Author name: CBCL

Proposed Section 28A of IBC: Efficiency Gains or Disproportionate Burden on Guarantors?

Leave a Comment / Insolvency Law /

[By Vanshika Kamboj] The author is a student of Rajiv Gandhi National University of Law   Introduction The Insolvency and Bankruptcy Code (“IBC” or “the Code”) has reshaped India’s approach to insolvency aiming to strike a balance between creditor recovery and fair treatment of debtors and other stakeholders. At its core, the Code is built on the ideas of value maximisation and equitable, efficient, and transparent processes. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (“the Amendment”), although builds on the same principles, marks a significant shift by introducing Section 28A which allows pooling of assets of corporate and personal guarantors (“guarantors”) with the Corporate Insolvency Resolution Process (“CIRP”) or liquidation estate. The Amendment aims to remove complexities and reduce delays by aligning with the Transfer of Property Act 1882 (“ToPA”) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (“SARFAESI”). However, the real effect may be less about “harmonisation”, and more about legislative dominance, potentially overriding existing substantive provisions under other laws. While the Amendment may appear to be well-intentioned, it raises important questions about how far the law can stretch without weakening the existing statutory and constitutional safeguards available to the guarantors. Section 28A gives the Resolution Professional (“RP”) the power to bring guarantors’ assets into the ongoing CIRP or liquidation estate. It allows the RP to use or transfer them as part of a resolution plan – which marks a significant expansion of its authority. This approach marks a shift from the inter-partes framework of the ToPA (where rights arise between specific parties) to the in-rem nature of IBC proceedings (which bind all stakeholders without explicit exceptions). Hence, the real concern is whether pooling third-party assets effectively converts a single-entity, inter-party process into a collective exercise of resolution – which transgresses the existing protections. Notably, the Parliamentary Select Committee in its report on the Amendment bill dated December 17, 2025 left the issues unaddressed. Instead, it adopted the ministry’s view that 28A is merely a facilitative provision and does not override any substantive rights under any other statute, mainly ToPA and SARFAESI. This analysis interrogates this legal fiction by examining the legislative reasoning, procedural implications, and potential constitutional and jurisprudential tensions it creates. It also analyses whether Section 28A genuinely advances value maximisation or risks deepening inequities. The analysis first discusses the intent and the procedure under section 28A. Second, it critically analyses the potential conflicts with current substantive laws, especially ToPA and SARFAESI and determines their implications on guarantors’ rights. Last, the analysis examines constitutional and jurisprudential implications of the amendment, and outlines the safeguards that should be included to guarantee equitable enforcement.  I. RATIONALE AND CONTEXT OF SECTION 28A Section 28A aims to simplify insolvency processes and allow greater creditor recovery by pooling the assets of the guarantors with the CIRP or liquidation estate. Before this amendment, third-party security holders (creditors in whose favour an asset is pledged or provided as security for another borrower’s borrowing) had to pursue recoveries pursuant to ToPA or SARFAESI, which usually resulted in delays, piecemeal recoveries, and increased litigation. Section 28A allows the creditor to pool the guarantor’s assets, whether personal or corporate, in the ongoing CIRP or liquidation proceedings. This inclusion is subject to the sanction by the Committee of Creditors (“CoC”) or creditors representing a specified majority, i.e. in case of a corporate guarantor going through CIRP, then at least 66% of CoC approval, and in case of a personal guarantor’s insolvency or bankruptcy, then by a majority of 75% in value of creditors. This is applicable when the creditor has the lawful possession of those assets. Once approved, the RP integrates the asset into the estate. Then, the Resolution Applicants (“RA”) can bid on the bundled package, with proceeds first adjusting the CD’s debt (after preservation costs), and any surplus is then returned to the guarantor. Further, Section 28A (2) creates a legal fiction by deeming that, once the assets are transferred into the estate, the buyer (potential RAs) acquires the title as though the transfer was made by the real owner i.e., the guarantor. It provides for an unencumbered title, overriding prior encumbrances, third-party claims, or inter partes rights under ToPA/SARFAESI.  II. INFRINGEMENT OF GUARANTORS’ RIGHTS While Section 28A aligns with the core objectives of IBC, i.e., value maximisation and safeguarding the interests of stakeholders, it undermines the statutory rights of the guarantors under ToPA and SARFAESI. This also results in a violation of Article 300A of the Constitution of India (“COI”). In Lalit Kumar Jain v. UOI (2021), the Hon’ble Supreme Court (“SC”), while upholding the inclusion of personal guarantors into the IBC framework, stressed that their liability remains distinct. Contrarily, Section 28A dilutes this by letting guarantors’ assets commingle with CIRP or liquidation estate, effectively subsuming the guarantee contract into the debtor’s insolvency, and hence, leaving the guarantor with far less control. The following violations are apparent: 1.Under ToPA Section 28A (2) provides that “the transfer of an asset referred to in sub-section (1) under a resolution plan shall vest in the transferee all rights in, or in relation to the asset, as if the transfer had been made by the owner of such asset.” This effectively grants ownership rights over a mortgaged asset. This position conflicts with ToPA as it limits a mortgagee’s interest to possession and enforcement only, and not ownership. Further, under Section 60 of the ToPA, the guarantor retains a statutory right of redemption, and even in the case of default, no right of ownership is transferred to the mortgagee. The only right a mortgagee gets is the right to file a suit of foreclosure u/s 67 of the ToPA. Ownership of the property can only be claimed through a suit of foreclosure, and once an order for sale or transfer of the ownership is passed, it must be followed by execution of a registered deed. The SC, in Narandas Karsondas v. S.A. Kamtam and Anr, reiterated that a mortgagee’s rights are limited, and ownership of a property can

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Ambiguity in Commercially Sensitive Information Classification: The Need for Sector-Specific Gradation Criteria Under India’s Competition Rules

