Extradition Law - Fundamentals and Processes

Part I of the article elaborates on legal basis and purpose extradition, the procedure and the statutory provisions of Indian Extradition Act, 1962 as well as the key aspects of the extradition treaty between India and the UK. Here we will discuss the extradition treaties between India and the US, India and UAE. This post further elaborates on the practice of non-extradition of own nationals and various issues that may be faced by States whilst processing a request for extradition.

Extradition Treaty Between India & the United States (US)

The offence is extraditable if punishable under the laws in both contracting parties by imprisonments for more than one year or by a more severe penalty. This applies: Continue Reading Extradition Law: Fundamentals and Processes – Part II

Indian Extradition Law - Fundamentals and Processes - Part 1

 

Under International law, extradition[i] is a formal, diplomatic process by which one state requests another to effect the return of custody of a fugitive criminal[ii] for crimes punishable by the laws of the requesting State and committed outside the jurisdiction of the country where such person has taken refuge. International extradition[iii] is an obligation undertaken by States in good faith to promote and execute justice[iv].

The first formal act providing for extradition was adopted in 1833 by Belgium, which also passed the first law on the right to asylum. Extradition Acts not only specify extraditable crimes, but also detail procedures and safeguards whilst defining the relationship between the Act and the treaty. Continue Reading Extradition Law: Fundamentals and Processes – Part I

 

Companies (Amendment) Act, 2019

Commitment to social causes is best done voluntarily. Accordingly, corporate social responsibility (CSR) was originally introduced in Section 135 of the Companies Act, 2013 (Companies Act), in keeping with global best practices, to provide a framework to encourage companies to meaningfully contribute to communities.

The framework was premised on the principle that companies would contribute the prescribed amount in good faith and the requirement ‘to explain’ any failure to contribute, in their board report, was considered a sufficient disincentive to ensure compliance.[1]  Continue Reading Corporate Social Responsibility – Less Carrot More Stick

Amendments to the ECB Policy - A Big Boost for Cross-Border Financings

Given prevailing market conditions, Indian corporates have increasingly been facing issues in accessing credit from onshore loan and debt capital markets. Recent Securities and Exchange Board of India (SEBI) regulations aimed at growing the debt capital market in India and reducing dependence of corporate India on loans from the Indian banking sector require that certain Indian companies must necessarily fund a specified percentage of their debt requirements by issuing bonds.

The forthcoming implementation of new norms on single and group exposures for the Indian banking system is also resulting in some of the larger corporates having to look at other options beyond their preferred relationship banks onshore for meeting their debt funding requirements. Both the non-banking sector and the mutual fund industry in India – significant sources for onshore debt markets – are also currently grappling with their own set of challenges. In this environment, these amendments to the External Commercial Borrowing (ECB) framework are most welcome as they will allow Indian companies to look at tapping the offshore loan and bond markets for raising debt capital. Continue Reading Amendments to the ECB Policy – A Big Boost for Cross-Border Financings?

US Sanctions on Iran and their Impact on India

The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against foreign countries, regimes, terrorists, and similar forces that are engaged in activities related to the proliferation of weapons of mass destruction and other acts that may be considered as threats to the national security, foreign policy or economy of the United States of America (US).

The nature of sanctions imposed by the US is two pronged, i.e. Primary and Secondary.  Primary sanctions are in the nature of asset freezing, trade embargos, and a prohibition on US citizens and companies from engaging with Iran. Secondary sanctions place an embargo on third-party countries, its citizens and companies with no nexus to the US, for dealing with sanctioned countries. Secondary sanctions are invariably extra-territorial in nature and raise important questions about legitimacy, international law principles, and the concept of sovereignty. Continue Reading US Sanctions on Iran and their Impact on India

InsurTech Sandbox - IRDAI Releases an Important Update

 

So far this year,  Indian financial sector regulators have taken steps towards adapting financial sector regulations to encourage the use of new technology. On April 18, 2019, the Reserve Bank of India (RBI) released its Draft Enabling Framework for Regulatory Sandbox for public comments. Following the RBI, the Securities and Exchange Board of India (SEBI) on May 20, 2019, released its Framework for Innovation Sandbox to the public[1].

