CS--Previous Question Papers

INTERMEDIATE EXAMINATION: DECEMBER 2005
COMPANY LAW
Time allowed : 3 hours Maximum marks : 100
NOTE: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
Attempt any five of the following:

(i) Mention the provisions relating to change in the name of a company.
(ii) Explain the provisions for transfer of unclaimed dividend.
(iii) State the provisions regarding registration and modification of charges.
(iv) "Company has an independent existence apart from its members." Comment.

(v) Abhijeet is a shareholder of Kutumb Ltd. On receipt of notice of an annual general meeting to be held on 28th September, 2004, Abhijeet issued a proxy in favour of Baljeet on 25th September, 2004. Abhijeet again issued another proxy in favour of Charanjeet on 26th September, 2004. Both Baljeet and Charanjeet attended the meeting on 28th September, 2004. Decide who is entitled to vote on a poll.

(vi) Clover Ltd. has received a notice from its shareholders holding in all 8% of the paid-up capital for the removal of one of the directors. Advise the company. (4 marks each)

Question 2
(a) GCL Ltd., a listed company, wants to increase its paid-up capital through private placement basis. Before placing the proposal to the Board of directors for formal approval, the managing director of the company would like to understand the legal provisions pertaining to the following issues :
(i) Restrictions on the quantum of preferential allotment.
(ii) Criteria for pricing of the proposed issue.
(iii) Restriction on currency of instrument.
(iv) Financial commitment necessary from the promoters/financial institutions, etc.
As a company secretary of the GCL Ltd., write a brief note to the managing director focusing on the above issues. (8 marks)

(b) "Green shoe option is a mechanism for establishing the post-issue price of the shares." Comment in the light of the SEBI guidelines. (8 marks)
Question 3
(a) Discuss the powers of the Board of directors which can be exercised only by means of resolution passed at a meeting of the Board. (6 marks)

(b) "A loan given to the wife of the managing director who is a bona fide employee of the company need not necessarily be treated as loans given to relatives of directors of the company." Comment. (5 marks)

(c) Explain the position of an interested director in the light of the provisions of section 300. (5 marks)

Question 4
(a) Balance sheet of ABC Ltd. as at 31st March, 2004 shows the following liabilities :

Paid-up capital Rs. 10 crore.
Reserves and surplus Rs. 20 crore.
Reserves for redemption of debentures Rs. 5 crore.

The company has already advanced to the following companies :
XYZ Ltd. — Rs. 6 crore.
MNO Ltd. — Rs. 2 crore.
ABC Ltd. has given corporate guarantee of Rs. 5 crore to STU Ltd.

PQR Ltd. has approached ABC Ltd. for inter-corporate loan of Rs. 8 crore.

As the Company Secretary of ABC Ltd., advise the management on the limits of making loans and inter-corporate investments. (6 marks)

(b) Discuss the law relating to acceptance of deposits by non-banking non-financial companies. (10 marks)

Question 5
(a) Bring out the distinguishing features of debentures and preference shares as a sources of finance. (6 marks)

(b) Write notes on any two of the following :
(i) Register of members as a prima facie evidence of membership
(ii) Pledging of securities in dematerialized form
(iii) Signing of the Board's report. (5 marks each)
Question 6

(a) Explain the provisions relating to 'buy-back of shares'. (10 marks)

(b) Following information is available from the audited balance sheet of Short Cut Ltd. as at 31st March, 2004 :

Paid-up share capital Rs. 500 lakh
Share premium account Rs. 100 lakh
General reserves Rs. 800 lakh
Secured loans Rs. 500 lakh
Unsecured loans Rs. 400 lakh

The company plans to buy-back its shares. Compute the maximum limit upto which the company can buy-back its shares. (4 marks)

(c) Whether the buy-back of shares amounts to reduction of share capital? (2 marks)

Question 7
Explain the provisions of the Companies Act, 1956 relating to protection of interests of minority shareholders. (16 marks)

Question 8:
(a) State the provisions relating to payment of maximum remuneration to managerial personnel. (8 marks)

(b) Explain the doctrine of cypres. (4 marks)
(c) Explain the law relating to alternate directors.(s-313) (4 marks)

How to seek justice from consumer redressal courts

How to seek justice from consumer redressal courts? what steps are needed to be taken by ordinary consumer?

The Consumer Protection Act, 1986 (here in after to be referred to as the ‘Act’) is one of the benevolent social legislation intended to protect the large body of consumers from exploitation. The Act has come as a panacea for consumers all over the country and has assumed the shape of practically the most important legislation enacted in the country during the last few years. It has become the vehicle for enabling people to secure speedy and in-expensive redressal of their grievances. With the enactment of this law, consumers now feel that they are in a position to declare “sellers be aware” whereas previously the consumers were at the receiving end and generally told “buyers be aware”.The Act postulates establishment of Central Consumer Protection Council and the State Consumer Protection Councils for the purpose of spreading consumer awareness. Central Council is headed by Minster, incharge of the Consumer Affairs in the Central Government and in the State it is the Minister incharge of the Consumer Affairs in the State Government who heads State Council.

To provide cheap, speedy and simple redressal to consumer disputes, quasi-judicial machinery is set up at each District, State and National levels called District Forums, State Consumer Disputes Redressal Commission and National Consumer Disputes Redressal Commission respectively. At present, there are 604 District Forums, 35 State Commissions with apex body as a National Consumer Disputes Redressal Commission (NCDRC) having its office at Janpath Bhawan, A Wing, 5th Floor, Janpath, New Delhi.
The District Forums are headed by the person who is or has been or is eligible to be appointed as a District Judge and the State Commissions are headed by a person who is or has been a Judge of High Court.
National Commission was constituted in the year, 1988. It is headed by a sitting or retired Judge of the Supreme Court of India. There is now an Additional Bench of the National Commission. The provisions of this Act cover ‘Products’ as well as ‘Services’. The products are those which are manufactured or produced and sold to consumers through wholesalers and retailers. The services are of the nature of transport, telephones, electricity, constructions, banking, insurance, medical treatment etc. etc. The services are, by and large, include those provided by professionals such as Doctors, Engineers, Architects, Lawyers etc. A written complaint, as amended by Consumer Protection (Amendment) Act, 2002, can be filed before the District Consumer Forum (upto Rupees twenty lakhs), State Commission (upto Rupees One crore), National Commission ( above Rrupees One crore) in relation to a product or in respect of a service, but does not include rendering of any service free of cost or under a contract of personal service. The service can be of any description, the illustrations given above are only indicative and not exhaustive.

The Consumer Protection Act is an alternative and cheapest remedy already available to the aggrieved persons/consumers by way of civil suit. In the complaint/appeal/petition submitted under the Act, a consumer is not required to pay any court fees or even process fee.
Proceedings are summary in nature and endeavour is made to grant relief to the parties in the quickest possible time keeping in mind the spirit of the Act which provides for disposal of the cases within possible time schedule prescribed under the Act.

