Author name: CBCL

From Form to Substance: Evaluating the SAT Order’s Impact on India’s Related-Party Transaction Governance

Capital Markets and Securities Law /

[By Sharad Dhruw] The author is a student of Hidayatullah National Law University, Naya Raipur Introduction In recent years, a significant evolution in the regulatory framework governing related party transactions (RPTs) under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has taken place. This evolution reflects the SEBI’s transition from a regime that was primarily form-based to that of substance-driven and focused on economic scrutiny of disputed transactions, minority protection, and transparency. In order to achieve these objectives, the Securities Appellate Tribunal (SAT) has established a broad definition of materiality, aggregation, and value transfer in the context of related party transactions by its recent order. The Tribunal has recalibrated the compliance obligations applicable to listed businesses and strengthened SEBI’s broader governance mission by emphasizing economic substance above legal characterization. Through this article, the author examines the SAT’s interpretation of the RPT framework. First, it outlines the key interpretative decisions, which includes related party aggregation, its view of strategic allocations as resource of transfers, its reliance on valuation for materiality and its greater emphasis on non-interested shareholder approval. Second, it examines the concerns these changes raise questions about regulatory proportionality, compliance assurance, and the limits of acceptable engagement in economic decision-making, even as they fortify protections against value diversion and conflicts of interest. Lastly, it puts forth a constructive way forward, informed by legal best practices. Examining the Recent SAT Order Firstly, for the purpose of determining materiality under Regulation 23(1) of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, the transactions which are entered into a related party in a financial year must be aggregated, notwithstanding whether it arises from a single or multiple independent contracts. SAT in its order under Regulation 23 has been treated as a complete machinery provision, mandating aggregation at the level of the related party rather than at the level of individual contractual arrangements. This aggregation-centric interpretation finds resonance in the EU Shareholder Rights Directive II (SRD II), which also mandates comprehensive review of significant related-party transactions in order to identify covert value transfers and protect minority shareholders. Secondly, the tribunal held that the geographical and product allocation of business between related parties with respect to a joint venture or shareholders’ agreement may constitute a “transfer of resources, service or obligations”, which qualifies as a related party transaction under Regulation 2(1)(zc) of the LODR, 2015. This allocation may involve the transfer of profit-making apparatus, including goodwill, customer relationships, and future revenue generating capacity, even in the absence of immediate assets transfer or monetary consideration. This portrays a substance-over-form approach, where impact on shareholder as well as economic consequences are prior over formal legal characterisation. In the regulatory domain, SEBI has consistently emphasised the requirement for an enhanced scrutiny of promoter-driven restructuring that affect minority shareholder, specifically by requiring that all material RPTs must disclose detailed pricing, valuation, and impact information to prevent value migration and ensure transparency. This aligns with IOSCO’s global guidance, which recognize that, transfers of commercial opportunities, intangible benefits, or future economic rights may constitute value transfers in related-party contexts even in the absence of formal asset conveyance, thereby warranting enhanced regulatory scrutiny. Thirdly, the tribunal’s recognition of valuation a crucial mechanism for evaluating the materiality and fairness of complex related party arrangements, specially where transactions involve territorial allocation, business realignment, or transfer of future economic benefits supports the SEBI’s direction to appoint an independent valuer to measure business acquired and lost, while highlighting out that without valuation, it would be impossible to determine whether shareholder approval is necessary or whether materiality thresholds under Regulation 23(1) have been crossed. This clarifies the established corporate and securities law practice where valuation is frequently applied in mergers, demergers and reorganizing transactions to ensure informed shareholder decision making. From a regulatory point of view, SEBI has relied steadily on valuation-assessed assessments in related party transactions, preferential allotments, and scheme approvals, reflecting a wider trend against procedural compliance and towards economic substance and fairness examination. A comparable emphasis aligns in the ESMA’s opinion undue costs in UCITS and AIFs,  stating the need to “identify, prevent, manage and monitor conflicts of interest to avoid detriment to investors,” highlighting similar objectives in material related-party scrutiny. Lastly, the ruling reaffirms the importance of non-interest shareholder approval.  This is a not a mere formality rather a substantive protection intended to protect minority interest in conflict-of interest situations involving related parties when a transaction or arrangement is determined to exceed materiality standards under Regulation 23. This aligns with the legal objective of the strengthened RPT regulation for listed businesses, which sets more stringent governance requirements rather than those found in the Companies Act, 2013 alone.  In Needle Industries Ltd. v. Needle Industries Newey, the Court stressed the importance of treating minority shareholders with fairness and transparency. This is further reflected in SEBI’s ongoing tightening of RPT standards through amendments to the LODR, 2015 Regulations. Similarly, the OECD Principles of Corporate Governance recognises independent shareholder approval as a central mechanism for ensuring accountability and preventing abusive RPT’s. Legal challenges consistent with the order. While the enhanced RPT framework strengthens investor protection, listed companies involved in a variety of commercial arrangements suffer uncertainty due to its broad interpretation of materiality, value transfer, and valuation. These issues indicate that, in spite of its protective objectives, the regime might need to be examined more closely to deliver proportionate and practically feasible control. First, Regulation 23(1) does not provide clarity by requiring all transactions with a related party to be aggregated within a fiscal year, but it also raises questions about how legally and commercially separate contractual arrangements are to be handled. By collapsing legally and commercially distinct contracts into a single aggregated assessment without regard to their underlying nature, purpose, or risk profile, the framework deprives listed entities of a predictable benchmark for determining ex ante whether a particular transaction is likely to trigger materiality thresholds, thereby generating compliance uncertainty. Since, materiality is evaluated cumulatively without taking into account the nature, purpose,

