Fraudulent money transfer: Delhi High Court asks PNB to deposit Rs 45 lakh

PTI Jun 23, 2013, 11.48AM IST

NEW DELHI: The Delhi High Court has asked a nationalised bank to deposit with it Rs 45 lakh, awarded as damage in an illegal fund transfer case, till the final disposal of its appeal.

The court stayed the Maharashtra adjudicating officer's February 25 order which asked Punjab National Bank (PNB) to pay Rs 45 lakh to Poona Auto Ancillaries as a fraudster transfered Rs 80.10 lakh from the PNB account of the MD of the Pune-based firm.

The vacation bench of Justice Sanjeev Sachdeva asked the bank to deposit the damage amount with theRegistrar General of the high court till the final disposal of its appeal.

"Operation of the impugned order be stayed subject to the petitioner deposits Rs 45 lakh with the RG of this court," the court said.

Issuing notices to the ministries of Commerce and Information and Technology, the court sought their replies by August 13.

The Centre's counsel Sumit Pushkarna accepted the notices. The court order came on an appeal filed by PNB against the adjudicating officer's order on the complaint of Poona Auto Ancillaries under the Information and Technology Act alleging fraudulent transfer of funds from its current account with PNB branch Pune to the account of M/s Sutlej Textile with the PNB's Kathua branch in Jammu and Kashmir in August 2011.

According to the complainant company, the amounts were transferred in 40 transactions of Rs 2 lakh each and one transaction of Rs 10,000 in quick successions.

Canara Bank unveils eLounge, eLobby services

   L N Revathi :BL :COIMBATORE, JUNE 25:2013

  

 

Have you dreaded going to a bank’s branch for some reason or other? 

Well, you may not have to wait indefinitely to get into the ‘do-it-yourself’ act, if you are a customer of Canara Bank.

The bank’s latest technology initiative — the eLounge or eLobby — aims to help the customer do all his transactions, including pass book updation himself.

“There will be no manual intervention,’’ said R.K. Dubey, Chairman and Managing Director of Canara Bank.

While the eLobby service will be available round-the-clock, all through the year, it will not be available at the customer’s door-step. Rather, the bank is planning to set up the facility in its own premises.

Canara Bank has already launched the eLounge service in Bangalore and Delhi. Dubey indicated that the bank would look to create one in each city, including Coimbatore.

The eLounge will have a cash dispensing machine, cash deposit and cheque deposit unit, passbook printing machine, an online trading terminal and another machine working like an eKiosk, for Internet banking operations, he said.

While the initiative is expected to lure tech-savvy customers, Dubey made it clear that proper use of the eLounge alone would help the bank benefit from the roll-out of such an initiative.

(This article was published on June 25, 2013)

Keywords: Canara Bank, eLounge service, eLobby service, Canara Bank new tech initiative,

What if a cheque bounces? Here's a guide to the legal recourse available to you

Sakina Babwani, ET Bureau | 24 Jun, 2013, 08.00AM IST0 

Bounced cheques are one of the most common offences plaguing the financial world. According to the Supreme Court, there are over 40 lakh such pending cases in the country. A cheque can be dishonouredfor various reasons, the most common being insufficient funds in the account of the person drawing the cheque, and a mismatch of signatures with the bank records. But what do you do if you land a bad cheque? Here's a step-by-step guide to the legal recourse that is available to you.

Filing a criminal complaint

When a cheque bounces the first time, the bank issues a 'cheque return memo', stating the reasons for non-payment. The holder can resubmit the cheque to the bank within six months of the date on it, if he believes it will be honoured the second time.

The other option would be to prosecute the defaulter legally. The first step is to send a legal notice to the defaulter within 30 days of receiving the cheque return memo. All the relevant facts of the case, including the nature of transaction, amount, date of depositing the instrument in the bank, and subsequent date of dishonouring, should be clearly mentioned in the notice. If the cheque issuer fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to file a criminal complaint under Section 138 of the Negotiable Instruments Act. However, the complaint should be registered in a magistrate's court within a month of the expiry of the notice period.

If you fail to file the complaint within this period, your suit will become time-barred and, hence, not be entertained by the court unless you show sufficient and reasonable cause for the delay. On receiving the complaint, along with an affidavit and relevant paper trail, the court will issue summons and hear the matter. If found guilty, the defaulter can be punished with a prison term of two years and/or a fine, which can be as high as twice the cheque amount.

However, the defaulter can appeal to the sessions court within one month of the date of judgement of the lower court. If a prolonged court battle is not acceptable to both the parties, an out-of-court settlement can be attempted at any point. "You can also file a case of cheating under Section 420 of the Indian Penal Code, but the above recourse is preferred as it is faster and specially dedicated to this particular offence (bounced cheques)," says Ravi Goenka, advocate, Goenka Law Associates.

Filing a civil suit

While the above-mentioned process is helpful in taking a defaulter to task, it may not always result in recovery of the pending dues. Hence, one can file a separate civil suit for recovery of the cheque amount, along with the cost borne and the lost interest.


