Author name: CBCL

Mandating Interoperability under Digital Competition Laws: Tracing the basis and boundaries of Enforcement

Leave a Comment / Competition Law /

[By Dhanshitha Ravi & Rishabh Guha] The authors are students of Symbiosis Law School, Pune.   INTRODUCTION Interoperability refers to the synergy between different systems to communicate with one another. Users can access multiple complementary services through a single access point. An example of interoperability in our everyday lives is the ability to upload one’s Instagram content on Meta (erstwhile, Facebook). The Draft Digital Competition Bill, 2024 (Bill), released by the Committee on Digital Competition law on 27 February 2024 mandates interoperability of third-party applications by Systemically Significant Digital Enterprises (SSDEs) i.e., Big Tech companies, on their platforms. This coincides with the European Commission’s active role in clamping down on the practices of Tech giants to an extent where Apple was forced to allow sideloading of applications from native websites and third-party app stores. The move seeks to comply with the interoperability mandate of the Digital Markets Act (DMA) that is effective from March 2024.  At this juncture, though mandating interoperability is in vogue, it is not only crucial to decipher where this modern remedy draws its legal foundations from, but also evaluate the same in the context of technological feasibility.   INTEROPERABILITY: A MODERN-DAY APPLICATION OF THE ESSENTIAL FACILITIES DOCTRINE  Concept of Essential Facilities Doctrine (Doctrine)  Briefly, the Doctrine mandates a duty on the monopolist incumbent controlling such essential facilities to ‘share’ such inputs with the competitors. A four-pronged test was devised based on which an input shall be determined as ‘essential’, if the following factors are satisfied –  A monopolist controls the essential facility  A competitor is unable to practically duplicate the essential facility.  The monopolist is refusing the use of the facility to a competitor  Providing the facility is feasible.  Furthermore, the courts also examine whether the facility should be a necessary input in a distinct, vertically related market. Though, traditionally, the doctrine has been applied to infrastructural facilities (such as railway bridges and telecommunications networks, to name a few), however, scholars have urged its applicability to regulate Big Tech.   Warranting application of EFD to regulate Big Tech  To understand whether the Doctrine can be directly applied while regulating Big Tech platforms, it is vital to consider whether it can be deemed as an essential facility and it is not feasible for the competitors to duplicate the same. Only then it is possible to establish a link between interoperability as a remedy in the modern sense to the sharing of facilities that is mandated, once the court opines that the facility is essential.  Firstly, in evaluating whether digital platforms are truly ‘essential facilities’, the core argument revolves around the assertion that these platforms are the railroads of the modern era which connect groups of consumers on either ends i.e., business users (sellers) and end consumers. Simply put, the usage of these platforms directly determines the volume of business or visibility that a seller gets and correlates to the number of choices that a consumer, by virtue of being a ‘bottleneck’ i.e., a service/an infrastructure that controls a process for which there is no sufficient bypass. This argument can be supported by the Court of Justice in Google and Alphabet v. Commission (Google Shopping case) which held that a search engine represents a ‘quasi-essential facility’ with no actual or potential substitutes. Furthermore, even the Competition Commission of India (CCI) in XYZ v. Alphabet Inc. & Ors. (Google Playstore case) has recognised that Google Playstore is a “critical gateway between app developers and users”, thereby indirectly affirming the theory that these platforms are indeed essential in the modern times.  Secondly, the requirement is that a ‘monopolist’ controls the essential facility. While prima facie reading shows that the tech space witnesses a massive influx of new companies, a deeper probe will reveal that the majority of the market share is still held by Google, Apple, Meta, Amazon and Microsoft (GAMAM), acting as gatekeepers, equivalent to monopolists in the traditional sense. As observed by the CCI in Umar Javeed & Ors. v. Google & Anr. (Google-Android case), the status quo maintained by GAMAM is attributable to strong network effects.  Thirdly, once a facility has been deemed as ‘essential’, the Courts assess whether competitors can reasonably duplicate the facility before mandating sharing. As discussed previously, due to advantages of network effects, it is impossible to duplicate the same without incurring significant costs.  Manifestation of the doctrine  In the EU, the DMA designates certain Big Tech platforms that serve as an important gateway for ancillary markets, as Gatekeepers supplying ‘Core Platform Services’, such as online search engines, online social networking platforms and operating systems, to name a few. Similarly in India, the Bill that draws inspiration from the DMA, designates such core platforms as ‘Systematically Significant Digital Enterprise’ (SSDE) supplying a ‘Core Digital Service’ in India.   Once designated, the entities will have to fulfil a set of behavioural obligations and ensure interoperability of third parties with the gatekeeper’s own services, so as to prevent refusal to access services that act as important gateways for business-to-business and business-to-consumer communication under Section 13 of the Bill and Article 5 of the DMA.   Thus, even though the terminologies differ, at the heart of both the legislations lie the intent to regulate such platforms that possess the characteristics of essential facilities, which if in the traditional sense would have required ‘sharing’, the modern-day application of which is interoperability.  MANDATING INTEROPERABILITY: ESTABLISHING A BOUNDARY  As much as regulating abusive behaviour by these Big Tech platforms is the need of the hour, mandating open sharing of platforms i.e., ‘interoperability’ might be problematic. Currently, the DMA mandates the platform to ensure interoperability and allow sideloading as well.  Technological considerations  It is argued that technology considerations take a back seat while mandating interoperability, thereby not being truly ‘feasible’. Scholar Guggenberger has suggested a renewed approach for the Doctrine wherein after an appropriate amortisation period, the regulator would mandate horizontal interoperability that would require the platforms to provide open access to their Access Point Interfaces (API). This would mean that Amazon would

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IBBI Recommends Mediation: Integration of ADR with IBC Laws