The Insurance Regulatory & Development Authority of India (IRDAI) has not lagged behind in proposing regulatory changes for encouraging the use of new technology as a part of the insurance sector, especially in the life and health insurance sector. In 2017, the IRDAI initiated discussions intending to refine existing law for allowing the use of telematics in the motor insurance space whilst protecting data and privacy of customers from organisations using telematics. In late 2018, the IRDAI constituted a Working Group (Wearable Technology WG) for considering regulatory reforms for examining innovation in the use of wearable / portable devices in the insurance sector. Continue Reading InsurTech Sandbox – IRDAI Releases an Important Update (But Some Debugging Still Required)

Model Tenancy Law - Model Tenancy Act Overview - Landlord Rights in India

 

The announcement of the Union Budget 2019-2020 (Budget) by the Finance Minister, Ms. Nirmala Sitharaman, introduced a few changes in the periphery of the real estate sector. On July 10, 2019, the housing ministry put a policy in the public domain for suggestions, which could act as the model act for States and Union Territories to regulate this segment. The Model Tenancy Act, 2019 (Model Act), takes forward what was proposed in the Draft Model Tenancy Act, 2015.

With property prices far beyond the reach of many millennials, renting has the opportunity to become a far more common housing option. The Model Act brings in transparency enabling a two-fold mechanism wherein the landowners will be less vary of a possible threat of repossession and will let-out their homes to yield rent, which will in turn increase the footing for the real estate market. The concept of sharing spaces both living and working viz. a viz. ownership, presently being the market preference, have been covered under the Model Act.   Continue Reading An Overview of Model Tenancy Law

New Drugs and Clinical Trials Rules, 2019 – A Regulatory Overview India 

Issues around payment of compensation in cases of clinical trial related injury, disability and death have long remained open. Despite a directive from the Hon’ble Apex Court, much was left open to question. On March 19 of this year, the Ministry of Health and Family Welfare (MoHFW) eventually took steps in this regard and notified the New Drugs and Clinical Trials Rules, 2019 (NDCT Rules) under the aegis of the Drugs and Cosmetics Act, 1940 (D&C Act), thus bringing an end to a long-drawn-out process to codify the rules applicable to clinical trials. Continue Reading New Drugs and Clinical Trials Rules, 2019 – A Regulatory Overview

 2019 IBC Amendment Bill - Insolvency and Bankruptcy

The Insolvency and Bankruptcy Code, 2016 (IBC) has been widely considered a landmark legislation that has brought about a paradigm shift in the recovery and resolution process.

However, during the implementation of the IBC over the past two years and eight months, several challenges have emerged, including:

  1. The Supreme Court recognises the utmost importance of following model timelines under Regulation 40A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), 2016 (CIRP Regulations) to ensure timely completion of CIRP[1]. However, adherence to the timelines (, completion of corporate insolvency resolution process (CIRP) within 180 or 270 days), especially on account of intervening legal proceedings, has been almost impossible. The time spent in any legal proceedings that hampers the CIRP was excluded by the tribunals[2]. The CIRP of Essar Steel India Limited will complete 730 days on August 2, 2019!
  2. On account of judicial pronouncements[3] by the Hon’ble National Company Law Appellate Tribunal (NCLAT), including the recent one in Standard Chartered Bank vs. Satish Kumar Gupta, R.P. of Essar Steel Ltd. and Others[4], the following position had emerged: (a) financial and operational creditors must be given similar treatment (which has been interpreted to mean the same percentage of haircut); and (b) discrimination amongst financial creditors on the basis of existing priorities or security interest is not permitted in a resolution plan.
  3. The NCLAT has also held that the committee of creditors (CoC) has no role to play in determining the manner of distribution of proceeds of a resolution plan amongst the financial or operational creditors, since the financial creditors comprising the CoC are interested parties and there will be a conflict of interest if they are permitted to decide on the manner of distribution[5].
  4. In cases like Jaypee Infratech Limited, where the majority of the CoC comprises thousands of homebuyers, decision-making has been severely hampered because of creditors not voting on resolutions.
  5. Applications to initiate CIRP have taken significantly more time than the prescribed 14 days in several cases. This is despite the requirement that the Adjudicating Authority has to ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor within 14 days of the receipt of an application by such financial creditor, as the timelines have been held to be directory and not mandatory[6].
  6. It has been observed that a large volume of litigation is initiated by tax authorities against successful resolution applicants for recovery of pre-CIRP tax dues, even after approval of a resolution plan by the Adjudicating Authority.

The Government of India has taken swift action to address these burning issues by introducing the Insolvency and Bankruptcy Code (Amendment) Bill, 2019 (IBC Bill). The IBC Bill follows the press release dated July 17, 2019 issued by the Ministry of Corporate Affairs, Government of India stating that the Union Cabinet had approved the proposal to carry out amendments with an aim to fill critical gaps in the corporate insolvency resolution framework as enshrined in the IBC, while simultaneously maximising value from the CIRP.

Unlike previous amendments to the IBC that were first brought about by way of ordinances, this time the Government has chosen not to follow that route.

Some of the key proposals are analysed below.

