Thursday, March 31, 2011

Changes to FDI Policy – Part I: Convertible Securities

The Department of Industrial Policy and Promotion (DIPP), Government of India today released its new edition of the Consolidated FDI Policy, Circular 1 of 2011 that comes into effect April 1, 2011. This is part of the bi-annual review process that the DIPP commenced last year so as to ensure that the policy is in tune with dynamics in the economy and industry.

The recent round of review has introduced a number of changes, and we will attempt to discuss all of the major ones on this Blog. At a broad level, the changes appear to be investor friendly as they seek to remove several obstacles that have long held back foreign investment in crucial sectors. In fact, this round represents one of the more progressive sets of changes made to FDI policy in recent times, as we shall examine. Neither the substance of the policy nor its timing are surprising, given recent reports appearing in the press about a steady drop in the FDI flows into India in recent times. Clearly, the effort seems to be to arrest the slide.

This post surveys the changes relating to pricing of convertible instruments. Investors, particularly financial investors such as private equity funds, are generally keen on investing in convertible instruments (such as preference shares or debentures) because the conversion price can be linked to future performance of the company, thereby incentivizing the management and promoters to make the business more profitable. This is more important in businesses where the value lies in the future. Start-up or early stage businesses may command low valuations based on current performance, but may demonstrate tremendous potential that may be realized only in the future. Convertible instruments enable promoters and managers to capture that potential in current valuation by linking the conversion price to the performance. Commercially, such conversion based on a formula seems beneficial to the company and its promoters (by their ability to secure better valuation) as well as investors (who minimize the risk of poor performance).

Even though convertible instruments are accompanied by sound commercial logic, they have not been very welcome by regulators in India. After long periods of ambiguity in the FDI policy, the erstwhile Consolidated Circular of 2010 provided as follows:
3.2.1 Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. The pricing of the capital instruments should be decided/determined upfront at the time of issue of the instruments.
As the underscored portion above suggests, there was no flexibility whatsoever regarding the conversion price. It had to be determined upfront by the company and investors, which effectively eliminated any of the commercial benefits of investing through a convertible instrument. It is believed that such an approach effectively curbed the market for convertibles.

The DIPP has done well to recognise this issue, and has attempted to address this by amending the relevant clause in the new policy (Circular No. 1 of 2011) as follows:
3.2.1 Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. The price/ conversion formula of convertible capital instruments should be determined upfront at the time of issue of the instruments. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with the extant FEMA regulations [the DCF method of valuation for the unlisted companies and valuation in terms of SEBI (ICDR) Regulations, for the listed companies].
These amendments carry several positive implications.
First, it is open to parties to agree upon a pricing formula. Note that the earlier policy required fixing the absolute price, and did not entertain a formula as such. This changes brings the use of convertible instruments in India in line with normal market practice.
Second, the minimum regulatory pricing norms (DCF, or SEBI, as the case may be) will be applicable with reference to the date of issue of the convertible instruments. Hence, parties are free to set any formula for conversion as long as the price so arrived at is not less than the regulatory minimum pricing as of issue date. The minimum pricing as of issue date will effectively operate as the floor price, as the conversion cannot result in issue of shares at a discount to such price. By pegging the regulatory minimum pricing to the issue date, the new policy introduces a great amount of certainty, because the parties already know that price at the time of the issue of the convertible instrument. Moreover, since the pricing can be at any amount in excess of that, it enables companies and their management to realize the upside potential in the business in future. It also enables investors to take a call on the future, and they are only limited by the minimum regulatory pricing, a risk that may be well worth taking considering the possible upside to their investment in the future.
On the whole, these changes to the FDI policy makes convertible instruments assume the their usual character, without being hamstrung by pricing restrictions. This may likely increase the use of such instruments while investing into India.
At the same time, the new policy is confined only to matters of pricing and there are no changes regarding the fundamental nature of convertible instruments themselves. In other words, only compulsorily convertible instruments continue to be treated as FDI. Non-convertible and optionally convertible instruments continue to be treated as external commercial borrowings (ECBs). It remains to be seen whether future rounds of changes to FDI policy will bring even optionally convertible instruments within its purview so as to broaden the flexibility available to investors. But, as of now, there does not seem to enough momentum to extend that far.

Friday, March 25, 2011

SEBI’s Call to Promote Market Transparency

In a circular issued this week, SEBI has advised market intermediaries to put in place a code of conduct and internal controls to prevent circulation of rumours and unverified information in blogs, chats and messenger sites. SEBI seeks to impose a check on circulation of such information, as “market rumours do considerable damage to the normal functioning and behaviour of the market and distort price discovery mechanisms”. The idea is to avoid market manipulation and other tendencies such as front running of stocks by market intermediaries (or their employees) and circular trading.

By a follow-up addendum, SEBI’s imposes the primary responsibility of controlling information available with market intermediaries on the compliance officer. In case of any breach, the compliance officer will also be held liable for breach of duty in addition to the employee committing a specific violation. This appears to be a method of self-regulation imposed on intermediaries with the compliance officer acting as the gatekeepers. But, as highlighted in this news report, it remains to be seen whether SEBI can effectively implement such a code of conduct given the explosion of information in the digital age and the difficulties in monitoring such information flow.

Thursday, March 24, 2011

Res Judicata, Venture Global and s. 48 of the Arbitration Act

It was commonly believed until the well-known decision of the Supreme Court in Venture Global that s. 34 of the Arbitration and Conciliation Act, 1996 did not apply to foreign awards. We have discussed at length the subsequent development of the law on implied exclusion and a challenge to a foreign award. A single judge of the Delhi High Court, in Anita Garg v Glencore, recently considered a different issue arising out of this controversy – the interaction between s. 11 of the Code of Civil Procedure (res judicata) and ss. 34 and 48 of the Arbitration Act. In short, the question was whether a failure to challenge a foreign award under s. 34 before Venture Global was decided bars a subsequent challenge by virtue of constructive res judicata.