Leave a Comment / Mergers & Acquisitions /

[By Abeer Sharma] The author is a student of Rajiv Gandhi National University of Law, Punjab. Introduction Recently, a penalty of Rs 40 Lakhs was imposed by the Competition Commission of India (CCI) on Goldman Sachs for the offence of Gun Jumping based on the acquisition of equity and information rights without informing the CCI. The offence of Gun Jumping is provided under Section 6(2A) of the Competition Act, 2002, which stipulates that no combination shall be given effect to until the expiry of 210 days from the date of notification to the CCI. Goldman Sachs, through its AIF scheme-1, acquired optionally convertible debentures (less than 10% equity) under Biocon Biologics, wherein it had access to the board and shareholder meeting minutes (information rights). Furthermore, under the ‘solely as an investment’ exemption in the Combination Regulations, 2011, acquisitions of less than 10% equity are exempt from notification to the CCI. However, CCI found these information rights not to be ‘ordinary’ for shareholders, and classified them as Commercially Sensitive Information (CSI). This interpretation amounted to  a significant shift, wherein certain acquisition or merger involving the sharing of CSI, regardless of the percentage of equity shares acquired, was required to be reported to the CCI. However, sharing of CSI, as prohibited under the new Combination Regulation of 2024, is defined through the CCI’s updated FAQs on combinations, part N of which provides a list, including information relating to prices, profit margins, sales, and terms with customers. Although this information criteria are uniformly applicable to all entities as recognised in the Beer Cartel Case, CSI differs from entity to entity depending on the functions performed by it and the industry in which it is involved. The ignorance of this distinction by the Combination Regulations and the updated FAQs creates a grey area, wherein acquirers are faced with ambiguity concerning the classification of information as CSI or not, based on their specific industry. Furthermore, this uncertainty results in a lowering of investments, as evidenced by a study, finding that firms perceiving uncertainty in regulatory policies as a major obstacle exhibit an approximately 2.5 percentage point lower investment rate compared to those not viewing uncertainty as an impediment. Considering the same, this article, by briefly discussing the concept of CSI, provides a sector-specific solution through changes under the Competition Act, 2002 and the Competition (Combinations) Regulations, 2024, for rectifying the uniform information criteria based on international precedent of the United Kingdom (U.K.) and European Union (EU) and further examines its application under the Indian antitrust regime. The Concept of CSI and its Blanket Sectorial Application CSI, as defined under Part N of CCI updated FAQs on Combinations of 2025, relates to information that is important for an undertaking to protect, maintain, or improve its competitive position in the market. Further, Part N also discusses what is excluded from CSI, which includes information that is readily ascertainable through appropriate means or information available to an ordinary shareholder of a company that is not considered by the management for commercial decision-making. However, these criteria can be ascribed as subjective due to their enforcement variability across industries. In light of this, the section contrasts industries selected to represent different market structures, such as: (a) oligopolistic digital/ automative markets, (b) hyperlocal/price-sensitive retail, (c) large national FMCG firms, and (d) pharmaceuticals depicting pricing/regulatory sensitivity. The reason behind choosing these industries was not their superficial similarity, but to test the robustness of CSI across market concentration, public observability, and strategic value. Building on this sectoral comparison, information concerning quality, sales, and market shares functions as CSI as per the FAQ’s and may be applicable in the automobile industry, where a company may consider its quality ratings and sales data as highly sensitive. This is due to the oligopolistic nature of the market, wherein even minor changes in sales numbers or quality indices can be used to realign pricing and financing by competitors. The same was observed in General Motors’ OnStar Smart Driver case from 2025, wherein driving behaviour and quality-related data were held to be highly sensitive competitive information. In contrast, within the bakery industry, quality ratings and sales data are often publicly available due to the entity’s reputational dependence on them. Moreover, they do not provide competitors with a significant strategic advantage because of hyperlocal and price-sensitive demand. A similar precedent can be observed with the Sweets Treats Bakery case study in Chicago, which experienced a 20% increase in sales after implementing a bakery management software that provided detailed tracking of customer reviews, depicting product quality and sales data. Additionally, the subjectivity of excluded information from CSI can be illustrated through the Fast-Moving Consumer Goods (FMCG) sector. For instance, Hindustan Unilever Limited (HUL) files annual reports, investor presentations and financial disclosures with the Securities and Exchange Board of India (SEBI), revealing details such as plant location and generic production capacity. However, this disclosure adds little strategic advantage because competitors focus instead on stock-keeping unit (SKU), level consumer insights (e.g., which wheat or pack size sells more), functioning as a CSI, rather than on how much wheat production is undertaken by HUL, which merely showcases its generic production capacity. By contrast, in the pharmaceutical industry, where pricing is highly sensitive and private medications compete with generic medications, information revealing production capacity can indeed provide rivals with an edge. It can help predict a company’s future strategy of undercutting prices, enabling counteractions such as pre-emptive price slashing or blocking contracts with distributors. A similar situation arose with the U.S. Pharma Company- Mylan, which conspired with Pfizer and Teva by entering into patent litigation settlements to deliberately delay the market entry of competitors’ epinephrine autoinjectors, strategically postponing its generic production. Therefore, the foregoing sectoral contrasts demonstrate that CSI is not a fixed or universal category, but one that turns on market concentration, the observability of information, and its strategic value within a particular industry. Information that is treated as competitively critical in an oligopolistic market may function as a routine in a fragmented

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From ABB to Clifford Chance: Service Permanent Establishment and the Digital Tax Divide

