Author name: CBCL

Sebi’s Expanded Strategic Investor Framework: The Double-Edged Sword

Leave a Comment / Contemporary Issues /

[By Divyansh Chauhan] The author is a student of Rajiv Gandhi National University of Law, Punjab Introduction: The Bordered Scope of the Strategic Investor In a move aimed at broadening institutional participation and deepening India’s capital markets, the Securities and Exchange Board of India (SEBI) has come up with changes meant to reform the meaning of Strategic Investor under the SEBI (Real Estate Investment Trusts) Regulations, 2014 and the SEBI (Infrastructure Investment Trusts) Regulations. The proposed revision attempts to align this definition with that of Qualified Institutional Buyers (QIBs) as provided in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. Before this, who could qualify as a Strategic Investor was limited to two specific definitions set out in India’s investment regulations. These rules applied to the two major investment structures used in real estate and infrastructure:  InvIT Regulations for Infrastructure Investment Trusts, which pool investor money to fund projects like highways, transmission lines, and power plants and secondly, REIT Regulations for Real Estate Investment Trusts, which invest in income-generating properties such as offices, malls, and commercial complexes. It focused on a few parties like infrastructure finance companies incorporated as NBFCs, scheduled commercial banks, multilateral and bilateral development financial institutions, systemically important NBFCs, foreign portfolio investors, insurance companies and mutual funds. While this structure maintained a focused pool of financially sound participants, it left limited room for a larger institutional base. The new definition includes other foreign portfolio investors than individuals, corporate bodies and family offices, an insurance company registered by the Insurance Regulatory and Development Authority of India (IRDAI), a mutual fund and any other qualified institutional buyer according to the definition of Regulation 2(1)(ss) of the ICDR Regulations. Yet the existing investment conditions remain unchanged, strategic investors are still required to commit a minimum of five per cent of the total offer size, with a lock-in period of 180 days after listing. Although the motive is to enhance institutional participation, the change might erode the distinction between strategic investment and simple financial anchoring, which is essential in ensuring the integrity of governance in a trust-wholes system. The paper reviews the updated definition of Strategic Investor as per the REIT and InvIT models by SEBI and evaluates its overall implications in the market. It highlights potential benefits like increased liquidity and institutional participation, while also addressing risks such as governance gaps, market concentration, and systemic vulnerabilities. The discussion goes beyond capital expansion to consider oversight, market signaling, and retail investor impact. Practical solutions, tiered classification, strategic intent statements, enhanced transparency, proportional lock-ins, and retail safeguards are proposed to ensure guidelines fulfil the purpose they were created for. Analysis of the Guidelines: Positives and Broader Implications Expanding the Capital Pool: Balancing Stability and Complexity The amendment is aimed at enticing a wider range of institutional capital, especially long-term investors like pension funds, insurance companies and provident funds. Such investors, commonly called patient capital, are in a better position to finance long gestation infrastructure and real estate projects. The definition presented under ICDR Regulations, in line with the QIB framework, facilitates the need to comply and enhances access to Indian REITs and InvITs by investors across the world. Nonetheless, the increase in the number of investing entities presents an intricate system of interconnections. Although these types of institutions are not invariably alike, they tend to share similar fiduciary rules, investment models and risk assumptions. These similarities might become correlated behaviour, such as massive simultaneous exits when there is economic stress, such as a sudden increase in interest rates or a liquidity squeeze. In this case, the depth that is generated by the increased number of participants might, paradoxically, increase the instability of the market. However, the amendment has the advantage of raising the amount of capital available, at the expense of linking the REITs and InvITs to the overall financial system, making them prone to external sector shocks. Regulatory Alignment and Governance Challenges Harmonising the Strategic Investor definition with the QIB category reduces procedural friction and encourages wider participation by automatically qualifying eligible institutions. This alignment creates a coherent investment framework across asset classes like REITs and InvITs, reducing regulatory friction. By eliminating duplicative checks and conflicting thresholds, it encourages broader institutional participation from mutual and pension funds, integrating these vehicles into the mainstream market and enhancing capital flow while simplifying the investment process for qualified institutions. Yet this alignment raises questions about the quality of oversight. The original definition implicitly favoured entities such as infrastructure finance companies and large insurers, which possess the sectoral expertise and managerial bandwidth to actively monitor sponsors. The cases of making this category broader to everyone that is a QIB water down this assumption. Passive or generalist investors can satisfy the financial requirement without taking part in asset-level management. This arises as a gap in governance whereby the role of checking the behavior of the sponsors gets scattered and may not be effective. Consequently, the system that is created to put strategic control in place ultimately presents the risk of becoming more symbolic than operational, expsing the minority investors even further. Signalling and the Shift in Market Perception Strategic Investors have long been used to give confidence to the market by showing that a deal is reliable. With bigger and more varied institutions coming in, this trust will likely grow, especially for small or retail investors. But this also changes what their involvement represents. Earlier, when a specialised infrastructure lender invested, it usually meant they had checked the project carefully. But when a pension fund or a general-purpose fund invests, it often shows trust in the overall sector or the economy, not in the details of a particular project. This new kind of capital is useful, but it also shifts how the market behaves. Instead of focusing on how well each project or asset is being managed, the market may start reacting more to broader financial trends. This could make REITs and InvITs more like standard products whose value moves up and down

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Demergers in India: Promise, Pitfalls, and the Need for Legal Synchrony

