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Rainshine Entertainment Private Limited invested in a media company and development platform Medverve Impact Ventures Private Limited (“ATS”)./strong>

Rainshine Entertainment Private Limited invested in ATS., a private limited company in the business of producing original journalism, documentaries and narrative non-fiction content across all formats including shows, films and digital properties. Rainshine will collaborate with ATS to offer strategic direction and drive growth.

Role:Jerome Merchant + Partners, Mumbai advised ATS alongwith its founders Supriya Nair, Sidin Vadukut, and Gaurav Vaz.

Members of JM+P team: The team was led by Partner Murtaza Somjee along with Associate Sumedha Kalra.

September 2019

India Infoline Limited (IIFL) invests approximately INR 40 Crores in craft beer brewey, White Owl Brewery Private Limited.

IIFL India Private Equity Fund, an investment arm of India Infoline Limited, invests approximately INR 40 Crores in White Owl Brewery Private Limited, a private limited company in the business of manufacturing craft beer and other related branded merchandise.

Role:Jerome Merchant + Partners, Mumbai advised IIFL India Private Equity Fund.

Members of JM+P team: The team was led by Partners Sameer Sibal and Shameek Ray along with Associates Nirav Bakshi and Rishabh Gupta.

September 2019

‘Digifin’ raises approximately INR 165 crores in Series A funding round.

Amica Financial Technologies Private Limited, led by Jitendra Gupta, raised approximately INR 165 crores in its Series A funding round from Matrix Partners, Sequoia Capital, Greyhound Capital Europe LLP, 3One4 Capital, Rocket Internet Capital Partners, BEENEXT Emerging Asia Pte Ltd., Tanglin Venture Fund I, LLC, Amrish Rau and other Angel Investors.

Role: Jerome Merchant + Partners, Mumbai advised the Company (Amica Financial Technologies Private Limited)

Members of JM+P team: The team was led by Partners Vishnu Jerome and Sameer along with Associate Komal Parakh.

October 2019

Amar Ujala buys majority stake in Cygnus Medicare for approximately INR 130 crores

Leading media firm Amar Ujala Ltd has acquired a majority stake in Cygnus Medicare Private Ltd, which operates a chain of super specialty hospitals, for around INR 130 crore as part of its expansion plans in the healthcare segment. The investment includes a significant primary commitment which includes the transfer of two Ujala Healthcare hospitals to Cygnus Medicare as well as the secondary investment which provides an exit to angel investors and a partial exit to existing institutional investors.

Role: Jerome Merchant + Partners, Mumbai advised the Company as well as the, Promoters and the existing investors i.e Somerset Indus Healthcare Fund I, Eight Roads Investments Mauritius II Limited and Evolvence India Fund II Ltd in the Company.

Members of JM+P team:The team was led by Partner Murtaza Somjee along with Associate Sumedha Kalra.

November 2019

Insolvency and Bankruptcy Updates November 2019

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Insolvency and Bankruptcy Updates November 2019

Insolvency and Liquidation Proceedings of Financial Service Providers

On 15th November 2019, the Ministry of Corporate Affairs (“MCA”) notified the Insolvency and Bankruptcy (Insolvency and Liquidation of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (“Rules”) pursuant to Section 227 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). Under Section 227, the Government may notify such financial service providers (“FSPs”) or categories of FSPs to be subject to the provisions of the IBC in relation to insolvency resolution and liquidation.

Further, on November 18, 2019, the MCA notified that systemically important non-banking financial companies and housing finance company with asset size more than INR 5,000,000,000 (Indian Rupees Five Hundred Crores) to be FSPs for the purposes of Section 227 and the RBI to be the appropriate regulator in respect of such entities.
The Rules layout the framework for insolvency resolution and liquidation proceedings of FSPs.

  1. Initiation of CIRP

    Under the Rules, the corporate insolvency resolution process (“CIRP”) in respect of an FSP may be initiated only by the appropriate financial regulator (such as the Reserve Bank of India (“RBI”)). This Rules authorize the financial regulator to take suo-moto action against the FSP if such FSP is in default of dues of INR 100,000 or more.

