Author name: CBCL

Same Test, Different Doors: Tata Power and the Case for Fewer Rounds

Leave a Comment / Arbitration Law /

[By Utkarsh Trivedi] The author is pursuing LL.M in IADR at the National University of Singapore. Introduction On 24 August 2026, the Singapore International Commercial Court (“SICC”) dismissed Tata Power’s application to set aside a SIAC award of nearly US$500 million in favour of Kleros Capital Partners (“Kleros”), a BVI vehicle that claimed to have lost the chance to develop a coal deposit in Kamchatka, Russia, as a result of Tata Power’s conduct, as enumerated in The Tata Power Company Limited v Kleros Capital Partners Limited, [2026] SGHC(I) 15. With costs, interest and an earlier costs award, Tata Power’s liability now approaches US$640 million.  The coram of Justice S Mohan and International Judges Anthony Besanko and Anthony Meagher rejected every ground Tata Power advanced, namely breach of natural justice in respect of causation, remoteness and mitigation, and apparent bias on the part of the tribunal majority. This piece argues that the judgment matters less for what it restates about Singapore’s narrow standard of curial review than for what it reveals by comparison with India: the substantive tests applied in the two jurisdictions are closely aligned, and the divergence in finality lies instead in the number of procedural opportunities each system affords a losing party to reopen an award. The dispute and the challenge in brief In 2013, Kleros approached Tata Power as a prospective co-investor in an undeveloped coal deposit on the Kamchatka peninsula, and the parties entered into two non-disclosure agreements (the “NDAs”) that bound Tata Power to confidentiality and prohibited it from circumventing Kleros’s economic interests. After the relationship broke down over who would lead the bid for the mining licence, Tata Power acquired the licence at public auction in 2017 and later abandoned the project as unviable. Kleros commenced arbitration proceedings that were subsequently consolidated before a single SIAC tribunal. In 2023, the tribunal (Lawrence Boo, Stuart Isaacs KC and former Indian Supreme Court judge AK Ganguli) found that Tata Power had misused confidential information, made false statements and concealed its intention to supplant Kleros, findings Tata Power did not challenge. In the 2024 quantum award, the majority valued the project at over US$1 billion, assessed Kleros’s lost chance at 60% and awarded US$490 million; the dissenting arbitrator would have awarded roughly US$13.5 million, reflecting only the negotiating leverage Kleros had lost. Before the SICC, Tata Power contended that the majority had failed to deal with causation, remoteness and mitigation in the manner the parties had agreed, in breach of natural justice. The SICC rejected each ground. It held that the causation complaint had shifted so substantially between the originating application and later submissions as to constitute a new, time-barred ground that was in any event without merit; that the tribunal was entitled to treat causation, remoteness and foreseeability as overlapping inquiries; and that the majority had twice rejected Tata Power’s mitigation case with reasons. The SICC also dismissed the bias allegations, which rested on undisclosed appointments of Mr Boo and Mr Isaacs in matters involving Kleros’s funder, Omni Bridgeway, and its counsel, Squire Patton Boggs, and on Mr Boo’s links with Benjamin Hughes, then chair of Omni Bridgeway’s investment committee. In closing, the coram described Tata Power as an unduly sensitive or suspicious litigant that had abandoned several of its original complaints and timed its challenge to land shortly before the quantum award. Analysis: process review and the limits of relabelling The judgment rests on the settled distinction between review of the merits, which is excluded, and review of the arbitral process, which is all that a set-aside application under Section 24(b) of the International Arbitration Act 1994 (the “IAA”) and Article 34(2) of the UNCITRAL Model Law permits. The governing framework remains Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 at [29], which requires an applicant to identify the rule of natural justice breached, show how it was breached, and establish that the breach was connected to the making of the award and prejudiced its rights. Where the complaint is that the tribunal failed to consider an issue, the High Court of Singapore in Lee Boon Khim v Entech Global Solutions Pte Ltd [2026] SGHC 141 at [22] held that the inference must be clear and virtually inescapable before a court will conclude that the tribunal failed to apply its mind to an essential issue, as opposed to every argument raised. Consistent with that approach, the SICC treated the award’s reasoning as sufficient if discernible when read as a whole, with appropriate latitude for imprecise drafting. On bias, the SICC first applied the time limit for arbitrator challenges in Rule 15.1 of the SIAC Rules 2016, which requires a notice of challenge within 14 days after the circumstances giving rise to the challenge became known, or should reasonably have become known, to the challenging party, and treated that limit as presumptively fatal before reaching the substance. On the merits, the court drew on the IBA Guidelines on Conflicts of Interest in International Arbitration and required more than professional overlap or repeat institutional affiliation. Non-repeat appointments in unrelated matters did not give rise to a reasonable suspicion of bias, nor did indirect social ties to a funder-affiliated individual absent evidence of communication about the case. The case also confirms that Singapore courts will look past the label a party places on its complaint. Framing a substantive disagreement with a tribunal’s assessment of loss of chance, causation or mitigation as a procedural failure does not convert it into one. The analytical significance lies in what follows from this. By absorbing the remoteness complaint into a finding that the tribunal had engaged with overlapping issues, the SICC placed the question whether the tribunal applied the correct test beyond the reach of Section 24(b) of the IAA. An error in applying a legal test, however consequential to quantum, remains an error within jurisdiction and is not reviewable. That is a deliberate allocation of risk: parties who choose Singapore as the

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AIF Regulations and Pre-IPO Placements: Timing of Breach for Category III AIFs

Leave a Comment / Company Law /

[By Siddhi Bhosale] The author is a student of Maharashtra National Law University, Mumbai. I. Introduction: Under the Alternative Investment Funds (‘AIF’) Regulations, 2012, AIFs can be classified into Category I, II and Category III AIFs. This categorisation is essentially based on the investment objectives and the overall impact a specific Category of AIF has on the broader economy at large. In this regard, Category III AIFs occupy a unique position as it employs diverse and complex trading strategies for investing in listed as well as unlisted securities. Moreover, Category III AIFs can use leverage and trade in derivatives, distinguishing them from Category I and II AIFs. Pre-IPO (‘Initial Public Offerings’) placements have increasingly become a familiar investment strategy for Category III AIFs, wherein the subscription monies are often placed in the escrow pending the allotment of shares. In a pre-IPO transaction, the subscription monies acquired from AIF are transferred to and blocked in an escrow account before the underlying shares are allotted, thereby the funds remain locked pending IPO completion, with the securities passing only upon the allotment. This lacuna vis-à-vis timing raises an important compliance question: does the breach of Regulation 15(1)(d), i.e., of ten per cent concentration limit crystallise on the date the subscription funds are committed and blocked in escrow, or on the date the shares are actually allotted to the AIF? This article examines the semantics revolving pre-IPO escrow arrangement by taking into account Regulation 15(1)(d), and the manner in which the concentration limit breach effectuate in such transactions. The timing of the breach is relevant as the concentration limit is calculated as a proportion of an AIF’s scheme, particularly the scheme’s investable funds, as stipulated in the proviso to Regulation 15(1)(d) and Regulation 2(1)(p) that defines what are “investable funds”.  The investable funds might fluctuate between the commitment of funds and the allotment of securities. Determining the timing is significant for open-ended schemes, where redemptions may reduce the investable funds during this intervening period that lies in between. For instance, a scheme with investable funds of ₹ 100 crores that commits ₹9.5 crores to a pre-IPO placement, it would initially remain within the prescribed ten percent threshold. However, if redemptions of ₹10 crores occur before allotment, the same commitment would represent approximately 10.56 per cent of the reduced investable funds of ₹90 crores. Consequently, the scheme would remain complaint if the concentration limit were assessed on the date of escrow funding, but would exceed the prescribed threshold if assessed on the date of allotment. The determination of the relevant date is therefore critical, as it directly affects the assessment of compliance under Regulation 15(1)(d) and the extent to which fund managers must anticipate and manage concentration risk before the securities are allotted. II. Regulatory Framework: Under Regulation 15(1)(d) of the AIF Regulations, 2012, Category III AIFs are subjected to a concentration limit which mandates that they are prohibited from investing more than ten per cent of their investable funds in a single Investee Company, directly or through investment in units of other AIFs. The ‘proviso’ to Regulation 15(1)(d) further allows Category III AIFs to calculate the concentration limit for investments in listed equity on the basis of either investable funds or the net asset value (“NAV”) of the scheme. This becomes relevant while assessing the applicable concentration limit and the timing of a potential breach in pre-IPO placements. This regulation is thereby intended in order to regulate the concentration of an AIF’s investments in a single company and prevent excessive exposure to one Investee Company. When a large value fund for accredited investors is set up, an exception has been provided as the concentration limit is capped at twenty per cent. Herein, an “Investee Company” is essentially the company in which the AIF makes or proposes to make an investment, either directly or through units of another AIF and “investable funds” entails the corpus of the scheme of AIF net of the expenditure for administration and management of the fund. Thereby, the ten per cent threshold consequently requires the amount invested in a particular Investee Company to be assessed against the investable funds of AIF.  The Regulation also gives rise to a distinction between an active breach and a passive breach of the concentration limit. An active breach arises where the AIF makes an investment which exceeds the prescribed limit at the time of investment. Whereas, a passive breach, on the other hand, may arise where an investment that was initially within the prescribed limit subsequently exceeds it owing to the changes in the value or composition of the underlying investment that was made. This distinction assumes significance in determining the point at which the obligation under Regulation 15(1)(d) is triggered. The concentration limits serve as an important measure for the protection of Limited Partners (‘LP’), and thereby compliance with the prescribed threshold forms an integral component of the regulatory framework for fund managers governing Category III AIF investments. III. Pre-IPO Escrow Mechanics: A pre-IPO placement generally begins with the execution of a subscription agreement between the AIF and the issuing company. Pursuant to the subscription, the escrow arrangements are undertaken wherein the AIF transfers the subscription monies to the escrow account, and the amount remains blocked pending completion of the conditions for allotment. The funds are therefore contractually committed towards the proposed investment and remain unavailable for other purposes, while also not being immediately released to the issuer. The subsequent steps involve the issuer completing the necessary corporate and regulatory formalities, allotting the underlying securities to the AIF and crediting them to demat account of the AIF as directed under the SEBI circular. Upon the allotment, the subscription monies are released to the issuer. Until that point, the AIF possesses a contractual right to subscribe to the securities, however, it does not hold legal title to the securities. As a result, there is a distinction between a contractual commitment to invest and the legal acquisition of the underlying securities. The SEBI (Issue

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The HUF Exclusion: Correcting the RBI’s Connected Lending Blindspot

