Contemporary Issues

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

[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

[By Divya Upadhyay] The author is a student of National University of Advanced Legal Studies, Kochi.   Introduction In the wake of the upcoming 18th G20 Summit being hosted by India, debt relief is one of the most significant changes posed to be brought in through India’s presidency for the 2022 – 23 tenure. Prime Minister Narendra Modi has recently highlighted India’s commitment to address matters of sovereign debt restructuring while at the same time decrying the advantage of debt crisis taken by “certain forces” – implying Chinese involvement through its massive lending programme under the Belt and Road Initiative to developing and emerging economies. In the South Asian region, particularly hit has been the Sri Lankan Economy with its external debt posed to reach a record high of  58.5 billion USD in 2023. There is substantial discourse surrounding China’s dual role as the single largest creditor to Sri Lanka and its non – involvement in the multilateral debt resolution process, which has led to a significant lack of transparency. However, there has been relatively little discussion about the ancillary consequences stemming from this situation. China’s avoidance to cut down on Sri Lanka’s debt through writing off, disrupts the larger multilateral process initiated by the International Monetary Fund and Paris Club – an informal group of official creditors, seeking to find sustainable solutions for the debtor nations. The Paris Club operates based on the principle of “comparability of treatment”. This means that a debtor country should not accept less favourable terms from non-Paris Club creditors, such as China, than those negotiated with the Paris Club. In essence, this principle aims to ensure that all creditors are treated equally and that no single creditor, like China in this case, receives preferential treatment. However, China’s unwillingness to participate in debt relief efforts can create a situation where private sector creditors are encouraged to demand more favourable terms from debtor nations. When China does not write off or reduce the debt, it sets a precedent where other creditors, especially private sector ones, may hold out for better repayment terms, further complicating the debt resolution process. Holdout creditors often reject the haircuts (or discounts) taken up by other creditors and insist on the full repayment of their debt. This reduces the debt relief received by the indebted country as well as increases the costs through disruptive individual litigation. Sri Lankan Single Series CAC Problem Thus far, the main policy response to solve this type of creditor coordination problem has been the introduction of Collective Action Clauses (CACs) in sovereign bond contracts. CACs are majority restructuring clauses, that alleviate the creditor coordination challenge by specifying threshold requirements for creditor approval and establishing a voting mechanism, often requiring a majority or supermajority vote. Once the threshold is met, the restructuring plan becomes binding on all creditors, preventing holdouts from obstructing the process. However, restructuring expert, Lee Buchheit has noted that a CAC on some of Sri Lanka’s older dollar bonds gives creditors a potential opening to hold the sovereign nation hostage and stall restructuring negotiations. This is a “single series” CAC, which allows a minority of bondholders to veto or demand terms in the negotiations. Single series CACs typically require a 66 ⅔% or 75% majority in “each individual series” irrespective of the aggregate acceptance rate. In Greece in 2012, in particular, more than half of the foreign-law bonds that had this type of bond-by-bond clauses did not reach the necessary voting threshold, resulting in large-scale holdouts despite CACs. As opposed to this, “enhanced” CACs in Argentina, Ecuador and Ukraine reduced the average duration of a sovereign debt restructuring from 3.5 years to 1.2 years. These enhanced CACs bind all creditors to any deal agreed to by a supermajority of creditors, making it easier to get to a deal, and removing the power of holdouts. Indian Intervention to Avert Hold Out The difficulty in Sri Lanka’s case is that while a majority of its private creditors hail from Western developed economies, the pivotal bilateral creditors originate from Asia. Middle-income countries such as China and India, alongside high-income Japan, wield notable significance. Effective collaboration between official creditors notably China and the Paris Club of Creditors, thus becomes paramount. To avoid a repeat of earlier debt crises and “a lost decade”, restructuring efforts should prioritize write-downs rather than emphasizing maturity extensions and interest rate reductions. The IMF relies on the Debt Sustainability Assessment as its primary tool to evaluate debt sustainability risks. If this assessment indicates the necessity of write-downs to restore sustainability, they should take precedence over other measures like extending maturities and reducing interest rates, a practice