    The Rules provide that an insolvency resolution application filed in respect of an FSP will be dealt with by the National Company Law Tribunal (“NCLT”) in the same manner as an application filed by a financial creditor against a corporate debtor. It has been clarified that presently, the regulator who makes an application for initiation of the CIRP against an FSP shall follow the same procedure as under the National Company Law Tribunal Rules, 2016. This procedure may be amended once the MCA notifies separate rules for FSPs in this regard.

  2. Moratorium

    The moratorium on the institution of suits, continuance of legal proceedings, transfer, disposal or recovery of any assets of the FSP under Section 14 of the IBC shall come into effect as an interim-moratorium at from the date of filing of the insolvency resolution application by the appropriate regulator. However, the license of the FSP to provide its financial services shall not be cancelled or suspended during the interim-moratorium or moratorium.

    During the subsistence of the interim-moratorium or the moratorium, if the FSP has any assets, funds, securities or any such asset which is held by the FSP on trust for the benefit of third-parties (“Third-Party Asset”) then such Third-Party Asset shall remain free from the effect of interim and final moratorium and the Administrator shall deal with such Third-Party Assets as may be notified by Government pursuant to Section 227 of the IBC. However, the provisions governing Third Party Assets has not been given effect to.

  3. Insolvency Professional

    The Rules provide that the NCLT will appoint as an administrator the person proposed by the financial regulator for such appointment. Further, Rule 9 of the Rules, provides that such an administrator shall fulfil the role of insolvency professional, interim resolution professional, resolution professional or liquidator, as the case may be.

  4. Advisory Committee

    Unlike a regular CIRP, the financial regulator is entitled to form an advisory committee (“AC”) within forty-five (45) days of the date on which the NCLT admits the insolvency petition.

    This AC shall consist of three (3) members and the chairman of such committee shall be the administrator who has been appointed by the financial regulator as in the insolvency application against the FSP. The members of the AC are required to have expertise in finance, accountancy, law, public policy or other areas of financial services. The function of the AC is to assist the Administrator in discharging its obligations under the IBC.

  5. Resolution Plan

    Under Rule 5 (d) of the Rules, the resolution applicant (“RA”) shall submit a resolution plan in respect of the FSP.

    Upon such resolution plan being accepted by the committee of creditors as under Section 30 (4) of the IBC, the same is required to be submitted to the financial regulator (and applicant) for a certificate of no-objection including confirmation on the satisfaction of fit-and-proper criteria of the RA.

    The Rules have also contemplated that, in the event the financial regulator does not provide a no-objection certificate within forty-five (45) days of such an application being filed, then it shall be assumed that the financial regulator in question has no-objection to the resolution plan being made effective.

  6. Liquidation Process

    The provisions of the IBC as regards the liquidation process will apply to the liquidation process of an FSP, subject to the following exceptions:

    (i) the license of the FSP shall not be suspended or cancelled during the liquidation process until the liquidator has been given an opportunity to be heard by the NCLT; and

    (ii) the financial regulator (shall also be provided an opportunity to be heard by the NCLT before an order is passed for liquidation as under Section 33 of the IBC or dissolution under Section 34 of the IBC.

  7. Voluntary Liquidation Process

    The Rules clarify that the provisions for voluntary liquidation shall be applicable to FSPs in the same manner as they are applicable to corporate entities. As above, the Rules have provided for modifications to the process as under the IBC in the following way:

    (i) if an FSP wishes to liquidate itself then it must approach the relevant regulator for permission under Section 59 of the IBC for the initiation of such proceedings;

    (ii) the affidavit as is required to be filed by the entity which wishes to initiate voluntary liquidation shall include a declaration that the permission of the financial regulator as sought under (i) above has been obtained; and

    (iii) the financial regulator (and applicant) shall also be provided an opportunity to be heard by the adjudicatory body before an order is passed for voluntary liquidation under Section 59 of the IBC.

Insolvency Resolution Process for Personal Guarantors to Corporate Debtors

The MCA on 15 November, 2019 also published the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (“PG Rules”).

