Tag: JN Gupta

Axis Mutual Fund scam: What we know so far and how experts interpret it

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Axis Mutual Fund, India’s seventh-largest fund house, has been in the eye of the storm ever since front-running allegations surfaced against two of its fund managers — Viresh Joshi and Deepak Agarwal — where the former also acted as the chief dealer. Axis Mutual Fund announced the suspension of both of its fund managers last week after an investigation.

The accusations against both Joshi and Agarwal include front-running and price rigging. When a mutual fund dealer tries to profit from the knowledge of orders that a fund house has lined up, it is referred to as front-running.

While the probe against the two accused personnel began in February, no action was initiated against them until last week. On May 8, the fund house’s Managing Director and Chief Executive Officer, Chandresh Nigam, announced the probe in a communication to its distributors and investors. He highlighted that the probe in question was being conducted by two external agencies appointed by the Axis Mutual Fund.

Also Read: Amid Axis Mutual Fund row, some analysts ask investors of impacted schemes to hold on to their units

Nigam assured investors of the “highest governance standards, stringent protocols and best-in-class processes for fund management.” He mentioned that the suspension of the two fund managers was done as preliminary action.

In an interview with CNBC-TV18, JN Gupta, former SEBI ED and MD of Stakeholders Empowerment Services, urged Axis Mutual Fund to bring out more transparency concerning the scam in question. He mentioned that he isn’t aware of the extent of the problem but believes that both the persons named are responsible for the said fraud.

“We do not know what has been the impact on the fund’s performance because of this action. If it has been a negligible impact, investors will probably not lose confidence. But that is where the problem is. Transparency needs to be brought into the thing as soon as possible,” Gupta said.

Meanwhile, Shriram Subramanian from InGovern, reckons that Axis Mutual Fund will come out with more details soon. He said that the fund house only came out with disclosures after the media pointed it out.

Also Read: Axis MF suspends 2 fund managers pending investigation of potential irregularities

He said, “It is surprising that it was actually the chatter on Twitter and by media etc., which put the onus on Axis to come out with the disclosure. Axis itself did not proactively come out with any disclosure. The fund managers have been suspended only now, two months since the investigation is supposed to have started. And investors are still unclear as to what the reason is and why the investigation was triggered. So, the statement put out by Axis is very insipid. I would expect Axis to come up with much more granular details on what triggered the investigation.”

Subramanian feels that the damage this fraud has done will take a while to clear out. He believes that mutual funds will find it tough to gain back the confidence and trust of people.

For the entire discussion, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

NCLT to hear Zee-Invesco case today: Experts believe Bombay HC unlikely to consider suit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Days after the National Company Law Tribunal (NCLT) asked Zee’s board to consider Invesco Developing Markets Fund and OFI Global China Fund LLC’s request for an Extraordinary General Meeting (EGM), Zee Entertainment Enterprises Limited (ZEEL) filed a suit before the Bombay High Court requesting it to declare shareholders Invesco Developing Markets Fund and OFI Global China Fund LLC’s requisition to hold an extraordinary meeting (EGM) illegal and invalid, the company said on Saturday.

Also Read: BOTTOMLINE: Zee’s real unanswered questions

The announcement, via a letter sent to the Bombay Stock Exchange and National Stock Exchange, came a day after the media firm refused to hold an EGM sought by the two shareholders to pass a resolution to remove Zee’s managing director and CEO Punit Goenka and appoint new independent directors earlier in September. The NCLT is set to hear the Zee- Invesco matter later today. HP Ranina, economist, corporate lawyer, Hetal Dalal, president and COO, IiAS, and JN Gupta, former ED, Securities and Exchange Board of India and managing director at Stakeholders Empowerment Services, discussed this further.

According to Ranina, since the matter is pending before the NCLT on a similar point, Bombay HC would not like to consider the suit at this stage.

“I don’t know why they have done this. All these multiple cases are complicating the issues and also trying to undermine the authority of the NCLT,” Ranina said.

Also Read: Zee EGM: Here’s why Invesco moved NCLT

Hetal Dalal also believes that a lot of this (cases) is basically going to complicate things in terms of legal matters.

“They are going to use the jurisdiction to delay the entire process. I don’t think it is in anybody’s hands. The court now has to decide how this is going to play out and given this period of the judicial system, this is likely to be protracted,” she mentioned.

