Extension of SEBI suspension on agro trading to ease pressure on India’s poor

Dubai - One of the steps being taken is that SEBI, which is a regulator for commodities trading on the market, is that has suspended new futures contracts in seven agro commodities for a period of one year.

Question: Wholesale price inflation in India is at an all-time high. Is something being done to protect the interests of the poor and vulnerable sections of society, who are primarily hit by rising prices?

Answer: In November 2021, the wholesale price inflation was as high as 14.23 per cent, which is the highest figure in the past 12 years. The rise was on account of a sharp increase in the prices of several items including food products. Due to the weakening of the rupee, the price of imported edible oil has increased substantially, and this has adversely affected the wholesale price index because about 70 per cent of the edible oil consumed in India is imported. One of the steps being taken is that the Securities and Exchange Board of India (SEBI), which is a regulator for commodities trading on the market, has suspended new futures contracts in seven agro commodities for a period of one year. SEBI has also directed commodity exchanges not to allow trading in commodity derivatives by prohibiting members from taking new positions. The seven commodities are paddy, wheat, gram, mustard seeds, soya bean, crude palm oil, and moong dal. The period of suspension has been extended till December 2022.

Question: My wife has been suffering from a critical ailment. While taking out an insurance policy this was fully disclosed to the insurance company. However the company is refusing to reimburse her medical expenses. Is this justifiable, and what action can be taken against the insurance company?

Answer: The person who is insured is under a duty to disclose to the insurance company all material facts which are within his knowledge. Once such disclosure is made and the medical insurance policy is issued after assessing the condition of the insured, the insurance company cannot repudiate the claim made by an insured. The company is bound to reimburse the amount of medical expenses which are covered under the insurance policy. The Supreme Court has recently taken this view in a case where a person had disclosed his cardiac condition to the insurance company while taking out an overseas mediclaim policy. He suffered a heart attack on reaching a foreign country which required him to be hospitalized for undergoing angioplasty. Three stents were inserted to remove the blockage of the arteries. The insurance company refused to pay the cost of the medical procedure undertaken in the foreign country. The Supreme Court held that this refusal to honour the commitment under the contract of insurance was illegal and the company was directed to reimburse the expenses. Therefore, you would have no option but to go to court and seek redress if the insurance company does not reimburse the medical expenses of your wife.

Question: Several startups have recently made initial public offers (IPOs). As soon as the issue is listed, there has been a drop in the prices which has resulted in substantial losses for small retail investors. Are attempts being made to protect the interests of gullible investors?

Answer: There have been cases where promoter shareholders have sold their original investments immediately after the listing of the shares pursuant to the IPO. For curbing this tendency, it has been stipulated that the key promoters or shareholders who have more than 20 per cent stake in the company cannot sell more than half of their holding as part of an offer for sale. To ensure full disclosure, companies are permitted to allocate only 25 per cent of the proceeds of the issue for acquisitions. Issuers will have to appoint a credit rating agency to monitor and report on the end user of funds. Further, it is stipulated that the difference between the floor and upper prices should be at least 105 per cent. One-third of the retail investors’ portion of the IPO is to be reserved for those who invest between Rs200,000 and Rs1 million. The balance two-thirds of the retail investors’ portion would be for those who invest more than Rs1 million.

H. P. Ranina is a practicing lawyer, specialising in tax and exchange management laws of India.