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World’s oldest central bank hits legal roadblock in crisis fight

May 3: Sweden’s central bank may need to have some of its age-old laws changed if it’s to act on a pledge to do “whatever it takes” to save the economy. 

The Riksbank’s 352-year history gives it the distinction of being the world’s oldest central bank. But the legislation governing it has yet to catch up with the kind of policy it needs to deliver to address the crisis triggered by Covid-19, Bloomberg reported. 

Specifically, the Riksbank doesn’t have the legal right to buy bonds issued by companies, even though it’s made clear it’s ready to do so as part of a recent package of emergency measures. 

“The intention of the current Riksbank Act doesn’t allow the bank to make outright purchases of corporate bonds or other private securities on the primary or secondary markets,” said Niklas Schullerqvist, secretary to the parliamentary committee charged with overhauling the bank’s policy framework. 

So far the Stockholm-based central bank has bought 5.6 billion kronor ($568 million) of corporate commercial paper as part of an emergency quantitative-easing plan. But it’s refrained from buying corporate bonds — an important source of financing in the biggest Nordic economy — despite repeated assurances it will so. 

Schullerqvist says the Riksbank needs to consider European Union legislation on state aid as corporate bond purchases “may be considered supporting some specific parts of the economy.” 

Riksbank spokesman Tomas Lundberg said the bank’s legal team is looking into the matter, but wouldn’t comment further because “it’s an ongoing process.” 

https://www.bloomberg.com/news/articles/2020-05-03/world-s-oldest-central-bank-hits-legal-roadblock-in-crisis-fight

Falling billion-dollar deals over coronavirus spur court fights

New York, May 1: A deal is a deal, except for a growing number of companies that agreed to buy assets before the Covid-19 pandemic sent markets plunging. 

Panicked executives already have launched a handful of legal battles that could blow up billions of dollars’ worth merger and acquisition agreements. And litigators predict at least a dozen more limping deals will crash land in courts over the next few months, Bloomberg reported. 

Among the high-profile transactions that have become feuds are Mirae Asset Global Investments Co’s $5.8-billion purchase of a US luxury hotel portfolio from Anbang Insurance Group, SoftBank Group’s $3-billion acquisition of We Cos. stock, and Sycamore Partners’ $1.1-billion deal for a controlling stake in L Brands, owner of the Victoria’s Secret lingerie chain. 

“The cases are just the tip of the iceberg,” Larry Hamermesh, a University of Pennsylvania law professor who specialises in Delaware corporate law, told Bloomberg. “There’s going to be a lot more deals that just get quietly renegotiated and never wind up in court.”  

Already, half a dozen cases of virus-related challenges to transactions are before judges in Delaware Chancery Court, records show. The state is the corporate home to more than half of US public companies and more than 60% of Fortune 500 firms.  

The main reason some big deals are ending up in court is that the value of assets companies agreed to buy have plummeted since the onset of the coronavirus pandemic. 

With shutdowns of most retail businesses including stores, movie theatres and restaurants, the US economy will contract a record 37% in the second quarter and have its worst recession since World War II, Bloomberg Industries estimates. More than 26 million Americans filed unemployment claims after losing their jobs.

https://www.bloomberg.com/news/articles/2020-04-29/exiting-billion-dollar-deals-over-virus-spurs-big-court-fights

Delhi High Court stays interim relief given to Indiabulls

New Delhi, April 29: A division bench of the Delhi High Court on Wednesday stayed an interim order of a single-judge bench that had prohibited coercive action against mortgage lender Indiabulls Housing Finance Ltd (IHFL) for failing to pay its dues to non- convertible debentures (NCD) holders.

The two-judge bench comprising Justices Siddharth Mridul and Talwant Singh has now listed the case for final arguments on 4 May, The Mint reported.

“Thanks to the division bench’s order today, debt-based mutual funds should be much relieved as they will continue to be able to compel payments from their borrowers. If mutual funds remain healthy and continue to receive payments, the general public who hold units in mutual funds will have at least one less reason to worry in these troubled times and will be secured in terms of the value and liquidity of their investments,” said advocate Shankh Sengupta, a partner in law firm Trilegal, and who represented the Association of Mutual Funds in India (Amfi) in the appeal.