If a consumer is not satisfied by the decision of the District Forum, he can challenge the same before the State Commission and against the order of the State Commission a consumer can come to the National Commission. In order to attain the objects of the Consumer Protection Act, the National Commission has also been conferred with the powers of administrative control over all the State Commissions by calling for periodical returns regarding the institution, disposal and pendency of cases. National Commission is empowered to issue instructions regarding, (1) adoption of uniform procedure in the hearing of the matters; (2) prior service of copies of documents produced by one party to the opposite parties; (3) speedy grant of copies of documents; and (4) generally over-seeing the functioning of the State Commissions or the District Forums to ensure that the objects and purposes of the Act are best served without in any way interfering with their quasi-judicial freedom. The Registry of the National Commission, is on 7th Floor, ‘B’ Wing, Janpath Bhawan, Janpath, New Delhi which remains open on all working days except Sundays, Saturdays and Central Govt. holidays. For any enquiry from the Registry of the National Commission, one can contact on Telephone Nos. 011-23712109, 23712459, 23389248 and Fax No. 23712456. Every matter filed with the Registry in person is listed on 7th day of its filing for admission before the National Commission. Functioning of District Forum, State Commission and National Commission is consumer friendly, and thus consumer can file complaint and can address arguments in person. In genuine cases where the parties are unable to engage the services of an advocate Bar Association of NCDRC also provides legal aid to needy.
Consumer redressal forums in states would be computerised and networked by the year-end at a cost of Rs.486.4 million, the project was in its final year and was being executed by the National Informatics Centre on a turnkey basis.
The government was in the process of strengthening the commission by increasing the number of members to nine from the existing five.
overall performance of the forum has been satisfactory with nearly 88 percent of the 2.8 million cases filed so far disposed off,
central government has been extending liberal assistance in the form of grants so that there is no resource constraint,

As part of the central government's encouragement to consumer courts in states and districts, the government was spending liberally in providing all requisite infrastructure and has already sanctioned Rs.980 million to 18 states and Rs.474.4 million to 16 state governments as the first tranche of assistance, Pawar said.

India has progressive consumer welfare legislation in the form of Consumer Protection Act, 1986 establishing effective machinery to resolve the disputes between the manufacturers and service providers and the consumers with regard to product defects, deficiency in service as well as matters pertaining to restrictive and unfair trade practices. The legislation envisages establishment of District, State and National level disputes redressal fora to adjudicate over such disputes. Each of these Fora has jurisdiction commensurate with the value of claims.

Each of these Fora is empowered to pass orders and direct the offending party to Indian Companies can hire services of foreign technicians and make remittances for technical services fees subject to certain conditions regardless of the duration of engagement of foreign nationals in any calendar year.

Remove the defect from the product replace the defective goods
return the price paid or costs incurred by the consumer pay compensation to the consumer withdraw hazardous goods, if any, from sale in the market
discontinue with the alleged restrictive/unfair trade practice.

The Act provides for penalty to be paid by the consumer in case it is found that the complaint by him is of vexatious in nature. Consumer Court in India is a special consumer redressal forum where disputes between a consumer(s) and a business(es) can be resolved relatively quickly and inexpensively. This court operates at District, State and National Level and created under Consumer Protection Act, 1986.

At present, there are 604 District Forums, 35 State Commissions with apex body as a National Consumer Disputes Redressal Commission (NCDRC) having its office at Janpath Bhawan, A Wing, 5th Floor, Janpath, New Delh
Government of India

National Consumer Disputes Redressal Commission New Delhi , the 31st May, 2005.

NOTIFICATION

G.S.R. 342(E). - In exercise of the powers conferred by section 30A of the Consumer Protection Act, 1986 (68 of 1986), the National Consumer Disputes Redressal Commission with the previous approval of the Central Government, hereby makes the following regulations, namely:-

1. Short title and commencement.-

(1) These regulations may be called the Consumer Protection Regulations, 2005.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions.- In these regulations unless the context otherwise requires,-

(a) "Act" means the Consumer Protection Act, 1986 (68 of 1986);

(b) "Consumer Forum" means a District Forum. a Consumer Disputes Redressal Commission established in a State under clause (b) of section 9 (hereafter called the State Commission) or the National Consumer Disputes Redressal Commission;
(c) "Registrar" means the head of the ministerial establishment of the Consumer Forum and exercising such powers and functions as are conferred upon him by the President of the Consumer Forum: (d) "rules" means the rules made under the Act; (e) "section" means a section of the Act: (f) words and expressions used in these regulations and not defined herein but defined either in the Act or in the rules shall have the same meaning respectively assigned to them either in the Act or in the rules, as the case may be.

3. Arrangements in Consumer Forum,--(1 ) A Consumer Forum, being not a regular court, shall have the arrangements as to depict it distinct from a court.
(2) In the hall in which the Consumer Forum shall hear the parties, the dais may not be kept more than 30c.m. in height than the place earmarked for the parties to occupy.

(3) At the dais of the hall, the President and the members of the Consumer Forum shall use the same type of chairs at the same level and these chairs need not have high backs.

4. Dress code.-

(1) The President and members of every Consumer Forum while presiding over the Benches,-

a) shall wear simple and sober dress;,

(b) shall not wear-

(i) flashy dress or dress display any affluence;,

(ii) Jeans or T-shirts,

(iii) as if they are holding Courts as Judges of a High Court or a

District Court.

(2) The advocates shall be allowed to appear in the usual dress as prescribed by the High Court but without the gown.

5. Hearing hours.-

Subject to the provisions of the rules, the normal working hours of the Consumer Forum for hearing matters shall be from 10.30 am to 1.00 p.m and 2.00 p.m to 4.00 p.m on all working days of the Central Government in the case of the National Commission and on all working days of the State Government in the case of the State Commission and the District Forum

6. Cause List.-

(1 ) Cause list of the Consumer forum for the following entire week shall be made ready before the close of the working hours of the preceding week and displayed on the notice board. The cause list in respect of a Consumer Forum having a website shall also be hosted on the website.

(2) Cause list shall be split into three different parts, namely:-(i) Admission and after notice matters;(ii) Matters where evidence is to be recorded; (iii) Final disposal matters.

(3) Every cause list shall contain the following particulars, namely:-

(1) Sl. No.

(2) No.of the matter

(3) Names of the parties

(4) Name of the partagent appearing

(5) If a date of hearing is given in the presence of parties or their agents, it shall not be a ground for non-appearance for the reason that the cause list for the concerned date does not show the matter or contains incorrect entry or there is omission of the particulars of the matter.