Leave a Comment / Insolvency Law /

[By Ayesha Nacario Gupta] The author is a student of Amity University, Rajasthan.   INTRODUCTION  The Insolvency and Bankruptcy code, 2016 (hereinafter the ‘Code’) is an important enactment by the legislature which provides for specialized mechanisms for insolvency and liquidation processes of corporate entities. The main highlight of this code is that it provides for the corporate insolvency process (hereinafter the ‘CIRP’) for financially distressed companies which is initiated on the application made to the Adjudicating authority i.e., the National Company Law Tribunal (hereinafter the ‘NCLT’) by financial or operational creditors, or even on the application of the corporate debtor itself by virtue of Sections 7, 9 and 10 of the aforesaid code respectively.  Even though the code emphasizes on providing a revival scheme for corporate entities in a “time bound manner” for “maximization of value of assets”, as stated in its preamble, it was observed that the code was unable to do so due to ambiguity in its text and various other external factors. The IBC laws were unable to provide a comprehensive mechanism to resolve matters relating to insolvency and bankruptcy within a reasonable time frame even though the law provides for it under Section 12. Therefore, in order to address this issue, an expert committee was constituted by The Insolvency and Bankruptcy Board of India (hereinafter the ‘IBBI’) to examine and produce a report regarding the scope of voluntary mediation in relation to various process under the code and also suggest recommendations. Therefore, this article aims to highlight various aspects of the report and its contribution to establishing a new paradigm of Insolvency and bankruptcy laws in India.  ABOUT THE REPORT  On 31st January, 2024, the IBBI published a report titled “Framework for Use of Mediation under the Insolvency and Bankruptcy Code, 2016”. This report was prepared by an expert committee constituted by the board and was headed by former secretary of Ministry of Law and Justice, Shri. T.K. Viswanathan. The expert committee, in its report, proposed that mediation can contribute as a supplementary mechanism to resolve conflicts which are associated with IBC laws.  The report suggests that adopting a non-adversarial approach will not only foster goodwill in business relationships but will also shield the Corporate Debtor from the negative connotations of insolvency, all while facilitating reconciliation of conflicts through amicable settlements.  The report, under the heading “Fundamental Objectives of the Framework” lays down its objectives which encompasses the following-   to expedite the resolution of insolvency cases by means of voluntary mediation,  to reduce pending cases that lie before NCLT,  to provide a specialist mechanism and infrastructure to settle insolvency disputes,  to maintain sanctity of timelines provided under the code,  to promote phased implementation,  to increase awareness of various stakeholders by means of mediation,  to foster insolvency mediation culture and encourage the use of mediation.  Hence, the recommendations made by the committee is vital to address pre-existing challenges of the Code by offering a more efficient, flexible, cost effective and collaborative approach by integrating mediation with IBC laws.  WHAT DOES IT BRING TO THE TABLE?  Firstly, the committee has recommended opting for the path of mediation to be voluntary (with consensus of parties) and a parallel process to the CIRP to make efficient use of time while also protecting the interest of stakeholders. “The essence of the framework is its independence and flexibility to provide room for quick incorporation of implementational learning,” the committee report said. It proposed the incorporation of mediation as an alternative dispute resolution (hereinafter ‘ADR’) mechanism within the existing statutory limitations and timelines of the IBC.  The committee further stated that it aimed to reconcile the objectives of the Code, including the timely restructuring of businesses and the maximization of asset value, while also allowing parties the freedom to voluntarily choose an ‘out-of-court’ mediation process, thereby improving the efficiency of the resolution process.   With the delegation of powers given to the Central Government, it may also prescribe rules for the basic structure if the insolvency mediation framework, the establishment of mediation cells in NCLT, the qualification required for the appointment of mediators and other essential notifications. On the other hand, the IBBI may specify the various procedures for the purpose of appointment of mediators and the method and manner in which insolvency mediations shall be conducted. It may also provide for the “automatic termination” of the insolvency mediation on the expiration of the given timeline.  It further opines the establishment of an internal mediation secretariat within the NCLT which shall be responsible to oversee, administer and manage the enforcement and conduct of insolvency mediation. However, this will also require the appointment of specialized mediators for resolving insolvency mediation disputes. Therefore, the report provided that such specialized mediators may comprise of retired members of NCLT/NCLAT, ex-senior officials in finance sector, insolvency professionals with more than 10 year of experience, and senior advocates to name a few.  Additionally, to prevent mediation from becoming an expensive affair, the committee proposes to provide a designated schedule on the various cost or fees associated with the mediation process and such fees shall be nominal. It also provides for the creation of a budget to reimburse any fee spent by the parties to NCLT. Such budget shall be managed by the mediation secretariat.  The committee also proposes to conduct “paperless mediation” by facilitating e-filing as it is of the opinion that conducting e-meetings would help NCLT achieve operational efficiency. Further, the committee insists on adopting hybrid or online mode for conducting mediation wherever possible.  On account of the above recommendations, it is understood that mediation would be seamlessly integrated into the existing framework of the IBC which will allow parties and various stakeholders to initiate mediation proceedings at any stage of the insolvency process starting from the pre-insolvency negotiations to the resolution and liquidation stage.  AUTHOR’S REMARKS  The committee report represents a commendable initiative by the IBBI to acknowledge the unique characteristics of ADR mechanisms. The framework provided by Shri. T.K. Viswanathan led committee is a right step

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Part 2 – Case Note: In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899