According to Dalal, the board is trying to block Invesco in terms of the actions that Invesco wants to undertake. “We logically believe that the board should engage with shareholders and try to address the issues or find a particular middle ground. Invesco also on the other side is looking at stricter and stricter and regulatory actions but in terms of being able to get its message through, it does need to engage with the remaining set of shareholders. Therefore, more open articulation of what the issues are, how it stands on the entire transaction and how it proposes to progress assuming Punit Goenka is not in the equation anymore is going to be the driver of how much comfort investors finally have in terms of how they are going forward, that is the way to look at this. All of this legal protracted battle is essentially just a strategy in terms of blocking the investors’ move to remove Punit Goenka,” she explained.

Also Read: Strategic Zee-Sony deal still underway; Invesco move likely backed by majority shareholders: Experts

“Invesco saying, I do not want to conduct the EGM because I am a US-based investor doesn’t hold water because US-based investors can always hire agency here for doing things and the company is bound to provide details to shareholders,” Gupta said.

For the entire discussion, watch the accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Zee dismisses Invesco’s request to hold EGM; expert says rejection on technical ground not good governance

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Zee Entertainment Enterprises Limited (ZEEL) board has decided to not hold an extraordinary general meeting (EGM) sought by its shareholder Invesco, the company said on Friday.

“The Board deliberated, and unanimously concluded that the Requisition Notice is not valid, as it suffers from multiples legal infirmities,” the media firm told Invesco in a letter.

The letter comes a day after the National Company Law Tribunal (NCLT) directed Zee’s board to consider Invesco Developing Market Fund and OFI Global China Fund’s requisition to hold an EGM.

Referring to the ‘multiples legal infirmities’ it has cited, Zee said the appointment of new independent directors, as proposed by Invesco in the requisition notice, is subject to prior approval from the Ministry of Information and Broadcasting.

According to JN Gupta, former ED, SEBI and MD at Stakeholders Empowerment Services, rejection on technical ground may not be the good governance on the part of Zee. “Zee is very well within its rights not to convene EGM because the law itself provides a remedy there. If I was in a position of Zee, I would have refused it on the fact that I am not calling it, you are free to call the EGM but I would not say that the notice is bad in law because then I should have provided them what was the bad in law in the notice. I don’t buy that argument because then they should have told that 20 days back,” he said.

Also Read: SEBI chief declines to comment on Zee, says action will be taken in case of violations

Gupta, however, pointed out that NCLT has a very limited scope of intervention in the issue. The tribunal cannot go beyond the law. “There is a provision that if there is a failure to call the meeting, the shareholders themselves can call the meeting. So, in my opinion, it is a matter for NCLAT and then for Supreme Court to decide. NCLT has to interpret the law, it cannot overwrite the law,” he explained.

Meanwhile, Hetal Dalal, President & COO, IIAS was disappointed with Zee’s handling of the case.

Zee has taken the legal opinion and therefore cannot hold the EGM and so, to that extent Invesco was right to preemptively approach NCLT because clearly the board was dragging it and now it has found the new reason to not hold the EGM. 

She said the law states that now that the board is refusing to hold the EGM, the investors now have to go ahead and hold the EGM. “That is where the board was probably banking on. I am a little disappointed that the board is reacting in this particular manner. It is blocking the issue rather than addressing it in any and every form that it can, which is not the way to be,” she said.

This reinforces Invesco’s point of view that the board needs better independence, she noted.

Also Read: Strategic Zee-Sony deal still underway; Invesco move likely backed by majority shareholders: Experts

Corporate Lawyer HP Ranina told CNBC-TV18 that if f the requisition has not been made then the company can refuse to have the EGM. “Now, the board will appear before NCLT on Monday morning and show how it is invalid and then the NCLT will decide whether to direct them to hold the EGM or now. They will have to now establish their point that it is invalid before the NCLT,” he added.

The ball is in the NCLT’s court to decide whether this requisition was valid or invalid, he said.

For the entire discussion, watch the accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Regulatory hurdles likely to delay Zee-Sony merger; Invesco’s NCLT move premature: Experts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The boardroom battle between Zee Entertainment and Invesco is getting more intense. Invesco has moved the National Company Law Tribunal (NCLT) against Zee Entertainment for failing to announce a date for the extraordinary general meeting (EGM) – Invesco had earlier demanded that an EGM be held to reshuffle the board. They had also sought Puneet Goenka’s ouster from the board. HP Ranina, corporate lawyer, JN Gupta, former ED, SEBI and MD at Stakeholders Empowerment Services, and Shriram Subramanian, founder and MD, InGovern, discussed this further.