This is where a summary suit under Order 37 of the Code of Civil Procedure (1908) comes in. A summary suit is different from an ordinary suit as it does not give the accused the right to defend himself. Instead, the defendant has to procure permission from the court to do so. However, remember that summary suits can be availed of only in recovery matters, be it promissory notes, bills of exchange or cheques. "Since a summary suit is a civil proceeding that does not have the force of a criminal charge, the chances of imprisonment are remote in such matters," says Goenka.

Exceptions

These legal remedies are available only where pending debt or liability can be clearly established. Hence, if a bounced cheque was issued as a donation or as a gift, the holder cannot legally sue the defaulter.

Risk faced by defaulters

A jail term or heavy penalty isn't the only consequence faced by the issuer of a dishonoured cheque. The bank has the right to stop the chequebook facility and close the account for repeat offences of bounced cheques. However, the RBI clearly states that such action can be taken only if the default has taken place at least four times on cheques valued at over Rs 1 crore. Says Aakanksha Joshi, senior associate, Economic Laws Practice: "If the bounced cheque was for repayment of loans, banks also have the collateral offered as security. They are bound to issue a notice before they auction such property to recover the money." According to her, a bank can also deduct money from the defaulter's account if there is an explicit contract giving the bank such a right.

Changes in the pipeline

The option of dragging an offender to court under Section 138 of the Negotiable Instruments Act may not be available for long. If the amendment proposed by an interministerial group—set up last year to look into policy and legislative changes to tackle the large number of pending cases—are accepted, all cases of dishonoured cheques will have to be decided only through arbitration, conciliation or settlement by lok adalats. If the matter is referred to an arbitrator, the latter will hear both the parties and pass an award binding on both. This can only be appealed on grounds that it is invalid or the defendant was not given adequate time to present the case, or was not given notice about the arbitrator's appointment.

If the matter is referred for conciliation, a third person has to help the parties come to a settlement. Lok adalats function on similar lines. In both these cases, if the disputing parties are unable to settle, the matter can be taken to court again. Banks, however, are not happy with these developments. "This is a backward step in terms of recovery mechanism," says Meenakshi A, head, operations, ING Vysya Bank.

From November, Indians to pay Rs 2.7 lakh bond for UK visa

Kounteya Sinha, TNN | Jun 24, 2013, 01.28 AM IST

The scheme will be applicable to visitors from India, 
Pakistan, Bangladesh, Sri Lanka, Nigeria and Ghana.


LONDON: Planning to visit UK post November? Get ready to deposit a hefty cash bond.

India is among the six nations that will have to pay £3,000 as fee from November 2013 to enter Britain, according to plans finalised by the British home office in a fresh crackdown on immigration abuse.

The scheme will be applicable to visitors from India, Pakistan, Bangladesh, Sri Lanka, Nigeria and Ghana. The fee of Rs 2.7 lakhs (at the present exchange rate of Rs 90 for a pound) will be over and above all visa costs.

The UK's Immigration & Asylum Act gives the government the right to force such a financial security from temporary migrants, which would be forfeited if they fail to leave after the expiry of their visa.

Home secretary Theresa May says this is the next step in making sure "our immigration system is more selective, bringing down net migration from the hundreds of thousands to the tens of thousands, while still welcoming the brightest and the best to Britain."
She also confirmed that in the long run, the UK will formally introduce a system of bonds that deter overstaying and "recover costs if a foreign national has used public services." MP Keith Vaz had earlier shot down the planned scheme warning that such bonds will 'antagonise settled communities in Britain and enrage our allies such as India'.

The number of Indians receiving visas to travel to the UK, either to work or study fell by nearly 20% between 2011 and 2012.

Asian nationals accounted for 273,927 (54%) of the 507,701 visas issued in 2012, with India and China each accounting for 15% of the total. The Home Office has already cut the number of migrants coming to Britain to its lowest level in over a decade.

The number coming to live in Britain fell by 74,000 in the 12 months to June last year as curbs on students and workers from outside Europe began to bite.

Between the year ending December 2011 and year ending December 2012, the nationalities with particularly large changes in visas issued were Pakistanis (down 25,841 or 48%), Indians (down 18,365 or 19%), Sri Lankans (down 4,202 or 45%) and Bangladeshis (down 3,175 or 30%).

Earlier this year, the UK's deputy prime minister Nick Clegg announced that migrants from "high risk countries" that is expected to include the Indian sub-continent will soon have to sign a cash bond to enter Britain. The cash would be refunded when they leave.

Clegg had also asked May, to double the maximum fine for unscrupulous employers who hire illegal immigrants as cheap labour to £20,000 per illegal worker.

"The amounts would need to be proportionate - we mustn't penalise legitimate visa applicants who will struggle to get hold of the money. Visiting Britain to celebrate a family birth or a relative's graduation or wedding should not become entirely dependent on your ability to pay the security bond," Clegg said.