Glencore had obtained an interim award upholding jurisdiction and a final award against M/s Shivnath Rai Harnarain, a registered partnership firm, from the Grain and Feed Trade Association [“GAFTA”] in 1997. This arbitration qualified as an international commercial arbitration and it appears that the seat of arbitration was outside India. The firm filed a civil suit in the Delhi High Court in 1997 challenging the validity of the underlying contracts that formed the subject matter of the arbitration [“the firm suit”]. An identical challenge had been rejected by the GAFTA Tribunal in its interim award. Glencore also filed a civil suit in the Delhi High Court, to enforce the foreign award. That was treated as a suit under ss. 47 and 48 of the Arbitration Act and decreed on 27 November, 2008 [“the first suit”]. The firm’s civil suit was consequently dismissed and its appeal was found to be not maintainable. Glencore commenced execution proceedings against the firm and its partners. The partners attempted to challenge the decree but were held not entitled to do so because Order 21 Rule 50 CPC only permits objections, collusion apart, as to the status of the judgment-debtor as a partner at the relevant date. The partners then filed a petition under s. 34 of the Arbitration Act, relying on Venture Global, which was decided on 10 January, 2008, and the question that arose was whether the challenge to the legality of the underlying contracts was barred by res judicata.

Before turning to the judgment of the single judge, a preliminary point should be noted, although it is not expressly considered in the judgment. S. 11 of the CPC, which applies to a “suit”, may nevertheless be a bar to an arbitration “petition” under s. 34. In Smita Conductors v Euro Alloy, the Supreme Court held, in the context of the 1940 Arbitration Act, that a decision as to the existence or validity of the contract by a court in an arbitration petition is binding on the parties because the court has jurisdiction under the Act to adjudicate such questions. In any event, it is settled law that s. 11 is a manifestation of a principle of public policy and that res judicata may therefore be invoked even when s. 11 is not in terms applicable (Lal Chand v Radha Kishan).

The single judge (Sanghi J.) upheld the res judicata objection for three reasons. First, Sanghi J. noted that the fact that the firm suit had been filed in the name of the partnership firm was immaterial, because the implied authority of a partner under the Partnership Act extends to the resolution of disputes. Secondly, Sanghi J. held that the issue in the s. 34 application had been “directly and substantially in issue” in the first suit and in the firm suit. Thirdly, it was held that the dismissal of the objections preferred by the partners in execution proceedings was binding in the s. 34 proceeding as well. In addition, the application was found to be time-barred. Of these, the second and the third conclusions are of some importance, and are discussed below in turn.

The test under s. 11 CPC is inter alia that what is directly and substantially in issue in the subsequent suit must have been directly and substantially in issue in the former suit. In the firm suit, the case of M/s Shivnath Harnarain was that the underlying contracts were invalid and that very issue was raised in its s. 34 application. The objection had been rejected in the first suit (and therefore in the firm suit) on the ground that s. 48 of the Act, under which that suit had been filed, required the court to construe “public policy” narrowly, and that it must necessarily involve the element of fraud or corruption. A challenge under s. 34 had not been made, because the first suit pre-dated Venture Global and it was thought that s. 34 was inapplicable. Sanghi J. held that this is irrelevant, because Explanation IV to s. 11 provides that any matter which ought to have been raised in the former suit as a ground of defence or attack shall be deemed to have been a matter directly or substantially in issue in that suit. This is the well-known doctrine of constructive res judicata. Nor did the fact that Venture Global was decided subsequently matter, because the Supreme Court only “declared the pre-existing legal position and did not vest or create any fresh right” (para 25). This is a close point. Although the theory that a court merely declares pre-existing law has been described by no less an authority than Lord Browne-Wilkinson as a “fairy tale in which no one any longer believes”, it is clear, as Lord Goff noted (Kleinwort Benson v Lincoln City Council), that retrospectivity of decisionmaking is inevitable in a system that is committed to the doctrine of precedent. Nevertheless, there is room for the view that it is not appropriate to apply constructive res judicata to a ground of defence or attack that at the time was contrary to the “settled understanding of the law”. It might also be said that the object of constructive res judicata is that a party cannot be permitted to disturb the finality of proceedings by raising subsequently points he ought to have raised earlier, but failed to do so for reasons of negligence or strategy. The obvious difficulty with this approach is that it requires the court trying the subsequent suit to investigate whether the plaintiff’s failure to raise the point in the former suit arose out of a settled understanding or strategy, especially where it was possible to have attacked the settled understanding itself (for example through interlocutory proceedings). Sanghi J. appears to have had this in mind as well, for his alternative reason for rejecting the s. 34 application was that the plaintiffs had failed to rely on Venture Global in the first suit although the suit was decreed eight months after Venture Global was decided.

A corollary to this problem is jurisdiction, because s. 11 also requires that the parties must have litigated under the same title, that the former suit must have been finally decided, and that the court that tried the former suit must have had jurisdiction to try the subsequent suit. In this case, it was argued that the court that tried the firm suit did not have jurisdiction to try that suit, because s. 5 of the Act mandates that there is to be no judicial interference in arbitration except as provided in Part I. Sanghi J. rejected this contention (para 23) reasoning that the “petitioner cannot blow hot and cold at the same time” and in any event that the first suit was delivered by a court of competent jurisdiction. The point was moot in this case because the court that tried the first suit (the Delhi High Court) would have had jurisdiction to entertain a s. 34 application, if maintainable (Fountain Head Developers v Maria Arcangela Sequeira, ¶ 14). However, it is not clear that s. 11 will apply in a case where constructive res judicata is pleaded in the subsequent suit in respect of an issue that could not have been raised before the court that tried the former suit.

The third reason Sanghi J. gave is, with respect, more doubtful, because it is difficult to see why the bar on challenging a decree in execution proceedings under Order 21 Rule 50 constitutes res judicata if the challenge is subsequently brought in a civil suit. It may be the case – as it was in Glencore – that the decree that was sought to be executed may itself constitute res judicata, but if it does not, Order 21 Rule 50, it is submitted, cannot come to the rescue.

Wednesday, March 23, 2011

Cairo Regional Centre for International Commercial Arbitration Rules, 2011:

(The following post is contributed by Rohan Bagai)
Notwithstanding the levitating political imbroglio in the Arab Republic of Egypt in the recent times, the Indian corporates (especially the fast moving consumer goods (FMCG) and the automakers) have enjoyed tempting tax breaks, favored trade treaties, and prompt approvals for operating businesses in the transcontinental nation of Africa.