JN Gupta believes it is a premature action.

“To me, it appears to be a premature action and I am wondering how NCLT is entertaining it unless until the application talks about something else,” he said.

According to his calculation, the time limit is up to October 3, 21 days from the day when one receives the notice. The day of receiving the notice is always excluded. So, if the notice was received on September 12, it will start from September 13, he explained.

Also Read: As Invesco reiterates demand for Zee EGM, expert says current board within rights to take any decision

Even if EGM is not called, there is no remedy in NCLT because the law provides that if the company fails to call the EGM, then the shareholders have the authority to call the EGM themselves, he mentioned.

According to Ranina, the whole process of merger of Zee and Sony is going to be delayed because of this.

“Whichever way it goes, it will help either party because it will expedite the issue one way or the other. Whether it will help the investors or whether it will help the current board and the Zee promoters along with the present managing director Punit Goenka – so one way or the other, the matter is going to be resolved but there will be a delay for sure. Once the NCLT gives the order, either party will go to the National Company Law Appellate Tribunal (NCLAT) and then possibly to Supreme Court (SC), so delay is inevitable,” Ranina said.

Also Read: Strategic Zee-Sony deal still underway; Invesco move likely backed by majority shareholders: Experts

While Subramanian noted that no analyst has questioned the rationale of the merger between Zee and Sony including Invesco.

“Zee-Sony deal itself is a very positive step for investors at large because Sony will be at the helm of affairs, it will be having majority of the board members, will have 53 percent shareholding. So, I would think that is a huge positive for investors at large,” Subramanian said.

For the entire disco, watch the accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

As Invesco reiterates demand for Zee EGM, expert says current board within rights to take any decision

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Zee Entertainment Enterprises was in focus on Monday as its single largest shareholder, Invesco, has written a new letter to the company’s board to call for an extraordinary general meeting (EGM). Invesco is reiterating its demand for the reconstitution of Zee’s board and the removal of Punit Goenka as director.

“The Board of Directors of ZEEL at its meeting held on September 22, 2021, has approved the execution of a non-binding term sheet with Sony Pictures Networks India Private Limited, in relation to a potential transaction involving a composite scheme of arrangement for the merger of the Company and Sony India and infusion of growth capital by the promoters of Sony India into Sony India as part of the merger,” Zee Entertainment said on September 22.

Now with this new letter, where does the game of brinkmanship between Invesco and the Zee board stand at the moment? To discuss this in detail, CNBC-TV18 spoke with experts JN Gupta, MD, Stakeholders Empowerment Services, and Abneesh Roy of Edelweiss Securities.

Asked whether the media giant’s current board is well within its powers to take these decisions while the EGM process goes on, Gupta cited the example of the election process in India, where the Election Commission has a moral code of conduct which begins when that election dates are announced.

There is nothing like that in the corporate governance code, he said. When an EGM notice is given, the company’s board does not stop to only start working normally only after the EGM is conducted. “I would disagree with this concept that the entire thing would put to be put to hold under until the EGM is held,” he said.

Also, both proposals will go to shareholders for approval, he said.

“So, if the current board has decided to go ahead with whatever they have decided, it has not lost sanctity because that proposal also will be put to the same body to which the EGM notice is going to be put,” said Gupta. If the same body is deciding on two proposals, there is nothing wrong with that, and it is not that the board has lost the moral sanctity to do that, he said.

Roy is of the view that the letter was in fact a bit surprising given there are three weeks for ZEE to announce on the EGM.

According to him, this doesn’t change much, because now a lot of investors would also feel that the ultimate end goal would have been a strategic player. Many investors also feel that operationally, Punit Goenka has done a decent job.

“ZEE promoters and the largest minority shareholder will need to work on this because for the EGM, Invesco would also need around 33 percent more support. Similarly, for the Sony deal, the ZEE promoters would need around 70 percent more support, and they would need that out of balance 82 percent if Invesco doesn’t support,” said Roy.

