9 Major Incidences in Indian CorporateLegal Sector in 2012 That You Must Read

About Before Interviews

If you are giving any interview, especially for legal or corporate- managerial
jobs the people across the table will expect you to know these few things that
rocked corporate India last year. Dont miss reading this. We have covered just
enough to give you the general idea feel free to read more on these issues.

Reebok India Case

Vodafone wins $2.2 Billion Tax Bill Battle

Diageos $2.1 billion deal for Mallyas United Spirits

Emkay Globals bad orders trigger brief halt on NSE

Kingfisher Airlines Loses License to fly

Axis Bank Partners with Tata General Insurance

INR 1,800 crore wiped off Adani Enterprise Ltd stocks after rumour fuelled by blogger

Hero Motors finally drops Honda

Sahara told to repay small investors

REEBOK INDIA SUFFERS A MAJOR SCAM

This is probably the biggest corporate scam after Satyam, at least of whatever has come to light.
Reebok India, owned by Adidas AG, alleged a Rs.870 crore fraud by its former managing
director (MD) Subhinder Singh Prem and former Chief Operating Officer (COO) Vishnu
Bhagat, in a criminal complaint filed at the Gurgaon polices Economic Offence Wing in May,
2012. In March 2013, Adidas, the parent company, announced a 153 million Euros loss on
account of the Reebok India episode.
The two were accused of criminal conspiracy and fraudulent practices including stealing
products by setting up secret warehouses. There has been a grave failure of corporate
governance as well since the company has also alleged that the former officials fudged accounts

and indulged in fictitious sales causing a multi-crore dent to the company. In its FIR, Reebok
has said that it carried out an internal investigation after certain fraudulent activities were
noticed which again points to the importance of internal checks for malpractices and
corruption.
Gurgaon police had arrested Singh and Bhagat along with three others Sanjay Mishra,
Prashant Bhatnagar and Surakshit Bhat. Allegedly, these individuals have been siphoning off
funds by creating ghost distributors across the country and generating forged bills over the last
five years.
Agencies probing the alleged Rs 870 crore corporate fraud in the operation of Reebok
India have detected a systemic mismanagement in the business planning and running of the
company.
The Income Tax department has alleged tax evasion of Rs 140 crore in the case. The
IT departments first goal is to ensure that the company later does not claim any bad debt. A
bad debt is that amount that is owed to a business or individual and has to be written off by the
creditor as a loss because the debt cannot be collected because of a host of reasons.
As soon as the scam came to light, affairs of the company came under close government
scrutiny. While the IT department documents investigated the accounts and imports of the firm,
the Serious Fraud Investigation Office is probing the entire governance affairs of the company
under Section 235 of the Companies Act. A forensic audit was conducted by the German arm of
Ernest & Young which revealed many falsification of documents and books.
It is interesting to note that accounting officials of the firm and the auditors were not held liable
for their deliberate or mistaken oversight in identifying the irregularities in the account
books which led to the alleged financial irregularities.

VODAFONE WINS $2.2-BILLION TAX BILL BATTLE

Vodafone Group PLC won a $2.2 billion legal battle against the tax department in a Supreme
Court ruling that analysts said would encourage foreign investment and clear the way for the
companys planned initial public offering (IPO) in India. Capitalists and Laissez Faire
enthusiasts applauded the judgment as a significant progressive judicial step.
The tax demand was over Vodafones $11 billion deal to buy Hutchisons Indian mobile
business in 2007. The UK-based company had appealed to the Supreme Court after losing the
case in the Bombay High Court in 2010. The verdict sent Vodafone shares up as much as 2.5
percent in London.
Vodafone, the worlds largest mobile operator by revenue, had taken the position that Indian tax
authorities had no right to tax the transaction which had taken place between two foreign
entities in the Caymans Island and had no sufficient connection with India for attracting capital
gains tax. The government on the other hand argued that the foreign entities are merely shell

companies without any assets or operations except for the Indian company. The transaction
between foreign entities was nothing but a sham to avoid taxes, and that there is sufficient
connection with India to tax the transaction.
Even if tax was due, the company had argued, it should be paid by the seller not the buyer.

Vodafone finally managed the avoid the capital gains tax slapped by the IT department
Indian authorities had said the deal was liable for tax because most of the assets were in India

and because under local tax law, buyers have to withhold capital gains tax liabilities and pay
them to the government.
The court ordered the tax office to refund to Vodafone with 4 percent interest the 25 billion
rupees it had been asked to deposit pending a ruling.
For a brief period there was a government proposal to introduce a retrospective law to tax all
transactions such as Vodafones from the past after the judgment was issued but it was
scrapped in the face of severe criticism and current President of India Pranab
Mukherjee leaving the finance ministry.