7. Institution of complaints, appeals and revision petitions.-(1 ) Where a complaint is filed in District Forum or State Commission it shall be filed in three sets and where it is filed in the National Commission it shall be filed in four sets with additional sets equal to the number of opposite party(ies)/respondent(s). (2) Every complaint shall clearly contain particulars of dispute and the relief claimed and shall also be accompanied by copies of such documents as are necessary to prove the claim made in the complaint.

8. Nomenclature to be given to the complaints, appeals and revisions p0etitions. –

(1) A complaint shall hereinafter be referred to as Consumer Complaint (C.C.) instead of O.P., e.g., C.C. No.2 of 2005 (2) An appeal shall be referred to as F.A., Revision Petition as R.P., Execution .Application as E.A, Transfer Application T.A. and Review as RA containing the number and the year of filing.

9. Scrutiny of complaint, appeal, petition and revision petition.-

(1) Every complaint, appeal, or revision petition shall after it is filed be numbered by the Registrar. (2) If there is any defect in the filing of the complaint, appeal or revision petition, the particulars of such defects shall be recorded and the party or his agents shall be informed of the defects asking them for removing the defects within 15 days. (3) In case the party disputes in the correctness of the defects pointed out the matter shall be placed before the Consumer Forum for appropriate orders.

(4) After the expiry of the time given, the matter shall, irrespective of the fact as to whether the defects have been removed or not, be placed before the Consumer Forum for appropriate orders. (5) If the objections raised by the Registrar are substantial and are not removed within the time allowed for the purpose, those days shall not be excluded for counting the period of limitation.

(6) As required by the second proviso to sub-section (3) of section 12, the admissibility of the complaint shall ordinarily be decided within twenty-one days from the date on which the complaint was

(7) In case any defect is pointed out by the Registrar, twenty-one days from the date on which such defect was removed shall be reckoned for the purpose of sub-regulation (5).

(8) All pending complaints, appeals and revision petitions which have not come up for admission till the date of commencement of these regulations and are pending for admission for more than 21 days shall be listed immediately by the Consumer Forum for admission and not later than 21 days from the date of commencement of these regulations.

10. Issue of notice.-

(1) Whenever the Consumer Forum directs the issuance of a notice in respect of a complaint, appeal or revision petition, as the case may be, to the opposite party(ies)/respondent(s), ordinarily such notice shall be issued for a period of 30 days and depending upon the circumstances of each case even for less than 30 days.

(2) When there is a question of raising presumption of service, 30 days notice shall be required.

(3) Whenever notices are sought to be effected by a courier service, it shall be ascertained that the courier is of repute.

(4) While appointing the courier for the purpose of effecting service, security deposit may also be taken.

(5) Along with the notice, copies of the complaint, memorandum of grounds of appeal, petitions as the case may be and other documents filed shall be served upon the opposite party(ies )/respondent( s).

(6) After the opposite party or respondent has put in appearance, no
application or document shall be received by the Registrar unless it bears an endorsement that a copy thereof has been served upon the other side.

11. Adjournment.-

(1) Every proceeding before a Consumer Forum shall be conducted as expeditiously as possible and as per the requirements of the Act.

(2) The Consumer Forum shall record the reasons for any adjournment made by it.

(3) The cost of adjournment, if asked by the opposite party or parties, shall not be less than five hundred rupees per adjournment and could be more depending upon the value and nature of the complaint as may be decided by the Consumer Forum.

(4). The complainant, appellant or petitioner, as the case may be, may also be burdened with cost unless sufficient cause is shown for seeking adjournment:

Provided that in the circumstances of a particular case, the amount of cost imposed may be less than five hundred rupees but in no case less than one hundred rupees.

(5) The cost imposed may be given to the other party or parties to defray his or their expenses or be deposited in the Consumer Legal Aid Account to be maintained by the respective Consumer Forum, as the Consumer Forum may order.

(6) If any adjournment is granted without awarding cost, the order sheet shall mention the reasons thereof.

(7) All orders adjourning the matter shall be signed by the President and members constituting the Bench and not by the Court Master or Bench Clerk.

(8) Non-availability of a lawyer who is representing the party shall not be a ground for seeking adjournment of the matter unless absence is beyond the control of the lawyer such as his sudden illness or bereavement in the family.

12. Hearing by Benches.-Where a Bench, constituted by the President of the State Commission or the National Commission as provided under section 16 or section 20, as the case may be, does not have a member with judicial background and any complex question of law arises and there is no precedent to decide the law point, the Bench so constituted may refer the matter to the President of the State Commission or the National Commission as the case may be to constitute another Bench of which the President shall be a member. (2) Where a party is represented by a counsel, it shall be mandatory to file a brief of written arguments two days before the matter is fixed for arguments.(3) In case of default to file briefs, the cost shall be imposed at the same rates as laid down for grant of adjournments.

14. Limitation.-

(1) Subject to the provisions of sections 15, 19 and 24A, the period of limitation in the following matters shall be as follows:-

(i) Revision Petition shall be filed within 90 days from the date of the order or the date of receipt of the order as the case may be;

ii) Application for setting aside the ex-parte order under section 22A or dismissal of the complaint in default shall be maintainable if filed within thirty days from the date of the order or date of receipt of the order, as the case may be;

iii) An application for review under sub-section (2) of section 22 shall be filed to the National Commission within 30 days from the date of the order or receipt of the order, as the case may be;
(iv) The period of limitation for filing any application for which no period of limitation has been specified in the Act, the rules of these regulations shall be thirty days from the date of the cause of action or the date of knowledge.

(2) Subject to the provisions of the Act, the Consumer Forum may condone the delay in filing an application or a petition referred to in sub-regulation (1) if valid and sufficient reasons to its satisfaction are given.

15. Review.-

(1) It shall set out clearly the grounds for review.

(2) Unless otherwise ordered by the National Commission, an application for review shall be disposed of by circulation without oral arguments, as far as practicable between the same members who had delivered the order sought to be reviewed.

16. Appearance of Voluntary Consumer Organisations.-

(1) Recognised Consumer Organisations have a right of audience before the Consumer Forum

(2) An authorisation of a Voluntary Consumer Organisation may be by way of special power of attorney executed on a non-judicial paper or even on plain paper duly attested by a Gazetted Officer or a Notary Public.

(3) The Power of Attorney holder shall be entitled to engage a counsel, if authorised to do so.

DEPLORABLE STATE OF CONSUMER COURTS IN INDIA

The State Government of Andhra Pradesh had blown its own trumpet on the progressive steps initiated and the mass awareness said to have been created by it in setting-up Consumer Clubs in various educational institutions for enlightening the basic rights of consumers from the school going age itself to have a salutary effect. Besides, it has made tall claims about the training camps being imparted to voluntary organizations for spreading the message of consumer movement. However, the ground realities are found to be in contrast to the loud proclamations made by it.