Also Read: Strategic Zee-Sony deal still underway; Invesco move likely backed by majority shareholders: Experts

He said it is good to see that Invesco is also saying that there is a need to evaluate the Sony deal with an independent board, and ZEE is valuable with or without the deal, which is a positive. A lot of investors feel that most of the concerns are getting addressed. But anything on the EGM does lead to volatility because then the merger and approvals could get delayed.

Roy expects volatility in the stock to continue till clarity emerges on the EGM front. One will also have to see how the approvals from the different regulators come through, he said.

Both parties seem to be working with a similar end goal, although currently, it looks like that their process is slightly different, he said.

Key takeaways

The current board is well within its rights to take any decision. Ultimately, whether or not the Invesco proposal goes through,  all these proposals that go through will be through a democratic election, where the shareholders will have to give a 50 percent vote of approval.

For the entire conversation, watch the video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

PNB Housing Finance moves SAT against SEBI order: Experts discuss

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The capital market regulator Securities & Exchange Board of India (SEBI) has stalled the deal between PNB Housing Finance and Carlyle on grounds of violation of articles of association provisions which was first highlighted by the proxy advisory firm SES.

PNB Housing Finance has challenged the SEBI’s order in Securities Appellate Tribunal (SAT) and goes ahead with the EGM on June 22. JN Gupta, MD of Stakeholders Empowerment Services (SES) as well as Shailesh Haribhakti of SH Associates discussed this further.

Read here: PNB Housing Finance moves Securities Appellate Tribunal against SEBI’s order to halt Carlyle deal

“The hierarchy of the law both The Companies Act, SEBI Listing Obligations and Disclosure Requirements (LODR) and the Article of Association – as long as article does not have anything contradictory, Companies Act on Issue of Capital and Disclosure Requirements (ICDR) would have prohibited valuation report and article would have said that valuation report is required then it will be in the conflict. There is something additional which is required by article of association which is very much permitted in the law, most of the ICDR or LODR provisions are much more stronger than the companies act themselves there is no conflict,” said Gupta.

In terms of valuing a company, Haribhakti said, “I would follow very strict principles of valuation in valuing any proposition which is as significant as this one. The considerations, which are usually in my mind are to keep the three methods which have been put in motion by the SC’s decision in HUL versus TOMCO would be applied and then appropriate weightage would be placed on it.”

“I am in full agreement with what Mr Gupta is saying. He is making a good point that if you want to be seen to be proper then please follow all the norms which have been laid down under regulation and under law,” Haribhakti added.

For the full interview, watch the accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Yes Bank’s past will not matter to future investors, says former Sebi ED JN Gupta

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Rana Kapoor, the co-founder and former CEO of crisis-hit Yes Bank, was on Sunday afternoon sent to three days Enforcement Directorate (ED) custody. He was arrested by the ED under provisions of the Prevention of Money Laundering Act (PMLA) in the early hours of Sunday. The arrest followed almost 20 hours of questioning by the ED officials.

Ashvin Parekh of Ashvin Parekh Advisory Services told CNBC-TV18 that the signs of problem may not be alarming as the RBI conducts routine checks on bank transactions. He added that the measures taken with respect to Yes Bank are justified.

Yes Bank co-founder Rana Kapoor sent to three days ED custody

He said that Yes Bank’s books will have to be investigated to see if more loans were irregular as well as examine the bank’s functioning under its former CEO Ravneet Gill. “These irregularities may have been happening for a while, have to ascertain specifics,” he added.

Parekh said that the RBI should have insisted on a thorough investigation “much earlier”, adding that Gill too should have tried to ascertain the rot at the bank earlier.

JN Gupta, former executive director of market regulator, the Securities and Exchange Board of India (Sebi), said that none of the investors brought in to raise capital for the debt-laden bank were up to scratch. He added that the RBI had not managed to find problems with the bank in the past, insisting that the banking regulator needs to look into the system to find what went wrong at the private lender.

However, Gupta added that problems in the bank’s past will not determine its future. Capital raising ability may not be hurt, he said. “With the SBI taking over, past of bank will not matter to any new investors.”

Kapoor’s residence had been raided on Friday night, hours after the Reserve Bank of India placed Yes Bank under moratorium and capped deposit withdrawals at Rs 50,000.

The ED is investigating Kapoor’s role in connection with the disbursal of a loan to a corporate and allegedly taking kickbacks in his wife’s accounts. The agency is also probing other irregularities, officials said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow