INDUSLAW 中文通讯

April 2020 – June 2020

INDUSLAW 中文通讯 brings you key regulatory and legal

developments in various sectors in India on a quarterly basis.

INDUSLAW is a multi-speciality Indian law firm with 47 CONTENTS

partners and over 180 lawyers across four offices in Bangalore,  Foreign Investment – Notifications
Delhi, Hyderabad and Mumbai. We advise foreign and by the RBI and DPIIT
domestic clients on matters of Indian law in relation to their
 Corporate & Commercial
transactions, dispute resolution, business strategies and
operations.  Capital Markets
 Banking & Finance
Our clients typically include financial institutions, investment
 Insolvency & Bankruptcy
funds, foreign multinationals operating in India, domestic
corporations, growing Indian companies, start-ups, social  Regulatory Updates - COVID - 19
enterprises and not-for-profit entities.  Competition Law
 Real Estate
We work with clients across various sectors including bio-tech,
 Technology, Media and
energy (including renewable energy), education, financial
Telecommunication
services, healthcare, hospitality, infrastructure,
manufacturing, micro-finance, natural resources, real estate  Energy, Infrastructure and
Natural Resource
and construction, retail (including online retail), technology,
travel and tourism, telecom and trading.  Litigation & Dispute Resolution
 Intellectual Property
Our clients generally structure sophisticated corporate and
financial transactions or may be involved in complex litigation
and dispute resolution proceedings.
 INDUSLAW 中文通讯
2020 年 4 月 - 2020 年 6 月

1. 外国投资 — RBI 和 DPIIT 官方通知 或是处罚。

1.1 审批路径下的“陆地”外商直接投资 2.3 加大制裁力度：《2020 年公司（审计

(FDI)：印度现已是一座孤岛 报告）决议》

印度政府于 2020 年 4 月 17 日发布第 3 公司事务部于 2020 年 2 月 25 日发布了

号新闻公告（2020 系列），对 2017 年 《2020 年公司（审计报告）决议》，
颁布的《外国直接投资政策》作出修 以取代《2016 年公司（审计报告）决
订，并声明此举旨在遏制对新型冠状 议》。该决议旨在收紧对审计师和董
病毒 (COVID-19) 影响下的印度公司进 事会的汇报要求和披露义务的约束。
行投机性收购/兼并。这一保护主义措
施要求与印度有陆地接壤的国家的外 3. 资本市场
国直接投资须事先得到政府审批。
3.1 COVID-19 疫情爆发：SEBI 进一步放
1.2 外国投资规则修订版：统一监管环境 宽上市企业的 LODR 合规规范

财政部公布了《2020 年外汇管理（非 在新型冠状病毒 (COVID-19) 持续肆虐

债务工具）（第二次修订版）规则》 之际，印度证券交易委员会根据《
，对《2019 年外汇管理（非债务工具 2015 年印度证券交易委员会（上市义
）规则》作出修订。此次修订对以下 务和披露要求）条例》，在某些关键
事项作出了修改：(i) 现有股东放弃后 的合规要求上放宽了对上市企业的要
以配股方式获得股份；(ii) 单一品牌零 求。
售贸易的采购规范；(iii) 放宽保险业外
国投资的限制；(iv) 对外国证券投资者 3.2 翻转沙漏 — SEBI 让资金迅速耗尽的
予以说明。 融资公司缓一口气

2. 公司与商业 2020 年 4 月 21 日，印度证券交易委员

会为公司提供临时赦免，使其免受印
2.1 MCA 发布召开 EGM 的救济措施是否 度公开发行（首次价格和后续）和配
是这个难题的绝妙解决方案？ 股的某些关键法规的影响，试图减轻
新型冠状病毒 (COVID-19) 对融资造成
继新型冠状病毒 (COVID-19) 大流行及
的影响。
随之实行限制之后，公司事务部
(MCA) 根据《2013 年公司法》减轻了 3.3 “对象正在改变” — 重新考虑
公司需遵循的公司治理和秘书程序方 COVID-19 期间IPO 对象变更问题
面的负担，尤其是召开成员和董事会
会议的某些程序要求。 新型冠状病毒 (COVID-19) 使经济陷入
“封锁状态”、市场跌入谷底，并迫
2.2 2020 年度公司重新开始方案 使上市公司重新考虑其业务和计划中
的扩张战略，包括其首次公开募股
公司事务部推出了《2020 年度公司新 (IPO) 收益的使用，在这种背景之下，
开始方案（方案）》该方案旨在让公 首次公开募股 (IPO) 招股书中提到的对
司重新开始其未完成的合规事宜，而 象变更问题如今变得非常重要。本文
不会因延迟申报受到任何起诉、诉讼 讨论了新型冠状病毒 (COVID-19) 疫情

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 INDUSLAW 中文通讯
2020 年 4 月 - 2020 年 6 月

期间 IPO 对象变更问题。 5.1 IBC 条例 — 服务于经济

3.4 让它“回归正轨”，SEBI 如是说：进 2020 年 6 月 5 日通过了一项《2016 年

一步放宽配股发行规范 破产与倒闭法》修订条例。该修订条
例旨在保障公司在新型冠状病毒
根据封锁情况，印度证券交易委员 (COVID-19) 大流行期间免于倒闭。
(SEBI) 会于 2020 年 5 月 6 日发出通函
，根据《2018 年 SEBI (发行资本和披 6. 监管更新内容 — COVID-19
露要求)条例》，临时放宽配股发行和
公开发行的某些程序要求。这是继印 6.1 增强抗击 COVID-19 的力度企业如何
度证券交易委员会早先授予的豁免权 加强力度 — 监管方面的促进因素与不
利之后的又一举措。 力因素

3.5 SEBI 为 FPO 点火启动 — 放宽快速通 世界各国政府都在采取严厉（但必要

道规范 ）的措施来控制新型冠状病毒
(COVID-19) 的蔓延，但与此同时，它
根据《2018 年 SEBI（发行资本和披露 们也面临着遏制其对经济的影响这一
要求）条例》，印度证券交易委员会 难题。由此导致的结果便是，在一个
于 2020 年 6 月 9 日发出通函，临时放 充满不确定性和限制性的全球经济中
宽后续公开发行 (FPO) 所需的某些资 ，企业被迫调整其供应的产品和服务
格条件。因此，上述公告倍受期待 — ，并发展新的业务方法，以保证自给
尤其对于上市发行人，他们出于商业 自足，满足经济需求，并在这场斗争
紧迫性或股权的细微差异，寻求通过 中发挥关键作用。
后续公开发行 (FPO) 途径进行募资。
本则新闻快讯探讨了在此次大流行的
4. 银行与金融 触发和推动之下，某些企业的突飞猛
进，以及一些最近的企业调整。
4.1 COVID-19 大流行期间，为借款人提
供避风港 — 关于 RBI 暂停资产分类的 7. 竞争法
讨论
7.1 《印度竞争委员会修订合并控制通知
的指导说明》
在印度处于封锁和围困状态期间，印
度储备银行 (RBI) 颁布了一系列指令， 虽然在新型冠状病毒 (COVID-19) 期间
为借款人提供为期 3 个月的避风港（ ，全世界都在进行有关修正的重要更
再延长 3 个月），以缓解此次大流行 新，但印度竞争委员会(CCI) 已发布《
对经济的负面影响，从而恢复经济增 对于表格 I 的修订指导说明（修订说明
长并减轻偿债负担。高等法院经过初 ）》，以使先前的指导说明与修订后
步考虑，对通告的适用性和解释性进 的表格 I 保持一致，并方便各方在 CCI
行了讨论，保护了借款人的利益。 之前提交通知。

本新闻快讯探讨了暂停资产分类与其 8. 房地产
他相关问题的交叉点。
8.1 根据 RERA 延长时限的建议要点
5. 破产与倒闭
住房和城市事务部已向邦政府发布咨
询意见，要求援引《2016 年房地产（

2
 INDUSLAW 中文通讯
2020 年 4 月 - 2020 年 6 月

法规和发展）法 (RERA)》规定的不可 点
抗力条款，并延长 (i) 因新型冠状病毒
(COVID-19) 疫情大流行而延误的房地 根据因新型冠状病毒 (COVID-19) 而实
产项目的完成时间，以及 (ii) 符合房地 施的全国性封锁，印度政府已宣布采
产监管局规定的各种法定要求的遵守 取某些步骤来缓解分销公司的财务状
时限。 况 。 根 据 Atmanirbhar Bharat
Abhiyan（政府一揽子计划），印度政
9. 技术、媒体通信 府宣布一次性注入 90,000 印度卢比的
流动资金，使这些分销公司能够履行
9.1 精彩不能落幕：COVID-19 疫情期间 各个项目的义务。
及其之后 — 从媒体和娱乐业的角度来
看 10.2 ATMANIRBHAR BHARAT
ABHIYAN 下能源和基础设施部门结
新型冠状病毒 (COVID-19) 大流行以及 构性改革要点
随之而来的政府限制，对媒体和娱乐
业产生了重大影响。本文讨论了这些 2020 年 5 月 16 日 发 布 的 第 四 份
措施对媒体和娱乐业的影响、可用的 Atmanirbhar Bharat Abhiyan （ 政 府
法律和合同补救方法，以及媒体公司 一揽子计划）主要涉及能源和基础设
在新型冠状病毒 (COVID-19) 疫情之后 施领域的结构性改革，涵盖煤炭、电
需要考虑的一些关键方面。 力、民航、矿产、社会基础设施和核
能。这些改革背后的意图是提高这些
9.2 马哈拉施特拉邦政府发布重新启动媒 垂直领域的效率，并吸引私营部门投
体和娱乐业的指导方针 资这些垂直领域。

随着中央政府和邦政府在全国范围内 10.3 《2020 年电力（修订）条例草案》要

逐步解封，马哈拉施特拉邦政府已允 点
许 拍 摄 电 影 、 电 视 和 Over the Top
(OTT) 平台的内容。通过 2020 年 5 月 虽然《2003 年电力法》促进了大量私
30 日的一项政府决议，该邦政府发布 人投资、市场发展以及透明电价机制
了《重新启动马哈拉施特拉邦媒体娱 的采用等，但一段时间以来，电力部
乐业的指导方针》。 门一直面临各种发展障碍。因此，为
解决该行业的各种突出问题，进一步
9.3 MIB 发布政府广告入驻社交媒体平台
深化电力部门改革，电力部于 2020 年
的政策指引
4 月 17 日发布了 《2020 年电力（修正
案）草案》，对《2003 年电力法》作
信息和广播部于 2020 年 5 月 13 日发布
出修订。
了《社交媒体平台与外联局入驻政策
指引》。该政策规定了社交媒体平台
11. 诉讼与纠纷解决方案
与外联局 (BOC) 的入驻条款，以及外
联局与客户部委/部门之间的关系条款
11.1 对外国法令的限制 — 印度与之持平
。
10. 能源、基础设施和自然资源 尽管存在明文规定要求执行互惠领土
法院通过的外国法令，但一直存在相
10.1 关于配电公司和承包商的救济措施要
当大的不确定性，并且事实上印度高
等法院对应执行外国法令事项应采用
的时效期限持相反意见。印度最高法

3
 INDUSLAW 中文通讯
2020 年 4 月 - 2020 年 6 月

院注意到了这种不确定性和差异性， 产在某个时间点存在的防篡改证据。
最终在巴罗达 (Baroda) 银行与科塔克马
恒达 (Kotak Mahindra) 银行有限公司案 有关上述主题的详细分析，请参阅
中澄清了立场。 随附之时事通讯中的相应段落。

11.2 法院的力量超过了人们的表面所见：
《1996 年仲裁和调解法》第 37 条

为最大程度地降低法院根据《1996 年
仲裁和调解法》在仲裁过程中的监督
作用，该法案第 34 条规定的“法院”
的权力范围在处理对仲裁裁决的质疑
时受到限制。因“法院”根据第 34 条
发出的命令而进一步受害的一方，有
权根据上述法案第 37 条提出上诉。印
度 德 里 高 等 法 院 在 最 近 名 为 MMTC
Ltd. 诉 Anglo American Metallurgical
Coal Pty. 有限公司 的判决中，对根据
上述法案第 37 条撤销仲裁裁决在法律
上可能被视为不正当的行为表明了独
特立场。

11.3 最高法院支持法院介入，纠正仲裁裁
决中合同解释的错误

最高法院在“ South East Asia Marine

Engineering and Constructions Limited
诉 Oil India Limited”一案（SEAMEC
判决）中支持撤销高哈蒂高等法院根
据《1996 年仲裁和调解法》第 37 条作
出的仲裁裁决，原因是该裁决对合同
条款的解释有误。该判决虽然重新确
认了既定原则，但确实倾向于扩大对
争议诉讼中合同解释事项的裁决的审
查范围。

12. 知识产权

12.1 WIPO 推出 WIPO PROOF — 提供知

识资产存在证明的新工具

世界知识产权组织（简称 WIPO）是
联合国的一个专门机构，它推出了一
项新的在线服务 WIPO PROOF，可提
供数字文件格式中包含的任何知识资

4
 INDUSLAW
April 2020 – June 2020
1. FOREIGN INVESTMENT – Note 3 does not list the Border
NOTIFICATIONS BY THE RBI 1
AND DPIIT2
1.1 ‘OVERLAND’ FDI UNDER
APPROVAL ROUTE: INDIA IS
NOW AN ISLAND
INTRODUCTION
The world is witnessing
unprecedented times in light of the
COVID-19 outbreak, which has led to
countries across the globe adopting
legal, political and economic measures
which are equally unprecedented. In
one such move, the Government of
India (“GoI”) had, on April 17, 2020,
released Press Note No. 3 (2020 Series)3
(“Press Note 3”) to amend the
Consolidated Foreign Direct
Investment Policy of 2017 (“FDI
Policy”) with a stated view of curbing
opportunistic take-overs/acquisitions
of Indian companies.
Press Note 3 comes across as a
protectionist measure to save Indian
industry from predatory capital, while
they struggle to survive the COVID-19
hit economy. It provides that all
foreign direct investment (“FDI”)
from countries which share a land
border with India (“Border
Countries”) shall be subject to prior
approval from the Government
(“Approval Route”). Press Note 3
came into effect on April 22, 2020, the
date of publication of the Foreign
Exchange Management (Non-Debt
Instruments) Amendment Rules, 2020
(“FEMA Notification”). While Press
1
Reserve Bank of India or RBI is the central bank of
India. Its primary responsibility is to regulate the
monetary policy of the Indian economy.
2 Department for Promotion of Industry and Internal
Trade or DPIIT or DIPP is the nodal government
5
中文通讯
Countries, India recognises land
borders with Nepal, Pakistan, China,
Bangladesh, Myanmar, Bhutan and
Afghanistan.
THE AMENDMENT
Press Note 3 has amended the FDI
Policy which provided that save for
investments from Pakistan and
Bangladesh, a non-resident was
permitted to invest into India in
accordance with the terms of the FDI
Policy without any prior approval
under automatic route, except in
limited sectors.
Pursuant to Press Note 3, all FDI from
the Border Countries and investments
where a beneficial owner of the
investment is situated in or is a citizen
of a Border Country (collectively the
“Border Investors”), are only to be
allowed under the Approval Route.
Press Note 3 goes a step further and
provides that an approval from the
Government is also required for direct
or indirect transfers of ownership of
any existing or future FDI in an Indian
entity resulting in a change in the
beneficial ownership falling within the
abovementioned geographic
restrictions.
KEY IMPLICATIONS AND
CONCERNS
Geography
Unfortunately, while mainstream
authority having the primary responsibility to promote
foreign direct investment in India.
3 Available at:
https://dipp.gov.in/sites/default/files/pn3_2020.pdf.
 INDUSLAW
April 2020 – June 2020
media has been reporting Press Note 3
as a measure aimed at curtailing
Chinese investment in India, the
application of Press Note 3 to other
Border Countries seems to be collateral
damage.
While it is unfortunate that FDI from
countries like Afghanistan, Bhutan
and Nepal with whom India enjoys
excellent relations and strong bilateral
trade and investment ties will now be
under Approval Route, it is unclear
whether Taiwan (a major world
economy and significant investor in
India) will also be considered as a
Border Country and whether
investments from Hong Kong will also
be under Approval Route. Notably,
while India does not officially
recognise the Republic of China as a
‘country’ and has unofficial diplomatic
ties with the regime in Tai Pei, it does
track FDI from Taiwan separately
from those received from China.
However, India also distinguishes and
tracks FDI from sHong Kong SAR of
China separately and such tracking, in
and of itself, may not be sufficient to
consider investments emanating
directly or indirectly from Taiwan as
4The thresholds to qualify as a ‘beneficial owner’ under
the KYC Guidelines are as provided below:
(i) In case of a company – the natural person(s) who,
whether acting alone or together, or through one or
more juridical persons has/have ownership
of/entitlement to more than 25% of the shares or
capital or profits of the company, or who exercises
control (which includes right to appoint majority of
the directors or to control the management or policy
decisions) through other means;
(ii) In case of a partnership firm – the natural person(s)
who, whether acting alone or together, or through
one or more juridical persons, has/have ownership
of/entitlement to more than 15% of capital or profits
of the partnership;
6
中文通讯
outside the Approval Route.
Determination of Beneficial Owner
Press Note 3 does not define the term
‘beneficial owner’. In absence of such
definition, one may have to rely on the
manner such term is understood under
pari materia statutes. From the
perspective of the Foreign Exchange
Management Act, 1999 (“FEMA”), the
Reserve Bank of India (“RBI”) does
not rely on the definitions of
‘significant beneficial ownership’ and
‘beneficial interest’ as prescribed
under the Companies Act, 2013 (the
“Companies Act”) and as such that
may prove to be a conceptual red
herring for investees and investors in
interpreting Press Note 3. The RBI’s
emphasis is on the Prevention of
Money Laundering Act, 2002
(“PMLA”) and the RBI (Know Your
Customer) Directions, 2016 (“KYC
Directions”). These prescribe certain
criterion for determining a beneficial
owner. Notably, the KYC Directions
which are issued pursuant to the
PMLA, define ‘beneficial owner’ in
further detail as one or more
persons/entities who hold a certain
threshold of stake in the relevant entity
and not just any stake in the entity. 4
Further, the SEBI (Foreign Portfolio
(iii) In case of a unincorporated association or a body
of individuals - the natural person(s) who,
whether acting alone or together, or through one
or more juridical persons, has/have ownership
of/entitlement to more than 15% of the property
or capital or profits of the unincorporated
association or body of individuals; and
(iv) In case of a trust - the author of the trust, the
trustee, the beneficiaries with 15% or more
interest in the trust and any other natural
person(s) exercising ultimate effective control
over the trust through a chain of control or
ownership,
 INDUSLAW
April 2020 – June 2020
Investors) Regulations, 2019 also
prescribe the standards set out under
the PMLA read with the KYC
Directions for determining the
beneficial owner of foreign portfolio
investors (“FPIs”).
The reporting requirements in relation
to foreign investments in India entail a
KYC check to be conducted by the
authorised dealer banks for the
remittances received from non-
resident investors. It remains to be
seen if the same basis and
methodology for determining a
beneficial owner shall be adopted for
purpose of Press Note 3 or a new
definition in this regard gets
prescribed through further
amendments to the Foreign Exchange
Management (Non-Debt Instruments)
Rules, 2019 (“Non-Debt Rules”).
No Minimum Threshold
Despite its stated objective of
restricting takeovers, Press Note 3 has
not prescribed any minimum
threshold of investment by Border
Investors in order for these to be
covered under Approval Route.
Therefore, as the position stands now,
even a miniscule or passive investment
by a Border Investor, as well as any
investment by investment funds/
vehicles with beneficial ownership in
Border Countries is under Approval
Route.
There is rampant fear in the industry
that such restrictions shall adversely
impact investment funds and vehicles
with significant limited partners or
beneficiaries from Border Countries
(even when they constitute minority in
their internal constitution), as
compared to other investors.
7
中文通讯
If emphasis was to be placed on the
objective set out in Press Note 3, only
majority investments or investments
which grant direct or indirect
ownership or control over the affairs of
the Indian entity in hands of a Border
Investor, or a beneficial owner from a
Border Country, should have been
under the Approval Route, and
passive financial investments should
have been excluded from its purview.
While the Government’s intent could
have very well be on similar lines, a
clarification to this extent was
expected from the Government under
the FEMA Notification.
Applicability to Foreign Portfolio
Investments
Given that Press Note 3 only amends
Para 3.1.1 of the FDI Policy which
primarily deals with FDI under
Schedule I of the Non-Debt Rules,
investments by FPIs under Annexure 9
of the FDI Policy and Schedule II of the
Non-Debt Rules have not been
expressly brought under the ambit of
Press Note 3 and the FEMA
Notification. FPIs are eligible to invest
under Annexure 9 of the FDI Policy
and Schedule II of the Non-Debt Rules
in listed or to be listed Indian
companies. As per the provisions
therein, foreign portfolio investment
by individual FPIs and their respective
investor groups is limited to 10% of the
total paid-up equity capital of the
Indian company on a fully diluted
basis and 10% of the paid-up value on
each series of debentures, preference
shares or warrants of the Indian
company. Further, aggregate foreign
portfolio investments by all the FPIs in
a company as a whole is limited to the
relevant sectoral cap, unless a
company has decreased the limit (to a
 INDUSLAW
April 2020 – June 2020
lower threshold limit of 24% or 49% or
74% as deemed fit) pursuant to a
resolution by such company’s board of
directors and the members before
March 31, 2020. Additionally, the
aggregate limit for portfolio
investments by FPIs with respect to an
Indian company in a prohibited sector
is limited to 24%.
However, as reported in mainstream
media, the SEBI in its communication
dated April 13, 2020, had directed all
designated depository participants/
custodian banks to grant any fresh FPI
registrations for applicants from
neighbouring countries, or from
applicants whose beneficiaries are
from neighbouring countries, only
after SEBI’s prior approval, i.e. post an
additional layer of scrutiny. However,
this action from SEBI was put on hold
by it, citing requirement of further
clarity from the Government. 5
Therefore, it appears that SEBI will
take similar measures in this regard for
FPIs from or having beneficial owners
from Border Countries. One will have
to keep a close watch on any
notification by SEBI in this regard.
Impact on transactions outside India
Press Note 3 imposes the requirement
of Government approval for share
transfers by non-residents to Border
Investors. Since such transfer of
shareholding between non-resident
investors will otherwise not attract any
reporting requirement under foreign
exchange laws, Indian companies will
have to exercise caution before
registering any such transfer in favour
5 News Reports available at:
https://www.livemint.com/market/stock-market-
news/sebi-awaits-clarity-from-centre-on-fpi-flows-
from-neighbours-including-china-
11586869128349.html;
8
中文通讯
of a Border Investor. However,
nothing restricts transfer of existing
investments by Border Investors to
investors other than Border Investors.
Additionally, any indirect investment
into Indian companies (say for
example, an investment or acquisition
of/ in a foreign holding company or a
special purpose vehicle established by
a fund situated outside India) by a
Border Investor, may also trigger
Approval Route under the FDI Policy
on satisfaction of the ‘beneficial owner’
test.
Impact on External Commercial
Borrowings (“ECB”)
ECBs from Border Investors have not
expressly been brought under the
ambit of Press Note 3. Accordingly,
Border Investors may explore (with
some caution) the ECB route in sectors
where they qualify as eligible lenders
within the ECB framework prescribed
by the RBI. It can be expected that the
Government will analyse the ECB
route and a clarification or perhaps an
amendment to the ECB framework
may be brought about.
A grey area relates to equity
conversion options linked to ECB
availed from lenders in the Border
Countries. While at time of conversion,
such conversion does not involve fresh
flow of funds, it results in a
reclassification of ECB as FDI and as
such may not be permitted and (unless
clarified) Indian companies may not be
able to honour their conversion
obligations under such loans, thus
and
https://economictimes.indiatimes.com/markets/stoc
ks/news/sebi-seeks-details-of-beneficiaries-of-fpis-
from-china-hk/articleshow/75148086.cms.
 INDUSLAW
April 2020 – June 2020
resulting in an event of default.
Competent Authority for
Government Approvals
The competent authorities for the
grant of government approvals under
the FDI Policy are spread across
several ministries of the Government
of India. Press Note 3 does not state the
relevant competent authority from
which the government approvals have
to be obtained for investments to be
made by Border Investors.
Under the pre-Press Note 3 regime,
applications for government approval
involving investments from ‘Countries
of Concern’ (which currently means
Pakistan and Bangladesh) were
processed by the Ministry of Home
Affairs (“MHA”).
Since the newly introduced limitation
for investments from Border Investors
is similar to restrictions placed on the
investments from Bangladesh and
Pakistan under the pre-Press Note 3
regime, it is likely that the MHA shall
process the applications made
pursuant to Press Note 3. This
processing of government approval by
the MHA shall be in addition to the
processing of sector-specific
government approvals by the
concerned competent authorities and
is likely to consume 8-12 weeks of time
in aggregate. Given the likely increase
in the volume of applications for
government approvals, the
Government may consider granting a
single window clearance for
applications from Border Investors.
Ongoing Transactions
Indian companies which are in the
middle of transactions involving
9
中文通讯
Border Investors, are clearly in a
muddle due to the abrupt
promulgation of Press Note 3 and the
subsequent FEMA Notification. The
investors in such transactions may be
rethinking their investment strategy,
as increase in any future stake shall
involve a government approval. Some
investors may be looking at delaying
their investment until they obtain
further details or clarity on the
limitations imposed by Press Note 3.
However, any delay in the funding
cycle is likely to reduce the valuation
of the Indian entity if the economy
further slows down in the coming
months, which shall be
counterproductive for the investees
that the Government is currently
seeking to protect.
Going forward and in the event that
the restrictions imposed by Press Note
3 continue for a longer period, the
Border Investors who are looking to
invest in tranches in an Indian entity,
may consider seeking an all-
encompassing government approval
for such tranched investment (within
the sectoral cap) so that each tranche of
investment does not have to go
through the process of seeking a
separate government approval.
INDUSLAW VIEW
Press Note 3 has brought with itself, an
enormous due diligence exercise for
Indian investees. In the absence of any
minimum threshold of beneficial
ownership in investors to qualify as
Border Investors, the Indian entities
looking for investment will have to
dive into the constitutional structure of
potential investors. Further, Indian
companies will be posed with a
daunting task to ensure none of their
 INDUSLAW
April 2020 – June 2020
shareholders have a passport
belonging to Border Countries or have
their beneficial ownership in Border
Countries (including by way of a
transfer of shares between non-
residents).
Investments funds/ investee
companies may have to come up with
new holding structures or reorganise
their own internal partnerships if they
intend to expand their investment
portfolio in India. Nevertheless, a
clarification to introduce a minimum
threshold in relation to ownership will
be a relief for both Indian companies
and the investor community. Absent a
threshold, the effect of Press Note 3
will be that of a ‘slow hand’ (or worse)
on all capital raise and exit
transactions where existing
shareholders from a Border Country
have rights of pre-emption regardless
of whether they may be the lead
investors in the proposed transaction.
The future of Press Note 3 brings with
it the uncertainty surrounding the
view of the competent authorities for
granting government approvals, and
on treatment of ECBs reaching
maturity. A list of Border Countries or
a specific exemption for Taiwan will be
of further help for all stakeholders.
Worryingly, the period for which the
limitations imposed by Press Note 3
are likely to survive has been left
unspecified. Given the purpose of
Press Note 3 is to curb opportunistic
takeovers/ acquisitions of Indian
companies due to the current COVID-19
pandemic, it appears that Press Note 3
is an exceptional measure created only
until effects of the COVID-19
pandemic subsist, and is not likely to
10
中文通讯
continue as a norm for the future.
In fact, it appears from the lack of the
detailing in Press Note 3, that the press
note was a hastened measure aimed to
completely restrict acquisition of all
stakes in Indian companies under the
FDI route by entities from Border
Countries at low valuations in these
troubled times. While it was
anticipated that the FEMA
Notification shall provide further
clarity on many aspects (as discussed
above), the FEMA Notification
materially replicates the language of
Press Note 3. Nevertheless, in the near
future, we expect the Government to
come up with more nuanced,
streamlined and detailed guidelines in
relation to investments from Border
Countries. Meanwhile, we also await a
notification from SEBI placing
restrictions on investments by FPIs,
similar to those contained in Press
Note 3.
Authors: Avimukt Dar | Akhoury
Winnie Shekhar | Harman Walia |
Kumar Gaurav
Practice Areas: Private Equity,
Venture Capital and Fund Investment
| Capital Markets and International
Offerings | Mergers & Acquisitions
1.2 AMENDMENT TO THE FOREIGN
INVESTMENT RULES:
HARMONIZING THE
REGULATORY LANDSCAPE
INTRODUCTION
On April 27, 2020, the Ministry of
Finance (“MoF”) notified the Foreign
Exchange Management (Non-Debt
Instruments) (Second Amendment)
 INDUSLAW
April 2020 – June 2020
Rules, 2020 6 (“Amendment”) to
amend the Non-Debt Rules.
The Amendment introduces changes
with respect to (i) acquisition of shares
by way of rights issue after
renunciation by an existing
shareholder; (ii) sourcing norms for
Single Brand Retail Trading (“SBRT”);
(iii) relaxations for foreign investment
in the insurance sector; and (iv)
clarifications with respect to FPIs.
Considering the current political and
economic landscape in our country,
these changes were introduced with
the intention of harmonizing and
clarifying certain foreign investment
norms.
KEY CHANGES
The key changes are discussed below:
Acquisition through a renunciation of
rights
Under the earlier regime, only non-
resident shareholders 7 (in addition to
resident investors or shareholders)
were entitled to receive renunciation
of rights entitlement of equity
instruments (except share warrants),
from the person to whom it was
initially offered, at:
(a) a price determined by the company
(for listed entities); and
(b) a price not lesser than the price offered
to the resident shareholders (for
unlisted entities).
The Amendment, by insertion of Rule
7A, has now permitted any non-
6 Available at:
http://egazette.nic.in/WriteReadData/2020/219200.pd
f.
11
中文通讯
resident person to acquire a right to
subscribe to equity instrument (except
share warrants) by way of
renunciation of rights entitlement
from a resident shareholder, subject to
compliance with the pricing guidelines
as detailed out under Rule 21 of the
Non-Debt Rules (as applicable to listed
and unlisted entities).
Single Brand Retail Trading
Prior to the Amendment, entities
undertaking SBRT of products having
‘state-of-art’ and ‘cutting-edge’
technology and where local sourcing
was not possible, were not required to
follow the sourcing norms as
prescribed under the Non-Debt Rules,
for a period of 3 years (“Exemption
Period”) from the commencement of
its first store.
Post the Amendment, the Exemption
Period for the said entities will now be
calculated from the commencement of
the entity’s first store or from the start of
online retail, whichever is earlier.
Insurance Sector
Earlier this year, Press Note 1 of 2020
dated February 21, 2020 (“Press
Note”), was released by the
Department for Promotion of Industry
and Internal Trade (“DIPP”). By virtue
of this Press Note, the permitted
sectoral cap of foreign investment in (i)
insurance companies; and (ii)
intermediaries in the insurance sector
were differentiated.
Further, certain additional
conditionalities were also introduced
7 For the sake of clarity, non-residents who were not
shareholders at the time of the rights issue could not
acquire equity instruments through a rights issue
renunciation.
 INDUSLAW
April 2020 – June 2020
to align the Press Note with the
regulations previously issued by the
Insurance Regulatory and
Development Authority of India
(“IRDA”)8 and RBI9.
The changes contained in the Press
Note were to come into effect only
from the date of amendment to the
Non-Debt Rules. Accordingly,
through this Amendment, the MoF has
given effect to the relaxations on
foreign investment to the insurance
sector. We have summarized the
changes below:
Insurance Companies
The sectoral limit for FDI into
insurance companies remain at 49%
under the automatic route. The
Amendment has introduced the
following additional conditions for
foreign investment in insurance
companies:
No Indian insurance company shall
allow the aggregate holdings by way
of total foreign investment in its equity
shares by foreign investors, including
portfolio investors, to exceed 49% of its
paid-up equity capital.
(a) Such foreign investment up to 49% of
the total paid-up equity of the Indian
insurance company shall be allowed
under the automatic route, subject to
approval or verification by the IRDA.
(b) An Indian insurance company shall
ensure that its ownership and control
remain at all times in the hands of
resident Indian entities as determined
8 Indian Insurance Companies (Foreign Investment)
Amendment Rules, 2019.
9 Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident outside India) (Fifth
Amendment) Regulations, 2016.
12
中文通讯
by the Department of Financial
Services or IRDA as per the rules or
regulations issued by them from time
to time.
(c) Foreign portfolio investment in an
Indian insurance company shall be
governed by the relevant provisions
contained in the Non-Debt Rules10 and
provisions of the Securities and
Exchange Board of India (Foreign
Portfolio Investors) Regulations, 2014.
(d) Any increase in foreign investment in
an Indian insurance company shall be
in accordance with the pricing
guidelines specified in the Non-Debt
Rules.
Intermediaries in the Insurance
Sector
According to the Amendment, the
sectoral limit for foreign investment
into intermediaries or insurance
intermediaries including insurance
brokers, re-insurance brokers,
insurance consultants, corporate
agents, third party administrator,
surveyors and loss assessors and other
entities as notified by the IRDA
(together referred to as
“Intermediaries”) is now revised to
100% under the automatic route.
While the FDI cap of 100% is subject to
the same terms and conditions as
applicable to insurance companies, the
condition regarding Indian owned and
controlled (as specified in (c) above)
shall not apply to Intermediaries. The
composition of the board of directors
and key management persons of such
Rule 10 and Rule 11 read with Schedule II of the Non-
10
Debt Rules.
 INDUSLAW
April 2020 – June 2020
Intermediaries shall be as specified by
the concerned regulators from time to
time.
Further, the FDI proposals shall be
subject to verification by the IRDA and
such investment into Intermediaries
will be governed by the relevant
provisions 11 of the Indian Insurance
Companies (Foreign Investment)
Rules, 2015, as amended from time to
time.
Insurance Intermediaries, in which a
majority shareholding is held by
foreign investors, is also required to
comply with the following:
(a) be incorporated as a limited company
under the provisions of the Companies
Act;
(b) at least 1 from among the Chairman of
the Board of Directors, Chief Executive
Officer, Principal Officer or Managing
Director shall be a resident Indian
citizen;
(c) obtain the prior permission of the
IRDA for repatriating dividend;
(d) bring in the latest technological,
managerial and other skills;
(e) not make payments to the foreign
group, promoter, subsidiary,
interconnected or associate entities
beyond what is necessary or permitted
by the IRDA;
(f) make disclosures in the formats to be
specified by the IRDA of all payments
made to its group, promoter,
subsidiary, interconnected or associate
entities; and
11Rules 7 and 8 of the Indian Insurance Companies
(Foreign Investment) Rules, 2015.
13
中文通讯
(g) composition of the board of directors
and key management persons shall be
as specified by the concerned
regulators.
Investment by FPI
According to the Non-Debt Rules, for
FPI investments that are in breach of
the limits prescribed under the Rules,
such FPIs shall have the option of
divesting their holding within 5
trading days from the date of
settlement of the trades causing the
breach. In the event the FPI chooses
not to divest, then the entire
investment in the company by such
FPI and its investor groups shall be
treated as FDI.
The Amendment now includes a
clarificatory language to the relevant
provision 12 , which states that: “The
divestment of holdings by the FPI and the
reclassification of FPI investment as FDI
shall be subject to further conditions, if
any, specified by Securities and Exchange
Board of India and the Reserve Bank in this
regard.”
INDUSLAW VIEW
Among all the changes introduced
under this Amendment, the partial
liberalization of the insurance sector is
a significant move. The relaxations
have been welcomed by stakeholders
at large as it will now encourage and
attract foreign investment. With the
existing liquidity crunch due to the on-
going pandemic, this timely move by
the government will provide much
needed respite for companies in the
insurance sector looking to raise
capital.
12Clause (iii) of sub-paragraph (a) of paragraph 1,
Schedule II, of the Non-Debt Rules.
 INDUSLAW
April 2020 – June 2020
Authors: Revathy Muralidharan |
Ravi Dubey | Shweta Adhikari |
Nabarun Chandra Ray
Practice Areas: Insurance | Corporate
& Commercial | Government &
Regulatory
2. CORPORATE & COMMERCIAL
2.1 MCA ISSUES RELIEF MEASURES
TO CONDUCT EGM: NIFTY
SOLUTION TO THE
CONUNDRUM?
INTRODUCTION
In the wake of the COVID-19
pandemic and the consequent
restrictions imposed on the movement
of people, goods and services,
companies are facing new hurdles in
carrying on their business while
ensuring compliance with the
Companies Act and the rules
prescribed thereunder. In light of this,
the Ministry of Corporate Affairs
(“MCA”) has taken measures to ease
the burden of companies in terms of
corporate governance and secretarial
processes required to be followed by
them, particularly with respect to
relaxing of certain procedural
requirements required to be followed
by companies for holding meetings of
their members as well as that of their
boards.
One of the key issues being faced by
companies is the requirement for
shareholders to hold physical
meetings to take up even urgent
matters which is affecting operations
of companies. This news alert
discusses one such measure taken by
the MCA by way of a notification
dated April 8, 2020 (“Notification”)
and a subsequent notification dated
14
中文通讯
June 15, 2020 (“June 15 Notification”)
relaxing this requirement with respect
to extra-ordinary general meetings
(“EGMs”) conducted by companies
for matters that are considered
‘unavoidable’.
NOTIFICATION AS A REMEDIAL
MEASURE
Section 108 of the Companies Act, read
with Rule 20 of the Companies
(Management and Administration)
Rules, 2014 enables provision of e-
voting at shareholder meetings for (i)
companies which have listed their
equity shares on a stock exchange and
(ii) companies which have 1000 or
more members.
Section 173(2) of the Companies Act
specifically permits participation of
directors in a meeting of the board
through video conferencing or other
audio-visual means (“VC-OAVM”)
which are capable of recording and
recognizing the participation of
directors at such meetings. However,
similar provisions relating to e-voting
and VC- OAVM were not extended to
general meetings.
In light of the aforesaid, the
Notification is a welcome step as it (a)
enables companies (including those
that are not prescribed under Section
108 to provide for e-voting facility) to
conduct EGMs by way of VC-OAVM
for matters that are considered
unavoidable, and (b) extends the video
conferencing facility (which was only
applicable to board meetings until
now) to general meetings as well for
matters that are considered
unavoidable; subject to the rules set
out therein, till June 30, 2020.
Subsequently, through the June 15
Notification, the MCA has extended
 INDUSLAW
April 2020 – June 2020
the aforesaid facility granted under the
Notification till September 30, 2020.
The Notification read with the June 15
Notification provides for two-fold set
of rules for conducting EGMs through
electronic means: the first set of rules
apply to companies which are
required to provide for VC-OAVM
facility to its members (being
companies prescribed under Section
108, as mentioned above) and the
second set of rules are applicable to
such companies which are not
required to provide for VC-OAVM to
its members for conducting general
meetings, as discussed above. This
news alert discusses these rules in
detail below.
PROCESSES LAID OUT IN THE
NOTIFICATION
Notice to the EGM to be held through
VC-OAVM
The notice for the EGM is required to
contain disclosures with respect to the
manner in which attendance through
electronic means is available to the
members and the company is required
to provide clear instructions on the
manner of access to and the
participation in the meeting.
Companies are also required to
provide a helpline number through the
R&T, technology provider or
otherwise, in case of any assistance
that the shareholders may require
before or during the meeting. A copy
of the notice is required to be
displayed on the company’s website
and due intimation of the EGM is
required to be provided to the stock
exchange(s) in case of a listed
company. If a notice for an EGM has
been issued prior to the Notification,
the processes laid down in this
15
中文通讯
Notification may be adopted provided
consents for shorter notice have been
obtained along with other relevant
compliances under the Companies
Act.
Set-up of the EGM by way of VC-
OAVM
While scheduling the EGM, the
company must ensure that all
conflicting time zones out of which all
shareholders are based, are taken into
consideration. The electronic facility
must allow for participation by all
members attending the meeting.
Further, for companies which are
prescribed to provide e-voting
facilities, the electronic facility must
allow e-voting for at least 1000
members. For companies which are
not required to provide for e-voting
under the Companies Act, the
electronic facility must allow e-voting
for at least 500 members or members
equal to the total number of members
of the company (whichever is lower)
on a first-come-first-serve basis.
Notwithstanding the above, all large
shareholders holding 2% or more of
the share capital of the company must
be allowed to attend the meeting. All
members present through VC-OAVM
must be accounted for the purpose of
achieving quorum in accordance with
the Companies Act. Further, for the
purpose of transparency, a transcript
of the meeting so held is required to be
kept in the custody of the company or
shall be released on the website (in
case of a public company).
Voting at such meetings
Further, the voting at an EGM held
pursuant to the Notification or June 15
Notification may be held by way of
show of hands during the meeting
 INDUSLAW
April 2020 – June 2020
unless a demand for poll has been
made in accordance with Section 109
of the Act (in case there are less than 50
members attending the meeting) or by
way of e-voting (in other cases).
Proxy not permitted
The Notification explicitly disallows
attendance of meetings by members by
way of proxies. The rationale provided
is that proxies are permitted when
physical attendance of meetings is not
possible. The Notification goes a step
ahead and encourages institutional
investors to attend the meetings
through VC-OAVM.
Miscellaneous provisions
Certain other processes should be
complied with while conducting
EGMs by way of VC-OAVM. At least
one independent director (wherever
applicable) and the auditor or his
representative are required to attend
such meetings held. Companies which
are not required to provide for e-
voting facilities under Section 108 of
the Companies Act, are also required
to ensure that confidentiality of the
password and other privacy issues
associated with the designated email
address are strictly maintained at all
times. Further, the Notification also
provides flexibility in declaring the
results of the votes cast. It states that if
the counting of votes requires longer
than the duration accounted for the
scheduled meeting, such a meeting
may be adjourned and called back
again later to declare the votes. Most
importantly, all resolutions passed at
an EGM held pursuant to the
Notification/ June 15 Notification
shall be filed within 60 days (as opposed
to 30-day period as prescribed for certain
forms like Form MGT-14 or otherwise) of
16
中文通讯
such meeting, with the registrar of
companies.
INDUSLAW VIEW
The Notification and the June 15
Notification surely provide much-
needed clarity and relief to all
stakeholders on an industry-wide
basis. It enables companies to conduct
business as usual to an extent whilst
ensuring that there is adherence to
principles of corporate governance
even during such challenging times.
However, given that the Notification
limits the applicability of these
relaxations only to matters which are
considered ‘unavoidable’, it remains to
be seen if any further clarification will
be provided by the MCA as to what
matters would be considered
‘unavoidable’. In the absence of any
guidance in this regard from the MCA,
companies need to ascertain whether
the matter in question can be
considered ‘unavoidable’ on a case to
case basis.
While this is a welcome move and
enables companies to hold general
meetings by way of VC-OAVM, it also
increases the compliance requirements
for companies, which may not be easy
to implement for certain smaller
companies having limited
infrastructure.
Though the relaxations granted
through the Notification and the June
15 Notification is meant to guide
companies to conduct EGMs only till
September 30, 2020, the times ahead
will decide if this will serve as a
temporary measure or beyond.
Authors: Rashi Saraf | Nishihi Shah
 INDUSLAW
April 2020 – June 2020
Practice Area: Corporate and
Commercial
2.2 COMPANIES FRESH START
SCHEME, 2020
INTRODUCTION
In furtherance to the MCA’s general
circular dated March 24, 202013 and the
powers conferred on it under the Act,
the MCA, vide general circular no.
12/2020 dated March 30, 2020,
introduced the Companies Fresh Start
Scheme, 2020 (“Scheme”) 14 . The
Scheme is intended to allow
companies registered in India, to make
a fresh start with respect to their
pending compliances without being
subject to any prosecution or
proceedings or imposition of any
penalty on account of delayed filings.
This news alert analyses the
applicability of the Scheme, the
relaxations provided and summarizes
the procedural requirements as
mentioned therein.
HIGHLIGHTS OF THE SCHEME
Applicability of the Scheme
The Scheme shall remain in force from
April 01, 2020 till September 30, 2020.
Under this Scheme, a company which
has defaulted in filing the necessary
documents, statements, returns
including annual filings on the MCA-
21 registry in accordance with the
provisions of the Act (“Defaulting
Company”), is given a one-time
opportunity to file such documents
belatedly under the Scheme.
13MCA Circular available at:
http://www.mca.gov.in/Ministry/pdf/Circular_25032
020.pdf.
17
中文通讯
However, this Scheme shall not apply
in the following cases:
(a) Where actions for final notice of
striking off a company’s name under
Section 248 of the Companies Act has
already been initiated by the
jurisdictional Registrar of Companies
(“RoC”);
(b) To companies which have already
filed an application with the RoC for
striking off its name from the registry;
(c) To companies which have
amalgamated under the scheme of
arrangement or compromise in
accordance with the Companies Act;
(d) To companies where an application for
obtaining a dormant status under
Section 455 of the Companies Act has
already been made;
(e) To vanishing companies; and
(f) Where the form to be filed with the
RoC relates to an increase in the
authorized share capital or pertains to
any charge related filings.
Applicability of the Scheme
(a) Waiver of additional fee and
immunity from prosecution for
delayed filings
The Scheme provides that every
Defaulting Company shall pay only
the normal fees as prescribed by the
Companies (Registration Offices and
Fees) Rules, 2014 and no additional
fees or penalty shall be levied while
making such delayed filings.
14MCA Circular available at:
http://www.mca.gov.in/Ministry/pdf/Circular12_300
32020.pdf.
 INDUSLAW
April 2020 – June 2020
Immunity from initiating any
proceedings for imposing a penalty
shall be provided only in connection
with such delayed filings. However,
the MCA has clarified that such
immunity does not exclude any
consequential proceedings involving
the interests of any shareholders,
directors, key managerial persons, etc.
(b) Appeals by the Defaulting
Companies
With respect to any violations relating
to statutory filings (under the
Companies Act or the erstwhile
Companies Act, 1956), if a Defaulting
Company or its officer in default, as
the case may be, has preferred an
appeal against any notice, complaint
or order passed by an adjudicating
authority or court, then the Defaulting
Company or its officer in default, as
the case may be, is first required to
withdraw such appeal before filing an
application for issue of immunity
certificate under this Scheme. The
proof of withdrawal should be file
along with the application made under
the Scheme.
In cases where an adjudicating officer
under the Companies Act has imposed
a penalty for a delay in filing, but the
Defaulting Company or its officer in
default has not preferred an appeal
against such order before the Regional
Director by April 1, 2020, then in such
cases:
(i) if the last date for filing such
appeal falls between March 01,
2020 and May 31, 2020, an
additional period of 120 days
from the last date on which such
appeal should have been filed
shall be provided; and
18
中文通讯
(ii) during the additional period of
120 days, prosecution for non-
compliance of an order in relation
to any delay in statutory filing
shall not be initiated against the
Defaulting Company or its
officers.
(c) Application for immunity
An application for seeking immunity
under the Scheme in respect of the
delayed filings should be made
electronically by the Defaulting
Company in Form CFSS-2020. No fees
shall be paid while filing this form.
This form should be made only after
closure of the Scheme, i.e. September
30, 2020, and once the statutory filings
made by the Defaulting Company are
taken on record or approved by the
RoC, but before the expiry of 6 months
from the date of closure of the Scheme.
This immunity will however not be
available in respect of (i) appeals or
any management disputes pending
before a court or tribunal, or (ii)
conviction by a court or penalty
imposed by an adjudicating authority
against which no appeal has been
preferred prior to the commencement
of the Scheme.
Based on the declaration made under
the Form CFSS-2020, an immunity
certificate in respect of documents
filed under the Scheme shall be issued
to the Defaulting Company. After
granting such immunity, the RoC shall
withdraw the pending prosecutions
for adjudication of penalties or any
proceedings pending before the
concerned courts.
 INDUSLAW
April 2020 – June 2020
(d) Provisions for inactive companies15
Inactive Defaulting Companies, while
filing the application under this
Scheme, also have the option to
simultaneously:
(i) apply to get themselves declared
as a ‘Dormant Company’ by filing
e-form MSC-1 at a normal fee; or
(ii) apply for striking off the name of
the company from the registry by
filing e-form STK-2 and paying
such applicable fees.
INDUSLAW VIEW
In the wake of the COVID-19
pandemic, the MCA has released a
series of relaxations addressing the
concerns raised by several
stakeholders in the corporate world.
The timely introduction of this Scheme
will go a long way in benefiting all
defaulting companies which have
previously failed to make the required
filings under the Companies Act. The
Scheme grants them immunity from
proceedings or additional penalties
being imposed in connection with
such delayed filings. However, it is
pertinent to note that the immunity
under the Scheme is only in connection
with certain delayed filings and does
not insulate companies against other
substantive non-compliances under
the Companies Act.
Authors: Revathy Muralidharan |
Aakash Dasgupta
15“Inactive Company” means a company which has not
been carrying on any business or operation, or has not
made any significant accounting transaction during the
last two financial years, or has not filed financial
statements and annual returns during the last two
financial years. “Significant Accounting Transaction”
means any transaction other than (a) payment of fees by
a company to the RoC; (b) payments made by it to fulfil
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中文通讯
Practice Area: Corporate and
Commercial
2.3 TIGHTENING THE NOOSE:
COMPANIES (AUDITOR’S
REPORT) ORDER, 2020
INTRODUCTION
Auditors have regularly come under
the scanner of market regulators due
to the scams unearthed at large
corporates, including financial
institutions such as the most recent
ones at Infrastructure Leasing &
Financial Services (“IL&FS”) and
Dewan Housing Finance Corporation
Ltd. (“DHFL”). These scams could
have been identified at a much early
stage if the auditors acted as
independent vigilantes and if internal
control measures were not
compromised with, frequently.
With a view to plug these gaps, the
MCA has notified the Companies
(Auditor’s Report) Order, 2020 (“MCA
Order”) on February 25, 2020 16 ,
superseding the Companies (Auditor’s
Report) Order, 2016 (“CARO 16”).
Under this MCA Order, every auditor
is required to include all matters
prescribed therein while preparing the
annual audit report of a company.
Initially this requirement was
applicable on all audit reports
prepared by auditors from the
financial year April 01, 2019 onwards.
However, due to the on-going COVID-
19 pandemic and with a view to relax
the compliance burden of companies,
the requirements of the Act or any other law; (c)
allotment of shares to fulfil the requirements of the Act;
and (d) payments for maintenance of its office and
records.
16 Available at:
http://www.mca.gov.in/Ministry/pdf/Orders_250220
20.pdf.
 INDUSLAW 中文通讯
April 2020 – June 2020

the MCA by a notification dated March (d) a one-person company 22, and a
24, 202017 postponed the applicability small company23; and
of the MCA Order to all audit reports
prepared from the financial year April (e) a private limited company (not
01, 2020 onwards. being a subsidiary or holding
company of a public company),
The auditor’s report being a public having:
document that is relied upon by
various stakeholders, the MCA Order (i) a paid-up capital and
aims to tighten the noose around reserves and surplus not
auditors and directors with respect to more than INR 1 Crore as
reporting requirements and disclosure on the balance sheet date;
obligations. This article analyses the and
applicability of and highlights the key
changes introduced under the MCA (ii) which does not have total
Order. borrowings exceeding
INR 1 Crore from any
APPLICABILITY OF THE MCA bank or financial
ORDER institution at any point of
time in a financial year,
This MCA Order continues to be and
applicable to all companies mentioned
(iii) which does not have a
under the CARO 16 and shall apply to
total revenue (including
every company including a foreign
revenue from
company18, but shall not apply to the
discontinuing operations)
following:
exceeding INR 10 Crores
during a financial year, as
(a) a banking company19;
per the financial
(b) an insurance company20; statements.

(c) a not-for profit company21; KEY HIGHLIGHTS

17 Available at: 21 Such a company should be duly registered under

http://www.mca.gov.in/Ministry/pdf/Notification_2 Section 8 (Formation of Companies with Charitable Objects,
5032020.pdf. etc.) of the Companies Act.
18 As per the Section 2(42) of the Companies Act, “foreign 22 As per the Section 2(62) of the Companies Act, “one-

company” means any company or body corporate person company” means a company which has only one
incorporated outside India which,(a) has a place of person as a member.
business in India whether by itself or through an agent, 23 As per the section 2(85) of the Companies Act, “small

physically or through electronic mode; and (b) conducts
any business activity in India in any other manner.
19 As per the clause (c) of section 5 of the Banking
Regulation Act, 1949, “banking company” means any
company which transacts the business of banking in
India; Explanation.--Any company which is engaged in
the manufacture of goods or carries on any trade and
which accepts deposits of money from the public merely
for the purpose of financing its business as such
manufacturer or trader shall not be deemed to transact
the business of banking within the meaning of this
clause.
20 As defined under the Insurance Act,1938.
company” means a company, other than a public
company,—(i) paid-up share capital of which does not
exceed fifty lakh rupees or such higher amount as may
be prescribed which shall not be more than ten crore
rupees; and (ii) turnover of which as per profit and loss
account for the immediately preceding financial year
does not exceed two crore rupees or such higher amount
as may be prescribed which shall not be more than one
hundred crore rupees: Provided that nothing in this
clause shall apply to—(A) a holding company or a
subsidiary company; (B) a company registered under
section 8; or (C) a company or body corporate governed
by any special Act.