In this context, the strengthened alternative dispute resolution (ADR) apparatus in Egypt has been a huge confidence building measure that has enhanced bilateral relationship between the industry and the Egyptian government machinery over the years. The conception of the Cairo Regional Centre for International Commercial Arbitration (the “CRCICA”) as a centre for administering institutional arbitrations, both domestic and international, for resolution of commercial disputes has been monumental. CRCICA is an independent non-profit international organization founded in 1979 under the auspices of the Asian African Legal Consultative Organization (“AALCO”), in pursuance of AALCO’s decision taken at the Doha Session in 1978 to set up regional centres for international commercial arbitration in Asia and Africa.

The CRCICA since its inception in the year 1979, fashioned its arbitration rules (the “Erstwhile Rules”) with slight variations, in line with the Arbitration Rules of the United Nations Commission on International trade Law (“UNCITRAL”), approved by the General Assembly of the United Nations vide resolution no. 31/98 dated December 15, 1976. Consequently, the Erstwhile Rules were amended in the years 1998, 2000, 2002 and 2007 to ensure that these meet the desires of their users while reflecting the best practices in the sphere of international institutional arbitration.

Recently, the CRCICA has brought into force the new Arbitration Rules (the “2011 Rules”) with effect from March 1, 2011, which is based upon the revised UNCITRAL Arbitration Rules of 2010 (with a few adaptations stemming from CRCICA’s position as an arbitral institution and an appointing authority). Accordingly, pursuant to the said date, the 2011 Rules should apply to all arbitral proceedings that have commenced under the CRCICA.

In this regard, it may be relevant to bring to light a few critical changes and/or additions in the 2011 Rules. The same are inter alia outlined hereunder:
(a) Use of electronic means such as facsimile or e-mail for notice (Article 2);

(b) Insertion of separate clause for response to the notice of arbitration (Article 4);

(c) Person acting as a representative of one of the parties may, at the request of any of the parties or by the arbitral tribunal suo moto, be asked to provide proof of authority for such representation (Article 5);

(d) Incorporation of an express clause regarding the decision by the CRCICA not to proceed with the arbitral proceedings in the event it manifestly lacks jurisdiction over the dispute (Article 6);

(e) Appointment of arbitrator by multiple parties jointly, as claimant or as respondent (Article 10);

(f) Challenge of the arbitrator in the event of failure to act or de jure or de facto impossibility of performing its functions (Article 12);

(g) Introduction of a provision for exclusion of liability of the arbitrator based upon any act or omission in connection with the arbitration (except intentional wrongdoings) (Article 16);

(h) Notice of arbitration may be treated as a statement of claim by the claimant and response to the notice of arbitration may be treated as a statement of defence by the respondent (Article 20 and Article 21);

(i) The phrase “counterclaim or a claim for the purpose of a set-off” has been added in the provisions relating to ‘Amendments to the claim or defense’ under Article 22 and ‘Pleas as to jurisdiction of the Arbitral Tribunal’ under Article 23 respectively;

(j) A detailed clause for interim measures ‘without limitation’ to the examples mentioned in the Erstwhile Rules has been provided (Article 26);

(k) Objections relating to the qualifications, independence, and impartiality of the experts appointed by the arbitral tribunal within the stipulated time period may be raised by the parties (Article 29);

(l) The arbitral tribunal should decide whether there are any remaining issues that need to be decided and if it is appropriate for the arbitral proceedings to be terminated, in case of the claimant’s failure to communicate its statement of claim (Article 30);

(m) In terms of the waiver of right to object, it is imperative under the 2011 Rules to determine if a party ‘does not show’ that its failure to object was justified, before it is deemed to have waived its right to object (Article 32);

(n) The 2011 Rules does not classify the arbitral awards as interim, interlocutory or partial awards, but as separate awards on different issues at different times (Article 32);

(o) Omission of the requirement for the final award to be registered or deposited by the arbitral tribunal and accordingly, keeping the same open to the mandatory provisions of the applicable law (Article 32);

(p) Failure on the parties to designate the law applicable to the substance of the dispute would empower the arbitral tribunal to apply the law, which has the closest connection to the dispute unlike the Erstwhile Rules that provides for the law to be determined by the conflict of law rules (Article 35);

(q) Corrective measures in the provisions relating to costs, arbitral tribunal’s fees and expenses etc. (Article 40, Article 41 and Article 42).
That said it remains to be seen if these amendments boost the efficacy of international commercial arbitration under the 2011 Rules whilst portraying the evolved arbitration law and practice (since the adoption of the original UNCITRAL Model law in the year 1976) and also making CRCICA a hot-spot destination for institutional arbitration in the Afro-Asian region.

- Rohan Bagai

Monday, March 21, 2011

Nomination Committees of Corporate Boards

The recent episode relating to the nomination of directors for appointment on the board of Hewlett-Packard Co. brings to the fore the role of the nomination committee. Institutional Shareholder Services (ISS), a shareholder advisory group, recommended a vote against certain nominees on the ground that HP’s nomination committee was heavily influenced by the HP CEO, Leo Apotheker. While HP’s actions have been strongly defended, there is also a belief that the nomination committee’s actions can never be removed in practice from involvement by the CEO.

The position and role of nomination committees gives rise to a different set of issues in the Indian context. At the outset, constitution of nomination committees is not mandated by the corporate governance norms in India. It is not one of the committees boards are obligated to establish under Clause 49 of the listing agreement. However, several leading Indian companies have constituted nomination committees as a matter of good practice, and the Corporate Governance Voluntary Guidelines, 2009 exhort boards of listed companies to set up nomination committees. The process of nomination acquires great importance in selecting independent directors. I have had occasion to consider this issue elsewhere and simply provide an extract of the discussion (footnotes omitted):
Although the [Voluntary] Guidelines do not significantly alter board structure, they continue the prevailing trend of re-emphasizing board independence and strengthening the role of independent directors. One of the significant drawbacks of board independence in the Indian context has been the pervasive influence of controlling shareholders (known as “promoters”) in the nomination and appointment of independent directors. In order to address this situation, the Guidelines call for the establishment of a nomination committee comprising a majority of independent directors, including its chairman, for evaluating and recommending to the board appropriate candidates for directorships, with transparency being key.

