Page 18 - Banking Finance January 2018

LEGAL UPDATE

Insolvency and Bankruptcy Code ordinance may affect Trader jailed for 5 yrs for

clean bidders too rigging stock
The amendments to the Insolvency and Bankruptcy Code aimed at preventing In one of the longest term awarded
company founders suspected of wrongdoing for violation
from regaining control of their assets may shut of Sebi laws,
the doors on clean bidders too, stakeholders a special
say. The executive order bars not only wilful de- court sen-
faulters, but also several other categories of tenced a
potential bidders, such as loan guarantors, stock trader to five years' rigorous
those with loans classified as non-performing imprisonment for not paying penal-
assets for at least a year and connected entities. ties imposed for defrauding investors
"While the ordinance lays down ineligibility criteria, it does not deal with a situ- by rigging prices of stocks.
ation where such criteria are already a subject matter of challenge before the Hearing cases relating to Sebi mat-
concerned courts. Would such applicant still be ineligible or otherwise?" said ters, special judge M G Deshpande
Diwakar Maheshwari, partner, Khaitan and Co. found Ashok Bhagat guilty in two
separate cases involving stock price
Indian judge wins after 'Brexit' manipulation. Bhagat was also sen-
India secured its place in the International Court of Justice after Britain with- tenced to four years of rigorous im-
drew its candidate ahead of a second run-off prisonment in the second case of
poll at the UN, ending a stand-off that again stock price manipulation. In both the
threw the spotlight on privileges the P5 coun- cases, he failed to pay fines, aggre-
tries enjoyed in the Security Council. The gating Rs 87 lakh, to Sebi. The case
Narendra Modi government led the celebra- was investigated in early 2005. This
tions here, billing the re-election of Justice is the longest term given in a case
Dalveer Bhandari as a sign of India's growing clout in the comity of nations. relating to Sebi laws that deal with
stock price manipulation.
The verdict was seen as evidence of the UK's "shrivelling" presence on the world
stage and a result of Brexit. This will be the first time since 1946 that the UK will Sebi investigations found that Bhagat
not have a judge in the world court. The UK's permanent representative at the was linked to the companies - Em-
UN, Matthew Rycroft, announced the decision to withdraw its candidate, Sir power Industries and Highland Indus-
Christopher Greenwood, from the contest, citing the "close relationship" be- tries - whose stocks were manipu-
tween London and New Delhi and acknowledging that further voting was un- lated. In the first instance involving
likely to break the deadlock. Empower Industries, in 2013 the ad-
judicating authority had imposed a fine
RERA ACT is applicable to ongoing projects, says of Rs 82 lakh. For failing to shell out
this amount, the judge handed him
Bombay High Court the five-year sentence and also fined
The Bombay high court has upheld the constitutional validity of the Real Estate him Rs 1.02 crore. Out of this amount,
(Regulation and Development) Act and its applicability to ongoing projects across Rs 92.25 lakh has been awarded as
states. The law intends to make homebuying a transparent and speedy transac- compensation to Sebi. In default of the
tion with powers of redressal. The judgment, has offered a breather to builders fine, he will undergo simple imprison-
too. It has expanded powers under Rera to grant more time in exceptional cases ment of one more year.
to a builder to complete a project. The additional time is meant to be granted In the second case, Bhagat was origi-
in compelling circumstances on a case-by-case basis. A division bench of Justices nally fined Rs 5 lakh. Besides the sen-
Naresh Patil and R G Ketkar gave separate but concurrent findings. The exten- tence of four years, the court addi-
sion would go beyond the statutory one-year extension after the deadline for tionally fined him Rs 6.25 lakh, of
completion, which the Act requires the project's promoter to mention during which Rs 5.62 lakh will be awarded
registration. to Sebi as compensation.

18 | 2018 | JANUARY | BANKING FINANCE

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