9911796707
TMI Blog2017 (3) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... ed have failed to ensure that true and adequate material disclosures were made in the Red Herring Prospectus and thus, the appellants have violated various provisions contained in the SEBI (Issue of Capital and Disclosure requirements) Regulations, 2009 ("ICDR Regulations" for short) and the provisions contained in the SEBI (Merchant Bankers) Regulations, 1992 ("the Merchant Banker Regulations" for short). By the said order, the appellants are called upon to pay the aforesaid monetary penalty of Rs. 1 crore jointly and severally within the time stipulated therein. 2. Facts relevant to the present appeal are as follows: a) Credit Analysis & Research Ltd. ("CARE" for short) is a company engaged in the financial services sector. All the six appellants were appointed by CARE as the Book Running Lead Managers ("BRLM" for short) for the Initial Public Offer ("IPO" for short) for sale of shares of CARE through an offer for sale. b) On 30th September, 2011 Draft Red Herring Prospectus (DRHP) of CARE was filed with SEBI for selling 71,99,700 equity shares of CARE through the IPO, having face value of Rs. 10 each at a price to be determined on the basis of book building process prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in Bangladesh and Pakistan) under the Foreign Direct Investment Scheme (FDI Scheme) Schedule 1 5(2) Investments by registered Foreign Institutional Investors ('FIIs') under the Portfolio Investment Scheme (PIS Scheme) Schedule 2 5(3)(i) Investments by Non Resident Indians ('NRIs') in shares and debentures of an Indian Company under Portfolio Investment Scheme (PIS Scheme) Schedule 3 5(3)(ii) Investments by NRIs in shares and debentures of an Indian Company on non-repatriation basis other than under PIS Scheme Schedule 4 5(4) Investments in securities other than shares and debentures of an Indian Company by NRIs or registered FIIs or QFIs or any other person resident outside India included in Schedule 5 Schedule 5 5(5) Investments by registered Foreign Venture Capital Investors (FVCI) Schedule 6 5(6) Trades of Registered FIIs in exchange traded derivative contracts approved by RBI/ SEBI to be subject to limits and margin requirements prescribed by RBI/ SEBI, as well as stipulations regarding collateral securities as directed by RBI from time to time 5(7) Investment by NRIs in exchange traded derivative contracts approved by SEBI from time to time out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... italization norms of bringing foreign capital upfront set out in Annexure B to Schedule 1 is not to be found in any other Schedules of the FEMA Regulations. Thus, the minimum capitalization norms set out in Annexure B to Schedule 1 of the FEMA Regulations apply only when investments are made by non-resident investors covered under Schedule 1 and the said norms do not apply to the non-resident investors covered under other Schedules of FEMA Regulations. i) CARE in its DRHP filed on 30.09.2011, proposed to offer its shares through the IPO to residents and to eligible non-residents covered under Schedule 1 and also to non-residents covered under various other Schedules of FEMA Regulations. Thus, as per the DRHP, CARE would have been required to comply with the minimum capitalization norms only in respect of investments by non-residents covered under Schedule 1 of the FEMA Regulations. j) Since CARE wanted its offer price to be discovered through the book building process prescribed under the ICDR Regulations, CARE wrote a letter to RBI on 19.10.2011 seeking its approval for sale of IPO shares at a price determined through the book building process instead of determining the offer pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following categories viz:- i) Resident investors. ii) Foreign institutional Investors ("FIIs" for short) and sub accounts registered with SEBI and investing in the offer under the portfolio investment scheme in accordance with regulation 5(2) and Schedule 2 of FEMA Regulations. iii) Non-resident Indians investing in the offer on non- repatriation basis under regulation 5(3)(ii) and Schedule 4 of the FEMA Regulations. iv) Qualified Foreign Investors ("QFIs" for short) investing in the offer in accordance with the provisions of the Master Circular on Foreign Investment in India dated 02.07.2012 and Schedule 8 of FEMA Regulations. It was also emphasized in the said letter that as the minimum capitalization norm set out in Clause 6.2.24 of the Consolidated FDI Policy dated 10.04.2012 is applicable only in case of foreign direct investment by non-residents covered under regulation 5(1) read with Schedule 1 of FEMA Regulations, the offer of CARE is being restricted to the FIIs covered under Schedule 2, NRIs covered under Schedule 4 and QFIs covered under Schedule 8 of the FEMA Regulations, so that there is no question of complying with the minimum capitalization norms in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the minimum capitalization norms in respect of investments made by non-residents covered under Schedule 2 & 8 and requested RBI to grant nine months time