Leave a Comment / Mergers & Acquisitions /

[By Harsh Ahuja] The author is a student of Hidayatullah National Law University I. Introduction and Context India’s corporate landscape is in the middle of a restructuring wave. Some groups are consolidating, others are splitting. A pattern has become visible: listed companies are increasingly turning to demergers as a way to unlock value, simplify holding structures, or prepare for sector-specific growth. Quess Corp’s recent three-way split, ITC’s decision to hive off its hotel business, and Tata Motors’ separation of passenger and commercial vehicle divisions are only the latest in a string of high-profile examples. Yet, these transactions are constrained by a complex and sometimes contradictory legal framework. The Companies Act, 2013 creates two main pathways for corporate restructuring: the conventional scheme of arrangement before the National Company Law Tribunal (“NCLT”) under sections 230-232, and a fast-track route under section 233. The latter was designed to reduce cost and time, but while it works reasonably for small company mergers, its application to demergers has been fraught. The Income Tax Act has not recognised fast-track demergers. Approval thresholds are near impossible for listed firms. Ambiguities remain about  how liabilities, guarantees, and minority rights are handled. Regulators retain broad discretion to push cases back into the conventional route. This blog analyses why India’s framework remains under-prepared for demergers. It examines the statutory routes, tax foundations and the specific frictions in practice, as well as lessons from comparative jurisdictions. Demergers may be strategically valuable, but until the law synchronises company procedure with tax certainty and investor protection, the fast-track will remain more of a mirage than a mechanism. II. Routes for Demergers in India: Conventional vs Fast-Track Every demerger in India that utilizes the conventional route begins the same way: with a plan on paper and a nod from the boardroom. Once the board approves the scheme, the company must turn outward- to its creditors,  shareholders, and finally, to the National Company Law Tribunal. The process advances at a slow pace through a framework of mandatory formal steps. Notices go out, meetings are called, votes are counted. If three-fourths in value agree, the scheme moves ahead. Then comes the tribunal’s turn. The NCLT examines whether the valuation stands up, whether minority shareholders were heard, and whether the deal respects both the letter and the spirit of the law. Only after that scrutiny does the gavel fall, giving the scheme its legal life. Appeals lie with the NCLAT, which ensures another layer of review. Every actor knows the next step, every order builds on the last. The route is long and heavy with paperwork, but it offers certainty in corporate restructuring. The fast-track route under section 233 was introduced to ease this burden. Originally limited to mergers of small companies or between a holding and wholly owned subsidiary, it allows approval through Regional Directors rather than the NCLT. The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (“Companies (CAA) Amendment Rules, 2025”) expanded this idea to allow demergers to follow a similar path. In theory, this offers a cheaper, quicker option, especially attractive for start-ups and smaller entities. However, a significant challenge emerges here: the Income Tax Act still defines a “demerger” narrowly in section 2(19AA), requiring transfer of all assets and liabilities and mirroring of shareholding. It recognises only schemes sanctioned by tribunal. Fast-track demergers risk falling outside this tax definition, with severe consequences. That uncertainty makes the fast-track route a legal gamble. III. Gaps, Ambiguities, and Friction in the Framework India’s fast-track demerger framework promises efficiency but is weighed down by legal uncertainty. The 90% approval requirement for shareholders and creditors may work for private companies, but it effectively excludes large listed firms with widely dispersed ownership. In practice, such companies rely on the conventional tribunal route, which is slower but predictable. The law is also silent on how liabilities transfer between entities. There is no clarity on whether contingent liabilities, guarantees, or third-party obligations automatically move to the new company. Vedanta’s proposed split into six listed entities exposed this flaw. Credit rating agencies, including Fitch and Moody’s, flagged uncertainty about how group-level debt and guarantees would be divided, warning that such ambiguity could trigger covenant breaches or weaken credit profiles. Without express statutory guidance, creditors face uncertainty each time a restructuring is attempted. Disclosure gaps further weaken the framework. When Vedanta sought shareholder approval, it omitted a ₹1,200-crore claim from SEPCO, a major contractor. The omission distorted the financial picture and misled investors about the company’s liabilities. The NCLT noted that shareholders cannot provide informed consent if material facts are missing. Regulators pointed out that the scheme had changed after initial clearances, raising questions about procedural transparency. Regulatory discretion adds another layer of unpredictability. Regional Directors can refer any fast-track scheme back to the NCLT on broad “public interest” grounds. This power, though well-intentioned, blurs the line between oversight and obstruction. In Vedanta’s case, the Ministry of Petroleum and Natural Gas alleged misrepresentation of hydrocarbon assets and non-disclosure of loans worth ₹3,200 crore. The objections led to adjournments, highlighting how regulatory intervention, often justified, can still prolong the process. Other listed demergers show similar systemic strain. Quess Corp’s three-way split in 2024 triggered concerns about whether all entities would qualify for tax neutrality under section 2(19AA) of the Income Tax Act. Tata Motors’ separation of its passenger and commercial vehicle businesses proceeded smoothly, but only because the company pre-emptively ensured full valuation transparency, an extra step that India’s law does not mandate. Taken together, these cases reveal a pattern. Approval thresholds remain impractical, liability allocation uncertain, disclosure incomplete, and oversight inconsistent. The framework, built to facilitate quick restructuring, often turns into a procedural maze. Until company law and tax law move in sync, India’s demerger process will stay slow, unpredictable, and risk-prone. COMPARATIVE INSIGHTS AND THE ROAD AHEAD The United Kingdom: Clarity through Restraint The United Kingdom’s demerger regime values clarity over control. Demergers are regulated by Parts 26 and 27 of the Companies Act 2006, which govern schemes of arrangement.

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Is Sebi’s New Regulatory Bargain Truly a Win? Exploring Sebi’s New Angel Fund Framework

