Applicability of the 2015 Amendments to the Arbitration and Conciliation Act

We have previously dealt with the Supreme Court’s decision in the case of BCCI v. Kochi[1] (see here and here) as well as the 2015 Amendments[2] to the Arbitration and Conciliation Act, 1996 (Act) and thereafter the 2019 Amendments[3] to the Act. Briefly recapped, the BCCI case read Section 26 to mean that the 2015 Amendments as a whole were to apply prospectively (meaning thereby that they would apply to arbitral proceedings commencing after October 23, 2015). However, as far as Section 36 (enforcement of a domestic award) of the principal Act was concerned, the 2015 Amendments applied retrospectively since the right to an “automatic stay” under Section 36 was not a vested one.

This meant that both in pending Section 34 petitions (filed prior to October 23, 2015) and in fresh Section 34 petitions, there would be no automatic stay of an award unless a separate application was made for such a stay, which the Court would have the discretion to grant or refuse and would also be premised on the posting of security. Continue Reading End Game – The Supreme Court Settles the Applicability of the 2015 Amendments

Good Faith Negotiations and Mediation 

It has become increasingly common for parties to adopt multi-tiered dispute resolution clauses in agreements. A typical multi-tiered dispute-resolution clause requires parties to first attempt to resolve a dispute amicably – for instance, by engaging in friendly discussions, submitting to mediation or undertaking good faith negotiations – before the commencement of arbitration proceedings. There has been much ado about the enforceability of such clauses and whether they should be considered void due to vagueness: how does one engage in “friendly discussions”, and what exactly are “good faith negotiations”, when a presumably acrimonious dispute has already arisen between parties?

Despite this ambiguity, courts have increasingly found tiered dispute-resolution clauses to be enforceable. In fact, with a view to combat rising pendency in courts, these principles have been extended to the initiation of litigation as well. The Commercial Courts Act, 2015 (CCA) was amended last year to state that any suit that does not contemplate urgent interim relief cannot be instituted without the plaintiff having exhausted the remedy of pre-institution mediation and settlement.[1] A similar model is also followed in a number of other countries, including the UK, Italy, Greece and Turkey, where it has been successful in encouraging dispute resolution through mediation.[2] Continue Reading Good Faith Negotiations and Mediation: A Missed Opportunity So Far

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Regulation 22(2A) of SEBI Takeover Regulations

A question that comes up regularly in the context of an underlying secondary transaction that triggers an open offer is whether such a transaction can be closed on the stock exchange? This is due to reservations expressed by the Securities Exchange Board of India (SEBI) in relation to the interpretation of certain provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations).

This has led to unintended consequences, which cast a doubt on the legality of the on-market closure of underlying share purchase transactions. The shadow of this doubt unfortunately extends to on-market closures even if the on-market closure follows the completion of the open-offer process. In this blog post[1] we would like to clarify that the on-market closure of underlying transactions is not contrary to Takeover Regulations and the provisions of Takeover Regulations are not subject to multiple interpretations on this aspect.[2] Continue Reading Regulation 22(2A) of SEBI Takeover Regulations : Is On-Market Closure of Underlying Transactions Prohibited?

Non-Debt Instruments -The New Rules for Foreign Flows

In a quiet mid-October surprise, nearly four and a half years after the passage of the Finance Act 2015 (20 of 2015), the Government notified the effective date for implementation of the clauses that amended Section 6 of the Foreign Exchange Management Act, 1999 (FEMA). The notification defining debt and non-debt instruments followed suit and then of course the Non Debt Instrument Rules (NDI Rules) under FEMA, which superseded the extant FEMA 20R and 21R. Continue Reading Non-Debt Instruments -The New Rules for Foreign Flows

THE ROAD TO RESOLUTION OF FINANCIAL SERVICE PROVIDERS - IBC

 

The Imperative for a distinct framework for the resolution of financial firms

The financial sector is facing a combination of liquidity, governance and business issues, on account of which certain Non Banking Financial Companies (“NBFCs”) are facing solvency concerns.

