Insolvency and Bankruptcy Code changes likely to be prospective
Changes made to the Insolvency and Bankruptcy Code (IBC) based on suggestions by a review panel are likely to be prospective and will not apply to cases already undergoing resolution, said a senior government official. This will mean that ongoing cases in which the eligibility of bidders to participate in resolution plans has come up may not benefit from the changes under consideration. The 14-member committee reviewing the law is expected to finalize its recommendations by the end of the week, said the official cited above. “There are still some issues which need to be resolved,” he said. “We are in the process of drafting the changes to remove any ambiguities.”
Sebi may impose trading restrictions on shares of insolvent companies
The Securities and Exchange Board of India (Sebi) may impose trading restrictions on shares of companies that are undergoing insolvency proceedings. The move, which is also a demand by industry players, is aimed at reducing volatility in stock prices and curbing manipulation or misuse of price-sensitive information. Sources said the market regulator would lay down a compliance framework for listed companies undergoing insolvency resolution. The announcement will likely be made at Sebi’s board meeting next week. The Sebi board may also announce more checks and balances on algorithmic (algo) trading, reduction of mutual fund costs and changes in buyback and takeover regulations.
PNB blames concurrent auditor for not flagging off SWIFT transactions
State-owned Punjab National Bank has blamed the concurrent auditor at its Brady House branch in Mumbai for not detecting the Rs 129-billion scam related to fraudulent letters of undertaking (LoUs) issued to the Nirav Modi and Mehul Choksi groups of companies. In its submission to investigative agencies and the government, PNB said LoUs were fraudulently issued for seven years, transmitting through SWIFT, an international messaging system, on a standalone basis. “The reconciliation of SWIFT messages with the trade module of the core banking system was not followed and the concurrent auditor did not point out this irregularity,” PNB informed the government.
Changes to IBC: Homebuyers to get financial creditor tag
Worried homebuyers waiting for the possession of their flats could soon be granted the status of financial creditors like banks and accorded similar benefits, in case their realty firm goes through insolvency proceedings, sources told FE. A 14-member panel set up to review the Insolvency and Bankruptcy Code (IBC) will likely recommend such an amendment to the IBC. This means, in case of liquidation of a stressed real estate firm, the homebuyers will be third in the preference order to get proceeds — after the clearance of the cost of resolution and workers’ dues. Any such move will enshrine the rights of home buyers in the IBC — which, originally, didn’t explicitly recognize such a category of creditors.
Fraud at listed firms: Sebi to rein in erring auditors, values
Regulator Sebi is considering a new set of norms for auditors and other third-party fiduciaries in the securities market under which defaulters will face stringent penal actions, including a ban on issuance of the audit or valuation reports and disgorgement of unlawful gains and their fees. The proposed move assumes significance as the role of auditors and valuers has come under scanner in a number of high-profile cases such as the Satyam and Kingfisher frauds, as also the PNB scam, WhatsApp leak and the Fortis matter in the recent past.
SEBI board to take up debt default disclosure
A phased rollout of corporate governance norms suggested by the Uday Kotak committee, the disclosure of debt default by listed companies and structuring of a pension scheme of its employees are on top of the agenda for the SEBI board meeting on March 28. In the wake of the PNB loan scam and subsequent instances of companies trying to delay default disclosure, SEBI is considering a proposal to force corporate borrowers to report all defaults above ₹5 crore if repayment is delayed by over 30 days, two people aware of the matter said. In August, SEBI had made it mandatory for companies to disclose any instance of a default on the payment of interest or repayment of principal to banks or financial institutions within a day of the default.
Telcos get notices on inflated input credit claims under GST
Telecom operators including Bharti Airtel Vodafone India, Idea Cellular and Reliance Jio Infocomm have been served notices for exaggerated credit claims under the Goods and Services Tax, said two people familiar with the development. The indirect tax department has issued notices to all the major telecom companies, including tower companies, for claiming additional transitional credit for capital expenditure incurred under GST. The companies also got separate notices for adding education, Swachh Bharat and Krishi Kalyan cess to their transitional credit balances.
Another bank fraud surfaces, this time involving Kanishk Gold
Close on the heels of the Rs12,636 crore PNB fraud case, the Central Bureau of Investigation (CBI) has unearthed another bank fraud to the tune of Rs824.15 crore, involving Chennai-based jewellery chain Kanishk Gold Pvt. Ltd. On 25 January—just four days before PNB filed a complaint with the agency against jewellers Nirav Modi and Mehul Choksi—a consortium of 14 banks, led by the State Bank of India (SBI), filed a complaint with the agency. SBI was the first to declare the Kanishk Gold account fraudulent to the Reserve Bank of India (RBI) in November 2017, having extended loans of Rs215 crore to the jewellery chain.
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