On April 21, 2018 the Fugitive Economic Offenders Ordinance, 2018 (FEO Ordinance) was promulgated to immediately bring into effect the provisions contained in the Fugitive Economic Offenders Bill, 2018 (FEO Bill)[1]. The Union Finance Minister Mr. Arun Jaitley, in his Budget speech, had announced that Central Government was considering the introduction of legislative changes to confiscate the assets of ‘big time offenders’, including economic offenders, who flee the country to escape the Indian legal system.

As the process of extradition has often been challenging and ineffective, the Ordinance seeks to compel the fugitive offender to face trial in India through severe deterrents. Care will need to be taken, however, to ensure that the Ordinance does not adversely impact creditor rights. The deterrents and their impact on insolvency resolution are discussed below.

Continue Reading Fugitive Economic Offenders Ordinance, 2018: Impact on Creditor Rights

This piece reviews the Telecom Regulatory Authority of India (TRAI) recommendations on “Privacy, Security and Ownership of Data in the Telecom Sector” released on July 16, 2018 (Recommendations) and attempts to highlight some of their more immediate potential consequences.

Consultations are typically taken up by TRAI based on requests from the Department of Telecommunications (DoT). In the instant case, the TRAI has atypically put out the consultation and subsequently the Recommendations of its own volition, without an explicit mandate on the subject.

TRAI recommendations are approved and implemented by the DoT pursuant to the procedure under Section 11 of the TRAI Act, 1997. This process may involve the DoT seeking clarifications, modifications or otherwise referring items back the TRAI.

This process may turn out to be more complex in connection with the current set of Recommendations, given that much of their content recommends the passing of broad-ranging new legislation that is not limited to only the telecom sector.

Continue Reading The TRAI Recommendations on Privacy, Security, and Ownership of Data in the Telecom Sector, 2018

Last month, the Securities Appellate Tribunal (SAT) passed an order in favour of Factorial Master Fund[1] (Factorial). This overturned the order of the SEBI Whole Time Member who had held that Factorial had contravened the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) by trading in the securities of L&T Finance Holdings Limited (LTFH), while in possession of unpublished price sensitive information (UPSI).
Continue Reading The Sound of SEBI’s Silence: Will the Factorial Order Change the Rules of the Game?

On June 6, 2018, the Government once again amended certain provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), by promulgating an ordinance[1] (the 2018 Ordinance) which introduces sweeping changes to the both substantive as well as procedural aspects relating to the insolvency process. Some of the key changes are analysed below.

Homebuyers – A New Class of ‘Financial Creditors’

The 2018 Ordinance has amended the definition of ‘financial debt’ to include amounts raised from ‘allottees’ in respect of a real estate project (as defined under the Real Estate (Regulations and Development) Act, 2016 (RERA)). Accordingly, homebuyers will now be entitled to a seat on the ‘committee of creditors’ (CoC) of the corporate debtor. However, given the large number of homebuyers for a project, they will be treated as a class of creditors and be represented in the CoC by an ‘authorised representative’ to be appointed by the National Company Law Tribunal (NCLT).

Continue Reading 2018 IBC Ordinance: Impact of Changes

On June 7th, 2018, the Reserve Bank of India (RBI) had introduced two new forms (namely Single Master Form and Entity Master Form) vide a circular[1] (RBI Circular), with the aim of simplifying reporting under the Foreign Exchange and Management Act, 1999 (FEMA). Our earlier blog post contained details of the two forms and our in-depth analysis of the same. On June 27th, 2018, RBI released a User Manual for Entity Master – FIRMS[2] (User Manual) which provides detailed instructions and the process for filing the Entity Master Form. Continue Reading India Simplifies Foreign Investment Reporting Process: Update

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