The severe liquidity crunch for NBFCs was caused  as banks and other financial institutions have curtailed refinancing the loans of NBFCs on account of which several NBFCs and other financial institutions faced debt servicing and solvency issues. These have sought to be resolved through the Stressed Asset Directions issued by the Reserve Bank of India (“RBI”) on June 7, 2019. This was fraught with complexities given the diverse sets creditor, including market borrowings  each of whom were governed by different financial regulators. Continue Reading The Road to Resolution of Financial Service Providers: A Firm First Step

Essar Steel India Limited - Supreme Court reinforces primacy of Creditors Committee in insolvency resolution

Essar Steel judgement of the National Company Law Appellate Tribunal (NCLAT), which required that the secured financial creditors share recoveries in a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC), inter se (irrespective of the ranking of their security positions) and with the trade creditors, on a pari passu basis, was considered a ”confusion in the different types of creditors” and a setback for the nascent but growing secondary debt market in India. The judgement perhaps was also opposed to the realities of credit risk assessments and pricing of the credit leading to an unsatisfactory resolution outcome for creditors in an insolvency situation. Continue Reading Essar Steel India Limited: Supreme Court Reinforces Primacy of Creditors Committee in Insolvency Resolution

Put-option Holders - Financial Creditors Under the IBC

In its recent judgment in the case of Jignesh Shah v. Union of India[1] (Jignesh Shah), a three-judge bench of the Supreme Court set aside the NCLAT judgment in the case of Pushpa Shah v. IL&FS Financial Services Limited[2] (NCLAT Judgment) along with the original judgment of the NCLT[3] (NCLT Judgment and, together, La-Fin Judgments). The NCLT Judgment and the NCLAT Judgment had rejected the corporate debtor’s objection in relation to the claim being time barred and initiated corporate insolvency resolution process on the basis that a put option holder may be treated as a “financial creditor” under the Insolvency & Bankruptcy Code, 2016 (IBC). Continue Reading Put-option Holders: Financial Creditors Under the IBC?

Contract Manufacturing - Press Note 4

The question of whether contract manufacturing constitutes “manufacture” from a foreign investment perspective is an oft debated topic in the manufacturing fraternity and many businesses have struggled with this issue for years.

“Contract manufacturing” refers to manufacturing undertaken through a third party and has a range of benefits for the principal manufacturer, including economic efficiency, scale, operational efficiencies and flexibility. For instance, if a specialised set of equipment or skills is required to manufacture a certain product, the principal manufacturer can use the facilities already available with a third party to manufacture these products, instead of investing its capital in creating these facilities for itself. Contract manufacturing also enables a principal manufacturer to utilise a contract manufacturer’s existing supply chains, linkages and labour force. If a principal manufacture has a cyclical manufacturing business, using the facilities of a third party may be more beneficial than making capital investments that may lie idle for large parts of the year. In light of these benefits, contract manufacturing as a business model is one that is preferred by many entities in the manufacturing business. Continue Reading The Contract Manufacturing Conundrum – Press Note 4 to the Rescue?

Surveillance in the Post-Puttaswamy Era - Right to Privacy

In 1997, the Supreme Court of India (Supreme Court) pronounced its judgment in the case of People’s Union for Civil Liberties (PUCL) v. Union of India (SC, 1997) (PUCL Case), which laid the groundwork for the right to privacy in the context of telephonic surveillance (i.e. wiretaps) and constitutional freedoms.

This article analyses the Supreme Court’s stance on the right to privacy in the PUCL Case, which was upheld in the 2017 landmark judgment by the nine-judge bench in KS Puttaswamy v. Union of India (SC, 2017) (Puttaswamy Case) that declared privacy a fundamental right. The applicability of the right to privacy has recently received further validation in the context of wiretaps in the October 2019 judgment in Vinit Kumar v. Central Bureau of Investigations and Ors (Bom HC, 2019) (Vinit Kumar Case), wherein the Bombay High Court outlined the ambit of the State’s power to surveil its subjects particularly on matters that do not fall within the category of ‘public emergency’ or ‘in the interest of public safety’. Continue Reading Surveillance in the Post-Puttaswamy Era

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Introduction to the Biodiversity Act of India

India is known to the world for its diversified biological resources. Arising out of its obligations as a signatory to the United Nations Convention on Biological Diversity held at Rio de Janerio in 1992, and “to provide for conservation of Biological Diversity, sustainable use of its components and fair and equitable sharing of benefits arising out of the use of biological resources and knowledge”, the Biological Diversity Act, 2002 (BD Act) was enacted by India to regulate access to, and use of, its biological resources.

In essence, the BD Act mandates approvals from the National Biodiversity Authority (NBA) and to inform State Biodiversity Authorities (SBAs) for people to access and use biological resources, or knowledge associated thereto, for research purposes, commercial utilisation, bio-survey and bio-utilisation, for applying intellectual property or for transferring results of research. Continue Reading The Biodiversity Act of India: An Introduction