20
 INDUSLAW
April 2020 – June 2020
An auditor’s report shall, in addition
to the matters provided under Section
143 of the Companies Act, also include
a statement on all matters detailed in
the MCA Order. For the purpose of
this article, we have highlighted below
only the additional reporting and
disclosure requirements that have
been newly introduced under this
MCA Order.
Assets
(a) The auditor is required to include a
statement on whether a company is
maintaining proper records and
details of both tangible assets (that is
property, plant, and equipment) and
intangible assets. Further, in cases
where the title deeds of all immovable
properties disclosed in the financial
statements are not held in the name of
the company, the auditor is required to
provide the following information in a
tabular format, (i) the description of
the property, (ii) gross carrying value,
(iii) name of the owner and whether
the owner is a promoter, director,
relative or employee, (iv) the reasons
for not holding the property in the
name of the company, and (v) if there
are any disputes pertaining to the
property.
(b) If the company has undertaken a
revaluation of either its tangible or
intangible assets and where the change
is 10% or more of the net carrying
value of each asset, the auditor is
required to clarify whether the
revaluation is based on a registered
valuer’s valuation.
(c) Details of any proceedings initiated or
pending against the company for
holding any benami property under
the Benami Transactions (Prohibition)
21
中文通讯
Act, 1988 are also required to be
disclosed.
Inventory and working capital
(a) The auditor is required to note if there
has been any discrepancy of 10% or
more, in the aggregate, for each class of
inventory and if so, whether such
discrepancies have been properly dealt
with in the books of account.
(b) If any banks or financial institutions
have sanctioned working capital limits
in excess of INR 5 Crores on the basis
of security of current assets, then the
auditor is also required to comment on
whether the quarterly statements filed
by the company with such banks or
financial institutions are as per the
books of accounts.
Loans, advances, guarantee or any
security provided
(a) With respect to loans, advances,
guarantees or security provided by a
company either to its subsidiaries,
joint ventures, associates or any other
party, the auditor is required to
disclose the total amount extended
during the year, the balance
outstanding as on the balance sheet
date and confirm that none of the loans
or advances are prejudicial to the
company’s interests.
(b) With respect to loans and advances
granted by a company, the auditor is
required to note (i) the schedule of
repayment of the principal and interest
amounts, (ii) whether the repayments
are regular, (iii) for any amounts that
are due beyond 90 days, whether
reasonable steps have been taken by
the company for recovery, (iv)
whether loans are renewed or fresh
loans are granted to settle the overdues
 INDUSLAW
April 2020 – June 2020
of existing loans, (v) the percentage of
the aggregate to the total loans or
advances in the nature of loans
granted during the year, and (vi) the
amount and aggregate percentage of
loans or advances granted to
promoters and related parties which
are repayable either on demand or no
specific terms of repayment are
provided.
Unrecorded income
If there are any transactions which
were not recorded in the books of
account but were disclosed as income
during that year in the income tax
assessments, under the Income-Tax
Act, 1961, the auditor shall specify if
such unrecorded income is properly
recorded in the books of account
during the year for which the audit is
being conducted.
Default in repayment of loans or
borrowings
(a) Any default by the company in
repayment of loans or borrowings or
related interest, shall be disclosed in
the audit report in a tabular format
specifying the nature of borrowing
(including debt securities), amounts
due, number of days of delay, among
other things.
(b) The auditor shall record in its report if
the company has been declared as a
wilful defaulter by any bank, financial
institution or other lender.
(c) If the loans or funds raised have been
utilized for a purpose other than for
which it was obtained, then the auditor
24As per the Rule 3 (da) of the Nidhi Rules, 2014,
“Nidhi” means a company which has been
incorporated as a Nidhi with the object of cultivating
the habit of thrift and savings amongst its members,
22
中文通讯
shall report the amounts so diverted
and the purpose for which it was
ultimately used.
(d) If a company has raised funds to meet
the obligations of its subsidiaries,
associates or joint ventures or has
raised a loan by pledging the securities
of its subsidiaries, associates or joint
ventures, then the details including the
nature of such transactions should be
reported.
Fraud and whistle-blower complaints
If the statutory auditor, in the course of
performance of his duties, has reason
to believe that an offence of fraud,
involving an amount of INR 1 Crore or
above is being or has been committed
against the company by its officers or
employees, then the auditor is
required to report it to the
Government of India in Form ADT-4
and should include such details in the
audit report. Further, the auditor shall
also record whether he has considered
the whistle-blower complaints (if any)
received by the company.
Compliance by Nidhi Company
For a Nidhi Company24, any default in
payment of interest on deposits or
repayment thereof for any period shall
be reported by the auditor.
Internal audit system
The auditor is required to include a
comment on whether the internal
audit system of a company is
commensurate with the size and
nature of its business and whether the
receiving deposits from, and lending to, its members
only, for their mutual benefit, and which complies
with the rules made by the Central Government for
regulation of such class of companies.
 INDUSLAW
April 2020 – June 2020
reports of the internal auditors for the
period under audit were considered
by the statutory auditor25.
Compliance of the regulations
prescribed by the RBI
If the company has carried on any non-
banking financial or housing finance
activities without obtaining a valid
certificate of registration from the RBI,
then the auditor is required to record
the same. If a company is a Core
Investment Company (a “CIC”) as
defined under the RBI regulations, the
auditor is required to report whether it
has fulfilled the criteria of a CIC and if
it is an exempted or unregistered CIC,
state whether the company continues
to fulfil such criteria. Further, if the
group companies also include other
CIC’s, then the auditor is required to
indicate the number of CIC’s forming
part of the group.
Cash losses
The auditor shall include in its report
whether a company has incurred any
cash losses in the financial year or in
the immediately preceding financial
year and the amount of cash losses so
incurred.
Resignation of statutory auditors
A statement in relation to whether any
of statutory auditors have resigned
during the year, and if so, whether the
auditor has considered the objections,
issues or concerns raised by the
outgoing auditors.
Material uncertainty
25As applicable only to such companies prescribed
under section 138 of the CA 13 read with Rule 13 of
The Companies (Accounts) Rules, 2014.
23
中文通讯
Based on the financial ratios,
information in the financial
statements, expected dates of
realization of financial assets and
payments of financial liabilities, and
the board and management plans, the
auditor is required to give its opinion
on whether any material uncertainty
exists as on the date of the audit report
and if the company is capable of
meeting its liabilities as and when they
fall due within a period of 1 year from
the date of the balance sheet.
Corporate social responsibility
With respect to any ongoing corporate
social responsibility (“CSR”) related
projects, the auditor is required to
certify if any unspent amount has been
transferred to a special account in
compliance with the requirements
under Section 135 (6) of the Companies
Act. Similarly, the auditor is also
required to report whether any
unspent monies which were originally
earmarked towards CSR activities
have been transferred to a fund in
accordance with the requirements
under Section 135 (5) of the Companies
Act, within a period of 6 months from
the expiry of the financial year.
Consolidated financial statement
It is interesting to note that the
requirements under this Order, shall
not be applicable to audit reports
prepared in relation to consolidated
financial statements. However, if any
adverse remarks or qualifications are
included in the previous audit reports
of the companies included in such
consolidated financial statements, then
 INDUSLAW
April 2020 – June 2020
the auditor is required to indicate the
details of the companies and
paragraph numbers of the report
containing such qualifications or
adverse remarks.
CONCLUSION
Typically, auditors are expected to
undertake an independent due
diligence on the affairs of a company
such that the audit reports indicate an
unbiased view on the activities of the
company. This MCA Order is expected
to improve the reporting and
disclosure standards of companies and
protect investors and shareholders
against promoter mismanagement,
embezzlement or corporate frauds.
Requiring detailed comments from an
auditor on the financial statements of a
company will slowly but surely pave
the way for greater transparency and
faith in the financial affairs of the
company.
Authors: Revathy Muralidharan |
Aditi Rani
Practice Area: Corporate &
Commercial
3. CAPITAL MARKETS
3.1 COVID-19 OUTBREAK: SEBI
FURTHER EASES LODR
COMPLIANCE NORMS FOR
LISTED ENTITIES
As COVID-19 continues on its rampage,
the Government of India and other
authorities have been continuously
26The Securities and Exchange Board of India or SEBI
was established to protect the interests of investors in
securities and to promote the development of, and to
regulate the securities market in accordance with the
provisions of the Securities and Exchange Board of India
Act, 1992.
24
中文通讯
initiating measures to contain the
pandemic, including a nationwide
lockdown, announced on March 24,
2020 (currently being eased out in a
phased manner), while also providing
for economic relief-plans – most notably,
Finance Minister’s INR 1.7 lakh crore
stimulus package.
Further, the capital markets regulator
continues to address the potential
compliance issues and provide
assistance to listed entities, their
shareholders and other participants
affected by COVID-19. Further to its
circular dated March 19, 2020, the
Securities and Exchange Board of
India 26 (“SEBI”) had granted
relaxation to listed entities (having
listed equity shares or convertibles)
from compliance with certain
provisions of the SEBI (Listing
Obligations and Disclosure
Requirements) Regulations, 2015
(“LODR”), by its circular dated March
26, 2020 (“SEBI March Circular”). 27
We discuss below some of the key
dispensations granted by SEBI
through the SEBI March Circular.
KEY DISPENSATIONS
Annual General Meetings by top 100
listed companies
The top 100 listed companies 28 are
required to hold annual general
meetings (“AGMs”) within 5 months
from the date of closing of the financial
year. 29 For the financial year ended
March 31, 2020, the due date for their
AGMs would, accordingly, have been
27 SEBI circular no.
SEBI/HO/CFD/CMD1/CIR/P/2020/48 dated March
26, 2020.
28 The top 100 listed companies are determined on the
basis of market capitalization, as at the end of immediate
previous financial year.
29 Reg.44(5) of LODR.
 INDUSLAW
April 2020 – June 2020
August 31, 2020. The SEBI March
Circular extends this deadline till
September 30, 2020.
Certificate on timely issue of share
certificates
A listed entity is required to ensure
that its share transfer agent/in-house
share transfer facility produces a
certificate from a practicing company
secretary on timely issuance of share
certificates within one month of the
end of each half year. 30 For the half-
year ended March 31, 2020, the due
date of production of such certificate
would, accordingly, have been April
30, 2020. The SEBI March Circular had
extended this deadline till May 31,
2020.
Committee meetings
A listed entity is required to conduct
meetings of its nomination and
remuneration committee, stakeholder
relationship committee and risk
management committee at least once
every year. 31 for financial year 2020,
the due date for conducting these
meetings would, accordingly, have
been March 31, 2020. The SEBI March
Circular extended this deadline till
June 30, 2020.
Standard operating procedures
On January 22, 2020, SEBI issued a
circular revising its standard operating
procedures (“SOP”) for imposition of
fines and other enforcement actions
against listed entities for non-
compliances with provisions of the
30 Reg.40(9) of LODR.
31 Reg. 19(3A), 20 (3A) and 21(3A) of LODR.
32 SEBI circular no.
SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January
22, 2020.
25
中文通讯
LODR. 32 The revised SOP superseded
those issued by SEBI on May 03, 2018
(“Erstwhile SOP Circular”) 33 and
would have come into effect for
compliance periods ending on or after
March 31, 2020. However, the SEBI
March Circular stipulates that the
revised SOP will now be applicable for
compliance periods ending on or after
June 30, 2020, and till such time, the
Erstwhile SOP Circular will apply.
Publication of advertisements in the
newspapers
The LODR requires a listed entity to
publish certain categories of
information, including notices of the
board meeting where financial results
shall be discussed, the financial results
and the statement of deviations or
variations in newspapers.34 Given that
certain newspapers have stopped
issuing printed versions for limited
periods, the SEBI March Circular
exempted companies from publication
of such information in newspapers till
May 15, 2020.
CONCLUSION
The relaxations granted by SEBI have
provided much-needed breather to the
listed entities and acted as a limited
cushion to the impact caused by
COVID-19. It is pertinent to note that
the SEBI March Circular relaxes
compliance requirements for listed
entities having specified securities
(equity shares and/or convertible
securities) and it is likely that SEBI will
also exempt similar compliance
requirements for companies having
33 SEBI Circular No.
SEBI/HO/CFD/CMD/CIR/P/2018/77 dated May 03,
2018.
34 Reg. 47 of LODR.
 INDUSLAW
April 2020 – June 2020
other categories of securities listed
(such as debt securities). As COVID-19
continues to spread, listed entities
should also be watchful of their
compliance requirements under
LODR and take appropriate steps to
fulfil such obligations in a timely
manner.
Author: Radhika Pandey
Practice Areas: Capital Markets |
Corporate and Commercial
3.2 TIPPING THE HOURGLASS –
SEBI STALLS RAPIDLY
RUNNING OUT SANDS FOR
FUND-RAISING COMPANIES
INTRODUCTION
The impact of COVID-19 on
commerce, businesses and markets has
been unprecedented. Rapid nose-dives
in domestic capital markets coupled
with lockdown restrictions have
proven to be the “hot gates” for fund
raising. IPO-bound issuers and listed
companies tapping capital markets
have therefore, been forced into limbo.
SEBI has been proactive in relaxing
compliance obligations of listed
companies scourged by COVID 19. 35
On April 21, 2020, in a very welcome
first, SEBI looked to the primary
markets as well. Through two circulars
35Please refer to our earlier news alerts on relaxations of
compliance norms by SEBI
https://induslaw.com/app/webroot/publications/pdf
/alerts-2020/InfoAlert-COVID-19-SEBI-eases-LODR-
compliance-norms-March-2020.pdf;
https://induslaw.com/app/webroot/publications/pdf
/alerts-2020/InfoAlert-COVID-19-SEBI-further-eases-
compliance-norms-March-2020.pdf; and
https://induslaw.com/app/webroot/publications/pdf
/alerts-2020/Infolex-Newsalert-COVID-19-Outbreak-
SEBI-further-eases-LODR-compliance-norms-for-listed-
entities-March27-2020.pdf.
中文通讯
issued on April 21, 2020
(“Circulars”) 36 , SEBI has offered
temporary amnesty from certain
crucial regulations governing public
offerings (initial and follow-on) and
rights offerings in India.
KEY DISPENSATIONS GRANTED
The key dispensations granted by SEBI
through the Circulars for initial public
offerings (“IPOs”), further public
offerings (“FPOs”) and rights issues
(collectively, the “Stipulated
Offerings”) are set forth below.
SEBI observations valid for six more
months
SEBI’s clearance (through ‘final
observations’) of a draft offer
document is ordinarily valid for 12
months (i.e., a Stipulated Offering
must be launched by such time). The
Circulars grant a temporary extension
to this deadline – SEBI clearances that
expire between March 01, 2020 and
September 30, 2020 will be valid for 6
additional months from the date of
their respective expirations, i.e.,
between August 31, 2020 and March
31, 2021. Accordingly, issuers within
this timeline have 6 more months to
launch their Stipulated Offerings.
Fresh Issue size can be altered by 50%
without fresh clearance
36 SEBI Circular No.
at SEBI/HO/CFD/DIL1/CIR/P/2020/66 available at:
https://www.sebi.gov.in/legal/circulars/apr-
2020/one-time-relaxation-with-respect-to-validity-of-
sebi-observations_46536.html and
SEBI Circular No.
SEBI/HO/CFD/CIR/CFD/DIL/67/2020 available at:
https://www.sebi.gov.in/legal/circulars/apr-
2020/relaxations-from-certain-provisions-of-the-sebi-
issue-of-capital-and-disclosure-requirements-
regulations-2018-in-respect-of-rights-issue_46537.html.
26
 INDUSLAW
April 2020 – June 2020
If an issuer seeks to increase or reduce
the size of the primary component of a
Stipulated Offering (“Fresh Issue”) 37
by more than 20%, it must re-file its
draft offer document with SEBI for
clearance38. The Circulars increase the
re-filing threshold significantly. For
Stipulated Offerings opening before
December 31, 2020, issuers may
change the size of their Fresh Issues by
up to 50%. This relaxation is subject to
certain conditions, including the
objects of the issue remaining
unchanged and adequate disclosures
through a public notice (as well as in
the updated draft offer document).
The stipulation that the objects of the
issue must be unchanged will require
an issuer who decreases the size of its
Fresh Issue to reduce the amounts that
it deploys towards its existing objects.
In case any of the objects involve
funding of a specific project, such
issuer would also have to show higher
amounts of tie-up of firm commitment
towards at least 75% of the balance
amount required for the project.
Eligibility for fast-track rights
offerings eased
In order to encourage fast-track rights
offerings, the Circulars provide
temporary relief from numerous
stringent eligibility norms for the fast-
track route. These apply to rights
issues of equity shares and convertible
securities (but not warrants) that open
by March 31, 2021 (“Eligible Rights
Issue”), and include the following:
Audit qualifications. An issuer having
audit qualifications in the financial
37Please note that rights issues only involve a
Fresh Issue component.
27
中文通讯
statements included in the letter of
offer (“LOF”) is debarred from
undertaking a fast-track rights issue.
However, the Circulars allow an issuer
with audit qualifications to proceed by
either (a) restating its financial
statements to give effect to the
qualifications, or (b) including
appropriate qualitative disclosures in
case the impact is unquantifiable.
(a) Settlement of securities laws
violations. If the issuer or its
promoters, promoter group or
directors have, in the last three years,
settled violations of securities laws
through SEBI’s consent mechanism
(such issuer, a “Settling Issuer”), it is
debarred from undertaking a fast-
track rights issue. The Circulars relax
compliance with this condition by
allowing Settling Issuers to proceed
with a fast-track issue if the terms of
the settlement have been duly
complied with.
(b) Certain compliance periods reduced
from 3 years to 18 months. The
Circulars reduce the compliance
periods for certain eligibility
conditions for a fast-track issuer from
3 years to 18 months. These are:
(i) the period for which the issuer’s
shares have been listed on a
recognized stock exchange;
(ii) the period for which the issuer
has been compliant with LODR;
and
(iii) the period for which the issuer’s
shares have not been suspended
38Para (1)(f)(i) of Schedule XVI of the SEBI (Issue
of Capital and Disclosure Requirements)
Regulations, 2018.
 INDUSLAW
April 2020 – June 2020
from trading as a disciplinary
measure.
(c) Show cause notices. An issuer with
any outstanding show-cause notices
(“SCNs”) or prosecution proceedings
from SEBI against the issuer, its
promoters or its whole-time directors,
is debarred from undertaking a fast-
track rights issue. The Circulars tapers
this requirement by allowing issuers
who have outstanding SCNs for
adjudication proceedings (i.e., in
respect of certain categories of offences
under the Securities and Exchange
Board of India Act, 1992 (“SEBI
Act”)39 ) or pending SEBI prosecution
proceedings to avail of the fast-track
route, subject to adequate disclosures
of such matters in the LOF.
Minimum subscription for rights
issue reduced to 75%; no requirement
for draft letter of offer for issues
below INR 25 Crores
The Circulars reduce the minimum
subscription threshold for an Eligible
Rights Issue (fast track or regular
route) from 90% to 75% of the issue
size. Further, if the issue is subscribed
between 75% and 90%, then at least
75% subscribed issue size must be
deployed towards identified objects of
the issue (other than general corporate
purposes). Also, for Eligible Rights
Issues of value below INR 25 Crores,
no draft letter of offer (“DLOF”) is
required to be filed with SEBI.
Please see Annexure A for a detailed
description of the existing regulations and
the dispensations to them granted through
the Circulars.
39Such categories include contraventions under
Sections 15A, 15B, 15C, 15D, 15E, 15F, 15G, 15HA
and 15HB of the SEBI Act.
28
中文通讯
INDUSLAW VIEW
The relaxations granted by SEBI
through the Circulars are a lease of life.
They will provide a much-needed
breather to issuers involved in on-
going and prospective IPOs, FPOs and
rights issues.
The 6 months’ extension in the validity
of SEBI observations, coupled with the
flexibility to change the Fresh Issue
size will provide reprieve to issuers
that have passed the rigors of SEBI
review. Based on public records, there
are as many as 14 issuers looking to
raise capital through IPOs or rights
issues whose SEBI observations have
expired or will expire between March
01, 2020 and September 30, 2020. With
the sands no longer running out, these
issuers can re-evaluate business plans,
funding requirements, the impact on
valuations, calibrate the size of their
offerings and look for opportune
windows to launch.
In COVID-19 markets, time is of the
essence – to this end, fast-track rights
issues can be a very useful tool for
issuers to recapitalize, with assistance
from their promoters/ promoter
group. The reduction in the period for
compliance with LODR, average
market capitalization and period of
listing under the Circulars will allow
more companies to avail the fast-track
route which were previously unable to
fulfil the eligibility requirements.
However, while the fast-track route
exists for FPOs as well, the exemptions
granted under the Circulars have not
also been extended to FPOs.
 INDUSLAW
April 2020 – June 2020
The relaxations on fast-track rights
issues under the Circulars apply only
to Eligible Rights Issues of equity
shares and convertibles. Warrants may
also be offered, along with equity
shares and/or convertibles, through a
rights issue and, in volatile markets, be
preferred instruments by investors
seeking to cash-in on a pricing upside
in post-COVID-19 times. SEBI may
accordingly consider piloting these
exemptions towards Eligible Rights
Issues of warrants as well. Further,
SEBI should consider allowing IPOs to
also be subject to minimum
subscription levels of 75% in the
exempted period, similar to Eligible
Rights Issues.
While the exemptions granted under
the Circulars are temporary, SEBI
would be well placed to consider if
some of them should be find
permanent place in the Securities and
Exchange Board of India (Issue of
Capital and Disclosure Requirements)
Regulations, 2018, as amended (“SEBI
ICDR Regulations”). These include:
(a) allowing issuers to restate audit
qualifications in their letters of offer, or
include full details if the qualification
is unquantifiable, and (b) allowing
issuers who have settled securities law
violations and duly complied with the
settlement terms to undertake fast-
track rights issues.
40 Variation in Terms of Contract or Objects in
Prospectus (Notified Date of Section: 01/04/2014)
(1) A company shall not, at any time, vary the terms of a
contract referred to in the prospectus or objects for which
the prospectus was issued, except subject to the approval
of, or except subject to an authority given by the
company in general meeting by way of special
resolution:
Provided that the details, as may be prescribed, of the
notice in respect of such resolution to shareholders, shall
also be published in the newspapers (one in English and
29
中文通讯
As COVID-19 intensifies, people,
nations, governments and regulators
of the world must reorient themselves
to a new normal. As SEBI re-orients
itself thus, issuers, merchant bankers,
intermediaries and market
participants will have an interesting
space to watch, and even more
interesting trades to structure and
execute.
Authors: Abhiroop Lahiri |
Priyadarshini Rao | Radhika Pandey
Practice Areas: Capital Markets &
International Offerings | Corporate
and Commercial
3.3 ‘OBJECTS, THEY ARE A-
CHANGIN’ - RETHINKING
VARIATION IN IPO OBJECTS
MIDST COVID-19
INTRODUCTION
The Standing Committee on Finance in
its 21st report had highlighted that a
company should not be able to freely
change the terms of contracts or the
objects stated in its IPO prospectus
after listing of the shares is achieved.
The idea behind such restriction was to
protect IPO investors who would have
invested based on disclosures made in
the prospectus, including in relation to
the objects or use of proceeds of the
IPO. This suggestion, along with
certain exceptions, eventually
translated into Section 27 40 of the
one in vernacular language) in the city where the
registered office of the company is situated indicating
clearly the justification for such variation:
Provided further that such company shall not use any
amount raised by it through prospectus for buying,
trading or otherwise dealing in equity shares of any
other listed company.
(2) The dissenting shareholders being those shareholders
who have not agreed to the proposal to vary the terms of
contracts or objects referred to in the prospectus, shall be
given an exit offer by promoters or controlling
 INDUSLAW
April 2020 – June 2020
Companies Act, which was notified in
April 2014.
Since then, many companies have
changed IPO objects following this
law, reflecting the dynamic nature of
businesses and any alterations in
assumptions made at the time of
stating IPO objects. It is well
understood that change in internal or
external factors would give genuine
reasons to a company to alter the use
of IPO money post listing. The issue of
variation of objects, however, has
become relevant today, when COVID-
19 has locked down economies, sent
markets into free-fall, and forced listed
companies to rethink their business
and planned expansion strategies,
including in relation to the use of
proceeds of their IPOs.
VARYING OBJECTS
What is variation
Section 27(1) of the Companies Act
states that a company shall not vary
the objects for which its prospectus
was issued unless it obtains consent
from its shareholders through a special
resolution. While the language
appears clear at first glance, it still
raises a few questions on its
applicability. Questions such as what
is meant by ‘vary the … objects for which
the prospectus was issued’. Questions are
often raised on whether the following
would be seen as “variation of the
objects”:
(a) using proceeds for a completely new
object;
(b) failure to utilize proceeds for an object;
shareholders at such exit price, and in such manner and
conditions as may be specified by the Securities and
Exchange Board by making regulations in this behalf.
30
中文通讯
(c) changing the amount to be spent for an
object;
(d) changing the amount for a sub head
within an object (with the overall
amount spent towards the same object
remaining unchanged); and
(e) changing the schedule of deployment
for an object.
Curiously, the Companies Act or the
relevant rules do not define variation
of an object, or lay down a bright-line
test. It could therefore be argued that
any change in the use of proceeds of
the IPO, either in terms of the amount
or timing of deployment or the terms
of the object itself, would require a
shareholders’ approval. What is
concerning here, is that whilst the
language of Section 27(1) of the
Companies Act seems to cover all
instances of change (regardless of how
insignificant), its real purpose or intent
should have been to apply to only
‘material’ or ‘significant’ changes. To
put the burden of compliance on
companies for changes which are truly
negligible, could not have been the
intent of Section 27(1) of the
Companies Act. Therefore, the
question remains whether companies
should take literal interpretation of
Section 27(1) of the Companies Act and
seek shareholders’ approval for each
and every change, regardless of how
insignificant the change is or restrict to
approaching the shareholders for their
approval only where the change is
‘material’, despite there being no
guidance on how to define ‘material’.
Certain instances where companies
have taken a shareholders’ approval
 INDUSLAW
April 2020 – June 2020
for variation in objects have been listed
in the Annexure B. These instances
range from change in deployment of
amounts as little as 0.05% of the IPO
proceeds, all the way up to 89% of the
IPO proceeds. Shareholder approvals
have also been taken for changes in the
funds spent on sub-heads within the
primary objects.
Procedure for varying objects
The proviso to Section 27(1) of the
Companies Act, gives the GoI the
power to frame rules in relation to the
process for obtaining shareholders’
approval. Rule 7 of Companies
(Prospectus and Allotment of
Securities) Rules, 2014, as amended,
prescribes the particulars to be
included in the notice of the
shareholders’ meeting for a special
resolution (required to be passed
through postal ballot) for approving
the change in objects. These include
the original object, unutilized amount
out of proceeds raised, particulars of
and reasons for the variation. The
notice is required to be published in
one English and one vernacular
newspaper in the city where the
registered office of the company is
situated, and also placed on the
website of the company.
It should also be noted that the MCA
has recently relaxed certain procedural
requirements for holding general
meetings, to ease the compliance
burden of companies, due to COVID-
19. Through the Notification (circular
dated April 8, 2020) and June 15
Notification, the MCA has allowed
companies, till September 30, 2020, to
41For details see - MCA issues relief measures to
conduct EGM: Nifty Solution to The Conundrum?
available at:
31
中文通讯
conduct general meetings by way of
video conference or other audio-visual
means for matters that are considered
unavoidable. 41 The MCA has also
through another circular dated April
13, 2020, allowed companies to send
notices for general meetings to
shareholders electronically, subject to
certain conditions.
Exit option for shareholders
Once the approval under Section 27(1)
of the Companies Act has been
obtained, Section 27(2) of the
Companies Act mandates that all
shareholders who have voted against
the resolution (“Dissenting
Shareholders”) shall be given an exit
offer by the promoters or the
controlling shareholders (“Exit Offer
Provider”) in a manner as specified by
SEBI.
In February 2016, pursuant to certain
amendments to the SEBI ICDR
Regulations, SEBI had set out the
manner of providing such exit to the
Dissenting Shareholders. These
provisions were carried over in the
SEBI ICDR Regulations under
Regulations 59 (in case of IPOs on the
main board) and 157 (in case of further
public offers on the main board), read
with Schedule XX. Needless to say,
these provisions for exit to the
Dissenting Shareholders are not
applicable in cases where there is no
identifiable Exit Offer Provider.
In terms of the SEBI ICDR Regulations,
the Exit Offer Provider is required to
provide an exit offer to the Dissenting
https://induslaw.com/app/webroot/publications/pdf
/alerts-2020/Infolex-News-Alert-MCA-issues-relief-
measures-to-conduct-EGM-Nifty-solution-to-the-
Conundrum-April-2020.pdf.
 INDUSLAW
April 2020 – June 2020
Shareholders if:
(a) the proposal for change in objects
referred to in the company’s offer
document is dissented by at least 10%
of the shareholders voting on the
resolution; and
(b) the amount to be utilized for the
objects for which the offer document
was issued is less than 75% of the
amount raised (including amounts, if
any, earmarked for general corporate
purposes).
As is evident from the foregoing, SEBI
has taken a more rational approach by
adding a materiality threshold in both
the limbs of this requirement, perhaps
signaling that the term ‘variation’ itself
should be pegged to a reasonable
benchmark.
As regards item (i) above, even though
the requirement under Section 27(1) of
Companies Act is to have the proposal
approved by a special resolution (i.e.,
75% of the shareholders present and
voting), the requirement to provide an
exit to the Dissenting Shareholders
will only kick in where at least 10% of
the shareholders who are present and
voting have rejected the proposal.
In item (ii) above, even though it states
that the Exit Offer Provider does not
have an obligation to provide an exit
offer if 75% or more of the amount
raised in the IPO has already been
spent on the objects as stated in the
company’s prospectus, it does not
state whether this 75% is supposed to
be calculated basis total proceeds (i.e.,
the aggregate of the fresh issue and the
offer for sale) or just the fresh issue
component of the IPO. However, due
to the fact that the proceeds of the offer
32
中文通讯
for sale go to the selling shareholders
and not the company, the intent seems
to peg this at 75% of the fresh issue.
Exit Price
The SEBI ICDR Regulations (under
Schedule XX) provides the method for
arriving at the exit price to be offered
to the Dissenting Shareholders by the
Exit Offer Provider, as being the
highest of the following –
(a) the volume-weighted average price
paid or payable for acquisitions, by the
promoters of the company or by any
person acting in concert with them,
during the 52 weeks immediately
preceding the relevant date;
(b) the highest price paid or payable for
any acquisition, by the promoters of
the company or by any person acting
in concert with them, during the 26
weeks immediately preceding the
relevant date;
(c) the volume-weighted average market
price of shares for a period of 60
trading days immediately preceding
the relevant date as traded on the stock
exchange where maximum volume of
trading takes place during such
period, provided such shares are
frequently traded; or
(d) in case shares are not frequently
traded, the price determined by the
Exit Offer Provider and the lead
managers taking into account
valuation parameters including book
value, comparable trading multiples,
and such other parameters as are
customary for valuation of shares of
such companies.
 INDUSLAW
April 2020 – June 2020
The relevant date for the purpose of
pricing is defined as the date of the
board meeting in which the proposal
for change in objects is approved,
before shareholders’ approval.
Further, Schedule XX of the SEBI ICDR
Regulations also lays down the
manner for providing an exit to the
Dissenting Shareholders’, which
involves, among other things,
appointment of a merchant banker or
a lead manager by the Exit Offer
Provider, creation of an escrow
account for deposit of the exit offer
consideration, opening and closing of
the tendering period and eventually
payment by the Exit Offer Provider to
the Dissenting Shareholders who
continue to be shareholders of the
company as on the relevant date, and
tender their shares in the exit offer.
The Dissenting Shareholders have the
option to either tender or hold on to
their shares, which arguably gives an
unfair advantage to investors and,
possibly, creates room for unfair play.
In addition, even after the entire
process has been followed, the
Dissenting Shareholders who have
tendered their shares have the option
to withdraw till the closure of the
tendering period, thereby making the
entire process infructuous. Till date,
there has not been any instance of an
exit offer being provided since the
provisions came into force.
Also, important to note is that
acquisition of shares by the Exit Offer
Provider under this process is exempt
from the obligation to provide an open
offer under Regulation 3 of the
Securities and Exchange Board of
India (Substantial Acquisition of
Shares and Takeovers) Regulations,
33
中文通讯
2011. Further, in case the exit offer
results in a breach of the minimum
public shareholding threshold, the Exit
Offer Providers must bring their
shareholding in compliance with such
thresholds.
INDUSLAW VIEW
Even though the applicability and
process for providing an exit offer to
the Dissenting Shareholders is clear
under the SEBI ICDR Regulations,
there still exits ambiguity on the
applicability of Section 27(1) of the
Companies Act, with respect to the
requirement of obtaining
shareholders’ approval for variation in
objects. This ambiguity arises out of
the disconnect between the language
of Section 27(1) of the Companies Act
and the need to take a rational
approach when it comes to
ascertaining the meaning of ‘variation
in objects’, and the absence of any
guidance or bright-line tests under
Companies Act 2013 or rules
thereunder.
Since the requirement to obtain the
shareholders’ approval is directly
under the Companies Act, SEBI is
unlikely to clarify this matter and any
clarity in terms of applicability or
threshold will have to come by way of
an amendment. Some regulatory
guidance on this matter through an
amendment to the Companies Act or
otherwise would go a long way to
assist issuers in achieving their
commercial ends, particularly in the
“times of COVID-19”, which
potentially threatens to topple (at the
very least) deployment schedules of
the proceeds of an IPO.
 INDUSLAW
April 2020 – June 2020
Authors: Manshoor Nazki | Deepansh
Goyal
Practice Area: Capital Markets &
International Offering
3.4 GET IT “RIGHT” SAYS SEBI:
FURTHER RELAXES RIGHTS
ISSUE NORMS
INTRODUCTION
In our earlier news alert in paragraph
3.2, we had discussed the
dispensations granted by SEBI from
certain crucial regulatory compliances
applicable to public offerings and
rights issues in India, in an effort to
hot-wire fund raising activity during
the COVID-19 pandemic. Through a
circular dated May 06, 2020 (“SEBI
Circular”) 42 , SEBI has granted
temporary relaxations from certain
procedural requirements related to
rights issues and public issues under
the SEBI ICDR Regulations.
We analyse below the key allowances
granted by SEBI through the SEBI
Circular.
KEY DISPENSATIONS GRANTED
TO RIGHTS ISSUES
The SEBI Circular grants certain
relaxations in the procedures that
apply to rights offerings opening on or
prior to July 31, 2020 (“Eligible Rights
Issues”).
Dematerialization of Rights
Entitlements
42 SEBI Circular
SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 06,
2020 available at
https://www.sebi.gov.in/legal/circulars/may-
2020/relaxations-relating-to-procedural-matters-issues-
and-listing_46652.html.
中文通讯
As a part of its efforts towards
reducing the timelines for rights
issues, SEBI issued a circular on
January 22, 2020, streamlining the
process of offering process, which
introduced a framework for trading of
dematerialized rights entitlements
(“REs”). 43 In order to receive REs,
physical shareholders are required to
provide their demat account details to
the issuer/registrar before 2 working
days of issue closure.
To address concerns of physical
shareholders (of issuers undertaking
Eligible Rights Issues) who may not
able to open demat account or
communicate details of such accounts
within the requisite timeline, the SEBI
Circular allows such shareholders to
apply in the rights issue process
subject to: (a) formulation of
additional mechanisms by the issuer,
the lead managers to the issue (“LMs”)
and other intermediaries by which
physical shareholders can apply in the
issue, and communication of such
mechanism to the physical
shareholders before the issue opening;
(b) such physical shareholders being
ineligible to renounce their REs; and
(c) allotment and receipt of the shares
in the Eligible Rights Issue to be made
only in demat form.
While this dispensation addresses the
issue of opening and communicating
details of demat accounts during the
issue period, such shareholders will
still be required to open demat
accounts before allotment to comply
with item (c) above. This may have
no. 43 SEBI Circular no.
SEBI/HO/CFD/DIL2/CIR/P/2020/13 dated January
22, 2020 available at:
https://www.sebi.gov.in/legal/circulars/jan-
2020/streamlining-the-process-of-rights-
issue_45753.html.
34
 INDUSLAW
April 2020 – June 2020
practical implications in case such
shareholders are unable to open demat
accounts or communicate details of
such accounts prior to even allotment
in an Eligible Rights Issue.
Mechanism in addition to
Application Supported by Blocked
Amount facility (“ASBA”)
Applications in rights issue are
allowed only through the ASBA
facility (whereby bidders provide
instructions to specified ASBA banks
to block amounts equivalent to the bid
amount in their ASBA accounts). 44 The
SEBI Circular relaxes this condition for
Eligible Rights Issues by allowing the
issuer, along with the LMs, registrar
and other intermediaries, to formulate
an additional non-cash mechanism to
accept applications from shareholders.
However, no third-party payments
will be allowed in respect of any
application under such additional
mechanism. In this respect, while SEBI
has provided this relaxation to
applications made by shareholders of
the issuer, it is not specifically clarified
whether such dispensation will also be
extended to applications made by
persons/ entities to whom
shareholders renounce their rights
entitlements.
In relation to additional mechanisms
mentioned above, as a word of
caution, SEBI has clarified that issuers
and LMs to Eligible Rights Issues must
ensure that: (a) the additional
mechanisms are optional and not a
replacement for the existing
framework; (b) the additional
mechanisms are transparent, have
adequate checks and balances and
impose no additional costs on the
44 Regulation 76 of SEBI ICDR Regulations.
35
中文通讯
shareholders; (c) FAQs, online
dedicated helpdesks and helplines are
created to increase the familiarity of
the shareholders with the application
process; and (d) the issuer along with
the LMs, the registrar and other
intermediaries remain responsible for
all investor complaints.
Availability of abridged letter of
offer and other issue materials
An issuer is required to dispatch the
abridged letter of offer along with the
application form and other rights issue
related material (“Issue Related
Material”) to its existing shareholders
through registered post or speed post
or by courier service or by electronic
transmission at least 3 days before the
opening of rights issue. 45 The SEBI
Circular clarifies that for Eligible
Rights Issues, Issue Related Material
can be dispatched by electronic means
alone - failure to dispatch Issue
Related Material through registered
post or speed post or courier services
will not be deemed to be a non-
compliance.
However, the issuer, registrar, stock
exchanges and LMs are required to
publish the Issue Related Material on
their respective websites. In addition,
the SEBI Circular also requires the
issuer, along with the LMs to explore
other means of communication such as
ordinary post, SMS and
advertisements (through audio-visual,
television or digital modes) to
approach shareholders in connection
with an Eligible Rights Issue.
Publication of issue-related
advertisements
45 Regulation 77(2) of SEBI ICDR Regulations.
 INDUSLAW
April 2020 – June 2020
The SEBI ICDR Regulations requires
an issuer to publish certain categories
of issue related information, including
the date of completion of dispatch of
Issue Related Material in certain
stipulated newspapers, with wide
circulation, at least 2 days before the
opening of the rights issue.46 The SEBI
Circular allows the issuer to publish
such advertisement in additional
newspapers (over and above the
stipulated newspapers) and requires
issuers to also disseminate information
relating to application process through
television, radio, internet, etc.,
including through crawlers and
tickers.
Further, the SEBI Circular also requires
such advertisements: (a) to contain
additional details regarding
application procedure for
shareholders to whom Issue Related
Material have not been served
electronically; and (b) to be published
on the website of the issuer, registrar,
stock exchanges and LMs.
DIGITAL AUTHENTICATION
AND INSPECTION
The SEBI Circular allows
authentication/certification of offer
documents (for both public offerings
and rights issues) filed until July 31,
2020 through digital signatures. It
should be noted herein that the term
‘offer documents’ is defined47 to mean
a red herring prospectus, prospectus
or shelf prospectus, as applicable in
case of a public issue, and a letter of
offer in case of a rights issue.
Accordingly, the SEBI Circular does
not appear to extend this benefit to
authentication of draft offer
documents filed, or any due diligence
46 Regulation 84(2) of SEBI ICDR Regulations.
36
中文通讯
certifications submitted to SEBI by the
LMs for filing of draft offer documents
in the relevant period.
In addition, issuers and LMs to public
issues or rights issues must also
provide procedures for inspection of
material contracts and documents in
relation to the such issues by electronic
modes.
INDUSLAW VIEW
The temporary relaxations granted by
SEBI are a welcome measure and will
significantly aid issuers to raise capital
through rights issues in the near term.
With the introduction of additional
mechanisms for applications in rights
issue and dematerialization for REs,
SEBI has sought to target maximum
participation by eligible shareholders
in the right offerings, with the
overarching aim of assisting
companies raise capital in these
extremely challenging markets.
Authors: Abhiroop Lahiri |
Priyadarshini Rao| Radhika Pandey
Practice Areas: Capital Markets |
Corporate and Commercial
3.5 SEBI HOT-WIRES FPOs –
RELAXES FAST-TRACK NORMS
INTRODUCTION
Over the last few months, SEBI has
offered much-needed relaxations to
the companies struggling with
disruption caused by COVID-19. In
continuation to its circular dated April
47 Regulation 2 (1) (kk) of SEBI ICDR Regulations.
 INDUSLAW
April 2020 – June 2020
21, 2020 (“Rights Issue Circular”), 48
SEBI has, by a circular dated June 09,
2020 (“June 9 SEBI Circular”), granted
certain temporary relaxations from
certain eligibility conditions for a FPO
under the SEBI ICDR Regulations.49
We discuss below the dispensations
granted by SEBI through the June 9
SEBI Circular.
KEY DISPENSATIONS GRANTED
TO FURTHER PUBLIC OFFER
The June 9 SEBI Circular grants certain
relaxations in the eligibility conditions
related to fast-track FPOs opening on
or prior to March 31, 2021. The
dispensations provided below are not
applicable in case of FPOs of warrants.
Average market capitalization
The requirement of average market
capitalization of public shareholding
of issuer has been reduced to INR 500
Crores, as opposed to earlier
requirement of INR 1,000 Crores.50
Show cause notices
The SEBI ICDR Regulations debar an
issuer from undertaking a fast-track
FPO if any show cause notices (“SCN”)
are issued or prosecution proceeding
are initiated by SEBI or pending
against the issuer, or its promoters or
whole-time directors.51
The June 9 SEBI Circular now allows
issuers that have outstanding SCNs for
adjudication proceedings or pending
48SEBI Circular no.
SEBI/HO/CFD/DIL1/CIR/P/2020/66 dated April 21,
2020.
49SEBI Circular no.
SEBI/HO/CFD/CIR/CFD/DIL/85/2020 dated June
09, 2020.
37
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SEBI prosecution proceedings to avail
of the fast-track route. However, the
FPO prospectus must contain
appropriate disclosures on the
pending SCNs or prosecution
proceedings, along with their potential
adverse impact on the issuer.
Settlement of securities law
violations
If an issuer or its promoters, promoter
group or directors have, in the last 3
years, settled violations of securities
laws through SEBI’s consent
mechanism, such issuer is debarred
from undertaking a fast-track FPO. 52
The June 9 SEBI Circular relaxes this
eligibility condition by allowing the
issuer or its promoter, promoter group
or director to fulfill the settlement
terms or adhere to directions of the
settlement order in cases where it has
settled any alleged violation of
securities laws through the consent or
settlement mechanism with SEBI.
Audit qualifications
An issuer with audit qualifications in
the financial statements is debarred
from undertaking a fast-track FPO if
the impact of audit qualification (if any
and where quantifiable) exceeds 5% of
its net profit/loss after tax in the
respective year.53
The June 9 SEBI Circular now allows
an issuer with audit qualifications to
restate financial statements adjusting
the impact of audit qualification, in
respect of those financial years which
50 Reg. 155(c) of the SEBI ICDR Regulations.
51 Reg. 155(h) of the SEBI ICDR Regulations.
52 Reg. 155(i) of the SEBI ICDR Regulations.
53 Reg. 155(l) of the SEBI ICDR Regulations.
 INDUSLAW
April 2020 – June 2020
are proposed to be disclosed in the
offer documents. Further, if the impact
of the audit qualifications cannot be
ascertained, the issuer may proceed
with appropriate disclosures made in
the offer documents.
INDUSLAW VIEW
In the Rights Issue Circular, SEBI had
provided decisive exemptions to listed
issuers undertaking fast-track rights
offerings. As noted in the Rights Issue
Circular, these exemptions had not
been extended to fast-track FPOs. The
June 9 SEBI Circular has, therefore
been much awaited – and in particular,
by listed issuers who, for commercial
exigencies or shareholding nuance,
seek the FPO route toward fund-
raising.
It should be noted that the June 9 SEBI
Circular does not replicate all of the
dispensations granted earlier to fast-
track rights offerings to FPOs. For
instance, it does not reduce
compliance periods for certain
eligibility conditions from 3 years to 18
months. Since an FPO is a public
offering (and not limited to existing
shareholders and renouncees like in
rights issues), SEBI may have, in its
benevolent avatar, understandably
treaded with caution. One hopes that
the June 9 SEBI Circular is successful in
reviving interest in FPOs at a time
when markets and participants are
increasingly seeking out non-
traditional windows and routes.
Authors: Priyadarshini Rao| Radhika
54 Available at:
https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/
PR21302E204AFFBB614305B56DD6B843A520DB.PDF.
55 Available at:
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/N
OTI186B27003E9DB3D4FB49BDDF955F4289D68.PDF.
38
中文通讯
Pandey
Practice Areas: Capital Markets |
Corporate and Commercial
4. BANKING & FINANCE
4.1 A SAFE HARBOUR FOR
BORROWERS DURING COVID-
19 PANDEMIC – DISCUSSION
ON RBI MORATORIUM VIS-À-
VIS ASSET CLASSIFICATION
INTRODUCTION
The Coronavirus or COVID-19
pandemic danse macabre is not only
taking catastrophic toll on human lives
but also causing severe economic
dislocation and market turmoil. The
outbreak of the pandemic has
necessitated imposition of
extraordinary measures such as
lockdowns in most countries keeping
in mind the larger interests of public
health.
The RBI has, in an attempt to mitigate
the adverse impact of the pandemic on
the economy and with a view to revive
growth and mitigate the burden of
debt servicing, released Circulars
termed as ‘Statement of Development
and Regulatory Policies’ dated March
27, 202054 and ‘COVID-19 – Regulatory
Package’ dated March 27, 202055 (“RBI
Circulars”) which inter alia permitted
all the lending institutions56 to allow a
moratorium of 3 months on
instalments in respect of all term loans
falling due between March 1, 2020 and
May 31, 2020, which was further
56 Lending institutions being all commercial banks
(including regional rural banks, small finance banks and
local area banks), co-operative banks, all-India Financial
Institutions, and NBFCs (including housing finance
companies).
 INDUSLAW 中文通讯
April 2020 – June 2020

extended by another 3 months until Provisioning pertaining to Advances

August 31, 2020 57 (“Moratorium
Period”).
The RBI Circulars further state that
repayment schedule and all
subsequent due dates, as also the tenor
for such loans, may be
commensurately shifted across the
board in accordance with the
Moratorium Period. Similarly, in case
of Working Capital facilities, the
lenders are permitted to allow a
deferment during the Moratorium
Period on payment of interest in
respect of all such facilities
outstanding as on March 01, 2020,
whilst the interest can continue to
accrue and will be payable after the
expiry of the said period.
THE SCOPE AND EXTENT OF
SAFE HARBOUR PROVIDED
IN THE RBI CIRCULARS
The objective of this safe harbour of
moratorium/ deferment is to
specifically enable the borrowers to
tide over the economic fallout from
COVID-19 and hence, a default will
not result in asset classification
downgrade. The RBI was however
mindful to caveat this by providing
that this will not be treated as change
in terms and conditions of loan
agreements due to financial difficulty
of the borrowers.
It is pertinent to understand here as to
what the stages of asset classification
are. Asset classification is primarily
governed by the Master Circular on
Prudential norms on Income
Recognition, Asset Classification and
dated July 01, 2015 (as amended from
time to time) (colloquially referred to
as “IRAC norms”). As per the IRAC
norms, an asset it classified as NPA
when the interest and/or instalment of
principal remains overdue for a period
of more than 90 days. IRAC norms
further state that, prior to classifying
an account as an NPA, an account shall
be first classified as Special Mention
Account – 1 (SMA-1) when the
account remains overdue between 31
to 60 days and Special Mention
Account – 2 (SMA-2) when the
account is overdue between 61 to 90
days. While this is the basic parameter
for declaring an asset as an NPA, the
RBI has released various other
circulars and guidelines on the
classification standards from time to
time, which may not be essential for
discussions here.
While the RBI Circulars provide a safe
harbour to the borrowers so as to not
trigger any ‘default’ during the
Moratorium Period, the Borrowers are
also protected from any downgrade in
classification of their account as per the
IRAC norms, during the Moratorium
Period. The circulars clearly provide
that the asset classification of term
loans which are granted relief shall be
determined based on revised due
dates and revised repayment schedule.
The borrowers have however,
knocked the doors of the Courts in
respect of issues concerning the
interpretation of the said RBI
Circulars. Few issues which came up
for consideration before the Courts till
now are (1) whether the safe harbour

57Available at:
https://www.rbi.org.in/Scripts/BS_PressReleaseDispl
ay.aspx?prid=49844.

