Dawn for REITs in India: SEBI issues consultative paper on Draft SEBI (Real Estate Investment Trust) Regulation, 2013

SEBI has finally released the CONSULTATIVE PAPER on the draft regulation for paving the way for the introduction of Real Estate Investment Trust (REIT) in India. SEBI had, in 2008, issued the first draft regulation for introduction of REITs but since then nothing happened. Finally, SEBI has woken up and issued a consultative paper in order to introduce REITs.

Now, let’s understand what exactly REIT is and how it functions. Real estate investment trusts (“REITs”) allow individuals to invest in large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or related assets. These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Further, these REITs are publicly traded on recognized stock exchanges. Globally, REITs have been a key driver towards development of the real estate sector, by providing a platform for retail and institutional investors to invest in real estate properties, with the benefits of a regulated structure and risk diversification. The opportunity to take an interest in completed and yield generating real estate assets with the option to obtain regular flow of income from REITs, makes them a popular instrument amongst investors.

STRUCTURE OF REIT IN INDIA

The draft regulation envisage a REIT as a trust set up under the provisions of the Indian Trust Act, 1882 which would raise funds through an initial public offer and be listed on stock exchanges. Further, REITs are required to invest at least 90 % of their funds in completed and rent generating properties. Also, the roles and responsibilities of various key parties to a REIT such as Trustee, the sponsor, the manager and the Principal Valuer appointed by manager are set out in detail.

‘Personal Information’ of a Mobile Subscriber is outside the purview of RTI Act

In an important decision, Delhi High Court (“High Court”) has allowed a writ petition filed by Telecom Regulatory Authority of India (“TRAI”) against the order of Central Information Commission (“CIC”). In the impugned order of CIC, TRAI was ordered to seek information of a mobile subscriber from the concerned service provider. [Telecom Regulatory Authority of India v. Yash Pal, judgment Dated 25^th October, 2013]

(Image Source: rationallibertariancorner.com)

Facts: The respondent, Yash Pal, had applied to the CPIO of TRAI seeking call and SMS details of certain mobile numbers. When his application was rejected by both the CPIO and the appellate authority, the respondent filed a second appeal before the CIC. By its order, CIC directed the TRAI to call for the requisite information subject to its availability with the  Service  Provider  and  pass  on  the  same  to  the  respondent. TRAI was required to do this by exercising its power under section 12(1) of Telecom Regulatory Authority of India Act, 1997 (“TRAI Act”). Against this order, TRAI filed the present petition before the High Court.

Relevant Legislations: Right to Information Act, 2005; Telecom Regulatory Authority of India Act, 1997]

Bench: Single Judge [Justice V.K. Jain]

'Doctrine of fairness' is not applicable to Statutory Contracts

Holding that doctrine of reasonableness or fairness is not applicable to statutory contracts, Supreme Court of India (“Supreme Court”) has rejected an appeal wherein the appellant had sought the refund of security amount which was deposited to open an arrack shop.  In Mary v. State of Kerala and Ors [Judgment dated October, 22, 2013], the court had to consider the following issue:

“.....in  case  of  a  statutory  contract,  will  it necessarily  destroy  all  the  incidents  of  an ordinary  contract  that  are  otherwise  governed  by the Contract Act?”

Facts: The appellant, Mary, having succeeded in an auction for sale of privilege to open an arrack shop, had deposited 30% of the bid amount as security. However, near to the area, where the arrack shop had to be started, was the birth place of Adi Sankaracharya and also a Christian pilgrim centre. Because of this, physical resistance was offered by the local people so that the arrack shop could not be opened in the area. This situation led the appellant to believe that it was not possible for her to open arrack shop in the area. Accordingly, she requested the concerned authorities to consider the ‘proposed contract’ as rescinded.

(Image Source: virginiabusinesslitigationlawyer.com)

Declining the request of the appellant, the Excise Inspector sent a notice to the appellant thereby awarding the contract to open arrack shop in her favour. In addition to this, security deposit, as requested by the appellant, was not returned. Further communications took place between the appellant and the authorities but the request of the appellant was not accepted. Against this, the appellant filed a writ petition before the High Court of Kerala (“High Court”). Applying the doctrine of frustration and impossibility, the single judge bench of the High Court held that the contract had become void from its inception. On appeal to division bench, the single judge bench judgment was reversed and it was held by the High Court that the state was justified in forfeiting the deposit made as a security.

Section 29(5) of the Trade Marks Act does not preclude the application of Section 29(4)

Recently, the Delhi High Court (“High Court”) has decided a trade mark dispute (Bloomberg Finance LLP v. Prafull Sak lecha & Ors.) wherein the court had to analyse whether section 29(5) of Trade Marks Act, 1999 (“TM Act”) is exhaustive for all situations of uses of the registered mark as part of the corporate name . That is, if conditions laid down under section 29(5) of TM Act are not satisfied, can the plaintiff still seek a remedy under section 29(4) of the Act. In the present case, a suit was filed by Bloomberg Finance LLP, the plaintiff, to restrain the defendants from using term ‘Bloomberg’ as a part of their corporate names.