The interim order restraining coercive action against IHFL for its inability to repay bondholders had raised fears among mutual funds that more debtors could take the same recourse.

The Securities and Exchange Board of India (SEBI), IDBI Trusteeship Services Ltd. and Amfi on Tuesday moved the Delhi high court against the interim order.

On the last date of hearing, senior advocate Rajiv Nayar, appearing for IHFL, had relied on the central bank’s 27 March circular that gave liberty to all banks and financial institutions to allow a moratorium of three months on payment of instalments of all term loans outstanding between 1 March and 31 May, subject to the borrower making such a request.

IHFL had said that it has become impossible for the company to effect recoveries of debt owed to it by various institutions due to the regulatory measures announced by the Centre, consequent to disruption on account of the covid-19 outbreak.

Disputing the applicability of the circular, senior advocate Neeraj Malhotra, appearing for SEBI, had said that it does not affect companies’ liabilities arising from NCDs. IHFL has also been involved in a similar tussle with rating agency Icra and had taken it to court, which later reaffirmed the short-term credit rating and outlook for the company at A1+ in April. The agency, however, downgraded the long-term rating outlook for Indiabulls to negative from stable.

https://www.livemint.com/news/india/delhi-hc-stays-no-coercive-action-against-ihfl-11588153743894.html

Bombay High Court grants bail to former VC Hari Sankaran of IL&FS

Mumbai, April 29: The Bombay High Court granted bail for eight weeks to former Infrastructure Leasing & Financial Services vice-chairman Hari Sankaran, arrested for alleged irregularities at the company and its subsidiaries. The bail was granted on surety of Rs 50,000, The Economic Times reported. 

“The applicant be released on temporary bail for eight weeks in connection with a criminal complaint registered by SFIO (Serious Fraud Investigation Office) for offence punishable under Section 447 of the Companies Act, 2013, subject to furnishing of a personal bond in the sum of Rs 50,000 or cash surety of the same amount,” the court said in an order on Tuesday. 

The court set conditions for Sankaran’s bail and asked him to surrender his passport, not leave the country and not to pressure prosecution witnesses or tamper with evidence. The Serious Fraud Investigation Office (SFIO) is likely to challenge the order in the Supreme Court, people aware of the matter said. 

In a related development, the Centre also plans to contest in the apex court a Bombay High Court ruling that disallowed a government petition seeking to take action against Deloitte and KPMG-affiliate BSR & Associates, auditors of IL&FS Financial Services. 

Last week, the high court had quashed a criminal complaint filed by the SFIO against the auditors and others charged in the case by the federal agency. 

Read more at:

https://economictimes.indiatimes.com/news/politics-and-nation/bombay-high-court-grants-bail-to-former-v-c-hari-sankaran-of-ilfs/articleshow/75443013.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Delhi HC refuses relief to investor in oil future contracts against MCX, SEBI

New Delhi, April 27: The Delhi High Court on Monday refused to grant interim relief to an investor who filed a petition against Multi Commodity Exchange, its clearing corporation MCXCCL and SEBI over negative pricing of the crude contract but directed the respondents to file their replies in four weeks to the petition. 

One of the investors Akshay Aluminium Alloys LLP had approached the Delhi High Court against MCX and the capital market regulator Securities & Exchange Board of India (Sebi), The Economic Times reported. 

However, the court has now directed the exchange and the SEBI to reply within four weeks and has adjourned the case to June 24. 

Meanwhile, in a related development, a Bombay High Court judge recused himself from hearing a petition filed by Motilal Oswal Financial Services and PCS Securities in the high court against the aforesaid respondents on the same issue. 

The April contract was settled by the MCXCCL at a negative Rs 2884 a barrel, mirroring the negative $37.63 a barrel settlement price on US-based Nymex. 

The petitioners have reportedly cited the inability of MCX’s software to take a zero or negative price quote and the fact that MCX had closed at 5 pm on April 20 at a positive rate while the Nymex front-month crude contract settled later at night at a negative rate. 

Also, the MCX contract is cash-settled while Nymex settled at a negative rate because of delivery based issues. 

The exchange’s clearing corporation blocked the funds for the negative price from the long brokers’ collateral to make them pay -into the brokers representing clients on the short side. 