Definition of Resolution Plan

A new Explanation is proposed to be inserted into the definition of resolution plan[7] to clarify that a resolution plan seeking the insolvency resolution of corporate debtor as a going concern may include the provisions for corporate restructuring, including by way of merger, amalgamation and demerger.

This new Explanation provides statutory recognition (earlier provided for in Regulation 37 of the CIRP Regulations) to corporate reorganisation as a result of a resolution plan, which may result in the legal entity of the corporate debtor ceasing to exist. These reorganisation structures will now not fall foul of the ‘going concern’ requirement of the IBC and may also enable reorganisation of businesses through schemes for better value maximisation.

Adjudicating Authority to Provide Reasons for Delay in Admission or Rejection of Application by Financial Creditors

The IBC Bill seeks to insert the following provision: if an application has not been admitted or rejected within 14 days by the Adjudicating Authority, it shall provide the reasons in writing for the same.

This will prevent inordinate delays in admission (which, in turn, may lead to further value deterioration) as Adjudicating Authorities may become averse to granting adjournments and push for speedier disposal of applications filed by financial creditors.

Maximum Timeline for Completion of CIRP is 330 Days

The IBC Bill mandates that the insolvency resolution process of a corporate debtor shall not extend beyond 330 days from the insolvency commencement date. It has been clarified that such timeline will include the time taken in legal proceedings, in order to prevent undue delays in the completion of the CIRP. If the CIRP is not completed within the timelines, then the corporate debtor will have to be mandatorily liquidated. Another change sought to be introduced is where pending CIRP proceedings have extended beyond 330 days, the same will have to be completed within 90 days from the IBC Bill coming into effect.

Whilst the proposed amendment is laudable, its implementation may be challenging especially in cases where the resolution plan itself has been challenged. Further, the burgeoning number of legal proceedings are already putting pressure on the National Company Law Tribunal (NCLT) and the NCLAT, thereby causing delay in the time taken for disposal of cases. The Government has endeavoured to address this issue by augmenting the strength of NCLT by inducting more members. Further enhancement of the strength of NCLAT will also greatly assist in the process. The Adjudicating Authorities should now impose costs for frivolous legal proceedings.

The proposed amendment will instil discipline among the various stakeholders to adhere to timelines. The proposed amendment, along with the decision of the Supreme Court in ArcelorMittal that states that challenges in relation to decisions of CoC or resolution professional in respect of resolution plans can only be made at the stage when an application is filed under Section 31 of the IBC, may help in reducing the timelines involved in CIRP.

Voting by Authorised Representatives

The IBC Bill provides that in all cases (except for withdrawal of CIRP proceedings), the authorised representative will cast the vote for all financial creditors he represents in accordance with the decision of more than 50% of the voting share of the financial creditors he represents, who have cast their vote (i.e. who are present and voting).

This change will help the authorised representative to effectively participate in the CoC proceedings and cast his vote on behalf of the financial creditors he represents. It will smoothen the decision-making process in cases where debenture-holders, homebuyers or depositors form the majority of the CoC.

Treatment Under the Resolution Plan

 

A. Priority and Value of Security to be Considered by COC

The IBC Bill specifically provides that while approving a resolution plan, the CoC is permitted to consider the manner of distribution of proceeds and can take into account the order of priority amongst creditors, including the priority and value of the security interest of a secured creditor.

This will ensure:

  • Primacy of security arrangements amongst the creditors (including security sharing arrangements/exclusive security).
  • That the value of property rights of a secured creditor is maintained, by providing such creditor the option to dissent and receive liquidation value of his security.
  • The important role of the CoC in making decisions on distribution.
B. Concept of Dissenting Financial Creditors Re-introduced

The CIRP Regulations had earlier provided for payment of liquidation value to dissenting financial creditors. The provision was struck off following a decision of NCLAT on the grounds that the same was ultra vires the IBC[8]. The IBC Bill seeks to introduce the concept of payment of liquidation value to dissenting financial creditors in the IBC itself. A resolution plan will be required to provide that financial creditors who do not vote in favour of a resolution plan shall receive an amount that is not less than the liquidation value of their debt. This principle has been recognised under the UNCITRAL Legislative Guide on Insolvency Law as well as the World Bank’s Ease of Business parameters and will provide reasonable safeguards to various categories of investors / creditors and afford certainty and predictability to the process.

This will also re-align the IBC with the Reserve Bank of India’s circular dated June 7, 2019 for resolution of stressed assets, which also provides that a resolution plan under that circular must provide for payment of at least liquidation value to dissenting creditors.