to comply with the minimum capitalization norms as required in the letter of RBI dated 06.12.2012. By its letter dated 10.12.2012 RBI gave six months time to CARE to comply with the minimum capitalization norms. v) On 11.12.2012, prior to the closer of subscription by retail investors, QIBs and non- institutional investors CARE published its addendum dated 10.12.2012 in the relevant newspapers. In the said addendum all the events that took place from time to time and the circumstances in which CARE agreed to comply with the minimum capitalization norms were set out. On 11.12.2012 at 3:00 p.m. CARE IPO closed for subscription by retail investors, QIBs and noninstitutional investors. It is not in dispute that CARE has complied with the minimum capitalization norms in relation to investments by non-resident investors covered under Schedule 2 & 8, within the time stipulated by RBI. w) On 07.10.2013 SEBI issued a show cause notice alleging that appellants as BRLMs to the IPO of CARE failed to ensure that full and complete disclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investors covered under Schedule 1 and since the non-resident investors covered under Schedule 1 were not permitted to participate in the offer of CARE, directions contained in the letter of RBI dated 26.09.2012 regarding compliance of the minimum capitalization norms was not a material information for the investors permitted to participate in the offer of CARE and therefore nondisclosure of the said information in the RHP cannot be said to be in violation of the provisions contained in the ICDR Regulations and Merchant Bankers Regulations. c) Whether the AO is justified in holding that failure to disclose in the RHP, the information relating to strict compliance of minimum capitalization norms referred to in the letter of RBI dated 26.09.2012 and the representation made by CARE to RBI on 05.10.2012 amounts to suppressing material facts in the RHP of CARE and an attempt to mislead the investors into believing that RBI had unconditionally exempted eligible non-resident investors from the requirement of obtaining NOC from their respective regulators for participating in the offer of CARE. d) Whether the AO is justified in holding that failure on part of appellants to disclose in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticipating in the offer from the requirement of obtaining NOC from their regulators subject to strict compliance of minimum capitalization norms applicable to NBFCs was a material information required to be disclosed in the RHP so as enable the investors permitted to participate in the offer to take an informed investment decision. 8. At the outset, it is relevant to note that under the FEMA Regulations, investments by non-resident investors in NBFCs engaged in non fund based activities (such as CARE) is subject to compliance of minimum capitalization norms only when investments are made under the route specified in Schedule 1 of the FEMA Regulations. Non residents investing through the routes specified in Schedule 2 to 8 of the FEMA Regulations are not required to comply with the minimum capitalization norms. In other words, under the FEMA Regulations minimum capitalization norms have to be complied by non-resident investors only when the investments are made under the route specified in Schedule 1 and the said norms are not applicable when investments are made under the routes specified in Schedule 2 to 8 of the FEMA Regulations. 9. It is not in dispute that CARE in its DRHP fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l strictly comply with the minimum capitalization norms. In the present case, CARE in its RHP has not permitted nonresident investors covered under Schedule 1 to participate in the offer. In fact, CARE permitted non-resident investors covered under Schedule 2, 4 & 8, to participate in the offer, to whom the minimum capitalization norms were not applicable. Since the exemption granted by RBI on 26.09.2012 was subject to strict compliance of minimum capitalization norms applicable to NBFCs, CARE decided not to permit the nonresident investors to whom the said norm were applicable. Thus, the minimum capitalization norms being not applicable to the non-resident investors permitted to participate in the offer, CARE was justified in disclosing that RBI by its letter dated 26.09.2012 has exempted the nonresident investors permitted to participate in the offer from the requirement of obtaining NOC from their regulators. In such a case, it cannot be said that half truth has been disclosed in the RHP, because, in the RHP what was relevant for the investors permitted to participate in the offer alone was disclosed. Since compliance of minimum capitalization norms were not applicable to the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and consequently no question of disclosing the said norms in the RHP. Therefore, in the facts of present case, the AO is not justified in holding that non-disclosure of the information relating to compliance of minimum capitalization norms constitutes failure to disclose material information for the investors permitted to participate in the offer for taking informed investment decision and that such failure is in violation of ICDR Regulations and Merchant Bankers Regulations. 