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[By Swarnendu Chatterjee & Shreya Mittal] The authors are Advocate-on-Record, Supreme Court of India and a student at National Law Institute University, Bhopal respectively.   (This is in continuation of the Part I of the blog where the author discusses the background and the verdict of the Supreme Court in the above-captioned case. In this Part, the author highlights the principle of arbitral autonomy and minimum judicial intervention and the doctrine of harmonious construction as applied in this case. Finally, the author concludes by summarizing the judgment and underlining the apparent criticism.) A. Arbitral Autonomy and the Principle of Minimum Judicial Interference Arbitration is a voluntary method for resolving disputes between parties that is founded on their agreement to submit their issues to an arbitral tribunal made up of one or three impartial arbitrators, who are either selected by the parties themselves or on their behalf.[1] The Judgement visits important principles enshrined in the Arbitration and Conciliation Act, 1996 to reason its decision. The principle of arbitral autonomy gives the Arbitral Tribunal the power to govern its own jurisdiction. It comes from the consent of the parties which excludes or limits the jurisdiction of legal systems to that specifically given in the concerned statutes, i.e., for India being the Arbitration and Conciliation Act, 1996. The principle of judicial non-interference also encompasses the principle of arbitral autonomy. The Supreme Court holds that the principle of separability goes beyond the issue of Kompetenz-Kompetenz principle. The word “authority” under Section 33 of the Stamp Act includes the Arbitral Tribunal as it is a creation of law supported by the provisions of the Arbitration Act and the intention of the parties to arbitrate. The stamp objection could be before the Arbitral Tribunal and taking the issue before the court would hold up the process. Rather, the alternative could be to limit the jurisdiction of the Court to interfere to the stage after the Arbitral Award has been passed instead of derailing the process. B. Harmonious Construction of the Arbitration Act, the Stamp Act, and the Contract Act Every statute is enacted by the Parliament with a legislative intent which gives purpose for the existence of the statute that must be taken into consideration while interpreting various provisions of the statute. However, it may be possible that while interpreting a provision of a statute, it may come into conflict with some other statute. Here, the Courts try to interpret the conflicting provisions harmoniously, so that it does not defeat the purpose of the statute. While interpreting, the Courts should keep in mind to not render the statute a “dead” letter and it must be so interpreted to give full effect to the conflicting provisions. With emerging developments in the field of Arbitration and UNCITRAL Arbitration Rules coming into place, the Arbitration Act was enacted by the Parliament to put India’s domestic laws at par with the international standards. On one hand, the intent of the legislature in enacting the Arbitration Act was to ensure the facilitation of an effective arbitration process and the reduction of judicial intervention within the arbitral proceedings. While on the other, the object of the Stamp Act was to generate revenue for the State. The two Acts come into conflict over here which is most precisely dealt by in the Judgement. The Judgement gives primacy to the Arbitration Act over the Stamp Act and the Contract Act, in matters involving arbitration agreements. This is reasoned by the way of classifying the Arbitration Act as a special legislation and the other two as general laws. The Arbitration Act governs the domain of arbitration in India. The issue here is in relation to arbitration agreements and not in general agreements or contracts as defined in the Contract Act. The Arbitration Act defines arbitration agreements and broadly deals with all the legal aspects of them. The Court in N N Global 2, while interpreting the various conflicting provisions, observes that in proceedings under Section 11 of the Arbitration Act, the interdict in Section 5 of the Arbitration Act would not take away limb from Sections 33 and 35 of the Stamp Act, and that it would not amount to judicial interference. However, interpreting differently, the Judgement does not agree with the said position of law laid down. The Judgement gives importance to the non-obstante clause in Section 5 of the Arbitration Act which reads as, “5. Extent of judicial intervention.—Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.” The Arbitration Act being a special law coupled with the non-obstante clause, the Judgement observes that it excludes the operation of Sections 33 and 35 of the Stamp Act, thus observing that the decision in N N Global 2 was not the correct position of law. The unqualified object of the Stamp Act is, among others, securing revenue for the state. However, the consequent cost of holding an unstamped or under-stamped agreement as unenforceable would result in derailing many arbitration proceedings over the country. Eventually, the price to be paid would be disastrous and it would miss the purpose of the Stamp Act. On the other hand, the principles upheld in the SC Judgement by letting the Arbitral Tribunal decide the issue of the validity of unstamped or under-stamped arbitration agreements while not interrupting the arbitration process would be in the best interests of revenue. Additionally, the revenue demand could be met during the arbitration process. II. CONCLUSION In the author’s view, the Supreme Court has set the jurisdictional framework in line with accepted and expected international arrangements of arbitrability. The Supreme Court has effectively gone on record to say that it was the Parliament’s view to further endeavor to make India an arbitration friendly regime. In the same vein, the Supreme Court has correctly set the legal framework in the right direction by upholding the validity of arbitration agreements contained in the

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Part 1 – Case Note: In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899

