In alignment with the Indian Government’s continuing efforts to bolster foreign investment and ease of doing business in India, the Reserve Bank of India (RBI) has issued two important circulars in June 2018 with the aim of simplifying reporting under the Foreign Exchange and Management Act, 1999 (FEMA). The circulars are as follows:

Simplifying reporting under FEMA - RBI Circular

Currently all foreign investment transactions are reported in a complicated, disintegrated manner across various platforms/modes. The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 (FEMA 20) provide for exhaustive reporting requirements for any foreign investment in India through 12 different forms[1]. Meeting these requirements had become a cumbersome process for foreign investors as well as Indian entities. 

Continue Reading India Simplifies Foreign Investment Reporting Process

From January 1, 2017 to May 31, 2018, the open offers launched under the SEBI Takeover Regulations for listed non-banking financial companies (NBFCs) constitute approximately 23.7% out of the total open offers during this period. In the calendar year 2018 (to May 31, 2018), the percentage of open offers for NBFCs out of the total open offers launched in this period is 23%, demonstrating significant interest in one particular sector in the listed space as opposed to others. As per our study, the following diagram illustrates the open offer activity from January 1, 2018 to May 31, 2018:

Open Offer Activitiy , Indian Sector Specific


Attractiveness of NBFCs

NBFCs are an important alternative source of financing. Given that banks are prohibited from funding M&A transactions, NBFCs fit in perfectly. In addition to this, that there have been few positive developments in the past couple of years that have increased the attractiveness of NBFCs. In August 2016, the Government extended the applicability[1] of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to 196 systemically-important NBFCs to enable them to enforce security interest in relation to secured debt of Indian Rupees one crore or more.

Continue Reading Takeover of Listed NBFCs: An Analysis of Current Trends

In its judgment pronounced on May 9, 2018, the National Company Law Tribunal (NCLT), Allahabad, in the case of ICICI Bank Limited v. Mr. Anuj Jain (Resolution Professional of Jaypee Infratech Limited), addressed the issue of the rights of third-party security holders of a corporate debtor under the Insolvency and Bankruptcy Code, 2016 (IBC).

The judgment negated ICICI Bank Limited’s contention that it should be considered a financial creditor of Jaypee Infratech Limited, the corporate debtor. ICICI Bank’s claim was based on the corporate debtor having created mortgages on its property to secure loans provided to Jaiprakash Associates Limited, the holding company of the corporate debtor. The NCLT concluded that there was no financial debt owed to ICICI Bank by the corporate debtor, and so it could not be considered a financial creditor of the corporate debtor.

We consider here the correctness of the judgment and whether the NCLT has considered all the implications of its finding.

Continue Reading Is a Third-Party Security Holder a Financial Creditor Under the Insolvency and Bankruptcy Code?

The Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) came into force with effect from October 23, 2015. Although this amendment was enacted to remove controversies and iron out wrinkles in the Arbitration and Conciliation Act, 1996, (Parent Act), it has in fact, given rise to its own set of controversies. One of the burning issues was the applicability of the 2015 Amendment. Section 26 of the 2015 Amendment provides for its applicability, and reads as follows:

  1. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.

One would believe that the above provision would have settled any issue of applicability of the 2015 Amendment. It has instead given rise to more litigation,[i] which has now been partially addressed by the Supreme Court.[ii]

The controversy in all the litigation that came up before the High Courts, and which also saw conflicting points of view, was around the applicability of the amended Section 36 of the Parent Act. In the pre-amendment era, when an award debtor challenged an award under Section 34, the award creditor was prevented from enforcing the award until a determination had been made by a court on the challenge, because of an ‘automatic stay’ on the operation of the award.

In order to overcome this, and for the benefit of award creditors, Section 36 of the Parent Act, was amended to do away with this ‘automatic stay’. It required the challenging party to separately apply for a stay and also required the court to direct the award debtor to deposit the award amount, so as to avoid frivolous challenges. The question for the courts has been the applicability of the amended Section 36 to Section 34 applications that were filed before and after the 2015 Amendment came into force.

