Unit-1

Q.1 What are the Powers and functions of SEBI?

Ans INTRODUCTION: SEBI also known as the Security and Exchange Board of India was
established on 12 April 1992 through the SEBI Act, 1992. It was a non-statutory body
established to regulate the securities market. The headquarters of the board is situated in
Bandra Kurla Complex, Mumbai. SEBI helps regulate the Indian Capital Market by
protecting the interest of investors and establishing the rules and regulations for the
development of the capital market.
-SECURITY EXCHANGE BOARD OF INDIA ACT 1992
SEBI or the Security and Exchange Board of India is a regulatory body controlled by the
Government of India to regulate the capital and security market. Before the Security and
Exchange Board of India, the Controller of Capital Issues was the regulating body to regulate
the market which was controlled by the Capital Issues (Control) Act, 1947. Majorly, SEBI
controls the issuers of securities, the investors, and the market intermediaries.
The Board drafts regulations and statutes under its legislative authority passes rulings and
orders under its judicial capacity, and operates investigations within its executive limits. SEBI
works as a barrier to avoid malpractices related to the stock market by establishing a code of
conduct and promoting the healthy functioning of the stock exchange. Initially, SEBI didn’t
have the authority to regulate the stock exchange, but in 1992 the Union Government gave
statutory powers to SEBI through the SEBI Act, 1992.

-PURPOSE AND ROLE OF SEBI

SEBI helps in creating a healthy environment to facilitate an effective mobilization between
the market participants and investors. It helps in locating the resources with the help of the
securities market. SEBI establishes rules and regulations, policy frameworks, and
infrastructure to meet the needs of the market.
The financial market majorly comprises of three groups:
1. The Issuer of Securities: Issuers are the group that works in the corporate department to
easily raise funds from the various sources of the market. So, SEBI helps the issuers by
providing them with a healthy and open environment to work efficiently.
2. Investors: The investors are the soul of the market as they keep the market alive by
providing accurate supplies, correct information, and protection to the people on a daily basis.
SEBI helps investors by creating a malpractice-free environment to attract and protect the
money of the people who invested in the market.
3. Financial Intermediaries: The intermediaries are the people who act as middlemen between
the issuers and the investors. SEBI helps in creating a competitive professional market that
gives a better service to the issuers and the investors. They also provide efficient
infrastructure and secured financial transactions.
-POWERS:
Quasi Legislative Powers: To formulate such rules and regulations like insider trading
regulations and essential disclosure requirements. This also helps in consolidating the
provisions of existing listing agreements of the financial market.
Quasi-Executive Powers: If any document or book of account violates of any regulation,
then they have the power to examine the documents. They are also empowered to take legal
action or to pass judgments against the person who violates the rules.
Quasi-Judicial Powers: It empowers the authority to deliver the judgment related to fraud
or other unethical activities.

-FUNCTIONS OF SEBI (Section 11 of SEBI ACT 1992)

PROTECTIVE FUNCTIONS
1. To protect the interest of the investors in the securities market.
2. It prohibits insider trading and unfair trade practices.
3. It serves as a platform for stockbrokers, investment, registrars, and other people.
4. It also checks price rigging.
5. It also educates the investors about the securities markets.
REGULATORY FUNCTIONS
1. It regulates the operations of custodians of securities, depositories, and participants.
2. To regulate the business operations in the securities market.
3. To monitor the acquisition of the shares.
4. It regulates the working of mutual funds.
5. It also conducts inquiries of the stock exchange.
6. Registration of brokers and sub-brokers
7. It also establishes the rules for taking over the company.
DEVELOPMENTAL FUNCTIONS
1. It promotes the development of the securities market.
2. It takes care of research and development to ensure an efficient security market.
3. It also promotes the free functioning of the market.
4. It also promotes the training of the intermediaries.
5. It also provides online trading.
Q.2 What is listing and delisting of Securities?
Ans STOCK EXCHANGE: It plays an important role in the capital market. It is the place
where any person can trade securities including shares, bonds, and other financial
instruments. It helps in the mobilization of funds from savings into the different developed
sectors of the economy. This has also some limitations for which there is a need for regulation
to control such activities. For this, An Act was passed by the Central government named “The
Securities Contracts (Regulations) Act 1956”.
This Act deals with regulations for control of all types of securities or aims to prevent
undesirable transactions of the securities. This Act deals with various procedures for the stock
exchange, the listing of the securities, the operation of the brokers, recognition of the stock
exchange, and rules and guidelines for the market participants.