Moody’s warns rupee weakness may hit India’s credit profile

Moody’s currently has a “stable” outlook on India’s ratings, in line with Fitch Ratings. Standard and Poor’s maintains a “negative” outlook. Photo: AFP

Reuters:Live MInt: 21 June 2013

Rupee decline is a reflection of India’s macroeconomic challenges, says Moody’s

Mumbai: The rupee’s weakness reflects domestic economic challenges, primarily a high current account deficit and lower capital flows, but does not significantly impact India’s foreign debt repayment capacity, Moody’s told Reuters on Friday.

“Given the very low level of foreign currency debt owed by the Indian government, rupee depreciation does not significantly affect sovereign debt repayment capacity,” said Atsi Sheth, vice-president of the sovereign risk group at Moody’s Investors Service, in an e-mailed response.

“However, it is a reflection of macroeconomic challenges, which do affect the country’s credit profile.”

Sheth said Moody’s current rating of “Baa3” for India—the lowest investment-grade level—incorporates macroeconomic imbalances and recent trends in the current account, capital flows, and the exchange rate.

The Indian currency had slumped to a record low of Rs.59.9850 to the dollar on Thursday, as the country’s record high current account deficit is exacerbating its vulnerability in an emerging market rout.

Moody’s currently has a “stable” outlook on India’s ratings, in line with Fitch Ratings. Standard and Poor’s maintains a “negative” outlook.

What does rupee @60 mean

The usual response to a sharp fall in the value of the Indian currency is a wave of unwarranted national angst which clouds clear thinking. Photo: Mint

Live mint : 20 June 2013

It is hard to predict what will happen in the coming days; even forecasters have been caught on the wrong foot

The rupee has touched a record low against the dollar. This newspaper has argued earlier that a fall in the Indian currency is both inevitable and positive for an economy such as India that has a high current account deficit, high inflation and high dependence on volatile capital flows.

The usual response to a sharp fall in the value of the Indian currency is a wave of unwarranted national angst which clouds clear thinking.

What now? It is hard to predict what will happen in the coming days; even professional currency forecasters have been caught on the wrong foot. But one thing is sure: India is now an open economy which makes the value of the rupee against the dollar the single most important price to consider.

Here are some issues worth tracking.

1. A weak rupee will tend to raise the landed costs of imports. Fuel prices are the most important, but the broad sell-off may even bring down global crude oil prices. So the inflationary impact of the falling rupee will be the result of a complex balance of factors.

2. The Reserve Bank of India has already made it clear that it cannot cut interest rates as long as the rupee is under pressure (and till food prices remain high). All bets on a reduction in rates in July should be off till the rupee stabilizes. No central bank in its right senses reacts to a weakening currency with a rate cut.

3. Money market interest rates may climb if foreign institutional investors continue to pull money out of India, especially from Indian bonds. They have already sold $5 billion of Indian bonds since 22 May. Local liquidity could also be impacted in case the central bank decided to buy rupees to stabilize it. But it makes sense right now for RBI to let the rupee find its fair value, only intervening during episodes of very high volatility.

4. Indian companies have rushed abroad to borrow at low rates thanks to quantitative easing. The Indian government has encouraged this debt wish. Though exact data is not available, a lot of this debt in unhedged. The fall in the rupee will hurt the financials of many company with high unhedged dollar debt.

5. The long-term effects of rupee depreciation has usually been positive for the Indian economy, as the famous examples of 1966 and 1991 show. But the interim period could be choppy. So the coming weeks could see many skeletons rolling out of cupboards as the Indian currency stays under pressure.

EU fines Ranbaxy, 8 others for blocking cheaper drugs

FP :June 20,2013

Nine drugmakers, including Denmark’s Lundbeck and India’s Ranbaxy, were fined a total of 146 million euros by EU antitrust regulators on Wednesday for blocking the supply of a cheaper anti-depressant medicine to the market.

The punishments follow a 2009 report by the European Commission on the pharmaceutical sector, which said “pay-for-delay” deals lead to consumers paying as much as 20 percent more for their medicines.

The EU action came two days after the US Supreme Court said that US regulators could challenge deals between brand-name drug companies and generic rivals because of the higher consumer costs.

The EU action came two days after the US Supreme Court said that US regulators could challenge deals between brand-name drug companies and generic rivals because of the higher consumer costs. Getty Images

Pay-for-delay agreements involve brand-name firms paying generic companies not to deliver versions of their drugs, which usually cost a fraction of the original medicine, to market, although the issue is also complicated by patent ownership.

In this case, Lundbeck was accused of paying other companies to have them delay delivering a generic version of its anti-depressant medicine citalopram to the market. Reuters first reported the fines on June 3.

“Agreements of this type directly harm patients and national health systems, which are already under tight budgetary constraints,” said EU Competition Commissioner Joaquin Almunia.