Leave a Comment / Taxation Law /

[By Devanshi Gupta] The author is a student of Symbiosis Law School, Pune INTRODUCTION In 2024, annual global revenue losses attributable to the challenges of taxing the digitalized digitalised economy were estimated at over USD 100 billion. This figure is projected to worsen as digital trade replaces traditional economic models. This challenge emanates from the existing tax rules that largely depend on physical presence, even as value creation increasingly occurs virtually and across borders. Nowhere is this tension more pronounced than in the Indian legal framework around the Service Permanent Establishment (PE) concept, a cornerstone of international income taxation and Double Tax Avoidance Agreements (DTAAs). On 4th December, 2025, the Delhi High Court’s decision in the case of Commissioner of Income Tax v. Clifford Chance Pte. Ltd. crystallised this dilemma. The Court’s interpretation of Article 5(6) of the India-Singapore DTAA rejected the idea of a “virtual” Service PE, thereby reintroducing the older parameter of mandating the physical presence of service providers for taxation, despite rapid digitization. Yet, the same judgment solidified the requirement of the actual delivery of services over physical presence when calculating the 90-day service PE standard, revealing a doctrinal inconsistency. This article examines the dissonance between the Clifford Chance judgement and earlier Indian precedents, such as ABB FZ-LLC v. DCIT and Verizon Communications Singapore Pte Ltd. v. ITO, which placed a greater emphasis on the economic substance of services provided.  It examines how differing interpretations of the Service PE concept, along with parallel, contradicting domestic measures, like India’s Significant Economic Presence and Equalization Levy, reveal limitations in the current direct tax framework in responding to digitalisation. Finally, the article offers recommendations based on global best practices aimed at harmonizing India’s treaty-based rules with the economic realities of the digital age. SERVICE PERMANENT ESTABLISHEMENT IN INDIA The concept of Permanent Establishment (PE) is utilized to ascertain whether a country has the right to tax a non-resident, natural or artificial. If the said non-resident meets a mutually agreed criteria, its profits and dividends are liable to be taxed. The standard is widely inculcated in DTAAs between nations to resolve taxation conflicts and promote ease and efficiency in business. True to its name, it was originally introduced with the intention of taxing non-residents undertaking business activities with a physical, permanent establishment and presence in India. However, with globalization and digitization, conduction of business and the administration of services is no longer restricted to physical spaces. The rapid expansion of the digital economy has disrupted the physical-presence paradigm. This has resulted in direct interpretation and adaption difficulties pertaining to the determination of ‘permanent establishment’ and the consequent taxation of such persons, raising questions regarding the relevancy and adequacy of existing definitions.  It is against this backdrop that the Clifford Chance judgment, which directly addressed the limits of service PE in the digital context, assumes particular significance. The judgement is examined below. THE CLIFFORD CHANCE JUDGMENT: REASONING AND RATIO The court, in the Clifford Chance case, held that in the absence of explicit treaty language extending the application of PEs to virtual presence, no deduction can be made to that effect. It rejected the concept of virtual Service PE in cross-border services. Physical presence of employees administering the services in India was made mandatory under Article 5(6) of the India–Singapore DTAA and other parallel, similarly framed agreements. This was based on the rationale that the textual interpretation of Article 5(6) does not support the inclusion of digital spaces, which states that “An enterprise shall be deemed to have a permanent establishment in a Contracting State if it furnishes services… within a Contracting State through employees or other personnel…”. The Court interpreted the phrase “within a contracting state” as having a clear “territorial connotation”, obligating the need for a physical footprint in India. The term “within” was therefore understood as referring to physical presence, not merely the place where services are implemented or have effect. Notably, however, the judgment adopts a different emphasis when addressing the calculation of the service-day period. In the same judgment, the Delhi HC also held that for the purpose of computing the service-day period, primacy must be given to the actual provision of services rather than mere physical presence. On this basis, it excluded vacation days from the calculation of the 90-day requirement. This creates a dissonance: physical presence is treated as essential for the existence of a Service PE, yet insufficient for the calculation of the actual service days. Additionally, this also marks a shift in ideology from a more adaptive, purposive interpretation in previous precedents to a formalist, text-centric treaty interpretation, an approach that may undermine India’s long-term taxation objectives..  The position taken in Clifford Chance, therefore, sits uneasily with the pre-existing Indian jurisprudence. This divergence is examined below. CONFLICTING INDIAN JURISPRUDENCE: IMPACT Prior to this judgement, Indian tax jurisprudence had not been uniformly dismissive of virtual or non-physical presence as a sufficient nexus for taxation. In the case of ABB FZ-LLC v. DCIT, the court rejected the necessity of physical presence, holding that in light of the technological advances, “it is rendition of services that is required and not the physical presence of employees” for establishing permanent establishment.  Similarly, in Verizon Communications Singapore Pte Ltd. v. ITO, the court stated that “the traditional concepts of physical control, possession, location on economic activities and geographic rules of source of income recede to the background” and have become insignificant. The Court noted that where customers have access to data and services through equipment enabling speed and delivery, such virtual engagement may constitute a sufficient taxable presence. Traditionally, emphasis has been laid on the location of the customers receiving the service, in lieu of the service provider. Notably, the judgment also contradicts the explanation to Section 2A of the Income Tax Act, 1961, which recognizes ‘Significant Economic Presence (SEP)’ as a part of ‘Business Connection’ leading to taxable income in India.  It further clarifies that a physical presence is not necessary for SEP. Consistently, the CBDT Explanatory

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The Dual-Track Framework of India’s Insider Trading Regime: Distinguishing Corporate Disclosure From Trading Restrictions