OVERVIEW OF SCRA ACT 1956

The Securities Contracts (Regulation) Act, 1956 (SCRA) is a significant piece of legislation
in India that governs the securities market and regulates transactions in securities.
The primary objective of the SCRA is to regulate transactions in securities to protect
investors and ensure the integrity and stability of the securities market.
-KEY PROVISIONS AND COMPONENTS:
Regulation of Contracts in Securities: The SCRA regulates contracts in securities,
including stocks, shares, bonds, debentures, and derivatives.
Establishment of Stock Exchanges: The Act provides for the establishment and regulation
of stock exchanges in India. It sets out the framework for the functioning, governance, and
regulation of stock exchanges.
Regulation of Transactions in Securities: The SCRA lays down provisions to govern
transactions in securities, including rules related to trading, settlement, and clearing.
Listing and Delisting of Securities: The Act outlines the procedures and requirements for
the listing and delisting of securities on stock exchanges, including eligibility criteria,
approval processes, and compliance requirements.
Regulatory Oversight: The Securities and Exchange Board of India (SEBI) is empowered
under the SCRA to regulate various aspects of the securities market, including registration
and regulation of intermediaries, monitoring of trading activities, and enforcement of
securities laws and regulations.
Investor Protection: The SCRA includes provisions aimed at protecting the interests of
investors, such as disclosure requirements, prohibition of fraudulent and unfair trade
practices, and mechanisms for redressal of grievances.
Penalties and Enforcement: The Act prescribes penalties for violations of its provisions and
empowers regulatory authorities to take enforcement actions against offenders, including
imposition of fines, suspension of trading privileges, and prosecution.
-LISTING OF THE SECURITIES UNDER THE SCRA ACT, 1956
Under Section 21 of the Securities Contracts (Regulation) Act, 1956 (SCRA), "listing" refers
to the process by which securities of a company are admitted for trading on a recognized
stock exchange. When a company decides to list its securities (such as shares or bonds) on a
stock exchange, it allows investors to buy and sell those securities through the exchange's
trading platform.
1. Eligibility Criteria: A company intending to list its securities on a stock exchange must
meet certain eligibility criteria set by the exchange. These criteria typically include factors
such as minimum capital requirements, track record of profitability, corporate governance
standards, and compliance with regulatory norms.
2. Application to Stock Exchange: The company interested in listing its securities needs to
submit an application to the concerned stock exchange(s) along with requisite documents and
fees. The application should comply with the listing requirements and guidelines specified by
the exchange.
3. Scrutiny and Approval: Upon receipt of the application, the stock exchange scrutinizes the
proposal to ensure compliance with its listing regulations and other applicable laws. If the
exchange is satisfied with the company's eligibility and compliance, it grants approval for the
listing of the securities.
4. Listing Agreement: Once approval is obtained, the company enters into a listing agreement
with the stock exchange, which sets out the terms and conditions of the listing, the rights and
obligations of the company, and the exchange's rules and regulations that the company must
adhere to.
5. Disclosure Requirements: Listed companies are required to comply with ongoing
disclosure and reporting requirements prescribed by the stock exchange(s) and regulatory
authorities such as the Securities and Exchange Board of India (SEBI). This includes periodic
financial reporting, disclosure of material information, and compliance with corporate
governance norms.
6. Trading Commencement: After fulfilling all necessary formalities and compliance
requirements, the securities are officially listed and trading commences on the exchange.
Investors can buy and sell these securities through the exchange's trading platform.
7. Continuous Compliance: Listed companies are expected to maintain compliance with
listing regulations and other applicable laws throughout their tenure as a listed entity. Non-
compliance can lead to penalties, suspension, or even delisting from the exchange.

Overall, the listing process under the SCRA aims to ensure transparency, fairness, and
investor protection in the securities market by establishing clear eligibility criteria, stringent
compliance requirements, and robust regulatory oversight. It provides companies with access
to capital markets for raising funds and offers investors an opportunity to participate in the
growth of listed companies.
-DELISTING OF THE SECURITIES UNDER THE SCRA ACT, 1956 (Section 21A)
The term “delisting” means the removal of the securities from the stock exchange which
further means that a particular company would no longer be able to trade in the stock
exchange. It happens because of mainly three reasons:
When the company or any association does not comply with the direction or the guidelines
given by the stock exchange,
When any particular company voluntarily wants to get a delisting of the shares.
When the Company is not trading for many years
It is of two types:
1. Compulsory Delisting: It means the permanent removal of the securities from the exchange
with some penalty for complying with the directions.
2. Voluntary Delisting: When a company decides on its own to remove the securities from the
stock exchange.

-PROCESS:
1. The decision on delisting should be taken by shareholders through a special resolution in
case of voluntary delisting & through a panel to be constituted by the exchange comprising
the following in case of compulsory delisting:
Two directors/ officers of the exchange (one director to be a public representative).
One representative of the investors.
One representative from the Central government (Department of Company Affairs) /
regional director/ Registrar of Companies.
Executive Director/Secretary of the Exchange.
2. Due notice of delisting and intimation to the company as well as other Stock Exchanges
where the company's securities are listed to be given.
3. Notice of termination of the Listing Agreement to be given.
4. Making an application to the exchange in the form specified, annexing a copy of the
special resolution passed by the shareholders in case of voluntary delisting.
5. Public announcement to be made in this regard with all due information. Section 21 A of
the Securities Contracts (Regulation) Act 1956 which states that a recognized stock exchange
may delist the securities from any recognized stock exchange on the grounds specified in the
act. However, the company should be given a reasonable opportunity to be heard before
delisting. If any company is not satisfied with the decision of the stock exchange, then it may
file an appeal before the Security Appellate Tribunal within 15 days of the decision. If in case
the Tribunal is satisfied that the company was prevented by sufficient cause from filing an
appeal then the tribunal may exceed the period but not more than one month.
Unit-2
Q.1 What are the changing functions of Bank?
Ans -WHAT IS AN INVESTMENT BANK?
It is a type of financial institution which acts as a bridge between the securities issuer and the
public investors. In layman terms, you can say that an IB works as a broker for clients. IB
also specializes in pension funding. They help institutions to issue new sets of stock through
an initial public offering (IPO) or follow-on offering. Besides helping financially, IB also
gives advice and predictions in order to make the institution or any particular company rise
more and more. Let us study the roles and functions of modern investment banks in detail.