13. It is relevant to note that in the RHP dated 24.11.2012 CARE had disclosed that RBI by its letter dated 26.09.2012 had granted exemption from the requirement of obtaining NOCs from the regulators of the nonresident investors to whom the offer was made in the RHP and further offered inspection of the said letter dated 26.09.2012. Without recording a finding in the impugned order, as to how the condition imposed in the letter of RBI dated 26.09.2012 regarding compliance of the minimum capitalization norms applicable to NBFCs was a material information for the investors permitted to participate in the offer to take an informed investment decision, the AO could not have held that CARE has failed to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to non-resident investors covered under Schedule 1, CARE has decided not to permit non-resident investors covered under Schedule 1 to participate in the offer, so that there was no question of complying with the minimum capitalization norms. In fact, in the RHP dated 24.11.2012, CARE has not permitted non-resident investors covered under Schedule 1 to participate in the offer. Thus, what was stated in the letter dated 0 5.10.2012 was actually reflected in the RHP. Therefore, the AO is not justified in holding that the appellants have failed to disclose minimum capitalization norms referred to the letter of RBI dated 26.09.2012 and the letter dated 05.10.2012 addressed by CARE to RBI. 16. Fact that RBI by its letter dated 06.12.2012 directed CARE to comply with the minimum capitalization norms in relation to investments by non-residents covered under Schedule 2 & 8 of the FEMA Regulations could not be a ground for AO to infer that RBI in its earlier letter dated 26.09.2012 had required CARE to comply with the minimum capitalization norms in relation to investments by non-residents covered under Schedule 2 & 8. 17. As noted earlier, there is nothing on record to suggest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, findings recorded by AO that the appellants, in the RHP of CARE have suppressed material facts contained in the letter of RBI dated 26.09.2012 cannot be accepted. 18. Appellants are justified in contending that in view of the decision of RBI in case of National Buildings Construction Corporation Limited and DLF Limited dated 06.09.2011 and 13.04.2006 respectively, the appellants had reason to believe that minimum capitalization norms are applicable only in relation to investments by non-resident investors covered under Schedule 1 of the FEMA Regulations. In those two decisions RBI had categorically held that minimum capitalization norms are not applicable to non-resident investors covered under Schedule 2 of the FEMA Regulations. The views expressed by RBI in the said two decisions could not be said to be the views applicable only to those two cases, because, the views expressed by RBI in the said two decisions were with reference to the provisions of law then prevailing and hence those views would apply to all cases till the law is amended. Admittedly, the law has not been amended till date. Therefore, when the consistent view of RBI was that minimum capitalization norms are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs covered under Schedule 2 & 8 of FEMA Regulations. Therefore, the AO is not justified in holding that the disclosures made in the addendum, could have been made in the RHP dated 24.11.2012. 20. Strong reliance was placed by counsel for SEBI on the letter of RBI dated 21.05.2014. It appears that the said letter was addressed by RBI pursuant to the clarifications sought by the AO during the adjudication proceedings. In the aforesaid letter of RBI dated 21.05.2014 it is merely recorded that in terms of RBI Circular No. 53 dated 17.12.2003, acquisition of shares by FIIs (non-resident investors covered under Schedule 2) under the Portfolio Investment Scheme in the circumstances set out therein shall be treated as investment under the FDI Policy and all the FDI conditionalities including minimum capitalization norms are made applicable. The said letter does not record that under the FEMA Regulation or under any circular, notification or press release issued by RBI perusal of the RBI, the minimum capitalization norms applicable to non-resident investors covered under Schedule 1 have been made applicable to non-resident investors covered under Schedule 2 & 8 of FEMA Regulations. In fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond any shadow of doubt that there is no provision in law by which minimum capitalization norms have been made applicable to non-resident investors covered under Schedule 2 & 8 and for the first time RBI by its letter dated 06.12.2012 sought to apply minimum capitalization norms to investments made by non-resident investors covered under Schedule 2 & 8 of the FEMA Regulations. In these circumstances, merely because CARE in the facts of the present case agreed to apply minimum capitalization norms to nonresident investors covered under Schedule 2 & 8 as