Under the PG Rules, the MCA has notified the process which must be followed by a personal guarantor in order to initiate voluntary insolvency proceedings and for creditors to initiate insolvency proceedings against the personal guarantors.

Under Rule 6, the guarantor shall either by itself or through a resolution professional be entitled to file an application with respect to Further, the guarantor will also be required to serve notice to the corporate debtor and every financial creditor of such application.
The creditors have also been given the right to file for initiation of insolvency process themselves or through a resolution professional as per the notified form against the personal guarantor of the corporate debtor. Prior to filing of such application, the creditor has to serve a demand notice in the format prescribed to the guarantor demanding payment of the amount in default within fourteen days from the receipt of the notice and if payment is not made, the creditor may file an application for initiation of the insolvency process in the format prescribed.

Additionally, Rule 5 of the PG Rules has clarified limits for “excluded assets” as under the Section 79 (14) of the IBC. “Excluded assets” are those which shall not be proceeded against in the event of insolvency proceedings against the corporate debtor and/or guarantor. The limits therein have been revised as follows for their applicability to personal guarantors: (i) unencumbered personal ornaments shall not exceed INR 100,000; (ii) unencumbered single dwelling owned by the debtor shall not exceed INR 2,000,000 for urban area and INR 1,000,000 for a rural area. The definition for “rural area” is to be as under the National Rural Employment Guarantee Act, 2005.


The Rules seek to address a significant gap in not having an insolvency resolution process and liquidation process under the IBC for FSPs.

The Government has been pragmatic in its approach by only allowing the relevant regulator to initiate proceedings against the FSPs and not any other creditor who the FSP may be indebted to. However, the effective role of the administrator will be key to successful implementation of the Rules.

The PG Rules, come into effect from December 1, 2019 and provides a defined regime under which creditors may enforce their claims against. It is important to note that the PG Rules do not apply to personal guarantors of FSPs but only to corporate debtors.

Indian Law Updates August 2019

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Indian Law Updates August 2019

Recent amendments relating to issue of shares with differential voting rights (DVRs), ESOP’s and DRR

On 16th August 2019, the Ministry of Company Affairs (MCA) notified the Companies (Share Capital and Debentures) Amendment Rules, 2019 (the Rules), which brought in certain amendments with regard to the issue of shares with differential rights, ESOP’s and the requirement on maintaining debenture redemption reserves.


Section 43 of the Companies Act, 2013 (the Act) enables the issue of shares with differential rights as to dividend, voting, or otherwise, provided that Rule 4 of the Companies (Share Capital and Debentures) Rules 2014 is complied with.

Amendments as per Notification

  • Shares with differential voting rights can now constitute up to 74% of the total voting rights in the company. Earlier, these shares could not constitute more than 26% of the total voting rights.
  • The requirement of having distributable profits for the last three years in order to issue equity shares with differential rights has been done away with.

Application to Private Companies

As per the MCA Notification of June 5th, 2015, Section 43 is not applicable to private companies if their memorandum and articles of association so provide. Therefore, even prior to this Notification, private companies which have exempted themselves from the Section 43 and 47 can therefore, issue shares with differential voting rights in accordance with the relevant provisions of the Companies Act, 2013.

Unlisted Public Companies: Unlisted Public Companies do not have the flexibility to exempt themselves from Section 43 or 47 of the Companies Act, 2013. Therefore, these amendments do represent a significant change. Hence, unlisted public companies which do not have a track record of distributable profit, can now issue equity shares with superior voting rights for the promoters. This will now enable many e-commerce companies which are not profitable to issue DVR’s to their founders so as to maintain control despite being diluted due to multiple rounds of funding.

Further, the ability for DVR’s to constitute up to 74% of the share capital may help founders of such companies retain control while availing funding from financial investors, who are primarily focused to increase their economic value of their investment, rather than in the voting rights.

Listed Companies

In addition to the requirements under the Companies Act, listed companies are to comply with SEBI regulations and therefore are only permitted to issue shares with inferior (or fractional) voting rights.