39
 INDUSLAW
April 2020 – June 2020
under the RBI Circulars apply to
Assets which were in default prior to
March 01, 2020; (2) whether the time
period for Asset Classification/ down-
gradation continue to run during the
Moratorium Period; (3) whether
moratorium has any effect on
enforcement of security interest for a
default occurred prior to March 01,
2020; and (4) whether the Moratorium
Period also applies in respect of
facilities availed by NBFCs.
Whether the safe harbour under the
RBI Circulars applies to Assets which
were in default prior to March 01,
2020
This issue came up for consideration in
the case of Anant Raj Limited v. Yes Bank
Ltd.58 before the Hon’ble High Court of
Delhi. In this case, Anant Raj Ltd., the
borrower, which is engaged in the
business of real estate, had availed
credit facilities to the tune of INR 1570
Crores from YES Bank Ltd. The
Borrower filed a writ petition
challenging YES Bank’s action of
classifying the Borrower’s account as
NPA on March 31, 2020. The Borrower
contended that it is squarely covered
under the aforesaid RBI Circulars to
avail moratorium on instalments from
March 01, 2020 and that, in this
intervening period, status quo qua
classification of the account should be
maintained. YES Bank contended that
the RBI Circulars apply to instalments
which fall due after March 01, 2020 and
in the present case, as the default had
occurred on January 01, 2020 and the
interest instalment remained overdue
for a period of 90 days, the account is
to be classified as NPA as per the IRAC
norms.
58W.P. (C) (Urgent) No. 5 / 2020, delivered on 6th April
2020. Accessible at:
40
中文通讯
The Delhi High Court, after analysing
the RBI Circulars held that, prima facie
it appeared that the RBI intended to
maintain status quo as on March 01,
2020 with regard to the instalment
payments which are to be made during
the Moratorium Period as well as the
classification of accounts of the
borrowers as on March 01, 2020. The
Court reasoned by observing that if the
RBI Circulars were intended to apply
only to Standard Asset accounts, there
would be no need for the RBI to even
refer to classification of NPA in the
said circulars, and reference to SMA-1
and SMA-2 would have sufficed. In
other words, an account which was
otherwise a Standard Asset as on 29th
February 2020, cannot become an NPA
post March 01, 2020 unless it goes
through the process of SMA-1 and
SMA-2. As the account cannot be
classified as SMA for instalments
falling due post March 01, 2020, there
is no question of stipulating a
moratorium for classification as NPA.
With the aforesaid observation and
reasoning, the Delhi High Court
ordered status quo ante and restored the
account classification as it stood on
March 01, 2020. In our view, the Delhi
High Court rightly observed that the
RBI Circulars clearly provide for status
quo on asset classification as it existed
on March 01, 2020. Whilst the Delhi
High Court may have arrived at
correct interpretation, the
maintainability of the petition itself is
required to be examined, as no state
instrumentality appears to have been
made a party to the writ petition filed.
The issue of maintainability of the writ
petition came up for consideration
http://delhihighcourt.nic.in/writereaddata/OrderSA
N_PDF/URGENT/wpcurgent5202006042020.pdf.
 INDUSLAW
April 2020 – June 2020
before the Hon’ble Bombay High
Court in the matter of Transcon Skycity
Pvt. Ltd. & Ors. v. ICICI Bank and Ors.59,
when the Court was seized with the
question of whether the Moratorium
Period is to be excluded from the
computation of time period for
classification of an account as NPA.
However, the Bombay High Court,
while passing interim orders under the
extraordinary circumstances, is yet to
pass any final observation and order
on the issue of maintainability of such
writ petitions, which is dealt in detail
below.
Whether the time period for Asset
Classification/down-gradation
continue to run during the
Moratorium Period
In the case of Transcon Skycity Pvt. Ltd.
& Ors. v. ICICI Bank and Ors. (supra),
the borrowers viz. Transcon Skycity
Pvt Ltd. and Transcon Iconica Pvt Ltd.
(“Transcon”) approached the Bombay
High Court in similar facts as that of
the Anant Raj’s case, however, the
issue which was examined by the
Court was whether the countdown for
computation of asset classification be
suspended during the Moratorium
Period. Like in the Anant Raj’s case, in
the present case Transcon availed
credit facilities from ICICI Bank and
had committed defaults in payment on
January 15, 2020 and February 15, 2020
thereby exposing Transcon to be
classified as NPA on April 15, 2020 and
May 15, 2020 respectively. The
Borrowers therefore approached the
Court against ICICI Bank and RBI
seeking safe harbour under the RBI
Circulars along with an injunction
against ICICI Bank from taking any
59 Writ Petition LD-VC No. 28 of2020. Accessible at:
41
中文通讯
coercive steps, including
downgrading asset classification of
Transcon.
Transcon placed reliance on the
judgement of Delhi High Court in
Anant Raj’s case and contended that
from the reading of the said judgment,
the duration of the lockdown period is
required to be excluded from the 90
day countdown, failing which, such
moratorium granted by RBI would be
rendered meaningless in a situation
akin to that of Transcon. On the other
hand, ICICI Bank had contended that
the writ petition itself was not
maintainable as it is a private bank and
not a state instrumentality to be
amenable to writ jurisdiction. It was
also contended by ICICI Bank that at
the ad-interim stage, the Court shall
proceed cautiously so as to not open
the floodgates to the borrowers during
these extraordinary circumstances.
The Bombay High Court limiting itself
to a prima facie enquiry, attempted to
preserve the parties’ status quo and
ensure minimal prejudice to both sides
in these unprecedented and
exceptionally difficult times. In an
attempt to fashion a workable order
limited to the facts of this particular
case ensuring that it sets no precedent
in other cases, held that the period of
the moratorium during which there is
a lockdown will not be reckoned by
ICICI Bank for the purposes of
computation of the 90 day countdown
for NPA declaration.
On the issue of maintainability of the
petition itself, which was never
challenged before the Delhi High
Court, the Court observed that the
https://drive.google.com/file/d/1mLqXrpqr4bdDaV6
jhqgp28i2TLzDNshE/view?usp=sharing.
 INDUSLAW
April 2020 – June 2020
challenge was to the directive or set of
directives issued by an instrumentality
of the State, viz. the RBI and what the
Borrower seeks is an interpretation of
those directives and circulars to bring
them into accord with their avowed
objective. It was therefore satisfied
that, prima facie, the Petition was
maintainable to grant ad-interim
reliefs, although keeping the issue of
maintainability open for contention, at
a later date.
It was clarified by the Court that the
period of moratorium shall not cease
to exist, as on the end of the
Moratorium Period, as currently
advised by the RBI but would extend
till complete lifting of the lockdown.
Likewise, if the complete lifting of
lockdown is lifted before the end of the
Moratorium Period, the period of
moratorium must be construed to end
on such day.
Whether the asset classification
position be altered during the
Moratorium Period on account of
non-payment of instalment due
before March 01, 2020
A similar proposition as above, once
again came for consideration before
the Delhi High Court in the matter of
Shakuntla Education and Welfare Society
v. Punjab and Sind Bank60, wherein the
Petitioner, Shakuntla Education and
Welfare Society (“Society”) had failed
to pay a quarterly installment that
became due on December 31, 2019 to
the Punjab and Sind Bank (“Bank”).
The Society was liable to make
payments on or before March 31, 2019.
Directions were sought to restrain the
60 W.P. (C) No. 2959 of 2020. Accessible at:
http://delhihighcourt.nic.in/dhcqrydisp_o.asp?pn=7
0481&yr=2020.
42
中文通讯
Bank from declaring its pending loan
accounts, instalment of which was
payable by March 31, 2020, as NPA.
The Society argued that although the
debt became due as on December 31,
2019, the same is payable anytime on
or before March 31, 2020. However,
owing to the nation-wide lockdown
and increased financial burden due to
such lockdown, it was necessary that a
safe harbor be provided to the Society
and the asset downward classification
be stayed. The Society placed reliance
on the judgements by Delhi High
Court in Anant Raj’s case and that of
Bombay High Court in Transcon’s case.
The Society stated that the payment
would have been made by March 31,
2020 if the lockdown was not imposed
and further undertook to make
pending payment to the Bank within a
week of the aforesaid directions of the
Government of Uttar Pradesh are
vacated.
The Bank, on the other hand,
contended that the moratorium only
applies to instalments which shall
become due and payable on or after
March 01, 2020. Since, the debt due by
the Society is prior to that, therefore,
the Moratorium Period has no
application on the accounts of the
Society. It was also stated that RBI
Circulars are silent on asset
classification for the debts due and
payable on or before March 01, 2020.
The Court, by its Order dated April 13,
2020, accepted that the applicability of
RBI Circulars on the Society are
questions which have to be
determined only post completion of
pleadings and after looking at the view
 INDUSLAW
April 2020 – June 2020
by the RBI (which was impleaded as a
party later). However, to limit itself to
the interim relief, the Court whilst
agreeing with the decision in Anant
Raj’s case held that since the Society did
have time to make payment till March
31, 2020 and prima facie it appears that
the intention of the RBI Circulars was
to maintain status quo since March 01,
2020, the Bank cannot be allowed to
alter the position in which the Society
stood as on March 01, 2020. The Bank
was, accordingly, restrained from
taking any coercive action against the
Society, till 1 week from the date on
which the directions of the
Government of Uttar Pradesh
(restraining educational institutions
from collecting fees) is vacated.
Interestingly, the RBI was not made a
party to the present Writ Petition,
however, upon an oral request by the
Society, the RBI was added as
Respondent party, therefore, the issue
of maintainability of the present Writ
Petition did not come up before the
Delhi High Court.
Asset classification standstill
announced by the RBI Governor
The RBI Governor, vide his statement
dated April 17, 2020 61 (“Governor’s
Statement”), recognized the
challenges faced by the borrowers to
even honour their instalment payment
commitments which fell due on or
before February 29, 2020. Accordingly,
the Governor has announced that for
all such accounts for which the lending
institutions have allowed a Whether the Moratorium Period
moratorium or deferment in view of
the RBI Circulars, and if such accounts
which were standard as on March 01,
61 Available at:
43
中文通讯
2020, the lending institutions are
allowed to exclude the Moratorium
Period from the 90-days NPA norm.
Therefore, in the case of such accounts
where the borrower has failed to
honour its commitment which accrued
on or before February 29, 2020, the
accounts shall be allowed an asset
classification standstill, if the
following conditions are satisfied,
which are:
(a) for which the lending institutions have
allowed a moratorium or deferment in
view of the RBI Circulars; and
(b) if such accounts which were standard
as on March 1, 2020.
The RBI Governor has further granted
Non-Banking Financial Companies
(“NBFC”) with flexibility under the
prescribed accounting standards, that
are required to be mandatorily
complied by the NBFC and has
directed the NBFCs to be guided by
the accounting standards (“AS”)
guidelines as may be duly approved
by their board as per the advisories
issued by the Institute of Chartered
Accountants of India (“ICAI”).
The RBI Governor, being conscious of
the fact of risk build up in the balance
sheets of the lending institutions on
account of delay in recoveries and
possible slippage, has directed all the
Banks to maintain higher provision of
ten percent on all such accounts which
are offered a standstill.
restrains enforcement of security
interest
https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?I
d=3853.
 INDUSLAW
April 2020 – June 2020
Whilst the possibility to invoke/
enforce security interest by the lenders
may be next to impossible in the
present extraordinary circumstances,
the RBI Circulars do not provide for
any such restriction. Unlike the
moratorium under the Insolvency and
Bankruptcy Code, 2016 (“IBC”) which
squarely restricts the lenders from
enforcing security interest, the safe
harbour provided by RBI in view of
the pandemic, does not place such
express restriction. However, Courts
have granted equitable reliefs of
injunction to protect the true market
value of secures assets such as shares,
which have plummeted due to the
COVID-19 pandemic.
Interestingly, the Supreme Court62 has
recently on April 17, 2020, upheld an
ad-interim order of injunction granted
by the Bombay High Court against
invocation of pledge against shares of
Future Retail Ltd., owing to
plummeting of share prices because of
the COVID-19 pandemic. The Bombay
High Court had, in the case of Rural
Fairprice Wholesale Limited & Anr. v.
IDBI Trusteeship Services Limited &
Ors. 63 , observed that while the share
prices of pledged shares were around
INR 350 at the time of execution of the
Debenture Trust Deeds, the same fell
to nearly INR 100 at the time of
issuance of notice of sale. Considering
these extraordinary circumstances, an
injunction was granted to protect the
market value of pledged shares,
although a debt of nearly INR 610
Crores were owed to UBS Bank on
62 UBS AG London Branch v. Rural Enterprise Wholesale Ltd.
& Ors., SLP (Diary) No. 10943 of 2020.
63 Interim Application No. 1 of 2020 in Commercial Suit
No. (L) 307 OF 2020, order dated March 30, 2020 10
Commercial Suit No. LD-VC-7 of 20-20, along with IA
No. LD-VC-7(IA) of 2020. Accessible at:
44
中文通讯
whose instance pledge was sought to
be invoked.
In contrast to this, the legality of
invocation of pledge after the issuance
of the RBI Circulars came up for
consideration in another case before
the Bombay High Court, which was in
fact referred by the Court while
deciding the Transcon’s case.
The Bombay High Court in the recent
case of Ideal Toll & Infrastructure Pvt.
Ltd., Mumbai and Anr. v. ICICI Home
Finance Co. Ltd., Mumbai & Anr.10
decided on 7th April 2020, examined
the issue of invocation of pledge
during the Moratorium Period, for a
default which occurred prior to March
01, 2020.
In that case, the default had occurred
in January, 2020 and whereas the
lender, i.e., ICICI Home Finance Co.
Ltd. sold pledged shared on March 31,
2020. When it was contended that the
safe harbour under the said RBI
Circulars clearly applies to the case,
the High Court disagreed and held
that while the account cannot be
downgraded as NPA after March 01,
2020, the moratorium cannot come to
the rescue to restrain sale of pledged
shared for a default which occurred
much prior to March 01, 2020. It is
pertinent to note that the sale of
pledged shares had already taken
place before the borrower had
approached the Court seeking reliefs.
In another companion matter of Mrs.
Anuya Jayant Mhaiskar v. ICICI Home
Finance Co. Ltd. & Anr. 64 , however,
https://drive.google.com/file/d/1BCb-fPxKgoysj-FE
4Cg8k1NajDvAxzD/view?usp=sharing.
64 Commercial Suit No. LD-VC-8 of 20-20, along with IA
No. LD-VC-8(IA) of 2020. Accessible at:
https://drive.google.com/file/d/18pOc8BflSOLF0w8
O1gO-dwfnd_gAmO5B/view?usp=sharing.
 INDUSLAW
April 2020 – June 2020
where the default occurred on March
25, 2020, the Court granted an
injunction on invocation of pledge,
subject to payment of amounts falling
due after March 01, 2020, as
undertaken to be paid by the Borrower
before the Court.
Therefore, the Courts are dynamically
approaching the issue of financial
distress in the times of a pandemic by
granting equitable reliefs after
assessing the situation. In the long run,
this would protect the actual market
value of secured assets, which may
have come into distress because of
such extraordinary circumstances.
Charging of interest during
moratorium period due to lockdown.
Unjust enrichment in times of
Pandemic? Plea filed before the
Hon’ble Supreme Court
Rather interestingly, a petition was
filed before the Apex Court with a plea
that the State cannot enrich itself nor
can it permit others to enrich
themselves by charging continued
interest during the lockdown period,
in the times of a global pandemic.
As discussed above, while the RBI
deferred the payment obligations, the
RBI clearly stated in the said RBI
Circulars that the interest shall
continue to accrue even during the
Moratorium Period. This accumulated
accrued interest shall be recovered
immediately by the lending
institutions after the completion of the
Moratorium Period, subject to
commensurate extension of the tenor
of the loans.
It was contended in this Petition that,
in wake of such health emergency, the
state must act as a ‘welfare state’ and
waive off all interest that may accrue
45
中文通讯
during the lockdown period. The
Petition is still sub-judice before the
Apex Court. In our view, however, this
could in fact be counterproductive and
have a negative impact on the
economy, as it can cause drastic effects
on the liquidity of the lending
institutions. Moreover, it is entirely in
the wisdom of the Executive and the
Legislative bodies to decide such
policy decision and it is unlikely that
the Supreme Court would
adjudicate/express its views on such a
plea.
Application of RBI Circular to a Non-
Banking Financial Company? RBI to
clarify
Indiabulls Commercial Credit Limited
(“Indiabulls”), an NBFC approached
Delhi High Court seeking directions
for SIDBI to comply with the directions
of the RBI Circulars. Indiabulls
contended that despite the
moratorium granted by the RBI, the
SIDBI, on April 03, 2020 raised a
demand towards payment of
instalment due and payable in the
month of April, 2020.
SIDBI contended that such demand as
made on April 03, 2020 is being done
as a regular process since it is unclear
that such moratorium as granted by
the RBI Circulars are applicable when
the borrower itself is NBFC. SIDBI
informed that the necessary
clarification in this regard is already
being sought from the RBI.
However, since the clarification was
pending and the instalment due and
payable in the month of April, 2020 is
already serviced, the Petition was
 INDUSLAW
April 2020 – June 2020
dismissed as infructuous by Delhi
High Court.65
On perusal of the RBI Circulars, it is
clear that the attempt of the RBI is to
enable the borrowers to tide over the
economic fallout from COVID-19. The
term ‘borrowers’ as per the Reserve
Bank of India Act, 1934 “is any person to
whom any credit limit has been sanctioned
by any banking company, whether availed
of or not.”
Interestingly, the RBI Act, unlike the
IBC, does not exclude the NBFC from
the definition of Debtor. Therefore, in
our view, Indiabulls or any company
(including NBFCs) shall, on plain
reading of the definition of ‘borrower’
above, may be construed to be a
Borrower for the purpose of the RBI
Circulars. The RBI Circulars, in no-
way explicitly restrict or limit this
definition. Therefore, presently it does
not seem that NBFC is beyond the
ambit of the safe harbour granted by
the RBI. However, the clarification
from RBI is still awaited.
INDUSLAW VIEW
We are of the view that the Courts
have attempted to decipher the true
intention of the RBI in releasing the
aforesaid circulars and applied to the
practical scenarios which unfolded
before them. A liberal reading of the
RBI Circulars does point out that the
RBI intended for the status quo as on
March 01, 2020 to be maintained qua
classification of account and payment
obligations of the borrowers. The
objective behind issuance of the said
RBI Circulars is certainly to provide a
65Writ Petition (C) No. 2955 of 2020. Accessible at:
https://drive.google.com/file/d/16p9D_TsAdHcBtNv
ExlA4EyGWnvVhQWyJ/view?usp=sharing.
46
中文通讯
safe breathing space for the borrowers
to recoup and defray the financial
distress caused by the COVID-19
pandemic.
While the aforesaid orders have been
passed at ad-interim/interim stage
taking into account only the prima facie
case, the Courts, by grant of
injunctions, did leave a room for
unintended consequences which may
arise in a similarly placed situations.
Although the RBI and the Judiciary
have given an umbrella protection, the
concerning factor is the misuse of this
protection by a regular/ordinary
defaulter (one who would have
defaulted even without the lockdown
being in place) in contrast to a genuine
defaulter who may not be in default
but for the pandemic/lockdown.
Thus, extending this safety net to an
ordinary/regular defaulter, may be
uncalled for and be counter-
productive to the already crippling
lending sector. However, the umbrella
protection could be the only way to
deal looking at the current pandemic
situation and the economic distress
arising out of such unprecedented
times.
There are other issues such as whether
the moratorium provided in the
aforesaid circulars would also apply to
declaration of borrowers as ‘wilful
defaulter’ which is governed by
Master Circular on Wilful Defaulters
dated July 01, 2014 (as amended).66 We
can expect more judicial precedents
covering wide array of issues
concerning the financial and
regulatory packages being
66Available at:
https://www.rbi.org.in/Scripts/NotificationUser.aspx
?Id=9044&Mode=0#21.
 INDUSLAW
April 2020 – June 2020
implemented in view of COVID-19
pandemic, in the coming days.
However, this may have a highly
beneficial impact on small and
medium scale industries and provide
them a relief from challenges thrown
by not just the lockdown but also from
already distressed economy. Such
measures coupled with changes in IBC
regime 67 , such as, increasing the
threshold limit of default to INR 1
Crore from existing threshold of INR 1
Lakh, and a suspension of Sections 7, 9
and 10 of the IBC may just give the
necessary breather to the India Inc.
Authors: Amit Jajoo| Sushmita
Gandhi | Bhargav Kosuru | Darpan
Bhatia
Practice Area: Banking & Finance
5. INSOLVENCY AND BANKRUPTCY
5.1 IBC ORDINANCE – IN SERVICE
OF THE ECONOMY
LIFE IN THE TIMES OF COVID-19
What started as a health crisis has
transformed rapidly into a pitched
battle between lives and livelihoods.
The Organization for Economic
Cooperation and Development
apprehends that the global economy
will suffer the biggest peace-time
downturn in a century, with equally
uncertain and unquantifiable views
emerging from the World Bank,
International Monetary Fund and
rating agencies. Meanwhile, on March
25, 2020, India was put under what
67As announced by Minister of Finance and Corporate
Affairs on March 24, 2020.
68Notification available at:
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/N
OTI186B27003E9DB3D4FB49BDDF955F4289D68.PDF.
47
中文通讯
many consider the world’s strictest
national lockdown. It is now followed
by an equally guarded and phased
easing, after 70 days.
As with every other major economy,
the Government has reacted with a
variety of fast-paced fiscal and
monetary measures. The MoF
announced a stimulus package
amounting to approximately 0.8% of
the GDP on March 26. The Prime
Minister then announced a fiscal and
monetary package amounting to
approximately 10% of the GDP on May
12. Thereafter, the MoF announced a
relief package, with stimuli amounting
to 2.7% of the GDP being allocated to
business, details of which were issued
over 4 days from May 13-17. On the
monetary side, RBI responded with a
3-month moratorium on payment of
all instalments falling due between
March 1, 2020 and May 31, 2020,
coupled with a standstill relief from
asset classification downgrade which
was announced on March 27. The
attempt was to improve liquidity, stem
non-performing assets and prevent a
stampede to the insolvency
courthouse doors by banks and
financial institutions. These measures
are further backstopped with rate cuts,
money market liquidity measures and
sector specific forbearances, to shore
up the balance sheets of institutional
lenders 68 . Subsequently, on May 23,
the RBI followed through with
monetary easing measures, with
further extension of the moratorium
and asset classification relief until
August 31, 202069.
69Notification available at:
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/N
T2455D86E6F80D9D4BC29C0DFAA43D76D9A4.PDF.
 INDUSLAW
April 2020 – June 2020
There appears to be no overarchingly
“correct” economic model. Measures
adopted by each economy vary
quantitively and qualitatively,
depending on the fiscal headroom
available, the ever-changing impact of
the pandemic and the size of the
population affected. What is common,
however, is that such measures are
often bookended with economic
experiments in amending insolvency
regimes. We accept one truism offered
by the World Bank 70 – that the
insolvency system can facilitate recovery
as a channel for resolving debt-overhang
and preserving employment. To make
sense of these experimental
amendments, these must necessarily
be juxtaposed in the petri-dish setting
of the fiscal and monetary packages in
place. The pandemic shows no signs of
ending, nor is it reasonably foreseeable
when it will end. What is reasonably
foreseeable is that these experiments
no longer have the luxury of gestating
in time. Much like the quest for a
vaccine, there is no longer the luxury
of prolonged clinical trials. The go-to-
market time has been significantly
truncated. Whether the Indian
amendments to the insolvency regime
are in service of the economy is perhaps a
3 trillion-dollar question. A large part
of the answer is dependent on the
adequacy and frequency of the
regulatory response, the efficiency of
the institutions and the strength
infrastructure that support the regime.
THE REGULATORY RESPONSE
2 days prior to the nationwide
lockdown announced on March 23, the
70Available at:
http://pubdocs.worldbank.org/en/91212158801894288
4/COVID-19-Outbreak-Implications-on-Corporate-and-
Individual-Insolvency.pdf.
48
中文通讯
Supreme Court 71 , exercising powers
under Article 142 read with Article 141
of the Constitution, presciently
extended the limitation period with
effect from March 15, 2020, until
further orders. The SC took suo motu
cognizance of the situation arising out
of the challenge faced by the country
on account of COVID-19. The National
Company Law Appellate Tribunal
followed suit and excluded the period
of lockdown for the purpose of
counting of the period for corporate
insolvency resolution process
(“CIRP”). The Insolvency and
Bankruptcy Board of India, or the
regulator, was quick off the blocks - in
amending the CIRP regulations and in
jump-starting e-filing procedures.
India’s responses so far appear to be
ahead of the curve, with other
jurisdictions adopting similar
measures a little later. Yet, taking a
page from out of the playbook of
countries that were ahead of us on the
impact curve of the pandemic, IBC was
amended to increase the minimum
amount of default for initiating an
insolvency resolution process against a
corporate debtor from INR 1 Lakh to
INR 1 Crore72 on March 24, 2020. From
as early as March 24, 2020, the MoF has
been mulling the more drastic measure
of suspension of filing of applications
for initiating a CIRP.
India has commenced the daunting
challenge of coming out of the
lockdown despite the rising number of
COVID-19 cases. The battle for
livelihoods has seemingly won and the
urgent need of the hour is to restart
and revive the economy. With an
71 Suo Motu Writ Petition (Civil) No(s)3/2020 dated 23
March 2020.
72 Notification available at:
https://www.ibbi.gov.in/uploads/legalframwork/48b
f32150f5d6b30477b74f652964edc.pdf.
 INDUSLAW
April 2020 – June 2020
already slowing economy, the
complete closure of work for over 2
months has had a devastating impact
on the balance sheets of many
businesses and, commensurately, their
ability to service debts. Emerging
economic data indicates that most
sectors are reeling from the financial
hits and it is a growing reality that
several businesses may not survive the
pandemic. In formulating a policy
response, one cyclic truth has become
exigently clear - protecting the lives of
people is of paramount importance
now; to be able to do that, their
livelihoods must be protected, and for
this, it is essential to protect the lives of
companies.
The IBC was brought into existence as
an economic legislation and is
recognized as a ‘code’ that “deals with
economic matters and, in the larger sense,
deals with the economy of the country as a
whole”73. It is only befitting that the IBC
evolves to play its part in safeguarding
and balancing the stakes of interest
holders, in service of our economy.
Now, post hibernation, when the
country is waking up to catch its first
worm, on June 5 an ordinance 74 was
passed to amend the IBC
(“Ordinance”). The statement of
objective of the amendment is clear – it
is to safeguard companies from fatality
in the midst of a pandemic that
continues unabated.
The two amendments that have been
brought into force are:
73 Swiss Ribbons Private Limited & Anr. v. Union of
India (available at:
https://ibbi.gov.in/webadmin/pdf/order/2019/Jan/2
5th%20Jan%202019%20in%20the%20matter%20of%20S
wiss%20Ribbons%20Pvt.%20Ltd.%20&%20Anr.%20Wri
t%20Petition%20(Civil)%20No.%2037,99,100,115,459,59
8,775,822,849%20&%201221-
49
中文通讯
(a) A new Section 10A - to disable for a
limited period (6 months extendable to
up to 1 year), application for
admission to CIRP of any corporate
debtor for what can be called ‘COVID
defaults’, and
(b) A new Section 66 (3) - to bar the
resolution professional from making
an application against a director or
partner of a corporate debtor, to make
contribution to the assets of the
corporate debtor, if due diligence is
not ensured to minimize potential
creditor losses immediately prior to
CIRP.
SECTION 10A: SUSPENSION OF
INITIATION OF CIRP
The new section 10A states:
“Notwithstanding anything contained in
Sections 7, 9 and 10, no application for
initiation of corporate insolvency
resolution process of a corporate debtor
shall be filed, for any default arising on or
after 25th March, 2020 for a period of six
months or such further period, not
exceeding one year from such date as may
be notified in this behalf:
Provided that no application shall ever be
filed for initiation of corporate insolvency
resolution process of a corporate debtor for
the said default occurring during the said
period.
Explanation- For the removal of doubts, it
is hereby clarified that the provisions of
this section shall not apply to any default
2018%20In%20Special%20Leave%20Petition%20(Civil)
%20No.%2028623%20of%202018_2019-01-
25%2013:07:58.pdf.
74 Available at:
https://www.ibbi.gov.in/uploads/legalframwork/741
059f0d8777f311ec76332ced1e9cf.pdf.
 INDUSLAW
April 2020 – June 2020
committed under the said sections before
25th March, 2020.”
THE ‘WHY’
Of the 5 aims stated in the preamble to
the IBC, 2 require constant responses
to evolving circumstances. The first is
the “time bound manner for maximization
of value of assets”. The second is “to
promote entrepreneurship, availability of
credit and balance the interests of all the
stakeholders”. That the IBC was never
intended as a debt recovery tool has
been emphasized and re-emphasized
time and again. The architecture of the
IBC is premised principally on value
maximization, to serve the economy and
not just creditors. Under normal
circumstances, a company that has
become unviable is given the
opportunity (through a CIRP) to start
afresh – a resolution applicant (a non-
related party, unless the corporate
debtor is an MSME) presents a
resolution plan, which, if found viable
and acceptable to the committee of
creditors (“CoC”) results in a fresh
start for the corporate debtor – most
often under a new management. If no
viable resolution plan is received, the
corporate debtor is liquidated on the
premise that resources thus freed up
may be effectively redeployed
elsewhere in the economy.
Today, these “normal circumstances”
no longer exist, and have been wholly
replaced by a set of circumstances
which are hitherto unprecedented and
wholly unpredictable. The preamble to
the Ordinance summarizes these
circumstances75. It is as a response to
75 “COVID-19 pandemic has impacted business, financial
markets and economy all over the world, including India, and
created uncertainty and stress for business for reasons beyond
their control”, “a nationwide lockdown is in force since 25 th
March, 2020 to combat the spread of COVID-19 which has
50
中文通讯
these extraordinary circumstances, the
Ordinance states, that it is considered
expedient to provide reprieve on
initiation of CIRP for defaults arising
on account of COVID-19. The tacit
admissions woven into the Ordinance
are: (a) it is no longer the inefficient use
of resources or inept management that
has resulted in unviability of
businesses, but the circumstances of
the pandemic clubbed with the
lockdown; (b) pushing these
companies into a CIRP cannot
foreseeably result in “value
maximization”; and (c) CIRPs leading
aimlessly into liquidation will destroy
value, if any, that may have been
salvageable. The corollaries are clear:
(a) due to the nationwide (even
worldwide) severity of the financial
shock, the prospects of a worthwhile
resolution applicant with a
worthwhile resolution plan are
undeniably slim; (b) in these
circumstances, in all likelihood, a CIRP
will erode far more value by tearing
down whatever has been built this far
and is remaining; (c) once dead, these
companies will not come back
(presumably after the pandemic has
done its worst – no one seems to know
when); and (d) the value will be lost
forever to the economy at large.
THE ‘WHAT’
The provision is limited in its
applicability. It suspends initiation of
CIRP for defaults for a period of 6
months (subject to extension for up to
1 year) commencing March 25, 2020
(“COVID Defaults”). The COVID
Defaults will continue to be “defaults”
added to disruption of normal business operations”, “it is
difficult to find adequate number of resolution applicants to
rescue the corporate person who may default in discharge of
their debt obligation”.
 INDUSLAW
April 2020 – June 2020
against which claims can yet be made.
The only action barred is the initiation
of CIRP under Sections 7 (by a
financial creditor), 9 (by an operational
creditor) and 10 (by the corporate
applicant). The IBC was designed to
speed up resolution or in its absence,
liquidation. It resulted in a change in
the manner in which business is
conducted and debts are treated owing
to its expeditious and far reaching
impact. While good in usual times,
entities now need breathing space (or
ventilators even) to recover from the
losses they have suffered. Section 10A
therefore takes away the threat of
admission to CIRP that will inevitably
(owing to the circumstances) lead to
fatality of the corporate entity on
account of COVID Defaults. It does not
in any manner ‘forgive’ the debt.
Recovery mechanisms under other
laws, including contracts, SARFAESI,
etc., continue to be available. In fact,
even under the IBC, if a corporate
debtor is already admitted to CIRP,
COVID Defaults can be made part of
the claims. The sole premise behind
section 10A is that COVID Defaults
cannot be used as grounds for
admission to a CIRP.
THE (POTENTIAL) “IFS” AND
“BUTS”:
The immediate knee-jerk reaction (so
far) to the Ordinance during the past
few days appear to be focused on the
word “ever” in the proviso reproduced
below:
Provided that no application shall ever be
filed for initiation of corporate insolvency
76 Anant Raj Limited v Yes Bank Limited - on April 6,
2020.
77 Transcon Skycity Private Limited & Ors v ICICI Bank
& Ors – on April 11, 2020 and earlier in Ideal Toll &
51
中文通讯
resolution process of a corporate debtor for
the said default occurring during the said
period.
Again, Section 10A does not impose a
blanket ban against making an
application under Sections 7, 9 and 10.
The Explanation to Section 10 is crystal
clear - Explanation- For the removal of
doubts, it is hereby clarified that the
provisions of this section shall not apply to
any default committed under the said
sections before 25th March, 2020. This
Explanation neatly takes away the
questions that arose in Delhi 76 and
Mumbai77 High Courts with respect to
applicability of the moratorium under
RBI’s COVID-19 package. The
controversy was quickly resolved by
the RBI itself pursuant to a timely
clarification issued on April 17, 202078.
At a superficial level, the apprehension
seems to be that a corporate debtor
may default with impunity during this
“suspension period” with absolutely
no consequences. The word “ever”
appears to provide an unwarranted
insulation and is a “moral hazard” for
corporate debtors who avoid payment
with little or no impairment in the
ability to pay. This apprehension
around the use of the word “ever”
probably presumes:
(a) Extinguishment or forbearance of the
debt / liability itself (which is
definitely not the case); and
(b) A different understanding of the
concept of “default” and its
occurrence.
Infrastructure Private Limited & Anr. v ICICI Home
Finance Company Limited & Anr., on April 7, 2020.
78 Available at:
https://m.rbi.org.in/scripts/BS_CircularIndexDi
splay.aspx?Id=11872.
 INDUSLAW
April 2020 – June 2020
The definition of “default” is set out in
Section 3(12) of the IBC:
“default” means non-payment of debt
when whole or any part or instalment of
the amount of debt has become due and
payable and is not paid by the debtor or the
corporate debtor, as the case may be;
Section 6 provides – “Where any
corporate debtor commits a default, a
financial creditor, an operational creditor
or the corporate debtor itself may initiate
corporate insolvency resolution process in
(d)
respect of such corporate debtor in the
manner as provided under this Chapter”.
However, Sections 7 and 9 provides a
CIRP may be initiated by a financial
creditor when a default has occurred and
may be initiated by an operational
creditor upon expiry of 10 days after
delivery of a demand notice / invoice
on the occurrence of a default.
(c) Under Section 238A (inserted in June
2018), the Limitation Act, 1963 is made
applicable to proceedings and appeals
under the IBC. Normally, a period of 3
years is provided to file an application
for admission to CIRP. The concept of
“continuing default” reconciles the”
where” and “when” used in the
sections – a default is “continuing” if it
has not been remedied / waived, until
such default is time barred. The word
‘ever’ in the proviso counters the
concept of “continuing default”. It
seems clear that no CIRP can ever be
initiated for COVID Defaults. The
rationale seems to be that various
sectors have suffered immense losses,
which may take years to recover.
While 6 months to 1 year is a necessary
reprieve to resurrect the economy and
get businesses to start repaying their
debts, to be asked to continually bear
the threat of insolvency post the
“suspension period” is considered too
52
中文通讯
heavy a cross to bear. A creditor may
enforce its rights under other law, but
the Ordinance does not consider it
justifiable for the corporate entity to be
subjected to CIRP and be liquidated
for COVID Defaults. The merits (or
demerits) of this experiment should
become apparent in due course,
hopefully without litigation.
SECTION 66(3): LIABILITY IN THE
TWILIGHT PERIOD
Section 66(3) of the IBC was
introduced to amend Section 66(2), to
cater to the prevalent circumstances.
Section 66 (2) allows the resolution
professional to make an application to
the National Company Law Tribunal
(“NCLT”), to order a director or
partner of a corporate debtor to
contribute to the assets of the corporate
debtor for actions (or lack thereof)
taken by the director/partner in the
period prior to CIRP. It states:
“On an application made by a resolution
professional during the corporate
insolvency resolution process, the
Adjudicating Authority may by an order
direct that a director or partner of the
corporate debtor, as the case may be, shall
be liable to make such contribution to the
assets of the corporate debtor as it may
deem fit, if-
(a) before the insolvency commencement
date, such director or partner knew or
ought to have known that the there was no
reasonable prospect of avoiding the
commencement of a corporate insolvency
resolution process in respect of such
corporate debtor; and
(b) such director or partner did not
exercise due diligence in minimising the
potential loss to the creditors of the
corporate debtor.
 INDUSLAW
April 2020 – June 2020
Explanation. – For the purposes of this
section a director or partner of the
corporate debtor, as the case may be, shall
be deemed to have exercised due diligence
if such diligence was reasonably expected
of a person carrying out the same functions
as are carried out by such director or
partner, as the case may be, in relation to
the corporate debtor.”
The rationale of this section is that a
director/partner is well aware of the
goings-on of the corporate debtor. If a
director/partner knows that the entity
will default and its admittance to CIRP
was likely, the director/partner is
required to act with due diligence to
prevent losses for the creditors of the
corporate debtor. If the
director/partner does not act with due
diligence, reasonability and care, the
resolution professional can appeal for
them to contribute to the assets of the
corporate debtor once the CIRP is
initiated.
In the given circumstances, however,
‘ordinary course of business’ itself will
mean trying to manage resources and
recover from the extreme and parlous
financial threats. Section 66 (3)
provides that “Notwithstanding
anything contained in this section, no
application shall be filed by a resolution
professional under sub- section (2), in
respect of such default against which
initiation of corporate insolvency
resolution process is suspended as per
section 10A.”
The circumstances are unprecedented
and to set out a benchmark of diligence
“reasonably expected of a person
carrying out the same functions” is
considered unreasonable. Further,
under Section 10A, application for a
CIRP cannot be made for a COVID
Default. This means that if the entity
53
中文通讯
has become irrecoverably unviable, it
may still be required to ride out the
relief period before a director/partner
can take action to mitigate losses for
creditors. It is, therefore, essential to
relieve this obligation on a
director/partner. Suspending the
personal liability of directors has now
become a standard “boiler plate”
response in quite a few jurisdictions,
including commonwealth
jurisdictions.
There are apprehensions in some
quarters whether this relief will
encourage fraudulent and wrongful
transactions by directors. This
apprehension probably arises from the
fact that Section 66 bears the heading
“Fraudulent trading or wrongful
trading”. Section 66 consists of 2 limbs
- Section 66 (1) deals with business
being carried on with an “intent to
defraud creditors of the corporate debtor or
for any fraudulent purpose”, while
Section 66 (2) deals with insufficient
diligence to reduce potential losses of
creditors in the “twilight zone” prior to
CIRP where a director or partner
knows that the company will face
insolvency. Section 66 (3) only bars
applications under Section 66 (2) and
does not in any manner condone
fraud.
INDUSLAW VIEW
The IBC is an economic legislation. Its
purpose is to serve the economy. The
SC judgment in Swiss Ribbons provides
an illuminating insight on the mindset
of courts in the interpretation of
economic legislations. The SC
recognizes that “there may be crudities
and inequities in complicated experimental
economic legislation” and also reiterates
that “to stay experimentation in things
economic is a grave responsibility, and
 INDUSLAW
April 2020 – June 2020
denial of the right to experiment is fraught
with serious consequences to the nation”79.
The Ordinance is supplemented by a
host of other fiscal and monetary
measures and is perhaps better
appreciated as sum of all components.
Nevertheless, in its bare-bones
simplicity too, the Ordinance may
indeed provide an optimum remedy.
Section 10A is intended as a lifeline,
providing an opportunity to ride
through and survive the COVID-19
storm. To some, the seeming
inattention to establishing bona fide
cause of default and the obvious one-
size-fits-all approach (especially for
certain sectors that have gained from
the pandemic) are irksome. To others,
the Ordinance (buttressed with the RBI
Covid-19 package) appears stilted in
favour of financial creditors. The
argument is that 90% of operational
creditors are MSMEs, and their
interests are apparently not considered
in economic modelling and policy
response. RBI’s COVID-19 package,
however, does consider incentivizing
credit flows to MSMEs (through
regulatory forbearance on asset
classification). Meanwhile, a special
insolvency resolution framework
under Section 240A of the IBC is on the
anvil and may be announced soon for
MSMEs. Whether these measures are
too less and / or too late is, should not
be countenanced (presently) as a valid
criticism of the Ordinance.
Given the context, paucity of time,
India’s variegated economy, lack of
fiscal space for direct benefit stimuli
and practicalities involved, it does not
appear there is much “wriggle room”
79We have analyzed Swiss Ribbons and its implications
in an article available at:
https://www.mondaq.com/india/insolvencybankrupt
cy/781154/swiss-ribbons-and-its-implications--the-
54
中文通讯
to consider a more nuanced or bespoke
precision-based approach. This is a
young regime and the infrastructure is
being built-up (and not without
complaints on speed). From a
practitioner’s practical viewpoint, we
believe a different approach would
lead to undesired ambiguity and much
litigation in circumstances where the
need for speed is paramount. We have
already witnessed an epic 850-day
marathon CIRP and in the present
circumstances that is not a burden that
should be readily imposed on entities
that are on the edge of survival or on
the nascent institutions that have
learnt to run before they could walk. It
cannot be denied that Section 10A may
result in dragging the life of “zombie”
unviable entities on for a while longer,
but the alternative appears to be much
worse. It is important to be mindful
that the provisions are temporary and
will at best be extended to 1 year
(fingers crossed). In the circumstances,
we believe it will first do no harm and
perhaps indeed be of service to the
economy.
We do admit that the Ordinance does
not fully address issues pertaining to
ongoing CIRPs. Cases having received
CoC approval, with only the NCLT
approval pending might yet require
renewed scrutiny and adjudication,
and it is possible that provisions for
that have not been included by design.
Perhaps, however, there are other
important gaps that could have been
plugged – for example, for resolution
plans submitted but not voted on by
the CoC owing to the lockdown, a
fresh valuation process and the
opportunity to revise, withdraw or
supreme-court-on-the-constitutionality-and-key-
provisions-of-the-insolvency-bankruptcy-code and
https://induslaw.com/app/webroot/publications/pdf
/alerts-2019/Swiss-Ribbons-InfoLex-12Feb19.pdf.
 INDUSLAW
April 2020 – June 2020
submit a new plan without being
penalized could have been a
reasonable reprieve.
We hope that absence of more stifling
restrictions will make room for
innovative solutions – speedier out of
court settlements, innovative one-
time-settlements, informal
restructuring, and workouts. This may
be an opportunity for stakeholders to
explore and develop alternate
mechanisms to resolve disputes. This
may be an opportunity for the various
authorities to streamline the processes
and the infrastructure. The average
time taken for completion of the 221
CIRPs yielding resolution is 415 days.
Perhaps the forced “innovations” of e-
filing and digital hearings are
serendipitous and may usher in a low-
cost technological revolution in
enhancing capacity. Pre-packs are
popular in various jurisdictions
around the world, India is yet to
embrace the concept. Perhaps the
circumstances will serve as the
proverbial necessity, the mother of
inventions. Another silver lining is
possibly that the adjudicating
authorities can use the “suspension
period” to clear logjams and build
capacities for what is to come after the
reprieve.
COVID-19 and the lockdown have
forced us to evaluate subjects and
approaches we would ordinarily
relegate to “better minds”. We have all
had to take a step back and refocus,
regroup and heal. It is what the
Ordinance is looking to do for
corporate entities, and it may not be
perfect, but it is a step in the right
direction, of healing and serving the
economy.
55
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We are tempted to end with this quote
from an economic modeler and a
statistician, George Box (which has
since become an aphorism in statistics)
– “Since all models are wrong the scientist
must be alert to what is importantly
wrong. It is inappropriate to be concerned
about mice when there are tigers abroad.”
Authors: Sudipta Routh | Pooja
Dadoo | Saumya Kapoor
Practice Area: Insolvency &
Bankruptcy
6. REGULATORY UPDATES-COVID-
19
6.1 AUGMENTING THE FIGHT
AGAINST COVID-19: HOW
BUSINESSES ARE STEPPING UP
– REGULATORY ENABLERS AND
MISSES
INTRODUCTION
COVID-19 has brought the world to its
knees. Countries are at different stages
of transmission of the pandemic,
trying their best to cope with its
growing economic and social impact.
Governments world-over are eager for
the economy to resume its usual pace,
but many of them have been
constrained to instead order
temporary closure of all non-essential
businesses in a bid to contain and
prevent the spread of COVID-19.
This is aligned with the advisory from
the World Health Organisation and
the International Chambers of
Commerce, in the following recent
joint statement: “The COVID-19
pandemic is a global health and societal
emergency that requires effective
immediate action by governments,
individuals and businesses. All businesses
 INDUSLAW
April 2020 – June 2020
have a key role to play in minimising the
likelihood of transmission and impact on
society”.80
While governments across the world
are taking drastic (but necessary) steps
to control the spread of COVID-19,
they also face the conundrum of
containing its impact on the economy
at the same time. The result being that
in an uncertain and restrictive global
economy, businesses are being pushed
to pivot their offering and evolve novel
business methods, to ensure self-
sustenance, address the needs of the
economy and to play a critical role in
this fight.
In this article, we attempt to examine
the sudden boost to certain businesses
and some recent business adaptations,
triggered and enabled by the
pandemic. We have also identified
some material gaps in the regulatory
framework governing such activities,
which need to be filled in order to
enable these businesses to function
more effectively and thereby assist
better in dealing with the fight against
COVID-19.
TELEMEDICINE
Regulatory Background
Until earlier this year, there was a lack
of clear regulatory framework
governing the practice of telemedicine
in India. In an attempt to bridge this
gap, the Hon’ble Supreme Court of
India in 2009 81 , while dealing with a
matter of medical negligence,
observed that the tendency to give
prescription over the telephone should
80Available at:
https://www.who.int/news-room/detail/16-03-2020-
icc-who-joint-statement-an-unprecedented-private-
sector-call-to-action-to-tackle-covid-19.
56
中文通讯
be avoided, except in case of acute
emergency.
To abate the pressure created by
COVID–19 on the Indian healthcare
system, and to improve access to
healthcare facilities by making use of
advancements in technology, the
Ministry of Health and Family Welfare
(“MOHFW”) on March 25, 2020,
issued the Telemedicine Practice
Guidelines (“Guidelines”). The
Guidelines enable all medical
practitioners registered under the
Indian Medical Council Act, 1956
(“RMP”), to provide telemedicine
consultation to patients from any part
of India through video, audio,
telephone or mobile phones, digital
data exchange or text (chat, messaging,
email, fax etc.) and data transmission
systems. The Guidelines have been
issued in the form of an amendment to
the Indian Medical Council
(Professional Conduct, Etiquette and
Ethics) Regulations, 2002 (“Ethics
Regulations”).
What is Telemedicine?
Pursuant to the Guidelines, the
practice of telemedicine comprises of
the following key ingredients:
(a) delivery of healthcare services by
healthcare professionals from a
distance/remotely; and
(b) use of technology for communication
between the parties involved in a
patient consultation.
Key factors to bear in mind for RMPs
on treatment of patients
81 Martin F. D’Souza v. Mohd. Ishfaq [AIR 2009 SC 2049].
 INDUSLAW
April 2020 – June 2020
The Guidelines list out multiple
precautions and measures to be
followed for safeguarding privacy and
security of a patient’s data and records,
ensuring accuracy of treatment
without a physical check-up, risk
mitigation for doctors; some of which
have been summarised as under:
(a) the RMP must exercise his/her
professional judgment before
commencing any telemedicine
consultation, to decide whether a
physical consultation is more
appropriate in the interest of the
patient;
(b) both the patient and the RMP are
required to know each other’s identity
during telemedicine consultations;
(c) the RMP must display his/her
registration number in all of his/her
communications with the patient;
(d) the patient’s consent is necessary for
telemedicine consultations, unless the
telemedicine consultation is initiated
by the patient (in which case consent is
implied), the RMP is required to obtain
and record express consent from the
patient; and
(e) the RMP must comply with applicable
data privacy laws, while handling and
dealing with any personal information
concerning the patient.
The RMP can also prescribe medicines
via such consultations, provided,
however, it is done in accordance with
82Available at:
https://www.expresshealthcare.in/covid19-
updates/cloudnine-group-of-hospitals-launch-
teleconsultation-services/418023/.
83Available at:
https://www.newindianexpress.com/cities/bhubanes
war/2020/apr/14/telemedicine-starts-at-aiims-
2129826.html.
57
中文通讯
the Ethics Regulations and is subject to
an appropriate diagnosis or
provisional diagnosis having been
made in the discretion of the RMP. The
RMP is required to share a copy of the
signed prescription or e-prescription
with the patient.
The Guidelines also define the term
“telehealth” as the delivery and
facilitation of health and health-related
services including medical care,
provider and patient education, health
information services, and self-care via
telecommunications and digital
communication technologies. As per
the Guidelines, ‘telemedicine’ denotes
clinical services delivered by an RMP
while ‘telehealth’ is a broader term for
use of technology for health and health
related services, including
telemedicine. However, since all other
aspects of telehealth are specifically
excluded from the scope of the
Guidelines, it is unclear whether the
GoI intends to issue separate
guidelines to deal with such aspects.
Industry developments after issuance
of the Guidelines
With the issuance of the Guidelines, it
is evident that the authorities have
recognised the benefits of telehealth
and telemedicine. Businesses such as
Cloudnine Hospitals 82 and AIIMS-
Bhubaneswar 83 , have launched
teleconsultation services after the
issuance of the Guidelines. State
governments such as the Chhattisgarh
Government 84 have also launched
84Availableat:
https://www.hindustantimes.com/india-
news/chhattisgarh-starts-telemedicine-service-amid-
covid-19-lockdown/story-
1N2QrXxcwBwaxHISYS3bGM.html.
 INDUSLAW
April 2020 – June 2020
telemedicine services. On account of
the clarity provided by the Guidelines,
existing players in the telemedicine
space such as Practo and mfine are also
trying to strengthen their businesses 85
and working on aligning their
practices with the requirements
prescribed by the Guidelines 86 . The
demand for telemedicine
consultations has been on the rise since
the spread of COVID-19, with an
increasing number of patients opting
for online consultations. What remains
to be seen is the manner in which these
businesses grow after the pandemic
becomes a thing of the past.
E-PHARMACIES
Regulatory Background
The Drugs and Cosmetic Rules, 1945
(“Drugs Rules”) formulated pursuant
to the Drugs and Cosmetic Act, 1940
(“Drugs Act”) regulate the import,
manufacture, distribution and sale of
drugs and cosmetics in India. The
Drugs Act and the Drugs Rules,
however, are silent on the online sale
of drugs. In the absence of any
regulation, India saw a progressive
rise in unregulated e-pharmacy
businesses after the initial e-commerce
boom. To this effect, the office of the
Drugs Controller General of India
(DGCI) issued a circular on December
30, 2015 clarifying that the Drugs Act
and the Drugs Rules do not
distinguish between the sale and
distribution of drugs through
conventional means and online.
Consequently, entities selling drugs
85Available at:
https://yourstory.com/2020/04/curefits-diagnostic-
vertical-carefit-telemedicine-mukesh-bansal.
86Available at:
https://economictimes.indiatimes.com/small-
biz/startups/newsbuzz/indian-healthcare-companies-
58
中文通讯
through e-pharmacies were required
to obtain a pharmacy license and
comply with the Drugs Act and the
Drugs Rules.
With a view to provide for appropriate
monitoring mechanisms, the draft
amendment to the Rules (“Draft E-
pharmacy Rules”) were published by
the Department of Health and Family
Welfare under the MOHFW on August
28, 2018, primarily setting out the
requirements and conditions for the
sale of drugs by an ‘e-pharmacy’. The
Draft E-pharmacy Rules are yet to be
notified. During the pendency of their
notification, the Hon’ble Delhi High
Court in December, 2018 passed an
interim order in the case of Dr Zaheer
Ahmed v. The Union of India & Ors. 87 ,
clarifying that online sale of medicines
without licence is prohibited forthwith
until further orders. Subsequently, the
DCGI in November, 2019 issued an
order directing all States and Union
territories (“UTs”) in India to prohibit
the sale of medicines through
unlicensed online platforms till the
Draft E-pharmacy Rules are finalized
and notified.
Impact of COVID-19 on e-pharmacies
On March 24, 2020, the Government of
India declared a country-wide
lockdown to prevent the spread of
COVID-19, and issued consolidated
guidelines on April 14, 2020, 2020 inter
alia to States and Union Territory
Governments for implementation of the
lockdown (“Consolidated
Guidelines”) .
88
see-big-boost-with-govt-move-on-
telemedicine/articleshow/74885564.cms
87 W.P.(C) 11711/2018 and CM APPL. 45307/2018
88Available at:
https://www.mha.gov.in/sites/default/files/PR_Con
solidated%20Guideline%20of%20MHA_28032020%20%
281%29_1.PDF.
 INDUSLAW
April 2020 – June 2020
The Consolidated Guidelines had
directed commercial and private
establishments to shut operations, but
the delivery of all essential goods
including food, pharmaceuticals,
medical equipment through e-
commerce were permitted as
exceptions to the lockdown. In fact, the
police department of the State of
Karnataka specifically issued an office
memo clarifying that online delivery
services and e-commerce retailers
including e-pharmacies such as
Medlife, PharmEasy, 1MG etc., will be
allowed to operate.89 The Government
of India also issued new guidelines on
May 01, 2020 90 for implementation of
the lockdown (“New Guidelines”).
The New Guidelines permitted e-
commerce activities in respect of
essential goods including
pharmaceuticals. It is evident that in
this unprecedented situation created
by the COVID-19 pandemic, e-
pharmacies are playing a crucial role
in meeting the healthcare needs of the
public. Allowing e-pharmacies to
operate during this hour of need,
further acknowledges the utility of this
business model.
Inevitably, on March 26, 2020, the
MOHFW acknowledged that retail
sale of drugs and delivery to the
doorstep of consumers is essential
during COVID-19 and issued
directions thereon (“MOHFW
Notification”). In terms of this
MOHFW Notification, any person
holding a license under the Drugs
Rules is permitted to sell any drugs,
except the drugs specifically
prohibited, by retail with doorstep
89 Memo No. 02/CP-BLR/Covid-19/2020 issued by the
Police Department of Government of Karnataka dated
March 26, 2020.
90 Available at:
59
中文通讯
delivery of the drug, subject to certain
conditions. One of the conditions laid
down in the MOHFW Notification is
that the drugs can be supplied at the
doorstep of only those patients located
within the same revenue district,
where the license holder is located.
This condition creates ambiguity on
the operation of e-pharmacies that
have an online-only presence but no
brick and mortar stores. The aforesaid
geographical limitation on the sale of
drugs also defeats the very purpose
that e-pharmacies intend to serve
through their business models.
On one hand, the GoI through the
Consolidated Guidelines and New
Guidelines, allowed the sale of
pharmaceuticals, being an essential
commodity, by way of e-commerce
and on the other hand, the Notification
imposes conditions which may not suit
the business model of all e-
pharmacies.
The current situation has brought the
issue of doorstep delivery of medicines
to the fore and highlighted the
importance of fast tracking the
finalisation and notification of the
Draft E-pharmacy Rules. The steep rise
in the business of e-pharmacies during
COVID-19 is proof of their necessity.
E-pharmacies are experiencing a
shortage of manpower owing to an
exponential increase in customer
orders and are hiring aggressively to
meet the high demand. Some of them
are finding innovative solutions to
their problem of achieving last mile
delivery 91 . For instance, e-health
platform– Medlife has partnered with
https://prsindia.org/files/covid19/notifications/IND_
Extension_Lockdown_May_1.pdf.
91Available at:
https://www.business-
standard.com/article/companies/online-pharmacies-
 INDUSLAW
April 2020 – June 2020
Uber for the delivery of medicines to
its customers92.
MAPPING SERVICE
APPLICATIONS
While the COVID–19 pandemic has
affected people in a myriad of ways, it
is evident that some of us are more
severely affected than others. Daily
wage earners, migrant workers, etc.,
have been displaced and are
struggling to meet their basic needs.
The GoI and State Governments in
India are converting schools, stadiums
etc., into public night shelters and
public food shelters to cater to the
needs of the underprivileged. Some of
these spaces are also being converted
into isolation centres for suspected
COVID-19 patients.
To help the public avail the benefit of
these government initiatives, mapping
service applications are now showing
locations of these shelters on GPS 93 .
This is a great example of technology-
based businesses using their expertise
to help people during these times of
need.
It is imperative that such information
which is made available through the
mapping applications is accurate and
reliable. The GoI is also taking
measures against the spread of any
misinformation or fake news.
on-hiring-mode-as-orders-during-covid-19-lockdown-
120041401021_1.html.
92Available at:
https://economictimes.indiatimes.com/small-
biz/startups/newsbuzz/uber-partners-medlife-to-
deliver-medicines-in-5-
cities/articleshow/75208152.cms.
93Available at:
60
中文通讯
For instance, the Ministry of
Electronics & Information Technology
issued an advisory on March 20, 2020
urging social media platforms and
other intermediaries under the
Information Technology Act, 2000 (“IT
Act”) inter alia to initiate awareness
campaigns on their respective
platforms for its users for restricting
the upload and circulation of false
news or misinformation concerning
COVID-19, and to take immediate
action to disable and remove such false
or misleading user content (“MEITY
Advisory”)94.
Subsequently, the Supreme Court of
India by its order dated March 31, 2020
in the case of Alakh Alok Srivastava v.
Union of India95, too, acknowledged the
menace of fake news and held that any
person who circulates a false alarm or
warning as to a disaster and issues any
fake news will be held liable for
imprisonment which may extend to
one year or with fine. This principle is
further reinforced through the
COVID-19 regulations passed by
various states under the provisions of
The Epidemic Diseases Act, 1897,
which prohibit all persons, institutions
and organisations from using print or
electronic media for dissemination of
any information regarding COVID-19
without prior permission or clearance
from the state government authorities
identified in the respective
regulations. This has been done with
an intent to avoid the spread of
https://www.business-standard.com/article/current-
affairs/google-govt-map-food-and-night-shelters-for-
public-during-lockdown-120040601364_1.html.
94Available at:
https://prsindia.org/files/covid19/notifications/106.I
ND_Advisory_False_News_Social_Media_Platforms_M
ar_20.pdf.
95 Available at:
https://prsindia.org/files/covid19/notifications/1033.
IND_SC_Media_Directions_Apr_1.pdf.
 INDUSLAW
April 2020 – June 2020
rumours and unauthenticated
information regarding COVID-19.
Any violation of the provisions of
these regulations is a punishable
offence under Section 188 of the Indian
Penal Code, 1860.
Accordingly, mapping service
applications that are providing
information in connection with
COVID-19 must verify the accuracy of
such information prior to its use. In
doing so, to the extent that mapping
service applications are intermediaries
under the IT Act, the safe harbour they
enjoy thereunder may get diluted as
they may be required to select or
modify the information/content on
their platform while ensuring its
accuracy, irrespective of whether or
not someone reports it. This would
also need to be considered by other
intermediaries while providing or
publishing information regarding
COVID-19 on their respective
platforms. Various web mapping
applications such as Google Maps and
MapmyIndia have collaborated with
the Central Government and various
State Governments in India to help
their users locate and access night
shelters and food shelters. 96 If such
web mapping applications rely solely
on government sources for
information to provide the aforesaid
services, their liability with respect to
accuracy of data and information used
may be limited.
DIGITAL PAYMENT SYSTEMS
The GoI, as a part of its vision to
transform India into a digitally
empowered and cashless economy,
96Available at:
61
中文通讯
encourages digital payments and
promotes cashless transactions
through the use of various electronic
payment modes. In this context, the
RBI recently issued a comprehensive
set of guidelines on the regulation of
Payment Aggregators (“PAs”) and
Payment Gateways (“PGs”) (“RBI
Guidelines”). Further, the directions
for opening and operation of accounts
and settlement of payments for
electronic payment transactions
involving intermediaries, issued by
the RBI on November 24, 2009
(“Intermediary Directions”) continue
to be applicable for PGs and other
payment intermediaries.
Extensive use of digital modes of
payments will encourage social
distancing and consequently minimise
the spread of COVID-19. Businesses
and non-profit organisations are also
entering into direct collaboration with
different PAs and PGs to raise
donations from the public through
various initiatives for those affected by
COVID-19. In this context, PAs and
PGs, through their respective
platforms, are allowing their users to
directly donate to the Government of
India’s relief funds such as the PM
CARES Fund.
In the above scenario, PAs and PGs are
merely facilitating donations from
their users. The manner in which the
donations made are utilised, fulfilment
of compliances and requirements in
relation to these donations is the
responsibility of the donee i.e. the
respective non-profit organisation or
the Government of India, as the case
may be. The donee is also required to
https://www.newindianexpress.com/cities/delhi/202
0/apr/15/delhi-government-asked-dms-to-identify-
paid-isolation-facilities-2130299.html.
 INDUSLAW
April 2020 – June 2020
issue tax certificates to the donors
under Section 80(G) of the Income-Tax
Act, 1961 for the amount donated.
However, because of the relevant PA’s
or PG’s involvement in the process,
this demarcation of the role and
responsibility is not always clear to the
donor and must be categorically
addressed by the relevant PA/ PG as
well as the donee organisation.
Recommended steps for
safeguarding the interest of PAs and
PGs
In this regard, following are a few
measures which PAs and PGs may
take to safeguard themselves in the
aforesaid arrangements:
(a) enter into appropriate agreements
with non-profit organisation partners
to ensure that the responsibilities of
both parties are accurately identified;
(b) for the benefit of users making such
donations, the terms of service of the
PAs and PGs should clearly state that
the manner in which donations will be
utilized and the responsibility of
fulfilment of compliances in relation to
these donations are responsibilities of
the donee; and
(c) ensure that the non-profit organisation
(donee) partners specify the terms of
collection and use of donations and
related compliance on their website as
well.
Ambiguity in the regulatory
framework
The RBI Guidelines and the
Intermediary Directions appear to be
structured specifically to enable e-
commerce activities and do not
contemplate facilitation of donations
62
中文通讯
while specifying the permissible list of
‘credits’ and ‘debits’ into the accounts
maintained by such intermediaries.
Considering the current scenario, it is
imperative to broaden the purview of
the RBI Guidelines as well as the
Intermediary Directions to also
address donations necessitated by
COVID-19, or other digital payments
not specifically involving ‘e-
commerce’.
ROAD AHEAD
The COVID-19 pandemic is a global
health and societal emergency that
requires effective immediate action by
governments, individuals and
businesses. Some businesses, as
discussed above, have managed to
turn adversity into an opportunity, by
pivoting their business models to
enable the government, common man
and other businesses in dealing with
challenges posed by the current global
situation. For businesses, innovation
and adaptation is the need of the hour.
This is also a time for the government
and regulatory authorities to support
the shift in approach to doing business,
to take unconventional measures to
accelerate revival and to encourage the
growth of the economy.
Authors: Namita Viswanath | Shreya
Suri | Archana Patkar | Anantha
Desikan S
Practice Areas: Corporate and
Commercial | Technology, Media &
Telecommunications
7. COMPETITION LAW
7.1 COMPETITION COMMISSION
OF INDIA REVISES GUIDANCE
NOTE FOR MERGER CONTROL
 INDUSLAW
April 2020 – June 2020
NOTIFICATIONS
INTRODUCTION
While the entire world is swarmed in
critical updates pertaining to redressal
during times of COVID-19; the
Competition Commission of India
(“CCI”) has issued Revised Guidance
Notes to Form I (“Revised Notes”) to
align the earlier guidance notes with
the amended Form I and facilitate
parties for filing the notice before the
CCI.
Under the Competition Act, 2002
(“Competition Act”), the CCI has the
mandate to regulate merger,
acquisition, amalgamation, among
others (herein referred as
“combinations”). Section 5 and 6 of
the Competition Act regulate
combinations and the Competition
Commission of India (Procedure in
regard to the transaction of business
relating to combinations) Regulations,
2011 (“Combination Regulations”) is
the principal regulation governing the
notice of combination with the CCI.
In order to streamline the combination
process, the CCI on August 15, 2019,
introduced a latest set of amendments
(“Amendment Regulations”) to the
Combination Regulations. The
Amendment Regulations among
others, introduced the Green Channel
for deemed approval of combinations,
its criteria for eligibility (Schedule III)
and amended the Form I provided
under Schedule II (“Amended Form
I”).
With the introduction of the Amended
Form I, the earlier guidance notes to
Form I was ill-equipped to address
practical aspects of availing the Green
Channel before the CCI.
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中文通讯
REVISED GUIDANCE NOTES
As mentioned in the introductory
remarks, the CCI by its Press Release
No. 49/2019-20 dated March 27, 2020,
issued comprehensive Revised Notes
to Form I (“Revised Notes”) to align
the guidance notes with Amended
Form I and to facilitate parties for filing
the notice before the CCI.
As compared to the old guidance notes
to Form I, the Revised Notes are more
detailed and practical. The Revised
Notes give a comprehensive guidance
for sub-parts of each of the VIII parts
of the Form I. Even though most of the
information that is required to be filed
under the Amended Form I remain the
same, the Revised Notes simplify the
understanding of the information
required to be filed in the Amended
Form I. Some of the key points made in
the Revised Notes are as under:
Basic Information
For Part I of the Amended Form I (that
is, “Basic Information”) – The Revised
Notes, necessitates role of a party to
the combination to be clearly
identified (that is, whether a party is an
acquirer or a target or a party to
merger/ amalgamation (transferor
and transferee). Similarly, in case an
acquisition is proposed through a
group company or affiliate (existing or
to be created); then the complete
details of acquiring entity is required.
In terms of a joint venture (“JV”); one
is required to indicate if one or more
parties is/are transferring
business/assets to JV.
Meeting the Thresholds
 INDUSLAW
April 2020 – June 2020
For Part IV of the Amended Form I
(that is, “Meeting the thresholds”) –
The determination of assets and/or
turnover in India, one is required to
also provide the assets/turnover of
companies registered in India and
those incorporated in foreign
jurisdictions. It is also clarified that
while checking the thresholds on
company or group basis, the assets and
turnover are to be considered in
accordance with substance of the
transaction and not merely by their
form. The Revised Notes also urge the
parties to rely upon the FAQs available
on the website of the CCI for
additional guidance.
Description of the Combination
For Part V of the Amended Form I
(that is, “Description of the
combination”) – This mainly includes
guidance on (a) explaining the scope of
the proposed combination, (b) rights
arising from the proposed
combination (such as veto rights,
affirmative voting right; any other
rights or advantage of commercial
nature; right to appoint board of
director; information sharing rights);
(c) constituents of value of proposed
combination and (d) certified copy of
the orders/decisions passed in other
jurisdictions relating to the proposed
combination to be attached.
In terms of “any other relevant
information related to the combination”
the CCI in the form of Revised Notes
has clarified that it may include
information that “has a bearing” or “is
material for assessment of the proposed
combination”, such as: (a) regulatory
approvals from government
authorities and other regulators; (b)
proceedings that may have a bearing
64
中文通讯
on the proposed combination and (c)
provide similar orders of CCI or other
jurisdictions with respect to market
definitions, industries, among others.
Activities of parties to the
combination and sector overview
For Part VI of the Amended Form I
(that is, “Activities of parties to the
combination and sector overview”):
(a) The Revised Notes provide a format
for providing details of Parties to the
proposed combination including their
affiliates and also guide on the extent
of information to be provided about
groups separately for acquirer side
and target side.
(b) Even though in the previous guidance
notes, the parties were required to give
details of horizontal overlaps, vertical
and complimentary activities,
however, in the Revised Notes this
information is simplified and
streamlined. It provides for separate
follow up questions in case there is (i)
horizontal overlaps, (ii) vertical
activities and (iii) complementary
activities of the parties. Further, for the
purpose of defining of relevant
market, the Revised Notes also suggest
that all plausible alternatives for
relevant product market and the
relevant geographic market should be
taken into account.
(c) The Revised Notes also take into
consideration direct or indirect
shareholding and/or control by the
parties or their group companies over
the other company (in case of
horizontal overlaps or vertical
activities or complementary activities).
Accordingly, 2 (two) types of entities
may be considered: (i) affiliates of the
 INDUSLAW
April 2020 – June 2020
parties and (ii) entities mentioned in
Schedule III of the Combination
Regulations, where the party has a
shareholding of 10% or more, a right or
ability to exercise any right that is not
available to an ordinary shareholder;
or a right or ability to nominate a
director or observer in another
enterprise.
(d) The Revised Notes further provide
guidance on the information to be
included for giving an overview of the
sector/ industry (broadly similar to
the old guidance notes).
(e) The parties to the proposed
combination are required to provide
information on pendency of any
proceedings over the last 5 years. This
information is to be about - nature of
proceedings, name of authority (CCI
or foreign), and status of proceedings.
Green Channel
For Part VII of the Amended Form I
(that is, “Green Channel”) – the
eligibility criteria for Green Channel is
laid down in Schedule III introduced
in the Amendment Regulations. Green
Channel is applicable wherein the
parties, their respective group entities
and/or any entity in which they,
directly or indirectly, hold shares
and/or control:
(a) do not produce/provide similar or
identical or substitutable product(s) or
service(s);
(b) are not engaged in any activity relating
to production, supply, distribution,
storage, sale and service or trade in
product(s) or provision of service(s)
which are at different stage or level of
production chain; and
65
中文通讯
(c) are not engaged in any activity relating
to production, supply, distribution,
storage, sale and service or trade in
product(s) or provision of service(s)
which are complementary to each
other.
Although, in the Amended Form I, the
notifying party was required to
indicate the applicability of Green
Channel (simpliciter); the Revised
Notes clarify that the notifying party
shall tick the applicability of
appropriate box (as Yes/No).
Attachments
For Part VIII of the Amended Form I
(that is, “Attachments”) – In this part,
apart from other things, the Revised
Notes clarify that the documents,
material (including reports, studies)
among others, considered by and/or
presented to the board of directors of
the parties to the combination are to be
attached only in cases where the
overlaps exist.
INDUSLAW VIEW
With a view to standardize the M&A
review process, the Revised Notes is
issued to render practical and user-
friendly approach. It provides the
scope of information and documents
that a party is required to file (going-
forward) along with the Form I. The
guidelines provided are crucial for
consideration by parties before filing
the notice before the CCI.
With regard to the Green Channel that
was introduced by the Amendment
Regulations, 10 notices (under Green
Channel) got automatic approval from
the CCI. The Revised Notes provide
more clarity regarding eligibility
criterion for green channel which will
 INDUSLAW
April 2020 – June 2020
help parties to ensure that the notice is
not considered invalid.
Also, vide a separate circular/ notice
dated March 30, 2020, the CCI has
allowed filing of combination notices
under Green Channel through email
and making the payment of the fee
electronically.
Authors: Rahul Goel | Ankush Walia
Practice Area: Competition Law
8. REAL ESTATE
8.1 HIGHLIGHTS OF THE
ADVISORY ON EXTENSION OF
TIMELINES UNDER RERA
INTRODUCTION
On May 13, 2020, the Ministry of
Housing and Urban Affairs
(“Ministry”) issued an advisory to the
state governments to invoke the Force
Majeure clause under the provisions of
the Real Estate (Regulation and
Development) Act, 2016 (“RERA”)
and to extend the timelines for (i)
completion of the real estate projects
which has been delayed due to
pandemic caused by Covid-19 and (ii)
for various statutory compliances
(“RERA Advisory”) under the
provisions of RERA. As per the RERA
Advisory, the Ministry mulled and
considered the effect of the ongoing
pandemic situation which resulted in
reverse migration of the workers to
their native places and break in supply
chain of the construction material
97 As established by the Central Government in
accordance with RERA.
98 Vide order no. 33/2020 dated April 13, 2020.
99 As available on:
http://www.tnrera.in/Downloads/CircularsAndOrde
rs/TNRERA-Circular-06042020.pdf.
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中文通讯
causing an adverse impact on the
construction activities of real estate
projects across India.
The RERA Advisory is issued in
accordance with the discussions held
on April 29, 2020 of the Central
Advisory Council 97 with all its
stakeholders including representatives
of homebuyers, developers, real estate
agents, financial institutions,
regulatory authorities and state
governments. It was noted that the
regulatory authorities in the states of
Gujarat 98 , Tamil Nadu 99 and Uttar
Pradesh100 have already issued orders
in their respective states for extension
of completion dates of registered real
estate projects under the provisions of
RERA by 3 to 5 months.
It may be noted that with the
introduction of RERA in the year 2016,
every promoter of a real estate project
is required to obtain registration
certificates from the real estate
regulatory authorities of the state/
UTs, prior to advertising, marketing,
booking, selling or offering for sale, or
inviting persons to purchase in any
manner any plot, apartment or
building101. Further, in terms of Section
4 of the RERA every promoter while
applying for a grant of registration for
a particular project is required to
prescribe a timeline for completion of
the project. Non-completion of the
project within the stated timeline
results in a penalty which may extend
up to 5% of the estimated cost of the
real estate project 102 . Additionally, if
the promoter is unable to give
100 As available on:
https://www.uprera.in/frm_Ifram_for_PDf.aspx?Pa
ram=Press_Release_32603ExtensionofValidityperiod.
pdf.
101 Section 3 (1) of RERA.
102 Section 60 of RERA.
 INDUSLAW
April 2020 – June 2020
possession in accordance with the
timeline as set out in the agreement to
sell, the allottee will be entitled to
payment of interest as may be set out
in the agreement to sell until the
handing over of the possession103.
As an exception, RERA also states that
in case of a Force Majeure, the
timelines for the completion of a
project may be extended up to 1 year
on an application made by the
‘promoter’ of the real estate project.
The term Force Majeure has been
defined under RERA to mean “a case of
war, flood, drought, fire, cyclone,
earthquake or any other calamity caused by
nature affecting the regular development
of the real estate project”. Furthermore,
the Supreme Court in the case of
Bikram Chatterji and Ors. vs. Union of
India (UOI) and Ors. 104 , has defined
force majeure in context of Section 6 of
RERA as ‘a case of war, flood, drought,
fire, cyclone, earthquake or any other
calamity caused by nature’. The
Ministry, looking at the current
scenario across the country stated that
it is quite evident that the current
pandemic is caused by nature and is a
calamity of nature. It is adversely
affecting the regular development of
real estate projects; hence, it attracts
the provision of force majeure under
RERA.
KEY HIGHLIGHTS OF THE RERA
ADVISORY
RERA Advisory has been introduced
in order to protect the interest of all the
stakeholders and accordingly the
RERA Advisory has been issued to all
states/UTs and their respective real
estate regulatory authorities.
103 Section 18 of RERA.
67
中文通讯
The said advisory states that in order
to avoid multiplicity of applications
from the promoters of various real
estate projects to extend the timeline
for completion of their respective real
estate projects, the regulatory
authorities of the states/ UTs under
their respective jurisdiction may issue
the following orders/ directions in
relation to all registered projects for
which the completion date, revised
completion date or extended
completion date as per registration
expires on or after March 25, 2020:
(a) Regulatory authorities may issue
orders/ directions to extend the
registration/ completion date or
revised completion date or extended
completion date automatically by 6
months due to outbreak of Covid-19
by invoking Force Majeure provisions
under RERA;
(b) Regulatory authorities may, on their
own discretion, consider to further
extend the date of completion for
another 3 months, if the situation in
their respective states, for reasons to be
recorded in writing, needs special
consideration for invoking force
majeure in view of the current
pandemic;
(c) Regulatory authorities may issue fresh
registration certificates with revised
timelines in each such registered real
estate project at the earliest; and
(d) Regulatory authorities may extend
concurrently the timelines of all
statutory compliances in accordance
with the provisions of RERA and rules
and regulations made thereunder.
104 As decided on 23rd July 2019.
 INDUSLAW
April 2020 – June 2020
On the same date at the date of the
RERA Advisory, the Rajasthan Real
Estate Regulatory Authority
(“RRERA”), issued an order 105 ,
whereby RRERA, amongst other
relaxations, granted an in-principle,
across the board approval to extend by
12 months the estimated finish date
and the period of validity of the
registration shown in the registration
certificates of all real estate projects
that were registered and not already
completed, lapsed or revoked as on
March 19, 2020. The said extension is
also available to projects which were
registered after March 19, 2020 upto
the date of issuance of the order.
However, in order to avail such
extension, the promoters of real estate
projects will be required to apply for
extension by submitting a simple
application along with fee. For this
purpose, the RRERA was required to
create, before June 30, 2020, a special
window on its web portal for online
submission of applications. Further,
the said order also directs that in light
of the ‘force majeure, no interest or
compensation is payable under
Section 12 and Section 18 of RERA for
the period covered by the aforesaid
extension.
INDUSLAW VIEW
This RERA Advisory has been issued
with a view to cater the situation
wherein most of the promoters of the
real estate projects across India will be
unable to complete their respective
projects within the prescribed
timelines due to the ongoing situation.
Accordingly, the adoption of the
RERA Advisory by the states and UTs
105Vide Order number F1 (146) RJ/RERA/2020/848.
106Available at:
https://www.business-
standard.com/article/economy-policy/ibc-
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中文通讯
will avoid a situation wherein the
authorities are piled up with
applications for extension for
completion of the real estate projects.
Further, the said RERA Advisory has
clarified that the Covid-19 situation is
a natural calamity and accordingly the
same amounts to force majeure under
RERA. This is a welcome move by the
Ministry as it avoids divergent
interpretations by various authorities.
More notifications from various State
regulatory authorities are awaited, in
light of the RERA Advisory, following
suit of RRERA in extending the
timelines for completion of real estate
projects registered under RERA. It
should be noted that the Finance
Minister has recently stated that owing
to the Covid-19 situation 106 , the GoI
will be suspending fresh initiation of
insolvency for up to a year and an
ordinance in relation to the same will
be notified shortly. Once such
ordinance is notified, the recourse
available to homebuyers (in their
capacity as the financial creditor)
under the IBC would not be available
for the said period of 1 year. Further,
with the extension granted by the State
Governments/ UTs on the project
completion date pursuant to the RERA
Advisory, the homebuyers (allottees)
will unwillingly be left with no
redressal during the interim period of
suspension of initiation of insolvency
under IBC/ extension of the project
completion date under RERA. Viewed
as such, the amendments brought
about the Government are pro
developers. However, if extension on
project completion dates is not
provided to the promoters, the same
suspended-for-a-year-covid-19-related-debt-
exempted-from-default-120051700543_1.html
 INDUSLAW 中文通讯
April 2020 – June 2020