Continue Reading BCCI v. Kochi Cricket: Supreme Court’s Much Needed Third Umpire Decision

On 1 May 2018, the Department of Telecommunications (DoT) released the much-awaited Draft National Digital Communications Policy – 2018 (Draft Policy) for public comments. The Draft Policy aims to give direction not only to the telecom market but also to digital communications and prepares the country for the future. The policy, when finalised, will act as a framework for all future legal and regulatory changes/ development in Information and Communications Technology (ICT).

The Draft Policy proposes the restructuring of the legal, licensing and regulatory framework including amendments to the Indian Telegraph Act, 1885 and related legislation, so as to enable the utilisation of newer/ advanced technologies/ convergence. Many stakeholders would suspect the same shall result in unrestricted interconnection between the internet protocol (IP) and Public Switched Telephone (PSTN) networks. The Draft Policy intends introduction of a light touch regulatory regime for various services such as over-the-top (OTT) that allows providers to stream content via the internet, cloud computing, data centres, etc. The Draft Policy also makes clear the requirement to amend terms and conditions for other service providers (OSPs). It further suggests establishing a unified policy framework and spectrum management regime.

Continue Reading Draft National Digital Communications Policy 2018: Restructuring the Legal and Regulatory Regime

Most sectors of the economy have been completely liberalised for foreign direct investment (FDI) and the Foreign Investment Promotion Board (FIPB) was abolished in June 2017. Policy watchers in this space were, therefore, taken unawares by a cryptic announcement by the Ministry of Finance on 16 April, 2018, on the “Minimum capital requirements for ‘other financial service’ activities which are unregulated by any financial sector regulator and FDI is allowed under government route”.

Why the Press Release

To put it in perspective, this announcement has its genesis in the RBI’s FEMA Notification No. 375/2016-RB dated September 9, 2016, which was a big ticket change, doing away with the nearly two decades old stipulation of minimum capitalisation in the NBFC sector. The playing field was thus levelled and the financial sector regulations could prevail in an ownership agnostic fashion.

The formal Press Note announcing this change in fact came subsequently (see Press Note 6 of 2016 dated October 25, 2016). FEMA 375 firmly placed all regulated financial services activities in the fold of the respective financial regulators, instead of the latter having to concern themselves with the ownership pattern of the entity.

FEMA 375, however, laid down that activities that are not regulated by any regulator, or where only part of the activity is regulated, or where there is doubt regarding regulatory oversight, approval would need to be obtained from the Government with attendant minimum capitalisation requirements as may be decided by the Government. It is not known , in the public domain, as to how many approvals in the ‘unregulated financial services’ space have actually been accorded post issuance of FEMA 375. This information would have been useful. Be that as it may, what has been set out in the press release of April 16, 2018 is perhaps the way for the future.

Continue Reading FDI and Unregulated Financial Services

There have been some very wide sweeping and deep impact changes in the business and economic environment over the past few years, many of which have also had a strong social impact. While some changes could be considered political, there are many changes that have happened basically because the government of the day chose to bite the bullet. These were long overdue and just couldn’t be kicked any further down the road – to put it succinctly, “the time had come”.

India’s Foreign Direct Investment (FDI) policy, which has its genesis in the liberalisation era beginning in the early 1990s, had always been subject to periodic incremental relaxation of sectoral caps and other easing measures. However, after years of a gradualist mode, the current decade has seen more dramatic shifts in the hitherto entrenched position in respect to FDI in various sectors. The ultimate measure was of course the abolition in June 2017 of the two and half decades old Foreign Investment Promotion Board (FIPB), the inter-ministerial body that granted ‘prior government approval’ in mandated sectors.