directed by RBI vide letter dated 06.12.2012, it cannot be inferred that RBI vide its letter dated 26.09.2012 had directed CARE to apply minimum capitalization norms to non-resident investors covered under Schedule 2 & 8 of FEMA Regulations and consequently hold that non-disclosure of the above information was in violation of ICDR Regulations and Merchant Bankers Regulations. It is equally important to note, that in the letter dated 06.12.2012 it is not stated that RBI in its earlier letter dated 26.09.2012 had called upon CARE to apply the minimum capitalization norms to non-resident investors covered under Schedule 2 & 8 of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs permitted to participate in the offer (i.e. non-resident investors covered under Schedule 2, 4 & 8) from the requirement of obtaining NOC from their regulators cannot be faulted. d) Fact that CARE in its RHP did not disclose that the exemption under the letter of RBI dated 26.09.2012 was subject to compliance of minimum capitalization norms applicable to NBFCs cannot be a ground to hold that CARE has suppressed material information in the RHP, because, the said condition was not applicable to the non-resident investors permitted to participate in the offer of CARE and consequently the said condition was not a material information for the investors permitted to participate in the offer to take an informed investment decision. In other words, non-disclosure of an information which is not at all material for the investors permitted to participate into offer to take an informed investment decision would not amount to suppressing material information in the RHP. e) Object of disclosure provisions contained in the regulations framed by SEBI is to ensure that the investors permitted to participate in the offer get true and adequate information for taking an informed investment decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investors covered under Schedule 2 & 8 of the FEMA Regulations. 23. Accordingly, in the facts of present case, decision of the AO that disclosing the letter of RBI dated 26.09.2012 in the RHP, but not disclosing in the RHP that RBI by the said letter dated 26.09.2012 had sought strict compliance of minimum capitalization norms applicable to NBFCs amounts to suppressing material information in the RHP and thus violative of the provisions contained in the ICDR Regulations and Merchant Bankers Regulations cannot be sustained, because, minimum capitalization norms were not applicable to the investors permitted to participate in the offer of CARE and the said norms had no bearing on the investors permitted to participate in the offer of CARE to take an informed investment decision. In other words, in the facts of present case, no fault can be found with CARE for not disclosing the norms which were not applicable to the investors to whom the offer was made in the RHP dated 24.11.2012. Fact that subsequent to the RHP dated 24.11.2012, RBI by its letter dated 06.12.2012 directed CARE to apply minimum capitalization norms to non-resident investors covered under Schedule 2 & 8 and CARE in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule VI, at the time of registering the prospectus with the Registrar of the Companies." Manner of disclosures in the offer document "57 (1) The offer document shall contain all material disclosures which are true and adequate so as to enable the applicants to take an informed investment decision. (2) Without prejudice to the generality of sub-regulation (1): (a) the red-herring prospectus, shelf prospectus and prospectus shall contain : (i) the disclosures specified in Schedule Ii of the Companies Act, 1956; and (ii) the disclosures specified in Part A of Schedule VIII, subject to the provisions of Parts B and C thereof." Due diligence "64 (1) the lead merchant bankers shall exercise due diligence and satisfy himself about all the aspects of the issue including the veracity and adequacy of disclosure in the offer documents." Regulation 13 of the Merchant Bankers Regulations Code of conduct. "Every merchant banker shall abide by the Code of Conduct as specified in Schedule III. Read with the following clauses: Clause 1- A merchant banker shall make all efforts to protect the interests of investors. Clause 4- A merchant banker shall at all time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn individual), registered with the Board (Regulation 2(1)(zd)(ii)). 