“The Commission will not tolerate such anticompetitive practices.”

The European Commission, which acts as competition regulator across the 27-member European Union, handed Lundbeck the largest fine totalling 93.8 million euros. As a result, Lundbeck cut its guidance for operating profits this year.

The Commission fined Germany’s Merck KGaA  21.4 million euros and handed a further 7.77 million euro fine jointly to Merck and its former subsidiary Generics UK, which is now owned by US generic drugmaker Mylan.

The other penalised companies were Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma – which is now part of Zoetis Products, AL Industrier and India’s No. 1 pharmaceutical company Ranbaxy.

The Commission said the generic companies agreed with Lundbeck in 2002 not to enter the market in return for substantial payments, with internal company documents referring to forming “a club” and “a pile of $$$” to be shared.

It said Lundbeck also bought generics’ stock and destroyed it. Lundbeck said it would appeal the EU decision to the courts.

The EU competition authority has two similar cases in the pipeline, involving Israel’s Teva, French drugmaker Servier, Johnson & Johnsonand Novartis.

Brand name companies have defended “pay-for-delay” deals in large part to protect patents and avoid costly litigation.

Reuters

Future of Indian equities in foreign hands

Rajesh kumar ;live mint ;Tue 18,June 2013

With dependence on decisions being taken outside the country, Indian markets may remain subdued

The Reserve bank of India (RBI) in its mid-quarter review of the monetary policy on Monday decided to keep policy rates unchanged with a view that currency depreciation can lead to higher inflation. The rupee has lost around 6% against the dollar in the last one month. Depreciation of rupee, other things being equal, means that Indian consumers will have to pay more for imported commodities, such as petroleum products, which will push the general price level.

The review of monetary policy, along with the reading of the economic conditions by the central bank, has left the Indian equity market in a difficult spot. On the one hand, a depreciating rupee will discourage foreign investors to invest—as it affects their dollar returns—and on the other hand, RBI will find it difficult to cut rates as a weaker rupee can create inflationary pressure which will affect growth prospects. Compared with an average of 7.4 % in 2012-13, inflation based on the Wholesale Price Index declined to 4.7% in May, though the consumer price inflation still remains elevated at 9.3%. “Rupee worries are understandable given global market volatility and the hefty need for financing the current account; but inflation worries should be minimal and growth concern should be heightened in our view,” said a post-policy note from Deutsche Bank. However, all are not in agreement. Says Madan Sabnavis, chief economist, CARE Ratings: “The policy serves a dual purpose.” Sabnavis elaborates that since imported inflation affects the core (manufacturing) inflation and India needs foreign money, RBI has done the right thing by not cutting rates.

Clearly, it appears that RBI will first like to see the volatility in the currency market to settle before cutting policy rates further. Therefore, policy direction and market movements in the near-term will heavily depend on foreign factors. The most important being the meeting of the Federal Open Market Committee (FOMC) of the Federal Reserve in the US scheduled for 18-19 June. If the Federal Reserve, as feared, drops a hint of withdrawal or partial rollback of its bond buying plan, there will be renewed pressure on the rupee. The Federal Reserve is currently buying assets worth $85 billion from the market and India has been a significant beneficiary with higher inflows. Though it is widely expected that the US central bank will be cautious and will reduce its target in a gradual manner, the issue is that markets will price it in as quickly as possible in order to adjust to the new realty. Reduction in asset purchase would lead to lower inflows and with India’s dependence on capital flows to fund the current account deficit—the difference between import and export of goods and services—the rupee will be under pressures. Since it is an established fact that the Indian stock market tends to move with the rupee (http://bit.ly/1atdnLp), it will be a difficult drive on the Dalal Street. However, if the Federal Reserve decides to maintain a status quo, there could be a relief rally in both equity and currency market in the short term. But markets will continue to prepare itself for a rollback by the Federal Reserve.

The bumpy road ahead

Indian markets depend heavily on foreign flows. The foreign institutional investor (FII) holding in the Indian markets is about $141 billion (Rs.6.5 trillion) which is worth 10% of the total market capitalization of the Bombay Stock Exchange (Rs.64.8 trillion). FIIs have pulled out about $3.5 billion from the debt market in June and, so far, are net sellers in the equity market as well, though at much lower scale. If FIIs pull out a similar amount from the equity market as they did in the debt market, which will be just about 2% of their total holding, it will be nothing short of a disaster in the stock market. Says Tirthankar Patnaik, director (institutional research), Religare Capital Markets Ltd: “The flow into the equity market is sticky in nature and there is 80% chance that it (FIIs pulling from equity market like they did in the debt market) will not happen.” Though the markets are not factoring in a large-scale pull out by FIIs, but will they continue to buy Indian equity with its associated macro risks? Ajay Bodke, head (investment strategy and advisory), Prabhudas Lilladher Pvt. Ltd: “The growth will be better than last year. The fiscal consolidation will be taken positively by the market and current account deficit is also expected to come down.” However, with a very high dependence on foreign flows, the most important factor that will decide direction in the near term would the outcome of the FOMC meeting.