Leave a Comment / Contract Law /

[By Swarnendu Chatterjee & Shreya Mittal] The authors are Advocate-on-Record, Supreme Court of India and a student at National Law Institute University, Bhopal respectively.   Abstract: By a judgement dated December 13, 2023, a seven-judge bench of the Supreme Court in In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, unanimously decided on the issue surrounding the admissibility of unstamped or insufficiently stamped instrument in evidence. By overruling the five-judge bench verdict in NN Global Mercantile Private Limited v. Indo Unique Flame Limited, the Court held that an unstamped or insufficiently stamped instrument would be inadmissible in evidence, however, the same is a curable defect and that in itself does not make the agreement void or unenforceable. In this case comment, we discuss the facts and view of the seven-judge bench verdict and critically analyze this decision and its impact while delving into the conflicting reasoning of previous judgements. The comment sheds light on the various key aspects discussed by the Supreme Court such as the distinction between admissibility and voidness, doctrine of arbitral autonomy, and the harmonious construction of the three statutes. Finally, the comment observes that even though the judgement promotes arbitration friendly regime in the country, it leaves room for further discussion. I. INTRODUCTION On December 13, 2023 the Supreme Court of India (“Supreme Court”) delivered the judgement In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899[1] (“the Judgement”). The Court laid to rest the long standing quandary of whether arbitration agreements would become non-existent, unenforceable, or invalid if the underlying contract is unstamped or under-stamped.Theseven-judge bench led by CJI D. Y. Chandrachud delivered its verdict to over-rule the law laid down inM/s N N Global Mercantile Pvt Ltd vs M/s Indo Unique Flame Ltd And Ors[2](“N N Global 2”). The issue arose in the context of three Statutes – the Arbitration and Conciliation Act 1996[3](“the Arbitration Act”), the Indian Stamp Act 1899[4] (“the Stamp Act”), and the Indian Contract Act 1872[5] (“the Contract Act”). On one hand, the quandary revolving around the enforceability of unstamped agreements has been a long-standing issue.On the other hand,Arbitration is a fast-emerging alternate dispute resolution mechanism.Unstamped or under-stamped arbitration agreements have,therefore,become a matter of exploration by the Courts in India. The conflicting decisions on this issue have been laid to rest by the Supreme Court. II. BACKGROUND The controversy began with the decision by the Supreme Court in N N Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd[6](“N N Global 1”),where Special Leave of the Court invokedto determine the enforceability of an arbitration agreement contained in an unstamped work order.It was observedthatthe arbitration agreements are separate and distinct from the underlying commercial contract and would not be rendered invalid, unenforceable, or non-existent by virtue of unstamping or under-stamping of the principal contract. The non-payment of stamp dutybeing a curable defect would not invalidate even the underlying contract. This was an important juncture in the series of cases as the view taken by the Supreme Court was at variance with previous decisions rendered by the Supreme Court. Relying on the decision in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd,[7](“SMS Tea Estates”), where the Court held that an arbitration agreement in an unstamped contract could not be acted upon, the Court in Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd[8] (“Garware Wall Ropes”)was of the opinion that an arbitration agreement in an unstamped commercial contract would not exist as a matter of law and could not be acted upon until the underlying contract was duly stamped.  This was further fortified in the three-judge bench verdict of Vidya Drolia v. Durga Trading Corporation,[9]where the Court observed that an arbitration agreement exists only when it is valid and legal, thereby arbitration agreements must satisfy requirements of both the Arbitration Act and the Contract Act. However, N N Global 1 doubted the correctness of this position of law and referred the question of applicability of the statutory bar on arbitration agreement contained in an instrument, where the payment of stamp duty was pending,to a five judge bench which decided the matter in the case of N N Global 2. The court in N N Global 2 observed that the position of law given in N N Global 1 was not correct and reiterated the position of law as decided in SMS Tea Estates and Garware Wall Ropes. The majority judgement in N N Global 2 may be summarized as under: In accordance with Section 2(g) of the Indian Contract Act, 1872 an instrument lacking proper stamp duty and incorporating an arbitration agreement is rendered void. An instrument devoid of proper stamping, not constituting a contract and lacking legal enforceability, is non-existent in the eyes of the law. The arbitration agreement contained therein can only be given effect subsequent to its appropriate stamping; The conceptualization of the “existence” of an arbitration agreement as contemplated in Section 11(6A) of the Arbitration Act transcends mere facial or factual existence and encompasses a requisite “existence in law”; A tribunal operating pursuant to Section 11 of the Arbitration Act is precluded from overlooking the imperatives delineated in Sections 33 and 35 of the Stamp Act, mandating thorough scrutiny and impounding of instruments lacking proper stamping; The authenticated copy of an arbitration agreement must transparently delineate the discharge of the stipulated stamp duty. In Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram v. Bhaskar Raju and Brothers,[10](“Bhaskar Raju”) the court cited SMS Tea Estates with approval. Bhaskar Raju was decided before N N Global 1. On 7 December 2022, a curative petition was filed seeking a reconsideration of Bhaskar Raju. On 26 September 2023, a Bench of five judges took up the curative petition. Considering the larger ramifications and consequences of the decision in N N Global 2, the Court referred the proceedings to a seven-Judge Bench. Hence, the Supreme Court in the Judgement considered

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Is Limitation Act, 1963 Applicable to Condone Delay for an Application Filed Under 17(1) of the SARFAESI 2002?

