Contemporary Issues

[By Shriyansh Singhal] The author is a student of National Law University Odisha.   Background  In a landmark decision, the Bank of Japan (BoJ) raised its interest rates for the first time in 17 years, triggering notable ripple effects across global markets, including India. After years of a negative interest rate policy, the BoJ raised its short-term rates from -0.1% to 0.1% in April 2024, followed by an increase to 0.25% in July. BoJ came forth with a negative interest rate policy to combat deflation and stimulate economic growth but its recent shift away from this policy has marked a significant change in global financial dynamics. This decision not only impacts the finance world but also affects the legal and regulatory challenges for markets like India, which are closely related to foreign capital flows as all the market regulators have recently been pushing investment facilitation and ease-of-doing business guidelines.   India’s response to BoJ’s Interest rate hikes  The Indian equity markets reacted to this policy change by witnessing significant drops in the indices such as BSE Sensex and Nifty, with increased volatility propelled by the destressing of the popular yen carry trade strategy where traders borrow in yen at low interest rates and invest in higher-yielding assets globally, to enjoy lucrative profits. Lured by the now higher domestic interest rates, Japanese investors have begun to repatriate funds back to their home country which was a reason for the noticeable outflow of Foreign Portfolio Investments (‘FPIs’) from Indian markets. The BoJ’s actions indicate a robust legal and regulatory framework to manage the intertwined global finance horizon and mitigate economic risks.   At present, Indian Regulatory Authorities such as the Securities Exchange Board of India (‘SEBI’) and the Reserve Bank of India (‘RBI’) are in the position of determining the stability of the financial system in the world turmoil. There emerges the need to reform the cross-border financial regulations with the increased market fluctuations, for instance in currency exchange and capital transfer for protection of the markets against manipulations and speculations.  Implications for India’s Financial Laws and Compliance  The BoJ’s rate hikes could significantly affect the Foreign Exchange Management Act (FEMA), 1999. The fluctuation in the exchange rate of the Indian rupee against the yen may cause the RBI to implement more stringent policies & strategies to bring changes in the laws on the exchange control system. In addition, SEBI may have to strengthen its FPI monitoring systems to ensure that such outflows do not cause fluctuations in the markets. Thereafter, some of the domestic corporates engaged in cross-border transactions may have to meet the stringent FEMA reporting requirements because of increased regulatory scrutiny of Foreign Direct Investors (‘FDIs’) and Foreign Institutional Investors (‘FIIs’) and their repatriation. It could also result in higher complexity of compliance with regulations concerning foreign exchange derivatives due to the necessity of hedging against currency risks.   The global shift in interest rates which is more likely to be initiated by the BoJ’s action is most likely going to exert pressure on the Indian debt markets. The Companies Act, 2013, which governs the issuance of corporate bonds and other debt securities, may see increased application if BoJ’s rate hikes lead to higher interest expenses for Indian firms, prompting them to rely more heavily on debt financing. Consequently, amendments to the provisions of the Companies Act concerning the issue of securities, including the regulatory approval, disclosure requirements and investors’ protection. This is especially important to maintain the competitiveness of corporate bond rules and protect investors’ rights, which may require SEBI to reconsider its rules in this regard. To make Indian bonds nearer to the reach of international investors, legal requirements related to the pricing and distribution of debt securities may also be looked into and aligned with international standards.  It could also make SEBI introduce stricter disclosure norms and more stringent rules regarding the repatriation of profits by FPIs, which could potentially require making amendments to the SEBI (Foreign Portfolio Investors) Regulations, 2019, especially in the registration and compliance obligations of FPIs. Enhanced scrutiny of market conduct related to insider trading and market manipulating activities could also be taken up by SEBI due to increased volatility. In periods of high volatility, there is a possibility to increase measures of SEBI (Prohibition of Insider Trading) Regulations, 2015 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 to prevent unfair practices. The impact on foreign investment in India will directly affect the taxes collected from these investments.   To address the issues concerning the taxation of capital gains and withholding taxes of foreign investors, the Government of India may contemplate changing the tax treaties or including the Income Tax Act, 1961. The exchange and interest rates may make those involved in cross-border transactions be subjected to a higher level of scrutiny under the transfer pricing regulations. To curb the multinational conglomerates from engaging in profit shifting or any other method of tax evasion, an even higher level of compliance with the provision of the Income Tax Act will be boosted.  It is also important to note that some of the Indian banks that have operations in the global markets may be affected by changes in the global interest rates including those occasioned by the BoJ. The Banking Regulation Act, 1949 may also have to be amended to ensure that the Indian banks are well-capitalized and in a state to meet the prudential Regulations in the face of Global Risks. The RBI may make new regulations on how to address the interest rate risks and foreign currency translation impacting statutory provisions of India’s banks under this Act.  Contractual and Financial Strain on Indian Companies  The rate increases by the BoJ can have severe contractual implications for Indian companies engaged in international business or having foreign currency debt linked to international benchmarks like the London Interbank Offered Rate (‘LIBOR’) or the Tokyo Interbank Offered Rate (‘TIBOR’). Foreign debt may be repaid at a higher cost because of the changes