This resulted in brokers Motilal Oswal Financial Services and PCS Securities filing a writ petition in the Bombay High Court and the investor moving the Delhi HC against the bourse. Market regulator SEBI is a co-respondent. 

Ravichandra Hegde and Malvika Kalra, partners at the law firm Parinam Law Associates are representing the investor in Delhi High Court. 

Read more at:

https://economictimes.indiatimes.com/markets/commodities/news/investor-in-oil-future-contracts-approaches-delhi-hc-for-relief-against-mcx-sebi/articleshow/75411704.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Brokerage firm moves Delhi high court against MCX

New Delhi, April 25: A broker member of MCX, country’s largest exchange for commodity derivatives, moved the Delhi high court against the manner in which the April crude oil contract was settled by the bourse.

Prrsaar Commodities (P) Ltd moved the court in the interest of its investors against MCX challenging the negative Settlement price for crude oil for the Trades expired on April 20, The Hindustan Times reported.

MCX, which initially announced a provisional settlement price of Re 1 for its contract that ended on April 20, later calculated a price of minus Rs 2,884 per barrel, exposing brokers to a potential loss of Rs 435 crore.

Mukesh Goyal, Advocate counsel for Prrsaar Commodities, has informed that a petition in the matter is likely to be listed on April 29.

Goyal has further said that settlement of trades in negative trajectory is unjust enrichment of one segment at the cost of another.

Crude oil contracts on MCX reflect prices on the New York Mercantile Exchange (Nymex) and since Indian commodity markets closed for trading at 5pm on Monday, local traders were unable to exit their positions, while US prices plunged to minus $37.63 later in the night.

He also said that MCX is unjustified in fixing the settlement price at a rate after the close of trading session.

Even the Software of MCX itself does permit negative bidding, he added.

The lawyer further said that SEBI, the market regulator, failed to intervene.

https://www.hindustantimes.com/business-news/brokerage-firm-moves-delhi-high-court-against-mcx/story-AXkklID45tUdcVhij2JYiP.html

Delhi High Court restrains Indian Oil from encashing Punj Lloyd’s bank guarantees

New Delhi, April 24: The Delhi High Court has restrained Indian Oil Corporation Ltd. from invoking or encashing bank guarantees extended by Punj Lloyd Ltd. pertaining to work for its refinery in Haldia for one week after the national lockdown is lifted. 

This comes after Punj Lloyd’s resolution professional filed a writ petition under Article 226 of the Constitution of India for quashing of Indian Oil’s communications to Central Bank of India and IDBI Bank Ltd. for invocation of the guarantees.

 A single-judge bench of Justice C Hari Shankar said it was necessary to provide “limited relief” as the resolution professional couldn’t approach the Chennai bench of the National Company Law Tribunal due to the lockdown, Bloomberg reported. 

The court, however, noted that its order won’t affect the merits of the bank guarantees. Punj Lloyd had extended certain bank guarantees in favor of Indian Oil against a contract for the Haldia project but the state-run refiner sought to encash it after disputes arose between them last year.

NCLT Chennai stayed the invocation of certain bank guarantees in December. Courts in India have been granting relief to companies affected by the coronavirus lockdown that has stalled all but essential goods and services for 40 days. The Delhi High Court recently restrained Yes Bank Ltd., and Punjab and Sind Bank Ltd. from classifying certain loan accounts as non-performing assets. 

Similarly, the Bombay High Court provided relief to two real estate companies by restraining ICICI Bank on similar grounds. It also restrained debenture trustees from selling shares of Future Retail Ltd. and MEP Infrastructure Developers Ltd. after the stocks tumbled tracking the worst selloff in Indian equities in more than a decade.

What Punj Lloyd Said The counsel for Punj Lloyd argued that: The company wants to approach the Chennai bench of NCLT for seeking injunction against invocation of bank guarantees. However, NCLT benches won’t commence hearing till the lockdown is lifted. The bank guarantees are set to expire in September and Indian Oil has an option to raise claims against them till the end of next year. 

