TaxTMI 
TaxTMI 
TaxTMI 
2009 (11) TMI 502
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....rse of arguments, following grounds were pressed :- (a)The applicant is registered as a Category-I Merchant Banker with Securities and Exchange Board of India (hereinafter referred to as 'the SEBI') and to arrange term loan from nationalized Banks, is one of the activities, which is recognized by SEBI and thus, arrangement of the loan and receipt of the commission, being in consonance with the functions of the Merchant Banker, prevailing norms and practice in financial sector, same ought to be construed as part of the activities of the Merchant Banker, as there is no prohibition imposed by the SEBI. (b)The conclusion arrived by this Court that term loan from the Bank could not be arranged by the Merchant Banker, even if it is so reiterated, various acts of omission and commission on the part of the Merchant Banker can only be examined by SEBI in pursuance of SEBI Act or under Merchant Banker Regulation, 1982, as the SEBI Act has a complete mechanism to regulate the conduct of the Merchant Banker. The Act provides Securities Appellate Tribunal and appeal to Hon'ble the Apex Court, therefore, the role of the Merchant Banker cannot be examined by Central Bureau of Investigation or R....
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....he Superintendent of Police (Economic Offences Wing), Unit-V, Vigilance Bureau, Punjab has also concluded that there was a connivance between the nationalised Banks and the Arrangers. The Investigating Officer has clearly indicted the Bank officials for collusion with applicant Loan Arranger. (iii)The Bank requested the Board to extend time for making an offer of loan up to 20-8-2005. The Board officials waited for the response of the Bank up to 22-8-2005. On 23-8-2005, Punjab National Bank, The Mall, Patiala informed that they have not received any sanction from the higher authorities, hence, were unable to consider the request of the Board to sanction the loan. Copy of this letter has been attached as Annexure R3/2 with the writ petition. This letter specifically states that the Bank is unable to quote any rate or other terms and conditions for sanction of the loan. The applicant was appointed to arrange for the loan on 15-9-2005 as per Annexure R3/4. On 16-9-2005, arranger fee was fixed by the Board as 0.49 per cent as per Annexure R3/4 (colly). On 24-9-2005, Punjab National Bank agreed to advance the loan and the communication to this effect noticed that they have been approac....
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....counts. If this was the presentation given, it hardly depicts any skill or special knowledge and expertise of the applicant. 9. This brings us to examine the role of Merchant Banker regarding raising of the term loan. 10. The Securities and Exchange Board of India Act, 1992 states that the securities will have the same meaning as is assigned to it in section 2 of the Securities Contracts (Regulation) Act, 1956. 'Securities' have been defined under section 2(h) of the Securities Contracts (Regulation) Act, 1956 as under :- "2(h) "securities" include- (i )shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ii )Government securities; (iii)Such other instruments as may be declared by the Central Government to be securities; (iv)Rights or interests in securities;" The definition of 'securities' does not include term loan. 11. In our judgment, we had noticed the Merchant Banker under the Securities and Exchange Board of India (Merchant Bankers) Rules, 1992. Relevant portion of the judgment reads as under :- "Merchant Banker has been defined under the Securities and....
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....which a Merchant Banker can undertake. Therefore, it can be safely concluded that as per SEBI guidelines, Merchant Banker cannot act as Loan Arranger, in the kind of transaction, which we have examined in the present case. It will be pertinent to mention here that on 1-10-2003, Reserve Bank of India issued a press release No. 2003-04/451, which reads as under :- "RBI does not approve Loan Arrangers October 1, 2003 It has come to the notice of the Reserve Bank of India (RBI) that one M/s. S.V. Management Consultants (P.) Ltd. has published an advertisement in a leading financial daily in Chennai claiming that it is an RBI approved arranger for external commercial borrowing. The Reserve Bank clarifies that it does not approve such agents. Members of the public are, therefore, advised to be cautious of such misrepresentations and to bring such instances to the notice of the Reserve Bank." 16. In the present case, Merchant Banker had carried no activity in the stock exchange, except for arranging a term loan from Punjab National Bank. Reserve Bank of India Act, 1934 set out the objectives of the Reserve Bank. One of the objectives reads as under :- "The responsibility for ensuri....