[By Anasruta Roy] The author is a student of National University of Advanced Legal Studies.   Introduction In early July 2024, the RBI published draft regulations titled “Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2024”( henceforth draft regulations), concerning foreign exchange transactions, continuing the government’s trend of policy liberalization in this area.  The proposed regulations introduce several key changes for exporters:  Expanded declaration requirement: Exporters must now declare the full export value of both goods and services to the designated authority, not just goods and software as before. Repatriation timeline: The entire export value must be received and brought back to India within nine months from the date of shipment (for goods) or invoicing (for services). Documentation process: Exporters are required to submit a specific declaration form to the designated authority and provide relevant documentation to the Authorized Dealer within 21 calendar days of shipment or invoicing. Late submissions: Authorized Dealers may accept documents submitted after the 21-day deadline, subject to their discretion and RBI guidelines. These changes aim to streamline the export process and ensure timely repatriation of foreign exchange earnings. However, the proposed regulatory changes raise a pertinent question: Would legal professionals offering consultancy services to international clients be required to provide additional documentation for each engagement under these new provisions? There exists a regulatory ambiguity due to conflicting interpretations across various legal frameworks. The Foreign Exchange Management Act (FEMA) includes legal assistance within its purview but excludes contracts of personal service. The Finance Act explicitly categorizes legal assistance as a reportable service. In contrast, consumer courts have interpreted legal services as contracts of personal service.  This inconsistency creates uncertainty regarding whether legal services provided to international clients must be reported in the draft regulations. The article in question examines this regulatory overlap and proposes potential resolutions to this ambiguity.  Service – A Finance Act Perspective The Finance Act of 2009 expanded the scope of services by introducing clause 105 (zzzzm). This amendment defined taxable services to include advice, consultancy, or assistance in any legal field provided by one business entity to another. However, it explicitly excluded appearances before courts, tribunals, or authorities from this definition.  This amendment sparked controversy, leading to a legal challenge in the case of Advocates Association of Western India v Union of India and Ors. The petitioners (Advocates Association of Western India) argued that the legal profession, traditionally viewed as an integral part of the justice system rather than a commercial enterprise, should not be subject to service tax. They contended that lawyers, as officers of the court, perform a solemn duty rather than providing a service in the conventional sense.  The opposing view held that lawyers do indeed provide a service to their clients, for which they receive compensation. This argument drew parallels between legal professionals and other service providers such as consulting engineers or doctors. It was suggested that while lawyers have unique responsibilities to the court, this does not negate the service aspect of their relationship with clients in the context of service tax applicability.  The court’s decision did not favour the petitioners, allowing for the imposition of a service tax on legal services. However, the case remained under review, and subsequent notifications provided more specific definitions of legal services for taxation purposes, with different tax treatments based on the nature of the legal work performed.  This discussion will not delve into whether such tax is payable in light of the 2012 amendment and the introduction of the negative list regime. The legal discourse and its outcome effectively established that, at least for the purposes of the Finance Act, legal consulting falls within the category of services.   The CPA’s take on Service The Consumer Protection Acts of 1986 and 2019 define “service” similarly, encompassing various services made available to potential users. However, the definition explicitly excludes services provided free of charge or under personal service contracts.  The court in President Jasbir Singh Malik & Ors v. DK Gandhi PS National Institute of Communicable Diseases and Ors noted that professionals are distinct from business people or traders, and their clients cannot be considered consumers in the traditional sense.  The court defined a profession as a vocation requiring advanced education, particularly in law, medicine, or ministry. They argued that professional services cannot be equated with commercial goods or services as defined in the Consumer Protection Act.  The bench suggested that lawmakers, presumed to be knowledgeable about existing laws, did not intend to include professional services within the Act’s scope. They highlighted the unique role of lawyers in society, emphasizing their duty to act with utmost good faith and integrity.  In examining the relationship between lawyers and clients, the court considered whether it constitutes a contract “for services” or “of service”. They concluded that clients exercise significant control over how lawyers perform their duties, indicating a contract of personal service.  Based on this reasoning, the bench determined that legal services fall under the category of personal service contracts and are therefore excluded from the definition of “service” in the Consumer Protection Act of 2019.  The ambit of services – FEMA lens To better understand the implications of the draft regulations, it is crucial to examine the definition of “service” as provided in the parent legislation, FEMA 1999. Section 2(zb) of FEMA offers a comprehensive definition that includes various activities, notably encompassing “legal assistance” within its purview. This inclusion suggests that legal services could potentially fall under the declaration requirements of the new regulations.  However, the FEMA definition also introduces a critical exclusion: services rendered under a “contract of personal service” are explicitly exempt from the definition. This exclusion creates a complex scenario, particularly when considering recent legal interpretations regarding the nature of professional services.  The crux of the issue lies in distinguishing between what constitutes “legal assistance” and what falls under a “contract of personal service” in the context of international legal consultancy. This distinction may not always be clear-cut and could vary depending on the specific nature