may lead to a situation wherein most
of the real estate projects will be in
non-compliance of law and hamper
the development of such projects.
Authors: Saurav Kumar | Sourav
Nath | Neha Balodhi
and the ‘social distancing’ and ‘stay at
home’ advisories from authorities,
have severely affected operations in
the media and entertainment industry,
resulting in reduced revenue
prospects for several businesses.

This article seeks to discuss the impact

Practice Area: Real Estate
on the media and entertainment sector,
some of the key measures adopted by
9. TECHNOLOGY, MEDIA
TELECOMMUNICATION various media bodies, legal and
contractual remedies available to
9.1 THE SHOW MUST GO ON: affected parties, and some key
COVID-19 AND AFTER - A considerations for the post COVID-19
MEDIA AND ENTERTAINMENT scenario.
SECTOR PERSPECTIVE
IMPACT ON THE MEDIA AND
INTRODUCTION
ENTERTAINMENT INDUSTRY

The GoI and state governments of

India have taken several
unprecedented and drastic measures
to curb the spread of the novel
coronavirus (COVID-19),
characterized as a pandemic by the
World Health Organisation. 107 These
measures include imposing
lockdowns, prohibitions under Section
144 of the Criminal Procedure Code,
1973, and issuing various government
advisories on social distancing 108 and
mass gatherings.109
Specifically in the context of the media
and entertainment sector, the
lockdowns and prohibitions imposed
by the governments, along with the
stalling of the film and television
productions, sporting events and other
industry events; shuttering of cinema
halls and theatres across the country,
The state governments of various
states announced a complete
lockdown of public places like theatres
in their states by March 15, 2020. This
was followed by the social distancing
advisory issued by the Ministry of
Health and Family Welfare on March
16, 2020 (“Advisory on Social
Distancing”). 110 These state and
central government measures led to
not only a shutdown of theatres
countrywide, but also an indefinite
halt in production of several films,
television (“TV”) series, web-series,
advertisements, and cancellation or
indefinite postponement of all live
events including the 13th edition of the
Indian Premier League (“IPL”).

