Diwali is one of the most anticipated and celebrated festivals in India. It is also a festival of giving gifts, which is often a challenge for compliance professionals who struggle with policies and nuances of law around this time, on giving gifts that might seem like bribes.

Under the Prevention of Corruption Act, 1988 (PCA), the principal anti-bribery and anti-corruption statute in India, giving and receiving any form of pecuniary gratification may imply criminal penalties for both the bribe-giver and the public official. Furthermore, according to the conduct rules of various government departments, government servants are obliged to report receipt of gifts that go beyond prescribed monetary limits..

Gifting per se is not an illegal activity under Indian law. Under the PCA, the determining factor that separates a gift from a bribe is whether the gift was made with an expectation of quid pro quo. Furthermore, it must be clarified that the various conduct rules do not prescribe a de minimis or a minimum monetary threshold up to which a gift is seen as unquestionable. The conduct rules (as may be applicable to different public officials) merely provision for reporting obligations on behalf of the government servant, in cases where the pecuniary value of the gift received exceeds a certain limit.

Continue Reading Diwali Gifts: Are You Wrapping Up a Bribe?

The RBI has amended the Master Directions on Financial Services provided by Banks. This is a significant move permitting Banks to invest in Category II Alternative Investment Funds.

As of June 30, 2017, Alternative Investment Funds (AIFs) had raised the cumulative figure of Rs. 48, 129 crores, against aggregate capital commitments of Rs 96,000 crores. The AIF industry is thus growing at an exponential rate, raising monies from domestic and offshore investors.

Unfortunately, however, the Indian AIF industry, lags behind its western counterparts in terms of participation by domestic pools of capital. In western countries, long term or patient capital, such as pension funds, contributes nearly 40% of the capital raised by AIFs. In the Indian context, restrictions prescribed by sector regulators have inhibited fund managers from raising capital from the domestic financial services sector.

Hence, it was no surprise that one of the key themes in the 2016 reports of the Alternative Investment Policy Advisory Committee (AIPAC), chaired by Mr Narayan Murthy, was “unlocking domestic pools of capital”. The committee’s recommendation was premised on the argument that the domestic capital pools – pensions, insurance, domestic financial institutions, banks, and charitable institutions – need access to appropriate investment opportunities to earn risk-adjusted returns.

Continue Reading It’s a Yes – for Banks!

Image credit: Scroll.in, September 26, 2017

Sociologists know that the formation and survival of civilization is conditional upon the universal adherence to a framework of acceptable norms and guidelines of human conduct and interaction. Moses therefore set out as God’s message, the directive to love thy neighbor, (so as not to have him for dinner) and also to not covet his wife (so that he may not make a meal out of you either).

While the Commandments set out God’s message which would be enforced by the fear of being struck down by lightning or if not then ultimately burning in hell, in later times, monarchies, and subsequently the democracies of the modern day needed to impose more earthly discipline. The judicial systems of to-day enforce not the will of the King but draw their legitimacy from the constitution and enforce laws which are framed by the people’s representatives.

Over the centuries, the singular truism which is well recognized is that the guidelines or laws to be enforced, cannot be mired in time and need to evolve so as to be relevant to the prevailing social and moral context. This truism requires constant change, which like all change is disruptive. History therefore inevitably reveals turbulence and conflict as the legal framework slowly adapts in a struggle to keep pace with social evolution.

The controversy and turbulence is more pronounced and correspondingly also more visible and prone to commentary by historians, sociologists and legal scholars alike, in “common law” democracies. This is because under the common law system, the law of the land is made by the courts since it is the manner in which courts interpret statutes that creates the judicial precedents which then is the established law. A study of how judicial decisions framed or established norms and values which we treasure today and perhaps take unthinkingly for granted can be fascinating.

CAM has embarked on an analysis of a series of such landmark decisions in an attempt to present a hindsight perspective into what exactly happened, the socio-political compulsions of the day and their impact in shaping Indian society and governance today.

This is the first piece in our series entitled “Those Were the Days”, which will be published monthly. We hope you enjoy reading this as much as we have enjoyed putting this together.


The case of Kesavananda Bharati v. State of Kerala (Kesavananda Bharati)[1] is perhaps the most well-known constitutional decision of the Supreme Court of India (Supreme Court). While ruling that there is no implied limitation on the powers of Parliament to amend the Constitution, it held that no amendment can do violence to its basic structure (the “Basic Structure Doctrine”). Further, it established the Supreme Court’s right of review and, therefore, established its supremacy on constitutional matters.

Continue Reading Kesavananda Bharati v. State of Kerala and The Basic Structure Doctrine

Financial investors in India are scared of regulatory uncertainties. Not that uncertainties are exclusive to our country but it’s a critical risk factor that is assessed by those making substantial investments. Historically, one of the most important regulatory concerns for such investors is related to being categorised as ‘promoter’ of a listed company, both when the company is going public and also in cases where a private equity (PE) player intends to take a control position in an already listed company, by replacing its present promoters or by becoming co-promoters. Promoter liability theories have kept such investors away from taking control positions in listed companies. On the contrary, in the unlisted space where the promoter position is perceived differently, control deals are a way of life for certain PE funds in India.