Leave a Comment / Banking Law /

[By Pawni Singh and Prikshit Rathore.] The authors  are students of Gujarat National Law University ,Silvassa A director of a Scheduled Commercial Bank can, under the RBI’s current rules, borrow money through his Hindu Undivided Family without triggering any governance protections. No board approval, disclosure or recusal is mandated. The conflict of interest that Section 20 of the Banking Regulation Act, 1949 was enacted to prevent, operates in this scenario, without any of Section 20’s consequences being attached at all. The RBI restructured the related-party lending framework for Scheduled Commercial Banks through the Credit Risk Management Amendment Directions 2026, dated 5 January 2026, by inserting a new Chapter V, and in doing so, explicitly defined “Entity” to exclude both individuals and Hindu Undivided Families. The thesis here is that this exclusion is analytically indefensible on two independently sufficient grounds: it cannot be reconciled with Section 20’s governing logic, and it produces a direct, unexplained contradiction with the RBI’s own framework for Urban Cooperative Banks, which operates under the identical statutory provision. This UCB framework, after the 2020 extension of Section 20 to cooperative banks, already treats a director’s coparcenary interest in a borrowing Hindu Undivided Family as this sort of disqualifying conflict that needs board approval. The stakes are not theoretical. Business-owning families remain a major force in the Indian enterprise, covering manufacturing, healthcare, FMCG, infrastructure and financial services. Family representation on boards of private-sector banks has historically been recognised as a governance concern: the RBI’s own guidelines recommend that not more than one family member or close relative serve on a single bank’s board, as a matter of desirable practice. The HUF is not an archaic legal form in commercial India; it is a functioning vehicle through which many promoter-directors hold assets, operate businesses, and access credit. When the governance framework for India’s commercial banking sector, with a combined asset base exceeding ₹200 lakh crore, contains a structural blind spot affecting precisely this class of borrower, the omission is not marginal. It is systemic. The Purposive Logic of Section 20 and Why the HUF Fits It Section 20(1)(b) of the Banking Regulation Act prohibits a Scheduled Commercial Bank from granting loans or advances to any director of the bank; to any firm in which a director holds a financial interest as partner, manager, employee, or guarantor; to any company in which a director is associated as director, managing agent, employer, guarantor, or substantial shareholder; and to any person for whom a director acts as partner or guarantor. If read textually, the Hindu Undivided Family does not appear in any of those categories. The Supreme Court confirmed in Commissioner of Income Tax v. Indira Balkrishna, AIR 1960 SC 1172, that the HUF is a legal entity distinct from its individual members, and no provision of the Banking Regulation Act expressly treats coparcenary membership, the birthright interest each member holds in the family’s undivided property, as a triggering connection. The textual gap is real. The question is whether that gap survives purposive scrutiny. The Statement of Objects and Reasons behind Section 20 identifies the prevention of directors directing credit towards entities in which they hold a personal pecuniary interest as its governing purpose. Examining the four categories listed in Section 20(1)(b), each describes a situation where the director holds an interest that is: legally recognised and enforceable; variable in value depending on the borrower’s commercial success; and incapable of unilateral disclaimer. Every listed category satisfies this three-element structure. Coparcenary interest, as the Supreme Court settled in Vineeta Sharma v. Rakesh Sharma (2020) 9 SCC 1, satisfies all three elements equally. A coparcenary interest vests by birth, not by choice; it can be enforced through a demand for partition; and it cannot be disclaimed without either the consent of all coparceners or judicial intervention. Its value fluctuates with the HUF’s assets; a profitable deployment of a bank loan increases what is available on partition, a default reduces it. Structurally, the coparcenary interest more closely resembles the guarantor relationship, explicitly listed under Section 20(1)(b)(ii), than it does the category of a mere bystander, since both involve a financial stake that persists until formal legal action dissolves it. Where the director is also the karta, the HUF’s managing member, authorised under Hindu personal law to incur debts binding on all coparceners, the conflict is not structural but literal. A director-karta who participates in decisions about whether his HUF should receive credit from the bank he governs simultaneously occupies the role of decision-maker on the bank’s side and authorised representative of the borrower on the other. No inferential reasoning is required at that point. The same individual is present on both sides of the transaction, and the 2026 Directions require nothing of him: not disclosure, not recusal, not board approval. The RBI’s Own UCB Framework Makes the Inconsistency Undeniable Formalist objections to purposive interpretation have weight, and a court applying restrictive canons of statutory construction might resist extending Section 20’s categories beyond their textual boundaries. That objection, however, does not survive the RBI’s own behaviour in an adjacent context. Following the Banking Regulation (Amendment) Act 2020, which extended Section 20 of the Banking Regulation Act to Urban Cooperative Banks, the RBI issued fresh directions governing loans and advances to UCB directors. Those directions define a director as “interested” where the director is a coparcener of any firm, company, or concern, including a Hindu Undivided Family. The RBI, applying the same Section 20 to UCBs, made an explicit and considered regulatory choice to treat coparcenary membership as a cognisable conflict of interest requiring board-level governance. That choice was not accidental; it was a recognition that a coparcener’s financial stake in a borrowing HUF creates the precise conflict that Section 20 was designed to regulate. Both the UCB framework and the 2026 Directions apply under Section 20 of the Banking Regulation Act. Coparcenary law is uniform across both contexts; a coparcener in a family that banks with a UCB holds an interest structurally identical to a coparcener in a family that banks with a Scheduled Commercial Bank. The RBI cannot coherently accept that

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Revisiting Approved Combinations: Defining the Limits of CCI’s Regulatory Powers