-ROLE OF BANKS TO ISSUE SECURITIES

Banks play a significant role in the issuance of securities through several channels:
1. Underwriting: Banks often act as underwriters in securities issuance. Underwriting
involves assuming the risk of selling a new issue of securities to investors. Banks may
underwrite the entire issue or a portion of it, guaranteeing to purchase the unsold securities if
necessary. This role provides stability to the issuance process and helps companies raise
capital by ensuring that their securities will be sold.
2. Advisory Services: Banks provide advisory services to companies looking to issue
securities. This includes structuring the offering, determining the appropriate pricing, and
advising on market conditions. Banks leverage their expertise in financial markets and
regulatory requirements to assist issuers in navigating the complexities of the issuance
process.
3. Distribution: Banks have extensive distribution networks through which they can market
and distribute newly issued securities to investors. They leverage their relationships with
institutional investors, retail clients, and other market participants to ensure broad exposure
for the securities being issued. This distribution capability is crucial for ensuring successful
securities offerings.
4. Market Making: After the securities are issued and traded in the secondary market, banks
often act as market makers, providing liquidity by quoting bid and ask prices and facilitating
trading. This role helps maintain an orderly market for the securities, which is essential for
investor confidence and efficient price discovery.
5. Regulatory Compliance: Banks ensure that the issuance of securities complies with
relevant regulations and guidelines set forth by regulatory bodies such as the Securities and
Exchange Commission (SEC) in the United States or the Financial Conduct Authority (FCA)
in the United Kingdom. They help issuers navigate these regulatory requirements to ensure
compliance throughout the issuance process.
6. Risk Management: Banks play a crucial role in managing the risks associated with
securities issuance. This includes assessing credit risk, market risk, and operational risk
throughout the issuance process. By effectively managing these risks, banks help mitigate
potential losses for both issuers and investors.
Overall, banks serve as key intermediaries in the issuance of securities, providing valuable
services that facilitate capital formation and support the functioning of financial markets.

-CHANGING FUNCTIONS OF BANKS FROM DIRECT LENDING TO MODERN

SYSTEM OF INVESTMENT BANKING
1. Direct Lending (Traditional Banking):
Deposits and Loans: Historically, banks primarily acted as intermediaries between
depositors and borrowers. They accepted deposits from individuals and businesses and used
those funds to provide loans for various purposes, such as mortgages, business loans, and
consumer credit.
Interest Income: Banks earned revenue primarily through the interest spread between the
interest rates they paid on deposits and the rates they charged on loans. This traditional
banking model focused on credit risk assessment and managing loan portfolios.
2. Reasons for changing structure
Market Dynamics: The financial landscape evolved with advancements in technology,
globalization, and regulatory changes. This evolution led to increased competition, narrowing
interest rate spreads, and greater market complexity.
Diversification of Services: Banks sought to diversify their revenue streams and adapt to
changing market conditions. Investment banking emerged as a complementary business line,
offering a broader range of financial services beyond traditional lending.
Client Needs: Corporate clients demanded sophisticated financial solutions, including
assistance with capital raising, strategic advisory services, risk management, and access to
global capital markets. Investment banking addressed these needs by providing specialized
expertise and a wide array of financial products and services.
3. Functions of Modern Investment Banking:
-Capital Markets Activities:
Underwriting: Investment banks underwrite securities offerings, including initial public
offerings (IPOs), bond issuances, and secondary offerings. They assume the risk of
purchasing securities from issuers and sell them to investors.
Trading and Market Making: Investment banks engage in trading activities, including
buying and selling securities, currencies, commodities, and derivatives. They provide
liquidity to financial markets by acting as market makers and facilitating trading activities.
-Advisory Services:
Mergers and Acquisitions (M&A): Investment banks advise companies on mergers,
acquisitions, divestitures, and other corporate transactions. They assist in valuation, deal
structuring, negotiations, and due diligence.
Corporate Finance: Investment banks provide strategic financial advice on capital structure
optimization, debt issuance, equity financing, and capital allocation strategies.
-Risk Management:
Derivatives and Hedging: Investment banks offer risk management solutions, including
derivatives, options, and other hedging instruments, to help clients manage exposure to
market risks, interest rate fluctuations, currency volatility, and commodity price movements.
-Asset Management:
Wealth Management: Investment banks offer wealth management and asset management
services to high-net-worth individuals, institutional investors, and corporate clients. They
manage investment portfolios, provide investment advice, and offer financial planning
services.

Q.2 What is Debt recovery Tribunal?

Ans SARFAESI Act 2002: The SARFAESI Act, which stands for Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, is a
significant piece of legislation in India aimed at empowering banks and financial institutions
to deal with non-performing assets (NPAs) more effectively.

-WHAT IS DRT?
Indian banks and financial institutions had since long been suffering to recover debts and
enforce securities from the defaulters. As the procedure regarding such recovery was erratic
and extremely cumbersome, the Narasimham Committee of 1991 recommended the setting
up of Special Tribunals like DRTs (Debt Recovery Tribunals) and DRATs (Debt Recovery
Appellate Tribunals), in order to streamline such processes. The Committee’s
recommendation led to the enactment of Recovery of Debts Due to Banks and Financial
Institutions Act (“RDDBFI”) 1993, from which DRTs and DRATs derive their authority to
adjudge on debt recovery matters. Since its inception, we have 39 DRTs and 5 DRATs
functioning in the country.