The Ranga Reddy District Consumers’ Forum has been housed in a small hired building in a very interior location in Dilsukhnagar of Hyderabad which is not easily accessible where even basic seating/drinking water/toilet facilities for the complainants are lacking. Based on my own harrowing experience, I had suggested to make some improvements in my letter dated 26th September, 2004 to Bhanwar Lal, the then Civil Supplies Commissioner of A.P. and the same has not even been acknowledged by him.

Some of my suggestions are listed below:-

(i) Large Bilingual Boards—Both in English and Telugu on the procedural formalities (step by step in a sequential order) required to be taken are to be displayed at the entrance itself.

(ii) Model Application---a format to be devised incorporating therein the main features/contents with para-wise captions and also the time limit fixed for filing complaints. (A priced brochure containing all the essential details can be evolved)

(iii) Application Fee—A/c Payee Order/DD to be taken on whose name and the amount specified.

(iv) Affidavit—Model Proforma to be attested by a Notary

(v) How to obtain judgment copy/additional copies especially in case of complainants who are not Local Residents—procedure for obtaining additional certified copies

(vi) Encouraging the complainants to plead their own cases in stead of depending on Advocates who are exploiting and fleecing the complainants. It has been observed that a group of Advocates are acting like touts lobbying in the court premises to attract the gullible public and pressurizing the complainants to entrust the cases to them claiming that they are specialized in consumer law. It has also been noticed that there is a nexus between the court staff and the Advocates and the former are acting as their agents and persuading the complainants to hand over the cases to their coterie.

(vii) A help desk is to be provided in each Consumer Court for proper guidance

(viii) Setting-up Complaint Box and speedy investigation and redressal of genuine grievances

(ix) Advance action to fill up the posts of Members and President fallen vacant after the expiry of their term. As most of these postings are dependent on political considerations and loyalty to the ruling party, the appointments are inexcusably delayed bringing the work to a grinding halt. During the change of guards when TDP Govt. lost in the last general elections and Congress (I) came into power, the work in RR Dist Consumer Court was held up for months due to lack of quorum and I was one of the worst sufferers as I was forced to make several trips from New Delhi to Hyderabad.

(x) The address on the envelope written both by RR Dist consumer court and the State Consumer Grievances Commission, Khairtabad, Hyderabad was “incomplete “ in many respects ( perhaps deliberately and intentionally done by the court staff to ensure that the court communications does not reach the petitioner at Delhi so that the case can be decided ex-parte in favour of the Opposite Party) leading to a serious suspicion that the court staff are in league/cahoots with the Opposite Party who happened to be a prominent Real Estate Developer. Even after reporting this grave blunder on the part of the RR Dist Court and State Commission, no action was taken against the erring/delinquent staff.

To my chagrin, I was forced to make fruitless visits to the State Commission to obtain a copy of the judgment as the same reportedly could not be dictated for a long time ostensibly due to lack of stenographic assistance. When a copy of the Order could finally be collected (Dist.Consumer Forum, Rangareddy Dt.), the amount deposited by the Opp. Party in the District Court could not be given as the President of the Forum did not sign the cheque for a long time as he was preoccupied with the marriage preparations of his son based in US. As a last resort, when the matter was brought to the notice of Registrar, State Commission and only with his intervention the cheque could be issued to me after unjustified delay. All the while, I had to stay in a lodge in Hyderabad incurring huge expenditure. It is therefore prudential to fix a time frame to deliver the judgment copies and the deposits made by the Opp. Party to mitigate the sufferings and woes of the complainants.

In another case between a person and the Andhra Pradesh Housing Board (APHB), it was decided in favour of my son by the Dist.Consumer Disputes Redressal Forum-III, Hyderabad for refund and stating that collection of huge amount as name registration fee and not refundable amounts to unfair trade practices committed by the APHB. However, the APHB filed an appeal against the verdict given by the Nampally Dist. Forum-III in the State Commission. Instead of deciding such petty cases on a war-footing basis for speedy disposal, it is learnt that the case would now drag on endlessly in the State Commission for several years as it is said to have been burdened with many piled up cases prior to this still pending in the State Commission waiting for their turn.

Many of the favourable decisions given by the Consumer Court, Qutab Enclave, New Delhi were not implemented disregarding the Orders issued by them as scrap of waste paper. Even reputed NBFCs like Mc.Dowel Finance of Vijay Mallya of King Fisher fame (illegally transferred the company to Chennai based Krest Lease Fin.Co.) EBF Finance floated by Rajaratnam, take over King of Coimbatore, DCM Finance of Lala Bharat Ram and Charat Ram Group have failed to make refund of the life savings of small depositors despite ordered by the Consumer Court in Delhi.

The ails plaguing the Civil and Criminal Courts in this country have already spread fast and wide to the Consumer Courts also and the hopes of common man for a quick-fix solution have been belied. Unless prompt remedial measures are taken to put an end to this malaise, a day is not far-off that people’s faith in the Consumer Courts shall also be undermined and eroded.

(4) A Voluntary Consumer Organisation can engage a counsel or an advocate of its choice or it can itself represent through one of its office bearers as per the rules governing it.

(5) In case of a complaint where the Voluntary Consumer Organisation is a complainant along with the consumer himself and the dispute affects the complainant individually, he can withdraw the complaint:

Provided that if the issue involves unfair trade practice or restrictive trade practice a Voluntary Consumer Organisation may continue to proceed with the complaint even if the complainant wishes to withdraw the same.

(6) A Consumer Forum has to guard itself from touts and busybodies in the garb of power of attorney holders or authorised agents in the proceedings before it.

(7) While a Consumer Forum may permit an authorised agent to appear before it, but authorised agent shall not be one who has used this as a profession:

Provided that this sub-regulation shall not apply in case of advocates.

(8) An authorised agent may be debarred from appearing before a Consumer Forum if he is found guilty of misconduct or any other malpractice at any time.

17. Ex-parte interim order.-

Any ex-parte interim order issued by the Consumer Forum shall stand vacated after 45 days if in the meanwhile the objections to the interim order are not heard and disposed of.

18. Final order.-

(1) An order on the top right hand comer shall show as to when the complaint was filed and the date of the order.

(2) The cause title of the order shall contain the names of all the parties with their addresses.

(3) In the body of the order it is desirable that after mentioning the complainant or the opposite party, their names as shown in the title be mentioned and parties thereafter may not be mentioned as complainant or opposite party No.1 or opposite party No.2, etc.

(4) The cause title shall also clearly show if the appellant or respondent was the complainant or opposite party.

(5) The order of a Consumer Forum disposing of a matter shall be as short and precise as practicable and unnecessary long quotations from the judgments of the higher courts or otherwise shall be avoided.