Competition Law /

[By Aman Pandey and Sukirti Bajpai] The authors are students of National University of Study and Research in Law, Ranchi. I. Introduction: The Supreme Court’s ruling in Amazon.com NV Investment Holdings LLC v. Competition Commission of India & Ors has decided on the issue whether the Competition Commission of India (“CCI”), after approving a combination under Section 31(1) of the Competition Act, 2002 (“the Act”), can reopen and suspend that approval subsequently. The Court’s answer, which is in the negative, is based on the Competition Act and constitutional principles. The case arose when, in 2019, Amazon acquired a 49% stake in Future Coupons Pvt. Ltd. (“FCPL”), and the acquisition was approved by the CCI in November 2019. Two years later, amid a commercial dispute between Amazon and the Future Group, the CCI kept that approval in abeyance and directed Amazon to file a fresh Form II notice for the same transaction. The CCI also levied penalties of more than ₹202 crore on Amazon. This piece analyses the statutory scheme of merger control, the facts and issues of the dispute, the Court’s reasoning, and the implications of this ruling for Indian competition law. II. The Statutory Framework: India’s merger-control framework, as given under Chapter VI of the Competition Act, is ex ante in character. Under Section 6(2), the parties to a combination must file a notice with the CCI, which then has to assess whether the transaction would cause an Appreciable Adverse Effect on Competition (“AAEC”). Once approved as per Section 31(1), the assessment ends and becomes the CCI’s final verdict on the combination. The proviso to Section 20(1) imposes a one-year limitation period on the CCI’s jurisdiction to initiate any combination inquiry after the approval under Section 31(1). The Supreme Court in this case held that this is a legislative limitation to ensure that once combinations have been approved by the CCI, they are not subject to open-ended regulatory revisitation, rather than merely a procedural guideline. Equally significant is what the Act does not contain. The original draft of the legislation included a Section 37 that would have explicitly empowered the CCI to recall its own orders. That provision was omitted during the 2007 amendment process.3 The Court analysed this as the Parliament’s deliberate decision not to confer a revocation power cannot be circumvented through administrative ingenuity. III. Facts and CCI’s Action In September 2019, Amazon filed a Form I notice with the CCI under the Combination Regulations, 2011, disclosing its ₹1,431 crore investment in FCPL and the attendant shareholders’ agreement, and related rights connected to Future Retail Limited (“FRL”). Approval was granted by the CCI under Section 31(1) on 28 November 2019. In 2021, the CCI revisited its own approval file and concluded that Amazon had not disclosed the true scope of the transaction, particularly its effective strategic influence over FRL. On 4 June 2021, the CCI issued a show-cause notice invoking Sections 43A, 44, and 45 of the Act and on 17 December 2021, it passed an order by which it kept the 2019 approval in abeyance and directed Amazon to file a fresh Form II notice for the identical transaction, and imposed multi-crore penalties. The National Company Law Appellate Tribunal (“NCLAT”) affirmed the CCI’s order in June 2022.6 Amazon’s appeal under Section 53T of the Act came before a bench of the Supreme Court, which rendered its judgment in May 2026. IV. The Supreme Court’s Reasoning: Jurisdiction, Finality, and Due Process The Court’s analysis is based on three interlocking pillars, each focusing on close textual and structural interpretation of the Competition Act. First, the CCI relied on Regulation 5(5) of the Combination Regulations and argued that, where approval was obtained on incomplete or incorrect disclosures, it could keep the approval in abeyance and require a fresh Form II. To this, the Court held that there is no statutory basis for keeping a Section 31(1) approval in abeyance. Once granted, a Section 31(1) order is a final statutory determination as the Act contains no provision allowing the CCI to suspend, revisit, or recall it and the CCI’s reliance on Regulation 5(5) was misplaced because the regulation is procedural and cannot create a substantive power that the Competition Act itself does not give the CCI. The Court held that any interpretation of Regulation 5(5) that authorises ex post re-notification would undermine the finality and certainty that the Act seeks to secure. Second, the CC submitted that the limitation period should not be applicable to reopen a combination review when the approval was obtained through concealment or misrepresentation. Against this, the Court held that the CCI’s reopening of a combination review after 2 years was contrary to the jurisdictional limit contained in the proviso to Section 20(1) and the limitation period cannot be avoided merely because information was not disclosed. Third, the CCI also asserted that Sections 43A, 44 and 45 of the Act empowered it to take consequential corrective action where the approval was based on false or incomplete information. Contrarily, the Court held that those provisions only enable the CCI to penalise procedural violations and they should not be interpreted as a penalty to move with a fresh merger inquiry. Crucially, the Court found that Amazon had in fact disclosed all material agreements in its original Form I filing and now allowing the CCI to retrospectively interpret it as a non-disclosure would widen Section 43A as an elastic penal provision which can undermine the entire framework governing the merger-review process. V. A Comparison with Other Jurisdictions: Under the EU Merger Regulation, the European Commission can revoke a clearance decision if the decision is based on incorrect or misleading information. However, such a revocation is limited to the cases of deliberate fraud. The regulation does not permit open-ended re-review of already decided mergers.  In the United States, the  Hart-Scott-Rodino Act imposes a pre-notification framework, but once the waiting period has elapsed without any challenges, a merger can proceed.8 Challenges after the beginning of a merger are pursued through

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Customer Suitability and Bank Liability: A Review of the RBI’s Marketing Directions

Banking Law /

[By Neha Lodha and Vivek Kumar] Ms. Neha Lodha is a Team Lead and Mr. Vivek Kumar is a Research Fellow at the Vidhi Centre for Legal Policy. Introduction In February 2026, the Reserve Bank of India (“RBI”) issued the Draft Amendment Directions for ‘Advertising, Marketing and Sales of Financial Products and Services by Regulated Entities’ (“Directions”) covering various aspects relating to marketing and sale of financial products and services. One of the central goals of these directions is to prevent mis-selling of financial products and services by ensuring the suitability and appropriateness of financial products and services for the customer. Though the Directions are a significant step towards protecting consumer interests in the banking sector, certain provisions may need revisiting in order to ensure a balance between protection of consumer interest and efficient conduct of financial activities by regulated entities (“REs”), which include banks and non-banking financial companies. This article aims to analyse certain provisions of the Directions in light of international practices and the existing jurisprudence around seller liability to suggest a balanced approach to the requirement of customer suitability assessment. The Directions define mis-selling as, inter alia, “sale of a product/service, which is neither suitable nor appropriate in view of the customer’s profile even if with his/her explicit consent;” In pursuance of this, the Directions explicitly require an RE to ensure the suitability and appropriateness of a financial product or service by analysing the features of such products and services against the customers profile, before they are marketed or sold to a customer. The requirement of customer suitability assessment is aimed at addressing the increasing customer complaints around aggressive marketing strategies and mis-selling by REs. However, to adopt a balanced approach, the scope of liability of REs may be circumscribed by providing the following: (i) distinction between retail and non-retail customers to calibrate compliances with the level of customer’s sophistication and knowledge, (ii) a graded approach to suitability assessment to link it with complexity of the product and the risk involved, and (iii) differentiation between solicited and unsolicited sales to recognise a greater reliance of customers on the recommendations or advice provided by an entity. (i)  Distinction between retail and non-retail customers The Directions provide for customer suitability assessment as a blanket requirement across all classes of customers, without regard to the expertise or sophistication of the customer. IOSCO’s Report on Suitability Requirements with Respect to the Distribution of Complex Financial Products (“IOSCO Report”) includes ‘Classification of Customers’ as its first principle and advises regulatory systems to establish a process to distinguish between retail and non-retail customers, in light of the complexity and the relative risk of different products, when assessing suitability. The EU Markets in Financial Instruments Directive 2014 (“MiFID II”) also follows this approach and provides, “Measures to protect investors should be adapted to the particularities of each category of investors (retail, professional and counterparties).” It is also relevant to mention that the distinction between retail and institutional/professional customers is well established in Indian jurisprudence. The Delhi High Court’s judgment in the case of Punjab National Bank v. Kohinoor Foods is a case in point. In this case, the respondent alleged mis-selling of certain derivative transaction by the petitioner on the ground that the said derivative transactions were entered into even though the risks involved were not commensurate with the respondent’s business, financial operations, skill and sophistication, internal policy and risk appetite and that the petitioner failed to carry out a proper due diligence, concerning user appropriateness, or suitability of the product qua the respondent. However, the Delhi HC ruled on the contrary, denying any allegation of mis-selling or fraud on the ground that the respondent was a sophisticated customer who routinely entered into such transactions and that he had consented to the transaction after understanding the impact of the transaction. Past experiences in financial markets also indicate that retail customers are more susceptible to mis-selling than non-retail customers, entailing a greater level of protection. The insurance sector alone saw 1,20,429 grievances regarding unfair business practices by insurance providers in FY24-25. However, a blanket requirement may be too onerous and may lead to high operational costs for REs. Further, the definition of mis-selling under the Directions includes the sale of an unsuitable or inappropriate product, even with the consent of the customer. In essence, this confers upon the RE a veto power, transforming a tool for the protection of retail customers into a restraint on a customer’s freedom to deal with certain financial products, even if they are willing to take the risks associated with such products or services. This is in sharp contrast to the position in the USA, where institutional investors are allowed to waive suitability assessment by indicating that it is exercising independent judgment. Thus, there is a need to recalibrate the requirement for suitability assessment for different categories of customers. (ii) Graded approach to suitability assessment To ensure compliance and avoid onerous obligations on REs, it is necessary that suitability assessment requirements are proportionate to the complexity of the product and the risk involved in dealing with such products. It would not be appropriate to mandate the same suitability assessment requirements for both non-complex products with minimum risk and complex products with high-risk profiles. Therefore, the Directions should provide for a graded approach commensurate with the level of complexity and risk involved in sale of such products, instead of blanket suitability assessment requirements. In contrast to the Directions, MiFID II follows a graded approach concerning suitability assessment. While article 25(2) provides that investment advice or portfolio management services to retail customers have to be suitable, requiring a written statement on suitability, as per article 25(3), other services only entail an assessment of whether a product or service is appropriate. Further, article 25(4) allows firms to skip such assessment entirely for certain non-complex products, including in situations where the service is provided at the initiative of the client or potential client. It is apposite to mention that the RBI (Non-Banking Financial