What it means for you

With challenges on the external front and high dependence on decisions being taken outside the country, things will remain tricky for Indian investors in the equity market. Says Patnaik: “Investors should stick to quality and not chase high beta stocks. What is cheap is likely to remain cheap and this is not the time for cyclical stocks.” Investors with lower risk appetite may chose to wait for clarity to emerge, at least on the external front.

Best Loan...Best Bank..

B T :  Edition: June 2013

Here are the best deals on offer from public and private sector lenders

Are you scouting for a loan to buy a house, a car or for your child's education? Here are the best deals on offer from public and private sector lenders -

>> All rates updated till 15 May 2013
>> Data provided by Rupeetalk.com

TAGS: best banks | lenders | home loan | auto loan | car loan | education loan | interest rate

India's pharmaceutical industry suffered twin blows

B T  :E. Kumar Sharma       Edition: June 23, 2013

India's drug regulator is getting a makeover but better enforcement and safer medicines are yet a chimera.

India's pharmaceutical industry suffered twin blows recently when Ranbaxy Laboratories and Wockhardt, two of the country's biggest drug makers, came under fire from US authorities. While Ranbaxy on May 13 admitted to fudging data , Wockhardt said on May 24 the US drug regulator had banned imports of medicines from one of its factories near Aurangabad in Maharashtra.

The incidents raise some pertinent questions: is everything in order in the Indian pharmaceutical industry? Are drug makers maintaining quality standards? And what are Indian authorities doing to ensure the medicines we consume are safe?

"We need to tighten our domestic laws and have a quality culture so short cuts are avoided and there is proper documentation," says Kewal Handa, a former managing director at Pfizer India who now runs healthcare advisory firm Salus Lifecare. "One never hears of such stringent penalties in India ," he adds, referring to the $500 million Ranbaxy agreed to pay to settle cases in the US .

By 2017, you will see a totally different regulatory regime where we have a more systemoriented and sciencebased evaluation: G.N. Singh

Ranjit Shahani, Vice Chairman and Managing Director at Novartis India, agrees the government must come down heavily on companies that do not follow regulations. "The Indian government clearly has to allocate significant resources speedily to controlling quality. Incremental change will not make any difference," says Shahani, who is also President of the Organisation of Pharmaceutical Producers of India, a group of global drug makers.

Such incidents "tarnish India's image", says Kiran Karnik, former president of the National Association of Software and Services Companies. Karnik has been tracking and writing on the subject of public health, among other areas, after his stint at NASSCOM.

The Indian drug landscape comprises two worlds. One world is relatively safe where companies such as Ranbaxy and Wockhardt, despite their weaknesses, meet stringent US and European regulations. According to the Drug Controller General of India (DCGI), there are 169 plants in the country approved by the US Food and Drug Administration (FDA).

Besides, 160 facilities are approved by European regulators and about 1,300 are certified by the World Health Organisation. The other world is a mix of players of different sizes with many of them small and escaping strict monitoring because regulatory agencies are under-staffed and under-equipped. Overall, the DCGI estimates there are about 8,000 manufacturing units across the country. Industry estimates put the number as high as 20,000 units.

A close look at the Indian pharmaceutical industry shows a complicated regulatory structure and a web of entities at the central and state levels tasked with monitoring the sector. Drug companies come under the purview of the chemicals and fertiliser ministry. The Central Drug Standards Control Organisation (CDSCO), the top industry regulator (see Between Many Stools) headed by the DCGI, comes under the health ministry. There is a separate agency for monitoring food products, the Food Safety and Standards Authority of India. In contrast, in the US, almost everything that goes into the human
body is regulated by the FDA.

In May 2012, a parliamentary standing committee report on the functioning of the Central Drugs Standard Control Organisation (CDSCO) pointed out that it was facing a severe staff shortage. It noted that, as of October 2011, only 124 of 327 sanctioned posts were occupied. The organisation's headquarters was staffed by four deputy drug controllers and five assistant drug controllers.

These nine officers together handle 20,000 applications, attend more than 200 meetings, and respond to 700 parliament questions and about 150 court cases annually. That has changed in the past year, says DCGI G.N. Singh. "It is not nine officers now but 200," he told Business Today. Singh said a total of Rs 3,500 crore would be spent on expanding the regulatory agencies in the five years to 2017. Of this, Rs 1,500 crore has been earmarked for strengthening the central regulator and a similar amount for state-level agencies. "By 2017, you will see a totally different regulatory regime where we have a more system-oriented and science-based evaluation," he adds.

According to last year's parliamentary report, the main problems are inadequate infrastructure, shortage of drug inspectors and lack of accurate data. The panel said a 2003 report by a group led by R.A. Mashelkar estimated a requirement of more than 3,200 drug inspectors.