-DEBT RECOVERY TRIBUNALS UNDER THE SARFAESI ACT 2002

Debt Recovery Tribunals (DRTs) play a significant role in the implementation of the
SARFAESI Act 2002 in India. Here's how DRTs function under the SARFAESI Act:
1. Adjudication of Disputes: DRTs are quasi-judicial bodies established under the SARFAESI
Act to facilitate the speedy adjudication of disputes related to the enforcement of security
interests by banks and financial institutions. These disputes primarily arise between lenders
and borrowers regarding the recovery of nonperforming assets (NPAs).
2. Jurisdiction: DRTs have jurisdiction over matters related to the recovery of debts due to
banks and financial institutions. They handle cases involving secured debts above a specified
threshold, which is determined by the Central Government. DRTs have authority over cases
pertaining to the enforcement of security interests under the SARFAESI Act.
3. Initiation of Proceedings: Banks and financial institutions may initiate proceedings before
DRTs for the recovery of debts covered under the SARFAESI Act. This typically involves
filing an application with the relevant DRT, providing details of the defaulting borrower, the
outstanding debt, and the security interest held by the lender.
4. Speedy Adjudication: One of the key objectives of establishing DRTs is to ensure the
speedy resolution of debt recovery cases. DRTs are mandated to dispose of cases within a
specified timeframe, as prescribed under the SARFAESI Act. This helps expedite the
recovery process and reduces delays in resolving disputes between lenders and borrowers.
5. Powers and Procedures: DRTs have powers similar to civil courts, including the authority
to summon and examine witnesses, compel the production of documents, and issue orders for
the enforcement of their decisions. They follow summary procedures to expedite the
adjudication process and ensure swift resolution of disputes.
6. Appeals: Decisions of DRTs are subject to appeal before the Debt Recovery Appellate
Tribunals (DRATs). Borrowers or lenders aggrieved by the orders of DRTs may file appeals
before the respective DRATs within the prescribed timeframe. DRATs review the decisions of
DRTs and provide a further avenue for redressal of grievances.
DRTs play a crucial role in the implementation of the SARFAESI Act by providing a
specialized forum for the adjudication of disputes related to debt recovery. They contribute to
the efficient resolution of NPA-related issues and help promote financial stability in the
banking sector.

-JURISDICTION AND ROLE OF DEBT RECOVERY TRIBUNAL UNDER

SARFAESI ACT, 2002
The Debt Recovery Tribunal (DRT) has jurisdiction under the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act,
2002 for matters related to the enforcement of security interest by secured creditors. The
SARFAESI Act empowers banks and financial institutions to recover their dues from
nonperforming assets (NPAs) without the intervention of the court.
The jurisdiction of DRT under the SARFAESI Act includes:
1. Adjudication of applications by secured creditors for enforcement of security interest.
2. Issuance of orders for the sale of secured assets.
3. Recovery of debts due to banks and financial institutions.
4. Other related matters concerning the enforcement of security interest.

-KEY ROLES OF DRTS UNDER THE SARFAESI ACT:

1. Adjudication of Applications: DRTs adjudicate applications filed by secured creditors, such
as banks and financial institutions, for the enforcement of security interest. These applications
typically involve recovery of outstanding loans and dues from borrowers who have defaulted
on their payments.
2. Issuance of Orders: DRTs have the authority to issue orders for the enforcement of security
interest. This includes issuing orders for the sale of secured assets pledged by the borrower as
collateral against the loan. The sale proceeds are then used to recover the outstanding dues of
the secured creditor.
3. Recovery of Debts: One of the primary objectives of DRTs is to facilitate the recovery of
debts owed to banks and financial institutions. By adjudicating disputes related to the
enforcement of security interest, DRTs ensure that secured creditors can recover their dues in
a timely and efficient manner.
4. Jurisdictional Matters: DRTs also handle jurisdictional matters related to the SARFAESI
Act. This includes determining the validity of actions taken by secured creditors under the
Act and resolving disputes between creditors and borrowers regarding the enforcement of
security interest.
5. Speedy Resolution: DRTs are designed to provide a speedy and efficient mechanism for
resolving disputes arising under the SARFAESI Act. This helps in expediting the process of
debt recovery and reducing the backlog of cases related to non-performing assets (NPAs).

IMPORTANT CASE LAWS

Several significant case laws have emerged over the years regarding the interpretation and
application of the SARFAESI Act 2002 in India. Here are a few noteworthy ones:
1. Mardia Chemicals Ltd. vs. Union of India (2004): This landmark case dealt with the
constitutional validity of certain provisions of the SARFAESI Act. The Supreme Court
upheld the validity of the Act but struck down Section 17(2) (b) as being ultra vires the
Constitution. This section pertained to the right of a borrower to make representations against
the action taken by the secured creditor.
2. Transcore vs. Union of India (2008): In this case, the Supreme Court held that a borrower's
right to file an appeal under Section 17 of the SARFAESI Act does not preclude the right of
the secured creditor to take possession of the secured asset. It emphasized that the pendency
of an appeal does not operate as a stay on the enforcement of security interest by the lender.

Unit-3

Q.1 what is the difference between FEMA and FERA?

Ans FOREIGN EXCHANGE: Foreign Exchange refers to the trading of one currency over
another. For example, USD can be swapped for, say, INR or Euro. The market that facilitates
the foreign exchange is called the Foreign Exchange Market or Forex for short.
The Forex market is one of the most profitable and liquidated markets in the world with
trillions of dollars flowing into it. The Forex market is a system of banks, brokers, institutions
and individual traders worldwide.

The rate of Foreign Exchange is determined by the market, a value which is known as the
exchange rate. The currencies are listed in pairs while trading in Foreign Exchange with a
price associated with them. Once, Foreign Exchange was touted as the affairs of the
government and large firms. Today’s world has become more accessible and anyone can
trade in the Foreign Exchange easily. Numerous investment companies offer opportunities to
individuals to open accounts for the purpose of trade.