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Bridging Archaic DTAAs and the 21st Century Digital Economy

Taxation Law /

[By Aviral Singhai and Shubham Sharma] The authors are students of National Law Institute and University Bhopal Introduction A foreign company can earn significant revenue from Indian users without adhering to the traditional notion of a fixed place. AppleTV, a service distinct from Apple Inc., can collect subscription fees from Indian viewers, Supercell can earn revenue from Indian gamers, and platforms such as Twitch or OnlyFans can generate advertising and subscription income from Indian users. Yet, under most of India’s tax treaties, much of this income may remain outside India’s taxing jurisdiction. The significance of this issue has increased with the growth of the digital economy. The OECD Digital Economy Outlook 2024 reports that the information and communication technology sector grew at nearly three times the rate of the overall economy across OECD countries between 2013 and 2023, while the UNCTAD Digital Economy Report 2024 records global business e-commerce sales of US$27 trillion in 2022. India has emerged as one of the world’s largest digital markets, with a January 2025 ICRIER study identifying it as the world’s third-largest digitally engaged economy. This shows the number of people engaging with companies online without any necessary physical presence. Despite this transformation, most Double Taxation Avoidance Agreements (DTAAs) still allocate taxing rights through the concept of a Permanent Establishment (PE), which generally requires physical presence. India and many of its treaty partners have explored alternatives based on digital or economic presence, but the DTAA framework continues to limit such approaches. The Protocol signed on 23 February 2026 amending the India-France DTAA expanded source taxation through a Service PE provision but still required the physical presence of personnel. Furthermore, the OECD’s update to the Model Tax Convention on 18 November 2025 introduced a commercial reason test for home office Permanent Establishments but this did not recognise a Virtual PE or taxing rights based solely on digital presence. This article examines these developments in depth and evaluates what is necessary to recognise meaningful digital presence as a basis for taxation. India’s approach to Virtual PE Regime India’s tax law does not require a Permanent Establishment, as Section 9(1)(i) of the Income Tax Act, 1961 (Income Tax Act) taxes income arising from a “business connection” in India. However, in cross-border situations, Section 90(2) allows the taxpayer to choose between the Income Tax Act and the DTAA, depending on which is more beneficial. This weakens the scope of domestic taxation and creates problems in taxing digital businesses, where significant income is earned from India but goes untaxed due to the absence of a Permanent Establishment under Article 5 of the OECD Model DTAA. As business shifted towards digital platforms and remote service delivery, disputes arose over whether treaty concepts developed for offices, factories and employees could adequately deal with these new business models. The concept of fixed place PE was explained in Formula One World Championship Ltd. v. CIT, where the Supreme Court held that a PE exists only when the place is at the disposal of the foreign enterprise and business is carried on through it. While the Court adopted a more practical approach by focusing on control over operations rather than ownership, it still treated physical presence as an essential requirement under DTAA. In order to address the problem of digital taxation, India introduced the Equalisation Levy in 2016 and expanded it in 2020. It applied only to online advertising and e-commerce services involving Indian users, including targeted ads and use of user data. Since it operated outside the Income-tax Act and treaty network, it enabled taxation even without a PE. However, it was withdrawn to align with the OECD/G20 BEPS framework and Pillar One, which allocated taxing rights based on business activity and user markets rather than physical presence. India then introduced the concept of Significant Economic Presence (SEP) through the Finance Act, 2018, effective from AY 2022–23. SEP creates a taxable nexus based on revenue from India and continuous user interaction. As per Explanation 2A of Section 9, it covers transactions where payments exceed the prescribed threshold or there is systematic and continuous interaction with users. The thresholds under Rule 11UD of Income Tax Rules, 1962 are INR 2 crore in revenue or 3 lakh users. However, the application of SEP is substantially limited by Section 90(2) of the Income-tax Act, which permits a taxpayer to rely on the more beneficial provisions of an applicable DTAA. Since India’s DTAAs continue to require a Permanent Establishment based on physical presence before business profits can be taxed, SEP has had limited practical effect in most treaty situations. The difficulty became clearer as technology transformed cross-border service delivery. In ABB FZ-LLC v. Dy. CIT, the ITAT recognised that consultancy and technical services could be provided virtually through e-mails, internet platforms, video conferencing, remote monitoring and remote-access systems and observed that continuous physical presence was no longer necessary for a Service PE. A similar shift is seen in Hyatt International Southwest Asia Ltd. v. ADIT, where the Supreme Court held that substantive control over operations of an Indian entity could establish a fixed place PE even without ownership of premises. These decisions reflected a growing judicial focus on how business was actually conducted. The limits of this judicial expansion became apparent in CIT v. Clifford Chance Pte Ltd. The Revenue argued that a “Virtual Service PE” could arise through services provided remotely into India. The High Court rejected the argument and held that the DTAA required services to be performed within India through personnel. Merely rendering services from abroad for Indian clients was insufficient. With regards to “Virtual Service PE” the Court expressly acknowledged that modern business models have exposed weaknesses in the traditional PE framework and referred to developments such as Significant Economic Presence as evidence of a broader policy shift. It made clear that recognising digital or virtual economic participation as a basis for taxation would require amendment of the DTAA itself. Domestic response of countries having DTAAs with India While India may seek