(6) When a copy of the order is sent to a party, the mode by which it is sent and the date on which it is sent shall be stamped on the last page of the order.

(7) The Consumer Forum shall pass final order invariably within fifteen days of the conclusion of the arguments.

19. Return on institution and disposal of cases.-( 1) A Consumer Forum is expected to dispose of at least 75 to 100 matters every month.
(2) A periodic monthly return of institution and disposal of cases shall be sent by the District Forums to the State Commission.
(3) The State Commission shall submit a periodic monthly return of institution and disposal of cases to the National Commission.
(4) Notwithstanding anything contained in this regulation, the President of the National Commission may, at any time, call for any return or information relating to its functioning from a State Commission or District Forums.

20. Preservation of records. –

(1) In the case of complaint, the record containing main files with original order sheet shall be preserved for a period five years.

(2) In the case of records of first appeal and revision petitions, it shall be preserved for three years from the date of disposal of the appeal or revision as the case may be. (3) Immediately after the consumer complaint, first appeal or revision petition, as the case may be, is disposed of, extra sets shall be given to the parties who may use the same for filing of appeal or revision petition and in that case the necessity to summon the record from the forums below can be dispensed with.

(4) The Registrar shall inform the parties while forwarding the certified copy of the final order, where they do not appear in person at the time of finally disposing of the matter to arrange to collect the extra sets.

(5) A period of at least one month shall be given for the purpose of collection of records by the party and in case of default the ex1ra sets shall be weeded out.

21. Certified copy.-

(l) A copy of the order is to be given to the parties free of cost as required under the Act and the rules made thereunder.

(2) In case a party requires an extra copy, it shall be issued to him duly certified by the Registry on a payment of Rs.20/- irrespective of number of pages.

(3) A certified copy of an order shall clearly specify the date when free copy was issued, date of application, date when the copy was made ready and the date when it was so delivered to him.

(4) A fee of Rs.20/- shall be paid for obtaining another certified copy.
(5) Any party desiring to get a certified copy of any document on the file of the Consumer Forum, may get the same on payment of certification fee of twenty rupees per copy. Provided that if any such document of which certified copy is sought, is over and above 5 pages, an extra amount of one rupee per page shall be charged over and above the fee of twenty rupees.

(6) Certified copy of any miscellaneous order passed by the Consumer Forum shall be supplied on payment of Rs.5 per copy.
22. Inspection of records.-Parties or their agents can inspect the records of any matter by filing an application on payment of Ten rupees as fee.
23. Filing of criminal complaint.-Wherever a complaint is required to be filed by the Consumer Forum under sub-section (5) of section 13, the Consumer Forum may authorise its Registrar to file the complaint.
24. Practice Directions.- The National Commission shall be entitled to issue practice directions from time to time as may be necessary for the proper conduct of the cases before Consumer Forum including prescribing forms for complaints, notices, returns, certificate to be issued to the collector and the like.

25. Parcsha Yad-dast.-

Where a party appears in person and is illiterate, the Court Master or Bench Clerk shall give to that party the next date of hearing in writing.

26. Miscellaneous.-

(1) In all proceedings before the Consumer Forum, endeavour shall be made by the parties and their counsel to avoid the use of provisions of Code of Civil Procedure, 1908 (5 of 1908):

Provided that the provisions of the Code of Civil Procedure, 1908 may be applied which have been referred to in the Act or in the rules made thereunder.

(2) Every State Commission and every District Forum shall take steps for its computerisation and networking.

(3) The Consumer Forum shall give proper respect and courtesy to the parties who appear in person and shall provide separate accommodation in the Hall for the convenience of the parties.

(4) The Consumer Forum shall not insist upon the parties to engage advocates.

(5) The Fees collected for inspection of the documents and supply of certified copies shall be deposited in the account maintained for the purpose of depositing fee for filing a complaint as prescribed by the Central Government by rules.

(6) The cases filed by or against the senior citizens, physically challenged, widows and persons suffering from serious ailments shall be listed and disposed of on a priority basis.

Source(s):

http://www.indialaw.org/consumer_forums....
http://www.icrpc.org/icrpc.org.regulatio...
http://www.thecitizen.com/~citizen0/node...
http://www.consumercourt.netfirms.com/co... for address of consumer courts

IPO -- FAQs -- imps

IPO FAQs

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What is an Initial Public Offering?

Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer’s securities.

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What is a Follow on Public Offering?

A follow on public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

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What is a Rights Issue?

Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.

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What is a Preferential Issue?

A preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer

company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP) guidelines which inter-alia include pricing, disclosures in notice etc.

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What is SEBI’s Role in an Issue?

Any company making a public issue or a listed company making a rights issue of value of more than Rs.50 lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further on the issue only after getting observations from SEBI. The validity period of SEBI’s observation letter is three months only ie. the company has to open its issue within three months period.

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Does it mean that SEBI recommends an issue?

SEBI does not recommend any issue nor does take any responsibility either for the financial soundness of any scheme or the project for which the issue is proposed to be made or for the correctness of the statements made or opinions expressed in the offer document.

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Does SEBI approve the contents of the issue?

It is to be distinctly understood that submission of offer document to SEBI should not in any way be deemed or construed that the same has been cleared or approved by SEBI. The Lead manager certifies that the disclosures made in the offer document are generally adequate and are in conformity with SEBI guidelines for disclosures and investor protection in force for the time being. This requirement is to facilitate investors to take an informed decision for making investment in the proposed issue.

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Does SEBI tag make my money safe?

The investors should make an informed decision purely by themselves based on the contents disclosed in the offer documents. SEBI does not associate itself with any issue/issuer and should in no way be construed as a guarantee for the funds that the investor proposes to invest through the issue. However, the investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. They are strongly warned against any ‘tips’ or news through unofficial means.

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What are Disclosures and Investor protection guidelines?

The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investor protection) guidelines. SEBI framed its DIP guidelines in 1992. Many amendments have been carried out in the same in line with the market dynamics and requirements. In 2000, SEBI issued “Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000” which is compilation of all circulars organized in chapter forms. These guidelines and amendments thereon are issued by SEBI India under section 11 of the Securities and Exchange Board of India Act, 1992. SEBI (Disclosure and investor protection) guidelines 2000 are in short called DIP guidelines. It provides a comprehensive framework for issuances buy the companies.

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How does SEBI ensure compliance with Disclosures and Investor protection?

The Merchant Banker are the specialized intermediaries who are required to do due diligence and ensure that all the requirements of DIP are complied with while submitting the draft offer document to SEBI. Any non compliance on their part, attract penal action from SEBI, in terms of SEBI (Merchant Bankers) Regulations. The draft offer document filed by Merchant Banker is also placed on the website for public comments. Officials of SEBI at various levels examine the compliance with DIP guidelines and ensure that all necessary material information is disclosed in the draft offer documents.