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“Honey (“CCI”), I Blew Up the Jurisdiction!”: The DG’s Unauthorised Sequel to Section 26

Competition Law /

[By Aditya Bhargava] The Author is a student of National Law School of India University, Bengaluru Introduction The Competition Act, 2002 (“the Act”) was enacted to ensure fair competition by prohibiting trade practices that have an appreciable adverse effect on competition (“AAEC”) in India. For this purpose, the Competition Commission of India (CCI or “the Commission”) was established and tasked with the duty to: (i) eliminate practices having an AAEC, (ii) promote and sustain competition, (iii) protect the interests of consumers, and  (iv) ensure freedom of trade carried on by market participants, in India.[1] The investigative wing of the CCI, i.e., the Director General (“DG”), assists it in investigations into anti-competitive practices of enterprise(s). Under Section 19 of the Act, any person aggrieved by the anti-competitive conduct of an enterprise can provide information to the CCI, requesting an investigation. Based on the information, if the Commission is of the prima facie opinion that there exists a potential Section 3 or Section 4 violation, it is required to direct the DG to investigate the matter through a Section 26(1) order. As per the Supreme Court’s judgment in CCI v. SAIL, this order acts as the “Jurisdictional Gateway” for the DG to proceed with the investigation. However, the precise scope of the DG’s investigation remains far from clear, considering conflicting jurisprudence from various courts and the latest 2023 amendments to the Act. The latest question is whether, relying on Excel Corp, the DG can unilaterally extend the inquiry to unnamed parties or reclassify Third Parties as Opposite or Contesting Parties without explicit permission from the CCI and in the absence of a mandatory Section 26(1) order. Currently sub-judice before several High Courts is the question of whether this reclassification is merely procedural or whether it also violates Third Parties’ substantive rights under the Act.  I argue that it is the latter, and it must not be preserved under the guise of procedural efficiency, as suggested by the existing literature. This article contends that the DG’s investigation must be strictly confined to the scope of the Commission’s prima facie order. The legislative history of the Competition Act, 2002, reveals a deliberate departure from the preceding MRTP Act, 1969, by stripping the DG of suo motu powers. This established a two-tiered structure: the CCI as a quasi-judicial body with exclusive discretionary authority, and the DG as its purely investigative arm. This statutory separation of powers has been decisively affirmed by the judiciary, particularly in the recent Bombay High Court’s judgment in Asian Paints Ltd. v. Competition Commission of India, which pointed towards the CCI’s supreme role in forming a prima facie opinion under Section 26(1). Consequently, I argue that the DG cannot unilaterally implead new parties or reclassify third parties as opposite parties, as this would constitute jurisdictional overreach and a back-door attempt to reclaim suo motu powers. Therefore, should an investigation reveal the culpability of a new enterprise, the only legally sound procedure is for the DG to refer the matter back to the Commission and seek explicit permission from the Commission. Only the CCI has the authority to apply its mind and issue a fresh or supplemental Section 26(1) order to expand the inquiry. Furthermore, any party subsequently impleaded must be formally notified of its status as an “Opposite Party” and afforded all attendant procedural and substantive rights. The Statutory Architecture of Sections 26 and 41 read with the General Regulations Section 26 is a carefully crafted provision that must be read alongside Sections 19 and 41. Section 19 empowers the CCI to form a “prima facie opinion” on the basis of information, a reference, or its own knowledge. Once the Commission reaches that opinion, it shall and only then issue an order under Section 26(1) directing the DG “to cause an investigation into the matter”. The phrase “the matter” is significant: textually, it refers to the specific allegations, theories of harm, and named enterprises that gave rise to the Commission’s prima facie satisfaction. Consequently, the Act does not authorise the DG to amend, expand, or substitute “the matter”; it merely authorises the DG to investigate exactly what the Commission has delineated in its Section 26(1) order. Notably, under the Monopolies & Restrictive Trade Practices Act, 1969 (the Competition Act’s predecessor), the DG possessed suo motu powers, powers explicitly removed by the Raghavan Committee in recommending the Competition Act 2002. This legislative history clarifies the intent: the DG’s authority is strictly derivative, and the DG, being an independent office, must operate at an ‘arm’s length’ from the CCI. A clear reading of Section 41, which provides for the powers of the DG, supports this. The Section is triggered only “when so directed by the Commission”. Its subsection (4) distinguishes between (a) “officers, employees and agents of the party being investigated” and (b) “any other person,” and obliges the DG to secure the Commission’s prior approval before examining the latter on oath. The dichotomy created by the subsection presupposes clarity, at every stage, as to who is the party under investigation and who is merely a third‑party information holder. The reason this differentiation is crucial is due to the difference in rights afforded to differently designated parties under the Act.  In particular, classification as an “opposite party” triggers rights such as notice, inspection of records, and participation in proceedings, alongside exposure to penalties and remedial orders, whereas a third party does not enjoy these rights nor bear such liabilities. The General Regulations, in force since 2009 and amended in 2024, reinforce this dichotomy by separating Regulation 24 (joinder of necessary parties) from Regulation 25 (participation of interested persons). Each of these is predicated on an application and a reasoned order of the Commission. Neither empowers the DG to alter party status proprio motu. The Commission’s power under Regulation 20 to “call for information from any person” is investigatory, not adjudicatory. When read alongside Section 36(1), which requires the Commission to be guided by natural justice, the text supports a clear proposition: the identity of