-FOREIGN EXCHANGE REGULATION ACT (FERA)

The Foreign Exchange Regulation Act was formulated with the aim of controlling foreign
exchange to preserve the foreign reserves, which were seen as a scarce resource back then.
The aim was to regulate foreign payments, regulate the dealings in foreign exchanges and
security and conservation the foreign exchange for the nation. There are a total of 81 sections
under this act.

Some important features of the FERA are as follows:

• The RBI shall authorise a company/individual for dealings in foreign exchange

• RBI has the power to authorise the dealers for transactions in foreign currencies and
even revoke the authorisation in cases of non-compliance
• Money changers, the individuals who are entrusted with the responsibility of
converting currency, shall be authorised by the RBI to do so at the specified rates (by
RBI)
• No individual apart from the authorised dealers shall attempt to deal in cases of
foreign exchange
• The foreign currency shall only be used for the purposes it was acquired for
• In case that is not possible, the currency shall be sold to another dealer within 30 days
• No person, without permission from RBI, is liable to make any transactions with a
partner, not a resident of India
• No negotiations shall be made regarding any bills of exchange in which the right to
receive payment is outside India
• No person is permissible to make any credits into the account of any person outside
India
 • No individual, other than the ones authorised by the RBI is liable to send foreign
currency outside the territory of India
• The person, liable to make foreign exchanges, shall not delay the receipt of the
foreign exchange
The FERA faced severe criticism and received backlash from the economic experts because it
hindered growth and also produced several impediments in the path of modernisation of
Indian industries.

-FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)

The Foreign Exchange Management Act was enacted in 1999 and replaced the previous
Foreign Exchange Regulation Act. It was introduced in the background of various
liberalisation reforms concerning the Indian economy. The main idea behind the act was to
facilitate external growth and encourage foreign exchanges. It has a total of 49 sections.

Some of the key features under FEMA are as follows:

• The Act enabled the authorised individuals to facilitate forex trading

• It also empowered RBI to place restrictions and they were expected to provide regular
input regarding the trading to RBI
• The Act allowed Indian nationals to trade in forex and own immovable property
outside Indian territory
• This was however only applicable if the property was acquired on trips to the said
country or if the person in question has inherited the property
• The FEMA Act also took into consideration foreign exchange transactions and
remittances which included foreign transactions by Indian residents or for the
exchange of foreign currency in India for travelling
• The Act also included several regulations and restrictions, pertaining to issues such as
authentication of the required documents, current account transactions
• According to FEMA, a few limits were also put in place such as:
1. In instances, where the person breaches the limit set in place, the penalty fee stands at
thrice the value of the transaction amount. In cases, where the amount of transaction is
unquantifiable, the penalty remains on INR 2 lakh and for daily occurrences of the
breach, the penalty amount stands at INR 5000 every day.
2. If any kind of property is involved in such cases, the property is confiscated and is
considered as a part of the penalty fee.
DIFFERENCE BETWEEN FEMA AND FERA
The Foreign Exchange Regulation Act (FERA) was the legislation governing foreign
exchange transactions in India until it was replaced by the Foreign Exchange Management
Act (FEMA) in 1999. Here's a comparison between FEMA and FERA:
1. Scope and Purpose:
FERA: FERA was enacted in 1973 primarily to regulate foreign exchange transactions,
control capital flows, and conserve foreign exchange reserves. It had stringent provisions and
focused on regulating and restricting foreign exchange transactions.
FEMA: FEMA, introduced in 1999, replaced FERA and aimed to facilitate external trade
and payments, promote orderly development and maintenance of the foreign exchange
market in India, and liberalize foreign exchange transactions. FEMA shifted the focus from
regulation and control to management and facilitation of foreign exchange transactions.
2. Regulatory Framework:
FERA: FERA had a more rigid regulatory framework with extensive government control
and strict penalties for violations. It required prior approval from the Reserve Bank of India
(RBI) for most foreign exchange transactions.
FEMA: FEMA introduced a more liberalized and flexible regulatory regime. It simplified
procedures for foreign exchange transactions, reduced government intervention, and
delegated powers to authorized persons to deal in foreign exchange.
3. Enforcement and Penalties:
FERA: FERA had stringent enforcement mechanisms and imposed severe penalties for
contravention of its provisions, including imprisonment and fines.
FEMA: FEMA retained provisions for penalties and enforcement but introduced a more
moderate approach compared to FERA. It emphasized compliance through education,
awareness, and administrative measures rather than solely relying on punitive measures.
4. Administration:
FERA: Under FERA, the Directorate of Enforcement was responsible for enforcing the
provisions of the Act, investigating violations, and initiating legal proceedings.
FEMA: FEMA continued to have the Directorate of Enforcement for enforcement
purposes. However, it introduced a more decentralized approach to administration, with
greater involvement of authorized dealers and other entities in foreign exchange transactions.
5. Liberalization and Foreign Investment:
FERA: FERA imposed significant restrictions on foreign investment and required
government approval for most foreign exchange transactions.
 FEMA: FEMA facilitated greater liberalization of foreign investment by simplifying
procedures, reducing government intervention, and allowing for automatic routes for certain
types of investments, subject to specified conditions.

Q.2 What is Capital and Current account transactions?