[By Ansh Chaurasia & Mudrika Jha] The authors are students of Dr. Ram Manohar Lohiya National Law University, Lucknow. INTRODUCTION The Reserve Bank of India (hereinafter, ‘RBI’) has released the final Framework for Self-Regulatory Organisations (SROs) for FinTech Sector (hereinafter, ‘Framework’) on May 30, 2024, after releasing the draft for the same on January 15, 2024. The principle underlying the proposed Framework can be traced back to 2018 when the Report of the Working Group on FinTech and Digital Banking suggested the principles for regulatory intervention in the FinTech industry. These principles were centered on fostering healthy competition, ensuring impartial treatment, systemic stability, and user protection. The Framework issued by the RBI lays down the eligibility and membership criteria, functions, and governance norms for the proposed SRO-FT(s) and their responsibility towards the RBI. A FinTech SRO (hereinafter, ‘SRO-FT’) has been proposed to be an industry-led entity responsible for, inter alia, the establishment and enforcement of regulatory standards within the FinTech sector, dispute resolution, market intelligence and promoting transparency, ethical conduct and accountability among its members.   This blog puts forth an analysis of the idea of establishing an SRO and its desirability in the FinTech industry, a critical evaluation of the proposed framework, and the way ahead.  SROs FOR FINTECH: REGULATING ON THEIR OWN ACCORD A. The FinTech Story Globally, FinTech evolved in the aftermath of the economic crisis of 2008, which challenged the traditional banking system and paved the way for a resilient financial infrastructure. Due to its ubiquitous nature and automation of services, FinTech has lived up to its touted potential. It has been instrumental in expanding and expediting the rendering of financial services, making it an indispensable component of a developing economy. In India, FinTech has played a crucial role in revolutionizing digital payments and lending, making India the house of 22 FinTech unicorns. It has made financial services in India accessible to those who otherwise would have remained deprived of such services. B. Locating Consumer’s Interest As formidable as it may seem, the FinTech paradigm raises regulatory concerns. Processing personal data is a function of rendering services by a FinTech entity, which poses a significant risk to the user. Any uninformed choice made by the users of FinTech platforms exposes them to a potential risk of breach of privacy and data security. Several consequential risks, such as fraud and unethical usage of user data, emanate from the breach of privacy. Risks arising out of services available on FinTech platforms have already been acknowledged by RBI when unethical practices in digital lending came to the fore. The Working Group constituted by RBI reasoned that reliance on third parties by the lending entity created unethical practices such as mis-selling to unsuspecting customers, breach of data, and illegitimate operations. Consequently, RBI had to issue Guidelines to deal with this specific issue.  The ease and fast-paced nature of services provided by FinTech platforms jeopardise the interest of consumers who may fall prey to impulsive purchasing behaviour. Such consumers are likely to be affected by ‘bounded rationality’, a situation where an individual’s rationality for decision-making is constrained by a lack of information, the individual’s cognitive limitation, and the limited time to make the decision. Even the abundance of information about any transaction may not serve well to ensure favourable conditions for the consumer or to eliminate any potential unethical practice on the part of the service provider. India’s abysmal financial and digital literacy rates further aggravate the vulnerability to which a consumer of such platforms is already exposed. With the FinTech industry poised to expand, regulatory concerns are of much more significance than ever.  The rationale behind introducing this Framework is to attempt a balancing act between promoting innovation within the FinTech industry and minimising the risks it poses. The experience and expertise of FinTech companies underlying self-regulation can be a relatively better response to the complexities of this industry than a traditional legislative intervention. Obligations drafted by the subject of the regulation ensure a greater degree of compliance. Further, the cost of information, supervision, and enforcement gets lowered in a self-regulatory framework.  In its pursuit of increasing profits, the industry’s adherence to norms that further social interest is unlikely. Instead, they have a strong incentive to adhere to socially undesirable norms. Self-regulation is likely more effective when adherence to norms and best business practices are concomitant and when there is a concurrence in public and private interest. Therefore, to wane off the potential shortcomings of the SRO and achieve the desired outcomes, the RBI’s oversight plays an important role.  ANALYSING THE FRAMEWORK The Framework is in line with the ‘Twin Peaks Model’ of financial services regulation. As per this model, two distinct supervisory bodies should be operational in a sector, one for overseeing conduct of business activities, and the other for overseeing financial stability and prudential regulation. This is done to separate market conduct regulation (ethics and consumer protection) and prudential regulation (for management of systemic risks, monitoring capital and liquidity requirements in the sector), the rationale for the same being, risks of varying nature necessitate varying expertise and approaches to regulation. Several jurisdictions, such as Australia, Belgium, France, the Netherlands, and the United Kingdom, have adopted this model. One such example is the distribution of regulatory functions within the financial sector in England. The Bank of England’s Financial Policy Committee (FPC) is the reform regulator of England’s financial system, focused on managing systemic risks, whereas the Financial Conduct Authority (FCA) is the conduct regulator, ensuring healthy competition among market participants and consumer protection. The Framework delineates the scope of SRO’s operations, conforming to the international standard of distinguishing between prudential and conduct-based regulation. Public interest, market conduct and market intelligence, i.e. overall market conduct regulation, are the key responsibilities underpinning the SRO-FT Framework whereas RBI would continue performing prudential regulation of the FinTech sector.   However, the intended self-regulation comes with its peculiar shortcomings. When considering sectoral dynamics within the FinTech sector, the Framework encourages FinTech entities to have membership