(i) Efficacy of the Nomination Committee

While the nomination committee requirements have been introduced in Indian corporate governance for the very first time by means of the Guidelines and hence are noteworthy, it is doubtful whether they constitute giant strides towards effective board nomination and appointment. An independent nomination committee may be effective where shareholding in companies is dispersed (such as in the U.S. and the U.K.) whereby it removes the director nomination process outside the purview of management. However, as I have argued elsewhere, such a system may not achieve its intended goals where shareholding in companies tends to be concentrated (such as in India). Although a nomination committee may recommend candidates to begin with, the election of such candidates is still subject to voting at shareholders’ meetings where controlling shareholders can wield significant influence. Due to this reason, the nomination committee is likely to pick candidates who have the tacit acceptance of the controlling shareholders so that the successful outcome of election of such candidates is not in doubt. In that sense, although the nomination committee system is superior to the existing model of director nomination and elections, it does not abate the influence of controlling shareholders in election of directors, particularly that of independent directors (who are expected to be independent monitors of management as well as controlling shareholders).

Arguably, the Guidelines provide cosmetic comfort, and a more radical approach is warranted to deal with issues of independent director nomination and appointment. There is a need for altering the process of election of independent directors by increasing minority shareholder participation. This can be achieved through processes such as (i) cumulative voting, and (ii) voting by a “majority of the minority”, in which the controlling shareholder is excluded from the voting process. At the outset, these notions may appear somewhat outrageous, but proposals of this nature are beginning to gather a fair amount of steam, particularly in the wake of recent episodes involving governance failures in controlled companies.

Sunday, March 20, 2011

Pledge of Demat Shares: Implications Under Takeover Regulations

A somewhat peculiar situation came up for consideration of the Securities Appellate Tribunal (SAT) in Liquid Holdings Private Limited v. SEBI, on which SAT passed its order on March 11, 2011.


Background
Liquid Holdings Private Limited (Liquid) was one of the promoters of Blue Coast Hotels Limited (the Target). Morepen Laboratories Limited, a group company of Liquid, obtained loans from two banks, against which Liquid pledged its holding of shares in the Target. The shares were held in dematerialized form, and the pledge was created using the procedures prescribed under the depository system for demat shares. Due to a default on the loans sometime in 2004, the banks enforced the pledge and transferred the shares into their own demat accounts. Appropriate disclosure of the acquisition of the shares was also made at that stage by the one of the banks, Lakshmi Vilas Bank Limited, as required under Reg. 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Subsequently, in 2007, Morepen discharged its loan to Lakshmi Vilas Bank and as a result the shares were transferred back to the demat account of Liquid.
Issue
The legal question that arose was whether the re-transfer of shares from Lakshmi Vilas Bank to Liquid required Liquid to make an open offer to all shareholders of the Target as the acquisition triggered its obligation under Reg. 11(1) of the SEBI Takeover Regulations.
SAT Decision
The adjudicating officer of SEBI found that Liquid (along with some other appellants before SAT) had breached Regs. 7 and 11(1) of the SEBI Takeover Regulations by neither disclosing the acquisition nor making an offer to the other shareholders of the Target. Liquid preferred an appeal to SAT.
SEBI argued that when Morepen defaulted on repayment of its loans, the banks became owners of the shares as they were transferred in their names upon invocation of the pledge. When the loan was subsequently settled, what occurred was a transfer of the shares back to Liquid. However, Liquid argued that the relationship between Liquid and the banks continued to be one of pledgor and pledgee even after the transfer of the shares and that the banks were only holding the shares as collateral security. Based on this argument, it was contended that the provisions of the Takeover Regulations were not attracted. On balance, SAT accepted the position of SEBI rather than Liquid.
First, SAT recognized that a pledge may be created in respect of demat shares through the procedure laid down in Reg. 58 of the SEBI (Depositories and Participants) Regulations, 1996. This act by itself does not constitute a change in beneficial ownership, and therefore the creation of the pledge by Liquid in favour of the banks did not attract the offer requirements under the Takeover Regulations. Second, once the banks invoked the pledge, the records reflected a change in beneficial ownership of the shares with the banks being treated as beneficial owners. All rights that flow with beneficial ownership, including voting rights, were now enjoyable by the banks and Liquid ceased to have any beneficial interest in the shares. Subsequently, when Liquid reacquired the shares upon repayment of the loan by Morepen, Liquid became the beneficial owner thereof as its name was entered in the depository’s records. This required Liquid to make necessary disclosures under Reg. 7 of the Takeover Regulations and to make an offer under Reg. 11, which was not done. Hence, the adjudicating officer’s order was upheld.
Analysis
SAT’s order reinforces the position that transfer of beneficial ownership in shares, particularly voting rights, puts the acquirer under an obligation to comply with the Takeover Regulations. Although the documentation between the parties inter se may confer a right on the original pledgor to obtain the shares back after the transfer, SEBI will have primary regard to the process followed under the Depositories Regulations for creation and enforcement of the pledge while determining the parties’ obligations under the Takeover Regulations. Hence, where a pledgee invokes the pledge and obtains a transfers of the securities through change in beneficial ownership of the shares through the process prescribed under the Depositories Regulations, that will determine the duties of the parties under the Takeover Regulations even though the parties may have intended in the documentation to allow a subsequent redemption of the transaction through repayment of the loan by the borrower. To that extent, SAT’s judgment provides clarity in structuring the creation and redemption of pledges over shares of listed companies that are held in demat form.

Tuesday, March 15, 2011

Streamlined Procedure for Incorporation of Companies, etc.

(The following post has been contributed by Rohan Bagai)
The Ministry of Corporate Affairs, Government of India (“MCA”) has recently notified a General Circular No. 6/2011 dated March 8, 2011 (the “Circular”) simplifying the procedure for incorporation of companies and establishment of principal place of business in India by foreign companies.

In this regard, MCA has come up with certain key recommendations in the Circular, which are provided hereinbelow:

Incorporation of a company

(a) Only the application and declaration for incorporation of a company (Form 1) would be required to be approved by the RoC. The other statutory filings for incorporation like Form 18 for notice of situation of registered office and Form 32 for appointment of directors would be processed online. Accordingly, any rectifications or changes to be carried in the said Forms 18 and 32 would also be notified online;

(b) Conception of a new category for the following incorporation Forms, which would be given highest priority for approval while processing:
 Form 1A: Application form for availability or change of a name;

 Form 37: Application by an existing joint stock company or by an existing company for registration;

 Form 39: Registration of an existing company as a limited company;

 Form 44: Documents delivered for registration by a foreign company, i.e. establishment of principal place of business in India by way of a branch office, liaison office or project office; and

 Form 68: Application for rectification of mistakes apparent on record.
This proposed measure would shrink the average time taken for incorporation of a company to just one (1) day pursuant to the name approval of the company.