observed in China. Past major debt crises in the 1980s and 1990s were only resolved when the focus finally shifted to debt relief through write-downs, first with the Brady Plan and later the Heavily Indebted Poor Country Initiative. However, both these measures primarily accommodated low-income countries. While India through its G20 presidency has expanded the focus to even middle-income countries such as Sri Lanka, it can further establish a local South Asian threshold through its domestic framework. India could take from the three New York proposed legislations, which seek to address some of the challenges that sovereigns face when seeking to restructure their debt. This would address the efforts of some holdout creditors to frustrate or circumvent the consensual resolution of a sovereign debt crisis. The proposed legislations would apply a CAC-style collective voting process to a wide range of New York law-governed debt claims. Assembly Bill A2102A will retrospectively change debt contracts by introducing the statutory collective voting mechanism under a new Article 7 to the New York State Banking Law. This would override any existing CACs to make the mechanism binding. A second bill, A2970 aims to extend “burden-sharing standards” to include private creditors. Under these standards, private creditors would be required to absorb the same level of losses or haircuts, as the U.S. government, acting as a sovereign creditor, when a financially distressed low-income country

[By Pritha Lahiri & Ria Agrawal] The authors are students of Institute of Law, Nirma and University Symbiosis Law School, Noida   PROLOGUE: WHO ARE FINFLUENCERS The audience on social media platforms is growing worldwide, resulting in a more varied group of people. To sustain such engagement, creating diverse content is crucial, ranging from entertaining dance videos to educational lectures and even valuable financial advice. Individuals who use their social media presence or websites to discuss financial products and services and provide investment advice are referred to as “Finfluencer”. Finfluencers often generate income and receive incentives by endorsing specific financial information or products. Finfluencers have played a significant role in increasing financial literacy and engagement amongst  young people. According to a survey, 33% of people aged 18 to 21 follow a financial influencer on social media, while 64% changed their financial behaviors based on finfluencer’s advice. However, it is crucial to recognize that every concept has both positive and negative aspects, and the rise of finfluencers is no different. Trust is a fundamental component of the influencer-audience relationship, as the audiences’ trust allows the influencers to thrive. The concern arises when considering the extent to which finfluencers are maintaining the trust of their audience. According to Regulation 2(1)(l) of the Securities Exchange Board of India (“SEBI”) (Investment Advisers) Regulations 2013, “investment advice” encompasses guidance related to securities and investment products, including recommendations on buying, selling, and managing portfolios. However, this regulation explicitly excludes advice provided by finfluencers through social media. On a similar footing, such advice is covered under the SEBI (Research Analysts) Regulations 2014, specifically under the provision of research reports as stated in Regulation 2(1)(w). Unfortunately, financial advice offered by finfluencers does not fall within the purview of these regulations since research reports can only be provided by SEBI certified research analysts who hold a postgraduate degree from the National Institute of Securities Markets, as required by Regulation 7(1)(iii). Consequently, there is currently no precise definition or specific guidelines outlined in Indian legislation regarding the financial advice provided by finfluencers. In light of such enigma, the article explores the existing regulatory framework, identifies its limitations, proposes potential solutions and measures to address the concerns surrounding finfluencers. The authors have argued that by striking a balance between financial education and safeguarding investors, a regulatory environment can be created that promotes responsible behavior amongst finfluencers  upholding the integrity of the financial market. NEED FOR REGULATION Lately, Finfluencers have faced backlash from SEBI as well as the investor community for providing unsolicited stock recommendations on social media platforms without being registered as investment advisers. In the most recent instance, the regulatory authority punished PR Sundar, a YouTuber, for violating Investment Advisor norms by providing advisory services without obtaining the requisite registration from SEBI. Furthermore, it fined a self-styled investment advisor Gunjan Verma for offering unregistered services violating the SEBI Act. Earlier in the case of In Re: Sadhna Broadcast Limited[1], SEBI, under the provisions of the SEBI Act read with Prohibition of Fraudulent and Unfair Trade Practices (“PFUTP”) Regulations, had prohibited Arshad Warsi and his wife from accessing the securities