DIAGEO AND UNITED SPIRITS: MASSIVE $2.1 BILLION M&A Deal

Sweet deal
Diageo PLC, the flagship of the worlds largest spirits group, bought a majority stake in United
Spirits Ltd, controlled by Vijay Mallya, for $2.1 billion.
Diageo, which first tried to buy United Spirits in 2008, will buy 53.4 percent of Indias largest
spirits company in a two-part deal. This was the biggest inbound Indian M&A deal since British
oil firm Cairn Energy PLC sold a majority stake in its Indian business to Vedanta
Resources PLC.
Diageo said that India would be their second big market after USA and may become the biggest
in the future.

EMKAY GLOBALS BAD ORDERS TRIGGER BRIEF HALT ON NSE

A series of technically erroneous orders placed by Emkay Global Financial Services sent the
NSEs index Nifty tumbling, raising serious concerns about the stability of trading systems after
a series of global market glitches.
Trading on the National Stock Exchange (NSE) was briefly halted after the 59 trades worth
more than $125 million were placed, triggering a sudden drop of more than 900 points on the

Nifty index. The orders, for an institutional client, were sent from a single dealer terminal at
Emkay Global.
Emkays actions marked the another incident in a glitch-filled year for Indias share markets,
and raised the ghost of a sudden collapse like the Wall Street flash-crash of May 2010.

KINGFISHER AIRLINES LOSES LICENSE TO FLY

The financially troubled Kingfisher Airlines lost its flying permit after a deadline to renew its
suspended license expired. The Directorate General of Civil Aviation (DGCA) has suspended
Kingfisher Airlines license to fly till further orders pursuant to Clause 15 (2) of Schedule XI of
the Aircraft Rules, 1937, after the airline failed to deliver a viable financial and organizational
revival plan. The debt-ridden carrier was grounded since October 2012 after repeated strikes by
workers over unpaid wages.
Kingfisher owes various public sector banks $1.4bn (870m) in debts and has been frantically
trying to raise funds after lenders refused to give fresh loans. The airline now owes money to
staff, airports, tax authorities and its lenders and may have to be liquidated.

AXIS BANK PARTNERS WITH TATA AIG GENERAL INSURANCE

Axis Bank partnered with Tata AIG General Insurance to become its agent for distributing
insurance products to Axis Bank customers.
Under the partnership, Tata AIG will offer a range of general insurance solutions to Axis Bank
customers through the Banks extensive distribution network across India. The Axis Bank-Tata
AIG synergy will offer products for a range of insurance needs such as motor, health, travel,

home for retail customers and marine, liability, property etc. for corporate customers.
Banking companies are not allowed to engage in offering insurance services although banks
with their wide network of branches create a unique opportunity to distribute financial products.
The tie up between Axis Bank and Tata AIG is very significant in this light.

1,800 CRORE WIPED OFF ADANI ENTERPRISE LTD STOCKS AFTER

ONLINE RUMOUR

This shocking event goes on to show the strength of online informal media such as blogs and its
real life impact. Stock prices of many companies under the Adani Group took a tumble after a
blogger posted incorrect rumors about Gautam Adanis arrest in connection with an arrest of a
political leader.
The blog, run by a Vadodara based blogger mentioned Believe it or not: Our Ahmedabad
Bookie says: Mr. GAUTAM ADANI is been arrested? What will happen to ADANI STOCKS?
Something related to Kidnapping of Congress LeaderWe are Hearing (Rumours or Facts??)
Lets see The stock dipped 8.4% and closed at Rs. 195.

HERO MOTORS FINALLY DROPS HONDA

Hero MotoCorp dropped Hondas badge from all

its models at the end of September 2012. The 26 year old joint venture was ended in 2010
through a separation agreement under which Hero Group bought out Hondas stake in the JV.
Hero MotoCorp continues to pay royalty to Honda for its technology despite the separation. It is
believed that the new company has now more potential for expansion as old restrictions such as
no-export policy and bar on new technology development under the JV agreement is now lifted.
After splitting from Honda and unveiling its new identity, Hero MotoCorp has finally dropped
the Honda mark from all its products in 2012.

SAHARA TOLD TO REPAY $3 BILLION TO SMALL INVESTORS

Unlisted conglomerate Sahara, one of Indias biggest business groups was ordered by the
Supreme Court of India after a prolonged legal battle with capital markets regulator SEBI to
refund 174 billion rupees raised by dubious means from 22 million small investors. From
2008-11, they received 174 billion rupees through what is known as an optionally fully
convertible debentures. The Sahara was also asked to pay 15 percent interest to the
investors of the fund which has been illegally raised from the public without resorting to proper
legal procedure.
The Supreme Court, whose order reaffirmed an earlier ruling that the fundraising did not
meet the rules, ordered two unlisted Sahara group firms to refund money they had raised with
the interest within three months.
The judgment closed a much exploited loophole of the corporate fundraising laws in India and
underscored an increasing assertiveness by Indias judiciary and regulators as businesses and
financial markets expand at a fast pace in Asias third-largest economy.