107 Available at: 109 Available at:

https://www.who.int/dg/speeches/detail/who- https://www.mohfw.gov.in/pdf/advisoryformassgathe
director-general-s-opening-remarks-at-the-media- ring.pdf.
briefing-on-covid-19---11-march-2020. 110 Available at:
108 Available at: https://www.mohfw.gov.in/pdf/SocialDistanci
https://www.mohfw.gov.in/pdf/SocialDistancingAdvis ngAdvisorybyMOHFW.pdf.
orybyMOHFW.pdf.

69
 INDUSLAW
April 2020 – June 2020
The release of several big-ticket films
was also deferred indefinitely, for
example the Akshay Kumar starrer
“Sooryavanshi”, and multi-lingual
historical epic “Marakkar: Lion of the
Arabian Sea”. With the extension of the
lockdowns (even with some
relaxations from the Government),
production activities and live events
remain suspended, and cinema halls
and theatres continue to be shut.111
While the segments that rely on social
gatherings like films, theatres, live
events and theme parks have been
affected adversely, the public adhering
to the Advisory on Social Distancing
has led to an increase in consumption
of content on other mediums - such as
television, digital streaming platforms,
and gaming platforms. In fact,
reportedly, viewership across several
digital entertainment platforms in
India, has increased by almost 20%.
However, despite viewership
television channels and digital
platforms increasing, monetisation
and revenue earnings of these
mediums are seeing a downward
curve, as revenues in the media and
entertainment sector depend largely
on advertising spends from other
industries. The impact of the pandemic
and the global recession on various
industries such as e-commerce,
manufacturing, financial services,
fashion and retail, automobiles,
hospitality and travel among others,
has led to reduction in advertising
spends from these sectors.
111Available at:
https://www.mha.gov.in/sites/default/files/MHA%2
0Order%20Dt.%201.5.2020%20to%20extend%20Lockdo
wn%20period%20for%202%20weeks%20w.e.f.%204.5.2
020%20with%20new%20guidelines.pdf;https://www.
mha.gov.in/sites/default/files/MHA%20order%20dt
中文通讯
The Indian Broadcasting Foundation
claimed that advertisement bookings
have gone down by almost 50%, owing
to various factors including
cancellation of big events like the IPL,
repeat content on television, and
slowdown in other industries. 112
Though subscription-based revenues
could improve over a period of time as
people get more and more accustomed
to consuming content at home and
seek a greater variety of content.
However, availability of new content
could prove to be a key factor in
retaining and increasing the subscriber
base for subscription-based platforms.
On the other hand, continuity of
business for small to mid-size media
and production houses have also been
severely affected, and has had a direct
impact on sustenance of daily wage
earners like chain artists, camera men,
spot boys, light boys and other
on
contractors engaged in the
entertainment business.
Similarly, the newspaper industry is
also reportedly among the worst
affected in India, with decreasing
revenues from both advertising and
circulation and is estimated to have
affected lakhs of workers engaged in
the news industry.
PARALLEL MEASURES TAKEN BY
VARIOUS BODIES IN THE MEDIA
AND ENTERTAINMENT
INDUSTRY
%2015.04.2020%2C%20with%20Revised%20Consolidat
ed%20Guidelines_compressed%20%283%29.pdf.
112Available at:
https://www.ibfindia.com/sites/default/files/IBF_Me
dia_Release_08.04.2020_IBF_feels_stopping_of_Govern
ment_Ads_on_TV_would_kill_the_industry.pdf.
70
 INDUSLAW 中文通讯
April 2020 – June 2020

Indian Motion Pictures Producers’

Considering the practical and Association, Western India Film
commercial impact on the media and Producers’ Association, Indian Film
entertainment industry, government and TV Producers Council (“IFTPC”),
departments along with various media Association of Film & Video Editors
bodies implemented several parallel decided to put all shootings of films,
measures relevant to the sector. Some television serials, web series, and
such measures are as below: advertising films, on hold from March
19, 2020 till March 31, 2020. Due to
Directives/ Advisories imposition of the nationwide
lockdown, all shooting schedules
The Cellular Operators Association of continued to remain suspended, until
India (“COAI”) on March 22, 2020, its recent resumption.
requested the Department of
Telecommunications to issue orders to Social and charitable measures
ease the pressure on the internet
infrastructure and facilitate working
Several associations and expert bodies
from home, online education, digital
operating in the media industry,
healthcare, banking and payment
remarkably took several relief-
systems, and other critical services
oriented measures to extend their
which are “essential” during a health
support to those most affected in the
crisis.113
entertainment sector. For example:

In lieu of this request by the COAI,

(a) the Indian Performing Rights
over the top (“OTT”) platforms in
Society (“IPRS”) declared an
India unanimously decided to reduce
emergency relief package to
the streaming quality to standard
support its authors and music
definition (“SD”) on cellular networks
composer members across
in India.
various geographies;

The Ministry of Information and

(b) the All India Cine Workers
Broadcasting also advised TV channels
Association requested the
to broadcast the videos, advising
government of Maharashtra to
people on the basic do’s and don’ts of
provide INR 5,000 per month to
COVID-19.114
each daily wage earner
employed in the Indian film
Industry Bodies/ Media Companies
industry,
The Producers Guild of India (“PGI”),
(c) the Indian Singers Right
Federation of Western Indian Cine
Association held a three-day
Employees (“FWICE”), Indian Film &
virtual concert which streamed
Television Directors’ Association,

113Available at: https://mib.gov.in/sites/default/files/Advisory%20o

https://cdn.coai.com/sites/default/files/2020- n%20COVID-19%20-
03/Hindustan%20Times%20Mumbai%20Mar%2023.jpg %20TVC%20of%20Shri%20Amitabh%20Bachchan-
. 03192020141247.pdf.
114Available at:

71
 INDUSLAW 中文通讯
April 2020 – June 2020

on several OTT platforms, with Such events typically include

the aim to raise relief funds, and government actions, war, terrorism,
strikes, civil unrest, acts of god, floods,
(d) the PGI along with the IFTPC earthquakes, hurricanes and other
and the FWICE set up a relief natural calamities, which are
fund to support those most characterised as unforeseeable and
affected by the industry wide outside the control of the contracting
shut down. parties, making it impossible for the
affected party to perform its
Further, various media companies, obligations.
including broadcasters and OTT
platforms also set up relief funds to aid Force majeure provisions usually
daily wage earners in their production require that the party seeking such
ecosystem. relief, should be affected by the force
majeure event such that it cannot
CONTRACTUAL AND LEGAL perform its obligations. Therefore, the
REMEDIES occurrence of COVID-19 in itself may
not lead a party to successfully claim
Due to the lockdown and relief, but depending on the nature of
consequential suspension of business obligations of a party, such party will
and commercial activities, several be required to demonstrate its inability
businesses, such as production houses, to perform its obligations under the
content aggregators, event organisers,
contract due to the spread of COVID-
artistes, and talent managers are
19.
bound to suffer substantial business
and operational interruptions. This
Typically contracts also set out
may inevitably lead to their inability to
consequences of occurrence of a force
perform their existing contractual
majeure event, which include: (i)
obligations. In this context, we analyse
below the key legal and contractual termination of the contract, (ii)
remedies that may be available to suspension of performance by the
them. affected party, without liability,
during the subsistence of the force
majeure event, and (iii) renegotiation
Force Majeure – Not just a boilerplate
of terms of the contract between the
Most commercial contracts include a
parties.
force majeure clause, which provides
for either limiting or waiving the
Corporate entities and individuals
liability arising from non-performance
engaged in the entertainment
of the party affected by occurrence of a
business, will need to carefully
‘force majeure event’. A “force
evaluate their key contracts and the
majeure event” refers to an feasibility of invoking force majeure
unforeseen event or condition which is provisions, which are routinely
beyond the control of the parties to a included in contracts typical to the
contract, and because of which the entertainment industry, such as talent
parties are prevented from performing contracts, production agreements,
their obligations. distribution arrangements, content

72
 INDUSLAW
April 2020 – June 2020
partnerships, licensing and acquisition
agreements, equipment hires, studio
rentals, marketing agreements,
advertising, event management,
sponsorships, branding agreements
and other industry arrangements.
However, these provisions are often
regarded as ‘boilerplate provisions’
and are not extensively negotiated in
normal circumstances.
A party seeking to invoke ‘force
majeure’ will need to analyse the
specific language of the clause
light of their facts and circumstances,
the governing law of the contract, and
the exceptions that may have been
carved out - which are critical to
understand if the contract remains
enforceable, or if parties
sufficient basis to renegotiate terms or
delay or alter the scope of their
obligations. Further, the procedural
terms set out in the contract in this
regard, such as requirement of a notice
to other parties, will also need
attention.
Doctrine of Frustration
Impossibility
In cases where a force majeure
provision is absent from the contract,
parties adversely affected by the
spread of COVID-19 or the lockdown
imposed, may take defence under
Section 56 of the Indian Contract Act,
1872 (“Contract Act”) for its inability
to perform its contractual obligations.
Section 56 of the Contract
embodies the doctrine of frustration or
impossibility, providing that if a
contract becomes impossible,
115Naihati Jute Mills Ltd. v. Khyaliram Jagannat, AIR
1968 SC 522.
中文通讯
impracticable, or unlawful to perform
it will be deemed void. However, the
threshold to establish impossibility of
a contract is high as the courts infer
impossibility of performance from the
nature of the contract and the
surrounding circumstances in which
the parties must have made their
bargain.115
Under Section 56 of the Contract Act,
on occurrence of a force majeure event,
if it can be established that the event
- in
has led to a change in circumstances
not contemplated under their contract,
and render the performance of the
contract impossible or impractical,
then such a contract will be deemed
void and therefore automatically
have
terminate.
Hence, in such a scenario termination
may be the only recourse available to
parties, as Section 56 does not provide
for suspension or variation in terms of
the contract. Therefore, where a party
is affected due to COVID-19 and does
not have a force majeure clause in its
or contract, it may seek relief under
Section 56 of the Contract Act to avail
termination of the contract.
Further, if a contract provides for a
force majeure clause which
contemplates an epidemic, pandemic
or a lockdown situation then the
contract will prevail, and the parties
cannot seek relief under Section 56 of
the Contract Act for impossibility of
performance.116
Act
Insurance
116M/s. Patikari Power Ltd., Shimla v. Himachal
Pradesh Electricity Regulatory Commission and others.,
2012 ELR (APTEL) 1120.
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 INDUSLAW
April 2020 – June 2020
Media businesses may also evaluate
recourses under their existing
insurance policies. In
entertainment industry, insurance is
usually procured to cover losses
arising during production, including
as a result of suspension of shoot or to
cover cancellation of a live event, costs
incurred for reshoots due
occurrence of specified events.
Businesses also procure business
interruption insurances to protect
them from critical events and put them
into a position “as if” the loss had not
occurred, however such insurances
typically cover actual losses caused
due to any physical damages to
premises due to a disaster, and may
not cover losses resulting from the
pandemic.
Whether losses arising
suspension of business activities
during the lockdown due to COVID-19
will be covered under insurance
policies will have to examined on a
case by case basis. This would largely
depend on whether the terms of
insurance include a pandemic, or a
lockdown, as an insured event; and
whether the insurance policy covers
indirect losses at all, such as a loss
arising as a result of disruption is
supply chains.
BUSINESS MEASURES
While there can be no universal
approach to navigate through the
impact of the pandemic, following are
some key business considerations that
management teams of media
companies may assess to deal with the
crisis:
中文通讯
Obtaining Loans and Availing
the Borrowing Facilities
Several media companies may have
availed borrowing facilities or
obtained debts by offering their assets
as security to lenders, which assets
to may include their content libraries. In
addition to focussing on liquidity to
ensure continuity of operations,
companies may also need to keep
sufficient liquidity buffer to account
for any decline in valuation of such
content. Further, they must review
their obligations under the existing
debt facility agreements, to ensure
they are not in default in the
foreseeable future.
Additionally, if a company
contemplates further drawdown from
from their sanctioned borrowing limits, it
will need to examine the provisions of
their facility agreements, which may
include further drawdowns being
conditional on solvency, and absence
of any change in events which have a
‘material adverse effect’ on business
and operations.
Workforce and Salary Revision
The prolonged financial impact,
similar to many other industries, may
force media companies to consider
workforce reduction or salary
reduction of employees, as a cost-
cutting measure. However, such
measures need to be carefully planned
to ensure that all steps are taken in
compliance with applicable labour
laws and regulations, and government
advisories in this regard.
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April 2020 – June 2020
Any inadvertence or non-compliance
in this regard could potentially lead to
legal actions against companies and
even monetary penalties. In this
context, companies could also consider
granting equity linked stock options to
employees, as a measure to make up
for the reduction in salaries or other
payments, if any, and to retain key
employees and talent.
POST COVID-19 ERA
While entering into commercial
arrangements in future, in addition to
re-evaluating the force majeure
provisions, contracting parties will
need to consider several other aspects
afresh in light of the pandemic. We
have summarised below some key
aspects that we believe may be
considered in the most common
contractual arrangements in the
entertainment industry:
Production Arrangements
Production of new content may be one
of the most challenging segments to
manage once shootings are resumed,
considering that production processes
rely heavily on physical gatherings
and interactions amongst people.
This may, therefore, require planning
production schedules, timelines and
budgets with a whole new perspective
- including by possibly dividing the
shoot schedules in a manner that
shootings are undertaken with smaller
group of people on a given day;
choosing shooting spots and locations
in areas that are least affected by the
pandemic; making additional
contingency provisions in the budgets
for delay in supplies, reshooting,
75
中文通讯
illness of a crew member who may
require time for recovery as well as
quarantining among others.
Studios or platforms funding the
production of any content, may
consider including appropriate legal
covenants in their contracts with
production companies, in light of the
above, and also specifically requiring
them to adhere to all Government
regulations and advisories regarding
social distancing norms and mass
gatherings as applicable to areas
where shootings are undertaken.
Talent Engagements
Companies such as production houses,
studios or platforms, directly engaging
talent may consider inclusion of
appropriate representations and
covenants from the talents to ensure:
adherence to all health advisories by
the talent, disclosure of symptoms of
any kind of contagion; necessarily
adhering to self - quarantining
measures, if and when required;
restrictions from undertaking travel to
regions most affected with COVID-19
during the term of engagement;
obtaining adequate personal health
insurances among others.
Further, such companies may also
want to take appropriate waivers from
the talents against any claims in
respect of contracting of COVID-19 or
any similar contagion in future, in the
course of production and shootings.
On the other hand, talents should
review and evaluate their contracts
carefully to ensure that they are not
bound to disclose their personal and
sensitive information to any person;
that they are protected against any
 INDUSLAW
April 2020 – June 2020
chances of contracting a contagion on
the shoot locations; that the
production house or the relevant
contracting party is obligated to take
all health precautions and safety
measures; and most importantly, that
they are not forced to travel to
locations and regions that are most
affected by COVID-19. Alternately, if
shootings are proposed in such
locations then this must be disclosed to
the talent much in advance and before
commencing the shoot.
There may also be other provisions to
consider such as replacement of talent
in case of contracting a contagion or
prolonged illness, suspension or
termination on this account and
consequences thereafter. However,
these may need to be negotiated on a
case to case basis between the parties.
Content acquisitions and licensing
Parties to licensing and content
acquisition contracts may examine
their delivery requirements
obligations, since there may be delays
on various accounts, such as delays in
supplies; delay is completion
production due to non-availability or
illness of crew members,
availability of shoot locations, or a
possible change in shoot locations in
light of the pandemic, among others.
Further, the manner of delivery of
content will also need to be assessed,
since physical deliveries may be a
challenge or may take longer in the
near future, especially in case of cross
border licensing and acquisitions.
Drafting of the force majeure
provisions in these contracts will also
be of utmost significance and will need
中文通讯
to be prudently negotiated between
the parties.
INDUSLAW VIEW
The onslaught of the COVID–19
pandemic has changed the social lives
of people across regions and economic
sections. The lockdowns and
restriction on movement of people has
not only led to an increased demand
for content but has also changed
content consumption patterns. While
traditional and outdoor mediums of
distribution of content, such as cinema
theatres, continue to be unavailable;
the home consumption mediums, such
as television channels and OTT
platforms have gained even more
popularity and viewership. However,
despite the rise in viewership,
monetisation and revenues are hugely
impacted, considering reduction in ad-
spends by other industries owing to
the global recession.
In addition to the lockdowns adversely
impacting a large number of daily
and
wage earners, and freelance creative
talents, decreasing revenues and
uncertainly around recovery from the
of
pandemic, unfortunately also
triggered a number of layoffs and pay-
non-
cuts in the media industry. In these
circumstances the social and charitable
measures taken by several media
bodies, including broadcasters, IPRS,
Producers Guild of India and other
industry bodies, are certainly a much-
needed lifeboat to sustain livelihoods
of composers, artists, singers, authors,
and daily wage earners in the
entertainment industry.
Going forward, the industry will need
to re-think various operational and
legal aspects of the business, such as
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 INDUSLAW
April 2020 – June 2020
timelines, production costs and
schedules, legal commitments etc., in
order to adjust to the ‘new normal’
being presented to the world. OTT
platforms, where a large chunk of the
content library comprises of acquired
content, or is dependent on
partnerships with third parties, may
have to think of innovative ways of
updating their existing content
libraries, given that the production of
new content may take much longer
than anticipated earlier.
Media companies including
production houses will also need to
find ways of increasing their use and
reliance on technology. In addition,
contractual arrangements and legal
provisions will need to be re-evaluated
wherever possible, so as to
appropriately account for such risks
occurring in future and mitigate losses.
However, on the bright side, the
demand for home consumption
mediums including digital streaming
services, which are hugely popular
since even before the pandemic, is
likely to increase even further. In the
long run, this may in fact benefit
subscription-based services which
may be able to penetrate even further
amongst viewers.
Given a rise in demand for content and
increasing viewership, and the halts in
production of new content, existing
content is likely to become more
valuable, and in time may increase
competition not only for existing film
and television libraries, but also for all
new content. To meet the demand for
content, the industry may also see
increased partnerships between
domestic and international media
companies, leading to a rise in
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中文通讯
acquisition of foreign language
content, and distribution of localised
versions of such foreign content to suit
different segments of the domestic
audience.
Given the above, while the media and
entertainment sector is currently
grappling with various challenging
issues, however, as people strive to
return to normalcy, eventually the
sector may be amongst the first few to
recover, and continue to provide to
everyone across all mediums and
segments, the much-needed
entertainment.
Authors: Tanu Banerjee | Ishan Johri
| Garima Kedia
Practice Area: Information
Technology, Media &
Telecommunications
9.2 MAHARASHTRA
GOVERNMENT ISSUES
GUIDELINES FOR RESTARTING
MEDIA AND ENTERTAINMENT
INDUSTRY
INTRODUCTION
The sudden outbreak of the novel
coronavirus (COVID-19) led the GoI to
impose a nationwide lockdown in an
attempt to control the spread of the
pandemic. The lockdown which began
on March 25, 2020, deeply impacted
the media and entertainment industry,
especially with the suspension of all
production work. As the Central and
State Governments ease the lockdown
in a phased manner, the Government
of Maharashtra has, on the request of
various stakeholders, allowed
shooting of content for films, television
and ‘Over-the-Top’ platforms and
 INDUSLAW
April 2020 – June 2020
through a government resolution
dated May 30, 2020 issued the
‘Guiding Principles to restart Media
Entertainment Industry in
Maharashtra’ 117 (“May 30
Guidelines”).
All production related activities are
permitted to be carried on outside
containment zones and only within the
daily permissible timings prescribed
by the Government. The May 30
Guidelines are required to be adhered
to strictly and any failure to comply
will lead to suspension of activities.
OVERVIEW
The May 30 Guidelines lay down
detailed standard operating
procedures to be followed by the
producers, various members and
departments of the crew as well as
cast, while shooting. The May 30
Guidelines are 18 pages long and
detailed covering different aspects of
shoot. To summarize the May 30
Guidelines, we have provided a
subject wise snap shot of the same
below.
Education and Sensitization
The May 30 Guidelines require that all
the partners and employees involved
in production of content should be
educated and sensitized on preventive
measures for COVID-19. Sessions with
certified health and safety consultants
should be scheduled to educate all
stakeholders at various locations,
focusing on precautions, symptoms,
stages of infections, tests for infection
117Available at:
78
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and various preventive measures that
should be taken.
Social Distancing
The May 30 Guidelines require
ensuring social distancing by
minimizing physical contact,
maintaining a distance of minimum 6
feet and wearing of masks and gloves
by all persons on set, except for those
on screen. The May 30 Guidelines
advise using larger tents with portable
air conditioners instead of trailer vans
or motorhomes, for shooting. In case of
use of a trailer van, having more than
5 people in the trailer van should be
avoided. Lunch breaks should be
staggered to avoid gatherings.
The strength of the crew is required to
be reduced to 33% of the strength prior
to the outbreak of COVID-19. The
reduction in numbers does not apply
to the main cast, security personnel,
drivers, catering services, and
generator operator. Any employee
who is above the age of 65 or pregnant
or whose spouse is pregnant is not to
be allowed on the set.
The May 30 Guidelines mandate floor
markings according to the social
distancing norms and displaying
precautionary guidelines and
emergency helpline at strategic
locations. Minimum number of junior
artists and crew should be on the
shooting premises and the production
should minimize the use of props.
Elaborate and extravagant sequences
such as marriage, market or fight
sequences are not to be planned until
the threat of COVID-19 subsides.
https://www.maharashtra.gov.in/Site/Upload/Gov
ernment%20Resolutions/English/20200602124712892
3.pdf.
 INDUSLAW
April 2020 – June 2020
Identifying activities that can be
carried out remotely, including
casting, and executing them over
video calls, emails etc. is encouraged.
The May 30 Guidelines encourage
actors to get ready at their residence
and bring minimum staff to the
shooting premises, with all trials,
fittings and look test being carried out
at the residence of the artist.
No audience is to be allowed in the
shooting premises. In respect of non-
fiction shows, children below the age
of 10 years are not be allowed to
participate. For children above the age
of 10 years, only one acquaintance of
the child may be allowed to
accompany such child.
Sanitization and Personal Hygiene
The May 30 Guidelines provide that all
doors and windows should be kept
open for ventilation. All deliveries
should be handled outside office.
Proper and regular sanitization is to be
maintained including daily
fumigation, regular cleaning and
disinfection of all gears and equipment
by members of each department.
Sharing of tools should be minimized
and each crew member should be
provided his or her own tools. The
producer should provide minimum 3
washrooms which should be sanitized
every hour. Housekeeping staff should
be trained regularly.
The May 30 Guidelines mandate the
use of masks or face shields and hand
sanitizers. All crew members coming
to the set should wash their hands and
change their clothes in order to
maintain proper hygiene. PPE should
be worn by hair and make-up artists
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中文通讯
and other crew involved in activities
involving person-to-person contact.
Medical Facilities
An ambulance, a doctor and nurse are
required to be present on every set,
constantly monitoring the health of the
entire cast and crew. Every set should
have an oximeter. Every person
entering the shooting premises or set
should be monitored for symptoms of
COVID-19 and advised accordingly.
All cases with symptoms of COVID-19
should be reported to nearest local
authority or the collector. Every
shooting unit should maintain data of
personnel suffering from co-
morbidities like diabetes,
hypertension, cardiac issue, etc.
Aarogya Setu Application
The May 30 Guidelines mandate the
installing of Aarogya Setu application
on compatible devices owned by the
cast and crew, which is required to be
kept on, throughout the day.
Self-Declaration
All employees are required to submit a
self-declaration about any close
contact with a COVID-19 patient,
person returned from a foreign
country, and any symptoms of
COVID-19. In case the history suggests
any COVID-19 symptoms, the same is
required to be reported to the
concerned authority.
Alternate Lodging
The May 30 Guidelines require
alternate lodging to be provided to
house crew for the duration of the
shoot. The crew is to be provided with
accommodation in the premises, in
 INDUSLAW
April 2020 – June 2020
compliance with social distancing
norms. In the event accommodation
cannot be provided inside the studio
premises, then the production house
should arrange accommodation in
nearby facilities like hotels or housing
apartments. Such premises should be
used exclusively for the shooting crew.
In the event of accommodation near
the shooting premises, the production
house is required to make travel
arrangements to and from the studio
for the crew. In the event
accommodation is not possible in the
premise or nearby, or if employees
choose to stay at home, employees will
have to travel on their own, adhering
to the rules and regulations laid by the
authorities.
Domestic Travel
Travelling should be minimized and
any travelling should be in adherence
to the guidelines issued by the
Government of India or State
Government of Maharashtra. People
returning from a containment area
should monitor themselves for any
symptoms for 14 days. If they notice
any symptoms of COVID-19, they
should self-isolate themselves, and
inform their health care provide or
local public health department. All
necessary permissions required for
travelling should be sought from the
concerned authorities.
Handling of COVID-19 Positive
Cases
In the event any person in the shooting
premises is found positive for COVID-
19, that person should be isolated and
the studio should be vacated
immediately. Any person who had
118 Available at:
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中文通讯
been in contact with the person who is
COVID-19 positive should also be
isolated. All advisory issued by
competent authority are to be
followed. Studio should be fumigated
and sanitized extensively. Shooting
and other operations are to be halted
for 3 days and resumed only after
safety checks.
Permission for Shooting
Permission for shoots can be sought by
making an application to the
managing director of the Maharashtra
Film, Theatre, Cultural Development
Corporation, Dadasaheb Phalke
Chitranagari for shoots within
Mumbai and to the respective district
collectors for shoots outside Mumbai.
The Collector may seek information
from the local authority, basis which
the Collector may grant or deny
permission. Permission for the
shooting of any TV show shall be
procured by the respective
broadcasting company, which shall
also be responsible to ensure that all
artists and technicians take proper
health precautions. All permissions
required for shooting of films shall be
the responsibility of the film producer.
INDUSLAW VIEW
The Hindi film industry which is
primarily located in Mumbai has an
annual turnover of INR 49.5 billion 118
which comprises the major portion of
the revenues collected by the entire
Indian film industry. The nation-wide
lockdown had completely stalled all
production activity and caused huge
losses to the Indian film industry,
which we have discussed in detail in
our previous article titled ‘The Show
http://ficci.in/pressrelease-page.asp?nid=3667.
 INDUSLAW 中文通讯
April 2020 – June 2020

Must Go On – COVID-19 and After-A The Ministry of Information and

Media and Entertainment Sector Broadcasting (“MIB”) notified 119 the
Perspective’ in paragraph 9.1 above. ‘Policy Guidelines for Empanelment of
Therefore, this government resolution Social Media Platforms with the
permitting resumption of shoots will Bureau of Outreach and
come as relief to producers. Communication’ (“Policy”) on May
120

13, 2020. The Policy is aimed at

However, it is to be noted that at 18 improving the Government’s outreach
pages long, the May 30 Guidelines are to public by way of advertisements on
very onerous on producers. Though social media platforms.
taking precautions is indispensable to
prevent the spread of COVID-19, The Policy sets out the terms of
implementation of the May 30 empanelment and engagement of
Guidelines on shooting premises may social media platforms with the
not only be a practical challenge, but Bureau of Outreach and
will also mean incurring huge Communication (“BOC”), a nodal
expenses and micro-level diligences to organization which executes paid
be observed by producers. Several outreach campaigns through print,
activities still remain restricted and it electronic, outdoor, digital media etc.
may not be possible to shoot scenes for Ministries and Departments of the
that may necessarily violate social Government. The Policy also sets out
distancing. the terms of the relationship between
the BOC and its client Ministries/
Yet, this government resolution will Departments.
enable producers who are at the final
stages of completing the principal OVERVIEW
photography, or carrying out patch-
work shoots to complete their films. The Policy defines a ‘Social Media
Platform’ as a web based and mobile
Authors: Tanu Banerjee | Ishan Johri | based internet application that allows
Annupriya Agarwal the creation, access and exchange of
user generated content. The content on
Practice Area: Technology, Media and the social media platform may be in
Telecommunications the form of text, audio-visual,
graphics, animation or any other form
9.3 MIB ISSUES POLICY prescribed by the BOC from time to
GUIDELINES FOR time.
EMPANELMENT OF SOCIAL
MEDIA PLATFORMS FOR To be eligible for empanelment with
GOVERNMENT ADVERTISING the BOC, a social media platform must
meet the following requirements:
INTRODUCTION

119There appeared to be a lack of clarity on whether the to clarify this, who confirmed that the Policy has been
Policy is a draft policy or has it in fact been notified by notified by MIB and is in effect from May 13, 2020.
the MIB. The IndusLaw team spoke to the BOC officials 120 http://www.davp.nic.in/writereaddata/announce/

Adv12171352020.pdf.