Ans CAPITAL ACCOUNT TRANSACTIONS
A capital account transaction meaning is when India and other countries trade money-related
things like assets and debts with each other. It includes transactions related to buying or
selling non-financial assets, such as real estate and patents, and financial assets, including
stocks, bonds, and derivatives.
The components of a capital account include the flow of foreign capital and loans, banking
activities, and other forms of investment, as well as fluctuations in the foreign exchange
reserve.
However, capital account transactions are restricted to a certain limit per the relevant
regulations. The RBI or Central Government do not impose any restrictions on the
withdrawal of foreign exchange for depreciation (decline in value) of direct investments.

CURRENT ACCOUNT TRANSACTIONS

A current account transaction includes various types of payments associated with foreign
trade, general business activities, services, short-term banking, and credit facilities used for
regular business operations.
It includes interest payments on loans and net income generated from investments.
Additionally, it covers remittances sent to support the living expenses of family members,
such as parents, spouses, and children residing in another country.
Education-related expenses, foreign travel, and medical care for parents, spouses, and
children further fall under current account transactions.
Current account transactions are much smoother than capital account transactions by
regulations. According to Section 5 of the FEMA (Foreign Exchange Management Act), any
individual has the authority to buy or sell foreign currency from an authorised dealer if it is
for a current account transaction.
To prevent money laundering through current account transactions, the Reserve Bank of India
(RBI) may impose certain restrictions requiring the valuation report of the particular imported
product or service.
DIFFERENCE BETWEEN CURRENT ACCOUNT AND CAPITAL ACCOUNT
TRANSACTIONS UNDER FEMA ACT
1. Current Account Transactions:
Nature: Current account transactions involve the exchange of goods, services, income, and
transfers between residents and non-residents on a regular basis.
Examples: Import and export of goods and services, payments for imports and receipts for
exports, remittances for family maintenance, education expenses, travel expenses, and
payment of interest and dividends.
Regulation: Current account transactions are generally liberalized, meaning they can be
conducted freely or with minimal restrictions. However, the Reserve Bank of India (RBI)
may impose regulations or restrictions on specific current account transactions if deemed
necessary for maintaining the stability of the foreign exchange market or safeguarding the
country's external financial position.
2. Capital Account Transactions:
Nature: Capital account transactions involve the movement of capital in and out of the
country and typically have a more significant impact on the country's external financial
position.
Examples: Foreign direct investments (FDI), portfolio investments, investments in
government securities and corporate bonds, borrowing and lending of funds between
residents and non-residents, and acquisition and transfer of immovable property by non-
residents.
Regulation: Capital account transactions are subject to stricter regulations and controls
compared to current account transactions. The RBI regulates capital account transactions to
manage capital flows, maintain financial stability, and safeguard the country's economic
interests. Regulations may include restrictions on the amount of foreign investment, sectoral
caps, reporting requirements, and approval processes.
In summary, current account transactions primarily involve day-to-day transactions related to
trade in goods and services, income, and transfers, and are generally liberalized under FEMA.
On the other hand, capital account transactions involve the movement of capital and are
subject to stricter regulations to manage capital flows and safeguard the country's economic
interests.

Unit-4
Q.1 What is Abuse of Dominance?
Ans EVOLUTION OF COMPETITION LAW IN INDIA: Competition law in India traces
its roots back to the enactment of the Monopolies and Restrictive Trade Practices (MRTP)
Act in 1969, which aimed to prevent the concentration of economic power and curb unfair
trade practices. However, with the evolving economic landscape and the need for a
comprehensive modern competition law framework, the MRTP Act was repealed and
replaced by the Competition Act in 2002.

-MONOPOLIES AND RESTRICTIVE TRADE PRACTICES (MRTP) ACT, 1969:

The MRTP Act was enacted to address concerns related to monopolies, restrictive trade
practices, and unfair competition. It provided the framework to regulate and control
anticompetitive practices, prevent abuse of dominant market positions, and investigate
mergers and acquisitions.

-COMPETITION ACT, 2002:

The Competition Act was enacted on January 13, 2003, and became fully operational in 2009.
It established the Competition Commission of India (CCI) as the regulatory authority
responsible for ensuring fair competition, preventing anti-competitive practices, and
promoting consumer welfare.
-PROVISIONS OF THE COMPETITION ACT:
The Competition Act prohibits anti-competitive agreements, and abuse of dominant market
positions, and regulates combinations (mergers and acquisitions) that may have an adverse
impact on competition. It also empowers the CCI to investigate and penalize entities engaged
in anti-competitive practices.

DIFFERENCE BETWEEN THE MRTP ACT AND THE COMPETITION ACT

The MRTP Act (Monopolies and Restrictive Trade Practices Act) and the Competition Act are
both regulatory frameworks in India aimed at promoting fair competition and preventing
anticompetitive practices, but they have some key differences:
1. Scope and Objective:
MRTP Act: Enacted in 1969, the MRTP Act primarily focused on controlling monopolistic
and restrictive trade practices to prevent the concentration of economic power in a few hands
and to ensure fair competition.
Competition Act: Enacted in 2002, the Competition Act is more comprehensive and
modern. It aims not only to prevent anti-competitive practices but also to promote and sustain
competition in markets, protect consumer interests, and ensure freedom of trade.
2. Regulatory Authority:
MRTP Act: The MRTP Act was administered by the Monopolies and Restrictive Trade
Practices Commission (MRTPC).
 Competition Act: The Competition Act established the Competition Commission of India
(CCI) as the regulatory authority responsible for enforcing competition law and promoting
competition advocacy.
3. Definition of Anti-competitive Practices:
MRTP Act: The MRTP Act primarily focused on monopolies and restrictive trade
practices. It defined and regulated unfair trade practices, monopolistic trade practices, and
concentration of economic power.
Competition Act: The Competition Act covers a broader range of anticompetitive practices,
including anti-competitive agreements, abuse of dominant position, and regulation of
combinations (mergers and acquisitions) that have adverse effects on competition.
4. Approach to Regulation:
MRTP Act: The MRTP Act had a more regulatory approach, often involving government
intervention to control and regulate business practices deemed anticompetitive.
Competition Act: The Competition Act adopts a more market-oriented approach, focusing
on promoting competition and allowing market forces to operate while intervening only
where necessary to prevent or correct anticompetitive behavior.
5. Penalties and Enforcement:
MRTP Act: The MRTP Act provided for penalties for violations of its provisions, including
fines and imprisonment.
Competition Act: The Competition Act also provides for penalties for anticompetitive
practices, including fines and other enforcement measures such as cease and desist orders,
divestiture, and imposition of penalties on individuals involved in anti-competitive conduct.