Leave a Comment / Capital Markets and Securities Law /

[By Mayank Upadhyay and Atharv Sharma] The authors are students of Hidayatullah National Law University. INTRODUCTION Following India’s goal to foster a nurturing environment for start-ups, the Securities and Exchange Board of India (‘SEBI’) has recently announced a seismic overhaul of the Angel Funds Framework. These funds are a sub-category of Alternative Investment Funds (AIF – Category I), which provides foundational support to a start-up during the early stages. These funds function by pooling capital from high-net-worth individuals (Angel Investors), to invest in early-stage start-ups, providing the start-ups with both capital and mentorship during the initial turbulent period. This reform seeks to achieve a dual goal: fostering a conducive environment for start-ups by encouraging investments in them and limiting the risks involved in such investments exclusively to individuals having commensurate risk appetite. To achieve this dual goal, SEBI, via circular dated 10th September 2025 (‘Circular’), has introduced a fundamental ‘regulatory bargain’ by drawing inspiration from the US qualified purchaser rule. This bargain offers unprecedented flexibility to Angel Funds registered under the SEBI (AIF Regulations) 2012 (‘AIF Regulations’), in exchange for restricting investment rights exclusively to independently verified Accredited Investors (‘AI’). This shift aligns with the thriving angel ecosystem, showcasing a Compound Annual Growth Rate (CAGR) of 106% in investments, opening the possibility of attracting ultra-wealthy investors who hesitated from investing due to outdated rules. However, these changes necessitate examination of how the underlying objectives can be better realised by studying practices across different jurisdictions. Therefore, this blog examines various issues surrounding the Circular. First, it analyses the changes introduced by the Circular. Next, it reveals the hidden flaws in the new framework. Finally, it evaluates and proposes additional reforms that could aid this overhaul by drawing lessons from other jurisdictions. THE CORE BARGAIN: CHANGES AND INTENT First and foremost, the Circular has limited the investor base of Angel funds exclusively to the AIs. This entails that only those individuals/body corporates are capable of investing in start-ups, through the instrument of Angel funds, who have been accredited by independent third-party recognised as accreditation agencies by the SEBI. Prior to these, any investor who fulfilled the wealth-based criterion laid down in the AIF regulations was entitled to participate in the investment schemes rolled out by Angel Funds. This fulfilment was attested entirely through self-declarations by investors. However, in an attempt to limit the risk to only those having a commensurate risk appetite, SEBI has laid down a strict wealth-based criterion for these accreditations. This change ensures that only reliable investors are permitted to invest in the start-ups, and also supports the ecosystem by channelling vetted and trustworthy capital. Second, the Circular has granted upon the AIs, the status of a Qualified Institutional Buyer (‘QIB’) as defined in SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. Prior to this, Reg. 19E(2) limited investments via Angel Funds to no more than 200 investors to bring the limit in line with the restriction placed upon private companies under the Companies Act, 2013. However, upon combined reading of S. 42 of the Companies Act 2013 with R. 14(2) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, this manoeuvre effectively excludes the AIs from the calculation of the numerical limit, which is placed on the membership of private companies. Third, the circular eliminates the restriction placed on the Angel Funds in the Reg. 19F(5) of AIF regulations, which mandates that not more than 25% of the total investments of an Angel Fund can be made in a single venture capital undertaking and must be within the limits specified, i.e., 25 lakhs to 10 Cr. Furthermore, the Circular permits Angel Funds to make Follow-on investments in companies even after they cease to be start-ups, as defined by the Department for Promotion of Industry and Internal Trade (‘DPIIT’). This change effectively permits an Angel fund to invest any proportion of its corpus into any start-up and continue to invest in it, regardless of it ceasing to be a start-up. This regulatory change has been introduced to safeguard the pre-emptive rights of angel investors in their portfolio companies and to preserve the value of their investments. THE NEW REGIME: FULFILLING OR SELF-DEFEATING? Firstly, a high wealth-based threshold for accrediting investors suggests the prioritisation of wealth over expertise. The new framework jeopardises seasoned entrepreneurs and domain experts in possession of invaluable industrial knowledge, but lacks the wealth-based criteria set up by the new regulations. This prioritisation of wealth condenses the quality of guidance and network available to the early-stage startups. Furthermore, reportedly, India has only around 650 registered Accredited investors (AIs) while the US has about 24 million of them due to the high threshold and transactional cost of accreditation, directly translating into a shrinking of the available pool of capital to the startups and stifling the benevolent intent of the Angel investors. This was the main concern raised by the NASSCOM during the consultations phase, which advocated against a wealth-based definition of Angel Investor to avoid adversely impacting the startup ecosystem. Secondly, the new framework extends the status of QIB to individuals solely based on their personal wealth, ignoring the institutional grade due diligence and professional oversight that form the very core of QIB, thus creating a situation where wealth is used as a lazy proxy for institutional sophistication. It sets a risky trend that could be extended to other areas of security laws for example, Qualified Institutional Placements (QIPs), institutional allocation portion of an Initial Public Offering (IPO) etc. eroding the critical line of difference between the retail and institutional investors diluting investor protections and alter market dynamics in domains designed to rely on the sophisticated due diligence capabilities of institutions. Thirdly, the removal of 25% concentration limit in one company acts as a dereliction of the regulator’s duty to protect investors for the reason that it fundamentally clashes with the fund manager’s fiduciary duty to manage risk and protect investors’ capital, as has been set out in the case of ILFS Investment Managers v.

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Addressing Algorithmic Collusion in Indian Competition Law