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Analysing the Amended PN3: From Blanket Screening to Measured Oversight

Contemporary Issues /

[By Nalin Arora & Sofia Dash] The authors are students of Jindal Global Law School.   Introduction During the COVID-19 pandemic, the Indian Government had introduced the Press Note No. 3 (2020 Series) (“PN3”) on April 17, 2020 to safeguard Indian companies from opportunistic takeovers/acquisitions. This was enforced through amendments to Rule-6(a) of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (“NDI Rules”). The amended Rule-6(a) mandated government approval through an approval-route mechanism for investors from countries sharing a land border with India (“LBCs”) or where the beneficial owner of the investment is situated in a LBC. PN3 has thus become an important factor in cross-border investments involving an LBC nexus. More recently, On 10th March 2026, the government issued a press release indicating amendment to the current framework of PN3 (“amended PN3”). Herein, the government has endeavoured to bring in strategic changes in PN3,indicating a shift from a blanket screening to a measured approach. Following this, on 15th March 2026, the Department for Promotion of Industry and Internal Trade (“DPIIT”) issued Press Note 2 (2026 Series) (“PN2”). PN2 amended Paragraph 3.1.1. of the Consolidated FDI Policy to enforce the revised framework introduced under the amended PN3. Furthermore, the Ministry of Finance notified the Foreign Exchange Management (NDI) (Amendment) Rules, 2026 on 1st May 2026, amending Rule 6 of NDI Rules, which aided in the formalisation of the amended PN3. Recently, on 4th May 2026, the DPIIT also issued an updated Standard Operating Procedure (“SOP”) to process future Foreign Direct Investment (“FDI”) proposals. Against this backdrop and recent legal developments, this article argues that while the amended PN3 offers much awaited relief for investors, it falls short of the structural stability India’s investment screening framework needs. The amended PN3’s geography-first logic is highly vulnerable to layered ownership structures and misuse due to insufficient clarity on the definition of key terms. The article will further draw a comparative analysis with the existing models in the United States of America (“USA”) and the United Kingdom (“UK”) to conclude that the amended PN3 is a reform beset with uncertainty and loopholes. Background: The Existing Framework and its Shortcomings PN3 in its original form had mandated all non-resident investors from LBC(s), even ones having beneficial ownership, to go through the approval-route. It did not define “beneficial ownership” which created a definitional vacuum given that the term has different meanings under the Companies Act, 2013 and the Prevention of Money Laundering Act, 2002 (“PMLA”). This led to inconsistent compliance across authorized dealer banks. In PN3’s implementation over the past 6-years, it has practically led to only 124 investment approvals out of a whopping 526 FDI proposals, 201 rejections and the balance under review, indefinitely, as per media reports in the Economic Times, Legal500, and Chambers & Partners. This led to a lot of unintended victims. Various blue-chip PE, VC funds domiciled in countries in Europe and America that were never intended to be caught by the net of PN3 ended up being trapped due to minute participation by LBC investors. For instance, a fund domiciled in the USA with a mere 0.5% Chinese Limited Partner investment would be subjected to the same government-approval route burden as a 100% China-backed investor. Thus, the amended PN3 provides no resolution to such an unintended conflation. Decoding the Amendment: Key Features The amended PN3 aims to fill-up the interpretive gap for “beneficial ownership” by importing the definition from the PMLA. This is supplemented with a 10% de minimis threshold which allows investors to invest through the automatic-route in case they are non-controlling in nature and fall within this threshold. However, investors must pay heed to Paragraph 3.1.1(d) of the amended Consolidated FDI Policy, introduced under PN2, which states that any investment which has any direct/indirect LBC ownership, regardless of whether it falls under the 10% de minimis threshold advantage or not, is subjected to a mandatory reporting obligation. Thus, the Indian investee company must mandatorily report the investment to the DPIIT as per the format prescribed in the SOP. This reporting obligation is not limited to future/fresh investments but also applies to transfers of existing FDI where such transfers amount to a beneficial ownership within the LBC nexus. In essence, this highlights the redundancy of the 10% de minimis threshold advantage since despite the option of an automatic approval-route, the investors are burdened with additional compliance obligations. The shift is merely from prior-approval to post-investment disclosure. Furthermore, applications for investments that require government approval, for instance, investments in manufacturing capital goods, electronic capital goods, electronic components, polysilicon, and ingot-wafer sectors shall be eligible for an expedited 60-day clearance. In these cases, the majority shareholding and control of the investee entity will be with resident Indian citizen(s) and/or resident Indian entity(ies) owned and controlled by resident Indian citizen(s), at all times. The government has also retained the ability to revise this list. These changes could revive previously stalled capital flows and increase fundraising for technology companies ahead of IPOs. The de-minimis threshold helps resolve a multitude of concerns for security for PE/VC funds, with passive LBC partners, since previously, such fundraising took months for approval. Additionally, the 60-day clearance may facilitate expansion of manufacturing units in India since it enables companies to enter into joint ventures with foreign players, to improve and adopt nascent technologies and integrate global supply chains. However, whether these benefits outlined will be fully realised in practice or not is still an impending question. The primary condition for the 10% de minimis threshold is whether the investor is “non-controlling” or not, a term which has been left undefined – thereby leaving authorised dealer banks without any guidance on whether to accept / reject a FDI proposal. Critical Assessment of the Amended Framework Firstly, the “beneficial ownership” rule is applied at the level of the immediate investor, leading to significant structural issues. Where a Chinese entity directly holds 40% of a Singapore holding-company that invests into India, the PMLA-based test is triggered cleanly – 40% exceeds the