[By Siddh Sanghavi] The author is a student of National Law University Odisha.   Introduction  The 22nd Law Commission on 5th March 2024 came out with its 289th report on “Trade Secrets and Economic Espionage”, wherein it suggested the need for special legislation to protect trade secrets and prevent economic espionage. The Law Commissiosn based on the report also came out with a draft bill titled the Protection of Trade Secrets Bill.  A trade secret is a type of intellectual property that is a confidential business secret and is not generally known or easily accessible. Trade Secrets are considered to be economically valuable because of their secrecy.    India is under an international obligation to protect Trade Secrets. Article 39 of the TRIPS agreement (Agreement on trade related aspects of intellectual property rights) mandates the state to protect “undisclosed information”. The risk of protection of trade secrets and economic espionage has affected businesses for a long time. From the 1983 Star Wars Case, wherein an employee tried to steal the script of the upcoming star wars movie, to the attempted breach of the secret Coca- Cola formula.   This blog analyses the current regulations in India to protect trade secrets vis- a- vis the need for specialised legislation, it analyses the provisions of the draft bill, and gives suggestions for the same.   Inadequacy of current Laws to protect trade secrets India does not have a specific statute or act protecting trade secrets. Currently, Trade Secrets in India are protected mainly through Non-Disclosure Agreements between parties and provisions of the IPC and Information Technology Act 2000 (IT Act), which provide for criminal sanctions. These acts do not provide any special procedure to protect the rights of the trade secret holder nor do they provide any comprehensive set of relief that will be available in case of any leak of trade secret. The question also arises as regards to civil remedies to protect trade secrets in the absence of a contract or in cases of breach by a third party.    Civil Remedies Indian courts, in the absence of a contract provide for protection of trade secrets based on equity principles and common law action for breach of confidence. For example in the case of Richard Brady V. Chemical Process Equipment Pvt Ltd the Delhi High Court granted an injunction even in the absence of a contract citing its broader equitable jurisdiction. Granting of injunction has been one of the main remedies used by courts in India to give protection for leak of trade secrets.   Further, in cases of violation of NDA or leak of trade secret, there is currently no special procedure outlined through which remedy can be sought through the court system. Usually if a company wants to claim damages or seek compensation it will have to go through the long and tedious court process, which itself might lead to disclosure of the trade secret and cause more harm than good.   Criminal Remedies With regards to criminal remedies, currently, when cases of Economic Espionage and trade secrets are registered the accused are usually charged with sections of Theft, trespass, dishonestly receiving stolen property and Cheating.   However courts are hesitant to apply IPC to cases of economic espionage. For example in the case of Pramod, Son of Lakshmikant Sisamkar V. Garware Plastics and Polyester {Pramod case}, the Bombay High Court refused to use criminal sanctions against certain engineers who had taken certain documents from their employers and opened a new company. The court held that since the allegedly stolen documents haven’t been used and the new company wasn’t operational criminal sanctions couldn’t be imposed. This leaves the aggrieved with almost no recourse to criminal charges against the accused.   Trade secret protection clauses have also been indirectly incorporated in the IT Act. When economic espionage is carried out through electronic means criminal remedies have been provided under the IT Act. For instance in Mphasis BPO Fraud case in 2005, the IT act was used to give punishment when there trade secrets were stolen due to unauthorised use of computer resources.   Section 43 of the IT Act read with Section 66 prohibit unauthorised use of computer systems and breach of electronic devices without authorisation. The punishment provided under these sections is imprisonment upto 3 years and a maximum fine of Rupees 5 Lakhs.   However, the penalty prescribed is not at all adequate since trade secrets when stolen may cause losses of millions and billions rupees to the aggrieved company who has invested a substantial amount of capital in the research of proprietary technology. This disproportionality between the loss caused to the company and penalty imposed needs to be rectified when cases specific to corporate espionage are involved. Calling for a specialised legislation for protection of trade secrets.   Furthermore, in the absence of a specialised legislation, when cases arise, judges rely on precedents and interpretation of the provisions of the IPC and IT Act in their applicability to protect trade secrets to address the problem. This leads to greater confusion and lack of reliability in the legal framework.   Further clarity regarding the law can only be ensured through a special law dedicated towards outlining the rights, restrictions and remedies for trade secret holders.   Analysis of the Draft bill The draft bill is definitely a step forward in providing a comprehensive framework for the rights and responsibilities of the trade secret holder. The draft bill now provides for an all-inclusive legislation, stating the various rights and duties of the holder, including the right to license and commercialise the trade secret to use it as a stream of revenue. It also provides that any misappropriation of the trade secret will allow the holder to initiate legal action.   While the right to license a trade secret was first governed by general contract law. An express statutory recognition of this right of the holder, along with an attached remedy in case of misuse is definitely more favourable for businesses in India.   Many countries like the UK, USA, and France among

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