market after allegations of stock manipulation through dubious and misleading youtube videos. Securities Appellate Tribunal[2], however, granted interim relief stating that the SEBI order was bereft of evidence. In the case of Marico Limited v. Abhijit Bhansali[3], wherein “social media influencers”  were regarded as a nascent category of individuals who have acquired a considerable follower base on social media and a certain degree of credibility in their space. The decision also noted the need to impose specific responsibility on such influencers, considering the power they wield over their audience and the trust placed in them by the public. The lack of transparency regarding the finfluencers’ qualifications and expertise raises doubts about the reliability of their financial advice. Additionally, there is uncertainty surrounding any potential financial transactions between finfluencers and the entities they endorse. This situation is concerning as the regulatory gap creates an opportunity for scammers to exploit the platform and manipulate stock prices and hence there is a pressing need for stringent regulation. A CLOSER LOOK: DISSECTING EXISTING REGULATORY FRAMEWORK SEBI Act read with PFUTP Regulations Through Section 12A of the SEBI Act, SEBI possesses the authority to investigate and take action against entities involved in fraudulent and unfair trade practices. This provision empowers SEBI to impose penalties and implement necessary measures to safeguard the interests of investors. Regulations 3 and 4 of the PFUTP Regulations offer specific guidelines and rules to prevent fraudulent and unfair practices in securities trading. These regulations outline prohibited activities, such as making misleading statements, manipulating prices, and engaging in insider trading. They also establish a framework for enforcement actions, including penalties and other disciplinary measures, with the aim of ensuring compliance with fair trading practices. SEBI’s utilization of Section 12A of the SEBI Act and the implementation of Regulations 3 and 4 of the PFUTP Regulations reflect its commitment to upholding the integrity of the securities market, protecting investors, and fostering transparency and fairness in trading activities. The Advertising Standards Council of India (“ASCI”), on 27th May 2021, released the final ‘Guidelines For Influencer Advertising In Digital Media’ wherein it laid down specific disclosure requirements and obligations and procedures for registering a complaint in case of violation of the guidelines. National Stock Exchange (“NSE”), in a circular dated February 2. 2023, stated that any payment made by brokers to influencers/bloggers would require prior approval of the exchange and should include specific standard disclaimers. Further, SEBI, vide its Circular dated April 5, 2023, introduced an advertisement code for IAs and RAs wherein it has stated the mandatory contents of the advertisement along with specific prohibitions and requirements of Prior Approval from SEBI before the advertisement. While Sebi has been discussing regulations to address the issue of financial influencers since January 2022, official guidelines have yet to be issued. In a recent Board Meeting held in June 2023, SEBI disclosed that it is in the

[By Arshia Ann Joy] The author is a student of the National University of Advanced Legal Studies (NUALS), Kochi.   Introduction The Micro, Small and Medium Enterprises Development Act, 2006 (hereafter ‘MSME Act’) envisages an effective and less time-consuming resolution mechanism for disputes pertaining to micro, small and medium enterprises in the country, thus facilitating the smooth functioning of these enterprises. Section 18 (2) of the MSME Act clearly specifies the procedure to be followed by the Facilitation Council (hereafter ‘the Council) when a dispute is referred to it. The section states that once the Council receives a reference under section 18 (1), the primary step is to conduct conciliation[i] followed by arbitration, should the conciliation attempts be unfruitful.[ii] This article attempts to discuss whether the scope of the powers envisaged under section 18 can be expanded expanded  to include the power to pass an ex parte order by the Council. This article delves into the nature of the Council as a civil court and its role within the realm of conciliation and arbitration. Furthermore, it examines the ramifications of procedural errors committed by the Council and explores potential remedies available in such circumstances. This article delves into the nature of the Council as a civil court and its role within the realm of conciliation and arbitration. Furthermore, it examines the ramifications of procedural errors committed by the Council and explores potential remedies available in such circumstances. The Council as a Civil Court Ex parte refers to a proceeding by one party in the absence of the other. The Civil Procedure Code under Order IX Rule 6 enables a court to issue an order that a suit shall be heard ex parte once it is proved that summons was duly served. While construing this provision, the Apex Court in Arjun Singh reiterated that if the defendant is absent after due service of summons, the court can proceed ex parte. Furthermore, an ex parte order has to contain the summary of the plaint, the issues and the findings arrived at by the court.