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How Residential DAGPAs Can Enter Into Commercial Courts

Commercial Courts Act /

[By Venna Siddharth Reddy] The author is a student of UPES  School of Law, Dehradun   In the high-stakes arena of real estate litigation, the choice of forum is rarely just procedural; it is a decisive strategic manoeuvre. Developers, seeking to enforce the rigid timelines and expeditious disposal mechanisms of the Commercial Courts Act, 2015, invariably attempt to shoehorn disputes into the “Commercial Division.” Similarly, landowners typically retreat to the traditional Civil Courts, preferring the broader procedural latitude and, the delays that are inherent in the Code of Civil Procedure. For years, this tug-of-war was settled by the Supreme Court’s strict constructionist ruling in Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP. The Supreme Court interpreting the  Section 2(1)(c)(vii) which governs agreements relating to immovable property laying down a formidable barrier stating that, for a dispute to be “commercial,” the property in question must be actually used exclusively in trade or commerce at the time of the agreement. Under this doctrine, a Development Agreement-cum-General Power of Attorney (DAGPA) for a future residential project would fail the test, as raw land destined for housing is not “currently commercial”. However, a judicial pivot is underway. Recent rulings from the High Courts of Telangana and Andhra Pradesh specifically in Blue Nile Developers v. Movva Chandra Sekhar have engineered a potent workaround to the Ambalal blockade. By reclassifying these disputes from “agreements relating to immovable property” (Clause vii) to “construction and infrastructure contracts” (Clause vi), these courts have effectively rendered the residential nature of the land irrelevant. This article analyses how this “Infrastructure Loophole” is reshaping the jurisdictional landscape, allowing residential disputes to bypass the Supreme Court’s usage test and enter the Commercial Courts through the backdoor The “Infrastructure” Loophole: The Blue Nile Doctrine The jurisprudential shift away from Ambalal Sarabhai finds its most aggressive articulation in the Andhra Pradesh High Court’s ruling in Blue Nile Developers Private Limited v. Movva Chandra Sekhar. Here, the Court was presented with a textualist defence that Blue Nile argued that the phrase “construction and infrastructure contracts” in Section 2(1)(c)(vi) must be read conjunctively. Under this restrictive interpretation, a contract would only qualify if it involved both construction and infrastructure typically implying large-scale public works like highways or bridges, rather than private residential villas. The High Court dismantled this restrictive syntax with a decisive purposive interpretation. It reasoned that reading the clause in isolation or restrictively would “frustrate the meaningful definition” intended by the legislature. The Court effectively parsed the statutory language of Section 2(1)(c)(vi) into three distinct, standalone categories: (1) Construction Contracts; (2) Infrastructure Contracts; and (3) Construction and Infrastructure Contracts. By holding that the provision covers any of these categories independently, the Court removed the requirement for a project to be “infrastructure” in the traditional public sense. This semantic decoupling is the “judicial innovation” that allows private residential construction to be read simply as a “construction contract,” thereby triggering commercial jurisdiction without needing to satisfy the “trade or commerce” requirement of land usage. The important aspect here us that the Court stretched the definition of “infrastructure” itself. Rejecting the notion that, infrastructure is the exclusive domain of