81
 INDUSLAW
April 2020 – June 2020
(a) Operate under the same domain name
for a minimum of 6 months prior to
application for empanelment;
(b) Have a minimum of 25 million unique
users per month from within India;
(c) Have an online panel with
demonstrated credibility for booking
advertisement space/inventory; and
(d) Must not be blacklisted or be under a
period of suspension by any Ministry,
Department, agency or autonomous
body of the Government of India or the
Government of any State or UTs of
India.
In order to get empaneled with the
BOC, an eligible social media platform
is required to make an application to
the BOC in the prescribed format and
enter into an agreement with the BOC
(“Agreement”). The form of the
Agreement has been annexed with the
Policy.
The BOC will execute its outreach
campaigns by participating in the
bidding process of social media
platforms for buying advertisement
inventory and will determine the
relevant social media platform for its
campaign based on the target
audience, theme and content of
proposed activity and the budget and
duration of the campaign.
Inter se the client Ministry
Department and the BOC, the BOC
shall be responsible for preparing a
media plan within the indicated
budget, suggesting platforms and
expected deliverables, along with the
tentative cost. Advertisement
campaigns are based on auction of ad
inventory and the actual cost of a
中文通讯
campaign is determined only upon
completion of the campaign; however,
the Policy requires the relevant
Ministry or Department to place 100%
funds, basis estimated costs of the
campaign, with the BOC in advance.
This is to avoid any adverse impact on
the social media campaigns of a
Ministry or Department as result of
default in payment by another
Ministry or Department.
A social media platform engaged by
the BOC is required to appoint a point
of contact for communication with the
BOC. The empaneled social media
platform must maintain a real time
dashboard which shows the actual
quantified outcome of the campaign in
the form prescribed or approved by
the BOC, execution reports as well as
dated reports.
If a social media platform already
engaged by the BOC gets suspended
or blacklisted by a Ministry,
Department, agency or autonomous
body of Government of India, public
sector undertaking or any State
Government or UT, then it will be
suspended by the BOC till its
suspension/blacklisting is revoked.
The Policy is intended to be valid for a
period of 5 years.
KEY ISSUES
or
Social Media Platform based in India
As per the Policy, the BOC may give
preference to social media platforms
based in India as long as it does not
affect the desired outcome of a
campaign. However, the Policy does
not provide any clarification as to what
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 INDUSLAW
April 2020 – June 2020
constitutes a social media platform
“based in India”.
It may be noted that the ‘Policy
Guidelines and Criteria for
Empanelment and Rate Fixation for
Central Govt Advertisements on
Websites’ 121 , issued by the BOC on
June 01, 2016 states that “Only the
websites which are owned and operated by
companies that are incorporated in India
will be considered for empanelment.
However, websites owned by foreign
companies / origin may be eligible if such
websites have a wholly owned company
registered and operating in India, which
looks after their Indian advertisement
business.” Whether a similar inference
can be drawn for ‘Social Media
Platforms based in India’, will have to
be clarified by the BOC or the MIB.
Agreement between BOC and the
Social Media Platform
The form of the Agreement annexed to
the Policy appears to be biased in
favour of the BOC, and will have to be
negotiated by Social Media Platforms
to arrive at fair and reasonable
provisions for both parties.
(a) Clause I (5) of the Agreement requires
the social media platform to ensure
‘that their content is not anti-national
/obscene / indecent / antisocial / violative
of communal harmony and national
integrity etc., or deemed objectionable in
any form, or in violation of the extant
Cyber Laws of India (Section 67 of the IT
Act, 2000 of the Government of India and
any other provisions made from time-to-
time) Further, since the content on social
media platforms is user-based, the Vendor
undertakes to moderate/delete the content
121Available at:
http://www.davp.nic.in/writereaddata/announce/Int
ernet_Policy02052019.pdf.
83
中文通讯
if it is found to be anti-national / obscene /
indecent / antisocial / violative of
communal harmony and national integrity
etc., or in violation of the extant Cyber
Laws of India (Section 69 of the IT Act,
2000 of the Government of India and any
other provisions made from time-to-time).’
This clause is of particular concern
since it creates a contractual obligation
on the social media platform to
monitor, moderate and delete user
generated content to comply with the
wide and sweeping language used in
the clause. Terms such as ‘anti-
national’ and ‘anti-social’ are not
defined under the Agreement and are
also not used under the Information
Technology Act, 2000 (“IT Act”),
which creates offences only on specific
grounds of identity theft, cheating by
personation, violation of privacy,
cyber terrorism, transmission of
obscene materials and transmission of
material depicting children in sexually
explicit acts.
Moreover, social media platforms
have safe harbours as intermediaries
under Section 79 of the IT Act subject
to compliance with the requirements
set out therein and the Information
Technology (Intermediaries
Guidelines) Rules, 2011. In Shreya
Singhal v. Union of India122, the Supreme
Court read down Section 79(3) of the
IT Act to clarify that an intermediary
would be liable only if it fails to
remove or disable access to certain
material after receiving “actual
knowledge” i.e. a court order and/or a
notification by the appropriate
Government or its agency which must
strictly conform to the subject matters
122 (2015) 5 SCC 1.
 INDUSLAW
April 2020 – June 2020
laid down under Article 19(2) of the
Constitution of India. Social media
platforms being neutral platforms for
third parties to interact should not be
required to monitor material and
exercise their own judgement on
whether same is unlawful.
It appears that Clause I (5) of the
Agreement seeks to create an
obligation on social media platforms,
for regulation of user generated
content, which is wider and more
onerous than what is provided under
the IT Act.
(b) The Agreement can be terminated only
at the instance of the BOC. Social
media platforms do not have the right
to terminate or suspend the
Agreement even in case of default or
delay in the payment of the
consideration on the part of the BOC.
(c) The Agreement provides for dispute
resolution by a sole arbitrator to be
appointed by the BOC. This clause is
also contrary to the law as laid down
by the Supreme Court in Perkins
Eastman Architects DPC & Anr. v. HSCC
(India) Ltd 123 , holding that a party
cannot be vested with the unilateral
power to appoint a sole arbitrator and
constitute an arbitral tribunal.
INDUSLAW VIEW
The MIB has previously issued policy
guidelines for systematic execution of
advertising campaigns on print
media 124 , television channels 125 ,
123 2019 SCC Online SC 1517.
124 Available at:
http://www.boc.nic.in/Intr_guidline.html.
125 Available at:
http://davp.nic.in/writereaddata/announce/Adv1082
2952019.pdf.
126 Available at:
84
中文通讯
radio 126 , internet and websites 127 for
various Ministries and Departments of
the Government through the BOC.
With the issuance of this Policy, it
appears that Ministries and
Departments may now allocate a part
of their advertising budgets towards
advertisements on social media
platforms as well. This is a positive
step by the GoI and will certainly
benefit social media platforms,
especially at a time when advertising
spends on various platforms have
taken a substantial dip. Additionally, it
is also evident from the Policy that the
Government recognizes the influence
that social media platforms wield on
their users and intends to target these
users, especially youth, through its
outreach campaigns.
However, it may be noted that the
Policy has been notified without any
consultation on the draft with
stakeholders, primarily, social media
platforms.
Further, the Policy sketches out only
the broad requirements and procedure
for the empanelment of a social media
platform with the BOC for publishing
government advertisements. Several
provisions of the Policy as well as the
form of the Agreement are completely
biased in favour of the BOC. Finer
nuances of the terms of engagement of
social media platforms will have to be
further discussed, and fairer and more
reasonable terms of empanelment may
have to be negotiated between the
BOC and the relevant social media
https://mib.gov.in/sites/default/files/Pvt%20FM%20
Radio%20Policy_0.pdf;
http://www.davp.nic.in/writereaddata/announce/cm
_g_rate_card.pdf.
127 Available at:
http://www.davp.nic.in/writereaddata/announce/Int
ernet_Policy02052019.pdf.
 INDUSLAW
April 2020 – June 2020
platform based on the advertising
model, nature of campaigns etc.
Authors: Tanu Banerjee| Ishan Johri
|Annupriya Agarwal
Practice Area: Technology, Media &
Telecommunications
10. ENERGY, INFRASTRUCTURE AND
NATURAL RESOURCE
10.1 HIGHLIGHTS OF THE RELIEF
MEASURES TO THE POWER
DISTRIBUTION COMPANIES
AND CONTRACTORS
INTRODUCTION
The nation-wide lockdown earlier this
year due to COVID–19 had led to
approximately 25% decline in power
demand due to very low power offtake
from commercial and industrial
consumers– this has in turn led to
financial stress on the distribution
companies (“Discoms”) and the
backlog of tariff payments to power
generating and transmission
companies by the Discoms. The
payment defaults by Discoms can
potentially have a significant impact
on banks/NBFCs since a lot of project
finance facilities availed by the
generating and transmission
companies can become non-
performing assets (NPAs).
However, the GoI on May 14, 2020 has
announced certain steps to ease the
financial positions of the Discoms by
announcing a one-time liquidity
infusion of INR 90,000 Crores under
the Atmanirbhar Bharat Abhiyan
(“Government Package”) to enable
the Discoms to make payments to the
power generating and transmission
companies. Another step taken by the
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GoI to ease the issues faced by the
infrastructure sector is the relief
provided to contractors in the nature
of an INR 20,00,000 Crores
Government Package, which also
includes a 6 months extension to
contractors, without additional costs,
to perform their obligations under
various projects.
KEY ASPECTS OF THE RELIEF
MEASURES TO DISCOMS AND
CONTRACTORS
A brief summary of the relief measures
announced for the power sector is
discussed below:
INR 90,000 Crore liquidity infusion
for Discoms
(a) INR 90,000 Crores (“DISCOM Relief
Package”) is intended to be used by
the Discoms to clear their outstanding
dues of central public sector power
generation companies, transmission
companies, independent power
producers and renewable energy
generators - which is estimated to be
around INR 94,000 Crores. The
DISCOM Relief Package will be
infused (in the form of loans) by Power
Finance Corporation (“PFC”) and
Rural Electrification Corporation
(“REC”) who will in turn raise the
amount of about INR 90,000 Crores
from the market against the
receivables of the Discoms.
The DISCOM Relief Package will be
made available to the Discoms subject
to the Discoms drawing up loss-
reduction strategy. The Discoms will
have to have their loss-reduction
strategy approved by the relevant state
government. In the event of any non-
compliance by a Discom of the state
government approved loss-reduction
 INDUSLAW
April 2020 – June 2020
strategy after PFC/REC has
sanctioned the loan pursuant to the
DISCOM Relief Package, PFC and REC
will be entitled to recall the loan.
The GoI is in the process of drafting the
detailed scheme that will set out the
conditions on which loans will be
given to the Discoms by PFC and REC.
Further, the MoF also announced that
the central government owned power
generating companies will be required
to provide a rebate to Discoms subject
to such rebate being passed on by the
Discoms to the final consumers. Low
demand on the part of the industrial
users that pay the highest tariffs is a
matter of concern for the Discoms and
such rebates from the central
government owned power generating
companies will potentially help lift
some of the financial difficulties faced
by the Discoms and also held in
financial sustainability of various
industries taking power from the
Discoms. Additionally, the late
payment surcharge that Discoms pay
to power generators will be reduced
from 18% to 8.5% to 9%.
Discoms will also be allowed to defer
payment of fixed charges when power
is not drawn from Central governed
power generators; the same relaxation
may also be allowed for industrial
consumers subject to the states
deciding on such a policy. Further, the
Central government owned power
generators may offer a discount to the
extent of 20% to 25% on the cost of the
power supplied to the states during
the lockdown.
(b) Procedure for financing the loan: The
DISCOM Relief Package will be
released in the form of loans in 2 equal
tranches of INR 45,000 Crores each,
which shall be for a tenure of 10 to 15
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years. The first tranche of loan is
anticipated to be conditional on a state
government backed guarantee and
allocation of budget from the relevant
state government to clear
departmental dues for their respective
Discoms. Further, the state
governments will be required to draft
a mechanism by which subsidies are
provided to the consumers on their
fixed charge, by routing it through the
Discoms. The second tranche of loan is
proposed to be disbursed after the
Discoms procure evidence to
corroborate the initial obligations and
fulfilment of conditions at the time of
availing the loan under the first
tranche. The loans under the second
tranche will be subject to the collective
efforts of the Discoms and their
respective state government to tackle
losses which are attributable to several
factors including but not limited to
difficulty in undertaking any meter
reading exercises due to the lockdown,
dues owed to Discoms by government
departments, lack of subsidy flow to
consumers of certain categories by
state governments.
The DISCOM Relief Package is not
designed a one-time bailout package
(various similar relief packages have
been provided in the past and have
failed to make any difference to the
overall inefficiency of Discoms in
India) – the loans under the DISCOM
Relief Package are linked to reforms
including increasing digital payment
interfaces, prepaid metering in
government departments and making
action plans for loss reduction, and
this in a welcome step.
The DISCOM Relief Package comes at
a time when the government is looking
to amend the Electricity Act, 2003
 INDUSLAW
April 2020 – June 2020
(“Electricity Act”) to bring in further
reforms in the power sector and has
proposed a distribution reforms
scheme, tentatively named the Atal
Distribution System Improvement
Yojana (“Aditya Scheme”), to cut
electricity losses. The Aditya Scheme
envisages make Discoms viable by
switching to prepaid smart meters,
clearing their dues, continuous supply
of power, adopting models such as
privatising state-run Discoms and
promoting retail competition. A
bailout was expected in the Union
Budget for the fiscal year 2021 but has
been brought forward due to the
ongoing COVID-19 pandemic.
Hopefully, like the bailout, even the
reforms will be brought forward as the
Discoms have for far too long been
thorn sticking out in the power sector
and have single handedly been able to
pull back all the good work done in the
power sector over the years. This
should be the best time to force
reforms in the state run Discoms to
make them financially viable, reduce
the deficit and resolve the structural
issues with Discoms.
Relief to Contractors
The GoI under the Government
Package, has also announced that the
central agencies including but not
limited to the Indian Railways,
Ministry of Road Transport and
Highways, Central Public Works
Department, shall grant a 6 months’
extension period to all contractors for
completion of their work, achieving
intermediate milestones, completion
of construction work, delivery of
goods and/or services without any
associated penalties.
10.2
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To tackle cash flow issues, the
government authority (which is party
to the contract) will also be required to
partially release bank guarantee
(provided by the contractor as
performance guarantee) to the extent
the work has been completed by the
contractors.
Concession period in public private
partnership (PPP) projects has also
been extended by 6 months. This
blanket extension of 6 months will be
applicable to all contracts in the
infrastructure sector between central
government agencies and contractors
for provisions of goods and services
and will save contractors from
individually approaching the
government agencies to seek
extension.
This extension of time will allow
contractors 6 extra months to fulfil
their obligations and the extension in
the concession period means that a
concessionaire will now be able to run
the project for an additional period of
6 months before transferring it to the
government authority. However,
given the uncertainty with respect to
when normal functioning of
businesses will resume, if ever, to
match the pre COVID-19 estimates on
the basis of which these contracts and
concessions were entered into, it
would be ideal to review the
concession and the state of affairs after
3-4 months.
Authors: Sabrina Afroze | Srijita Jha
Practice Area: Energy, Infrastructure
and Natural Resource
HIGHLIGHTS OF THE
STRUCTURAL REFORMS TO
 INDUSLAW
April 2020 – June 2020
THE ENERGY AND
INFRASTRUCTURE SECTOR
UNDER THE ATMANIRBHAR
BHARAT ABHIYAN
INTRODUCTION
In a bid to stimulate and strengthen the
Indian economy amidst the
nationwide lockdown to contain the
coronavirus (Covid – 19) pandemic,
the GoI rolled out the Government
Package. The Government Package
was released in 5 tranches and consists
of targeted relief measures for various
sectors. In this newsalert, we have
discussed measures and reforms
announced for the energy and
infrastructure sector. The fourth
tranche of the Government Package,
which was released on May 16, 2020,
primarily dealt with structural reforms
relating to the following verticals
within the energy and infrastructure
sector: (a) coal; (b) power; (c) civil
aviation; (d) minerals; (e) social
infrastructure, and (f) nuclear energy.
The intent behind these reforms is to
increase efficiency in these verticals
and attract private sector investments
in these verticals.
KEY ASPECTS OF THE
STRUCTURAL REFORMS TO THE
ENERGY AND INFRASTRUCTURE
SECTOR
A brief outline of the relief measures
announced for the energy and
infrastructure sectors is discussed
below.
Coal
The Mineral Laws (Amendment) Act,
2020, promulgated as an ordinance in
January, 2020, was passed by the
Parliament to amend the Coal Mines
(Special Provisions) Act, 2015 and the
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Mines and Minerals (Development
and Regulation) Act, 1957 to ease
restrictions on end use and to relax the
eligibility criteria for participating in
coal auctions. This was primarily done
to kickstart the commercial coal
mining auction process. To attract
private investment in the coal sector,
the GoI has introduced the following
measures:
(a) To reduce dependency on import of
coal and increase self-reliance in coal
production, the GoI proposes to allow
private players in the coal sector, and
plans to introduce competition,
transparency and private sector
participation in the coal sector through
a revenue sharing mechanism.
Further, the Central Government also
proposes to liberalise entry norms for
private players and offer nearly 50
blocks immediately for allocation. The
liberalisation of entry norms would
see the removal of the eligibility
conditions apart from upfront
payment with a ceiling. The GoI
proposal envisages setting up an
exploration-cum-production regime
for partially explored blocks, as
opposed to the prevailing provision of
auction of only fully-explored coal
blocks. This is expected to allow and
incentivise private sector participation
in exploration. Additionally, the GoI
has decided to grant incentives by
means of a rebate in revenue share if
the production occurs earlier than
scheduled. The Cabinet Committee on
Economic Affairs has approved the
adoption of methodology for auction
of coal and lignite mines/blocks for
sale of coal / lignite on revenue
sharing basis, and has increased the
tenure of coking coal linkage.
 INDUSLAW
April 2020 – June 2020
(b) To create the required infrastructure to
support coal mining, the Central
Government has also proposed to
infuse INR 50,000 Crores for the
evacuation of Coal India Limited’s
target of 1 billion tonnes of coal
production by 2023-24 as well as coal
to be produced from private blocks.
This investment amount includes INR
18,000 Crores worth of investment in
mechanised transfer of coal from
mines to railway sidings. The Central
Government is also planning to
incentivise coal gasification and
liquefaction through granting rebate in
revenue sharing. Both these measures
will help in reducing environmental
impact.
(c) The extraction rights of coal bed
methane are proposed to be auctioned
to private participants from Coal India
Limited’s mines. Additionally, the GoI
also proposes to adopt measures to
ease business operations in the coal
sector – such as mining plan
simplification, which will allow for
automatic 40% increase in annual
production.
(d) To benefit the consumers of Coal India
Limited, the GoI also plans to provide
relief worth INR 50,000 Crores in
relation to concessions in commercial
terms. The proposed measures include
reduction of reserve price in auctions
for non-power consumers, easing of
credit terms, and enhancement of the
lifting period.
Power
In addition to the measures announced
for easing the liquidity pressure on
DISCOMs on May 14, 2020, the Central
Government, with an aim to cut
electricity losses below 12% and to
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revive the power sector, has
introduced the following reforms:
(a) Introduction of a new tariff policy:
The GoI intends to roll out a new tariff
policy (“Tariff Policy”) which will
address the following:
(i) Consumer rights: The Tariff
Policy will ensure that the
inefficiencies faced by DISCOMs
do not affect the consumers and
that consumers have adequate
rights. Further, the Tariff Policy
will also prescribe standards of
service and associated penalties
for the DISCOMs. The Tariff
Policy will include provisions to
ensure adequate power for
consumers and penalise
DISCOMs for load-shedding.
(ii) Promotion of the industry:
Progressive reduction in cross-
subsidies would be a
fundamental aspect of the Tariff
Policy. Further, it would also
provide for time bound grant of
open access. In order to guarantee
transparency, the selection of
generation and transmission
project developers would happen
on a competitive basis.
Sustainability of the sector:
The Tariff Policy would aim to provide
better payment security to the
generating companies. Introduction of
direct benefit transfer for electricity
subsidy and the mandatory usage of
smart prepaid meters are also in
consideration which will be
incorporated in the Tariff Policy.
Further, provisions of creation of
“regulatory assets” will be excluded
from the Tariff Policy.
 INDUSLAW
April 2020 – June 2020
(b) Privatisation of DISCOMs in UTs
The financial distress faced by
DISCOMS and consequent payment
delays have had a negative impact on
the investment sentiment in the power
sector. The bad financial condition of
DISCOMs adversely affects their
ability to buy power for supply, and
the ability to invest in improving the
existing distribution infrastructure,
consequently impacting electricity
distribution quality - past measures
such as the Ujwal DISCOM Assurance
Yojana have not been very successful
in fixing the underlying issues faced
by DISCOMs across India.
To undertake structural reforms in
functioning of DISCOMs, the Ministry
of Power has been considering the
privatisation of DISCOMs across the
country. Privatisation of DISCOMs has
been tested in some places in India,
such as Delhi, Mumbai, Ahmedabad
and Odisha. Under the Atmanirbhar
Bharat Abhiyan, the Central
Government has proposed to privatise
the DISCOMs in all of India’s UTs.
DISCOMs in UTs are administered by
the Central Government, whereas the
ones in the States are not. Accordingly,
while the GoI will privatise DISCOMs
in the UTs, it is exploring the option of
public-private partnerships (“PPP”)
for DISCOMs in States.
It is anticipated that the privatisation
of DISCOMs will be a significant step
towards resolving the structural issues
faced by the power sector, and is
expected to lead to better service to
consumers and is also likely to bring
about improvement in operational and
financial efficiency in power
distribution.
Minerals
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In relation to the minerals sector, the
following measures were announced:
(a) Private investments in the mineral
sector
The GoI has introduced structural
reforms aimed at the mineral sector to
boost growth, employment and
promote use of state-of-the-art
technology. These reforms are
intended to bring about greater private
investments in the sector and are
expected to benefit companies
involved in the business associated
with aluminium, iron ore and
limestone.
Primarily, the GoI has planned to
introduce a seamless composite
exploration-cum-mining-cum-
production regime - under the
proposed new regime, 500 mining
blocks would be offered through an
open and transparent auction process.
Further, to enhance the
competitiveness of the aluminium
sector, the Central Government has
resolved to conduct joint auctions of
bauxite and coal mineral blocks.
(b) Policy reforms
The distinction between captive and
non-captive mines is set to be removed
to permit the transfer of mining leases
and sale of excess unused minerals –
this is a very welcome step which is
expected to cause better efficiency in
mining and production. The Ministry
of Mines has been tasked with the
responsibility to develop a mineral
index for different minerals. Further,
the stamp duty payable at the time of
award of mining leases is proposed to
be rationalised.
Nuclear Energy
 INDUSLAW
April 2020 – June 2020
Under the Government Package, the
Centre intends to establish a research
reactor under the PPP model for the
production of medical isotopes. The
Central Government also intends to
establish facilities to use irradiation
technology for food preservation,
which would also be implemented
under the PPP model. Additionally,
the Central Government intends to set
up Technology Development-cum-
Incubation Centres to foster synergy
between research facilities and tech-
entrepreneurs.
Civil Aviation
The civil aviation sector has been one
of the hardest hit sectors by the
ongoing coronavirus pandemic and
the nationwide lockdown.
Consequently, the airline revenues
have plummeted and the sector is
unable to service its fixed costs and
other liabilities. Further, despite falling
aviation turbine fuel prices
internationally, high taxes on fuel have
been a pain point for airlines. As a
response to the crisis in the aviation
sector, the Central Government has
proposed the following measures to
revive the sector:
(a) Efficient airspace management
Currently, only 60% of the Indian air
space is available for usage by the civil
aviation sector. Consequently, airlines
have been forced to ply on longer
routes. Since 2014, the Airports
Authority of India (“AAI”) had
recommended the flexible usage of
airspace as a measure to promote
sustainability. Subsequently, the
Ministry of Civil Aviation has also
espoused this view.
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The restrictions on the utilisation of
Indian air space are proposed to be
eased in order to make civilian flying
more efficient. By encouraging
efficient air space management for
civil aviation, the Central Government
intends to bring about optimal
utilisation of the airspace and a total
benefit of about INR 1,000 Crores per
year for the aviation sector. This
measure is also expected to have a
positive impact on the environment
and reduce fuel usage and flight time -
it is anticipated that subsequent cost
benefits will trickle down to
consumers.
(b) More airports through PPP
The GoI intends to develop world-
class airports in India under PPP in
three rounds – adoption of PPP-model
for more airports will enable AAI to
develop smaller airports.
Under the first round, which is already
underway, the AAI had awarded 3
airports out of 6 bids for operation and
maintenance on a PPP basis. In this
first round, the annual revenue is
expected to be INR 1,000 Crores per
year and AAI is also expected to
receive a down payment of INR 2,300
Crores.
With regard to the second round, the
GoI has identified 6 more airports. The
bid process for the second round is
slated to commence immediately. The
Central Government expects that
additional investment by private
players will gather around INR 13,000
Crores. Another 6 airports will be put
out for the third round of bidding - the
announcement from the Central
Government does not mention the
 INDUSLAW
April 2020 – June 2020
names of the identified cities for any of
these rounds.
(c) Making India a hub for MRO
The aircraft maintenance, repair and
overhaul (“MRO”) industry, which
forms a core component of the aviation
ecosystem, was in focus in the Union
Budget. India has a limited MRO
industry, which has been
disadvantaged by the fact that Indian
airlines usually avail MRO services
from overseas players.
As a measure to uplift the domestic
MRO industry, the Central
Government has promised to take
steps to position India as a hub for
MRO activities. The Central
Government has rationalised the tax
regime in respect of MRO. The
Government anticipates that aircraft
component repair and airframe
maintenance segment, which is worth
INR 800 Crores is expected to increase
to INR 2,000 Crores in the next 3 years.
The Government anticipates that
convergence between the defence
sector and the civil MROs will create
economies of scale. If India becomes a
hub for MRO activities, it will result in
savings of precious foreign exchange
and will also enable Indian airlines to
service their aircraft locally.
Social Infrastructure
To boost private sector investments in
the social infrastructure projects, the
GoI has allocated INR 8,100 Crores.
The Central Government will enhance
the quantum of Viability Gap Funding
(“VGF”) up to 30% each of the total
project cost as VGF by the Centre and
State/Statutory Bodies in respect of
social infrastructure projects. For other
sectors, VGF support of 20% each from
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Central and States/Statutory Bodies
shall continue.
Apart from the measures across
sectors mentioned above, the Central
Government also proposes to
introduce incentive schemes for
promotion of new ‘champion sectors’
such as solar PV manufacturing and
advanced cell battery storage.
Authors: Kush Saggi | Ishan Javid
Practice Area: Energy, Infrastructure
and Natural Resource
10.3 HIGHLIGHTS OF THE
ELECTRICITY (AMENDMENT)
BILL, 2020
INTRODUCTION
The Electricity Act was enacted to
consolidate the electricity laws in
India. While the Electricity Act
facilitated significant private
investments, market development,
and adoption of transparent tariff
mechanism etc., the power sector has
been facing various developmental
hurdles for some time. Consequently,
to address various issues which have
been highlighted by the industry and
to further reform the power sector, the
Ministry of Power (“MoP”),
Government of India, released the
draft Electricity (Amendment) Bill,
2020 (“Amendment Bill”) on April 17,
2020 to amend the Electricity Act. The
MoP had requested the stakeholders to
provide their comments and
suggestions on the Amendment Bill
within 21 days from the date of release
of the Amendment Bill (i.e. by or
before May 08, 2020).
KEY AMENDMENTS PROPOSED
TO THE ELECTRICITY ACT
 INDUSLAW
April 2020 – June 2020
A summary of the key proposed
amendments is set out below.
Improving Enforcement of Contracts
(a) Establishment of the Electricity
Contract Enforcement Authority
(“ECEA”):
While various provisions of the
Electricity Act relate to the sale and
purchase of electricity, there are no
specific provisions existing in the
Electricity Act dealing with the issues
under power purchase agreements
(“PPAs”) executed for such sale and
purchase of electricity or contracts
relating to transmission. In order to
improve enforceability of PPAs and
contracts relating to transmission, and
to ensure time bound adjudication of
disputes under PPAs/ transmission
related contracts, the Amendment Bill
proposes to establish the ECEA to
adjudicate upon the matters regarding
specific performance of:
(i) PPAs between a generating
company and a licensee or
between licensees; and
(ii) contracts related to transmission
of electricity executed between a
generating company and a
licensee or between licensees.
ECEA is proposed to be the sole
adjudicating authority with original
jurisdiction over enforcement of
performance obligations under PPAs/
contracts relating to sale, purchase and
transmission of electricity to the
exclusion of the Appropriate
Commission , whose jurisdiction is
128
128 Under the Electricity Act, the “Appropriate
Commission” is defined to mean the Central Regulatory
Commission referred to in sub-section (1) of Section 76
of the Electricity Act or the State Regulatory Commission
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proposed to be clearly limited to
determination of tariff or any other
dispute regarding tariff. According to
the MoP, the ECEA is required to
dispose of the matter within 120 days
from the date of its receipt. Under the
Amendment Bill, it is proposed that
the orders of ECEA will be executed in
the same manner as in the case of a
decree of civil court. Further, an appeal
against the orders of ECEA will be
heard by the Appellate Tribunal for
Electricity (“APTEL”).
It appears that if the Amendment Bill
is enacted, agreements for sale,
purchase and transmission of
electricity involving a licensee cannot
provide for arbitration (which is
generally considered as acceptable
terms to the international investor
community).
(b) Payment Security Mechanism for
Scheduling of Electricity: A robust
system to enforce compliance with
payment security mechanism has been
a major pain point for the power
industry and has led to a huge pool of
unpaid dues to generators – this has
caused a lot of stress in the sector. The
Amendment Bill provides that “no
electricity shall be scheduled or dispatched
under such contract unless adequate
security of payment as agreed upon by the
parties to the contract, has been provided”.
The dispatch of electricity is being
undertaken by the load dispatch center
through the process of scheduling - the
Amendment Bill proposes to empower
the load dispatch centers to administer
the establishment of adequate
payment security mechanism before
scheduling dispatch of electricity as
referred to in Section 82 of the Electricity Act or the Joint
Commission referred to in Section 83 of the Electricity
Act, as the case may be.
 INDUSLAW
April 2020 – June 2020
per the relevant contracts129. Creation
of such a payment security mechanism
is proposed to be made mandatory
keeping in view the sanctity of
contracts, unless it is waived by the
parties to the contract themselves.
Promotion of Renewable Energy and
Hydro Power Sector
The Amendment Bill proposes that the
Central Government (in consultation
with the State Government) will
prepare and notify, from time to time,
a National Renewable Energy Policy
(“NRE Policy”). The formulation and
notification of the NRE Policy is
intended to promote the generation of
electricity from renewable sources of
energy. The Amendment Bill
proposed a minimum fixed percentage
(as prescribed by the Central
Government) of electricity from
renewable and hydro sources of
energy should be purchased –
specifically, the proposed amendment
to Section 86(1)(e) of the Electricity Act
makes it mandatory for State
Commissions to follow directions
given in NRE Policy for prescribing a
minimum percentage of purchase of
electricity from renewable and hydro
sources of energy. Further, as hydro
power has been recognized as the
renewable source of energy, the
Amendment Bill further proposes to
expand the scope of renewable power
purchase obligations to include hydro
sources.
Tariff and Cross Subsidy
129In this context we should highlight that recently, the
MoP had issued direction to Load Dispatch Centres to
ensure opening of letter of credit for dispatching and
scheduling of the electricity. However, the DISCOMs of
Andhra Pradesh had challenged the legality of the order
before the High Court and one of the grounds for
challenge was locus standi of the MoP in interfering in
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In respect of the retail tariff, the
Amendment Bill seeks to ensure that
such retail tariff is determined by the
Appropriate Commission to reflect the
actual cost or fair cost of the power
which is to be supplied in order to
ensure financial health of the
distribution companies. In order to
achieve this, the Amendment Bill
provides that the Appropriate
Commission should set the tariff for
the retail sale of electricity without
accounting for any subsidy, which, if
any, under Section 65 of the Electricity
Act, should be provided by the
relevant government directly to the
consumer. As per the Amendment Bill,
it is proposed that the tariff should
reflect the cost of the supply of
electricity and reduces the cross-
subsidies levied in the manner
provided under the tariff policy.
Open Access
Under the Electricity Act, open access
can be granted to a consumer on the
payment of surcharge and wheeling
charges as determined by the relevant
State Commission 130 . However, such
charges do not include charges for
intra-state transmission and inter-state
transmission of power. In view of this,
the Amendment Bill proposes to add
such transmission charges, wherever
applicable, to the existing charges (i.e.
surcharge and wheeling charges).
Further, it is proposed under the
Amendment Bill that open access
surcharge and cross-subsidies will be
“progressively reduced” by the State
the agreement between a Distribution Licensee and a
Generating Company.
130 Under the Electricity Act, a “State Commission” is
defined to mean the State Electricity Regulatory
Commission constituted under sub-section (1) of Section
82 of the Electricity Act and includes a Joint Commission
constituted under sub-section (1) of Section 83 of the
Electricity Act.
 INDUSLAW
April 2020 – June 2020
Commission in the manner provided
in the tariff policy - Section 42 of the
Electricity Act envisaged reduction in
cross subsidy as per discretion of the
relevant State Commission, however,
the Amendment Bill seek to take away
discretion of the State Commission for
determination of cross subsidy and
post amendment the State
Commission will be bound to follow
the mandate of the Central
Government.
The Distribution sub- licensee and
Franchisee
The Amendment Bill proposes that
distribution licensees, with the
permission of the relevant State
Commission, can recognize and
authorize a person as “distribution
sub-licensee” (distinct from the
“franchisee” model already available
under the Electricity Act) to distribute
electricity on its behalf in a particular
area within its area of supply -
however, the original distribution
licensee will remain the licensee and
will ultimately be responsible for
ensuring the quality of the distribution
of electricity in its area of supply. It is
also proposed that such distribution
sub-licensee is not required to obtain a
separate license under Section 14 of the
Electricity Act from the relevant State
Commission.
Enhancement of the Regulatory
Framework/ Ensuring Better
Compliance
Easing the process for appointment of
members of regulatory and
adjudicatory bodies: Under the
existing provisions of the Electricity
131Under the Electricity Act, a “Central Commission”
is defined to mean the Central Electricity Regulatory
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Act, there are multiple selection
committees which are required to be
constituted for the appointment of (a)
members of the APTEL, (b) the
chairperson and members of Central
Commission,131 and (c) the members of
State Commission. The Amendment
Bill proposes to streamline the
appointment process by having a
single selection committee for the
appointment of (a) members of the
APTEL, and (b) chairperson and
members of ECEA, Central
Commission, State Commission and
Joint Commissions. Further, the
Amendment Bill also proposes
uniform qualifications for the
appointment of chairperson and
members of Central Commission and
State Commissions.
(a) Increasing the strength of APTEL:
The Amendment Bill proposes to
increase the number of APTEL
members to seven from three, in
addition to the chairperson to enable
speedy adjudication and disposal of
matters which are filed before the
APTEL.
(b) Increase in penalties for non-
compliance: Penalties under Section
142 and Section 146 of the Electricity
Act are proposed to be increased
through the Amendment Bill to ensure
better compliance with the provisions
of the Electricity Act.
(c) Penalty for failure to comply with the
Renewable Purchase Obligation
(RPO): In what could be a major boost
to the renewables sector, for non-
compliance with the renewable and
hydro power purchase obligation, the
Amendment Bill proposed a penalty of
Commission referred to in sub-section (1) of Section 76
of the Electricity Act.
 INDUSLAW
April 2020 – June 2020
INR 0.50/kWh for the shortfall in
purchase in the first year of default,
and if such default continues for the
second successive year, then the
penalty is proposed to be increased to
INR 1 /kWh and thereafter INR
2/kWh.
Other material amendments
proposed in the Amendment Bill
(a) In view of the emerging requirement
to regulate the cross-border
transactions of electricity with other
countries, the Amendment Bill
proposes that the Central Government
should be empowered to oversee and
prescribe rules and guidelines for cross
border electricity transactions.
(b) To address a situation where there are
vacancies in any of the State
Commission and on account of such
vacancies any State Commission is
unable to discharge its functions, the
Amendment Bill proposes that Central
Government may, in consultation with
the relevant State Government, entrust
functions of such State Commission to
any other State Commission or Joint
Commission, as it deems fit.
Section 63 of the Electricity Act
provides for adoption of tariff by an
Appropriate Commission if such tariff
was determined through transparent
bidding process. However, the
timelines in which such tariff should
be adopted has not been provided in
the Electricity Act. The Amendment
Bill proposes to set the timelines for
such adoption of tariff (i.e. within 60
days from the date of receipt of
application for adoption of tariff by the
Appropriate Commission). The
Amendment Bill further proposes that
in the event the tariff is not adopted
within such period (i.e. 60 days), then
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such tariff will be deemed to have been
adopted by the Appropriate
Commission.
Authors: Avirup Nag | Kush Saggi
Practice Area: Energy, Infrastructure
and Natural Resource
11. LITIGATION & DISPUTE
RESOLUTION
11.1 LIMITATION RE FOREIGN
DECREES – INDIA COMES AT
PAR
INTRODUCTION
Even after pursuing a legal battle for
years and obtaining a decree from the
court, parties are faced with yet
another task- enforcement of the
decree. This task becomes all the more
herculean when it involves a party
seeking to invoke the Indian courts’
jurisdiction for the purposes of
enforcement of a decree passed by a
foreign court. The first and foremost
issue that would naturally arise for
consideration while planning such
litigation strategy is - when to
approach the executing forum?
With increasingly fading boundaries,
there has been a sharp rise in cases
where Indian parties are involved in
cross border transactions. This has led
to a corresponding increase in the
number of disputes and therefore
more foreign decrees are being sought
to be enforced in Indian courts. Under
Indian Law, foreign decrees passed by
 INDUSLAW
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the courts of reciprocating territories 132
are to be enforced in terms of Section
44-A of the Code of Civil Procedure,
1908 (“Code”).
Despite the existence of an express
provision, there has been considerable
uncertainty and in fact, contrary views
have been taken by the High Courts in
India regarding the period of
limitation that ought to be applicable
to matters pertaining to enforcement
of a foreign decree. The Supreme
Court of India, noticing this
uncertainty and variance, has sought
to finally clarify the position in the
Bank of Baroda vs. Kotak Mahindra Bank
Limited133 (“Bank of Baroda case”). In
this article, we seek to discuss the law
relating to ascertainment of period of
limitation for seeking enforcement of a
foreign decree in India.
LAW OF LIMITATION FOR
SEEKING ENFORCEMENT OF A
FOREIGN DECREE IN INDIA –
POSITION IN INDIA TILL DATE
Courts in India have consistently
considered the law of limitation as a
procedural law.134 It may be noted that
earlier, most common law jurisdictions
also expounded the same view, that is,
the law of limitation is procedural and
not substantive. It is for this reason
that the law of the country where a
decree is sought to be enforced
(“Forum Country”) was applicable.
In India, while this position has been
consistent, the issue that arose before
the various High Courts was whether
Article 136 or Article 137 of Schedule I
132 Explanation 1 of Section 44-A of the Code provides
that the Central Government may, declare any country
or territory outside India by notification in the Official
Gazette to be a ‘reciprocating territory’.
133 Civil Appeal No.2175 of 2020.
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of the Limitation Act, 1963
(“Limitation Act”), that is, 12 years or
3 years respectively, would be
applicable. This was, obviously,
without regard to the limitation period
which may be provided for in the
country where the decree was passed
(“Cause Country”).
On one hand, India has a series of cases
such as Sheik Ali v. Sheik Mohamed,
wherein the Madras High Court has
taken the view that even though
Section 44-A of the Code makes the
procedure for execution of Indian
decrees equally applicable to
execution of foreign decrees, Article
136 of the Act cannot be applicable.
Therefore, it was held that the only
applicable provision will be Article 137
of the Act, that is, the period of
limitation will be 3 years from the date
on which the right to apply accrues.
However, on the other hand, there is a
series of cases such as Lakhpat Rai
Sharma v. Atma Singh, wherein the
Punjab & Haryana High Court took
the view that Section 44-A of the Code
treats a foreign decree as an Indian
decree, for all purposes. Therefore, it
was observed that Article 136 of the
Act will be applicable, that is, twelve
years from the date on which the right
to apply accrues. The common origin
for both the above line of decisions is
that the law of limitation, in India, is
interpreted as a procedural law.
However, the laws across the globe,
including common law nations have
been slowly moving away from this
concept. In fact, the Law Commission
134BK Education Services Private Limited v. Parag Gupta and
Associates, Civil Appeal No. 23988 of 2017; NNR Global
Logistics (Shanghai) Co. Ltd. v. Aargus Global Logistics Pvt.
Ltd., OMP No. 61 of 2012.
 INDUSLAW
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of India (“LCI”) in its 193rd Report
(“Report”), itself, took note that the
position in India with regard to the
application of limitation period for
enforcement of a foreign decree is
contrary to the position in most
commonwealth countries which
considers the law of limitation as
substantive law.
In the Report, the LCI recommended
an amendment to provide that in
respect of decrees passed in
reciprocating foreign countries, which
are sought to be enforced in an Indian
Court, the law of limitation as
prevalent in the Cause Country would
apply.
LAW OF LIMITATION FOR
SEEKING ENFORCEMENT OF A
FOREIGN DECREE- POSITION
ABROAD
As noted above, the countries that
follow civil law have considered
limitation to be substantive law and
therefore, when it comes to enforcing a
foreign decree, they have applied the
law of the Cause Country. Over time,
even common law countries have been
moving towards this concept and a
harmony is being evolved globally
that limitation is a matter of
substantive law.
Below are examples of certain
common law as well as civil law
jurisdictions and their respective laws
that govern the issue of limitation qua
enforcement of foreign decrees in their
respective jurisdictions.
United Kingdom
135 Section 1.
136 [1991]HCA 56.
137 Section 5, Choice of Law (Limitation Periods) Act
1993.
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In the United Kingdom, the Foreign
Limitation Periods Act, 1984 changed
the erstwhile position that the law of
limitation is procedural and provides
that the law of limitation of the Cause
Country shall apply to proceedings
relating to enforcement of foreign
decrees.135
Australia
Various states of Australia such as
Victoria, New South Wales and
Queensland, among others, have
enacted the respective Choice of Law
(Limitation Periods) Act, 1993. The
statute was enacted by Australian
states in acceptance of the minority
view taken in the case of Mc Kain Vs.
RW Miller & Company (SA) Pty Ltd.136 It
provides that the limitation law of the
Cause Country is to be regarded as
part of the substantive law and
therefore applied by the court.137
United States of America
Several States in the United States of
America have adopted the Uniform
Conflict of Laws Limitation Act, 1982,
which provides that if a claim is
substantively based on the law of any
other state, then the limitation period
of that state would apply.138
BANK OF BARODA CASE
Until recently, the law of limitation
was considered as procedural in
nature thereby leading to the
consequent uncertainty in law, in
India. However, the above position
has undergone a change recently as the
Supreme Court in the Bank of Baroda
138Section 2, Uniform Conflict of Laws Limitation Act,
1982.
 INDUSLAW
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case, while dealing with an application
seeking enforcement of a decree
passed by the High Court of Justice,
Queens Bench, Divisional Commercial
Court of London (“London Court”)
held that the law of limitation is
substantive, rather than procedural
law.
The Supreme Court was faced with the
issue of an application for execution of
a foreign decree, under Section 44-A of
the Code, after almost 14 years from
the date when the decree was passed
by the London Court. Both the courts
below were of the view that limitation
being a procedural law, Article 136 of
the Limitation Act, that is, a limitation
period of 12 years ought to be
applicable from the date on which the
foreign decree was passed.
The Supreme Court, after clarifying
that Section 44-A of the Code is merely
an enabling provision and does not
give rise to a fresh cause of action to
execute a foreign decree, proceeded to
delve into the issue of whether
limitation ought to be an issue of
procedural or substantive law. To aid
its finding that limitation can no longer
be considered as procedural law, the
Supreme Court referred to the
evolution of the law in United
Kingdom as well as USA and further
took support of the Report.
Further, the Supreme Court, after
discussing various academic texts,
gave credence to the evolution of the
law across the world and therefore
affirmed the view that the law that
governs the validity of a contract or
decides a parties rights and liabilities
arising out of a contract, ought to be
the law that governs when those rights
stand extinguished. In other words,
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unless there is an express provision in
the Forum Country pertaining to the
limitation period regarding
enforcement of a foreign decree, it is
the law of the Cause Country that
ought to govern the law of limitation.
Additionally, the Supreme Court also
held that the limitation period
prescribed under Article 136 of the
Limitation Act only deals with decrees
passed by Indian courts and the
wordings of the said provision do not
extend to foreign decrees.
Furthermore, the Supreme Court held
that the language is imperative as the
legislature at the time of enactment of
the Act in 1963, was deemed to be
aware of Section 44-A of the Code.
Despite the same, it did not expressly
make Article 136 of the Code
applicable to foreign decrees.
In view of its analysis, the Supreme
Court laid down two principles to
determine the limitation period for
enforcement of foreign decrees, that is,
firstly, where no step has been taken in
the Cause Country for enforcement,
the limitation period will commence
from the date on which the decree was
passed and the applicable law of
limitation shall be that of the Cause
Country.
Secondly, in cases where a party has
sought part-enforcement of a decree in
the Cause Country itself and thereafter
approached an Indian court for
enforcement of the remainder of the
decree, the period of limitation will
commence from the conclusion of the
execution proceeding in the Cause
Country and the applicable law will, in
view of the absence of any other
provision in the Limitation Act, be the
 INDUSLAW
April 2020 – June 2020
residual provision, that is, Article 137
of the Limitation Act.
The Supreme Court also took note that,
if the law of limitation in India would
have continued to be considered as
procedural law, it would have
continued to create incongruous
situations where parties which would
have lost their remedy to execute a
decree in the courts of the Cause
Country, due to expiry of the
limitation period, would still be
permitted to seek execution of the said
decree in an Indian Court- which is a
form of ‘forum shopping’. The
judgment now rectifies this error and
aims to rule out any such eventualities.
INDUSLAW VIEW
There is a catena of decisions of the
Supreme Court, including three Judge
Bench decisions, which have
consistently upheld the general
position that the law of limitation is
procedural and not substantive law.
While the Bank of Baroda case settles
the position that in cases of
enforcement of foreign decrees, the
law of limitation is substantive, it also
proceeds to make observations that the
aforesaid general position of law is due
for a change. The impact of this
decision is far reaching as up until now
the evolution of Indian jurisprudence
has been on the basis that the law of
limitation is procedural.
For instance, foreign awards are
deemed to be enforced as decrees
passed in India and therefore the
period of limitation to seek its
enforcement is governed by Article 136
of the Limitation Act. However, it
appears that the principles laid down
in the Bank of Baroda case may extend
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to foreign awards as well.
Additionally, when dealing with
interpretation of statutes, the courts
have repeatedly held that the law of
limitation, being procedural in nature,
ought to be applied with retrospective
effect. This understanding has been
applied even to cases under the IBC.
However, in view of the Bank of
Baroda case it remains to be seen
whether, in the honest attempt to bring
India at par with the international best
practices, has the Supreme Court
tipped the proverbial domino which
may now require a re-look at
innumerable decisions that have been
based on the erstwhile position that
the law of limitation is procedural. In
view thereof, it is likely that a larger
bench may need to clarify the position
whether, under the general law, the
law of limitation is to be considered as
a procedural or substantive.
Notwithstanding the above, it is
laudable that the Supreme Court has
taken the commercial realities and
global best practices into consideration
and brought the Indian law in sync
with foreign jurisdictions. The intent of
the Supreme Court is evident that it is
working towards creating a
commercially sound and a globally
friendly legal framework. Since India
is amongst the fastest growing
economies and a sought after FDI
destination, such steps are vital and
the legal ecosystem in India must
continue to evolve with other major
economies across the globe.
Authors: Padmaja Kaul | Varun
Khanna | Aman Chaudhary
Practice Area: Litigation and Dispute
Resolution
 INDUSLAW
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11.2 POWERS OF THE COURT
TRANSCENDS WHAT MEETS
THE EYE: SECTION 37 OF THE
ARBITRATION AND
CONCILIATION ACT, 1996
INTRODUCTION
As obvious as it is, one of the keys
objects behind enactment of the
Arbitration and Conciliation Act, 1996
(“Arbitration Act”) was to minimize
the supervisory role of courts in the
arbitral process. For the said reason,
the scope of powers of a ‘Court’ under
Sections 34 of the Act while dealing
with challenges to an arbitral award
were kept limited.
A party further aggrieved by an order
passed by a ‘Court’ under Section 34
has the right to appeal under Section
37 of the Arbitration Act. The Hon’ble
Delhi High Court, in a judgment titled
MMTC Ltd. v. Anglo American
Metallurgical Coal Pty. Ltd. (“MMTC
Case”) 139 decided on March 02, 2020,
despite its restrictions, has taken a
unique stand as to what may be
deemed perverse in law for setting
aside an arbitral award under Section
37 of the Arbitration Act.
STANDARD OF REVIEW UNDER
SECTION 37 OF THE ACT
Section 34(2A) of the Arbitration Act
provides that in case of domestic
arbitrations, violation of Indian public
policy also includes patent illegality
appearing on the face of the award.
The proviso to the same also expressly
states that an award shall not be set
aside merely on the ground of an
erroneous application of the law or by
139 FAO (OS) 532/2015.
140 MMTC v. Vedanta Ltd., AIR 2019 SC 1168.
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re-appreciating of evidence. This
implies that while entertaining appeals
under Section 37 of the Act, the Court
is not actually sitting as a court of
appeal over the award of the arbitral
tribunal and would not re-appreciate
or re-assess the evidence.
From a perusal of the judicial
precedents, there remain no two
thoughts on the fact that a court
exercising appellate jurisdiction under
Section 37 of the Arbitration Act
cannot undertake an independent
assessment of the merits of an award,
and must only ascertain that the
exercise of power by the court under
Section 34 of the Act has not exceeded
the scope of the provision.140 Thus, it is
natural that courts under Section 37 of
the Arbitration Act are cautious and
vastly unwilling to disturb findings of
the tribunal.
The reason behind such limited
interference from the court is also well
established – an arbitrator is
considered the ultimate master of
quantity and quality of evidence to be
relied upon when he delivers the
award and once it is found that the
arbitrator’s approach is not arbitrary
or capricious, the arbitrator is the last
word on facts.141 If the courts, sitting in
appellate jurisdiction, were to interfere
with the merits of the awards as a
matter of procedure, it would defeat
the very purpose of having an
alternative dispute resolution
mechanism.
BRIEF FACTS
In the case at hand, MMTC, a
Government of India enterprise,
141NHAI v. Progressive Constructions Ltd., 2015(5) ArbLR
71 (Delhi).
 INDUSLAW
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challenged a judgment dated July 10,
2015 wherein the Ld. Single Judge,
whilst dismissing challenges to the
arbitral award under Section 34 of the
Act upheld the arbitral award dated
May 12, 2014 (“Award”).
By way of the Award, the claim filed
by Anglo American Metallurgical Coal
Pty. Ltd. (“AAMC”) for damages for
breach of contract on account of non-
lifting of coking coal by MMTC Ltd.
was allowed and AAMC was held
entitled to recover damages in the sum
of USD 78,720,414.92 along with
pendente lite and future interest and
costs.
Broadly, the challenge made by
MMTC was based on the fact that
despite unambiguity, the tribunal had
given its own interpretation to the
communications between the parties
and hence, it was argued that the
Award was perverse and irrational.
On the other hand, AAMC defended
the challenge so made by contending
that the arbitrators were entitled to
read the documents holistically, and
that the duty of the court in these
circumstances is to see whether the
view taken by the arbitrator is a
plausible view on the facts, pleadings
and evidence before the arbitrator.
Even if on the assessment of material,
the court while considering the
objections under Section 34 of the
Arbitration Act is of the view that
there are two views possible and the
Arbitral Tribunal has taken one of the
possible views which could have been
taken on the material before it, the
court would be reluctant to interfere. It
was further argued that the court is not
to substitute its view with the view of
Jhang Cooperative Group Housing Society v. P.T Munshi
142
Ram & Associates Private Limited, 202(2013) DLT 218.
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the arbitrator if the view taken by the
arbitrator is reasonable and plausible
even though there may be a differing
view, the courts ordinarily cannot get
into merits of an award by evaluating
evidence under Section 37 of the
Arbitration Act.142
DECISION
Upon perusal of the arbitral record and
the evidence, the Hon’ble High Court
has in this case held that
notwithstanding the limitations of its
jurisdiction, the court shall not be
hesitant in correcting an inference of
the tribunal, which is not supported by
a plain reading of the documents. It
was also held that it is an overreach of
powers by the arbitral tribunal to
mould the principles of interpretation
and choosing to read into words that
do not exist while omitting to read
what is written in plain, simple
English. Furthermore, it was held that
when such communication is purely
commercial and exchanged between
educated, worldly-wise men of the
relevant field, words that do not exist
in the communications cannot be
inferred.
The Hon’ble High Court came down
heavily upon the Award passed by the
arbitral tribunal observing that when
asked to interpret a document, a court
must focus at its language. Thereafter,
if the language is clear and
unambiguous, it shall accept the
ordinary meaning, for the duty of the
court is not to delve deep into the
intricacies of the human mind to
ascertain one’s undisclosed intention,
but only to take the meaning of the
words used by him, that is to say his
 INDUSLAW
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expressed intentions. 143 Relying upon
various judgments 144 , the Hon’ble
High Court expressed a strong view to
state that when imaginary
interpolations are allowed into the e-
mails/ correspondence of parties
unnecessarily, then the inferences and
conclusions derived therefrom must
be held to be perverse in law and liable
to be set aside.
In furtherance to criticizing the claim
being allowed in the Award, the
Hon’ble High Court also noted that
there was no basis on which the
amount of damages was granted by
the arbitral tribunal. The Hon’ble High
Court was of the view that the tribunal
showcased perversity by relying upon
‘imaginary evidence’ which can under
no circumstances be permitted.
In view of the above mentioned, the
Hon’ble High Court ultimately while
setting aside the award on the grounds
of being arbitrary and capricious held
that majority view therein is not a
possible view since it is not a question
of the ‘quantity’ or ‘quality’ but that
the inferences drawn are a non-
sequitur to the plain and simple words
of the e-mails/communications read
in evidence, which were before the
tribunal and which do not support the
inferences drawn.
INDUSLAW VIEW
The discussed judgment of the
Hon’ble High Court is most likely to
go before the Hon’ble Supreme Court
where the question as to what may be
143 Smt. Kamala Devi vs. Seth Takhatmal & Anr., (1964) 2
SCR 152.
144 Associate Builders v. DDA 2015 (3) SCC 49, Excise and
Taxation Officer-cum-Assessing Authority v. Gopi Nath &
Sons (1992) Supp. (2) SCC 312, Kuldeep Singh v. Commr. of
Police, AIR 1999 SC 677.
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deemed ‘perverse’ and ‘irritational’
under Section 37 of the Arbitration Act
will be answered by court.
The Hon’ble High Court is fair in
upholding the trite law that the
intention and the conduct of the
parties need only be adverted to in the
event there is ambiguity or the
language is capable of lending a
meaning which leads to ambiguity. 145
While the said judgment on one hand
may be considered a welcome move as
it shall help maintain better checks and
balances, it may also be considered to
have opened a pandora’s box inviting
frivolous litigations challenging
awards on merits, thereby defeating
the purpose of having an alternative
dispute resolution mechanism in
place.
Authors: Mohit Chadha | Vaishnavi
Rao | Swati Mittal
Practice Area: Litigation & Dispute
Resolution
11.3 SUPREME COURT UPHOLDS
COURT INTERVENTION TO
RECTIFY ERRONEOUS
CONTRACTUAL
INTERPRETATION IN AN
ARBITRAL AWARD 146
INTRODUCTION
A three-judge bench of the Supreme
Court in its recent judgment in South
East Asia Marine Engineering and
Constructions Limited v. Oil India
Limited 147 (“Judgment”) upheld an
145 The Godhra Electricity Co. Ltd. & Anr. v. State of Gujarat
& Anr. (1975) 1 SCC 199.
146 First published on Bar and Bench at
https://www.barandbench.com/columns/supreme-
court-upholds-court-intervention-to-rectify-erroneous-
contractual-interpretation-in-an-arbitral-award.
147 Civil Appeal No. 673 of 2012.
 INDUSLAW
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order passed by the Gauhati High
Court under Section 37 of the
Arbitration Act, setting aside an
arbitral award. The High Court
reversed the decision under Section 34
of the Arbitration Act (whereby the
challenge to the award was rejected)
on the ground that the interpretation
of the terms of the contract by the
arbitral tribunal is erroneous and is
against the public policy of India. The
Judgment (upholding the High
Court’s decision) is an interesting
development as it marks an important
checkpoint on the principle that an
error of interpretation of contract is
considered to be an error within the
arbitral tribunal’s domain and thus not
a ground to set aside an award. Before
analyzing the Judgment, it is necessary
to advert to a brief factual background,
as set out hereunder.
FACTUAL BACKGROUND
Pursuant to a tender floated by the
Respondent, the parties entered into a
contract whereby the Appellant was
engaged to carry out well drilling and
other ancillary operations in the state
of Assam. During the term of the
contract, the price of high-speed diesel
(“HSD”), one of the essential materials
for carrying out the operations
contemplated in the contract, was
increased by the Government though a
circular. On account of rise in price of
HSD, the Appellant sought certain
reimbursements from the Respondent
by relying on Clause 23 of the contract
(“Clause 23”) which provided for
reimbursement of cost in the event of
change in prices of essential materials
due to enactment of a new law or
modification in an existing law. As the
Respondent denied the
148 Finding as noted in Para 4 of the Judgment.
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reimbursements sought, the Appellant
invoked arbitration claiming
reimbursements on account of rise in
price of HSD.
The arbitral tribunal passed an award
dated December 19, 2003
(“Arbitration Award”) in favour of the
Appellant. It took a view that Clause
23 ought to be interpreted liberally, in
as much as it held that “while an
increase in HSD price through a circular
issued under the authority of State or
Union is not a “law” in the literal sense,
but has the “force of law” and thus falls
within the ambit of Clause 23.” 148 The
tribunal held that this clause must be
construed as ‘Habendum Clause’,
thereby bringing price escalation of
HSD within its purview.
The Respondent’s application under
Section 34 of the Arbitration Act for
setting aside the award was dismissed
by the district judge who took the view
that the award was neither without
basis nor against the public policy of
India nor patently illegal and did not
warrant interference. The decision of
the district judge was further
challenged before the Gauhati High
Court in an appeal under Section 37 of
the Arbitration Act which set aside the
award on the ground that it was
passed overlooking the terms of the
contract between the parties. In its
reasoning, the High Court took a view
that Clause 23 is akin to a force
majeure clause. Aggrieved by the
decision of the High Court, the
Appellant filed an appeal before the
Supreme Court.
The main grounds of challenge before
the Supreme Court were (a) that
interpretation of contractual terms
 INDUSLAW
April 2020 – June 2020
falls within the domain of the arbitral
tribunal to decide and the High Court
is conferred with only a supervisory
role which cannot impart its own view
with regard to interpretation of
contractual terms between parties; and
(b) as there exists no patent illegality in
the Award, the questions of law
decided by the arbitral tribunal were
beyond the judicial review of the High
Court under Section 34 of the
Arbitration Act.
ISSUE FOR CONSIDERATION
BEFORE THE SUPREME COURT
The key issue before the Supreme
Court was the scope and ambit of the
court’s jurisdiction to scrutinize the
award on matters of interpretation.
The Supreme Court referred to and
relied upon its earlier judgment in
Dyna Technologies Pvt. Ltd. v. Crompton
Greaves Limited149 wherein it was held
that if there are two plausible
interpretations on fact and terms of
contract, the court should defer to the
view taken by the arbitral tribunal
unless such view taken by the arbitral
tribunal portrays perversity which is
‘unpardonable’.
In light of the judgment in Dyna
Technologies (supra), the Supreme
Court set out to determine – “Whether
the interpretation provided to the contract
in the award of the tribunal was reasonable
and fair, so that the same passes muster
under Section 34 of the Arbitration Act?”
DECISION OF THE SUPREME
COURT
The Supreme Court delved into the
reasons offered by both, the arbitral
tribunal and the High Court. It did not
149 (2019) 15 SCC 131.
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subscribe to either 150 and offered its
own reasoning to uphold the setting
aside of the Arbitration Award.
The Supreme Court observed that the
interpretation of Clause 23 by the
arbitral tribunal is contrary to the
thumb rule of interpretation of
contract i.e., a written contract should be
read as a whole and so far as possible as
mutually explanatory. On examining the
terms of the Letter of Intent and other
clause of the contract, it reached the
conclusion that as the contract was
based on a fixed price, the Appellant
had taken into account the risk of price
variations before entering the tender
process. Therefore, the purpose of the
tender being to mitigate the risk of
price variations, the interpretation of
the arbitral tribunal that change in
price of HSD is akin to change in law
cannot be said to be a possible
interpretation of Clause 23. The court
also observed that the provision of
change in law in Clause 23 cannot be
stretched so far so as to include price
fluctuations, which if intended by the
parties, would have been specifically
included in the contract.
The Supreme Court also laid emphasis
on certain terms of the contract which
specifically provided that (a) rates,
terms and conditions under the
contract were to continue in force until
the completion and abandonment of
the contract; and (b) fuel was to be
supplied by the contractor at his
expense as per the ‘Consolidated
Statement of Equipment and Services
furnished by the Contractor’ as
provided in the contract. The court
observed that such clauses clearly
indicated that the prices stipulated in
the contract were not open for
150 Paragraphs 25 and 26 of the Judgment.
 INDUSLAW
April 2020 – June 2020
modification and the interpretation of
Clause 23 given by the arbitral tribunal
was not possible. Hence, it was well
within the scope of Section 34 of the
Arbitration Act to set aside the
Arbitration Award.
To sum up, it held that the contractual
interpretation of Clause 23 of the
contract was not a possible
interpretation of contract as (a) the
arbitral tribunal ignored the thumb
rule of contractual interpretation i.e.,
the contract shall be read as a whole,
and ignored express terms in the
contract which provided that rates
agreed in the contract were not open to
modification till completion or
abandonment of the contract; and (b)
price fluctuations of essential materials
required for performance of the
contract had been reasonably
considered by the Appellant at the
time of placing its bid for the contract
and entering into the contract.
INDUSLAW VIEW
As elucidated in Associate Builders v.
Delhi Development Authority 151 and
McDermott International, Inc. v. Burn
Standard Co. Ltd. 152 , it is a settled law
that matters of construction of contract
primarily fall within the domain of the
arbitrator and an error
interpretation does not warrant
interference with the award. The
Judgment does not deviate from that
settled position, but is an example
where the court, as a matter of
exception, intervenes when the error of
interpretation in the award is
unpardonable and perverse.
It is pertinent to take note that the
Supreme Court delved into the
reasoning of the arbitral tribunal on
151 (2015) 3 SCC 49.
中文通讯
the interpretation of the contractual
terms and did not agree with the same.
It also did not subscribe to the High
Court’s reasoning and in fact, replaced
it with its own view on the
interpretation of the contract in
question and upheld the operative part
of the High Court’s decision i.e., to set
aside the Arbitration Award. The
Judgment is a reminder that the ‘hands
off’ approach of courts on errors of
construction in the award does have its
limits and in appropriate cases the
courts may intervene and rectify the
fallacious and impossible
interpretation of the contract by the
arbitral tribunal.
The Judgment does not provide a carte
blanche mandate to courts to enter into
issues of interpretation or sit in appeal
over findings of the arbitral tribunals
on matters of contractual
interpretation, however, it does tend to
widen the scope of scrutiny of awards
on such matters. The ruling may have
a bearing on the approach adopted by
the courts in applying settled legal
principles for considering challenge to
arbitral awards.
Authors: Mayank Mishra | Yugank
Goel | Aman Chaudhary
in Practice Area: Litigation & Dispute
Resolution
12. INTELLECTUAL PROPERTY
12.1 WIPO INTRODUCES WIPO
PROOF – NEW TOOL TO
PROVIDE EVIDENCE OF
INTELLECTUAL ASSETS
EXISTENCE
INTRODUCTION
152 (2006) 11 SCC 181.
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 INDUSLAW
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The World Intellectual Property
Organization (“WIPO”), a specialized
UN agency assisting almost 195
countries of the world in developing
an international intellectual property
legal framework, has launched WIPO
PROOF, a new online service that
provides tamper-proof evidence of the
existence at a point in time of any
intellectual asset contained in a digital
file format.153
This tool aims to protect the creative
and innovative content which when
created in today’s highly digitalized
setup, results in the creation of a
multitude of data files, each carrying
valuable content. Unless every data
generated is watermarked or in some
manner earmarked, they could fall
prey to misuse or misappropriation by
third parties.
KEY FEATURES
WIPO PROOF primarily aims at
preventing misuse
misappropriation of any intellectual
asset by creating tamper-proof
evidence which proves that a digital
file existed at a specific point in time,
and that it has not been altered since
that time. In essence, this feature
creates WIPO PROOF token which
serves as a date and time stamp of a
digital file, which would be like a
digital fingerprint of the file. It can be
used by parties in actions relating to
misuse or misappropriation to
establish that the particular intellectual
asset was prior in time.
The WIPO PROOF token intends to
safeguard intellectual assets at every
stage of development from concept to
commercialization, whether or not
153 Available at:
中文通讯
they eventually become formal IP
rights. The intellectual assets
qualifying for WIPO PROOF token
could be anything like AI-based
algorithms, large data sets, incomplete
manuscripts, musical
(re)arrangements, innovations,
product designs, business records and
strategies, R&D results and any form
of trade secrets, but stored in a digital
file. For receiving WIPO PROOF
token, the creator of the intellectual
asset need not share his digital file
with the WIPO authorities.
This token can be purchased one at a
time for a modest fee, or in bundles of
multiple tokens at reduced rates valid
during a 2-year period.
INDUSLAW VIEW
WIPO PROOF as a tool is a welcome
step of the WIPO and appears
promising as it will aid and assist
parties in dating their digital
or intellectual asset and claiming prior
rights or priority over the same.
However, as a word of caution, WIPO
PROOF must be viewed as a service
which will assist parties in claiming
prior rights over their intellectual
property assets during different stages
of the development and lifecycle of the
asset. It should not be compared or
confused with the formal registration
of an intellectual property with IP
Offices around the world. Registration
of an intellectual property is a stronger
form of protection, as it is granted after
a detailed examination of the
protectable subject-matter under
relevant intellectual property laws and
has more weightage in intellectual
https://www.wipo.int/pressroom/en/articles/2020/a
rticle_0012.html.
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 INDUSLAW 中文通讯
April 2020 – June 2020