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With the presence of the Central Listing Authority, what would be the role of SEBI in the processing of Offer documents for an issue?

The Central Listing Authority’s , CLA, functions have been detailed under Regulation 8 of SEBI (Central Listing Authority) Regulations, 2003 (CLA Regulations) issued on August 21, 2003 and amended up to October 14, 2003. In brief, it covers processing applications for letter precedent to listing fromapplicants; to make recommendations to the Board on issues pertaining to the protection of the interest of the investors in securities and development and regulation of the securities market, including the listing agreements, listing conditions and disclosures to be made in offer documents; and; to undertake any other functions as may be delegated to it by the Board from time to time. SEBI as the regulator of the securities market examines all the policy matters pertaining to issues and will continue to do so even during the existence of the CLA. Since the CLA is not yet operational, the reply to this question would be updated thereafter.

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What is the difference between an offer document, Red Herring Prospectus, a prospectus and an abridged prospectus? What does it mean when someone says “draft offer doc”?

“Offer document” means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue, which is filed Registrar of Companies (ROC) and Stock Exchanges. An offer document covers all the relevant information to help an investor to make his/her investment decision. “Draft Offer document” means the offer document in draft stage. The draft offer documents are filed with SEBI, atleast 21 days prior to the filing of the Offer Document with ROC/ SEs. SEBI may specifies changes, if any, in the draft Offer Document and the issuer or the Lead Merchant banker shall carry out such changes in the draft offer document before filing the Offer Document with ROC/ SEs. The Draft Offer document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI.

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What is a Red Herring Prospectus?

Red Herring Prospectus is a prospectus, which does not have details of either price or number of shares being offered, or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later. An RHP for and FPO can be filed with the RoC without the price band and the issuer, in such a case will notify the floor price or a price band by way of an advertisement one day prior to the opening of the issue. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of the Companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with ROC is called a prospectus.

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What is an Abridged Prospectus?

Abridged Prospectus means the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues.

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What does one mean by Lock-in?

Lock-in indicates a freeze on the shares. SEBI (DIP) Guidelines have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons who are controlling the company, shall continue to hold some minimum percentage in the company after the public issue.

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How the word Promoter has been defined?

The promoter has been defined as a person or persons who are in over-all control of the company, who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public and those named in the prospectus as promoters(s). It may be noted that a director / officer of the issuer company or person, if they are acting as such merely in their professional capacity are not be included in the definition of a promoter.

'Promoter Group' includes the promoter, an immediate relative of the promoter (i.e. any spouse of that person, or any parent, brother, sister or child of theperson or of the spouse). In case promoter is a company, a subsidiary or holding company of that company; any company in which the promoter holds 10% or more of the equity capital or which holds 10% or more of the equity capital of the Promoter; any company in which a group of individuals or companies or combinations thereof who holds 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the issuer company.

In case the promoter is an individual, any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter' or a firm or HUF in which the 'Promoter' or any one or more of his immediate relative is a member; any company in which a company specified in (i) above, holds 10% or more, of the share capital; any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10% of the total, and all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus "shareholding of the promoter group".

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Who decides the price of an issue?

Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. There is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. There are two types of issues one where company and LM fix a price (called fixed price) and other, where the company and LM stipulate a floor price or a price band and leave it to market forces to determine the final price (price discovery through book building process).

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What is Fixed Price offers?

An issuer company is allowed to freely price the issue. The basis of issue price is disclosed in the offer document where the issuer discloses in detail about the qualitative and quantitative factors justifying the issue price. The Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the Draft offer documents filed with SEBI and actual price can be determined at a later date before filing of the final offer document with SEBI / ROCs.

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What does “price discovery through book building process” mean?

“Book Building” means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for the securities is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover price for securities.

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How does Book Building work?

Book building is a process of price discovery. Hence, the Red Herring prospectus does not contain a price. Instead, the red herring prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. Only the retail investors have the option of bidding at ‘cut-off’. After the bidding process is complete, the ‘cut-off’ price is arrived at on the lines of Dutch auction. The basis of Allotment (Refer Q. 15.j) is then finalized and letters allotment/refund is undertaken. The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process.

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What is a price band?

The red herring prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. The price band can have a revision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing press release and also indicating the change on the relevant website and the terminals of the syndicate members. In case the price band is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding thirteen days.

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Who decides the price band?

It may be understood that the regulatory mechanism does not play a role in setting the price for issues. It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers. The basis of issue price is disclosed in the offer document. The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price.

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What is firm allotment?

A company making an issue to public can reserve some shares on “allotment on firm basis” for some categories as specified in DIP guidelines. Allotment on firm basis indicates that allotment to the investor is on firm basis. DIP guidelines provide for maximum % of shares, which can be reserved on firm basis. The shares to be allotted on “firm allotment category” can be issued at a price different from the price at which the net offer to the public is made provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public.

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What is reservation on competitive basis?

Reservation on Competitive Basis is when allotment of shares is made in proportion to the shares applied for by the concerned reserved categories. Reservation on competitive basis can be made in a public issue to the Employees of the company, Shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company, Indian Mutual Funds, Foreign Institutional Investors (including non resident Indians and overseas corporate bodies), Indian and Multilateral development Institutions and Scheduled Banks.

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Is there any preference while doing the allotment?

The allotment to the Qualified Institutional Buyers (QIBs) is on a discretionary basis. The discretion is left to the Merchant Bankers who first disclose the parameters of judgment in the Red Herring Prospectus. There are no objective conditions stipulated as per the DIP Guidelines. The Merchant Bankers are free to set their criteria and mention the same in the Red Herring Prospectus.

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^{Who is eligible for reservation and how much? (QIBs, NIIs, etc.,)}

In a book built issue allocation to Retail Individual Investors (RIIs), Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35: 15: 50 respectively. In case the book built issues are made pursuant to the requirement of mandatory allocation of 60% to QIBs in terms of Rule 19(2)(b) of SCRR, the respective figures are 30% for RIIs and 10% for NIIs. This is a transitory provision pending harmonization of the QIB allocation in terms of the aforesaid Rule with that specified in the guidelines.

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How is the Retail Investor defined as?

‘Retail individual investor’ means an investor who applies or bids for securities of or for a value of not more than Rs.1,00,000.

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Can a retail investor also bid in a book-built issue?

Yes. He can bid in a book-built issue for a value not more than Rs.1,00,000. Any bid made in excess of this will be considered in the HNI category.

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Where can I get a form for applying/ bidding for the shares?

The form for applying/bidding of shares is available with all syndicate members, collection centers, the brokers to the issue and the bankers to the issue.