public utilities, the Court relied on broad dictionary definitions, citing Oxford, and Merriam-Webster to define “infrastructure” simply as the basic physical and organizational structures needed for operation. Applying this logic to residential projects, the Court catalogued standard private amenities “storm water disposal,” “solid waste management,” “sewerage treatment plants,” “street lights,” and even “100% Diesel Generator backup” and labelled them as infrastructure. The Court concluded that because the Development Agreement involved creating these systems, the dispute arose directly from a “Construction and Infrastructure Contract”. This ruling represents a pivotal expansion of the Commercial Courts Act, 2015. By elevating the internal utilities of a private gated community to the status of statutory “infrastructure,” the High Court has effectively standardized the commercialization of residential disputes. The logical corollary of the Blue Nile doctrine is that almost any large-scale residential project which inevitably requires drainage, power backup, and internal roads is now a “commercial” infrastructure project by default. The distinction between a civil suit for home construction and a commercial infrastructure dispute has thus shifted from the nature of the land (public vs. private) to the complexity of the amenities, effectively moving high-value residential litigation permanently into the commercial sphere. The “Activity over Asset” Shift While the Blue Nile judgment broadened the definitions, the Telangana High Court using the Blue Nile ruling expanded on the interpretation. In Legend Estates Private Limited v. P Srinivas Reddy 2024, provides the procedural blueprint for this jurisdictional capture. The analytical pivot here is subtle yet profound. The Court moved the inquiry from the status of the asset to the substance of the activity. The petitioner (Legend Estates) in this case mounted a classic defence rooted in the Supreme Court’s Ambalal Sarabhai precedent, arguing that the Development Agreement-cum-General Power of Attorney (DAGPA) did not involve property “used exclusively in trade or commerce”. However, the Division Bench explicitly held that Ambalal was “of no assistance” to the petitioner (Legend Estates). The Court’s reasoning was surgical: Ambalal interprets Section 2(1)(c)(vii) (agreements relating to immovable property), but the Court found that the dispute actually fell under Section 2(1)(c)(vi) (construction and infrastructure contracts). By re-categorizing the agreement under Clause (vi), the Court rendered the strict “commercial use” requirement of Clause (vii) legally moot. To justify this classification, the Court did not look at the title of the agreement but deconstructed its specific performance obligations. It read the DAGPA and the Supplementary Agreement as a single, integral corpus. The Court isolated specific clauses to prove the “construction” character of the deal. Clause 7 obligated the developer to take “total responsibility of the construction of Row Houses”. Clause 34 mandated the construction of a “Club House/Resort”. Clause 40 detailed infrastructure specifications like “underground cabling” and “WBM Roads”. The Court concluded that these were not merely agreements to sell land but were fundamentally contracts to construct This ruling effectively establishes an “Activity over Asset”

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

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

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

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

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

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

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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