6. Although Part A of Schedule VIII captures what comprises of disclosures, there is no exact definition of "material" in the ICDR Regulations. The Black's Law Dictionary (Tenth Edition) defines 'Material' inter alia as 'Of such a nature that knowledge of the item would affect a person's decision making; significant; essential.' Therefore, it needs to be noted that the word 'material' means 'important'. However, purely by virtue of being important, the information may not per se be complete in all respects. Regulation 57 of the ICDR distinguishes between material disclosure on one hand, and true and adequate information in an attempt to strike a balance between information on the other, which is important and complete. From an investor's standpoint, an RHP is the source of all information required in order to make an investment decision. Consequently, investors expect real facts to be mentioned in the RHP in order to assess the situation before putting their money in the market. Hence, disclosures in the RHP should be based on actual facts at the time of the issue and not on speculation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required under erstwhile Regulation 10(A)(c)(ii) of the FEMA Regulations since CARE, the issuer company, was a company engaged in the financial services sector. C. Circular No. 43 dated November 4, 2011 was issued by RBI stating that transfer of shares from an Indian resident to a non-resident investor will not require RBI's approval if the following conditions were satisfied: a NOCs to be obtained from the regulators of the company in which investment was sought to be made, along with NOCs from regulators of the transferor and transferee of shares; and b Requirements under the FDI Policy and FEMA Regulations to be met, including the Minimum Capitalization Norm (MCN). D. The RBI, while returning the first application dated October 19, 2011 without approving or disapproving the proposed investment structure, vide letter dated December 2, 2011 asked CARE to take a look at its application in light of the abovementioned Circular dated November 4, 2011. E. After consultations with the Appellants, CARE's Letter dated May 15, 2012 undertook to the RBI that the IPO would indeed adhere to the FDI Policy and the FEMA Regulations as required by law. In addition, exemption was sought fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations and supposedly would not attract MCN. J. In this background, the RHP dated November 27, 2012 was then filed with SEBI by the Appellants on behalf of CARE. The RHP mentioned on page 228, as part of disclosures regarding "Government and Other Approvals", that "RBI by letter dated 26th September 2012 exempted eligible non-residents, in their capacity as transferee entities, from the requirement to obtain a no-objection certificate from their respective regulators in relation to participating in the IPO". However, the conditions on the basis of which the said exemption was granted were conspicuously absent. K. The RHP also listed letter dated September 26, 2012 under the head "Material Contracts and Documents for Inspection". L. CARE's Letter dated October 5, 2012, unilaterally deciding that the MCN did not apply to its proposed IPO, was not disclosed anywhere in the RHP. M. But, the RBI vide letter dated December 6, 2012 instructed CARE once again to comply with the MCN of 0.5 million dollars upfront investment by FIIs and QFIs. The IPO opened for anchor investors on December 6, 2012 itself. N. On December 7, 2012, CARE wrote to RBI stating that on the very same day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criteria which should weigh in the minds of BRLMs when it comes to actual disclosure of such information by BRLMs in the offer documents. The company concerned (in this case CARE), in fact, heavily relies upon the knowledge, experience and the expertise of the BRLMs in this regard. 13. In respect of the instant appeal, it is a fact, as stated above, that the RHP, on page 228, did consider it important to disclose RBI's letter dated September 26, 2012 where exemption was granted to foreign investors from seeking NOCs from their regulators. It, thus, becomes evident that the exemption which was a crucial development in itself as it was in favour of CARE was disclosed, and the MCN condition on which the exemption was based, also being a mandatory requirement which was sought to be circumvented vide letter dated October 5, 2012, was not specifically disclosed. I fail to understand how information regarding a certain exemption from a regulator is considered material enough for disclosure purposes, but the nonnegotiable condition on which that very exemption is based is not considered material enough to be disclosed. The Appellants' argument that by listing RBI's letter dated September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onduct of a responsible and diligent merchant banker. Therefore, I agree with the findings of the Ld. AO that letter dated October 5, 2012 reflected the level of compliance, or the lack thereof in this case, with a strict order of an expert agency such as the RBI. The following paragraphs of the Impugned Order being relevant are reproduced hereinbelow: "1.1 It is observed from the above that though the exemption granted by RBI vide its letter dated September 26, 2014 to eligible Non-Residents investors, in their capacity as transferee entities, from the requirement of obtaining a NOC from their respective regulators in relation to participating in the Offer was disclosed in the RHP dated November 24, 2012 under the para on 'Government and Other Approvals', the conditions based on which the said exemption was granted by RBI and the status of its compliance were not disclosed in the RHP. Further, the factual status of filing of reply dated October 5, 2012 by CARE with RBI, whereby CARE in consultation with the BRLMs and the legal Counsels and the applicable legal framework, believed that the minimum capitalization norms applicable to NBFCs engaged in non-fund based activities shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign regulators of the foreign investors subscribing for shares in the IPO. It is pertinently noted that no exemption whatsoever was sought even once from the RBI regarding the compliance with the MCN since compliance with the MCN was mandatory for investment through the FDI route in companies engaged in the financial services sector. 