The NCLT had already stayed invocation of some other guarantees by Indian Oil. Indian Oil’s counsel argued that the company has already challenged NCLT’s interim stay on the grounds of jurisdiction. Any relief by the high court must not affect the merits of the case, it had contended.

https://www.bloombergquint.com/amp/business/delhi-high-court-restrains-indian-oil-from-encashing-punj-lloyds-bank-guarantees

Edison Partners invests USD 10 million in legal tech platform Bodhala

April 24: US-based Bodhala, a data-intelligence and legal technology platform, has secured USD10 million in an investment round led by Edison Partners, a Princeton, NJ-based growth capital firm. 

The company will use the funds for product expansion and sales and market acceleration as it transforms and modernises the purchasing of outside counsel services.

Bodhala applies data science, machine learning and AI-driven insights to help companies analyse, interpret and optimise legal spending, UK’s Private Equity Wire reported. 

The company experienced 300-pls per cent growth in both revenue and headcount in 2019 and is on pace to do the same in 2020. Bodhala also saw significant client growth in the last 12 months across each of its key verticals including financial services, healthcare services, insurance, energy and private equity.

“Analysts estimate AI-driven legal technology will be a USD37 billion business by 2026, and the Bodhala SaaS platform delivers the insights general counsel and claims officers need to make meaningful decisions about their budgets, while still producing equal or better legal outcomes,” said Daniel Herscovici, partner, Edison Partners, who led the investment. 

Herscovici who will join Bodhala’s board of directors.

“Bodhala is at the centre of a rapidly changing legal system marked by the emergence of legal operations as a profession, the changing economic models of law firms, and the rise of new technologies. Relationships are no longer the sole proxy for evaluating the value that a law firm brings to its clients. We’re creating a clear win for everyone involved in our modern legal system, from corporate legal departments to law firms to alternative service providers,” said Raj Goyle, co-founder and CEO of Bodhala.

https://www.privateequitywire.co.uk/2020/04/24/285019/edison-partners-makes-usd10m-investment-bodhala

Corporate America seeks legal protection for post lockdown situation

Washington, April 21: Major U.S. business lobbying groups are asking Congress to pass measures that would protect companies, large and small, from coronavirus-related lawsuits when states start to lift pandemic restrictions and businesses begin to reopen.

Their concerns have the ears of congressional Republicans, though it is far from clear if the idea has the Democratic support it would need to pass in the Democratic-controlled House of Representatives, Reuters reported.

The U.S. Chamber of Commerce, National Association of Manufacturers (NAM) and National Federation of Independent Business (NFIB) are seeking temporary, legal and regulatory safe harbour legislation to curb liabilities for employers who follow official health and safety guidelines. The Business Roundtable, which represents corporate chief executives, is also exploring ways to limit coronavirus liabilities.

Businesses want to make sure that they are not held liable for policy decisions by government officials, should employees or customers contract COVID-19 once operations resume. They also want protection from litigation that could result from coronavirus-related disruptions to issues like wages and hours, leave and travel.

“These are practical things to reassure businesses that they can confidently move to implement a reopening,” Neil Bradley, the U.S. Chamber of Commerce chief policy officer, said in an interview.

The debate over when to ease restrictions intended to slow the spread of the COVID-19 respiratory disease, which has killed more than 40,000 Americans, has recently entered a more politically charged phase with Republican President Donald Trump voicing support for scattered street protests aimed at ending the restrictions.

Public health officials warn that doing so prematurely risks sending infection rates soaring and further taxing an overwhelmed healthcare system.

The idea of protecting businesses from being sued by workers or customers has already found support in some quarters on Capitol Hill.

https://www.reuters.com/article/us-health-coronavirus-usa-liability/corporate-america-seeks-legal-protection-for-when-coronavirus-lockdowns-lift-idUSKCN223179

HC order on Indiabulls NCD dues puts Mutual Funds in tight spot

April 21: An order of the Delhi high court obtained by private sector lender Indiabulls Housing Finance against market regulator SEBI has put mutual fund houses in a tight spot. The HC has granted Indiabulls, a non-banking financial company (NBFC), the permission to not pay its debenture holders including fund houses interest and principal as long as the RBI allows banks and NBFCs to offer moratorium to their borrowers. Fund managers now fear that other NBFCs may take the same route and not pay MFs for the next few weeks, The Times of India reported.