Leave a Comment / Competition Law /

[By Saksham Agrawal] The author is a student of National Law School of India University, Bengaluru. Introduction The CCI’s 2025 Market Study on Artificial Intelligence and Competition (‘2025 Market Study’) marks a decisive moment in India’s evolving engagement with digital markets. For the first time, it confronts not merely the deployment of artificial intelligence (‘AI’) as a business tool but its emergence as a participant in market coordination itself. Pricing algorithms, which were previously appreciated      for their efficiency and quick respons     es     , now act on their own as autonomous economic agents that can create results similar to, and sometimes better than, human collusion. The implications are profound because when coordination no longer requires communication, traditional antitrust concepts begin to fray. The central question that follows is both conceptual and institutional. Can a legal framework built upon human intent, consensus, and “meeting of minds” extend to a world where coordination is computational? This article examines how the 2025 Market Study reframes this problem within India’s competition law regime. It argues that while the study expands regulatory consciousness of algorithmic risks and proposes mechanisms for internal accountability, the Competition Act, in its present form, remains constrained by doctrines that presuppose human agency. The resulting gap is not of enforcement capacity but a gap between how markets now behave and how the law still thinks. However, a purposive interpretation of its wide wording to increase accountability among enterprises deploying pricing algorithms, along with building capacity through technical literacy, may provide solutions to the same. Background Algorithmic collusion refers to the coordination of prices or market conduct achieved through artificial intelligence systems, whether by deliberate human programming or through autonomous machine learning. What distinguishes these mechanisms from conventional cartels is not the outcome they produce, but the process by which they reach it. The Study refers to 4 identified operational forms. These are monitoring algorithms, parallel algorithms, signalling algorithms, and self-learning algorithms. Monitoring algorithms serve as instruments of execution or surveillance, implementing or monitoring agreements that have been consciously formed by human actors. Parallel algorithms or Hub-and-Spoke algorithms involve competitors relying on a common pricing algorithm or platform, enabling indirect coordination of prices through a shared technological intermediary. Signalling algorithms capture situations where firms independently deploy reactive algorithms that adjust to market conditions in similar ways, thereby increasing the likelihood of tacit alignment without explicit agreement. Finally, self-learning algorithms autonomously optimise prices through iterative learning, giving rise to collusive outcomes that occur without human intent, awareness, or participation. The first three categories fit comfortably within the conceptual apparatus of antitrust enforcement: they depend, at some level, on human design or tacit consensus. The fourth does not. It involves coordination without communication. The resulting difficulty is not merely evidentiary but ontological. Competition law has always treated collusion as an act of will, a convergence of minds expressed through behaviour. But when algorithms learn to align independently, what remains of collusion once its human authors disappear? The Competition Act’s framework      Section 3 of the Competition Act prohibits agreements, decisions, and “actions in concert” that cause or are likely to cause an appreciable adverse effect on competition. Its open-textured phrasing reflects deliberate legislative breadth where it captures conduct that may fall short of an explicit contract but nonetheless reveals a common economic design. This elasticity offers interpretive room to address algorithmic coordination. Where enterprises knowingly deploy similar pricing algorithms, or adopt machine-learning systems calibrated to react to market data in comparable ways, the resulting interdependence may constitute an action in concert even in the absence of explicit communication. In theory, then, the statutory language is capacious enough to include technologically mediated coordination within its fold. Yet the structure of Section 3 remains rooted in an anthropocentric model of collusion. It assumes actors capable of intention, decision, and mutual awareness, all attributes that belong to legal persons, not autonomous systems. Self-learning algorithms fracture this premise. They act without instruction, evolve without oversight, and generate patterns of market alignment that no individual firm may have foreseen or even understood.  The law presupposes agency as a precondition for culpability, but in algorithmic markets, agency is diffuse, distributed between code, design, and data. The result is a conceptual disjunction between how the law identifies responsibility and how coordination now occurs.  The 2025 Market Study implies that accountability should remain with the enterprise deploying the system, but the Act provides no clear doctrinal bridge between control and outcome once human intervention ceases. If liability follows control, firms could evade responsibility by distancing themselves from their algorithms’ autonomy. If it follows effect, firms risk sanctions for conduct they neither intended nor could reasonably predict. The absence of an intermediate principle that ties responsibility to foreseeability and design risks creating a zone of regulatory paralysis precisely where control has been surrendered to machines. The Market Study’s Approach The 2025 Market Study acknowledges that algorithmic interaction can generate and sustain supra-competitive pricing even in markets that are neither concentrated nor consciously collusive. What distinguishes such outcomes is not conspiracy but code per se and the capacity of algorithms to observe, infer, and adjust with a speed and precision far beyond human coordination. The study identifies three structural attributes that make algorithmic collusion uniquely resilient. First is its speed, which compresses the interval between detection and retaliation; second, opacity, which obscures causation and intent; and third, interdependence, which ensures that one system’s decision becomes another’s signal. Together, they      create a feedback loop that can stabilise collusive equilibria without any act of human agreement. In response, the study proposes a shift from reactive enforcement to preventive compliance. It recommends that enterprises conduct algorithmic self-audits consisting of systematic reviews of how their AI tools function in practice, documenting design parameters, data inputs, and market outcomes. Firms are encouraged to test algorithms periodically to detect patterns of unintended coordination and to maintain internal documentation explaining how pricing decisions are reached. A second strand of reform concerns hub accountability. Digital platforms and intermediaries that deploy common algorithms

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Risk to Creditworthiness: Policy and Legal Vulnerabilities in India’s Credit Scoring System