-ABUSE OF DOMINANT POSITION UNDER COMPETITION ACT 2002

Under the Competition Act of 2002 in India, abuse of dominant position refers to the conduct
of a dominant enterprise or group of enterprises that may harm competition in the relevant
market. Here's a detailed explanation:
1. Definition of Dominant Position: A dominant position refers to a position of strength
enjoyed by an enterprise in the relevant market in India, which enables it to operate
independently of competitive pressures or to affect its competitors or consumers or the
relevant market in its favor.
2. Types of Abuse of Dominant Position: The Competition Act identifies various forms of
abuse of dominant position, including but not limited to:
Unfair or Discriminatory Pricing: Charging excessive prices, predatory pricing, or
discriminatory pricing that harms competition or consumers.
 Imposition of Unfair Conditions or Terms: Imposing unfair or discriminatory conditions or
terms of trade that restrict competition or harm consumers or other market participants.
Limiting Production or Technical Development: Limiting production, supply, or technical
development to the prejudice of consumers.
Denial of Market Access: Refusing to deal with particular enterprises or imposing unfair
conditions on trading partners, thereby restricting market access.
Tying and Bundling: Tying the sale of one product or service to the purchase of another
product or service, without any valid business justification.
3. Assessment of Abuse: The Competition Commission of India (CCI) assesses allegations
of abuse of dominant position based on various factors, including:
The market power of the dominant enterprise or group of enterprises.
The nature and extent of the alleged conduct and its impact on competition and consumers.
The existence of any valid business justifications or efficiencies that may outweigh any
potential anti-competitive effects.
The effects of the conduct on consumer welfare, innovation, and overall economic
efficiency.
4. Exemptions and Defenses: The Competition Act provides for certain exemptions and
defenses to allegations of abuse of dominant position, including:
Conduct necessary to promote technical or economic progress or to improve production or
distribution of goods or provision of services.
Conduct necessary to protect the legitimate interests of the enterprise, such as ensuring
product quality or protecting intellectual property rights.
5. Penalties and Remedies: If the CCI determines that an enterprise has abused its dominant
position, it may impose various penalties and remedies, including:
Monetary fines of up to 10% of the average turnover of the enterprise for the preceding
three financial years.
Issuance of cease-and-desist orders to stop the anti-competitive conduct.
Imposition of behavioral or structural remedies to restore competition in the relevant
market.

Q. 2 What are the Powers and Functions of Competition Commission of India (CCI)?
Ans MEANING: Competition Commission of India (CCI) is a statutory body of the
Government of India responsible for enforcing the Competition Act, 2002, it was duly
constituted in March 2009.
The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and
replaced by the Competition Act, 2002, on the recommendations of the Raghavan committee.
COMPOSITION:
The Commission consists of one Chairperson and six Members who shall be appointed by the
Central Government.
The commission is a quasi-judicial body which gives opinions to statutory authorities and
also deals with other cases. The Chairperson and other Members shall be whole-time
Members.

ROLE OF THE COMPETITION COMMISSION OF INDIA (CCI):

In India, the Competition Commission of India (CCI) is the primary authority responsible for
competition advocacy activities under the Competition Act of 2002. The CCI engages in a
range of advocacy efforts to promote competition by issuing policy papers, conducting
studies, participating in policy discussions, and collaborating with stakeholders.

POWERS AND FUNCTIONS OF THE COMPETITION COMMISSION OF INDIA

-POWERS
1. Investigation:
The CCI has the power to investigate anti-competitive practices, abuse of dominance, and
combinations that may have an adverse effect on competition in India.
It can initiate investigations based on complaints received from aggrieved parties, suo
moto (on its own motion), or upon a reference from the central government or a statutory
authority.
2. Search and Seizure:
The CCI has the authority to conduct searches and seizures of documents, records, or other
evidence relevant to its investigations, subject to the provisions of the Competition Act and
other applicable laws.
3. Examination of Witnesses:
The CCI can summon and examine witnesses under oath during its investigations, and it
has the power to compel the production of documents or other evidence relevant to the
proceedings.
4. Imposition of Penalties:
If the CCI finds that an enterprise has violated the provisions of the Competition Act, it has
the power to impose penalties, including fines of up to 10% of the average turnover of the
enterprise for the preceding three financial years.
 The CCI can also impose penalties on individuals responsible for anticompetitive conduct,
including directors, officers, or employees of the offending enterprise.
5. Issuance of Cease and Desist Orders:
In addition to imposing penalties, the CCI can issue cease and desist orders to stop anti-
competitive behavior or practices that are detrimental to competition in India.
6. Approval of Combinations:
The CCI has the authority to review and approve combinations such as mergers,
acquisitions, and amalgamations that meet certain thresholds and may have an appreciable
adverse effect on competition in India.
It can approve combinations subject to conditions or modifications aimed at preserving
competition in the relevant market.
7. Advocacy and Awareness:
The CCI has the power to undertake advocacy and educational initiatives to promote
competition awareness among businesses, consumers, and other stakeholders.
It can issue guidelines, conduct workshops, seminars, and other activities to enhance
understanding of competition law and policy.
8. Judicial Functions:
The CCI can adjudicate disputes related to competition law violations and combinations,
and its decisions are subject to review by the Competition Appellate Tribunal (COMPAT) and
the courts.