MEETING FDA STANDARDS
Piramal Enterprises's bulk drugs unit at Digwal village, about 100 km from Hyderabad, has had four US FDA inspections in the past decade. The company claims it has never had any adverse comments. Business Today visited the plant to see how the company ensures it meets FDA standards. The company maintains log books in the quality control laboratory where samples of the material produced are analysed before dispatch. In the documents section, there is a constant check on temperature as samples from each batch of production are stored there.

In the raw material warehouse, the focus is on labelling and ensuring clear identification of incompatible and hazardous raw material. During FDA inspections, the bulk drugs units are usually asked to show a complete manufacturing step conforming to the required quality systems. In the finished product area, the focus is on the particle size of ingredients based on required dosage and customer needs.

The panel said there were only 846 drugs inspectors against 1,349 sanctioned posts in states. Singh says the number of drug inspectors has now risen to about 1,200 and will cross 3,000 by 2017.

Singh denies the staff shortage has hampered regulatory work. "We are also good now and that is why the share of substandard drugs being sold in the Indian market is down from 10 per cent in 2002 to between four and 4.5 per cent today."

Industry executives disagree. "The share of spurious drugs being sold in India may be over 20 per cent in India," says Tobby Simon, founder and President, Synergia Foundation, a Bangalore-based applied research think tank. He adds the WHO estimate of the value of counterfeit drugs globally would be about $140 billion this year and could touch over $200 billion by 2020.

Two recent incidents indicate the severity of the situation. In April, a scandal involving purchase of spurious medicines by a government-appointed committee came to light in Jammu and Kashmir. On May 6, shops, other businesses, public transport and educational institutions remained closed in Srinagar to protest against fake drugs. Again, in April, the Gujarat Food and Drug Control Administration (FDCA) busted a racket of illegal manufacturing and sale of spurious drugs in Ahmedabad. Last year, the FDCA launched a system that notifies all chemists and druggists of recalled fake or substandard drugs through text messages. Other states are keen to implement a similar system.

Laboratory testing of samples is another big issue. At present, drug inspectors pick samples randomly to check for quality or following a complaint from a consumer. These samples are then sent to state laboratories for testing, and manufacturers asked for an explanation in case of an adverse report. Singh says about 50,000 drug samples are tested annually across the country. He says the aim is to enhance this number five to six times by 2017 and also to ensure quicker turnaround time.

Currently, it takes five to six months to get the final sample report. "We will have a fast-track system, and mobile labs equipped not only with modern equipment but also with trained manpower," he says. The government is also planning to use the expertise of organisations such as the Centre for Cellular and Molecular Biology and the Indian Institute of Chemical Technology, both in Hyderabad, for this exercise.

Are these measures enough? No, say industry executives. The government's main focus appears to be on controlling drug prices as part of its social welfare agenda. While price control benefits consumers, it may also encourage companies to cut corners.

Industry executives say that, as FDA-approved plants cannot match the prices of drugs made in non-certified units, many top companies do not take part in tenders that government hospitals and some large government organisations call for drugs supply, since the selection yardstick is the lowest price. Howsoever stringent, external supervision alone cannot tackle all problems the pharmaceutical industry is facing. The government and industry should encourage corporate executives as well as government officials to disclose wrongdoings in their organisations. "The government has had a whistleblower policy for the last two years with a reward of Rs 25 lakh for the whistleblower," says Shahani of Novartis. "Have you heard of any whistleblower?"

TAGS: Pharma | Drug regulator | india pharma industry

Another story unfolds at Yes Bank

Since March 2011, Rana Kapoor has been listed as the single largest shareholder with a 26.57% stake, which includes the 12.68% stake held by the Madhu Kapur group. Photo: Abhijit Bhatlekar/ Mint

Joel Rebello  :Live Mint: Tue, Jun 18 2013. 11 27 PM IST

The row between the two largest promoter shareholders of Yes Bank has taken a toll on its stock

There wasn’t much of an inkling about the battle that had been brewing at Yes Bank Ltd between its two largest promoter shareholders—managing director and chief executive officer Rana Kapoor and sister-in-law Madhu Kapur—over a board seat until it broke in the media on 7 June.

Rana Kapoor’s wife Bindu and Madhu Kapur are sisters, and the latter is the wife of Ashok Kapur, co-founder of Yes Bank, who died in the November 2008 terrorist attacks at the Trident Hotel in Mumbai. Although the row has taken a toll on the stock, analysts have ruled out any long-term impact on Mumbai-based Yes Bank, the country’s fourth largest private sector bank by assets.

As recently as November last year, Madhu Kapur’s daughter and son—Shagun Kapur Gogia and her elder brother Gaurav Kapur—threw a party in honour of Rana Kapoor’s daughter Raakhe Kapoor before her wedding with Alkesh Tandon later that month.

That bonhomie seems to have suddenly evaporated.

The Madhu Kapur group had asked for a board seat for Gogia in early 2009, a few months after the death of Ashok Kapur.