Leave a Comment / Commercial Law, Company Law /

[By Siddhi Bhosale and Saloni] The authors are students of Maharashtra National Law University, Mumbai and Rajiv Gandhi National University of Law respectively. ABSTRACT Amidst the complex landscape of credit agencies and subsequent ratings derived from the agencies, an individual’s borrowings are highly dependent. The approval from financial institutions and banks is directly proportional to the CIBIL score of an individual. Thereby, CIBIL score plays a pivotal role in determining an individual’s prospect vis-à-vis loan approvals and disbursement. However, the integral sector of CIBIL score is not immune from the bottlenecks of the regulatory framework governing the score. There is lack of transparency, accountability, delay in updation, lack of uniformity, no effective redressal mechanisms addressing the grievances of the consumers, etc. All these challenges draw the attention towards the creditworthiness of the scores provided by the credit rating agencies in India. Adding to this, several concerns regarding privacy further aggravate such fragmented sector’s effective implementation, despite legislations and statutes in place. This paper highlights the grave challenges faced by the consumer base and provides effective measures that can be undertaken to ameliorate the situation, thereby providing assistance to the individuals who actively take actions to improve their CIBIL score. INTRODUCTION An individual’s credit score is important in deciding access to financial resources because it directly determines loan eligibility, relevant interest rates, credit card issuance, and other financial goods. From one’s eligibility of availing a loan to the rate of interest at which such loan is to be issued, one’s credit cards and more is governed by one’s credit score. It is a statistical method used to predict an individual’s or small business’s ability to repay debt. The credit score is a three-digit number, generally ranging from 300 to 900. It provides a numerical measure of creditworthiness, derived from an individual’s repayment history and financial behaviour across various credit accounts and institutions. It is a way for credit institutions to gauge an individual’s financial reliability. TransUnion CIBIL Limited (formerly known as Credit Information Bureau India Limited, or “CIBIL”), Experian, Equifax, and CIRF High mark are the four foremost credit information companies in India that are licensed by the Reserve Bank of India for the management of credit information, as per Statement on Developmental and Regulatory Policies, Reserve Bank of India. Among the, four, CIBIL, a Chicago-based company, arguably is the most recognised and prevalent one among the Indian Credit Institutions. It was incorporated in 2000 based on the recommendations made by the RBI Siddiqui Committee. A person’s reputation with lenders and credit card companies rises in direct proportion to how close their credit score is to 900. Because it indicates dependability and reduced credit risk, financial institutions typically favour candidates who maintain a credit score of 700 or above. If your CIBIL score is 700 or higher, your loan and credit card applications will be processed more quickly than those with lower credit scores may already be approved for some of the cards. Through the means of this article, the authors delve into the regulatory structure that governs Credit Information Companies in India. It emphasizes the operational and systemic challenges that result from a lack of transparency, over-reliance on a single institution, and loopholes in legal oversight. The article concludes with a comparison to worldwide methods and ideas for improving the fairness, accountability, and dependability of credit reporting in India. REGULATORY FRAMEWORK AND EMERGING CONCERNS These Credit Information Companies (CICs), are regulated by the Credit Information Companies (Regulation) Act, 2005 (CICRA) and Credit Information Company Rules, 2006. These companies are registered with and governed by RBI. RBI issues directions in exercise of the powers conferred under Section 11 of the CICRA, 2005 on credit information reporting. While the existing framework also extends access to the RBI’s Integrated Ombudsman Scheme for grievance redressal, this mechanism has often been regarded as insufficient. CIC possess considerable power as barriers to financial opportunity, yet many struggle to understand the complex factors that contribute to calculation of CIBIL Score. Congress MP Karti P Chidambaram recently raised the issue in Parliament. “If you want to take a car loan, if the Finance Minister of this country wants to take a house loan, everything depends on the CIBIL score, but nobody knows how the CIBIL organisation works” “It is a private company. It is called TransUnion. This is the company which is rating every one of us,” Chidambaram said in Lok Sabha, voicing concern over the opaque methodology of credit scoring. Absence of Regulatory Oversight The present state of affairs raises two primary concerns. Firstly, there is a glaring absence of regulatory oversight and transparency in the manner in which credit scores are calculated. As per the latest RBI Master Guidelines, the Credit Institutions (CIs) are now needed to update credit bureau records every 15 days, instead of the existing monthly cycle. With the introduction of a 15- day reporting cycle, borrowers’ financial conduct, is expected to be captured and reflected more promptly in their credit history. In principle, this should enhance accuracy and ensure that borrower behaviour is duly reported. However, the ground reality reveals a stark gap between regulatory intent and practical implementation. CIBIL scores often remain depressed even after repayments are made, leaving borrowers uncertain whether their updated information has been transmitted by the CI or incorporated by the CIC. In a writ petition praying to direct Trans Union CIBIL Limited (‘TUCL’) to restore the credit rating of the petitioner to the levels entitled, since the petitioner had paid off his loan amount, Justice Devan Ramachandran gave necessary directions for such restoration. In this case, despite the petitioner paying off the loan, the TUCL continued to show his credit rating as low which led to closure of loan account and banned him from availing subsisting loan. In cases of non-compliance, complaints can be raised before the concerned CI or CIC, which must be resolved within 30 days. However, even with the RBI’s Integrated Ombudsman Scheme, 2021 the mechanism remains inadequate as the Ombudsman have

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Trading on Thin Ice: A Critical Look at Sebi’s 2025 Consultation Paper on Brokers’ Trading Systems

Leave a Comment / Capital Markets and Securities Law /

[By Ayushman Shrivastava] The author is a student of Hidayatullah National Law University (HNLU), Raipur. Introduction On 22nd September 2025, the Securities and Exchange Board of India (‘SEBI’) released a consultation paper on Review of Framework for ‘Technical Glitches’ in Brokers’ Trading Systems (‘Consultation Paper’), proposing revisions to its framework for managing technical glitches in brokers’ electronic trading systems. This is an effort to tweak an already existing regulatory regime (‘2022 Framework’), that has been operational since November 2022. The new proposals do not introduce new compliance burdens, but rather aim to adjust the balance between the protection of the investors and the practical realities of running a brokerage company. SEBI through these changes, signal a shift towards more precise and proportionality of regulation by reducing the definition of a technical glitch, confining the framework to bigger brokers, and streamlining the reporting mechanisms. This rethinking has to be understood in the light of the 2022 Framework. Back then, SEBI was following the approach of unveiling a comprehensive framework for all brokers with detailed guidelines released by stock exchanges a month later. The framework mandated prompt reporting of technical glitches, imposed penalties for defaults, and treated all disruptions, whether technical or otherwise, as the broker’s responsibility.. While this seemed investor-centric, it quickly came under scrutiny for being too prescriptive. Brokers resented being penalized even for disruptions that resulted from circumstances beyond their control, such as cloud service provider outages or payment gateway issues. Smaller brokers who had little technology infrastructure also felt compliance unproportionately burdensome. This article will critically examine the recent consultation paper on technical glitches by SEBI, and not just the gloss of the reforms it has offered. The redefinition of what should be considered a technical glitch seems to be exact, yet it risks absolving brokers of responsibility for disruptions that would affect investors outside regular trading hours. Equally, SEBI’s decision to exempt small brokers from the framework in the name of proportionality could inadvertently create a patchwork of regulation, leaving retail investors at the mercy of their brokers depending on size. Although the fact that reporting is being centralized and penalties are being softened is an indication of progress, the same changes can also lead to lack of accountability, as they put the burden of self-assessment and internal controls directly on the brokers. Finally, this article raises the question of whether the re-calibrated method of SEBI is sufficient in protecting the interests of investors or is too focused on regulatory convenience and industry comfort, which may compromise the integrity of the market. Glitches Redefined: Fine-Tuning Oversight or Diluting Accountability? SEBI’s idea to restrict the scope of what can be called a “technical glitch” marks one of its most consequential changes in the new Consultation Paper. Under the proposed definition, only malfunctioning during trading hours that are directly hindering trading or risk management (such as login failures, errors in placing orders or margin allocation) will fall into the regulatory net. Substitutions or failures that take place because of cloud service providers, banks, payment gateways, KYC onboarding, back-office systems, or analytical tools are specifically excluded. This seems like a logical change over the 2022 Framework, which unfairly burdened brokers with liability for things they cannot control. However, the accuracy of this new definition is purchased at a price. By excluding such broad areas of disruptions as “non-glitches”, SEBI risks undermining accountability in ways that have a direct bearing on investors. Take the example of payment gateway failures: while they are not trading, they can cause customers to miss their chance to be able to deposit their accounts in time and therefore lose out on trades, or worse, put them at the mercy of market volatility. There is also a temporal blind spot. By ignoring after-hours glitches, SEBI assumes that risks are confined to market hours. In reality, modern trading never really stops. Investors keep preparing strategies, transferring funds, and analysing their positions long after the trading bell has rung. A systemic outage at 6 p.m. may not register under SEBI’s framework, but it could undermine trading decisions the next morning. The underlying tension is apparent: SEBI does not wish to unfairly penalize brokers, but in doing so, it threatens to impose the burden of technological weakness on investors themselves. Overcorrection in regulation towards intermediaries can ultimately destroy trust in the very markets it aims to stabilize. Accuracy of definition must not be a codeword for avoidance of responsibility. Applicability and the Two-Tier Market: Proportionality or Privileged Protection? One of the most striking proposals in SEBI’s consultation paper is the narrowing of the framework’s applicability. Under the revised regime, only brokers offering Internet-Based Trading (IBT) or Securities Trading Using Wireless Technology (STWT) platforms with more than 10,000 registered clients as of March 31 of the preceding financial year will be covered. By SEBI’s own estimates, this would exempt around 457 smaller brokers from the compliance obligations. This threshold has been set by SEBI with reference to proportionality. But the larger and more technologically intensive a broker is, the more systemic its impact. Smaller brokers with few clients are not levied with an excessive compliance charge. Theoretically this is a fair difference. The migration, however, is risky due to the fact that it will create a two-tier marketplace which will act as a safeguard to investors. While large brokerage firms’ customers will be able to take advantage of the improved glitch awareness, tracking, and enforcement of noncompliance. Meanwhile, clients of smaller brokers will remain frustrated by an ineffectively designed system. There are namely three problems with this split. Firstly, these thresholds can create perverse incentives for regulatory gaming companies who are hovering over the 10,000-client threshold to not to expand their client base so that they do not have to pay to comply, and therefore ultimately restricting their own growth. Secondly, this kind of approach will generate informational asymmetry. The bugs between the exempted brokers are going to be less visible to regulators but will keep causing enormous damage to