Leave a Comment / Debt Recovery /

[By Aryaditya Chatterjee] The author is a student of School of Law (Christ Deemed to be University).   INTRODUCTION On 3rd of January, 2024 the High Court of Madhya Pradesh (HC) in the case of Aniruddh Singh v Authorized Officer ICICI BANK LTD[1], held that Debt Recovery Tribunal has the power to condone delay for an application filed under Section 17(1) of the SARFAESI Act2002 through the application of Section 5 of the Limitation Act 1963 (Limitation Act). It is pertinent to mention that this particular judgment is not binding on all high courts as several high courts have passed judgments contrary to the same. This article will attempt to provide an answer to whether the DRT has the power to condone the delay for an application filed under Section 17 of SARFAESI Act 2002 by analysing various judgments pronounced by the High Courts and the Supreme Court. The first step towards answering the above question, is to decode the judgment given by the Madhya Pradesh High Court (HC). DECODING THE JUDGMENT The Madhya Pradesh High Court (HC) in its judgment held that Section 5 of the Limitation Act 1963 (Limitation Act) will be applicable to condone the delay for an application filed under section 17(1) SARFAESI Act 2002. The court relied on the decision of the Supreme court (SC) in the case of Baleshwar Dayal Jaiswal vs. Bank of India and others[2]wherein an ‘appeal’ under section 18(1) can be condoned by the Appellate Tribunal through the application of the Limitation Act 1963 (Limitation Act). However, when the judgments of other High courts (HC) are taken into consideration then they are on a different pedestal than that of the Madhya Pradesh High Court (HC). The Calcutta High Court (HC) in the judgment of the Akshat Commercials Pvt. Ltd v Kalpana Chakraborty[3] held that Section 5 of the Limitation Act 1963 (Limitation Act) will not be applicable to condone the delay for an application filed under section 17(1) of the SARFAESI Act 2002  because an application filed under this section is that of a civil suit in nature. The Orissa High Court (HC) in the Judgment of Bm, Urban Co-operative Bank Ltd v Debt Recovery Tribunal[4] held that delay in filing of an application under section 17(1) of the SARFAESI Act 2002 cannot be condoned by the DRT by applying Section 5 of the Limitation Act since an application may be disposed in accordance with the Recovery of Debts Due to Banks and Financial Institutions Act 1993 (RDB)  as per section 17(7) of the SARFAESI Act 2002 and RDB has not given any special power to the DRT to dispose an application filed under Section 17(1) .The Orissa High court also placed a special reliance on the judgment of the Supreme Court (SC) in International Asset Reconstruction Company of India Ld. v. Official Liquidator of Aldrich Pharmaceuticals Ltd[5]wherein it was held that Section 5 of the Limitation Act 1963 (Limitation Act) is only applicable to an original proceeding filed under Section 19 of the RDB Act. After a detailed analysis of the three High Court judgments, it is clear that there is a Question of Law as to whether Section 5 of the Limitation Act 1963 (Limitation Act) is applicable to an application filed under Section 17(1) of the SARFAESI Act 2002. The first step towards answering the above question, is to understand the nature of an application filed under section 17 of the SARFAESI Act 2002. NATURE OF AN APPLICATION FILED UNDER SECTION 17 OF SARFAESI ACT 2002 A remedial application under section 17 of the SARFAESI Act 2002 is filed in the DRT by an aggrieved borrower against any measures taken by the Secured Creditor under Section 13(4) of the SARFAESI Act 2002 and such an application shall be filed within 45 days of such measure taken against the borrower. Even though the statute considers an application under section 17 of SARFAESI Act 2002 to be an “Application” in nature, the Supreme Court (SC) has taken a contrary view in this regard through various judgments. In the case of Mardia Chemicals v Union of India[6], the Supreme Court (SC) observed that proceedings under an application filed under section 17 of SARFAESI Act 2002 are not an appellate-proceeding but a misnomer. The proceeding is an initial action which is brought before a Forum as prescribed under the Act, raising grievance against the action or measures taken by one of the parties to the contract. The Supreme Court in this case decided that an application under Section 17 of the SARFAESI Act 2002 falls within the lieu of a civil suit. Later in the judgment of M/s Transcore v Union of India[7],the Supreme Court relied on Mardia Chemicals[8] and were of the opinion that an application filed under section 17 of the SARFAESI is that of a “civil suit” in nature. It is clear from both the judgments of the Supreme Court (SC) that an Application filed under section 17 of the SARFAESI is a ‘civil suit’ in nature. APPLICABILITY OF LIMITATION ACT FOR AN APPLICATION FILED UNDER SECTION 17 OF THE SARFEASI The Supreme court (SC) in the case of Baleshwar Dayal Jaiswal vs. Bank of India[9] held that delay in filing an ‘appeal’ under section 18(1) of the SARFAESI Act 2002 can be condoned by the Appellate Tribunal by applying the Limitation Act 1963 (Limitation Act). However, it is pertinent to mention that the nature of an appeal under section 18(1) of the SARFAESI Act 2002 is that of an “Appeal” to an Appellate Tribunal. In such a scenario, delay in filing an ‘appeal’ can be condoned by the limitation act because it is an appeal in nature. It is pertinent to mention that an application under section 17(1) of the SARFAESI Act 2002 is that of a “Civil Suit” in nature as decided by the Hon’ble Supreme Court (SC) in the various of its judgments. The Limitation Act 1963 (Limitation Act) has defined both suit and an

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Towards Ending the Oscillation between Relevant and Global Approach: 2024 CCI Guidelines

Leave a Comment / Competition Law /

[By Ayushman Rai] The author is a student of National Law University, Jodhpur.   Background Until the 2023 amendment, the Indian law didn’t explicitly take a stand between the global and relevant turnover, and hence the pendulum kept on swinging between the two. This article is written with the twin motives of examining the backdrop and implications of the changes in the basis for penalisation under Indian law; and assessing the extent to which this alteration conforms with the aims and objectives of competition policy, through a juxtaposition with other (European and British) jurisdictions.  Pre-Amendment Developments: Buildup to Excel Corp Case Initial inclination towards “global approach”  The notion of penalising the entity distorting competition based on its turnover has been universally accepted. However, there is a split of opinions on the appropriate basis for the calculation. Should it be calculated based on the firm’s turnover in the specific market where it has (or attempted to) distort competition, i.e., the “relevant turnover”; or should it be based on the “global turnover” of the firm regardless of the size/type of market distorted?  The initial years post-enactment saw the Competition Commission of India (CCI) attempting to take the widest import in fining, and went for the global turnover approach. Applied in a plethora of cases,1 the approach was justifiable to a certain extent, based on the aim of imposing penalties—“deterrence”.  The Excel Corp Rift   In order to prevent arbitrariness, Section 27 of the competition act provided that the onus was on the court to elucidate appropriate reasons before imposing punishment. However, the penalties imposed still seemed unjustifiably excessive and disproportionate in many cases.  This culminated in the Excel Corp Case, which was an appeal against a case where the penalties imposed were enormously disproportionate, despite being culpable for the same offence.  Proportionality, enshrined under Article 14, meant that the fine should be imposed proportionate to the gravity of the offence. Taking cue from South Africa, the court acknowledged the aim of deterrence (purposive interpretation), but conceded that it cannot go to the extent of imposing penalties that eradicates the existence of a firm. It was held that the aim of deterrence can be sufficiently served with “relevant turnover”, by reading the purpose with proportionality.  The 2023 Amendment: Inferences and Implications Debunking the Excel Corp  The 2023 amendment act addresses the issue of  the Excel Corp by explicitly adding an Explanation to Section 27, to clear the ambiguity. The purpose of deterrence is also served effectively  by the ‘global turnover’ approach. Moreover, the concern for disproportionality lies in the percentage of the turnover (on the scale of zero to 10 %) taken for the penalty, and not the nature of turnover- i.e., global or relevant. Section 45 of the amendment takes care of the same, by provisioning for guidelines to CCI for ensuring proportionality in imposing penalties.  The Positives  The amendment enforcing a reversion to the global approach is commendable for plenty of reasons, as it plugs several loopholes, which were not addressable by the relevant approach.  The digital (muti-market) conundrum— a major ambiguity revolved around penalising the “digital market platforms”. The non-feasibility of relevant turnover for digital enterprises was emphasized in Matrimony.com vs. Google. As Google could contend herein that it is bereft of any liability, since the search is free, there is no revenue from this stream of (relevant) market, hence no penalty. Such an inference would straightaway defeat the purpose of the act, and is impermissible. This stance found the latest reiteration in 2022, when the court in MMT-GO, interpreted the aggregate turnover under the titular of relevant turnover only, to preserve the aim of deterrence.  Dominant in one market, abusive in another (Tying cases)— the delineation of market is easier when the abuse is through anti-competitive agreement, but in the cases of abuse through dominant position (by conduct) it turns complex. More so, in cases where the firm in dominant in one market and is abusing it in the other (related) market. For instance, in a case of tying, where the firm makes the supply of the product (where it has dominant market) contingent on the purchase of another product (not dominant). Since, the relevant market is not determinate, the approach will fall flat here. Even if we take the market where abuse happens to be the relevant one, the fine imposed will be inept, unfair and insignificant to deter.   Cover bidding loophole—  the firms, not involved in the business of the product, were bid-rigging and getting away without being punished. This was being done through complementary bidding agreements (page 6). The CCI took no time to distinguish the case, reflected as a glaring drawback of relevant approach, from the Excel Corp. With the new amendment, this loophole is done away with.  The Negatives  While the amendment meets several of its targets, there are some aspects that reflect badly on it too.   Procedural accountability/scrutiny compromised— a major criticism of the amendment comes against the procedural irregularity in the pursuit of passing the bill. Specifically, the provision of the amendment (Explanation II of S. 20) doing away with the Excel Corp, was not included in the original amendment bill tabled before the Indian parliament. The provision, subsequently, was not scrutinised even by the Parliamentary Standing Committee on Finance, to which the bill was referred by the Lok Sabha on Aug, 17th, 2022. It was passed without debate once it was reverted by the Standing Committee. Moreover, it was not included even when the draft bill was published to invite public comments, hence it also escaped the direct public scrutiny. Thus, a major question arises as to accountability of this provision, which nullifies a landmark judgement in the arena of Indian competition law. It was not a recommendation of any committee report, not even the most recent CLRC report, nor was it debated by parliament, standing committee or even public, hence it has a shaky foundation.  Furthering the protectionist agenda— arguably an unintended repercussion of the amendment is the bias against the