[By Ananta Chopra] The author is a student of University School of Law and Legal Studies, Guru Gobind Singh Indraprastha University.   Introduction  With effect from 1 January 2024, Ministry of Corporate Affairs (MCA) and other regulatory bodies under it, such as, the Competition Commission of India(CCI) and the Insolvency and Bankruptcy Board of India are following a uniform policy of seeking public comments before finalising any regulation or legislation. Public consultations are intended to be conducted as a part of the policy during both the original rule-making and review phases.  Need for Uniform Policy  Currently, different regulators (SEBI, IBBI, CCI, etc.) have different procedures when it comes to public engagement before establishing regulations. Therefore, in order to increase openness and stakeholder involvement, it has been observed that a policy for public consultation in rule-making exercises is essential. By adopting a unified approach, this change enhances openness, fosters stakeholder engagement, and ensures a standardised framework for public comments. This not only promotes fairness but also facilitates more inclusive and informed decision-making, aligning regulatory practices and promoting a cohesive and accountable regulatory environment.  Pre-Legislative Consultation for New Rules and Regulations  The policy’s Part A highlights the Ministry’s methodology, which involves drafting primary regulations and revisions, while also emphasizing transparency and public engagement in the regulatory process. An explanation note is required to accompany these regulations and revisions, outlining the problem addressed, current regulations, tactics for implementation, and the procedure for gathering public input. These versions will be made available for public review and feedback for at least thirty days on the Ministry’s website, ensuring that stakeholders have ample opportunity to provide input and suggestions. The Ministry’s divisions may decide to abbreviate this period in urgent situations or skip it altogether. In addition, the policy requires public feedback to follow a systematic framework, which encourages thorough, clause-by-clause responses. The broader public is not the only audience for this inclusive strategy; it provides a thorough consultation process by involving field offices, outside specialists, and certain stakeholder groups.  Additionally, unless the circulars are merely clarifications or informative, the Ministry intends to include the public in discussions about fee relaxations or compliance. Remarkably, the policy suggests disclosing answers to public feedback to guarantee openness in the process by which public opinion influences final regulations.  Including Regulators in the Process of Consultation  Pre-legislative consultations are a requirement for regulators operating under the Ministry’s purview. This entails making major rules and revisions available to the public for at least 30 days, unless there is an urgent need to do otherwise. According to the policy, prospective regulations must be accompanied by an explanatory note that addresses comparable topics to those of rules. Regulators are urged to ask the public for input on any changes they make, no matter how little, or on interim measures like fee reductions. Additionally, they might release their answers to queries from the public, reflecting the Ministry’s dedication to openness.  Comprehensive Review of Existing Rules and Regulations  Part B outlines a policy for thorough review of existing rules and regulations. This is critical for ensuring that laws remain relevant and effective in a rapidly changing economic environment. The Ministry and the regulators are tasked with evaluating each rule and regulation against a set of criteria, including their objectives, implementation experiences, current relevance, and overall regulatory practices. Public consultation, as detailed in Part A, plays a vital role in this review process. Feedback from stakeholders, experts, and field officers will be integral. Even forms attached to the rules and regulations are subject to review, aiming to reduce compliance burdens.  Timeline and Execution  The goal of this thorough review process is, to start on 1 January 2024and finish it in time for the 2024–2025 fiscal year. The effort taken by the Ministry is a positive step in the direction of democratising the rule-making and regulating process. The policy guarantees that the legal framework is fashioned not only by a top-down approach but also by the experiences, needs, and insights of people who will be most affected by it by actively involving the public and other stakeholders. Including a variety of stakeholders guarantees that a wide range of viewpoints are taken into account, including that of subject matter specialists and specialised interest groups. By addressing any blind spots that might not be apparent in a more closed regulatory process, this diversity of opinion can result in more thorough and balanced regulations.  Furthermore, the dedication to re-examining and even revising current laws and guidelines guarantees that the legal system remains  relevant and efficient in the face of changing social, technological, and economic environments. In a world that is changing quickly, this dynamic approach to policy-making is crucial.  Impact of Policy on Stakeholders  Increased Inclusivity and Transparency: By giving stakeholders a uniform framework for participation, a unified approach guarantees transparency. This encourages inclusivity by allowing a range of viewpoints to be taken into account during the decision-making process, which advances a more democratic and equitable regulatory environment.  Streamlined Compliance and Lessened Burdens: Outdated or onerous requirements are found by thoroughly reviewing all current rules and regulations, along with any paperwork that may be attached. Stakeholders gain from this as it streamlines compliance procedures and lessens needless regulatory obligations.  Openness and Accountability: Encouraging public comment and requiring regulators to publish their answers to it improves transparency and accountability. The policy emphasises a dedication to transparency in the regulatory process, making sure interested parties understand how their feedback affects the final regulations. The development of trust between stakeholders and regulators is facilitated by this accountability.  Compliance Difficulties: Despite the thorough examination of current regulations being meant to guarantee their applicability and efficacy, stakeholders could find it difficult to adjust to any modifications. The neutral effect results from the possibility that the review process will require modifications to compliance protocols, resulting in a transitional time for impacted parties.  Time and Resource Allocation: The policy stipulates a 30-day public review process. Although this length of time is meant to allow for in-depth