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Data at Risk: What Happens to Your Personal Data in a Corporate Insolvency?

Leave a Comment / Insolvency Law /

[By shivangi nawalkha] The author is a student of National Law University, Jodhpur Introduction When Jet Airways entered its Corporate Insolvency Resolution Process (‘CIRP’) in mid-2019, the Resolution Professionals (‘RP’) came across an unexpected “intangible asset” – the airline’s entire customer database. Jet’s loyalty programme called as Jet Privilege held records of approximately 8.5 million of its members encompassing names, contact details, travel histories and payment information. Not surprisingly, prospective bidders evaluated this data trove almost as highly as the aircraft and route licences, viewing it as a revenue-generating asset that could be monetised post-acquisition. Although Jet privilege ultimately remained with Etihad and was excluded from the sale, this episode starkly illustrated a dangerous conflict at the intersection of insolvency and privacy which is that the airlines routinely hold gargantuan volumes of sensitive personal and financial data, yet neither the Insolvency and Bankruptcy Code, 2016  (‘IBC’) nor its regulations prescribe any data-privacy safeguards. Since May 2025, this tension has only intensified with the Insolvency and Bankruptcy Board of India (‘IBBI’) revamping its e-CIRP portal and expanding the online auction framework which requires the Resolution Professional’s (‘RP’) to upload and share the assets through web-based data rooms. Without clear statutory guardrails, personal data could be treated like any other asset risking mass privacy breaches, loss of consent and non-compliance with the newly enacted Digital Personal Data Protection Act, 2023 (‘DPDP’). Jet Airways’ CIRP stands as a cautionary tale to warn us that in the drive to maximise value, we cannot afford to overlook the protection of individual privacy rights. This Article critically examines the unaddressed intersection of data privacy and insolvency under India’s IBC, beginning with an analysis of why personal data demands the same rigour as tangible financial assets. It then maps the existing legal vacuum examining the IBC’s silence with the DPDP’s stringent requirements and explores our key legal tensions that RPs and CoCs must navigate. Lastly, it reviews how the EU’s GDPR and USA’s consumer-privacy ombudsman model address these challenges and concludes with five policy overhauls to embed global best practices into India’s digital CIRP and online auction processes. Importance of Privacy in Corporate Insolvencies Insolvency of an entity invariably entails transferring a company’s entire records – its financials, contracts and the operational data into the hands of unfamiliar stakeholders. In today’s digital economy, these “books” also contain vast troves of personal information. These could be passenger profiles and payment credentials in airlines, patient records in healthcare, customer usage data in telecom and employee details technically across every sector. A sudden CIRP can expose this personal data trove into the data rooms of bidders, creditors and even the competitors – none of whom the original data principals originally consented to engage with. This exposure carries serious risks because the personal data exposed during an insolvency process may be leaked for unsolicited marketing, financial fraud or re-identification attacks. Concurrently, sensitive health data and financial details such as medical histories and credit card information respectively could be exploited for identity theft, insurance fraud or targeted scams. In the wrong hands, this data could be sold on the dark web or used to profile individuals without their knowledge or consent. Crucially, unlike physical assets such as machinery or aircraft, personal data cannot lawfully change hands without informed consent, purpose limitation, and clear notice. Had bidders acquired Jet Airways’ customer files without privacy safeguards, each of its 8.5 million members would have lost control over their information with a potential of being misused. In short, insolvency dramatically escalates the privacy stakes – the larger the data pool, the greater the potential fallout from any misuse requiring the RPs treat data protection with the same rigour and care as they do financial assets. Yet, despite these heightened risks, India’s insolvency framework under the IBC remains silent on how such personal data should be handled leaving the RP’s without statutory guidance and exposing stakeholders to significant compliance and liability gaps. The Legal Landscape in India: Insolvency Law Meets (or not) Data Privacy India’s insolvency framework currently operates in a legal blind spot when it comes to personal data. The IBC and its accompanying regulations are entirely silent on how sensitive personal information should be handled during a CIRP or liquidation. There are no provisions that limit what personal data, a RP is allowed to share with the bidders nor any guidance on how long such data may be retained. Section 30(2)(e) of the IBC simply mandates that a resolution plan must not contravene any existing law and should maximise the value of “all assets” of the debtor – it does not contain any provision for the protection of personal data. This is problematic because unlike physical assets, personal data implicates individual privacy rights and are subject to completely different legal obligations i.e. DPDP. However, the section being non-exhaustive leaves enough space to carve out a provision in the IBC for the protection of the personal data. In similar spirit, regulation 36 of the CIRP Regulations has no provisions for protection of “intangible assets” like personal data. Meanwhile, the DPDP marks India’s first comprehensive attempt to regulate the collection and use of personal data. It was enacted to give effect to fundamental rights under Article 21 and is modelled on principles akin to the GDPR. It contains the provisions that would bind any entity processing personal data called a “data fiduciary.” Since a RP assumes possession and control of the corporate debtor’s personal data during a CIRP or liquidation, it may be deemed as a “data fiduciary” under DPDP. Section 6 of the same mandates consent as the default basis for processing any kind of personal data unless one of the specific “legitimate uses” under Section 7 applies. Two such exceptions could arguably apply in an insolvency for the use of personal data, first; section 7(c) which allows for processing of personal data without consent for “performance of any function under the law.” This could be a possible fit for statutory CIRP duties of