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What is the amount of faith that I can lay on the contents of the documents? And whom should I approach if there are any lacunae?

The document is prepared by an independent specialized agency called Merchant Banker, which is registered with SEBI. They are required to do through due diligence while preparing an offer document. The draft offer document submitted to SEBI is put on website for public comments. In case, you have any information about the issuer or its directors or any other aspect of the issue, which in your view is not factually reflected, you may send your complaint to Lead Manager to the issue or to SEBI, Division of Issues and Listing.

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Is it compulsory for me to have a Demat Account?

As per the requirement, all the public issues of size in excess of Rs.10 crore, are to made compulsorily in the demat more. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a demat account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms.

^{What is the procedure for getting a demat account?}

The FAQs relating to demat have been covered in the Investor Education section of the SEBI website in a separate head. They are available on the http://investor.sebi.gov.in/faq/dematfaq.html.

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What are the dos and don’ts for bidding / applying in the issue?

The investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. They are strongly warned against any ‘tips’ or relying on news obtained through unofficial means.

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How many days is the issue open?

As per Clause 8.8.1, Subscription list for public issues shall be kept open for at least 3 working days and not more than 10 working days. In case of Book built issues, the minimum and maximum period for which bidding will be open is 3–7 working days extendable by 3 days in case of a revision in the price band. The public issue made by an infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum

period of 21 working days. As per clause 8.8.2., Rights issues shall be kept open for at least 30 days and not more than 60 days.

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Can I change/revise my bid?

Yes. The investor can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing of revising the bids shall be completed within the date of closure of the issue.

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What proof can bidder request from a trading member or a syndicate member for entering bids?

The syndicate member returns the counterfoil with the signature, date and stamp of the syndicate member. The investor can retain this as a sufficient proof that the bids have been taken into account.

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Can I know the number of shares that would be allotted to me?

In case of fixed price issues, the investor is intimated about the CAN/Refund order within 30 days of the closure of the issue. In case of book built issues, the basis of allotment is finalized by the Book Running lead Managers within 2 weeks from the date of closure of the issue. The registrar then ensures that the demat credit or refund as applicable is completed within 15 days of the closure of the issue. The listing on the stock exchanges is done within 7 days from the finalization of the issue.

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Which are the reliable sources for me to get information about response to issues?

In the case of book-built issues, the exchanges (BSE/NSE) display the data regarding the bids obtained (on a consolidated basis between both these exchanges). The data regarding the bids is also available categorywise. After the price has been determined on the basis of bidding, the

statutory public advertisement containing, inter alia, the price as well as a table showing the number of securities and the amount payable by an investor, based on the price determined, is issued.

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How do I know if I am allotted the shares? And by what timeframe will I get a refund if I am not allotted?

The investor is entitled to receive a Confirmatory Allotment Note (CAN) in case he has been allotted shares within 15 days from the date of closure of a book Built issue. The registrar has to ensure that the demat credit or refund as applicable is completed within 15 days of the closure of the book built issue.

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How long will it take after the issue for the shares to get listed?

The listing on the stock exchanges is done within 7 days from the finalization of the issue. Ideally, it would be around 3 weeks after the closure of the book built issue. In case of fixed price issue, it would be around 37 days after closure of the issue.

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How does one come to know about the issues on offer? And from where can I get copies of the draft offer document?

SEBI issues press releases every week regarding the draft offer documents received and observations issued during the period. The draft offer documents are put up on the website under Reports/Documents section. The final offer documents that are filed with SEBI/ROC are also

put up for information under the same section. Copies of the draft offer documents in hard copy form may be obtained from the office of SEBI, Mittal Court, ‘A’ wing, Ground Floor, 224, Nariman Point, Mumbai – 400021 on a payment of Rs.100 or from SES, LMs etc. The soft copies can be downloaded from the SEBI website under Reports/Documents section. Some LMs also make it available on their web sites for download. The final offer documents that are filed with SEBI/ROC can also be downloaded from the same section of the website.

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Who are the intermediaries in an issue?

Merchant Bankers to the issue or Book Running Lead Managers (BRLM), syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue. The issuer discloses the addresses, telephone/fax numbers and email addresses of these intermediaries. In addition to this, the issuer also discloses the details of the compliance officer appointed by the company for the purpose of the issue.

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Who is eligible to be a BRLM?

A Merchant banker possessing a valid SEBI registration in accordance with the SEBI (Merchant Bankers) Regulations, 1992 is eligible to act as a Book Running Lead Manager to an issue.

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What is the role of a Lead Manager? (pre and post issue)

In the pre-issue process, the Lead Manager (LM) takes up the due diligence of company’s operations/ management/ business plans/ legal etc. Other activities of the LM include drafting and design of Offer documents, Prospectus, statutory advertisements and memorandum containing salient features of the Prospectus. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including finalisation of Prospectus and RoC filing. Appointment of other intermediaries viz., Registrar(s), Printers, Advertising Agency and Bankers to the Offer is also included in the pre-issue processes.

The LM also draws up the various marketing strategies for the issue. The post issue activities including management of escrow accounts, coordinate non-institutional allocation, intimation of allocation and dispatch of refunds to bidders etc are performed by the LM. The post Offer activities for the Offer will involve essential follow-up steps, which include the finalization of trading and dealing of instruments and dispatch of certificates and demat of delivery of shares, with the various agencies connected with the work such as the Registrar(s) to the Offer and Bankers to the Offer and the bank handling refund business. The merchant banker shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Company.

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What is the role of a registrar?

The Registrar finalizes the list of eligible allottees after deleting the invalid applications and ensures that the corporate action for crediting of shares to the demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. The Lead manager coordinates with the Registrar to ensure follow up so that that the flow of applications from collecting bank branches, processing of the applications and other matters till the basis of allotment is finalized, dispatch security certificates and refund orders completed and securities listed.

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What is the role of bankers to the issue?

Bankers to the issue, as the name suggests, carries out all the activities of ensuring that the funds are collected and transferred to the Escrow accounts. The Lead Merchant Banker shall ensure that Bankers to the Issue are appointed in all the mandatory collection centers as specified in DIP Guidelines. The LM also ensures follow-up with bankers to the issue to get quick estimates of collection and advising the issuer about closure of the issue, based on the correct figures.

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What is the recourse available to the investor in case of issue complaints?

Most of the issue complaints pertain to non-receipt of refund or allotment, or delay in receipt of refund or allotment and payment of interest thereon. These complaints shall be made to the post issue Lead Manager, who in turn will take up the matter with registrar to redress the complaints. In case the investor does not receive any reply within a reasonable time, investor may complain to SEBI, Office of investors Assistance

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Where do I get data on primary issues? (issuer, total issues, issue size, the intermediaries, etc., during a given period)

SEBI brings out a monthly bulletin that is available off the shelf at bookstores. A digital version of the same is available on the SEBI website under the “News/Publications” section. The Bulletin contains all the relevant historical figures of intermediary issue and intermediary particulars during the given period placed against historical figures.