-FUNCTIONS
1. Competition Advocacy:
The CCI engages in advocacy efforts to raise awareness about the benefits of competition
and the importance of compliance with competition law among businesses, consumers,
policymakers, and other stakeholders.
It conducts seminars, workshops, and outreach programs to educate stakeholders about
competition law and policy and to foster a culture of competition in the Indian economy.
2. Policy Formulation:
The CCI contributes to the formulation of competition-related policies and regulations in
India by providing inputs and recommendations to the central government and other
regulatory authorities.
It conducts research and analysis on competition-related issues and trends to inform policy
development and decision-making.
3. Enforcement of Competition Law:
The primary function of the CCI is to enforce the provisions of the Competition Act of
2002, which prohibit anti-competitive agreements, abuse of dominance, and combinations
that have an adverse effect on competition in India.
The CCI investigates alleged violations of competition law, conducts hearings, and issues
orders to address anti-competitive behaviour and promote competition in the market.
4. Review of Combinations:
The CCI reviews and approves combinations such as mergers, acquisitions, and
amalgamations that meet certain thresholds and may have an appreciable adverse effect on
competition in India.
It assesses the potential impact of proposed combinations on competition and consumer
welfare and may impose conditions or modifications to mitigate any adverse effects on
competition.
5. Adjudication of Disputes:
The CCI adjudicates disputes arising from alleged violations of competition law and
disputes related to combinations that have been referred to it for review.
It conducts quasi-judicial proceedings, hears parties' arguments, examines evidence, and
issues orders to address competition law violations and promote fair competition.
6. Market Studies and Research:
The CCI conducts market studies and research projects to assess competition dynamics,
market structure, and the effectiveness of competition policy in India.
It publishes reports and studies on various sectors of the economy to identify potential
barriers to competition and recommend policy reforms.
7. International Cooperation:
The CCI collaborates with competition authorities and organizations in other countries to
share best practices, exchange information, and enhance cooperation in the enforcement of
competition law.
It participates in international forums and initiatives to contribute to the development of
global competition policy and regulatory frameworks.

Q.3 What are Combinations?

Ans MEANING: Under the Competition Act of 2002 in India, the term "combinations"
refers to certain types of mergers and acquisitions, amalgamations, or other forms of business
combinations that have an appreciable adverse effect on competition within the relevant
market in India. Here's a detailed explanation:
1. DEFINITION:
Combinations are defined as:
Acquisitions of control, shares, voting rights, or assets,
Mergers or amalgamations of enterprises, or
Acquiring of control over enterprises or assets outside India by Indian enterprises, if such
combinations cause or are likely to cause an appreciable adverse effect on competition within
the relevant market in India.
2. THRESHOLDS:
The Competition Act specifies certain thresholds based on assets or turnover that trigger
the requirement for mandatory notification of combinations to the Competition Commission
of India (CCI). These thresholds vary depending on whether the combination involves:
Acquiring control over an enterprise,
Acquiring shares, voting rights, assets, or control in an enterprise, or
Mergers or amalgamations.
3. MANDATORY NOTIFICATION:
Parties to a combination meeting the specified thresholds are required to notify the CCI
within 30 days of:
Approval of the proposal relating to the combination by the board of directors or the
shareholders, or
Execution of any agreement or other document for the implementation of the combination,
whichever is earlier.
4. REVIEW PROCESS:
Upon receiving a notification of a combination, the CCI conducts a review to assess
whether the combination is likely to cause an appreciable adverse effect on competition in
India.
The review process involves a detailed examination of various factors, including the
market shares of the parties, the level of concentration in the relevant market, the likelihood
of competition being eliminated or reduced, and any efficiencies that may result from the
combination.
5. EXEMPTIONS AND EXCLUSIONS:
The Competition Act provides for certain exemptions and exclusions from the requirement
to notify combinations, including:
Combinations that result from an intra-group restructuring not resulting in a change of
control,
 Acquisitions of shares or voting rights solely as an investment or in the ordinary course of
business,
Acquisitions of assets in the ordinary course of business, and
Combinations specifically exempted by the Indian government.
6. PENALTIES AND REMEDIES:
If the CCI determines that a combination is likely to cause an appreciable adverse effect on
competition, it may:
Disapprove the combination,
Approve the combination subject to modifications or conditions, or
Refer the combination to the Competition Appellate Tribunal (COMPAT) for further
review.
Parties found to have implemented a combination without notifying the CCI or in violation
of any conditions imposed by the CCI may be subject to penalties, including monetary fines.

In summary, combinations under the Competition Act of 2002 encompass mergers,

acquisitions, and other forms of business combinations that may have an appreciable adverse
effect on competition in India. The Act provides for mandatory notification requirements,
review by the CCI, and potential penalties or remedies for non-compliance.