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Courts, Capital, and Confidence: Towards a Rule of Law Framework for Investor Protection

Leave a Comment / Contemporary Issues /

[By Sejal Sahu and Anenya] The authors are students of Hidayatullah National Law University Introduction In the recent judgement of Hyeoksoo Son v. Moon June Seok & Anr., the Supreme Court (SC) emphasized that “the rule of law has a responsibility to protect the investments of foreign investors”. While reiterating that the accused had a right to a fair trial, the SC expressed a wider systemic responsibility to depict that fraud on foreign entities should not be left unexamined. The reinstitution of criminal charges in this matter is an indication of a departure in our system of purely procedural adjudication to one that consciously considers the economic impact of legal outcomes. This reflects a shift towards a substantive conception of the rule of law, where justice is not only procedural but also considers investor protection and legal integrity. Does this signal an evolving jurisprudence where constitutional values like the rule of law and due process are being reinforced? Meanwhile, does it reflect an alignment with the economic goal of making India an attractive and secure destination for foreign investment? This post examines how judicial justice is beginning to define the boundaries of a legal environment responsive to the demands of investments. The first part highlights the judicial shift, followed by an analysis of the SC’s verdict. The second part explores India’s legal system in fostering investors’ trust. The third part provides a comparative analysis of investor rights in other jurisdictions. Lastly, recommendations are proposed to strengthen investor protection and create a safe environment for them. Analysing The SC’s Verdict as A Beacon for Investor Protection The Indian subsidiary of the South Korean company Daechang Seat Automotive Pvt. Ltd. experienced a significant financial fraud involving the siphoning of GST money by outsourced advisors and former Chief Financial Officer (CFO) Moon June Seok. The High Court ruled in favour of the accused CFO due to the absence of direct evidence, raising concerns about investor protection. However, the Supreme Court interpreted the situation as an institutional failure with wider implications and recognised that leniency could undermine investor confidence and the credibility of India’s legal system. The SC cited the case of State of Haryana vs Bhajan Lal, where the limited scope of judicial interference was applied to Section 482 of Cr. P.C. and held that the apex court must refrain from conducting the mini-trial at the preliminary stage and assess only if a prima facie case exists. In its reasoning, the SC carefully balanced the interests of investors and constitutional fairness. It did not want the sheer enormity of the alleged financial wrongdoing to be used as an excuse to circumvent legal protections. This finding indicates that the SC was reluctant to prejudge guilt solely based on the presence of foreign investment. Instead, it reaffirmed that procedural fairness, grounded in the presumption of innocence, should guide the process. More importantly, the SC acknowledged that the validity of the Indian investment environment depends not only on the ability to prevent financial wrongdoing but also on upholding the legal rights of all stakeholders. By emphasizing this dual obligation, the SC conveyed to both domestic institutions and international investors that the Indian legal system is committed to due process, transparency, and accountability, a system where economic governance and constitutional integrity work in unison. Where’s the Safety Net? India’s Rule of Law Deficit in Investor Protection Investors have long been accustomed to structuring their regulatory compliance around contractual obligations. The transactions, hence, majorly depend upon the party’s legal ability to perform. The major portion of the A.T. Kearney 2025 index underscores the importance of legal and regulatory efficiency as the top two most important factors for investors when choosing where to make their investment. India’s performance has fallen short of attracting investments, where it manages to come at the 24th position out of 25 countries that make up the index. Hence, the judgment comes in to save the picture and provides hope in the clouded Indian investment landscape. In Vedanta Resources Plc v Union of India, the Court reiterated the public trust obligation of the State. However, it failed to offer any meaningful protection for investors. The court justified the state’s discretion in allocating resources and allowed for the retrospective amendment of contractual rights, which increased uncertainty for investors. Likewise, the enforcement of arbitral awards was only available after the dispute in Cairn Energy Plc v Republic of India. These examples show that even prominent investors do not receive proactive safeguarding or stabilization, but resort to the time-consuming process of litigation and corrective enforcement. A significant lack of the judiciary’s protective armour rests in its blunt-edged approach, with no relief to investors in terms of pivotal democratic rights. Even when upholding the rights of investors against illegal use of power by tax authorities in another case, the  SC reasoned that “case is of considerable public importance, especially on Investment, which is indispensable for a growing economy like India”, hence, outlining a very narrow and incentive-driven approach to the legal protection of investors in the country. The only relatively useful safeguard that emerges is Section 125 of the Companies Act, 2013, which offers limited relief through the Investor Education and Protection Fund (IEPF). It requires investors to transfer any unclaimed dividends or other amounts to the IEPF, which is further used to create awareness among investors and to clear any valid dues. It aims to stop the possible misappropriation of unutilised funds by the business institutions and offer a platform in which the rightful owners can reclaim their legitimate cash. However, the refund process through the IEPF is usually bureaucratic and opaque and thus discourages a large number of small investors from going forward with their claim. Furthermore, the outreach and education programs facilitated through the IEPF are regarded as small-scale and short-lived, particularly outside of urban centres. Section 125 deals only with unclaimed financial entitlements. It does not cover larger issues like fraudulent investment schemes, lack of transparency, or weak enforcement against corporate misconduct in India’s investor