[By Ankur Singh] The author is a student of National Law University, Odisha.   INTRODUCTION  This article delves into the impact of Virtual Power Purchase Agreements (VPPAs) on the adoption of Renewable Energy (RE) and the dynamics of the Indian market. With a growing global emphasis on reducing carbon emissions and transitioning to renewable energy sources, the demand for RE is on the rise. VPPAs play a crucial role in facilitating energy transactions between producers and consumers, primarily businesses, without the need for actual electricity transmission. Unlike traditional contracts, VPPAs establish fixed prices, offering stability amidst market fluctuations. Oversight of VPPAs falls under the purview of both the Central Electricity Regulatory Commission (CERC) and the Securities and Exchange Board of India (SEBI). However, India’s VPPA regulatory framework faces several challenges.  This article explores key questions surrounding VPPAs, including the collaboration between SEBI and CERC, the issuance of Renewable Energy Certificates (RECs), and the arbitration of disputes arising from RE-related transactions. It suggests strategic enhancements to regulatory frameworks, advocates for the streamlining of International Renewable Energy Certificate (I-REC) registration procedures, and proposes the integration of VPPA mechanisms under CERC authority with SEBI supervision. By addressing these issues, the article aims to advance international environmental objectives while improving the efficiency and competitiveness of India’s renewable energy sector. It particularly underscores the uncertainty surrounding regulatory jurisdiction between SEBI and CERC, providing insights into financial and physical aspects of VPPA collaboration, REC issuance protocols, and dispute resolution mechanisms. The article seeks to delineate collaboration between SEBI and CERC in VPPAs, encompassing both financial and physical dimensions, and addressing REC issuance processes and dispute resolution mechanisms for RE-related transactions involving both entities.  The Role of Virtual Power Purchase Agreements in Renewable Energy Adoption and Market Dynamics  The importance of renewable energy versus non-renewable sources is highlighted by rising energy demand and the need to reduce carbon emissions. On the other hand, switching to RE presents difficulties. The emphasis on environmental issues around the world forces nations to lower their carbon footprint, and one simple and efficient way to do this is through the use of renewable electricity. VPPAs facilitate the switch from conventional fossil fuels to renewable energy sources more quickly, despite certain obstacles.  A Virtual Power Purchase Agreement is a type of contract in which a generator and a client exchange energy. In essence, it’s a contract in which one party sells electricity to another together with RECs. A Commercial & Industrial (C&I) company interacts with the “seller,” usually the developer or project owner, in a VPPA arrangement, acting as the “buyer” or “off-taker.” PPAs for C&I renewable energy can be classified as either physical or financial, with the latter being referred to as “virtual.” VPPAs do not involve direct energy transfer, in contrast to physical PPAs. Rather, a predetermined price known as the strike price is agreed upon by the client and the electrical provider. The VPPA offers revenue certainty by insuring the power plant against market price fluctuations. If the market price exceeds the strike price, the generator compensates the off-taker for any negative surplus, and vice versa if the strike price surpasses the market price. Crucially, a VPPA doesn’t alter the buyer’s relationship with its utility at the retail level. It’s purely a financial arrangement, with the buyer still fulfilling its electricity load through standard methods. In the energy market, the generator sells brown power which is the energy produced by the fossil fuel industry, and the customer can choose to buy the energy either from the generator or another party in a separate transaction.  Instead of providing actual electricity, the generator offers Renewable Energy Certificates (RECs) to customers as evidence of the extra energy produced. This energy industry mechanism seeks to promote the usage of renewable energy sources. Electricity and renewable energy assurance are purchased independently in REC transactions; this is referred to as the “Unbundled Approach.” Under Virtual Power Purchase Agreements (VPPAs), consumers purchase renewable energy certificates (RECs) from renewable energy generators while continuing to get conventional electricity from utility providers. Although the Central Electricity Regulatory Commission (CERC) historically set floor and forbearance prices to safeguard stakeholders’ interests, the market ultimately determines the price of renewable energy certificates. On September 29, 2021, the Ministry of Power (MoP) declared, however, that floor and forbearance limits would no longer apply to REC pricing, which would now be exclusively based on market price. There is now a great deal more VPPAs in India than ever before. Cleantech Solar just signed one, promising to produce 187 GWh of green energy over the course of the project. With this capability, more than 171 kilotons of carbon emissions may be offset. These initiatives help India reach its targets of producing 500 GW of renewable energy by 2030 and reaching net-zero emissions by 2070.  Jurisdictional Ambiguities and Unresolved Issues in the Regulation of Virtual Power Purchase Agreements (VPPAs) in India  The conflict over the jurisdiction concerning the physical and financial contracts between the SEBI and CERC has been a long-term issue and was first dealt with in the Multi Commodity Exchange of India Limited & Another v. Central Electricity Regulatory Commission & Ors., 2010, where  SEBI argued that it had the jurisdiction over forward and the future contracts of all types and thus it should have the jurisdiction over the contracts. Furthermore, they maintained that the forward and future contracts were not even alluded to in the Electricity Act of 2003. The argument suggested that only contracts with immediate delivery fell under the purview of CERC because forward and future contracts were exclusively pecuniary in character. It recommended that the relevant government regulate contracts that are solely financial in nature.  On the other hand, CERC contended that the Electricity Act sought to combine the laws that oversee the generation, transmission, distribution, trade, and use of electricity. As a result, CERC affirmed its right to pass laws promoting the expansion of the energy sector, including trade. Through a combined interpretation of Sections 66 and 178(2)(y) of the