Two people close to the Madhu Kapur group said the board didn’t reject her nomination.

Instead, she was verbally told by the board to “wait for a couple of years”.

In response to questions by Mint on 12 June, a Yes Bank spokesperson said, “As the matter is sub judice, we decline to comment to your queries. We request you to kindly await the outcome of Yes Bank’s board meeting later this month and even more importantly, the outcome of the honourable high court hearing, scheduled for 1st July, 2013.”

Part of the reason for the reluctance to accede to a board seat can be found in comments made by S.L. Kapur, who was chairman of Yes Bank in April 2009 when Madhu Kapur and Gogia first met the board and sought a nomination for either of themselves.

Now retired from Yes Bank, he said in an interview on 13 June that the board didn’t approve of the nomination because the members felt that both Kapur and Gogia wouldn’t meet Reserve Bank of India (RBI) stipulations regarding bank directors.

“After Ashok was gone, both mother and daughter met the board during a meeting in April 2009 and suggested that either mother or daughter could be considered for a board seat. But based on the fit and proper criteria of the RBI as understood by us and implemented by the bank, we indicated to them that they do not qualify,” said Kapur, who retired from the bank’s board in January 2013 after an eight-year stint.

“I do not remember specific details, but generally the board went through the guidelines and based on our interpretation and experience of the RBI criteria decided that they didn’t qualify,” he said.

When pressed, the former chairman said, “Madhu Kapur is just a housewife so the board thought she was not qualified enough. Shagun was a youngster at that time.”

Gogia, 38, is a double major in economics and biology from Tufts University in the US and also holds an MBA in finance from the Indian School of Business.

Promoters’ stake

Yes Bank’s annual report for 2008-2009 shows the Ashok Kapur group’s stake at 16.02%. In fiscal 2010, the Madhu Kapur group’s (formerly Ashok Kapur group) stake was put at 12.68%, while that of Rana Kapoor was 14.48%. The bank raised $225 million (around Rs.1,315 crore today) through a qualified institutional placement in January 2010, diluting the promoters’ stake that fiscal.

Since March 2011, however, Rana Kapoor (comprising promoter and promoter group) has been listed as the single largest shareholder with a 26.57% stake, which includes the 12.68% stake held by the Madhu Kapur group.

Matters came to a head in January 2013 when a document released by Yes Bank detailing its history since incorporation in November 2003 avoided any mention of Ashok Kapur or his heir Madhu Kapur. The six-page document, The Yes Bank Story, is available on the bank’s website.

The two people close to the Madhu Kapur group said this led to fears that her side of the family could be excluded from the role of co-promoter. The two people did not want to be named.

“The bank officials and Rana Kapoor always communicated verbally in 2009, 2010 and 2011. After the 2009 interaction, the Madhu Kapur group realized that their shares were being clubbed with Rana Kapoor’s as ‘promoter and promoter group’ in the bank’s annual report for 2010-11,” said one of the two people cited above.

“When contacted, the company secretary said it was done to make the disclosure easier. Afterwards in 2011, since two years had passed since Shagun (Gogia) met the board, the possibility was again discussed with Rana Kapoor, but it was brushed aside,” the person said.

On 6 June this year, Madhu Kapur, along with daughter Gogia and son Gaurav, filed a petition in the Bombay high court, asking for the right to nominate directors to the bank’s board.

On 8 June, the tussle found its way to the company’s annual general meeting. The Bombay high court on 11 June directed Yes Bank to consider Gogia for the position of a director on its board.

The board, earlier scheduled to meet on 24 July, will now meet on 27 June as directed by the court. The high court also said the appointment of new directors will be subject to its final order. The case will come up for hearing on 1 July.

Letters as evidence

Madhu Kapur’s side of the story is told in part through six letters that have been submitted to court as evidence. Written by Gogia and Madhu Kapur between 2 May and 5 June, Mint has copies of the letters.

The 2 May letter starts with “Dear Rana uncle” and goes on to say: “It is indisputable that obtaining the banking license was a product of joint efforts of my father and you. It is also indisputable that after his unfortunate and tragic demise, your efforts and passion have brought the bank to the position it is at today.”

It then goes on to say that, “However, it appears that the contribution of my father is overlooked. My father’s name is deleted from the promoters’ shareholding and does not even appear in the ‘Yes Bank Story’ at all.”

It also recounts Gogia meeting the board in January 2009 and being told “to wait a couple of years prior to assuming directorship on the board or exercising our right to nominate a nominee director. I respected the decision and abided by it as you were party to it”.

When Gogia raised the directorship demand again, “you brushed it aside. Since then you have not addressed this issue. My father’s vision and your hard work has created the bank. We are equally invested. By virtue of that our family name is tied to YBL (Yes Bank Ltd). It is only imperative that we are aware of the happenings and are part of YBL. I request you to protect and honour my father’s rights and contributions in building this bank. In this regard my mother and I would like to meet you at your convenience to address this issue”.