(Image courtesy: Westpalmbeachlaw.com)

According to section 29(5) of the TM Act, a registered trade mark is infringed if (i) it has been used in relation to a trade, and (ii) it has been used in relation to goods or services in respect of which the trade mark registered. On the other hand, section 29(4) of the TM Act provides for a situation where a mark is infringed when it ‘is used in relation to goods or services which are not similar to those for which the trade mark is registered’. In this post, I am highlighting only the issues related to the interpretation of section 29(4) and section 29(5) of the TM Act and not the other parts.

Arushi Talwar Case: Applications for Addition Evidence may be rejected if the object is to stall proceedings

Is a criminal court bound to entertain the plea of accepting additional evidence? In a recent judgment, the Supreme Court answered the question in negative.

In a ground breaking development in the already long and controversial Arushi Talwar murder case, a two judge bench of the Hon'ble Supreme Court comprising of Dr. B.S. Chauhan and S.A. Bobde, JJ rejecting the plea of the petitioners seeking for the reports of the Narco-analysis tests, brain mapping tests, polygraph tests, lie detector tests and psychological tests conducted on the 3 persons arrested for allegedly helping the petitioners in the commission of the offence,recently held that the petitioners were adopting dilatory tactics in the trial as the learned Trial Judge who has been conducting the trial is likely to retire very soon. 

In order to arrive at the conclusion the Court considered the fact that the petitioners had not raised any previous objection regarding non-supply of the reports and documents allegedly proved by the witnesses to them or them not being made part of the Court record. They had even participated in the examination and cross-examination of two witnesses. The Hon'ble Court opined that criminal courts are not obliged to accede to the request made by any party to entertain and allow application for additional evidence and in fact, are bound by terms of Section 233(3) Cr.PC. to refuse such request if it appears that they are made in order to vex the proceedings or delay the same.

The full order of the court can be found here

Concealing Existing Marriage will allow Wife to claim Maintenance under Section 125 CrPC

Under Section 125 of the Code of Criminal Procedure (“CrPC”), wives, children and parents, if the situation requires, can claim maintenance. Recently, Supreme Court of India, while delivering the judgment in Badshah v. Sou. Urmila Badshah Godse & Anr, had to decide a vital question pertaining to section 125. In this case, a situation had arisen where a woman, being unaware of the existence of man’s first marriage, was claiming maintenance. The question which the court had to decide was – whether, in such a situation, a woman can be considered as ‘wife’ for claiming maintenance under section 125 of CrCP? Under Hindu Marriage Act, 1955 (“Hindu Marriage Act”), a person cannot marry where he/she has a spouse living at the time of marriage. Because of this, the question that arose in the present case becomes important. In this post, I have summarised the important points of this case where court had upheld the maintenance claim of wife.

(Singapore Cheating Spouse Blog)

Facts: The Petitioner, Badshah, married Respondent no. 1, Urmila, after the divorce of the latter from her first husband. Later, it was found by the Respondent No. 1 that the petitioner was already married to one lady, Sobha. Petitioner had duped respondent No.1 by not revealing the fact of his first marriage and pretending that he was single. Even after finding this fact, the Respondent no. 1 continued to live with the Petitioner as she had become pregnant. When the ill-treatment by the Petitioner became intolerable, the Respondent no. 1 was left with no choice but to go to the house of her parents. Subsequently, Respondent no. 1 gave birth to a girl child whose biological father was Petitioner. A proceeding was consequently initiated by Respondent no.1 for claiming maintenance under Section 125 of CrPC. The maintenance was granted in favour of the Respondent no. 1 by the Sessions Judgment and, on appeal, the order was affirmed by the High Court.

SEBI finally releases Draft Regulation on Consent Order i.e. SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2013

SEBI has finally issued draft regulation on Consent order i.e. SEBI (Settlement ofAdministrative and Civil Proceedings), Regulations 2013. Now, before moving on to discuss the main features of the draft regulations, certain important point needs to be discussed here. The need to have a regulation for consent and settlement order became increasingly necessary following the promulgation of the Securities Law Amendment Ordinance, 2013. Now, I shall bring out one important fallacy currently prevailing in matters relating to Consent orders passed by SEBI.

[Image Source- Click here]

The Ordinance granted statutory approval and sanction to the consent orders of the SEBI passed over the several past years from any challenge. It may be recalled HERE that the legal basis for guidelines relating to consent order was challenged before the Delhi High Court. However, the PIL was not successful. Thus, it appears that to overcome this and other related concern that the securities ordinance has specifically inserted Section 15JB to empower SEBI to settlement of proceedings with retrospective effect from 20th April, 2007. Also, the first GUIDELINES relating to consent order was issued on 20th April, 2007.

Now, the newly inserted SECTION 15JB (2) states that SEBI ‘may’ agree to a proposal for settlement on such terms “as may be determined by the Board in accordance with the regulations made under this Act”

SECTION 15JB (3) further reads as follows:-

“The settlement proceedings under this section shall be conducted in accordance with the procedure specified in the regulations made under this Act.”