Leave a Comment / Capital Markets and Securities Law /

[By Raghav Sharma] The author is a student of Indian Institute of Management Rohtak.   Introduction The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) establish a comprehensive framework to prevent insider trading while maintaining market efficiency. Central to this framework is the concept of Unpublished Price Sensitive Information (UPSI), which governs both corporate disclosure obligations and restrictions on individual trading. Central to this framework is the concept of Unpublished Price Sensitive Information (UPSI), which governs both corporate disclosure obligations and restrictions on individual trading. Recent decisions by the Securities Appellate Tribunal and the Supreme Court in Reliance Industries Limited (May 2025, upheld December 2025), alongside SEBI’s Quasi-Judicial Authority order in Adani Green Energy Limited (December 2025), have prompted discussions about regulatory consistency. This article examines these decisions not as conflicting precedents, but as complementary components of a dual-track regulatory framework addressing distinct obligations under separate provisions of securities law. The Conceptual Foundation: What Constitutes UPSI? Regulation 2(1)(n) of the PIT Regulations defines UPSI as information relating to a company or its securities that is not generally available and, upon becoming generally available, is likely to materially affect the price of securities. The definition hinges on two critical concepts, materiality and general availability. Regulation 2(1)(e) defines “generally available information” as information accessible to the public on a non-discriminatory basis. Beyond this statutory guidance, the N.K. Sodhi Committee Report (2013), which forms the legislative foundation of the 2015 PIT Regulations, deliberately refrained from exhaustively defining “non-discriminatory access”, observing that this would be “a question of fact, to be answered by adopting the standard of a reasonable man”. The Committee clarified that paywalled access does not render information discriminatory, since it remains accessible to any person willing to pay. Through subsequent adjudicatory practice, notably in 63 Moons Technologies Ltd. (2018) and Bharti Airtel Ltd. (2020), SEBI applied contextual factors including source credibility and reach, specificity of reported facts, and corroboration across multiple outlets. The Note appended to Regulation 2(1)(n) clarifies that information published on a stock exchange website would ordinarily be considered generally available. However, the precise interaction between media reports, corporate authentication, and formal disclosure has evolved through legislative amendments and judicial interpretation. The 1992 PIT Regulations used the phrase “not generally known or published by the company,” suggesting information could become known through means other than company publication. The landmark decision in Hindustan Lever Ltd v. SEBI (1998) recognized that market expectations reported in media could constitute generally known information. However, a 2002 amendment narrowed this definition, requiring information to be “published by the company or its agents” to cease being unpublished. The 2015 Regulations adopted a broader approach, providing that information would be generally available if accessible to the public on a non-discriminatory basis, regardless of source. This expansive interpretation received judicial support in several decisions, most notably the Securities Appellate Tribunal’s decision in Future Corporate Resources Pvt. Ltd. v. SEBI (December 2023), which explicitly rejected a restrictive view that only stock exchange disclosures constitute generally available information. The May 2024 Amendment: Adding Nuance The May 2024 amendment to Regulation 2(1)(e) excluded “unverified event or information reported in print or electronic media” from the definition of generally available information. This amendment introduces an important qualification that not all media reports render information generally available. The distinction between verified reporting containing specific facts from credible sources and unverified speculation or rumours becomes legally significant. This amendment does not represent a reversion to the restrictive 2002 approach. Rather, it recognizes that the quality and reliability of media reporting vary substantially, and regulatory frameworks must distinguish between substantiated journalism and mere speculation. To illustrate this distinction, consider a scenario where Reuters reports that “Company X is in advanced merger talks with Company Y, according to three sources familiar with the matter, with a deal expected within two weeks.” This would likely constitute verified information under the May 2024 framework due to multiple attributed sources, specific factual details, and a credible news outlet. Conversely, a social media post stating “hearing rumors that Company X may be exploring partnerships” would constitute unverified information lacking substantiation. The amendment thus creates a qualitative threshold, permitting trading based on substantiated journalism while preserving the UPSI character of mere speculation. While the May 2024 amendment post-dates both the Reliance and Adani Green decisions, it crystallises a distinction that was already implicit in the regulatory architecture these cases navigate. The amendment’s exclusion of “unverified” media reports from generally available information does not, in either case, retrospectively alter the legal principles applied—both involved substantiated reporting from credible sources containing specific, verifiable facts. Rather, the amendment provides an interpretive lens that sharpens the inquiry: the relevant question is not merely whether information appeared in media, but what quality of information was disseminated and to whom the corresponding regulatory obligation attaches. The cases examined below illustrate this differentiation precisely, Reliance addressing corporate disclosure duties triggered by media leakage, and Adani Green addressing individual trading restrictions where verified media reports rendered information generally available. Together, they demonstrate the complementary operation of India’s dual-track framework, a coherence the 2024 amendment now makes explicit. The Reliance Framework: Corporate Disclosure Obligations The Reliance case involved negotiations between Facebook and Reliance Industries for an investment in Jio Platforms Limited. On March 24, 2020, major publications such as the Financial Times, Reuters, and The Economic Times reported on an impending deal. Following these reports, the stock price rose by approximately 15 percent. The formal announcement came nearly a month later on April 22, 2020, resulting in an additional 10 percent price increase. SEBI alleged violations of Section 30(10) and 30(11) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, read with Principles 1 and 4 of Schedule A to the PIT Regulations. Critically, the allegations did not concern Regulation 4, which prohibits trading while in possession of UPSI, but rather the Code of Fair Disclosure provisions. Principle 1 requires prompt public disclosure of unpublished price sensitive information that would impact

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Sweeping Too Wide: Rethinking Sebi’s Algorithmic Trading Rule