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Dual Dynamics: Navigating Issues and Unlocking Value

Leave a Comment / Contemporary Issues /

[By Agrima Bajpai & Kritika Soni] The authors are students of National Law Institute University, Bhopal.   Introduction  The Air India-Vistara merger has been picking up speed since the approval was granted by the Chandigarh Bench of the National Company Law Tribunal (“NCLT”) in early June this year. The merger is likely to make it India’s largest international carrier and the 2nd largest domestic carrier, second only to Indigo. The entities are owned by the Tata Group and shall be merged under the “Composite Scheme of Arrangement”. Additionally, the low-budget carriers of the Tata Group namely, Air India Express as well as AIX Connect (formerly known as, “AirAsia India”), shall also be combined with the merged entity and will be collectively known as Air India Limited.  The merger would likely hold 22.5% of the market share and received a green light from the Competition Commission of India (“CCI”) in September last year. The competition regulator shall continue to monitor and report the merger’s development, progress and effect on the Indian economy, particularly the aviation sector. Air India is a part of the Star Alliance which already houses some of the biggest global airlines. This means that the merged entity will have the benefit of  an increased fleet size and  access to more flying routes, greater connectivity, more destination options for consumers, enhanced quality of service and cost-effective business solutions.  The merger is a huge step forward in the aviation industry. However, it comes with its own set of complications and troubles. This article aims to discuss the next step forward for the merger in terms of both its victories as well as hurdles.  Understanding the Merger   The Tata Group acquired government-owned Air India in 2022 and shortly after, announced its merger with Vistara. Air India is a flag carrier airline of India serving a variety of international and domestic destinations whereas Vistara is a joint venture of Tata Sons and Singapore Airlines in a 51:49 partnership, respectively. As a result of the merger, Singapore Airlines will have a 25.1% shareholding in the combined entity.    This merger has been approved under the “Composite Scheme of Arrangement” by the NCLT under Sections 230 to 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.  The scheme obtained approvals from both the CCI and the Competition and Consumer Commission of Singapore (“CCS”), Singapore’s antitrust regulator. After the CCI had approved the merger, the CCS had only granted conditional approval, having raised concerns that could eventually affect the competition in India. These included concerns over the parties holding the majority of the market share in the aviation industry in four major routes of Singapore and India. However, to address these concerns the parties suggested that they would appoint independent auditors to oversee and supervise adherence to their flight capacity commitments which they had proposed to keep at pre-COVID levels. Consequently, they would submit both annual and interim reports to monitor compliance. These proposed commitments were seen as adequate to address the competition concerns raised by Singapore’s antitrust regulator.    NCLT further directed that Vistara be dissolved without undergoing the process of winding up once the airlines merge. It stipulated the transfer of all concessions or benefits to which it was entitled under statutes like the Income Tax Act to Air India Limited. Subsequently, all contractual obligations, liabilities, and employees of Vistara would be deemed transferred to Air India.   Unfolding Challenges and Opportunities  While the merger may be ridden with complexities of its own in the current scheme of things, it has numerous advantages not only  for the stakeholders but also for the Indian economy.  Staff Integration  After a merger or acquisition, the biggest challenge is integrating the staffs of the merging companies. Sensitive handling by HR and top executives is crucial to address potential conflicts over pay structure, seniority, rank, and promotions. Deciding who holds executive positions can create tension. These sensitive issues must be managed responsibly to ensure a successful merger, as employee dissatisfaction can harm the company.  Returning to the current topic, a recent occurrence pointed towards troubled waters in the whole Air India-Vistara realm. Several Vistara pilots and crew members called in sick which led to delays and flight cancellations. If we go by the sources, it is rumoured that not all of Vistara’s staff is likely to be merged with Air India. Even though the combined entity is supposed to house 218 aircraft, it does not have the means to keep all staff onboard. Furthermore, the Air India Express Employees Union, which comprises mostly the cabin crew, had also previously adhered to the same strategy by calling in sick. The staff is clearly dissatisfied with the new worker appreciation policy, mismanagement, and unequal treatment of the staff under the guise of the merger. Many valuable pilots and senior cabin crew members have been leaving since everyone is not expected to be a part of the merged entity. This is more concerning since both Vistara and Air India are losing their prized employees  Air India’s Commercial Pilot Union and the Indian Pilot’s Guild are also on the side of the disgruntled employeesThe Directorate General of Civil Aviation (“DGCA”) had also intervened and asked the CEOs of both companies to sort out these obstacles in an internal capacity. Needless to say, if these employee troubles are not resolved soon, the future of the merged entity is likely to be in peril.   Profitability and Consumer Base  Despite differentiating its service levels, Vistara has consistently struggled with profitability due to costs being about 30% higher than its low-cost competitors. Ticket prices have not fully compensated for this disparity. Although reducing losses, Vistara still operates at a deficit, with cumulative losses exceeding Rs. 9000 crores (as of FY 2023). A merger appears to be the only viable solution for turning the business around, making it inevitable despite differing opinions.   Vistara’s loyal fliers are concerned that their trusted brand is being compromised. The airline’s loyalty program, with numerous platinum, gold,