In the second letter, dated 13 May, Gogia reminds Kapoor that “10 days have passed since (the first letter) but there has been no response from you... You have not consulted us before appointing nominee directors of promoters. If you continue to overlook our interest, then we will have to proactively ensure that my father’s rights are restored”.

Following this letter, Kapoor’s wife Bindu called Gogia on 14 May, suggesting they meet. In her 15 May letter to Rana Kapoor, Gogia acknowledged the phone call and requested a meeting on either 1 June or 2 June since she was “travelling from 15 May to 31 May”, but giving Rana Kapoor the option to advance the meeting either through a phone call or SMS.

However, Rana Kapoor delayed meeting her citing a busy schedule. Finally, on the morning of 4 June, Kapoor’s wife Bindu, along with their daughter Radha, met Gogia and her mother at the Kapurs’ Napean Sea Road home in Mumbai. Another letter addressed to Rana Kapoor, this time by Madhu Kapur, was given to his wife at this meeting, said the first person cited earlier.

The 4 June letter had the following subject line: “Rights of Ashok Kapur family as Indian partners in Yes Bank and related matters”. It pointed to the articles of association of Yes Bank, which gives Indian partners “special rights, responsibilities and positions in the bank”.

The letter said: “We noticed changes in the shareholding pattern disclosures. So far as Ashok and we as his successors were concerned, we felt let down as you have described only yourself as ‘promoter’ and clubbed our shareholding in the bank with yours as if we did not exist at all. On Shagun talking to the company secretary he literally stated it was to make disclosure easier. On Shagun protesting to you about the literal erasure of Ashok in Yes Bank you seriously or sarcastically told her that Ashok Kapur’s name existed in the records of the bank.

“I do not want to say our family’s trust in you was misplaced or more. But we are indeed feeling wrongly deprived of our rights as if you alone have them all. This is not acceptable,” Madhu Kapur said in the letter.

The special rights, responsibilities and positions that the Madhu Kapur group is referring to includes the right by the partners to nominate directors on the board of the bank.

Meetings after letters

Following the 4 June letter, Rana Kapoor and his daughter Radha met Gogia and her mother at the latter’s residence in the evening of that day. At Kapoor’s suggestion, they met Yes Bank director M.R. Srinivasan on 5 June at Mumbai’s Willingdon Club.

Following that meeting, Madhu Kapur wrote another letter, dated 5 June, in which she invoked the articles of association of the bank that says both Indian partners holding more than a 10% stake have a right to nominate directors.

“Nomination of three directors by two Indian partners should be as far as possible by consensus. In the absence of a consensus, one director may be nominated by each of the Indian partners and the third be appointed on an alternative basis,” said the letter, before suggesting that Gogia’s nomination to the board be made jointly by both promoters “for a positive beginning now”.

This letter was followed by an email from Gogia to Srinivasan on the same day, which said that “despite having rights in the articles of association of the bank... our family feel(s) let down and hurt. Therefore we now need a commitment, backed up by appropriate writing and attested by honourable people like you and therefore I need to have suitable writing from Rana uncle duly signed by him and witnessed by people like you”.

When this wasn’t forthcoming, the Madhu Kapur family filed the case, said one of the person cited above.

Gogia said by email that the decision to go to court “was done most reluctantly and with sadness...as it could not be settled in the family”.

When asked what her main demand was, she said she wanted Yes Bank and Rana Kapoor “to recognize our rights as granted by the articles of association”.

Anil Singhvi, founder director at Institutional Investor Advisory Services India Ltd, an independent shareholder advisory firm, said the law “is silent” when it comes to nominating the largest stakeholder to the board.

“Hence, it is the articles of association which have to be taken into account,” Singhvi said.

The dispute has had an impact on the bank’s stock. Since 7 June, when the news broke, Yes Bank shares have dropped 6.32%, compared with the 1.5% fall in the benchmark Sensex.

However, Kajal Gandhi, analyst at ICICIdirect.com, the retail broking arm of ICICI Securities Ltd, said the episode shouldn’t be seen as having a long-term impact.

“The drop could be a hangover of the news reports coming out recently. But going forward, I expect the issue to be settled in court or out of court, and even if the Madhu Kapur group gets a board seat, I do not expect it to impact the management of the bank,” Gandhi said.

Bank of America Merrill Lynch analysts Veekesh Gandhi and Rajeev Varma said the impact of the ongoing court battle will be nil.

“We recently met with Yes Bank to get an operating-level update and also insight on recent news flow with regard to a single large promoter shareholder filing a case against the bank in high court for their nomination to the board,” they wrote in a recent report.

“This has resulted in significant stock volatility in the last few sessions. While the promoter case is sub judice, we believe that impact on business may be ‘nil’, but stock sentiment could remain weak in the near term. We reiterate our buy rating and believe that there is an opportunity to buy into any correction,” the analysts said.