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Blind Spot in Esg Bonds: The Forgotten Leaf Purpose Washing

Leave a Comment / Capital Markets and Securities Law /

[By Aditya Kumar and Samridhi Singh] The authors are students of Chanakya National Law University, Patna Introduction In the era of online campaigns and global movements, corporate entities have found a place for themselves to engage with the larger social discourse either through their strong advertising campaigns or their ESG commitments. What has become a trendy PR activity for most companies, especially post the success of the Nike campaign on the lines of Black Lives Matter, was initially set out to instil a sense of broader responsibility towards society and governance. This is precisely where the threat of purpose washing knocks at the door of corporate giants, with the tide turning on their faces in several instances when their practical actions fall short of their larger PR budgets. Companies like Gillette, Coca-Cola, and McDonald’s have done their fair share of what is known as Woke Washing, a subset of Purpose Washing apart from Greenwashing. Although these terms have minute differences, they share the common thread of inconsistent action when it comes to purposes beyond profit maximisation. Purpose washing, as defined in the Securities Exchange Board of India (“SEBI”) Circular titled ‘Framework for Environment, Social and Governance (“ESG”) Debt Securities (other than green debt securities)’ (hereinafter referred to as the “SEBI Circular”) dated June 05, 2025, refers to false, misleading, unsubstantiated, or otherwise incomplete claims regarding the purpose of issuance of bonds. The SEBI Circular, in pursuance of the Circular dated December 2024 and Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“NCS Regulations”), introduced the regulatory framework for social bonds, sustainability bonds, and sustainability-linked bonds. Notably, one of the regulatory parameters covered the compliance for curbing purpose washing in cases of issuance of social and sustainability bonds. The SEBI Circular on ESG Debt Securities excludes sustainability-linked debt securities from the ambit of compliance, and it mandates keeping purpose washing in check. This specific lacuna, apart from the others, poses a serious threat to the overall purpose of the Circular itself. With this premise, the article explores the regulatory compliance for sustainability-linked debt securities and critically evaluates the void in the framework curbing purpose washing. Differing Compliances for Debt Securities ESG Debt Securities, other than green debt securities, are largely distinguishable from each other on the basis of the primary objective for which they are to be utilized. Social bonds, on the one hand, are utilized for social projects initiated to alleviate a social issue (a list of which is mentioned in the SEBI Circular). Sustainability bonds are issued for financing or refinancing of green projects and social projects as defined in the Circular. However, the third category of debt securities, i.e., sustainability-linked debt securities, does not have any set parameters of activities or objectives for which it is issued. These instruments address the predetermined goals of the issuer, furthering their broader sustainability objectives. Contrary to social and sustainability bonds, which are ‘use proceeds’ and are utilized for a specific purpose, sustainability-linked bonds attend to the sustainability goals of the issuer itself. Due to the differences in the nature of the debt security, the compliance that follows also differs significantly. Sustainability-linked debt securities are measured using Sustainability KPIs against predefined Sustainability Performance Targets (SPTs). The initial disclosures to be made by the issuers of sustainability-linked bonds revolve around the rationale for the issuance and its consistency with the broader sustainability strategy of the issuer. Moreover, the details of the KPIs and SPTs, and their modus operandi for carrying out risk assessment, need to be disclosed initially. The issuer, under this, can also elect an ESG committee in order to monitor the performance under the issuance of debt securities. These initial disclosure compliances differ significantly from those of social and sustainability bonds as they are more inward-looking in nature. They demand contemplation and introspection from the issuer as it functions as its own assessor while achieving the sustainability targets defined by it. The compliances enable the issuer (who is more of a self-serving referee in this case) to play from both sides of the fence Where the reality differs from this presupposition is when the independent third-party report surfaces in the continuous disclosures filed by the issuer. As opposed to the use proceeds, where the majority of post-issue compliance obligations revolve around reporting the utilization of the proceeds and their subsequent social impact, KPI-based securities depend on the international standards for post-issue compliance. The predicament with international standards arises from the leniency granted by the regulator to issuers in choosing the standard they wish to comply with. Certain standards, like indicators of the European Union, present a discrepancy in the compliance requirement for green bonds and sustainability-linked bonds, where, on one hand, for the former, it offer robust protections to investors, and for the latter, the disclosure requirements remain voluntary in nature. This, in pursuance of the prior heavy-handedness of the issuer in the initial disclosure, puts the investor in a dubious situation. Essentially, it demands that the investor be active in ascertaining the protections offered by the international standard to be adopted by the issuer, as mentioned in the offer document, along with the report of the reviewer for the issue of sustainability-linked debt securities. The curious case of purpose washing Although it appears that the SEBI Circular intends to remain consistent with the international standards by requiring SPTs to be ambitious and material, it fails to maintain a robust mechanism to keep the threat of purpose washing in check. Interestingly, the compliance mentioned in the Circular to curb purpose washing does not require any such compliance on the part of issuers of sustainability-linked bonds. For debt securities with the flexibility and lack of end-use restrictions, like that of sustainability-linked bonds, a complete absence of adherence to any set of rules for purpose washing puts investors in a turbulent position, as the fluctuations in the interest rates on these bonds rely on the fulfillment of the targets set by the issuer. Considering the overbearing

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