This is the first time in India that a situation has arisen where fund houses may not be in a position to meet their payment obligations to their investors if they don’t get money from the issuers of debentures, that is NBFCs. “A situation like this has never happened. Looks like more NBFCs will take this same route and not pay MFs on the NCDs they hold, and the MFs will fail to pay to investors,” a top fund manager said. “One of the ways out could be for the RBI to step in like in 2008 and 2013 and guarantee a line of credit to the fund houses.”

So far, the RBI has not spoken about providing a line of credit to the fund houses. SEBI is also working to find a solution to the imbroglio, sources said. While the RBI has allowed banks to provide a moratorium to their borrowers, the Indian Banks Association specifically excluded NBFCs. A meeting among lenders on Saturday was inconclusive with banks deciding to approach the RBI. 

Sources in credit rating agencies said that with the court order, they might have to suspend their rating for Indiabulls or they might inform their investors that given the current scenario ratings may no longer be relevant.

According to reports, Edelweiss Financial Services has also moved the Bombay High Court to restrain rating agencies from revising its double-A rating during the lockdown period. Sources said the company wants more time to communicate its plans to the rating agency.

https://timesofindia.indiatimes.com/business/india-business/hc-order-on-indiabulls-ncd-dues-puts-mfs-in-tight-spot/articleshow/75260711.cms

IL&FS case: Bombay HC dismisses MCA plea to ban Deloitte and KPMG for five years

Mumbai, April 21: Granting relief to audit firms BSR and Associates, and Deloitte Haskins and Sells, both former auditors of IL&FS Financial Services, the Bombay High Court on Tuesday quashed all prosecution against the two firms that had been pending before the National Company Law Tribunal and a special court in the city, over alleged financial irregularities.

BSR, part of KPMG India, and Deloitte had moved HC last year challenging the validity of the Union government’s plea before the NCLT seeking their removal as auditors of IL&FS, PTI reported.

Such removal under section 140 (5) of the Companies Act would also bring along a ban on the audit firms for five years.

The Union Ministry of Corporate Affairs had sought such removal and also initiated criminal proceedings against the firms for their role in alleged financial irregularities at the now bankrupt IL&FS Group.

In August last year, the NCLT had found merit in the Union government’s plea, and subsequently approved the proposed removal of both firms.

The firms however, approached HC arguing that they had already resigned as auditors of IL&FS much before the Ministry sought their removal. They had, therefore, challenged the constitutional validity of section 140 (5) of the Act.

The section deals with removal and resignation of auditors and imposes a five year ban on an auditing firm that is proven to have “acted in a fraudulent manner”, or to have “abetted or colluded in any fraud”.

On Tuesday, a bench of Chief Justice BP Dharmadhikari and Justice NR Borkar quashed the prosecution of both firms before the NCLT.

While the bench upheld the constitutional validity of section 140 (5), it held that the provisions of the section did not apply to former auditors who had resigned.

The bench also quashed a criminal complaint filed against the two firms by Serious Fraud Investigation Office (SFIO), a Central agency, in the above case of financial irregularities.

The bench said the SFIO complaint filed before a special court was “bad in law”.

In June last year, the Ministry of Corporate Affairs had moved the NCLT against BSR and some of the then external auditors of IL&FS alleging professional misconduct.

At the time, it had also directed the SFIO to initiate probe and disciplinary action against such audit firms.

The SFIO had subsequently claimed BSR and some other audit firms had acted in breach of auditing standards and that they had failed to detect financial inconsistencies at IL&FS.

Advocate Sujay Kantawala, who was a part of the legal team for BSR, said on Tuesday, the Union government sought a stay for eight weeks on HC’s order quashing such prosecution.

While the counsels for BSR and Deloitte opposed the government’s request, HC granted such stay on its own order.

Kantwala stated that HC granted such stay saying that denying time to the government for an appeal would not be “fair in todays troubled times”.

He added that Tuesday’s order quashing prosecution would have major implications on the corporate world and would act as a precedent in preventing “harassment of innocent firms”.

https://www.livemint.com/companies/news/il-fs-case-bombay-hc-dismisses-mca-plea-to-ban-deloitte-and-kpmg-for-five-years-11587469080688.html