Interestingly, no such Regulations, as mandated, have ever been framed for the settlement proceedings. Only guidelines were issued in the form of Circular by the SEBI. It seems that the earlier Guidelines relating to consent order are liable to be set aside as not being Regulations. Therefore, the SEBI has finally come up with the draft regulations to overcome this difficulty.

Now, we shall move on to discuss the salient features of the Draft regulations released by SEBI.

Modifications in the existing Buy Back Regime: SEBI’s new ‘Buy Back of Securities (Amendment) Regulations, 2013’

SEBI has recently amended the existing buy back regime (Buy Back of Securities Regulations, 1998) concerning the securities market vide notification dated 8^th August, 2013. Thus, the new buy back regime has kicked in by the way of SEBI (Buy Back of Securities) Regulations,2013. Various changes have been introduced in the new regulations to ensure that there is lower volatility in the capitals market. Further, the new regulations has taken a substantial amount of flexibility and leeway, the companies earlier enjoyed concerning the time lines attached to open market purchase of the securities.

Now, before moving on to discuss the changes and modifications introduced in the new buy back regime, a little understanding of what exactly is ‘buy back of securities’ would be useful.  

[Image Source-taxmantra.com]

Buy Back of securities basically means the purchase of securities by a company from its existing shareholders. Thus a company purchases backs its own share in order to reduce the number of shares in the market. Buy back of shares is usually done by a company due to of following reasons-

i.            Return surplus cash to the shareholders

ii.   Support share price during periods of temporary weakness

iii.         Increase the underlying share value

iv.          To increase the value of shares still available (by reducing the supply)

v.      To eliminate any threats by shareholders who may be looking for controlling stake(hostile takeover)

Now, we shall discuss the modifications and amendments introduced by the new Buy Back of Securities, Regulations 2013.

Delhi High Court rejects ESPN’s plea on Sharing Live Signals with Prasar Bharti

In what can be considered as an important decision, Delhi High Court (“High Court”) has dismissed a writ petition filed by ESPN Software India Pvt. Ltd (“Petitioner”) wherein the validity of Rule 5 of the Sports Broadcast Signals (Mandatory Sharing with Prasar Bharti) Rules, 2007 [“Broadcasting Rules”] had been challenged. Rule 5 of the Broadcasting Rules casts an obligation on television/radio broadcaster to ensure the compliance with statutory obligation of sharing live feed with Prasar Bharti while an agreement is entered into with event organiser. Rule 5 covers a situation where television or radio broadcasting service provider is different from the contents rights owner or holder. 

(Image Source: Dashbrust.com)

According to the petitioner, Rule 5 of Broadcasting Rules was violative of section 3 of Sports Broadcast Signals (Mandatory Sharing with Prasar Bharti) Act, 2007 (“Signal Sharing Act”) and Article 14 of the Constitution of India. Section 3 of the Signal Sharing Act makes it obligatory for a content owner/holder and a broadcasting service provider to share live signals of sports of national importance with Prasar Bharti. While sharing such signals, it should be ensured by the content holder, owner etc. that ‘its advertisements’ are not present in the shared in the shared signal. The provision can be read as:

                                       “3. Mandatory  sharing  of  certain  sports  broadcasting  signals-(1)  No  content  rights  owner  or  holder  and  no  television  or radio  broadcasting  service  provider  shall  carry  a  live television broadcast on any cable or Direct -to-Home network or radio commentary broadcast in India of sporting events of national importance, unless it simultaneously shares the live broadcasting  signal,  without  its  advertisements, with the Prasar Bharati to enable them to re-transmit the same on its terrestrial  networks  and  Direct-to-Home  networks  in  such manner  and  on  such  terms  and  conditions  as  may   be specified...........”

‘Sanction’ Required for an Investigation Order against a 'Public Servant' under Section 156(3) of Code of Criminal Procedure, 1973

Section 156(3) of the Code of Criminal Procedure, 1973 (“Code”), provides that any magistrate, who is empowered under Section 190 (of the Code) to take cognizance of an offence, may order an investigation. Yesterday, Supreme Court of India (“Supreme Court”) has decided a case (AnilKumar & Ors v. M.K. Aiyappa & Anr) wherein the following the question had arisen:

                                            `“Whether the Special Judge/Magistrate is justified in referring a private complaint made under Section 200 Cr.P.C. for investigation............, in exercise of powers conferred under Section 156(3)  Cr.P.C. without  the  production  of  a  valid sanction  order  under  Section  19  of  the  Prevention  of Corruption Act, 1988.”

(Image Source: Lawyersbook.com)

While section 200 of the Code provides for the competency of a magistrate to take the cognizance of an offence on the basis of a complaint, section 156(3) of the Code provides for magistrate's power to order an investigation . In the present case, a complaint had been filed by the Appellants, Anil Kumar & Ors, before the Special Judge (Prevention of Corruption) thereby accusing the Respondents, M.K. Aiyappa & Anr, of certain offences. The alleged offences, as contended by the Appellants, were under (“IPC”) and Prevention of Corruption Act, 1988 (“Corruption Act”).