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AI-Generated Intangibles in Transfer Pricing: A Case Study on OECD and Indian Frameworks

Taxation Law /

[By Shivam Tiwari] The author is a student of Gujarat National Law University, Gandhinagar.   Introduction Once a patentable drug compound is produced through an artificial intelligence system on its own, the conventional concepts of ownership and value creation begin to collapse. An example may be a cross-border structure in which the Indian research and development subsidiary offers data curation services to its Luxembourg parent on a cost-plus basis, such that the subsidiary is paid its costs plus a predetermined markup. The parent company’s AI system, which has access to both publicly available molecular databases and the proprietary patient data of the subsidiary, creates a commercially viable compound without the involvement of its human counterparts. Under the OECD functional analysis, residual profits are generally allocated to the entity that performs the economically significant functions, assumes the relevant risks, and makes the principal contributions to value creation. AI-generated intangibles, however, complicate this analysis. Where an AI system autonomously develops a commercially viable drug compound using both publicly available molecular databases and proprietary datasets supplied by an Indian research and development subsidiary, it becomes difficult to determine whether the subsidiary merely rendered routine data-curation services or made a substantive contribution to the creation of the intangible. This uncertainty also raises a broader question: which entity should be recognised as the developer of the AI-generated intangible for transfer pricing purposes? These questions are no longer merely hypothetical. Intangible assets now account for 82% of the total value of S&P 500 companies, according to Brand Finance’s Global Intangible Finance Tracker (GIFT) 2025. As Jonathan Haskel and Stian Westlake observe in Capitalism Without Capital, economies that are becoming more reliant on intangible assets pose special measurement and allocation problems. When non-human systems create or refine those resources, the problem becomes structural. Thus, the question is not whether AI can fit perfectly into the existing doctrine but whether it remains conceptually clear. The OECD Framework and India’s Transfer Pricing Regime The OECD Transfer Pricing Guidelines (Guidelines) are based on the arm’s length principle, which stipulates that related business enterprises should price transactions in a manner that is similar to how unrelated businesses would do so in the same market conditions. Chapter VI applies the DEMPE model of Development, Enhancement, Maintenance, Protection, and Exploitation to intangibles. This model identifies the party entitled to residual profits because it performs economically significant functions, assumes economically significant risks, and contributes to value creation. Legal ownership alone is insufficient. The Guidelines also deal with hard-to-value intangibles, or assets whose capabilities to generate future income cannot be properly estimated at the moment of transfer. In such cases, tax authorities can consider the ex post performance to determine whether arm’s length conditions were incorporated in the original pricing. Recognised methods of valuation are functional analysis, comparability studies, discounted cash flow techniques and contingent arrangements such as royalties or milestone payments. To a great extent, this structure is reflected in India’s transfer pricing regime under Sections 161 to 174 of the Income Tax Act, 2025 (IT Act), which govern the computation of income arising from international transactions and specified domestic transactions between associated enterprises in accordance with the arm’s length principle. Section 165 recognises six methods for determining the arm’s length price, while Rule 79 of the Income-tax Rules, 2025 (IT Rules) sets out the manner in which those methods are to be applied. The Cost-Plus Method compensates a service provider by marking up the expenses. The Profit Split Method is used to allocate total profits to related businesses based on their related contributions. The Transactional Net Margin Method helps to compare net margins of similar independent businesses. In 2012, India introduced Advance Pricing Agreements (APA) in order to enhance certainty. An Advance Pricing Agreement is a pre-transaction agreement between a taxpayer and tax authorities stating in advance the way transfer pricing rules will apply to specific transactions (typically over a number of years). Of the over 500 unilateral and bilateral APAs that the Central Board of Direct Taxes (CBDT) had finalised by March 2023, approximately 18 percent were of intangibles. To resolve cases of double taxation, tax authorities in different jurisdictions invoke the Mutual Agreement Procedure (MAP) as a post-transaction dispute resolution mechanism. These mechanisms are effective when there is an identifiable human activity that can be associated with the value creation. Once that assumption fails, the real challenge emerges. The Attribution Paradox: Algorithms as a Value Creation Process The DEMPE model presupposes the involvement of identifiable legal persons informing the human decision-making process and executing economically significant functions. Current AI systems complicate this concept. Large language models, among other high-end predictive models are trained using large datasets to identify patterns and deliver results with minimal human supervision. The data used to facilitate this learning process is referred to as training data. In a conventional analysis, the role of the latter may be identified as routine in cross-border AI arrangements in which the former party develops and trains the model and the latter provides proprietary datasets. The distinction between regular input and value creation becomes difficult when the quality of datasets directly affects commercial performance. The allocation of residual profits therefore relies more on the technological interdependence than on legal ownership. Domestic law displays this uncertainty. The Copyright Act, 1957 (Copyright Act) does not attract any presumption of non-human authorship. Although 2024 governmental clarifications suggested that already developed rules regarding copyright could help regulate the AI-generated works, they did not provide the answer to the more significant question regarding the attribution of ownership. The case of Asian News International v. Open AI (2024) (Open AI) highlights this ambiguity in the impending ruling in the case. The case concerns an admittedly illegal use of copyrighted content to provide training to large language models, but it raises broader concerns regarding control and ownership in AI-driven models. The Digital Personal Data Protection Act, 2023 (DPDP Act) remains silent on the issue of the proprietary rights of AI-generated outputs but only focuses on personal data processing.