Leave a Comment / Capital Markets and Securities Law /

[By Shaunak Rohit Wagle] The author is a student of Maharashtra National Law University, Mumbai   For more than a decade, the Securities and Exchange Board of India (SEBI) has experimented with ways of taming algorithmic trading. Circulars in 2012 and 2016 addressed risk controls for brokers and exchanges, and a 2025 circular aimed to clarify obligations in the rapidly evolving “retail-algo” space. However, none of these attempts had ever been codified in the SEBI (Stock Brokers) Regulations, 1992. This changed in August 2025, when SEBI proposed to incorporate the following statutory definition of algorithmic trading in the aforementioned regulations: “Algorithmic Trading” means any order generated/placed using automated execution logic.” Prima facie, this is a straightforward act of consolidation; however, in substance, it is a radical expansion. It entails the inclusion of every order touched by automation, from the most sophisticated high-frequency strategy to retail SIP auto-executed through an application programming interface (API) in the definition. By making the definition broad instead of precise, SEBI risks blurring vital distinctions, overburdening small intermediaries, and stunting innovation and growth in India’s fintech ecosystem. SEBI’s draft definition gives rise to doctrinal ambiguities and potential economic burdens that warrant careful reassessment. SEBI should rework its approach through a tiered definitional framework, a retail sandbox, and a clarified liability allocation. A well-balanced framework can help SEBI fulfill its dual statutory mandate under Section 11 of the SEBI Act: to protect investors while promoting market development. The Problem of Overreach At its core, financial regulation derives legitimacy from statutory authority. SEBI’s mandate under the SEBI Act, 1992, is straightforward: regulate intermediaries, not clients or software vendors. Yet, by defining algorithmic trading as “any order generated/placed using automated execution logic,” the draft threatens to expand SEBI’s jurisdictional powers indirectly to actors far outside its ambit. While the definition is housed within the Stock Broker Regulations, its practical implications extend further. A stockbroker’s compliance obligations inevitably shape its commercial relationships. If every automated order is deemed ‘algorithmic trading,’ brokers will be compelled to impose stricter due diligence, contractual obligations, and potential liabilities on the fintech firms and vendors that provide API access and other automated tools. This creates a de facto regulatory burden on these entities, as they must conform to the broker’s heightened requirements to remain in business. This means that a broker using basic order-routing software would, under this definition, be deemed to have engaged in “algorithmic trading”. A client using an API to execute recurring trades might also fall within its scope. This is not because SEBI would regulate the client directly, but because the broker, who is the regulated entity, would be obligated to treat the client’s automated instruction as a regulated ‘algorithmic trade.’ Consequently, the broker would need to subject the client to more rigorous monitoring, risk management protocols, and potentially restrictive terms of service, thereby indirectly bringing the client’s actions under the ambit of the regulation. This interpretative sprawl creates doctrinal instability. Delegated legislation cannot extend beyond the scope of the parent statute. The overreach is not one of direct regulation but of indirect consequence, where the broker acts as a conduit for regulatory burdens that ultimately fall upon their clients and technology partners. Thus, SEBI risks straying into ultra vires territory by sweeping in activity that is not meaningfully broker conduct. Definitional Ambiguity The absence of clarity in the definition is also a problem. The phrase “automatic execution logic” is not defined. It raises multiple questions, like – Does it mean any pre-programmed function? Does it require decision-making autonomy, or is mere automation enough? SEBI’s own past practice suggests the former. The 2012 and 2016 circulars specifically distinguished between discretionary algorithmic systems and routine automation. The former involves systems making autonomous decisions on parameters like price or timing (e.g., a VWAP algorithm), whereas the latter simply executes a client’s pre-determined instructions without any independent decision-making (e.g., an automated SIP instruction). The 2025 circular went one step ahead and demarcated retail automation as a distinct phenomenon. The draft, however, collapses these definitions into a single catch-all. The result is doctrinal incoherence: a haphazard definition inconsistent with SEBI’s own regulatory history. Compliance Burdens and Constitutional Concerns Definitions have significant ramifications as they affix liability. A broad definition does not simply describe; it mandates who must register, what risk controls must be implemented, what audits may be performed, and what liabilities may be attached. SEBI risks imposing compliance burdens where no systemic risks exist by equating trivial automation with high-frequency trading. This essentially undermines the very proportionality required by Article 14 of the Constitution. Comparing Approaches: India’s more extensive Definition compared to other countries The dangers of SEBI’s approach are emphasized by a comparative study of other jurisdictions. The European Union’s MiFID II is instructive. Therein, algorithmic trading is defined narrowly: it only occurs when a computer algorithm automatically determines order parameters such as timing, price, or quantity. Explicit exclusions remove order-routing systems, post-trade processing, and data feeds from scope. The EU’s choice was deliberate as it reflects a clear regulatory philosophy: regulation should only apply when an algorithm substitutes for human discretion in setting economically significant variables. Similar trends are seen in the United States. The SEC’s Market Access Rule requires brokers to deploy risk controls, but does not attempt to regulate “algorithmic trading” in the abstract. The CFTC’s proposed Regulation AT, ultimately withdrawn after facing significant industry opposition over its high compliance costs and controversial source code repository requirements that raised intellectual property concerns, was designed to apply only to automated systems that generated order parameters, excluding tools used solely for order management.  Similarly, the frameworks of Singapore’s MAS and Hong Kong’s SFC define algorithmic trading as systems that make independent trading decisions, while tailoring compliance requirements to match the level of system complexity. India is perhaps the only country amongst other major jurisdictions to have taken such an anomalous stance by defining algorithmic trading as “any order using automated execution logic”. Such a broad definition entails that nearly all trading

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Shock Therapy or a Necessary Reset? Analyzing the 2025 Electricity Bill