Establishment of principal place of business in India by foreign companies

With regard to establishment of a principal place of business in India i.e. branch office, liaison office or project office, a foreign company is required to obtain prior approval of the Reserve Bank of India (“RBI”). Such an establishment should comply with the regulations prescribed by the RBI vide Master Circular No.11/2010-11 on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities dated July 1, 2010. Pursuant to such permission from the RBI, the foreign company is required to apply to the RoC under Form 44 for registration of such establishment in India. Typically, conclusion of the registration process takes around two (2) weeks.

That said, there seems to be an ambiguity in the aforestated recommendation, which reduces the average time taken for incorporation of a company to one (1) day only. It is pertinent to note that the case of registration of a foreign company is not expressly covered under the said proposal. Consequently, it remains to be seen if the same timeline would apply even in cases of registration of foreign companies with the RoC.

- Rohan Bagai

Sunday, March 13, 2011

Actions Against Independent Directors

On March 11, 2011, SEBI passed an order in relation to Pyramid Saimara Theatre Limited (PSTL) restraining three of its independent directors (Mr. K.S. Kasiraman, Mr. K. Natarahjan and Mr. G. Ramakrishnan) from being independent directors or members of audit committees of any listed company for a period of two years from March 11, 2011.
The order was passed on the ground that these independent directors of PSTL failed to perform their role in preventing false and misleading disclosures made by the company in its accounts, which were found to contain inflated profits and revenues through fictitious entries. SEBI refused to accept the independent directors’ arguments that they were not responsible for day-to-day affairs of the company and that they participated at board meetings where only broad policy matters were discussed.
In its order, SEBI has made strong observations regarding the role of independent directors on listed companies:
5. A company acts through its board of directors. It is the duty and responsibility of the directors to ensure that proper systems and controls are in place for financial reporting and to monitor the efficacy of such systems and controls. While the extent of responsibility of an independent director may differ from that of an executive director, an independent director has the duty of care. This duty calls for exercise of independent judgment with reasonable care, diligence and skill which should be reasonably exercised by a prudent person with the knowledge, skill and experience which may reasonably be expected of a director in his position and any additional knowledge, skill and experience which he has. The audit committee exercises oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. It reviews the adequacy of internal control system and management discussion and analysis of financial condition and result of operations. The institutions of independent directors and audit committee have been established to promote corporate governance and enhance the protection of interests of investors. These have a critical role to play in the regulation and development of the securities markets and protection of interests of investors in securities.
7. I find that the noticees overlooked numerous red flags in the trend in revenues, profits, receivables, advances, etc. which could not escape the attention of an independent director, who is also a member of the audit committee. … Such aberrations in financial figures would alert any person of ordinary prudence. The appropriate questions at the right time from the noticees would have unraveled the fraud being played by the company on the innocent investors. By failing to ask the right questions at the right point of time, I find that the noticees have failed in their duty of care as an independent director. They failed to review, as members of the audit committee, the internal control systems, which generated misleading financial statements. I find that the noticees were either too negligent to notice the aberrations in performance of the company and the fraud behind such abberrations or acted as shadow directors of the board / members of the audit committee. In either case, they facilitated the company to make false and misleading disclosures and thereby created artificial prices and volumes in the securities of PSTL in the market, to the detriment of innocent investors. I, therefore, conclude that the charge of disclosure of false and misleading statements, as alleged in the [show cause notice] against the noticees, is established. …
8. Such conduct on the part of the noticees is disgrace to the institutions of independent directors and the audit committee of a listed company. This cannot be viewed lightly and warrants regulatory intervention.
SEBI’s warning signals to independent directors are loud and clear. While this enunciates the importance of the monitoring role of independent directors, it remains to be seen whether SEBI’s order operates as a serious disincentive to otherwise competent and capable individuals from taking up or continuing with their board positions. As we have seen in the past, the Satyam episode resulted in a several hundred independent directors relinquishing their positions from boards of Indian listed companies.
The approach recently adopted by a court in Singapore is even severe. An independent director was sentenced to a four months’ jail term for a misleading statement made by the company to the Singapore stock exchange SGX. A Straits Times news report states:
SINGAPORE'S corporate scene has been stunned by a jail term given to an independent director under stock trading and disclosure laws.
Lawyer Peter Madhavan, a former independent director at scandal-hit air cargo firm Airocean, was sentenced to four months' jail for his part in making a misleading statement to the Singapore Exchange. He was also fined $120,000.
This is believed to be the first time an independent director here has been sentenced to jail for breaking securities laws. Independent directors are non-executives not involved in day-to-day management.
District Judge Liew Thiam Leng said Madhavan had played a major part in issuing a statement to the SGX in 2005 that tried to downplay a bribery probe involving the firm's former chief.
He said that as a lawyer, Madhavan was regarded by fellow directors as being more familiar with legal proceedings.
Although Madhavan had no shares in Airocean, he was the 'most active' in making the misleading statement, the judge found. He drafted the document and was the 'main contact person' with Airocean's lawyers who amended it.
A broader discussion on independent directors is available on this multi-part series on Money Control (The Firm – Corporate Law in India).

Saturday, March 12, 2011

Court of Appeal on Concurrent Liability

Earlier this year, the UK Court of Appeal was called on to consider an important question dealing with concurrent liability in contract and tort. The facts in Robinson v. Jones involved the defective construction of a house by a builder, which caused economic loss to the purchaser. However, the contractual remedy was barred by limitation. As a result, the purchaser sought to argue that he had a concurrent remedy in tort, which was not barred by limitation (since the limitation period for tort commences only from the date on which the party comes to know of the breach). It was also contended that the contractual exclusion of this tortious liability fell foul of the Unfair Contract Terms Act [“UCTA”]. Against the backdrop of an excellent summary of the English law relating to concurrent liability, the Court of Appeal held that there was no concurrent liability in tort. It also held obiter, that the contractual exclusion was reasonable, and did not violate the UCTA.