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The Confidentiality Conundrum in India’s Competition Framework

Leave a Comment / Competition Law /

[By Sidhanth M K Majoo] The author is a student of National Law University, Odisha.   Introduction Competition Commission of India recently passed an order requiring Swiggy to share confidential business information. Swiggy filled a petition in the Karnataka High Court challenging this order on the ground that is it arbitrary and could detrimentally impact its business operations.  The dispute originates from a 2021 complaint by the NRAI, in which it accuses Swiggy and Zomato of engaging in anti-competitive practices. In response to that complaint, the CCI initiated an investigation in 2022, which led to the current contention over the confidentiality of the information disclosed during the probe​​​​.  While this particular complaint is Sub Judice, this situation does shine light on the confidentiality practices that the CCI has adopted, or lack thereof.    This article evaluates the effectiveness of confidentiality measures in India’s competition law. It explores the evolution of confidentiality regulations, assesses their current effectiveness, and compares them with international standards from the ICN. The piece also highlights the impact of inadequate safeguards on the fairness and integrity of competition law enforcement in India.  Assessing the Sufficiency of CCI’s Confidentiality Measures  Currently in India, confidentiality in proceedings conducted by the CCI is governed by specific provisions in the Competition Act, 2002, along with supplementary regulations. Section 57 of the Act mandates that the CCI shall keep information relating to any enterprise, being confidential, as confidential unless the disclosure of such information is required under the provisions of the Act or for compliance with any other law.   Regulation 35, of the Competition Commission (General) Regulations, 2009, currently provides a framework for treating of sensitive information, and prevents disclosure of it to protect business interests.  In May 2024, CCI introduced the CCI (General) Amendment Regulations, 2024, aiming to enhance its confidentiality regime in legal proceedings. This was preceded by a Public Consultation initiated by the CCI in February of 2024. This is not the first time CCI has made major changes to the regulations, as a matter of fact in 2022, CCI introduced the concept of a confidentiality ring which allows limited access to sensitive information during investigations.  The  Competition Commission of India (General) Amendment Regulations, 2024 mainly formalize the process for establishing a confidentiality ring upon request, designating specific time rings for the same. They have also adjusted the protocol for document inspection and the associated fees, aiming to streamline procedures and ensure more effective case handling while providing parties more robust means to protect and manage confidential information.  However, one must wonder if these enhanced measures are sufficient to ensure the integrity and fairness of the proceedings, or is it too little too late. As we consider the domestic efforts to bolster confidentiality within the competition framework, it is insightful to look towards international collaborations that influence these practices globally.  Breaking Borders: How ICN Shapes Global Competition Policies  The International Competition Network (“ICN”) is a global partnership which was formed in 2001 with the purpose of enhancing the efficacy of competition law enforcement worldwide. It unites competition authorities from diverse jurisdictions, fostering a collaborative space where ideas and best practices in competition policy and enforcement are exchanged. Periodically, the ICN releases documents and guidelines. It is prudent to note at this point that India recently became a member of the steering group of ICN in 2023.  The ICN Recommended Practices for Investigative Process states that transparency regarding the legal standards and agency policies is crucial for accountability and predictability in enforcement. It is advised that agencies should communicate clearly about their procedures and investigative tools, and provide reasons for their decisions to foster understanding and compliance. While these practices advocate for a balanced approach that considers the commercial interests, procedural rights, and enforcement transparency, the situation in India appears to diverge from these ideals.  Transparency protocols in India do not live up to the same standards that has been recommended by the ICN.  The Protocol recommends that competition agencies should possess internal safeguards, in case the CCI has any they have not been communicated to the public.  Section 57 of the Indian Competition Act primarily outlines a general obligation for the CCI to maintain confidentiality without providing specific guidelines on what should be classified as confidential. ICN recommends the contrary in the form of detailed conditions for handlining sensitive personal data and trade secrets. India not living up to this recommendation could be a bane for it in the long term for its competition regime. This gap not only limits the effectiveness of confidentiality protections but also impacts the overall trust in the enforcement process managed by the CCI.  ICN also in the Recommended Practices for Merger Notification and Review Procedures suggests that competition agencies should defer contacting third parties about a merger until it becomes public knowledge, unless early contact is essential for the review. The regime in India again fails to clearly release guidelines which fulfil this role.  Global Trends in Confidentiality: Lessons for India  A survey conducted of 39 ICN members (Not including India) regarding confidentiality practices in their countries shines a dark light on the current situation in India. It was observed that confidential documents are generally destroyed once a case has been resolved – a practice not explicitly defined in India’s competition law regime. The survey’s findings emphasize the need for India to consider incorporating these practices to enhance the robustness and reliability of its competition law procedures.   The survey indicated that 92% of the agencies around the world have established statutory provisions to protect confidential information obtained during investigations. 70% of these agencies publish the criteria governing their handling and treatment of confidential information. India has till date not notified any such procedures to the general public.  The ICC’s Blueprint for Competition Law  Even the International Chamber of Commerce has released a document titled “Recommended Framework for Best Practices in International Competition Law Enforcement Proceedings” which underscores the importance of procedural safeguards such as transparency, due process, and non-discrimination to ensure fairness in