Leave a Comment / Energy Laws /

[By Ankur Singh and Mansi Maheshwari] The authors are students of National Law University, Odisha INTRODUCTION The Indian power industry is at a crucial point. On the one hand, it will need to prioritize the ambitious Viksit Bharat @2047 vision of the country, where the non-fossil electricity capacity should increase to 500 GW by 2030. On the other hand, this engine is being strangled by its most maladaptive component: a distribution segment that is being crippled by years of chronic financial stress, with cumulative losses soaring past 6.9 lakh crore. The Ministry of Power has come up with the draft Electricity (Amendment) bill, 2025,  within this high-stakes environment. This is by no means a regulatory cosmetic facelift but a rewiring of the sector, on a fundamental level, and in a radically ideological sense of more than 2 decades old, Electricity Act, 2003. The Bill marks a radical break from a historic pattern of political populism and government-imposed deficit that goes on the offensive towards an unfamiliar pattern of market discipline, financial responsibility and consumer choice. The suggested amendments aim at curing the long-term illness of the sector by compelling it to gulp the bitter pill of tariffs that are cost-reflective, competitive markets, and regulatory accountability. Its direction is apparent, but the most vital question is: Is this the correct prescription and does the country have the political will to see the treatment through? This article breaks down the main provisions in the Bill to discuss how it is likely to make the power sector in India finally strong and the way forward. THE CORE DIAGNOSIS: CURING THE DISCOM MALIGNANCY The most unquestionable core of the 2025 Bill is its outright attack on the economic unsustainability of Distribution Companies (Discoms). The Explanatory Note puts the problem in a very direct way: “most Discoms are incurring chronic losses since the tariffs charged to them do not reflect the real cost of supply.” That is what has been the original sin of this sector over the decades. The “Cost-Reflective” Mandate The main weapon in the Bill is a potentially proposed amendment to Section 61(g), which states that tariffs would be determined based on the cost of supply of electricity. This has been further strengthened by a 2025 Supreme Court ruling in BSES Rajdhani Power Ltd. and Anr. v. Union of India and Ors., wherein the Court articulated ten core principles (“sutras”), including the mandate of cost-reflective tariffs, expressly holding, under Section 61 of the Electricity Act, 2003, that tariffs must reflect the actual cost of supply to ensure the financial viability of the electricity sector. This amendment tries to remove the political populism in the setting of tariffs and place it in a solid economic reality foundation. More importantly, the Bill does not push subsidies out. Rather, it further affirms the (but otherwise overridden) clause in Section 65, “in case a state government would like to offer subsidized power to any consumer group, it must do so through giving advance subsidies to the Discom itself”. This is a monumental shift. It concludes the shadow-play of promises of free power being made politically, and the financial obligation being crammed on the balance sheets of Discoms, who in turn default in their payment obligations to generators and grid operators. It is mandatory in the state governments under this new regime to explicitly budget their populist promises and fund them immediately. This was a change to be implemented and the sole change that would stop the vicious circle of Discom debt. Tackling Regulatory Delays In another effort to seal the loopholes, the Bill empowers State Electricity Regulatory Commissions (SERCs) to set tariffs independently (suo-motu), in case a utility does not file a tariff petition within the stipulated period of time by amending Section 64. It is aimed at having new tariffs effective as of April 1st of every financial year. This clause strikes at the regulatory delays in which, in most cases, utilities, being politically pressured, would just fail to apply to raise tariffs, letting their losses to accumulate indefinitely. This is the most controversial and necessary section of the Bill of this two-pronged assault on Discom finances. It recognises the issue in question and has a sound, technically-justified resolution that is supported by the law. Nonetheless, it might be met by political opposition by the state governments that have long been utilizing Discoms as an off-balance sheet instrument to make political concessions. LIBERATE THE MARKET: A NEW DEAL TO INDUSTRY The second key push of the Bill is to increase the economic competitiveness of India by eliminating the practice of cross-subsidy induced high industrial tariffs. The reasoning is that Indian manufacturing cannot become competitive globally if it is compelled to offset the inefficiencies of the sector, as well as agricultural subsidies. Ending the Cross-Subsidy Raj It is not only Section 61(g) that has received an amendment; there is a guillotine clause: cross-subsidies of Manufacturing Enterprises, Railways, and Metro Railways will be completely abolished in five years. This is a radical move. The artificial low tariffs on residential and agricultural tariffs were being borne by Commercial and Industrial (C&I) consumers, who have been paying higher tariffs to keep residential and agricultural tariffs artificially low over decades. This, the Bill claims, has undermined the competitiveness of industry, limited the development of MSMEs and has increased the cost of logistics across the economy as a whole. By removing this burden, the Bill will open up a significant electricity demand and will cause energy-led economic growth. Freeing the “Golden Goose” In line with this, there is a new provision in Section 43 which would enable the State Commissions to waive the Universal Service Obligation (USO) of Discoms on consumers with a demand exceeding 1 Megawatt. Even now, when a big industry would wish to purchase cheap power in the open market, the Discom must construct and maintain capacity for them, which is done frequently through contracting new and costly power. The inherent costs of this unutilized capacity are

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Safeguarding Bonafide Taxpayers: Reconsidering Section 16(2)(C) of the Cgst Act

Leave a Comment / Taxation Law /

[By Madhu Murari K] The author is a student of Rajiv Gandhi National University of Law, Punjab. The Goods and Service Tax (GST) laws have been enacted to overcome the difficulties of the multiple tax regimes and to get away from the tariff and non-tariff barriers which would hinder the free flow of trade throughout the Country. The structure of GST is of a destination-based consumption tax with input tax credit (ITC) of the tax paid on goods or services at each stage available in the next stage of value addition for avoiding cascading effects irrespective of the destination, be it an inter-state supply or intra-state supply. Section 16 of the Central Goods and Service Act, 2017 (CGST Act) lays down the conditions in which ITC can be claimed. One of the conditions under Section 16(2)(c), which denies ITC to buyers/recipients if the sellers have not remitted the tax to the government. Denying of ITC to the purchaser dealer for default of supplier dealer over whom the purchaser dealer has no control, is an arbitrary and irrational exercise of powers. While earlier commentaries on the impugned provision have primarily focused on drawing comparisons between various judicial decisions from the former tax regimes, current academic discourse on the issue appears limited. Recent judicial decisions demonstrate that courts have either favoured the revenue’s position by upholding the provision or have directed the authorities to conduct thorough investigations before holding a recipient liable for non-payment of tax. Nevertheless, none of these discussions offer a substantive alternative to resolve the present legislative dilemma, leaving a significant gap in the policy analysis on the issue. The prime tenets which would be delved into this particular piece are: firstly, the contention that the impugned provision violates the equality guaranteed under Article 14 of the Constitution, secondly, an analysis of this provision through the lens of doctrine of impossibility, and thirdly, proposal of potential solution that could benefit both the bonafide recipients and the government. Arbitrary classification under Article 14 The principle of equality, is enshrined in Article 14 of the Constitution of India. The guiding principle of this article is that everyone should be treated equally by the state and its essence lies in the prohibition of unequal treatment to individuals who are equal and at the same time it permits valid classification made by the state to avoid arbitrary denial of rights to equals. The Supreme Court (SC) in the EP Royappa v. State of Tamil Nadu, duly held that classification must be based on an intelligible differentia that is bona fide and meaningful, and must serve a legitimate legislative goal. A valid classification does not require mathematical nicety and perfect equality. If there is a similarity or uniformity within a group, the law will not be discriminatory. Analyzing the issue at hand, the Section 16(2)(c) lays a prerequisite for claiming ITC that if the sellers have not transferred the tax amount to the government, then the recipients of goods are not eligible for ITC credit. It draws no distinction between the bonafide purchasers and culpable purchasers who are in collusion with defaulting sellers. This arbitrariness is further aggravated by the fact that while the Government reverses the ITC availed by the buyer and simultaneously demands tax, interest, and penalty from the seller. The effect of such parallel actions is that the revenue secures a double recovery of tax, which is wholly inconsistent with the equitable principles of fiscal law. Precedents can be referred from the earlier Value Added Tax (VAT) regimes, such as Arise India Ltd v Commissioner of Trade & Taxes (Arise India), wherein, the court struck down a materially similar provision under the Delhi VAT Act, holding that law cannot complied in good faith if it imposes disproportionate consequences upon a bona fide purchasing dealer for mere non-compliance of the seller, it risks falling foul of the equality guarantee enshrined in Article 14 of the Constitution. In a very recent pronouncement, the SC in the Commissioner Trade and Tax Delhi v. M/S Shanti Kiran India, also ruled that ITC under the Delhi VAT Act, cannot be denied to bona fide purchasers when sellers fail to deposit VAT. By following the decision in Arise India, it emphasized that at the time of transaction the sellers were duly registered, invoices were genuine and there was no collusion between parties, hence paving the way for equitable treatment to the bonafide purchasers. Even though revenue protection is a legitimate legislative objective, fraudulent, and innocent transactions cannot attract the same punitive measure. However, to impose the same penalties on a bona fide purchaser who has fulfilled all his legal requirements but cannot control the supplier’s compliance is an unjustifiable burden that goes against the constitution and defeats the purpose of the GST framework. This analysis proves that Section 16(2)(c) is ultra vires the quintessential Article 14 of the Constitution by treating both the guilty and the innocents at par. Doctrine of Impossibility The maxim, “Lex non Cogit Ad Impossibilia” means that the does not compel one to impossible things. This is foundational principle in contract law providing relief to parties when the performance becomes impossible wholly due to reasons out of their control. Over the course of time, this principle has expanded to taxation law across globe, especially when the statutory framework places responsibilities on taxpayers to perform an impossible act. Addressing the issue at hand, the Section 16(2)(c) postulates such a scenario where the recipient of goods has to not only to fulfil his duties, but also to ensure that the supplier of goods remits the tax to government to claim ITC. Also, statutorily the recipient is not required to ensure compliance of tax remittance to the government by the supplier. Further in Arise India, the court observed that purchasing dealer cannot reasonably be expected to perform the impossible task of foreseeing which selling dealer may eventually default in remitting the tax collected to the Government and to accordingly refrain from transacting with such sellers.