In Henderson v. Merrett, Lord Goff laid down the present English position on concurrent liability, by holding that the existence of a contract between parties does not necessarily exclude the concurrent existence of liability in tort. When the facts suggested that the defendant had assumed a responsibility towards the claimant, on which the claimant relied to his detriment, there would exist a concurrent liability in tort. The question before the Court of Appeal was whether a builder could be considered to have assumed responsibility in relation to economic loss resulting from economic loss.

The Court held that apart from the liability under the contract, the law of tort (independent of the assumption of responsibility) imposed an obligation on the builder to protect the purchaser and subsequent users against personal injury and damage to other property. In order to show liability for economic loss, reliance would have to be placed on the assumption of responsibility. The facts of Henderson involved insurance agents, and was itself based on Hedley Byrne, which was a case of professional negligence. However, the Court of Appeal held that this assumption of responsibility could not be easily assumed outside the realm of professional retainers. The explanation for this conclusion was as follows:

Contractual and tortious duties have different origins and different functions. Contractual obligations spring from the consent of the parties and the common law principle that contracts should be enforced. Tortious duties are imposed by law, as a matter of policy, in specific situations. Sometimes a particular set of facts may give rise to identical contractual and tortious duties, but self-evidently that is not always the case.

Lord Justice Jackson also examines Lord Goff’s speech in Henderson and points out that not every contract is held to lead to an assumption of responsibility. All that Lord Goff was clarifying was that the existence of a contract did not, by itself, exclude tortious liability. On facts here, there was held to be nothing which suggested that the builder had assumed any responsibility, and the parties were not in a professional relationship “whereby, for example, the claimant was paying the defendant to give advice or to prepare reports or plans upon which the claimant would act”. Finally, on the possible inequity of the contractual claim being barred by limitation, the Court held that it was but a manifestation of the contractual allocation of risk between the parties, and could not be disturbed.

Lord Justice Stanley Burton adopts a slightly different line of reasoning, arguing for a distinction between “a person who supplies something which is defective and a person who supplies something (whether a building, goods or a service) which, because of its defects, causes loss or damage to something else”. Even in the context of negligent advice by a professional, the tortious claim does not arise due to the defective nature of the advice itself, but because of the damage that it causes to the claimant’s assets.

In sum, the following propositions on concurrent liability in contract and tort appear from the decision-

(1) The existence of a contract does not necessarily result in a co-extensive liability in tort. The liability in tort must either be imposed by law, or be assumed by the defendant on the facts of the case. On this issue, however, Lord Justice Jackson’s decision is a little unclear, and seems to co-opt both sources of the tortious liability being public policy (¶¶ 76 and 79).

(2) Contracts with professional advisors and other contracts may be treated differently, with responsibility being more easily assumed in the former than the latter. This is where there may be a slight divergence between Jackson LJ and Burton LJ. The former seems to think that public policy may have something to do with the different treatment of professional advisers, while the latter relies solely on the fact that in negligent advice cases, the claimant is usually suing for the damage to assets caused by the advice and not for the negligent advice itself.

Friday, March 11, 2011

Waiver of a Loan - Capital or Revenue?

Recently, the Delhi High Court was called on to decide the interesting question of the tax treatment of loans and interest waived by financial institutions. In Logitronics v. CIT, the Court considered two cases which raised similar issues, and held that the treatment of the waived loan amount would depend on the purpose for which the loan was taken.

In the first case, the assessee had taken loans from the State Bank of India, which it had been unable to repay. As a result, proceedings before the Debt Recovery Tribunal had been commenced, which were settled. In return from the payment of a certain amount upfront, SBI waived the payment of the loan and the interest amount. The assessee offered the waived interest for tax, but did not offer the waived loan amount. The basis of this was because usually a loan is considered a capital asset, as a result of which the assessee argued that waiver of the asset would not be an income receipt in the hands of the assessee.

The Court drew a distinction between the nature of a loan and the nature of the benefit that accrues to the borrower on it being waived. Although the loan is a capital asset, its waiver need not necessarily result in a benefit of a capital nature. In a remarkably well-reasoned passage (¶ 13) , the Court lays down the position of law laid down by the Supreme Court in TV Sundaram Iyengar, in relation to whether nature of receipts in the hands of an assessee can change over the course of time. Departing from authority to the contrary in the United Kingdom (laid down in Tattersal), the Court there had held that although an amount may be capital at the time of receipt, if it was received in the course of the trade or business, it could change its nature over the course of time “when [it] becomes the assessee’s own money because of limitation or by any statutory or contractual right”. Subsequently, in Travencore Rubber and Tea Co v. CIT, the Supreme Court clarified that Tattersal could be departed only from only when there was a subsequent event which recharacterised the nature of the receipt.

The Court then cited past authority from the Delhi and the Madras High Courts for the proposition that the purpose for which a loan was taken would determine its tax treatment upon waiver. On facts here, the Assessing Officer had not made conclusive findings as to the purposes for which the loan had been borrowed. Hence, the Court held that the order by the ITAT to refer the matter back to the AO for determining the purpose for which the money was borrowed was valid in law.

In the second case, the assessee was an investment company engaged in shares and loan transactions. The Court there drew a distinction between the borrowings made for the purposes of the share business, and the financing business. On facts, the Tribunal had found that the loan was used for the former and not for the latter. As a result, though used to make its business run smoother, the loan amount itself was not a business receipt, and not taken ‘for the purpose’ of a business.

Much can be said for the Court’s decision that the tax treatment of a waived loan liability depends on the purpose for which it was taken. This is particularly true given that the nature of a receipt has been held to be amenable to change over the course of time. However, there are two aspects of the decision that are a cause for some concern and uncertainty-

First, not enough consideration has been given to distinguishing this case from Travencore Rubber and Tea Co v. CIT, which emphasised the importance of some event causing the nature of the receipts to change. On the facts of that case, a mere breakdown in a contractual relationship subsequent to which earnest moneys were forfeited, was not considered an event which would convert the capital receipts in the form of earnest moneys into revenue receipts. How the breakdown of a contractual receipt was different from the waiver of an unpaid loan on settlement is not sufficiently addressed.

Secondly, the test of what purpose the loan was taken for is one which may prove difficult to apply in practice. In the context of section 14A, several previous discussions have highlighted the problems that have arisen from the need to allocate specific borrowings to specific investments, which has led to highly arbitrary allocation provisions in the form of Rule 8D of the Income Tax Rules. Even if a purpose-oriented test is thought appropriate, the use of a presumption against a change in the nature of the receipt would have been a change for the better, and would not have been at odds with prior authority.

