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[By Prathamesh N Bhutada] The author is a student of Maharashtra National Law University, Mumbai.   Introduction The United Nations Convention on Contracts for the International Sale of Goods (hereinafter CISG) is a uniform contract law that was brought in place to harmonize the differences in governance by domestic law.[1] However, the convention is not all-encompassing. Scope of the application of CISG has been given under Articles 1-6 of the convention.[2] The convention covers the majority of the aspects of international commercial disputes, however, certain issues are out of the scope of CISG and have to be settled using the private international law or the domestic law applicable to the contract.[3] However, CISG leave one major aspect of contracts unaddressed, the matter of validity of contract.[4] Since the fact that the CISG generally does not address validity, the majority of issues that fall within the validity category, such as fraud, duress, or the unreasonableness of contract conditions, must be decided by domestic (non-CISG) principles of law.[5] Additionally, the Convention does not specify any particular guidelines for the pre-contractual stage[6] which includes concepts of misrepresentation, fraud, non-disclosure, etc. These pre-contractual complications can affect the validity of the contract. Therefore, because CISG does not define what is an issue of validity it is pertinent to establish a boundary for it to understand how misrepresentation is more than just an issue of validity. Defining Validity Validity in a general sense is determining whether all the prerequisites of an enforceable contract have been satisfied. If all the prerequisites are not satisfied then it cannot be classified as a ‘valid’ contract and, hence, can be void, void ab initio, or unenforceable. Art. 4 of CISG states that the convention is not concerned with the issues of validity unless expressly provided by the convention,[7] however, the CISG does not define the term ‘matter of validity’. The wording of Art. 4 leaves a huge scope for interpretation as the CISG does not define the term ‘validity of the contract’.[8]  Art. 4 reads that CISG governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer.[9] However, the phrase “governs only” is considered to be misleading and should be read as “governs without a doubt” by many scholars.[10] Therefore, CISG does not explain what is the matter of validity the majority today is of the opinion that Art. 7(1) has to be relied upon to autonomously determine whether an issue is of validity or not.[11] While others maintain that it should be resolved using domestic law.[12] One of the situations which can render the contract void is the case of misrepresentation. Misrepresentation in a contract can render it voidable if it induces a party to enter the agreement based on false information, impacting the contract’s validity and enforceability. However, left the issue of misrepresentation completely unaddressed. Misrepresentation and validity Misrepresentation is viewed differently in different legal systems. This is the reason why conventions like CISG were brought in place, to bring uniformity. In US Law, misrepresentation is defined as misrepresentation of a material fact to induce the other party to act or to refrain from acting in reliance upon it.[13] Under English law, a false statement of material fact that at least in part induces entry into a contract with the maker of the statement.[14] Both the definitions have the main ingredients of misrepresentation in common, “Conduct”, “intention (inducing other party)” and “the casual connection” between the statements made by a party and it influencing the other into entering the contract. Misrepresentation raises a unique issue in the context of the CISG’s autonomous interpretation. There is quite a lot of debate as to whether the claims of misrepresentation under domestic laws are displaced by the CISG. The answer to this question varies from misrepresentation being displaced by CISG[15] to the complete opposite of it being governed by domestic laws.[16] Although there are such polar opposite opinions there are some authors who take a middle ground and are of the opinion that misrepresentation is partly governed by CISG. To understand this, we need to first understand the types of misrepresentation. Misrepresentation can be broadly categorised into 3 types: Innocent Misrepresentation, Negligent Misrepresentation and Fraudulent misrepresentation.[17] Some scholars are of the opinion that only Fraudulent misrepresentation is an issue not governed by CISG, however, in cases of Innocent misrepresentation and Negligent misrepresentation the remedies under Art. 35 of CISG et. seqq. prevails.[18] Innocent Misrepresentation In general, innocent misrepresentation is defined negatively.[19] An innocent misrepresentation is a misrepresentation that is neither fraudulent nor negligent.