[iii] The court further held that, “The burden becomes much more onerous in ex parte matters. The Court cannot blindly decree the suit on the ground that the defendants are ex parte.”[iv] Appreciating the evidence before the court is hence key to a valid ex parte order. The Facilitation Council is however not in the nature of a Civil Court as per the Civil Procedure Code and hence it does not have the authority to pass an order ex parte. This is because firstly, the CPC itself provides for a definition as to what constitutes a civil court. As the Apex Court rightly pointed out in Nahar Industrial Enterprises Ltd. “Which courts would come within the definition of the civil court has been laid down under CPC itself…..Civil courts are constituted under statutes like the Bengal, Agra and Assam Civil Courts Act, 1887.” The Supreme Court recently in Bank of Rajasthan Ltd. vs. VCK Shares and Stock Broking Services Ltd, affirmed the rationale in Nahar. Secondly, a parallel can be drawn between the Facilitation Council and other similar bodies like the Debt Recovery Tribunal and the Securities and Exchange Board of India (hereafter ‘SEBI’). A comparison can be made between these bodies as they are statutorily formed for specific purposes and have certain powers including powers of adjudication ordained to them by the legislature through those statutory provisions. The Apex Court in Nahar Industrial observed that the Debt Recovery Tribunal could not be treated as a civil court as under the relevant statute, the debtor or a third party does not have an independent right to approach it first nor can any declaratory relief be sought for by the debtor from the Tribunal. The court also noticed that there is no deeming provision in the relevant statute which allowed the Tribunal to be deemed a civil court. Applying the same rationale to the Facilitation Council would provide similar results except for the fact that the Facilitation Council can provide declaratory relief under section 18(3). However, the provision makes it clear that this power could be exercised by the Council when it acts as an Arbitral Tribunal and not as a Civil Court. Hence, as the name suggests, the powers entrusted with the Council is to act as a ‘Facilitator’ rather than as a court. Unlike the DRT, the SEBI is empowered to pass ex parte orders. However, it can do so only in extreme and urgent cases. As the Securities Appellate Tribunal (SAT), Mumbai has held, “We hasten to add that Respondent No. 1 (SEBI) is empowered to pass ex-parte ad-interim orders in urgent cases but this power is to be exercised sparingly in most deserving cases of extreme urgency.” The MSME Act however has no such enabling provision which allows the Council to pass an ex parte order. Further, it is a settled position of law that if a statute prescribes a mode of action, the act done must not deviate from the prescribed procedure. As the Apex Court reiterated in Babu Verghese, “It is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all.” Since section 18 envisages a clear procedure of conciliation and arbitration, the Council cannot resort to passing an ex parte order without adhering to the specifications of the statute. Role of the Council during Conciliation The very heart of dispute resolution through conciliation lies in the mutual nature of the proceedings. Conciliation is a process of persuading the parties to reach an agreement.[v] In conciliation, the parties reach an agreement on the basis of mutual consent and not on the basis of legal propriety or legal reasonableness.”[vi] This follows that if either of the parties fail to cooperate, the entire proceedings will be vitiated. Thus, the Council acting as the Conciliator as per section 18, cannot pass an order

[By Madhav Goel] The author is an Advocate, Supreme Court of India, Delhi High Court & Tribunals.   Introduction An increasing proportion of litigation happening across Indian Courts, including the Hon’ble Supreme Court of India, is commercial and economic in nature. The manner in which the Courts interpret and apply commercial and economic laws, to myriad situations, affects how India Inc. does business. Be it insolvency, arbitration, intellectual property, or tax, the list is endless. The regulatory framework in each of these areas, affected by the legislature and the executive making the law, and the judiciary interpreting and applying it, has a direct and indirect impact on the “ease of doing business”. It determines how well the free market welfare state model that India has come to adopt post-1991 works for the collective interest and economic growth of Indian society. The need for economics to infuse judicial decision making – law is no longer an autonomous discipline Given the wide-ranging impact that judicial decisions have on India’s business environment, it is important to reflect on whether judicial decision-making is approaching the practice and interpretation of commercial laws in a