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Hedging in Currency Derivatives Market: Is This End of Currency Derivatives?

Leave a Comment / Capital Markets and Securities Law /

[By Pranshu Agarwal] The author is a student of Institute of Law, Nirma University.   Introduction  The Exchange-Traded Currency Derivatives (“ETCD”) was introduced with the primary aim to enable traders and members to hedge their forex risk exposure, but they were using the ETCD platform for speculative trading without having any underlying contracted exposure. Although, the Reserve Bank of India (“RBI”) had stated that the Authorised Dealers (“AD”) do not need to establish the existence of any underlying contracted exposure up to $100 million yet, this led to speculative trading by the traders without having any underlying contracted exposure at all.  The RBI on 5th January, 2024, issued a circular titled “Risk Management and Inter-Bank Dealings – Hedging of foreign exchange risk” (“RBI Circular”) and thereafter, the National Stock Exchange (“NSE”) issued circular to the brokers to comply with the RBI Circular by April 5th. Because of these circulars, Market experts are expecting a slump of 80-85% in the volume in the ETCD overnight that is comprised of proprietary traders, retailers and arbitragers. This article seeks to analyses the principle-based regime and RBI’s direction to establish an underlying contracted exposure for ETCD. The article explores the requirement of valid underlying contracted exposure and its implications. It also discusses the effect of the RBI Circular on the derivatives market.  Underlying Exposure for ETCD: The Current Position  ETCDs are financial contracts traded and regulated by the stock exchanges. These contracts are akin to the volatility in international trade and exchange rates, making such contracts exposed to transactional exposure. To ensure stability and exposure against sudden market movements, RBI required the users to have underlying exposure for taking a position in the market. Whereas, for the convenience of the users, RBI allowed them to take up a position of up to $ 10 Million in the market without having to establish the existence of any underlying exposure. Later the limit was increased to $ 100 Million combined across all exchanges.  The RBI Circular, followed by the 1st April NSE’s circular specified that the users are allowed to take a position in the ETCD upto $100 Million without having to establish the underlying exposure, however they have to ensure a valid underlying contracted exposure for the same. What this entails is that before the RBI Circular, the users could trade on the ETCD up to $ 100 Million without having to show any underlying exposure and RBI did not have any authority to ask for the existence of the same. The RBI Circular has granted the RBI the power to inquire the user whether the ETCD units purchased by them have been hedged by a valid underlying contracted exposure. If the users fail to comply with the Circular by 5th April, 2024, they will be held liable for non-compliance under the Foreign Exchange Management Act, 1999 (“FEMA”). The deadline for the compliance has been extended to May 3rd, 2024 in light of numerous requests from members and traders.  Analysis of the RBI’s Circular  A prima facie reading this circular implies that an exemption provided to the users from having an underlying exposure in the ETCD unit upto $ 100 Million. This exemption has been curbed by the RBI Circular, prescribing the users to ensure valid underlying contracted exposure. Due to this, the traders are squaring off their current position in the ETCD market as the circular aim to eliminate speculative trading and various scams in the derivatives market. As per the SEBI report 90% of the traders make loss in the market, the circular will also ensure protection to the traders.  The derivatives market is very volatile for trading purposes, which can multiply your investment or shrink it down to zero in few minutes. Using this speculative and volatile nature of the derivatives market, many traders trade without any underlying exposure. For example, one of the trader keeps on buying derivative units and another trader keeps on selling the same derivative units thereby artificially inflating the price of the derivative unit, and the situation results in significant loss or profit to either of the trader. Such a scenario is not possible in case the users establish an underlying exposure. That is why hedging is prescribed by the RBI under FEMA as it reduces risk and profitability by creating a negative position in the particular unit.  On the close reading of the RBI Circular in line with the RBI’s policy for currency derivatives, it can be said that the RBI Circular does not make any real changes in the hedging requirement for the currency derivatives. The RBI’s policy has always been consistent over the years regarding the hedging requirement. Earlier, the RBI provided exemption from producing evidence of an underlying exposure, but it never intended to allow trading without any exposure. The exposure requirement was always mandatory. The users understood this exemption from producing evidence of exposure tantamounting to no exposure at all. The RBI Circular merely reiterate what was said in the earlier directions and nothing new has been introduced in the RBI Circular.  End of Speculation: Would this serve the RBI’s Purpose?  Speculative trading is often perceived as inherently risky, posing significant risk to traders. However, it is also necessary as it contributes to market volume. Eliminating speculative trading in the market may lead to reduction in market liquidity, issues in finding getting accurate pricing.  The RBI Circular will not affect the hedgers, as they already hedge their investment, but the proprietary traders and retailers were the biggest contributors to the currency derivatives market, liable for more than 80% liquidity in the market. This circular will require these traders and investors to square off their existing positions without having underlying exposure. With all the traders and investors gone, hedgers will not find any liquidity or any counterparty to execute a contract or hedge their securities in the currency derivatives market. However, hedgers have the option to hedge their securities with future contracts through the Over-The-Counter (“OTC”) market with the banks. Still, there

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