However, keeping in line with the market reality of fund raising and the promoter founder protection, the SEBI board in June has approved a framework for issue of differential voting rights shares. This framework enables issue of “SR Shares” or superior voting rights shares by ‘tech companies’ to the promoters. The new framework prescribes SR Shares to have voting rights in the ratio of a minimum of 2:1 and a maximum of 10:1 compared to ordinary equity shares.

However, this framework is still to come into effect and therefore will need to be separately examined upon the amendments being notified.


Given the market trend of ‘scaling up’ and the requirement for additional capital to operate businesses, this Notification provides Promoters of companies to retain control even as they raise equity capital from investors.

Having said this, at this stage, the primary benefactors of these amendments are promoters of (a) unlisted public companies, and (b) private companies being converted into public companies or for listing of their securities.

Employee Stock Options

The Rules exclude a promoter, any person belonging to a promoter group or a director (directly or indirectly) holding more than 10% from being entitled from the definition of an ‘Employee’. Therefore, such persons are not entitled to ESOPs under the said provisions.

This restriction for the aforementioned persons is however not applicable to startup entities for a particular period of time as set out below.

  • Time period for the exemption has been increased from 5 years to 10 years from the date of incorporation for startup companies.

This amendment will enable startup entities to provide incentives to promoters/ directors of startup entities through ESOP’s for a longer duration (i.e. 10 years).

Debenture Redemption Reserves (DRR)

The Companies Act, 2013 prescribes certain reserves for companies which have issued debentures to maintain so as to ensure timely redemption of such debentures. However, given the liquidity constraints being faced by Indian corporates, the debenture redemption reserve (DRR) requirements for various categories of companies has been relaxed as follows:

  • For public issues and private placement of debentures by listed companies, including NBFCs and HFCs, no DRR is required to be maintained;
  • For private placement of debentures by unlisted NBFCs and HFCs, no DRR is required to be maintained
  • In the case of issuances by all other unlisted companies, a DRR of 10% of the outstanding debentures payable is required to be maintained.


Indian Law Updates August 2019

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Indian Law Updates August 2019

Amendments proposed to FDI Policy

The Union Cabinet, approved certain amendments to the Foreign Direct Investment (“FDI”) policy which was amended by way of a press release dated August 28, 2019 (“PR”). Amendments have been proposed in the conditions governing FDI in the following sectors:


Single Brand Retail Trading (SBRT)

Current FDI Regime

  • SBRT entities with more than 51% FDI must source more than 30% of their goods from India and sell such goods in India.
  • This 30% requirement must be met as an average of the first five years. Goods which were purchased in India, but exported were counted towards the above mentioned 30% requirement only for the above first five years.
  • Post the fifth anniversary it shall be required to be met annually
  • SBRT entities required to establish physical stores for the purposes of retail trading before commencing e-commerce activities.

Amendments Proposed as per PR

  • Any goods sourced from India by the SBRT entity shall count towards the 30% requirement, irrespective of whether such goods are sold in India.
  • All goods purchased in India, even if exported will count towards satisfying the local sourcing requirement.
  • Retail trading through e-commerce portals can also be undertaken prior to opening of physical stores, subject to the condition that the SBRT entity opens physical stores within 2 years from date of commencing online retail trading.

contract manufacturing

Current FDI Regime

  • The present FDI policy did not categorically prohibit FDI in contract manufacturing, both on a principal to principal basis and on an agency basis.

Amendments Proposed as per PR

  • The PR clarifies that 100% FDI in the contract manufacturing shall be allowed via the automatic route, thus bringing to an end certain ambiguities which .

Coal mining

100% FDI is currently permitted for coal and lignite mining for captive consumption in certain eligible industries, as also certain limited use coal processing plants. In a significant move to liberalise the coal industry, FDI is not fully permitted under automatic route in coal mining and sale of coal activities. This is, however, subject to the provisions of Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Regulation and Development) Act, 1957.