Thursday, March 10, 2011

A Level Playing Field and Public Interest

One of the striking features of the Indian economy post-1991 is the conception it has of a level playing field as between Government and private enterprises. It should be noted that this cuts both ways, for while there are commercial advantages for certain Government entities, others are required as part of Government policy to bear losses that a private enterprise in that position would choose not to bear. While the law governing this relationship has not been fully tested, the Delhi High Court last week had occasion to consider it in the context of a dispute in the aviation sector. The judgment of the First Bench in Federation of Indian Airlines v Union of India is available here.

The case arose out of set of circulars issued by the Director-General of Civil Aviation that, in gist, purported to require that “ground-handling” services in the six major airports in the country be handled exclusively by the airport operator, or by subsidiaries or joint venture partners of the national carrier (National Aviation Co. Ltd.). In other words, it prohibited private airlines from undertaking ground-handling services, and the object was said to be the protection of national security in light of the heightened risk of terrorist activity. There is no doubt that these services are an integral part of the airline business, not only because of their significant impact on consumer satisfaction, but also because of the enhancement of an airline's ability to secure its equipment. The Federation’s case therefore was that this circular was ultra vires inter alia s. 5A of the Aircraft Act, 1934, and ex facie unconstitutional, because it conferred an unfair advantage on airport operators (AAI or an AAI JV partner) and on the national airline.

The first of these issues raised a point of statutory construction that is likely to prove influential. It is necessary to reproduce s. 5A in its entirety:

5A. Power to issue directions. - (1) The Director- General of Civil Aviation or any other officer specially empowered in this behalf by the Central Government may, from time to time, by order, issue directions, consistent with the provisions of this Act and the rules made thereunder, with respect to any of the matters specified in [clauses (aa), (b), (c), (e), (f), (g), (ga), (gb), (gc)], (h), (i), (m) and (qq) of sub-section (2) of section 5, to any person or persons using any aerodrome or engaged in the aircraft operations, air traffic control, maintenance and operation of aerodrome, communication, navigation, surveillance and air traffic management facilities and safeguarding civil aviation against acts of unlawful interference], in any case where the Director-General of Civil Aviation or such other officer is satisfied that in the interests of the security of India or for securing the safety of aircraft operations it is necessary so to do [emphasis added].

For convenient analysis, it may be noted that s. 5A for the purpose of this controversy consists of three distinct parts – first, that the DGCA (or authorised officer) may issue directions “consistent with the provisions of this Act…”; secondly, those directions may be issued “with respect to any of the matters specified in…” and finally, “in any case where the DGCA… is satisfied that in the interests of security...”. The first impression one has of this provision is that the three conditions are cumulative, and not alternative. It is also difficult to take the view that the expression "with respect to any of the matters..." qualifies "consistent with the provisions..." because that construction denudes one or the other of meaning. Thus, the Federation argued that the DGCA circular is ultra vires s. 5A because it did not fulfill the second condition, as it was not shown that the circular was traceable to one of the provisions specified in s. 5A. The Delhi High Court rejected this contention, after referring to the uncontroversial principle that a provision in a statute must be construed “contextually”. The Court found two elements in the context that were said to militate against the view that every direction under s. 5A must arise out of one of the enumerated provisions. First, their Lordships held that the words “in any case” used in the opening part of the third condition are an indication that the provision is to be construed widely – to wit, “in all cases” where the security of India is involved, regardless of the applicability of one of the specific provisions enumerated. Secondly, their Lordships referred to s. 4A of the Act, which provides that the DGCA shall perform “safety oversight”.

With respect, it is submitted that this analysis of s. 5A, and in particular, of the expression “in any case”, may require reconsideration. To substantiate the proposition that “in any case” must be construed widely, the Delhi High Court cited the judgment in Lalu Prasad Yadav v State of Bihar, where the Supreme Court did indeed observe that “in any case” means “in all cases”. However, it is important to notice that the Supreme Court was dealing with the meaning of “in any case” in s. 378 of the Code of Criminal Procedure, 1973, which provides inter alia that the State Government may, “in any case”, direct the Public Prosecutor to present an appeal against acquittal. It is difficult to imagine that the legislature intended a similarly wide meaning to attach to the expression in s. 5A of the Aircraft Act, especially because the specific provisions enumerated in the second condition are not exhaustive - indicating that the power was consciously confined to a set of carefully defined circumstances. That impression is strengthened by the fact that s. 5 provides that the Central Government (not the DGCA) may make rules in general regulating the possession, use etc of aircraft. It is therefore submitted, with respect, that while “in any case” often means “in all cases”, that conclusion depends ultimately on whether the legislature purposefully confined what appears to be a general provision or did so merely by way of abundant caution. Similarly, s. 4A does not seem to be of assistance, since the "safety oversight" in question is "in respect of matters specified in this Act."

The second point - on constitutionality - is similarly likely to be of general importance. The Court repelled a challenge to the vires of the circular on the grounds of Art. 14 and 19(1)(g), holding essentially that the court will be slow to interfere with matters of policy, and will not substitute its view of what is desirable policy for that of the Government. That is especially so when the ground of restriction is national security, as it was in this case. The following observations are apposite:

The factum of security cannot be gone into by court of law and more so when specific aspects have been dwelled upon and delved into by the Bureau of Civil Aviation Security. The security of a country is paramount. It is in the interest of the nation. There is no question of any kind of competition between the commercial interest and the security spectrum. The plea that in the name of security the commercial interest of the petitioners is infringed or abridged does not merit consideration and in any case this Court cannot sit in appeal over the same

Interestingly, the Court also rejected a legitimate expectation challenge, holding that legitimate expectation is itself subject to a change of policy that is reviewable only on Wednesbury principles.



Tuesday, March 8, 2011

Notification of Merger Review Provisions under Competition Law

(The following post has been contributed by Rahul Singh, Assistant Professor, National Law School of India University, Bangalore (on leave) and Senior Associate, Trilegal)
The Ministry of Corporate Affairs (MCA), Government of India has recently notified the provisions for regulation of combination (commonly known as “merger review provisions”) under the Competition Act, 2002.