property enforcement or defense Practice Area: Intellectual Property

cases.
Authors: Aditi Verma Thakur | Pooja
Nair

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ANNEXURE A

(Refer to Paragraph 3.2)

Item Existing Requirement Relaxations granted by Key Implications/ Comments

the Circulars

Dispensations towards all Stipulated Offerings (i.e. IPO, FPO, Rights Issues)

Validity of SEBI A Stipulated Offering For issuers whose Issuers whose SEBI final
Observations must open within 12 observations have expired observations expired/ were
(twelve) months from or will expire between going to expire within March 01,
the date of issuance of March 01, 2020 and 2020 and September 30, 2020 can
SEBI’s final September 30, 2020: launch their Stipulated Offerings
observations. 154 validity of SEBI’s final between August 31, 2020 and
observations extended by 6 March 31, 2021.
months.

The lead manager of the

Stipulated Offering must
submit an undertaking
confirming the compliance
of the offering with the
issue size requirements
(discussed below) under the
SEBI ICDR Regulations
while submitting the
updated offer document to
SEBI.

Change in Fresh If an issuer seeks to For Stipulated Offerings
Issue size change the size of the opening before December
Fresh Issue by more 31, 2020, issuers may
than 20%, it must re-file change (i.e., decrease or
its draft offer increase) the size of their
document.155 Fresh Issues size by up to
50%, subject to:
• No change in the
underlying objects of
the Stipulated Offering;
• If the Fresh Issue
proceeds were to be
utilized to partly fund a
specific project, the
• In December 2018, SEBI
granted a similar, but
permanent dispensation for
change in the size of the
“offer for sale” component
of an IPO/ FPO after filing of
a draft offer document
keeping in mind that such
change is unlikely to have an
impact on the business or the
results of the issuer. The
Circulars render the 50%
requirement uniform, given
the market exigency.

154 Regulation 44(1), 85 and 140 of SEBI ICDR Regulations.

155 Para (1)(f)(i) of Schedule XVI of SEBI ICDR Regulations.

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 INDUSLAW 中文通讯
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Item Existing Requirement Relaxations granted by Key Implications/ Comments
the Circulars
issuer must continue to • An issuer undertaking an
show firm tie-up of at
least 75% of the balance
amounts required for
the project; and
• The merchant bankers
should ensure that all
“appropriate” changes
in “relevant” sections of
the draft offer
document are made,
and that an addendum
to this effect is filed
publicly.
• In case of a change in Fresh
Dispensations towards eligibility conditions for a fast-track rights issues (of equity shares and convertibles)
launched before March 31, 2021
110
IPO may, depending on
post-IPO valuations dilute
between 10% (ten percent) of
its post-IPO capital (“10%
Deal”, for valuations above
INR 4,000 Crore) to 25% of
its post-IPO capital (“25%
Deal” for valuations below
INR 1,600Crores). Note that
the Circulars do not help an
issuer of a 10% (ten percent)
Deal convert to a 25% Deal,
since this change may be in
excess of 50%. Accordingly,
if IPO valuations of INR
4,000 Crores or higher at the
draft stage have, on account
of COVID-19, depleted to
INR 1,600 Crore or less, an
issuer has no choice but to
file afresh.
Issue size, the Circulars do
not specify what
information is required to be
made public through the
addendum. However, it
would be reasonable to
assume that the addendum
should inform the public
only of the changes in the
size of the Fresh Issue, and
related changes. All other
factual updates may be
gleaned from the final offer
document, once filed.
 INDUSLAW 中文通讯
April 2020 – June 2020

Item Existing Requirement Relaxations granted by Key Implications/ Comments

the Circulars

Period of listing Issuer must be listed on
a recognised stock
exchange for 3 years.
Compliance with Issuer must be in
LODR compliance with then
LODR Regulations for
the last 3 years.
Reduced to 18 months.
Reduced to 18 months.
Note that the SEBI ICDR
Regulations allow issuers to
undertake rights issues with an
abridged set of disclosures (than
that required for an IPO)156 if it
satisfies certain eligibility
conditions. One of them
requires the issuer to be
compliant with periodic filing
requirements under the LODR
for at least 3 years.

Accordingly, an issuer who

avails of these timing
relaxations will be unable to
undertake an Eligible Rights
Issue utilizing the abridged
disclosure framework under
Part B, Schedule VI of the SEBI
ICDR Regulations.

Average market Average market Reduced to INR 100 This will help smaller-cap
capitalization capitalization of public Crores. companies to go fast-track as
shareholding to be at well.
least INR 250 Crores.

Audit An issuer cannot If an issuer has audit This is a well-thought out

qualifications undertake a fast-track qualifications, it can restate
rights issue if it has any its underlying financial
audit qualifications in statements in its LOF after
any of the years in adjusting the impact of the
respect of which qualifications 157 . Further,
financial statements are even if the impact of the
disclosed in its DLOF. qualifications cannot be
ascertained, the issuer may
proceed with a fast-track
rights issue after making
appropriate disclosures in
the LOF.
stipulation, making the
disclosure standard for an
Eligible Rights Issue similar to
that of an IPO. An audit
qualification in the issuer’s
financial statements should
trigger restatement of its
financial statements, and not
debarment from the offering per
se.

Show cause An issuer cannot SCNs issued under Reasonable disclosure-based

notices undertake a fast-track adjudication proceedings stipulation, giving flexibility if
rights issue if there are are not included in this

156 Part B of Schedule VI of the SEBI ICDR Regulations.

157 Regulation 99(m) of SEBI ICDR Regulations.

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 INDUSLAW 中文通讯
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Item Existing Requirement Relaxations granted by Key Implications/ Comments

the Circulars

any show cause notices condition. Accordingly, adjudication related SCNs are
(“SCN”) issued or issuers who have received suitably disclosed.
prosecution proceeding SCNs from SEBI under
initiated by SEBI against adjudication proceedings The main body of Regulation
it, or its promoters or (i.e., in respect of certain 99(h) (as revised by the
whole-time directors.158 categories of offences Circulars) only carves out SCNs
under the SEBI Act 159 ) or for adjudication proceedings.
have prosecution However, in the following line,
proceedings initiated the Circular suggests that even
against them by SEBI, or matters where prosecution
whose directors, promoters proceedings are initiated by
or promoter group have SEBI will not disqualify the
outstanding SCNs for issuer from fast-track eligibility.
adjudication proceedings
While the general tone of the
or have prosecution
Circulars is to ease eligibility
proceedings initiated
and compliance requirements, it
against them by SEBI, are
adds the requirement to disclose
not barred from
SCNs for adjudication
undertaking a fast-track
proceedings involving group
Eligible Rights Issue,
companies as well. Issuers
subject to adequate
looking to raise capital through
disclosures of the notices in
fast track rights issue with
the LOF.
abridged disclosures160, were till
now not required to consider
outstanding SCNs involving
group companies as relevant for
either eligibility or disclosure
purposes.

Suspension from The equity shares of an Compliance period -

trading eligible issuer should reduced to 18 months.
not be suspended for
trading as a disciplinary
measure in the last 3
years.

Settlement of If an issuer or its If an issuer, its promoter, -

securities laws promoter, promoter promoter group or any
violations group or directors had director has settled any
settled any violation of securities laws violations, it
securities laws in the can still undertake a fast-

158 Regulation 99(h) of SEBI ICDR Regulations.

159 Such categories include contraventions under Sections 15A, 15B, 15C, 15D, 15E, 15F, 15G, 15HA and 15HB of
the SEBI Act.
160 Part B of Schedule VI of the SEBI ICDR Regulations.

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Item Existing Requirement Relaxations granted by Key Implications/ Comments

the Circulars

last 3 years, it is track Eligible Rights Issue if

prohibited from the settlement terms and
undertaking a fast track other directions have been
rights issue. fulfilled.

Other dispensations in respect of Eligible Rights Issues

Minimum The minimum For Eligible Rights Issue,
subscription subscription for a rights reduced to is 75% of the
issue is 90% of the issue issue size.
size.
If the Eligible Rights Issue
is subscribed between 75%
to 90%, at least 75% of the
issue size should be
utilized for the objects
other than general
corporate purposes.
This relaxation has only been
granted in respect of Eligible
Rights Issues. Similar
dispensations in minimum
subscription conditions for IPOs
and FPOs would also have been
welcome. Since IPOs and FPOs
are significantly market driven
(as opposed to rights issues,
which are subscribed primarily
by promoters/ promoter
group), pegging minimum
subscription to 75% would have
significantly buoyed such
offerings.

Threshold limits A listed company
for filing draft raising over INR 10
letters of offer Crores through a rights
issue is required to file a
DLOF with SEBI.
Threshold increased to INR The SEBI review period has
25 Crores. been dispensed with for lower
value offerings.

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ANNEXURE B
(Refer to Paragraph 3.3)

Name of the Date of Amount Variation in object Amount of Type of change

company notice raised in variation
IPO (in (in Rs.
Rs. crores and
crores) % of
change over
fresh issue
proceeds)

Inox Wind July 31, 1,000 (700 Transfer funds from 171.5 Changing the
Limited 2017 fresh expansion and upgradation amount to be
issue) of existing manufacturing (24.5%) spent for the
facilities, investment in objects
subsidiaries and issue
related expenses to meet the
long-term working capital
requirements.

Orient Green April 5, 900 Transfer unutilised amount 0.42 Changing the
Power 2014 from repayment of loans amount to be
Company availed by subsidiaries to (0.05%) spent for the
Limited funding of a subsidiary objects

Dilip Buildcon August 2, 654 (430 Transfer funds from 0.26 Changing the
Limited 2017 fresh prepayment of loans to amount to be
issue) GCP. (0.06%) spent for the
objects

PC Jeweller July 28, 563 (net a) Change in location of 288 a) Change in the
Limited 2014 issue) store opening. object
(51.1%)
b) Extend the timeline for b) Change in
opening stores. schedule of
deployment

Newgen May 15, 424 (95 Transfer unutilized funds 12.8 Changing the
Software 2019 fresh from purchase and amount to be
Technologies issue) furnishing of office (13.4%) spent for the
Limited premises to GCP. objects

PNC Infratech May 27, 488.44 a) Transfer of unutilized a) 3.36 a) Changing the
Limited 2016 fund from issue expenses amount to be
and on capital expenditure (0.6%) spent for the
to GCP objects
b) 12.23
b) Changing the
(2.5%)
amount for a sub

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 INDUSLAW 中文通讯
April 2020 – June 2020

Name of the Date of Amount Variation in object Amount of Type of change

company notice raised in variation
IPO (in (in Rs.
Rs. crores and
crores) % of
change over
fresh issue
proceeds)

b) Change in the equipment head within an

under the head “investment object
in capital equipment”.

Speciality August 12, 176 Transfer unutilized funds 57.85 Transfer of funds
Restaurant 2015 from development of new to new object with
Limited restaurants to development (32.8%) change in
of new restaurants/ schedule of
conversion of existing deployment
restaurants.

February Extension of timeline for 23.9 Change in

14, 2018 development of new schedule of
restaurants/ conversion of (13.5%) deployment
existing restaurants.

TeamLease August 8, 150 Transfer unutilised amount 49 Changing the

2017 from working capital amount to be
requirements, IT (32.6%) spent for the
infrastructure and GCP to objects
acquisition and other
strategic initiatives.

Nitin Fire August 14, 64.41 Delay of one year in project - Change in
Protection 2014 implementation. schedule of
Industries deployment
Limited

All Companies mentioned below are SMEs

Amrapali February 42.48 Transfer funds from 38.11 Transfer of funds

Fincap Limited 27, 2016 purchase and set up of to new object
office space, investment in (89.7%)
NBFC and leftover issue
expenses to deposit in a
company

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 INDUSLAW 中文通讯
April 2020 – June 2020

Name of the Date of Amount Variation in object Amount of Type of change

company notice raised in variation
IPO (in (in Rs.
Rs. crores and
crores) % of
change over
fresh issue
proceeds)

Steel City November 27 Transfer unutilised funds 6.8 Changing the

Securities 24, 2017 from investment in amount to be
Limited technology upgradation (25.1%) spent for the
etc., to working capital objects
requirements.

Aarvi Encon - 21.24 Transfer unutilized 4 Changing the

Limited amounts from acquisition amount to be
and other strategic (18.8%) spent for the
initiatives to working objects
capital requirements.

Ushanti October 23, 11.55 Use unutilized funds from 2.48 Transfer of funds
Colour Chem 2019 setting up of manufacturing to new object
Limited facility to setting up a (21.4%)
different manufacturing
facility.

Ciensys Tech June 29, 9.60 Variations within 0.84 Change in object
Limited 2015 “Purchase Technical and schedule of
(formerly equipment, software and (8.7%) deployment
ADCC Infocad hardware” object for
Limited) increasing or decreasing
quantity as well as changing
the vendor etc.

Touchwood July 11, 4.21 Transfer unutilised amount 1.61 Transfer of funds
Entertainment 2019 from capital expenditure for to new object
Limited business expansions, (38.2%)
repayment of loan and issue
expenses to business
expansion, IP development,
working capital, business
promotions, marketing and
advertisement

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 INDUSLAW 中文通讯
April 2020 – June 2020

INDUSLAW CHINA TEAM KEY CONTACTS

Suneeth Katarki,
Partner
Bangalore Office
Admitted to practice in India
B.A., LL.B. (Hons.), National Law School of India University,
Bangalore (1996)
suneeth.katarki@induslaw.com

Srinivas Katta,
Partner
Bangalore Office
B.A. LL.B. (Hons.), National Law School of India University,
Bangalore (1996)
srinivas.katta@induslaw.com

Akhoury Winnie Shekhar,

Partner
Bangalore Office
Admitted to practice in India
LL.B. (Law), Gujarat National Law University
winnie.shekhar@induslaw.com

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