Digital Media

The current FDI Policy provides that 49% FDI under Government route is permissible for up-linking of ‘News and Current Affairs’ TV Channels. There are no specific provisions for uploading / streaming of such content through digital media and hence such digital media players were receiving FDI freely in their entities. The proposed amendments is that the 26% FDI under Government route is permitted for uploading and streaming of news and current affairs content through digital media. The exact scope of the term “digital media” and “news and current affairs”, will need to be examined to understand the full impact of the proposed amendment.

Regulatory Updates Insolvency Practice – August 2019

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Indian Law Updates August 2019 Insolvency Practice

Insolvency and Bankruptcy Code(Amendment) Bill, 2019

The Bill provides for the following:

  1. The Bill provides statutory recognition that maintaining a corporate debtor as a going concern would include ‘resolution plans’ that are in the nature of corporate restructuring schemes including mergers, amalgamation and demergers,where the corporate debtor itself may cease to exist.
  2. The National Company Law Tribunal, as the Adjudicating Authority shall be obliged to provide reasons in writing why it has not been able to ascertain the existence of a default, if it cannot make such ascertainment within a period of 14 days from the receipt of the application.
  3. The Bill brings in a total time limit of 330 days for completing the resolution process, including the time taken in any legal proceedings with regard to such resolution process of the corporate debtor. For proceedings pending on the date of the enactment of the Bill, which have already exceeded 330 days, the Bill brings in a transition time limit for completion within 90 days of Bill coming into force. This consequence of not completing the CIRP within the prescribed time period of 330 days presumably means that such a company will be subject to liquidation, which may not be the favourable outcome for the stakeholders. Further, the provision opens itself to legal challenge, especially in circumstances where there are pending legal proceedings, but the expiry of the 330 day period forces the corporate debtor into liquidation.
  4. At the proceedings of the Committee of Creditors (‘CoC’), where an authorised representative i.e. an agent or trustee for the financial creditors has been appointed, such representative shall cast his vote in accordance with the decision of vote of more than 50% voting share of the financial creditors who have voted, except in cases relating to the withdrawal of insolvency application where the authorised representative must vote according to the
    instructions received from each creditor to the extent of his voting share.
  5. The Bill provides that the COC in approving a resolution plan will be required to consider the proposed manner of distribution and if it recognizes the waterfall provided under the Code at the time of liquidation and the priority of the interests of the secured creditors. The Bill incorporates an earlier position of the CIRP which provides that any dissenting financial creditor must receive in the resolution plan an amount not less than its liquidation value
  6. The Bill seeks to address operational creditors who have disputed resolution plans on the grounds that the plans the Code are prejudicial to their rights and interests, by allowing for the resolution plan to disregard their claims. Accordingly, the Bill provides that the resolution plan will have to provide that operational creditors will receive not less than the higher of the liquidation value or the amount stated in the resolution plan if the stated waterfall under Section 53 of the Code is adhered to. This provision is retrospective in effect and will apply to all plans which are pending decision of the Adjudicating Authority or have been appealed against or where a legal proceeding has been initiated against the decision of the Adjudicating Authority as on the date of the Bill coming into force.
  7. The Bill further provides that the distribution plan should be “fair and equitable”. It unfortunately, does not lay down any definition of the principles of determining “fair and equitable” and thus leaves wide scope to judicial authorities to determine whether the plan is fair and equitable.
  8. Again, in order to expedite the timelines under the Code, the Bill provides that the CoC may decide to liquidate the company prior to the conclusion of the time period for completing the CIRP and even before the preparation of the information memorandum.

Regulatory Updates Banking Practice – August 2019

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Indian Law Updates August 2019 Banking Practice

Reserve Bank of India circular on rationalization of end use provisions for External Commercial Borrowings (ECBs)

The Reserve Bank of India (RBI,) pursuant to a circular dated 30th July 2019 (‘Circular’), liberalized certain end uses for the proceeds of which External Commercial Borrowings.

Under the earlier ECB regime, proceeds of an ECB could not be applied for working capital purposes or to repay Rupee loans, unless obtained from an equity holder.