18. It is clear that between the filing of the DRHP and the RHP - a period of almost a year - the Appellants' sole focus was to ensure that foreign investors be exempted from the abovesaid requirement of obtaining NOCs from their respective regulators. Once that was achieved on September 26, 2012, i.e. when RBI issued a letter granting the requested exemption but only on the fulfillment of certain non-negotiable criteria, within ten days thereafter, CARE, after consultation with the Appellants, attempted to unilaterally alter its entire investment to circumvent the compliances under the FDI route, and the MCN in particular. The hurry with which the investment structure was purportedly altered and RHP issued without seeking RBI's opinion/clarification was clearly done with a view to circumvent regulatory norms. 19. It was obligatory on the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught in upfront by the foreign investor irrespective of the level of foreign investment" 21. If the Appellants would have us believed that it had indeed been decided to alter the proposed investment structure by excluding FDI, then it logically follows that there was no need to mention information related to the MCN of USD 0.5 million which the Appellants claim was not applicable to the IPO in the RHP. It, therefore, emerges that the Appellants have made completely divergent and even contradictory disclosures in the RHP. These conflicting conclusions and indications in the RHP reflect a clear disjunct between what the Appellants claimed the investment structure to be on the one and what they tried to achieve on the other by one, successfully getting prospective investors exempted from complying with the NOC requirement and two, trying to circumvent the MNC of USD 0.5 million. It is pertinent to mention here that both the abovesaid requirements which the Appellants tried to avoid complying with are requirements which flow from the FDI Policy, in particular Circular No. 43 dated November 4, 2011. The following paragraph of the Impugned Order being relevant is reproduced hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be true and adequate disclosure. It, therefore, falls to reason that at the time the RHP was filed, non-disclosure therein regarding the MCN points obviously to the lack of proper due diligence on the Appellants' part since the Appellants clearly failed to ensure true and adequate disclosure. The following paragraph of the Impugned Order being relevant has been reproduced hereinunder: "3. In the RHP, I find that the BRLMs, by disclosing only the half-truth with respect to RBI's letter dated September 26, 2012, had misled the non-resident investors into believing that RBI had unconditionally exempted the non-resident investors from obtaining an NOC from the respective regulators in relation with their participation in the offer. The fact that RBI had exempted the non-resident investors from obtaining a NoC from the respective regulators in relation to their participation in the Offer, subject to the company strictly adhering to the minimum capitalization norms as per the FDI Policy and FEMA Regulations, was concealed from the non-resident investors in the RHP." 24. Even if the BRLMs are ever in doubt as to the materiality of information, they should opt to include suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not mandatory for an MB to look into the bank statements it would have been prudent for the Appellant to peruse the bank statements instead of merely relying on the Statutory Auditor's Report and the statement of the Issuer Company". 25. It is pertinent to note that in the case of Almondz for want of a more vivid depiction of the issuer company's position in the offer documents, this Tribunal held the merchant banker i.e. Almondz liable for failing to disclose material information in the matter of the IPOs of PGEL and BGIL. In the present case, the Appellants have deliberately not disclosed the conditional nature of the exemption granted by the RBI for the NOC, thereby failing to honour the Code of Conduct that governs the actions of merchant bankers/ book running lead managers. In the instant case, it is established from a plain reading of the law that RBI is the nodal authority for matters pertaining to the FEMA Regulations and that the Appellants, as advisors to the Issuer Company alongwith the Issuer Company itself, were in constant communication with RBI since October 19, 2011. In light of the aforementioned facts, the Appellants should have acted prudently and sought ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