Continue Reading New Promoters on the Block: The Financial Investors

India has long recognised the right of foreign creditors to participate in the winding up of Indian companies. As early as 1961, the Supreme Court of India, in Rajah of Vizianagaram (AIR 1962 SC 500), clarified that foreign creditors have the same right as Indian creditors in winding up proceedings under Indian law. Given the backlog of cases and resultant timelines for resolving disputes in the Indian judicial system, winding up has been the remedy of choice, albeit mostly as a pressure point, for unsecured creditors including foreign unsecured creditors of Indian companies. Such creditors have taken winding up actions despite the low return (an abysmal 28% as per one source) and pace of insolvency (almost 4.5 years) in the Indian market. At the same time, there have been instances where consensual restructuring of stressed Indian companies has been halted by such actions of unsecured creditors.

The Indian government from time to time provided a specific legal regime for Indian financial creditors to recover their money – for example, debt recovery tribunals (DRT) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). But no additional measures were suggested for non-financial creditors.

Continue Reading IBC- Making “Doing Business in India” Easy for Foreign Trade Creditors?

The ability to attract large scale Foreign Direct Investment (FDI) into India has been a key driver for policy making by the Government. Prime Minister Modi seems to be going along the right track, with India receiving FDI inflows worth USD 60.1 billion in 2016-17, which was an all-time high. Hence, the FDI policy of India has always been closely watched and carefully amended over the years.

On August 28th, 2017, the Department of Industrial Policy and Promotion (DIPP) had issued the updated and revised Foreign Direct Investment Policy, 2017 – 2018 (FDI Policy 2017). The FDI Policy 2017 incorporated various notifications issued by the Government of India over the past year.

Please find below a brief analysis of the key amendments brought by the FDI Policy 2017 to the erstwhile FDI Policy of 2016 and their potential impact on FDI in India:

Continue Reading India announces new Foreign Direct Investment Policy, 2017 – 2018

On August 31st 2017, the Supreme Court of India in the case of Innoventive Industries Limited v. ICICI Bank Limited* delivered its first extensive ruling on the operation and functioning of the Insolvency and Bankruptcy Code, 2016 (Insolvency Code). The Court said that it is pronouncing its detailed judgment in the very first application under the Insolvency Code, so that all Courts and Tribunals may take notice of a paradigm shift in the law.

The Supreme Court dismissed the appeal filed on behalf of Innoventive Industries Limited and confirmed the decision of the National Company Law Appellate Tribunal (NCLAT), which in turn had affirmed the order passed by the National Company Law Tribunal Mumbai (NCLT) admitting the insolvency petition filed by ICICI Bank Limited against Innoventive Industries Limited. Continue Reading Innoventive Industries Limited v. ICICI Bank Limited: Paradigm Shift in Insolvency Law in India

Mergers are compared to marriages. As a union of companies, they require patience and understanding, but they also involve a large amount of paperwork. Mergers, like marriages, can flourish with the right synergies, but if there are differences between the entities, the arrangement can often collapse. The recent breakdown of the Snapdeal – Flipkart transaction, can provide a useful context to understand the reasons for the success/failure of M&A transactions.

The success of a deal depends on the companies, the individuals, the business climate, as well as the different regulators involved in the transaction. A few common reasons for deals breaking down are – valuation differences, different expectations between the parties involved, regulatory roadblocks or a lack of consensus regarding the exit horizons.

While these are reasons general to any corporate transaction, there are some requirements specific to M&A deals that must be met in order for the deal to survive.

Continue Reading When the Engagement Ring Doesn’t Fit – Why M&A Deals Fall Apart

Second in our series of Employment Law blogs on the Maternity Benefit Act. The earlier piece was published here.

The Maternity Benefit Act, 1961 (MB Act) was amended by the Maternity Benefit (Amendment) Act, 2016 (MB Amendment Act) which became effective on April 1st, 2017 (except for the provision that required a crèche facility to be provided by the employer, which came into effect on July 1st, 2017). Questions have now been raised about whether the provisions of the MB Amendment Act apply to employees covered under the Employees’ State Insurance Act, 1948 (ESI Act).

The purpose of this note is to provide an insight into the applicability of the MB Act and the ESI Act and benefits available therein, especially provided under the MB Amendment Act, to a woman employee, etc.

Continue Reading What is Relevant to Know about the Maternity Benefits Act and the Employees’ State Insurance Act

Offshore Derivative Instruments (ODI) have been a focal point for the Government in India and over the years, the regulatory boundaries of doing business in this space have been re-aligned by the Securities and Exchange Board of India (SEBI), quite frequently.

As a part of SEBI’s efforts towards increasing transparency and accountability in the ODI space as well as encouraging direct investments through the foreign portfolio investment (FPI) route, the SEBI Consultation Paper of May 29, 2017, titled ‘On streamlining the process of monitoring of Offshore Derivative Instruments (ODIs)/ Participatory Notes (PNs)’, proposed prohibiting the issuance of ODIs against derivatives, except for those used for hedging. SEBI had invited public comments on the matter until June 12, 2017. Thereafter, at a board meeting on June 21, 2017, the SEBI board approved this proposal, with the minutes specifically stating that “The Board has decided to prohibit ODIs from being issued against derivatives, except those which are used for hedging purposes. SEBI will issue a circular in this regard.

The question now is whether this is the right approach to bringing down volumes in speculative trades being undertaken in the derivatives market.

Continue Reading SEBI Circular on ODIs: Step too Far or the Right Balance?