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?

The foundation of every state is the education of its youth,” said Diogenes, the ancient Greek philosopher.

Herein lies the crux of why education remains vital for any government across the world, often as a charitable and social responsibility.

This piece intends to provide an overview of the education sector in India; to highlight some of the key legislations and regulatory regimes that govern education in the country; shed light on some of the recent government initiatives in the sector; and, in conclusion, make a case for increased private participation in Indian education.

Continue Reading Regulatory Hot Broth: Why Private Participation Would Add to the Flavour of the Indian Education Sector

First in our series of Employment Law blogs on the Maternity Benefit Act.

The Maternity Benefit (Amendment) Act, 2016 (“Amendment Act”), which was passed by Parliament on March 9th, 2017, introduced certain significant changes to the Maternity Benefit Act, 1961 (“MB Act”). The Amendment Act received Presidential assent on March 27th, 2017 and came into effect from April 1st, 2017 except for the provisions, that require an employer to provide a creche facility. These are scheduled to become effective from July 1st, 2017.

Subsequent to the introduction of the Amendment Act and clarifications issued by the Ministry of Labour and Employment on April 12th, 2017 (“Clarification”), several questions have been raised by companies with respect to their obligations as employers under certain aspects of the Amendment Act.

Continue Reading Analysis of Certain Aspects of the Maternity Benefit (Amendment) Act, 2016

It seems we live in an independent director-bashing era. News articles, blogs, scholarly write-ups are replete with criticism relating to independent directors, whether it’s to do with their appointment, ‘true’ independence, removal, resignation or generally their very existence! Anything remotely connected to what such directors do is presented as wrong. From a legal stand point, however, the law of director’s liability and fiduciary duties applies equally to independent directors. Such directors do not have any meaningful defence available to them by the mere taxonomy of the position held by them. Why then is the sentiment so negative?

Critics argue that the key issue emanates from the method of appointment of such directors because they feel that the people chosen are typically those that are close to promoters and can influence decision making. But practically, a total stranger on board could be the worst choice even for truly independent decision making.

Continue Reading Need for New Voting Regime to Achieve True Independence

Until recently, whilst it was possible for a foreign company to merge with an Indian company, it was not possible for an Indian company to merge with a foreign company within the court sanctioned merger framework set out under Indian corporate law. This finally changed in April 2017, when the company law provisions that govern cross border mergers were brought into force. In the same month, the Reserve Bank of India (RBI) also issued draft regulations setting out the conditions for obtaining ‘deemed’ approval from the RBI for cross border mergers. Now, companies in India desirous of merging with a foreign company may do so in specified jurisdictions.

Following are some of the key highlights of the recent regulations governing cross border mergers:

  • Jurisdiction Test

The eligible jurisdictions are: (a) those whose securities market regulator is a signatory to the Multilateral Memorandum of Understanding of the International Organisation of Securities Commission or to the Bilateral Memorandum of Understanding with the Securities and Exchange Board of India; or (b) jurisdictions whose central bank is a member of the Bank of International Settlements; and jurisdictions not identified in the public statement of the Financial Action Task Force (FATF) for deficiencies relating to anti-money laundering or combating terrorism financing or jurisdictions without an action plan developed with the FATF to address the deficiencies. Key countries like the USA, UK, Russia, Germany, France, Japan, China, Singapore, Mauritius, etc. will fall within the definition of eligible jurisdictions. Continue Reading A New Dawn for India’s Cross Border Merger Regime

The Securities and Exchange Board of India (SEBI) recently issued an informal guidance in response to a request for an interpretive letter from Kotak Mahindra Bank Limited (KMBL) on the continual disclosure requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations).

Regulation 7(2) of the PIT Regulations prescribes a two-step disclosure mechanism wherein:

  1. Promoters/ employees/ directors of listed companies are required to disclose to the company, within two days of the occurrence of a transaction, the number of securities acquired or disposed, where the value of such securities in the transaction (or a series of transactions in any calendar quarter) amounts to a traded value in excess of Rs. 10 lakh.
  2. The company in turn is required to disclose such trades to the stock exchanges, on which the traded securities are listed, within two days of receipt of the disclosure or upon becoming aware of such information.

Continue Reading SEBI’s Informal Guidance on Continual Disclosures under the Prevention of Insider Trading Regulations

In a landmark judgment recently delivered by the National Company Law Appellate Tribunal (NCLAT) in the case of Innoventive Industries Limited v. ICICI Bank Limited, the NCLAT has held that the National Company Law Tribunal (NCLT) is bound to issue only a limited notice to the corporate debtor before admitting a case under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Insolvency Code).

Whilst dismissing the appeal filed by Innoventive Industries Limited against an order passed by NCLT, Mumbai admitting the insolvency petition filed by ICICI Bank Limited, the NCLAT has clarified that adherence to principles of natural justice would not mean that in every situation the NCLT is required to afford reasonable opportunity of hearing to the corporate debtor before passing its order.

Continue Reading NCLAT Defines the Scope and Extent of the Corporate Debtor’s Right to Contest Admission of Insolvency Applications Filed by Financial Creditors