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Stalled Runways: Repossession vs Moratorium in Aviation Insolvency

Insolvency Law /

[By Arunav Kapur and Jacob Eldho Kalarikkal] The authors are students of Rajiv Gandhi National University of Law, Punjab Introduction In the era of ever-increasing need for expeditious travel and prioritization of convenience, the aviation industry plays a major role in providing swift and accessible transportation. The aviation industry of India recently made history with over 5,00,000 travelling passengers accounted for in a single day. Yet, paradoxically, the industry operates on razor-thin margins. It is a huge loss bearing industry with a net loss of over Rs 110 billion in 2022-2023, driven by high fixed costs, volatile fuel prices, and cutthroat competition on fares. Along with this it is pertinent to highlight the extreme capital required to purchase an aircraft outright. To overcome this, airlines rely on sale-and-leaseback models, leasing up to eighty percent of their fleets from international financiers. However, when an airline defaults on its payments and insolvency proceedings are started, the presence of these international entities who are the lessors of the aircraft causes a complex jurisdictional and statutory conflict. Against this backdrop, the Convention on International Interests in Mobile Equipment (“the Cape Town Convention” or “CTC”) becomes the necessary guiding force. The CTC, aims to reduce the risks of aircraft financing by establishing a predictable, structured and independent framework for lessors to protect their asset i.e. the aircrafts. Through this essay, the authors analyse the conflict between the Irrevocable De-Registration and Export Request Authorisation (“IDERA”) mechanism under the CTC and the statutory moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). By examining recent legislative advancements leading to the Protection of Interests in Aircraft Objects Act, 2025 (“the Act”) and drawing  insights from U.S. jurisprudence. While giving appropriate arguments and reasoning, the author would highlight rationale behind the prioritization of the IDERA provisions as well as the need to find a balance in aviation insolvency between international financiers and corporate debtors. Domestic Moratorium vs. International Repossession Section 14 of the IBC lays down provisions for a strict moratorium period upon the commencement of a Corporate Insolvency Resolution Process (“CIRP”). This provision provides an automatic stay, prohibiting the enforcement of security or recovery over any asset in the possession of the debtor. It also includes those assets which are under lease with the objective of preserving the debtor as a going concern. In the aviation context, this historically froze the assets of insolvent airlines, prohibiting lessors from deregistering and exporting their aircraft. Conversely, the CTC champions the express repossession of mobile equipment. Under the CTC framework, an IDERA empowers an authorised party (typically the lessor) to procure the deregistration and physical export of an aircraft without judicial impediment, overriding local insolvency moratoriums. For years, this created a severe normative hierarchy dispute in India. The IBC’s asset-freeze ideology clashed directly with the CTC’s asset-recovery mandate. Lessors argued that grounding aircraft during a protracted CIRP inevitably destroys their value, as aircraft are highly depreciable assets that require rigorous, continuous maintenance. Article 13 of the Protection of Interests in Aircraft Objects Act, 2025, which implements the Cape Town Convention, provides for the statutory recognition of the Irrevocable De-registration and Export Request Authorisation regime under the Aircraft Protocol as the only authorised party able to initiate the deregistration and the export of the aircraft, i.e., the lessor, an irrevocable request is made to the local aviation authority to deregister the aircraft and physically remove the plane overriding any local insolvency moratorium. The Go First Catalyst The breaking point for this statutory dissonance was the insolvency of Go First in 2023. When the National Company Law Tribunal (“NCLT”) admitted the airline into CIRP and imposed a moratorium, lessors were barred from repossessing over fifty aircrafts. In response, the Aviation Working Group had downgraded India’s compliance rating, which is used to decide the interest rate and other financials relating to the leasing,  triggering an immediate spike in leasing premiums for all lessees from India. The crisis laid bare a fundamental reality that prioritising domestic insolvency moratoriums over international finance obligations artificially inflates the cost of doing business for the entire domestic aviation sector. Acting under the pressure of plummeting investor confidence, the Ministry of Corporate Affairs issued a notification in October 2023 under Section 14(3)(a) of the IBC, exempting aircraft and engines from the statutory moratorium. While this action facilitated the deregistration of Go First’s aircraft, it was widely viewed as a stop-gap measure. Delegated legislation lacks the permanence often preferred by international financiers. Recognising the need for a permanent measure, the Parliament enacted the Protection of Interests in Aircraft Objects Act, 2025. This legislation formally incorporated the CTC into law, granting it primacy over the conflicting domestic statutes, including the IBC. Crucially, the Act adopted the “Alternative A” under Article XI of the Aircraft Protocol of the CTC. To understand its significance, it is important to understand that the Aircraft Protocol offers its Contracting States a choice of insolvency frameworks. Alternative A is possibly the most rigid, creditor-protective option. It states that upon the initiation of insolvency proceedings, the debtor or insolvency administrator must either cure all defaults and commit to future lease obligations within a strictly defined “waiting period,” or unequivocally surrender the aircraft back to the lessor. This is not a novel  experiment; rather, it is the adoption of a recognised standard that jurisdictions like the United States have enforced for decades, yielding benefits such as significantly lower capital and leasing costs for airlines. Comparative Jurisprudence: The U.S. Standard To understand the mechanics and benefits of the new regime, it is important to look at the country that inspired it the United States. Recognising the unique nature of aviation finance, the U.S. Congress carved out Section 1110 of the Bankruptcy Code. Section 1110 serves as the global gold standard for balancing airline restructuring with lessor rights. It mandates that a lessor’s right to repossess an aircraft is not hindered by the automatic stay, unless the airline debtor, within sixty days of the bankruptcy filing, agrees

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