manner conducive to that ultimate, collective goal. What does that mean? Judicial interpretation has generally treated law to be an autonomous discipline, i.e., the legal discipline has its own set of rules for analysing and interpreting the law, and reliance on other disciplines for this exercise is unnecessary. Indian jurisprudence especially, continues to treat law as an autonomous discipline. While that has been the Indian approach, the world over, things are changing, and changing fast. Law is no longer treated as a purely autonomous discipline but is one that is considered to learn from and derive from other disciplines such as sociology, philosophy, history, and economics. While its core principles remain unchanged, it is no longer considered immune from learning from these other disciplines. In the context of commercial laws, the need for legal interpretation to learn from economics is extremely crucial, i.e., the adoption of ‘Law & Economics’ as a tool of interpretation is critical in ensuring that laws are applied in a manner that helps achieve their underlying objectives. Unfortunately, while the knowledge of economics is considered important to law practitioners and regulators and the knowledge of law is important for an economist, the relationship between law and economics has never been given the consideration it deserves. Why should it be given such importance? The aim of these laws is to further economic goals – regulation and promotion of competition in the free market, healthy business practices, and efficiency. When that is accepted, why should the interpretation of the law continue to have a siloed, technical and legalistic approach? Instances of textual interpretation ruining the legislative objective The judiciary’s legalistic approach to interpreting commercial laws has often led to problematic situations arising for India Inc. Commercial laws have often received interpretation that is textually correct but has the effect of turning the law’s intent upside down, thereby defeating its very objective. As a consequence, the legislature has often had to intervene by amending the law and revamping the entire legal framework, thus leading to greater uncertainty of the law. Let us take, for example, the Insolvency and Bankruptcy Code, 2016 (“IBC” or “Code”). The Code, and the issues arising therefrom, have captured the bulk of the time and imagination of the Indian legal system in recent years. However, increasingly, there have been judgements of the Hon’ble Supreme Court, and consequently the Hon’ble National Company Law Appellate Tribunal and the Hon’ble National Company Law Tribunals that have gone against core principles of the IBC, for example, the decision to confer discretion on the Hon’ble National Company Law Tribunal to admit or reject applications by financial creditors to initiate corporate insolvency resolution processes of defaulting corporate debtors in spite of the existence of ‘debt’ and ‘default’, or the decision to give secured creditor status to the Government in respect of dues owed to it in certain cases in clear contravention of the waterfall mechanism. Each of these decisions fails to factor in and learn from basic principles of finance and insolvency economics, thus creating a framework that defeats the objectives it sought to achieve. By adopting a textual approach to statutory interpretation, rather than a purposive approach with its foundation in Law & Economics, the Hon’ble Apex Court has given greater fodder to its critics that question the judiciary’s expertise to suitably understand and interpret commercial and economic legislation. The fact that the Hon’ble Apex Court has erred in these instances is evident from the fact that industry-wide criticism has been supplemented by the Government of India’s decision to mend the Code suitably in order to undo the effect of these judicial decisions. This is not a new trend. Time and again, commercial legislation has been interpreted in India in a manner that has frustrated their purpose. Another example is the judgement of the Hon’ble Supreme Court in NAFED v. Alimenta S.A. whereby the Court refused to enforce a foreign arbitral award on the ground that it was in violation of the public policy of the country. In doing so, the Court expanded the public policy exception/defence against enforcement of foreign arbitral awards to such an extent so as to include mere violations of substantive provisions of Indian law. Consequently, the Court opened the door for arbitral award debtors to engage in speculative litigation and stave off enforcement of foreign arbitral awards by inducing the Court to engage in another review of the award on merits.The judgement, by ignoring the economic objective behind the Arbitration and Conciliation Act, 1996. The negative consequences of this approach are not limited to strictly commercial disputes, but have far reaching impact on private tort law as well. For example, rules pertaining to motor accident cases, that have otherwise proven to be efficient in the economic analysis of liability rules. However, the manner in which the Courts have interpreted the same have resulted in generating