C. Treatment of Operational Creditors

The IBC Bill provides that a resolution plan must allow for payment to operational creditors of an amount that is higher of the: (i) liquidation value of their debt or (ii) amount that would have been received if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in section 53 of the IBC.

A further Explanation is sought to be inserted to clarify that any distribution shall be ‘fair and equitable’ to such creditors. Thus, the Explanation clarifies that such distribution shall be deemed to be in compliance with the Supreme Court’s decision in Swiss Ribbons v. Union of India.

Whilst the concept of ‘fair and equitable’ cannot be defined with mathematical precision, the cue can be taken from foreign jurisdictions where the concept of ‘fair and equitable’ treatment in insolvency has been developed to mean:

  1. Creditors who are in the same class will receive similar treatment amongst themselves.
  2. A junior class of creditors will not receive any payments unless and until the senior classes above it have been paid in full.

It would be helpful if a deeming provision is provided in the Explanation so that the issue of what constitutes ‘fair and equitable’ treatment does not remain open for interpretation.

D. Applicability to Pending Cases

The amendments relating to payments to creditors under a resolution plan shall also be applicable to cases where the application for approval of the resolution plan is pending before the Adjudicating Authority or where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan.

Statutory Authorities Cannot Pursue their pre-CIRP Claims Against Successful Resolution Applicants

The IBC Bill proposes to insert a clarificatory amendment that once a resolution plan has been approved by the Adjudicating Authority, the same shall be binding on all creditors including the governmental, statutory and local authorities (Authorities) to whom a debt in respect of the payment of dues arising under any law are owed.

This amendment will ensure that Authorities respect the resolution plan approved by the Adjudicating Authority like other stakeholders of the corporate debtor and will go a long way to bringing about a closure to the various proceedings (especially tax proceedings) that are pending against successful resolution applicants. It may have also been useful to clarify that no creditor can pursue pre-CIRP claims after approval of a resolution plan by the Adjudicating Authority.

CoC May Decide for Liquidation At Any Time

The IBC Bill clarifies that the CoC may take the decision to liquidate the corporate debtor any time after the constitution of the CoC until the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.

Conclusion

The proposed amendments sought to be introduced by way of the IBC Bill will restore confidence in the credit markets by, inter alia, ensuring that the fundamental principle that a secured creditor has priority over unsecured creditors is not diluted in any manner.

The IBC Bill shows that the Government is quick to react and bring about legislative changes to ensure that important legislation like the IBC is implemented to achieve its objectives. The swift action taken by the Government will help to increase confidence among the creditor and investor community.

Whilst the IBC Bill is commendable in providing a necessary course correction to the IBC, the development of distresses markets will be enhanced by the introduction of pre-packs and a cross-border insolvency framework.


[1] Arcelormittal India Private Limited v. Satish Kumar Gupta and Others, 2018 SCC OnLine SC 1733 (“ArcelorMittal”).

[2] Id.

[3] SREI Equipment Finance Limited v. Sree Metaliks Limited, Order dated December 13, 2018 in CA (AT) Insolvency No. 289 of 2017 (NCLAT); Mr. Sharad Sanghi v. Ms. Vandana Garg & Ors, Company Appeal (AT) (Insolvency) No. 461 of 2018, with Company Appeal (AT) (Insolvency) No. 464 of 2018, with Company Appeal (AT) (Insolvency) No. 548 of 2018 (NCLAT).

[4] 2019 SCC OnLine NCLAT 388. The operation of this order has been stayed by the Hon’ble Supreme Court on July 22, 2019.

[5] Id.

[6] Surendra Trading Company vs. Juggilal Kamlapat Jute Mills Company Limited and Others, (2017) 16 SCC 143

[7] Section 5(26) of IBC.

[8] Central Bank of India Vs. Resolution Professional of the Sirpur Paper Mills Ltd. & Ors, Company Appeal (AT) (Insolvency) No. 526 of 2018)

Bombay High Court’s New Rules on Arbitral Tribunal Fees

 

The provisions for appointment of an arbitrator, under Section 11 of the Arbitration and Conciliation Act, 1996 (Act), underwent a sea change with the 2015 amendments. A notable amendment was in relation to setting fees for arbitrators appointed by a court under the Act, for the purpose of which, the new Section 11 (14) and Fourth Schedule were introduced.

Under these provisions and for the purpose of determination of the fees of the arbitral tribunal and the manner of their payment, the High Court was empowered to frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.

Years after the amendments kicked in (on and from October 23, 2015), the Bombay High Court issued the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018, pursuant to Section 11 (14) and the Fourth Schedule (the Rules).[1] Continue Reading How the Penny Drops– An Examination of the Bombay High Court’s New Rules on Arbitral Tribunal Fees