vacation of the order dated September 15, 2017 was granted by the judge, on application filed by the respondent, holding that there was no bar on NCI-T from proceeding the IBC application of the respondent.


Whether since NCI-T has been conferred jurisdiction because of special statute of IBC, no Civil Court has jurisdiction in respect of any matter in which it is empowered under the Code?


It was held that section 63 of the IBC injuncts a civil court to entertain proceedings in respect of any matter on which the NCI-T has jurisdiction. However, section 231 emphasises that no civil court shall have jurisdiction in respect of any matter in which the Adjudicating Authority is empowered to pass orders. Additionally, no injunction shall be granted by any court for any action pursuant to any orders passed by such an Adjudicating Authority. Hence, it is manifestly indicated that a special statute has conferred the jurisdiction on NCI-T. The court also observed that the Companies Act, 1956 would be treated as a general law, whereas, IBC would be treated as a special statute to the extent of provisions relating to revival or resolution of the company. [Jotun India Pvt Ltd. V. PSL Limited, Appeal Lodging No. 68 of 2018; 2018 SCC Online Bom 1952 (Bombay High Court)]. Supreme Court whether expands scope of Arbitration Section 11?

The Supreme Court of India has interpreted the scope of the powers of a court under Section 1 1 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) while appointing an arbitrator. To draw context, the Arbitration Act as amended in 2015 provides that the jurisdiction of High Court / Supreme Court while appointing an arbitrator under Section 1 1 is limited to examining only the existence of an arbitration agreement. Effectively, if an arbitration agreement exists, the Court shall appoint the arbitrator(s) and if not, direct the parties to pursue other remedies available to them. Obviously, the amendment was aimed to reduce court's interference while appointing an arbitrator, leaving any dispute as to the arbitrability of the disputes to be decided by the arbitrator in order to avoid duplication of disputes. This position was also affirmed by the Supreme Court in Duro Felguera, SA v. Gangavaram Port Limited (2017) 9 SCC 729.

However, in this present case, the Supreme Court has opined that the Court acting under Section 1 1 cannot just limit its role to ascertaining mere existence of arbitration agreement but also shall ascertain whether the disputes between the parties are covered by the arbitration clause sought to be invoked by the parties.

Brief facts:

The Petitioner, an insurance company, had provided the Respondent / Contractor with a 'Contractor All Risk Insurance Policy' ("CAR Policy"). The policy contained an arbitration clause which stated that when a dispute arose with respect to the quantum of claim under the policy the same shall be decided through arbitration. However, the clause clarified that disputes that arise out of repudiation of liability by the Petitioner insurance company cannot be arbitrated upon. The arbitration clause in the Policy Document read as under:

" If any difference shall arise as to the quantum to be paid under this Policy (liability being otherwise admitted) such difference shall independently of other questions be referred to the decision of an is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this Policy...

Allegedly, an accident occurred causing losses to the contractor. The contractor raised claims under the policy. The Petitioner insurance company on a finding that the accident occurred on account of faulty design and improper execution of the construction, repudiated the claims of the contractor.

The contractor invoked arbitration and sought to appoint an arbitrator to resolve the dispute by arbitration. The Petitioner insurance company resisted on the ground that the disputes arose out of repudiation which cannot be referred to arbitration as they are specifically excluded. An application was filed under Section 1 1 before the Madras High Court. The High Court relying on Section 1 1 (6A) of the Arbitration Act held that the arbitration agreement existed between parties and nothing was required to be done to commence arbitration. This Order was challenged before the Supreme Court by the insurance company.


The Supreme Court, setting aside the order of appointment of the arbitrator held that in the present case, no liability was admitted by the insurance company and as a result, the dispute did not pertain to the quantum of compensation payable under the insurance policy but arose out of repudiation. Thus, the disputes were not arbitrable.

The court held that where there since the arbitration specifically stated that arbitration could be invoked only where liability was unequivocally admitted, the arbitration cannot be invoked unless such precondition is fully satisfied. The precondition is thus sine qua non for the invocation of the arbitration agreement. This examination according to the Supreme Court was well within the jurisdiction of the Court exercising power under Section 11 of Arbitration Act. [United India Insurance Co. Ltd. v. Hyundai Engineering and Construction Co. Ltd. - Civil Appeal No. 8146 of 2018, decided on 21-8-2018, Supreme Court]