[By Akhil Raj & Ekta Gupta] The authors are students of National Law University Odisha.   INTRODUCTION  If a person frequently purchases airline tickets online, they have probably encountered websites that use the phrase “I will stay unsecured” in the event that the buyer declines insurance coverage. This is a classic example of how dark patterns function to nudge people into making forced choices thereby generating commercial gains for the sellers, advertisers, or any such platform.   According to data revealed by the Advertising Standards Council of India (ASCI), 29% of the advertisements they processed between 2021 and 2022 were influencers’ covert advertisements, indicating a kind of dark pattern. Hence, in a virtuous endeavor to regulate the e-marketplace and to rein in the use of dark patterns, the Central Consumer Protection Authority (CCPA) introduced the ‘Guidelines for Prevention and Regulation of Dark Patterns, 2023’ (The Dark Patterns Guidelines). The Dark Patterns Guidelines pique interest owing to its admirable aims and purpose but this blog strives to go beyond the fine print and unveil the limitations in terms of its applicability, stringency, and obscure provisions.   NOTABLE ASPECTS OF THE GUIDELINES  The Dark Patterns Guidelines representing an important attempt to regulate deceptive interfaces and protect ‘users’, define dark patterns as manipulative digital design practices that are used to deceive users to influence their decisions and choices. Such devious practices shall amount to misleading advertisement, unfair trade practice, or violation of consumer rights. In other words, it states that engaging in any dark pattern practice for commercial gain that impairs user choice amounts to an unfair trade practice or misleading ad under consumer protection law. The applicability of the Dark Patterns Guidelines extends to all platforms, advertisers, and sellers and it unequivocally forbids any person from indulging in the practice of dark patterns.  The Dark Patterns Guidelines provides illustrations of specific dark pattern practices. For instance, online travel sites may use ‘false urgency’ tactics like claiming “only 1 room left!” to pressure users to make quick purchases. Food delivery apps can engage in ‘basket sneaking’ by automatically adding a small donation amount during checkout without consent. Platforms can use ‘confirm shaming’ by displaying messages like “No thanks, I want to stay uninformed” when users try to reject newsletter signups, guilting them into accepting. ‘Nagging’ tactics can be seen when education sites relentlessly prompt users to share emails or accept cookies to access services, persistently disrupting the experience. These demonstrate how various dark pattern techniques exploit users through deceptive design elements on online platforms.  Although, these specific dark patterns have been recognized but the definitions and the interpretation of their functionality as mentioned in the Guidelines are not legally binding and may change from case-to-case basis  RECONCILING INCONSISTENCIES AND GAPS WITH EXISTING LAWS:  E-market platforms and consumer data are the prime focus of the Guidelines and these aspects also fall within the scope of other statutes including the Information Technology Act, 2000 (IT Act), the Digital Personal Data Protection Act, 2023 (DPDP Act), and the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisement, 2022 (Advertisement Guidelines).  To begin with, the wide definition provided for ‘platforms’ in the Dark Patterns Guidelines brings within its ambit, all sorts of platforms which are an online interface in the form of any software, making such platforms liable for any dark patterns that they indulge in. This implies that even intermediaries which can also be an online-market place fall within the scope of the definition. However, the inconsistency is that Section 79 of the IT Act extends safeguard to an intermediary from any information or data from third parties, presented in any way, that they provide access to or store on their platforms.   Further, the Dark Patterns Guidelines prohibits the practices where the user is forced to enter some personal details (for example, email Id and contact information) in order to avail of the services offered by the platform. However, it overlaps with the DPDP Act which is quite particular about the requirement of explicit consent of the person to whom such data relates.   Before the Dark Patterns Guidelines, the Advertisement Guidelines defined non-misleading and valid ads, banning false and dishonest ads. This intent and objective intersects with the Dark Patterns Guidelines.   The CCPA did not consider the prospect of amendments in the existing Advertisement Guidelines or the existence of other coinciding legislations before the release of the Dark Patterns Guidelines leading to an ambiguity in its implementation. The Dark Patterns Guidelines specify that the provisions under the guideline should not be interpreted to be in derogation of any other law which has been regulating dark patterns. But, even the existence of coinciding legislations would amount to confusion. In this case, the regulatory authorities could issue clarifications in the form of FAQs or notifications and should adopt a phased implementation in order to avoid market disruption.   SUBSTANTIAL SHORTCOMINGS  Despite having noble intentions behind the introduction of the Dark Patterns Guidelines, the dearth of appropriate provisions in its substantive part makes its effective execution challenging. For instance, in case of violation of the Dark Pattern Guidelines, it does not allude to the forum to be approached in that case. Albeit, when the draft was released, it stated that in case of any violation, the provisions of the Consumer Protection Act, 2019 (CPA), shall apply.  By removing this provision, the CCPA left the Dark Patterns Guidelines toothless.   Additionally, the absence of specific penalties for the contravention of the Dark Patterns Guidelines strips away the enforcement authority. Since, in a general scenario, corporate entities in the form of e-commerce platforms indulge in such practices, thereby demanding the existence of penal provisions. Although, the exact amount of the compensation to be awarded would depend on the facts and circumstances of each case, levying a specific penalty can be the way forward. For instance, penalizing the alleged entity to disgorge a certain percentage of its average turnover in the last preceding years and increasing it for the repeat offenders. The non-existence

[By Sibasish Panda & Disha Bandyopadhyay] The authors are students of National Law University Odisha.   Introduction India’s economy stands as one of the fastest-growing major economies worldwide. The growth in the investment market has been impeccable especially with the Alternative Investment Funds (AIFs) now surpassing the mutual funds (MFs) in terms of growth rate. With transparent structures, a diversified portfolio, and a promise of superior returns the industry has attracted investment from a wider spectrum of investors encompassing High Net individuals (HNIs) and Ultra High Net Individuals (UHNIs). AIFs have experienced a remarkable Compound Annual Growth Rate (CAGR) of 26%, resulting in impressive assets under management (AUM) of ₹13.74 lakh crore as of June FY24. SEBI as of June 2023 reported the total commitment by the AIF industry to stand at Rs 8.44 trillion. The Security Exchange Board of India (SEBI), and the Reserve Bank of India (RBI) are working hand in hand to make the market more investor-friendly by curbing shoddy practices such as “Evergreening of loans” through AIFs. SEBI was reported to investigate such cases involving Rs15,000 crores to Rs 20,000 crores. In November 2022 it also banned the priority distribution (PD) model of the AIFs and now the RBI has come up with a circular directing lenders investing in alternative investment funds to liquidate their holdings if the funds invest in a debtor firm.  The authors in this blog try and analyse the impact of the RBI guidelines on the players involved in the industry. Background  RBI noticed a practice whereby banks or Non-Banking Finance Companies (NBFCs) when they find that a borrower is unable to repay, float an AIF, invest funds in that AIF, and lend the money to the stressed company so that it can repay the bank or the NBFC. Now since AIFs redeem themselves after six or seven years the borrower company has enough time to turn A naround. This practice of extending new loans to a borrower to pay the existing loans thereby concealing the status of non-performing assets is known as the Evergreening of loans. In May 2023 SEBI floated a consultation paper highlighting the regulatory arbitrage of “priority distribution (PD)” among AIFs. It envisages that AIFs maintain the pro-rata rights of the investors since they are privately pooled investment vehicles. Now in a PD model an investor who subscribes to a junior tranche suffers loss more than the one who subscribes to a senior tranche thus disrupting the pro-rata harmony.  This arrangement is used by regulated lenders to offload the bad loans to the AIFs and to mitigate the initial impact on their books.    The regulated lenders subscribe to the junior class of investors and their investment is equivalent to a loss on the loan portfolio given to the borrower. The AIF then onboards other investors to its senior class and subscribes to the Non-convertible Debentures (NCDs) of the borrower company. This investment, representing the expected loss or haircut on the loan portfolio, is shown at par with senior class units in the lender’s books. This structure potentially helps regulated lenders avoid compliance requirements related to defaulting loans, while also deferring the recognition of the deteriorating creditworthiness of the investee company. Now the junior class of AIFs is structured to absorb losses hence by subscribing to the junior class the lender also ensures that in case of any further default by the borrower, the risk is proportionately distributed among the whole class of investors of the AIF and bad loan is not reflected in the books of the lender.   Although the borrower may still default on the AIF, the AIF can hold defaulted debt for extended periods, waiting for potential recovery. The risk is somewhat concealed as the NBFC’s exposure to the AIF doesn’t immediately reflect the default, and the AIF can take several years before declaring the debt as unrecoverable. This process allows the NBFC to maintain the appearance of a healthy portfolio by avoiding the immediate recognition of bad loans and creating a situation commonly known as “evergreening,” where the default is obscured over time.  RBI’s Stringent Measures: Impact on Regulated Entities, Market Disruptions, and Investor Confidence  To prevent this regulatory arbitrage, the RBI in the recently released circular takes a restrictive stance. It has directed investor Regulated Entities (REs) and NBFCs not to invest in any AIFs that have a downstream investment in debtor companies that have loans or investment exposures from the same REs in the preceding 12 months. It further directs the REs to liquidate their investment in the AIFs within 30 days of the AIF’s investment in the debtor company. This timeline applies to both investments as of the issuance of the circular and also in case of any future investments. This short timeline would trigger panic selling among the investors and they would rush to comply with the directive. Such abrupt liquidation of investments and mis-selling in such a short period can cause market disruptions and negatively impact asset prices. The 30-day timeline would be inadequate to carry out thorough due diligence. This raises the risk of undervaluation of assets and diminished return as a result of forced selling.  Another flagged issue is the circular’s broad application to all REs would inadvertently impact Development Financial Institutions (DFIs) such as SIDBI, NABARD, NHB, NIIF, etc. These DFIs often have a developmental mandate to channel capital into specific sectors for economic growth. Unlike entities engaging in evergreening practices, DFIs may not have the intent of concealing non-performing assets. However, the circular, by applying uniformly to all REs, including DFIs, may unintentionally subject them to the same regulatory provisions. This could be counterintuitive to the primary purpose of DFIs, potentially hindering their ability to fulfill their developmental objectives by imposing restrictions meant to address issues unrelated to their specific operations.  In case of failure of the REs to comply with the above direction within the stipulated timeframe, RBI has mandated them to make 100% provision on their investments in AIFs. Now to make a