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Turning Points in the Indian Corporate Landscape: A Private Equity Lens

Leave a Comment / Mergers & Acquisitions /

[By Isha Khurana] The author is a corporate lawyer. Introduction Over the last decade, Private Equity (PE) has emerged as a primary financing mechanism for Indian corporations. Previous literature has examined how the typical leveraged buyout (“LBO”) model employed by private equity investors in other jurisdictions was not feasible in India due to regulatory restrictions.Thus, PE investors structured their investments as minority shareholdings, with a wide range of investor rights to protect their investments. While the investor rights typically granted to PE investors are beneficial for both the investor and the firm, the investor rights so granted have faced severe scrutiny by Indian authorities, such as the Competition Commission of India (CCI). Moreover, the 2025 Commercial Banks – Capital Market Exposure Draft Directions (2025 Directions) by the Reserve Bank of India (RBI) seek to open the door for banks to fund corporate acquisitions. The 2025 Directions allow banks to increase their capital market exposure (an area that has been heavily regulated so far) while also limiting the participation of PE funds in raising capital. This paper analyses the two developments collectively and argues that they may alter the mergers and acquisitions landscape in India while simultaneously limiting the growth of PE investments. CCI’s Concerns with PE investors CCI, as the anti-trust authority of India, is concerned with ensuring fair competition and equitable investor rights. The CCI had earlier taken a quantitative approach to assessing competition where “control” was seen only through the lens of shareholding percentages. Until this time, the CCI did not scrutinize PE investments due to their position as minority shareholders. Over time, however, the CCI integrated the substance over form approach  in its assessments and began delving into qualitative features such as the investor rights. As a part of these investor rights, PE investors typically negotiate for, inter alia, information rights, veto rights, right to board representations, reserved matters, and exit rights. From their standpoint, this helps them protect their investments in a largely family-business controlled business environment wherein promoter opportunism is a major obstacle. However, from the CCI’s perspective, these rights move the investment outside the ordinary course of business and make PE investors privy to sensitive information. While PE investors may not exercise control through shareholding, their veto rights and director appointment powers enable them to influence a firm’s business decisions. Thus, the CCI views such influence as a strategic investment, making it reportable under prevailing laws and regulations. This background led to the CCI’s scrutiny of Goldman Sachs’ investment this year, as the authority found that the investment goes beyond the scope of a minority investment. The CCI’s approach is a departure from its earlier quantitative approach, but still aligns with global practice. Interestingly, the EU’s competition commission has similarly found that governance rights amount to strategic investments and go beyond the scope of a minority investment due to the element of decisive influence. These events mark a shift in the regulatory approach, since anti-trust and competition authorities have typically focused on competition at the market level but now are venturing into competition concerns at the investor level as well. Authorities across jurisdictions seek to prevent any fund or group of funds from engaging in transactions that may accord it strategic control or market influence over any industry. What remains concerning, is the PE funds primary focus to build their portfolios and maximise returns. So, in theory, PE funds may share important business and market information of firms that they have invested in (belonging to the same industry) to maximize their returns. This may lead to serious competition concerns, thereby warranting concerns from competition authorities. Moreover, most PE investors negotiate for exit rights, as they leave an investee firm after maximizing returns ( through an IPO or otherwise). However, this raises concerns regarding market and industry stability that must be addressed. We have established that the CCI’s approach in the Goldman Sachs decision aligns with that of the competition authorities of other jurisdictions. However, it is worth noting that in the Indian landscape, PE investors have had to modify their investment model (moving away from an LBO). PE investors in India have no alternative but to rely solely on investments as minority shareholders, while this may not hold true in other jurisdictions. While PE Funds’ governance and exit rights may raise concerns, one cannot ignore their importance, since they are key to maintaining a favorable investment landscape for PE investors. Unfortunately, the CCI’s recent findings have distinct implications for the PE industry in India, as they severely increase the compliance and reporting burdens. Due to the CCI’s recent findings and scrutiny of most governance rights, PE investors may be forced to report perhaps all their investments, which is extremely cumbersome. These compliances may eventually deter  PE investments and work against the PE framework, which has grown in India. In the larger scope, it could substantially alter the investment landscape in India altogether when viewed with the RBI draft master directions discussed hereinafter. Consequently, a revised PE model addressing competition concerns whilst maintaining essential investor protections is essential for sustainable PE growth in India. RBI’s Move Towards Acquisition Financing The RBI on 24th October 2025 issued the 2025 Directions for capital market exposures by commercial banks, thereby allowing Indian banks to finance corporate acquisitions, which was previously off-limits. The 2025  Directions define acquisition financing as the lending funds to a company (acquiring company) for the purchase of all, or a controlling portion of the target company. Interestingly, acquisition financing seems to follow the same model of financing or investing as an LBO. An LBO is the acquisition of a target company by an acquirer, where the acquirer company uses debt for such acquisitions. Such debt is typically borrowed from one or multiple lenders (which are usually commercial banks). Since there is a high risk of non-payment here, the assets of the target company are often provided as security against the debt undertaken. It is interesting that the RBI now allows commercial banks’ entry in