The demise of this institution regarded as venerable by some and obstructionist by others, met as expected, with a mixed response. With nearly 95% of the FDI inflows in the country already coming in through the automatic route, the utility and need for such a body was clearly on the wane; practitioners were, however, apprehensive of the absence of the body, which had become the proverbial ‘go to place’ for clarifications and was the last port of call for policy intervention in case of need.

With the formal dissolution of the FIPB at the end of June 2017, a Standard Operating Procedure (SOP) was put in place whereby the sectors / activities / transactions that required government approval were mandated to approach the respective administrative ministries for the same. Simultaneously, the FIPB portal was literally morphed into the Foreign Investment Facilitation Portal (FIFP), bringing with it bare essential changes to name and ownership, but virtually nothing more.

Continue Reading FDI Policy – So What’s New?

Previously, the provisions of the Companies Act, 2013 (Act) governing inbound and outbound mergers, amalgamations or arrangements between Indian companies and foreign companies (Cross Border Mergers) were notified by the Ministry of Corporate Affairs on April 13th, 2017. Subsequently, on April 26th, 2017, the Reserve Bank of India (RBI) issued draft regulations to govern Cross Border Mergers (Draft RBI Regulation).

We had published an earlier blog piece on this, discussing the key highlights of the Draft RBI Regulation, which is available here.

It has been close to a year since the Draft RBI Regulation and on March 20th, 2018, the RBI has finally notified the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (Merger Regulation). This article briefly analyses the key changes brought about in the Merger Regulation and its implications.

Continue Reading India finally notifies Cross Border Merger Regulations

Image credit: Scroll.in, September 26, 2017

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


The need for “rule of law” to prevail is repeatedly espoused by today’s social and political commentators. In light of this, it is important to revisit the origin of the doctrine of “rule of law”, and understand how it originated, so as to fully appreciate its significance and meaning.

In 1676, Sir Mathew Hale, the then Chief Justice of King’s Bench (1671-76), set out 18 tenets for dispensing of justice. The sixth tenet read as follows,

“That I suffer not myself to be possessed with any judgment at all till the whole business of both parties be heard.”

This very sound principle has two fundamental requirements.

The first is that the judge ought not to be predisposed to either one of the adversarial parties, and should not form a view on the merits of the matter before him until all the parties are heard. This of course is very difficult to do given that all persons including judges are bound to have their own views, opinions and preferences. However, through the ages the hallmark of an eminent member of the judiciary is the manner in which he/she overcomes inherent prejudices so as to ensure that the judicial adjudication is based only on the law, the facts based only on evidence on record before the court, and the interplay of the facts in relation to the law.

Continue Reading The Principles of Natural Justice – Origin and Relevance

The Central Government in India had introduced the Prevention of Money Laundering Act, 2002 (“PMLA”), to prevent the circulation of laundered money. The Act defines money laundering as any process or activity connected to proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as legitimate property. While the PMLA Act allowed for confiscation and seizure of properties obtained from the laundered money, such actions were still subject to the processes of criminal prosecution. This led to many of the persons accused of money laundering, to flee the jurisdiction of Indian courts to avoid criminal prosecution under PMLA and the consequent confiscation of the properties.

On March 12, 2018, the Indian government introduced the Fugitive Economic Offenders Bill, 2018 (“Bill/Proposed Act”), in the Lok Sabha, after receiving approval from the Cabinet, to address the issue of such economic offenders avoiding criminal prosecution. The Bill defines a ‘fugitive economic offender’ as any individual against whom a warrant for arrest in relation to economic offences, under various statutes, listed in a schedule to the Bill (“Scheduled Offence”) has been issued, on or after the enactment of this Bill, by any Indian court, and who:

  • Has left India to avoid criminal prosecution, or
  • Being abroad refuses to return to India to face criminal prosecution.

Pertinently, in 2015, the definition of proceeds of crime in the PMLA was amended to include property equivalent to proceeds of crime held outside the country.

Continue Reading Fugitive Economic Offenders Bill, 2018