In a move which is intended to improve the liquidity in the market for corporate borrower, pursuant to the Circular the proceeds of an ECB may be used by:

  1. An eligible borrower for working capital and general corporate purposes is permitted, if the minimum average maturity of the loan is for 10 years.
  2. NBFCs for on-lending, if the minimum average maturity of the loan is for 10 years.
  3. An eligible borrower for repayment of rupee loans availed of for capital expenditure, if the minimum average maturity is for 10 years.
  4. An eligible borrower for repayment of rupee loans availed of for purposes other than capital expenditure, if the minimum average maturity is for 7 years.
  5. NBFCs for on-lending, for the above purposes and for the above minimum maturity.

For the first time Indian lenders will be able to assign loans provided to corporates for capital expenditure in the manufacturing and infrastructure sector and which have been classified as SMA-2 or NPAs to eligible lenders under the ECB regulations. Indian corporates are also allowed to obtain loans from eligible lenders under the ECB regulations to re-finance.This has the potential to significantly boost the securitisation market in India and provide some relief to banks in managing their stressed assets.

Managing Distressed Assets In India

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Managing Distressed Assets In India

Jerome Merchant + Partners, presented sessions on Managing Distressed Assets in India for advisors, law firms and in-house counsels in Singapore on July 24 and July 25. Our partners, Vishnu Jerome and Murtaza Somjee discussed both developments and challenges in the insolvency regime and Dinesh Arora, partner PWC spoke on the insolvency resolution process and the management of resolution plans. Mohammed Reza and Justin Kwek of Simmons & Simmons presented the audience with a comparative analysis of insolvency laws in Singapore

IIFL, Lok Capital as well as existing investor Amicus Capital invests approximately USD 19 million (INR 130 crores) in insurance tech start up, Renew Buy

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New Delhi based insurance tech start up, Renew Buy, received an aggregate investment of USD 19 million from India Infoline, Lok Capital as well as existing investor Amicus Capital by way of Series C round of funding/investment

Role :Jerome Merchant + Partners advised IIFL

Members of JM+P team:The team was led by partner Sameer Sibal along with associates, Nirav Bakshi and Rishabh Gupta

Other Legal advisor 1:Shardul Amarchand Mangaldas, New Delhi advised Lok Capital

Members of SAM Co. team: The team was led by partner Visruta Kaul along with senior associate Pratyush Singh and associate Sonali Bhardawaj

Other Legal Advisor 2: Jyoti Sagar Associates (JSA), Mumbai advised Amicus Capital

Members of JSA team: The team was led by partner Anand Lakra along with senior associate Abhilash Chandran

Other Legal Advisor 3: PDS Legal, New Delhi advised the Company

Members of PDS Legal team: The team was lead by partner Probal Bhaduri along with principal associate Nidhi Arora, senior associate Shilpa M Ekka and associate Tanisha Gupta

Closing Date:24th June, 2019

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Oriental Structural’s Infra Investment Trust

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Oriental Structural Engineering launched an infrastructure investment trust (Invit) to issue units listed on the BSE and NSE for an amount of INR 2300 crores on June 12, 2019

Role : Jerome Merchant + Partners advised the lead bank, I-Sec

Members of JM+P team: The team was led by partner Shameek Ray

Other Legal advisors: 1) Shardul Amarchand acted as counsel to OSE 2) Cyril Amarchand acted as counsel to certain of the investors in the Invit 3) Latham & Watkins acted as international counsel to the issue

Closing Date: June 26th, 2019

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Aditya Birla Retail acquires Jaypore for Rs 110 crore

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Aditya Birla Fashion and Retail Limited has acquired Jaypore, an ethnic apparel and accessories retailer for Rs110 crore

Role : Jerome Merchant + Partners advised the exiting promoters and angel investor Haresh Chawla

Members of JM+P team: The team was led by partners Kalpana Merchant and ­­­­­­­­Murtaza Somjee

Other Legal advisors: 1) Khaitan & Co advised Aditya Birla, Fashion and Retail Investor, the acquirer 2) S&R Associates for Aavishkar, an exiting investor

Closing Date: July 2nd,2019

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