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Segregation or Substance? Assessing Sebi’s Ring-Fencing Framework for Debenture Trustees

Leave a Comment / Capital Markets and Securities Law /

[By Himansh Soni and Ankit Kumar Yadav] The authors are students of Hidayatullah National Law University,Raipur. Introduction India’s corporate bond market has been witnessing a pronounced expansion, with outstanding issuances nearing the Rs. 55 trillion mark. Notwithstanding the substantial surge, the limited retail investor participation has been a persistent challenge to the evolving bond market. In response, the Securities and Exchange Board of India (‘SEBI’) has taken steps aimed at broadening retail participation in the market, such as the recent proposal to incentivize the issuance of certain public bonds. However, the effectiveness of these measures’ hinges on the structural soundness of the expansionary reforms and the underlying market structure. In pursuit of structural development in the corporate bond market, the board issued a circular specifying the conditions for debenture trustees (‘DTs’)  for carrying out non-regulated activities (‘Circular’). This comes in furtherance of the Securities and Exchange Board of India (Debenture Trustees) (Amendment) Regulations, 2025, which allowed debenture trustees to undertake activities that fall outside the purview of SEBI and are regulated under any other financial sector regulator. The conditions outlined by the regulator mark an unprecedented step, in terms of global regulatory practices, towards building the financial viability of the job of DTs while advancing the board’s objective of making the bond market retail-friendly. In this blog, the author offers a critical analysis of various aspects of the circular, including the structural segregation adopted by means of the Separate Business Unit (SBU) ring fencing mechanism for DTs. To begin with, it addresses the key implications of the circular, along with their legal context and analysis of global best practices. Secondly, it highlights the potential shortcomings of the segregated mechanism adopted in the circular. Finally, it proposes recommendations by the author to alleviate these challenges, summing up the circular with a way forward. Decoding The Reforms The SEBI, exercising its statutory powers under Section 11(1) of the Securities and Exchange Board of India Act 1992, has regulated the undertaking of activities outside its purview by the DTs by the insertion of Regulations 9C and 15A in SEBI (Debenture Trustees) Regulations, 1993 (‘DT Regulations’), which provide for the permitted non-regulated activities and enhanced oversight powers of DTs, respectively. The regulatory intervention aims to resolve the financial unsustainability of the job of the DTs arising out of low income from fees, in contrast to high monitoring costs. However, regulators’ limited resources may be better deployed to protect retail-level and vulnerable consumers than those who have greater levels of experience or net worth. The SEBI, in furtherance of Regulation 9C of the DT Regulations, specified the conditions for DTs to undertake non-regulated activities. Firstly, the board has mandated that non-regulated activities be conducted on an arm’s-length basis only by the Separate Business Unit (SBU) of DTs. This measure is to prevent potential conflicts of interest that could arise when the monitoring and enforcement functions of DTs owed to debenture holders are superseded by commercially motivated non-regulated activities. It aligns with Schedule III of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, which requires intermediaries to mitigate and disclose any conflict of interest.  The principle of prevention of conflict of interest is also reflected in international legal principles, such as the International Capital Market Association’s note on International Practices of Bond Trustee Arrangements, which expects the trustees to act independently by avoiding conflicts of interest. However, in other global jurisdictions, the principle of prevention of conflict of interest has not been translated into the incorporation of a ring-fenced mechanism for trustees. For instance, Section 310(b) of the US’s Trust Indenture Act of 1939 employs only a time-bound approach by providing DTs with a ninety-day period to eliminate any conflict of interest. The regulator’s prescriptive approach represents a regulatory refinement unique to Indian market conditions, which has a narrow and fragile investor base with a retail participation of less than two percent, in contrast to developed markets such as the US, where retail participation is estimated at 28 percent. Secondly, Each SBU must have a “Chinese Wall” that insulates it from trustee operations, with dedicated and independent staff, a separate grievance-redressal framework, and individually maintained records. Further, Shared IT systems or infrastructure may be used, but only with explicit board-approved protocols. SEBI has also strengthened transparency requirements, as DTs must display the mandatory disclosures for investors on their websites. he use of Chinese walls as a segregation mechanism is consistent with international regulatory practices. The Senior Management Arrangements, Systems and Controls Sourcebook (SYSC) 10.2 of the United Kingdom’s Financial Conduct Authority (FCA) requires firms to establish a Chinese wall arrangement to manage conflicts and internal information regulation. The need for the establishment of information barriers has been repeatedly underscored by market failures such as the London Whale scandal, wherein the investigations highlighted the possibility of concealment of losses in the information booklet by chief information office (CIO) employees. Similarly, in the Enron Scandal, the firm exploited the obscurity in both the internal control and accounting loopholes to conceal outstanding debts, leading to the enactment of the Sarbanes-Oxley Act of 2002 to reinforce internal controls and the financial reporting standards. Shortcomings Of The Framework While the Circular marks a major step towards building the financial viability of DT’s job in line with market realities in the Indian corporate landscape, which continues to exhibit fragile retail participation, concerns surrounding the expected challenges to its efficiency demand closer examination. Firstly, whereas the board requires an arm’s length separation structure, the structure does not stipulate operational standards, including the requirement of independent reporting lines. In the absence of independent reporting lines, the segregation risks being merely functional rather than institutional, conflicting with the aim of mitigating conflicts of interest. For instance, if the heads of both the SBUs report to the same senior management, there may be an overlap in managerial decisions over operational decisions, which will influence the outcomes of enforcement. In such a structure, the trustee SBU may hesitate to promptly report and enforce covenant

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