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What are the relevant regulations and where do I find them?

The SEBI Manual is SEBI authorized publication that is a comprehensive databank of all relevant Acts, Rules, Regulations and Guidelines that are related to the functioning of the Board. The details pertaining to the Acts, Rules, Regulations, Guidelines and Circulars are placed on the SEBI website under the “Legal Framework” section. The periodic updates are uploaded onto the SEBI website regularly.

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What are Risk Factors?

Here, the issuer’s management gives its view on the Internal and external risks faced by the company. Here, the company also makes a note on the forward-looking statements. This information is disclosed in the initial pages of the document and it is also clearly disclosed in the abridged prospectus. It is generally advised that the investors should go through all the risk factors of the company before making an investment decision.

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What is an Introduction?

The introduction covers a summary of the industry and business of the issuer company, the offering details in brief, summary of consolidated financial, operating and other data. General Information about the company, the merchant bankers and their responsibilities, the details of brokers/syndicate members to the Issue, credit rating (in case of debt issue), debenture trustees (in case of debt issue), monitoring agency, book building process in brief and details of underwriting Agreements are given here. Important details of capital structure, objects of the offering, funds requirement, funding plan, schedule of implementation, funds deployed, sources of financing of funds already deployed, sources of financing for the balance fund requirement, interim use of funds, basic terms of issue, basis for issue price, tax benefits are covered.

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This presents a review of on the details of the business of the company, business strategy, competitive strengths, insurance, industry-regulation (if applicable), history and corporate structure, main objects, subsidiary details, management and board of directors, compensation, corporate governance, related party transactions, exchange rates, currency of presentation dividend policy and management's discussion and analysis of financial condition and results of operations are given.

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What is a Financial Statements?

Financial statement, changes in accounting policies in the last three years and differences between the accounting policies and the Indian Accounting Policies (if the Company has presented its Financial Statements also as per Either US GAAP/IAS are presented.

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What are Legal and other information?

Outstanding litigations and material developments, litigations involving the company and its subsidiaries, promoters and group companies are disclosed. Also material developments since the last balance sheet date, government approvals/licensing arrangements, investment approvals (FIPB/RBI etc.), all government and other approvals, technical approvals, indebtedness, etc. are disclosed.

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What is a Green-shoe Option?

Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter VIIIA of DIP Guidelines, which is granted to a company to be exercised through a Stabilizing Agent. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size. From an investor’s perspective, an issue with green shoe option provides more probability of getting shares and also that post listing price may show relatively more stability as compared to market.

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What is an e-IPO?

A company proposing to issue capital to public through the on-line system of the stock exchange for offer of securities can do so if it complies with the requirements under Chapter 11A of DIP Guidelines. The appointment of various intermediaries by the issuer includes a prerequisite that such members/registrars have the required facilities to accommodate such an online issue process.

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What is Safety Net?

Any safety net scheme or buy-back arrangements of the shares proposed in any public issue shall be finalized by an issuer company with the lead merchant banker in advance and disclosed in the prospectus. Such buy back or safety net arrangements shall be made available only to all original

resident individual allottees limited up to a maximum of 1000 shares per allottee and the offer is kept open for a period of 6 months from the last date of dispatch of securities. The details regarding Safety Net are covered under Clause 8.18 of DIP Guidelines.

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Who is a Syndicate Member?

The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an ‘Underwriter’ as syndicate members. The syndicate members are mainly appointed to collect and entire the bid forms in a book built issue.

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What is Open book/closed book?

Presently, in issues made through book building, Issuers and merchant bankers are required to ensure online display of the demand and bids during the bidding period. This is the Open book system of book building. Here, the investor can be guided by the movements of the bids during the period in which the bid is kept open. Under closed book building, the book is not made public and the bidders will have to take a call on the price at which they intend to make a bid without having any information on the bids submitted by other bidders.

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What is Hard underwriting?

Hard underwriting is when an underwriter agrees to buy his commitment at its earliest stage. The underwriter guarantees a fixed amount to the issuer from the issue. Thus, in case the shares are not subscribed by investors, the issue is devolved on underwriters and they have to bring in the amount by subscribing to the shares. The underwriter bears a risk which is much higher in soft underwriting.

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What is Soft underwriting?

Soft underwriting is when an underwriter agrees to buy the shares at later stages as soon as the pricing process is complete. He then, immediately places those shares with institutional players. The risk faced by the underwriter as such is reduced to a small window of time. Also, the soft underwriter has the option to invoke a force Majeure (acts of God) clause in case there are certain factors beyond the control that can affect the underwriter’s ability to place the shares with the buyers.

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What is a Cut Off Price?

In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut off price”. This is decided by the

issuer and LM after considering the book and investors’ appetite for the stock. SEBI (DIP) guidelines permit only retail individual investors to have an option of applying at cut off price.

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What is Differential pricing?

Pricing of an issue where one category is offered shares at a price different from the other category is called differential pricing. In DIP Guidelines differential pricing is allowed only if the securities to applicants in the firm allotment category is at a price higher than the price at which the net offer to the public is made. The net offer to the public means the offer made to the Indian public and does not include firm allotments or reservations or promoters’ contributions.

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What is Basis of Allocation/Basis of Allotment?

After the closure of the issue, the bids received are aggregated under different categories i.e., firm allotment, Qualified Institutional Buyers (QIBs), Non-Institutional Buyers (NIBs), Retail, etc. The oversubscription ratios are then calculated for each of the categories as against the shares reserved for each of the categories in the offer document. Within each of these categories, the bids are then segregated into different buckets based on the number of shares applied for. The oversubscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined. Then, the number of successful allottees is determined. This process is followed in case of proportionate allotment. In

case of allotment for QIBs, it is subject to the discretion of the post issue lead manager.

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Who is Qualified Institutional Buyer (QIBs)?

Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified Institutional Buyer’ shall mean:

a. Public financial institution as defined in section 4A of theCompanies Act, 1956;

b. Scheduled commercial banks;

c. Mutual funds;

d. Foreign institutional investor registered with SEBI;

e. Multilateral and bilateral development financial institutions;

f. Venture capital funds registered with SEBI.

g. Foreign Venture capital investors registered with SEBI.

h. State Industrial Development Corporations.

i. Insurance Companies registered with the Insurance Regulatoryand Development Authority (IRDA).

j. Provident Funds with minimum corpus of Rs.25 crores

k. Pension Funds with minimum corpus of Rs. 25 crores)

These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.

Source: http://www.sebi.gov.in