The Competition Act, 2002 was partially enforced on 20 May, 2009 whereby the provisions relating to anti-competitive agreements and abuse of dominant position were notified (and yet merger control provisions were not notified). The Ministry of Corporate Affairs, Government of India has now notified that sections 5, 6, 20, 29, 30 and 31, dealing with merger control, will come into force on 1 June, 2011. With the enforcement of these sections, all mergers, amalgamations and/or acquisitions falling within the thresholds indicated in section 5 of the Competition Act, 2002 (“Combination”) will require prior approval of the Competition Commission of India.

Four separate notifications relating to different aspects of merger control have been issued. The salient features of the notification are the following:
I. Effective Date:

Appointment of June 1, 2011 as the date on which sections 5, 6, 20, 29, 30 and 31 of the Competition Act, 2002 will come into force;

II. Monetary Threshold Requirements:

Enhancement, on the basis of the wholesale price index, of the value of assets and the value of turnover, by 50% for the purposes of section 5 of the Competition Act, 2002;

III. Target entity:

Exemption for an enterprise, whose control, shares, voting rights or assets are being acquired has assets of the value of not more than Rs 250 crores (USD 55 million approx) or turnover of not more than Rs 750 crores (USD 165 million approx) from the provisions of section 5 of the Competition Act, 2002 for a period of five years;

IV. Group:

Exemption for the ‘group’ exercising less than 50% of voting rights in other enterprise from the provisions of section 5 of the Competition Act, 2002 for a period of five years.
The notifications are available on MCA website. The notifications issued by MCA, however, are unsigned and undated. Hence there is a prevailing confusion about the exact legal status of the notification. The notifications have also been uploaded on CCI website.

- Rahul Singh

Friday, March 4, 2011

Smaller holding companies exempted from registration


While the August 2010 Guidelines of Core Investment Companies (“CICs”) have been discussed in detail earlier on this blog, the final notification of the Directions by the Reserve Bank of India on 5th January 2011 needs attention for a different reason. And this is to understand how Reserve Bank of India has solved – for itself and for the companies - the problem of thousands of unregistered investment/holding companies. This has done by a separate notification of the same date.

It is worth understanding this peculiar problem. It is almost an open secret that there are in all probability thousands of holding investment companies that are not registered as non-banking financial companies with the Reserve Bank of India under Section 45-IA of the Reserve Bank of India Act, 1934. Punishment for non-registration is, on conviction, a mandatory minimum 1 year imprisonment which may extend upto 5 years and fine under Section 58B(4A) of the Act.

The reasons why thousands of such investment companies have not registered are many. Numerous older (pre-1997) such companies apparently simply forgot to apply for registration and missed the deadline of July 1997 for registration. After this date, technically, as per Reserve Bank of India, they could not continue as such. Then there were some companies that took a legal stand that holding investment companies were not required to be registered. Some of these took such a stand possibly also because otherwise it would have been impossible for them to comply with the requirements of minimum net  owned fund, some of the Prudential Norms, etc. Holding companies are typically those companies that hold shares in group companies not for regular sale or dealing, but as Promoters for the long term.

Apart from the technical stand some of such companies took that they are not really “NBFCs” as defined under the Act, the fact that most of such holding companies do not accept “public deposits” as defined, RBI may have found taking action against such companies not worth, particularly since the consequential punishment is quite harsh. Further, though not widely known, Reserve Bank of India has even been giving “exemptions” on a case-to-case basis to some such companies that applied to it. Thus, there are companies that are unregistered because of default, some unregistered because of a legal stand  andsome unregistered because of exemption.

This situation has continued for several years. Recently, however, Reserve Bank of India realized that while such companies may not accept public deposits, many of them are “systemically important”. This means that they are of such a size that their actions (or defaults) can affect the financial system.  Further, while they may not accept public deposits, many of them borrow heavily from banks, etc. Thus, the latest initiative to require such companies to come forward and register as NBFCs and comply with a diluted version of the requirements relating to net owned funds, Prudential Norms, etc.

What is important and not highlighted is that, simultaneously, the Reserve Bank of India has also exempted all those holding companies that are not systemically CICs from the requirement of registration. Thus, at one stroke, all these holding companies that are having total group assets of less than Rs. 100 crores are now not required to be registered.

Some areas of concern still remain.

  1. What about the past period of “default” by such holding companies – both for systemically important CICs that come forward for registration and other CICs that are only now exempted from registration?
  2. What about those holding companies that are not systemically important but have still registered. Can they claim to be no more required to be registered and thus surrender their registration?
  3. What about those holding companies that are registered as investment companies and not as CICs? Can they apply for registration as CICs and thus get benefit of relaxed requirements of net owned funds, Prudential Norms, etc.
  4. It is the Act that lays down the type of NBFCs that require registration. Since the RBI has only issued a notification requiring such investment companies to register, and not amended the Act itself, can holding companies still take a stand that they are still not required to register?
 x-x-x

Tuesday, March 1, 2011

More on CSR in the Companies Bill

(The following post has been contributed by Satvik Varma)
It has been reported in yesterday’s Economic Times that the Ministry of Corporate Affairs is perhaps doing away with the mandatory spend of 2% on Corporate Social Responsibility (“CSR”). While details of any such changes are not available on the Ministry’s website, based on the news report, it is most likely that the Companies Bill will now only contain a provision requiring corporations to disclose to their shareholders whether they have made a 2% contribution to CSR and, if not, their reasons for not making the said contribution. Thus, while the disclosure to corporate shareholders may be made mandatory, the actual implementation of the prescribed percentage will not.

I had written on the proposed mandatory 2% spend last week and the provision as it was previously drafted was more in the nature of a tax and took away from the whole concept of CSR. Based on what has been reported, it is extremely unclear on what gets achieved by this change (rather than doing away with the whole provision) and what also remains to be seen is whether such a benign provision can help achieve the larger objective of getting corporates to accept their responsibility to society, their stakeholders and the environment in which they operate. Such provisions only make their compliance a check-the-box obligation and can in fact deter from the larger and more desirable social objectives. If nothing else, the Ministry should look into making public the list of corporate defaulters so that the customers and other stakeholders are aware of such non-compliance and can at least impose moral pressure on corporations to comply with their CSR obligations, both which are prescribed by law and those which corporations should themselves be fulfilling.

- Satvik Varma