[20] Thus, more often than not it is considered to be a case of strict liability when rights and obligations arise due to honest misstatement of the parties. There are many domestic laws which govern the issues. However, the prevailing view is that innocent misrepresentation is also governed by the CISG, therefore, it displaces the application of the domestic laws.[21] Additionally, they also believe that Art. 35 of CISG not only displaces the contractual obligations (culpa in contrahendo) and claims, but also the tortious claims under the domestic law.[22] The reasoning behind the above-mentioned stance is that, firstly, CISG contains the rules regarding the two parties’ declarations—offer and acceptance—through which a contract is established. Secondly, Article 8(3) mentions the parties’ pre-contractual discussions as a consideration to take into account when interpreting their declarations and actions.[23] Both domestic law on innocent misrepresentation and the CISG apply to factual situations when parties negotiating a sales contract share information about important facts. Upon close analysis, innocent misrepresentation is clearly based on the pre-contractual obligations of the parties. The prevailing opinion among commentators holds that the CISG does not impose pre-contractual duties on the parties.[24] Hence, even though there is a prevailing opinion amongst the scholars that innocent misrepresentation is governed by CISG it cannot be settled as there exists a conflict related to governing of pre-contractual liabilities. Negligent misrepresentation Under both English and US law negligent misrepresentation is broadly defined as

[By Harshit Joshi] The author is a student at the Vivekananda Institute of Professional Studies. Introduction According to common law principles, a breach of duty by a director can be ratified if the shareholders pass a resolution exonerating the director from the liability arising from such breach. It is an expansion of the common law concept that states people who owe duties may be relieved from the legal obligations resulting from those duties by those to whom the duties are owed. Therefore, shareholders have the authority and power to ratify any irregularities in the company’s operations, relieving directors of personal obligations to the company. This article examines the case of Terrascope Ventures Limited v. Securities and Exchange Board of India, in which the Securities Appellate Tribunal, Mumbai (“SAT”) recently upheld the validity of shareholders’ ratification of breach of fiduciary duties by directors on June 2, 2022. Through this study, the article aims to investigate the validity and relevance of the ratification principle in regard to Indian law by tracking its prevalence in common law jurisdictions. Brief Facts According to section 166 of the Companies Act 2013, directors of companies owe a fiduciary and statutory duty to the company, its personnel, and its shareholders. The validity of any ratification by shareholders subsequent to the adoption of a special resolution is conditional on the nature of the director’s breach of duty. In order for the shareholders to make an informed choice, this ratification procedure is subject to full and open disclosure of all relevant information. Directors who are also shareholders cannot ratify their own breach of duty. Shareholders cannot approve a breach of duty resulting from an act ultra vires of the company. A special resolution enacted on October 1, 2012, in accordance with section 81(1A) of the Companies Act, 1956, authorized Terrascope Ventures Limited, formerly known as Moryo Industries Limited, to issue 63,50,000 shares as a preference. The shareholders and general public were informed at an extraordinary general meeting held the same day that the funds raised through the preferential issue would be used for the following: (1) capital expenditures, including the purchase of businesses or companies; (2) opening of offices abroad; (3) funding long-term working capital requirements; (4) marketing; and, (5) for other authorized corporate purposes. The company’s trading operations were the subject of a Securities Exchange Board of India (“SEBI”) inquiry from 15 January 2013 to 31 August 2014. According to the adjudicating authority’s order, the proceeds from the preferential issue were used to buy shares in other companies and to extend loans and advances to other businesses and entities, which was against regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. This was done in contrast to the objectives stated in the notice given at the Extraordinary General Meeting. The adjudicating officer further observed that the company had broken the terms of Section 21 of the Securities Contracts (Regulation) Act, 1956, read with Clause 43 of the Listing Agreement by failing to disclose the variation in how the proceeds were utilized to the Stock Exchange (which requires listed companies to furnish a statement to stock exchanges indicating the variations between projected and actual utilization of funds). Furthermore, the directors’ report in Moryo’s annual report for the fiscal years 2012–13 and 2013–14 did not offer an explanation for the discrepancy between intended and actual utilization. The firm’s shareholders approved a special resolution on September 29, 2017, approving all the acts, deeds, and things the company had done regarding the use of the money from the preferential issue. The adjudicating officer stated that such post-facto approval of the company’s misconduct was unlawful. The Hon’ble Tribunal has observed that penal liability is neither dependent upon the intention of parties nor gains accrued from such delay in its judgment of Akriti Global Traders Ltd. v. Securities and Exchange Board of India. The adjudicating officer noted that even though the utilization of revenues did not produce any excessive advantages, a penal liability nevertheless exists because regulations’ provisions were breached. In accordance with section 15 HA of the SEBI Act of 1992 and section 23E of the Securities Contracts (Regulation) Act of 1956, the order imposed a fine of Rs. 1 crore on the company and Rs. 25 lakhs on each of the directors. Order of the Securities Appellate Tribunal, Mumbai The SAT effectively overturned the SEBI ruling by holding that although the use of the proceeds from the preferential offer was carried out in deviation from the objects issued, the shareholders later approved the deviation. This post-facto ratification of a duty breach was recognized as legal by the tribunal. The tribunal, in its order, relied on the ruling of the Supreme Court in the case of National Institute of Technology vs Pannalal Choudhury. The Supreme Court has observed that the expression “ratification” means “the making valid of an act already done”. This principle is derived from the Latin maxim “ratihabitio mandato aequiparatur” meaning thereby “a subsequent ratification of an act is equivalent to a prior authority to perform such act.” The tribunal further ruled that because the variation in the use of the funds was ratified by the shareholders, it was no longer a “variance” that needed to be notified to the stock exchange and so did not breach clause 43 of the Listing Agreement. Provision of Ratification in Common Law Most common law countries statutorily recognize the competence of shareholders to ratify directors’ breaches of duty, absolving them of corresponding liabilities. However, Indian laws do not provide any such power to shareholders and only acknowledge the competence of the courts to acquit directors of their violation of duty after full consideration of the circumstances of the case. There is no enabling mechanism that creates the conditions under which ratification would be declared legally effective because there is no statutory mention of shareholders’ power to ratify directors’ breach of duty. Section 239 of the UK Companies Act 2006 applies where a company ratifies the action of

[By Aditya Maheshwari and Dhruv Gupta] The authors are students at the Gujarat National Law University. Introduction Both global and domestic markets witnessed continuous growth post-1991’s globalization policy. One of the outcomes of this policy was Foreign Direct Investment (“FDI”). It can be understood as financial transactions between a foreign and a domestic entity where the former has a significant say in the management of the latter. Over the years, the Ministry of Corporate Affairs (“MCA”), along with the Reserve Bank of India (“RBI”), has liberalized the FDI Policy to provide an opportunity to foreign investors and Indian companies to boost access to investment opportunities. In the Consolidated Foreign Direct Investment Policy, 2017 (“Policy”), only investors from Bangladesh and Pakistan are required to take permission from the govt, while others were allowed to invest through an automatic route. However, due to the threat posed by opportunistic takeovers by investors from bordering countries, certain amendments were introduced by the MCA to strengthen national security against such investments. This article intends to take the lid off the amendments that are being brought since the inception of Covid-19, the cause and effects of such amendments, and the loopholes in the present legal regime of the FDI Policy. Press note No. 3 (2020) – a first step towards preventing opportunistic takeovers The Department of Promotion of Industry and Internal Trade (“DPIIT”) vide Press Note No. 3 (2020 Series) (“PN3”) amended para 3.1.1 of the Policy. Consequently, the restriction to take the govt route for FDI by a citizen or an entity of Bangladesh and Pakistan had been replaced with “an entity of a country which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country.” As PN3’s subject indicates, DPIIT’s sought to check opportunistic takeovers/acquisitions of Indian companies in light of the pandemic. The approach to making amendments is evident from the fact that China’s central bank has acquired a 1% stake in India’s largest mortgage lender i.e., Housing Development Finance Corporation Ltd (“HDFC”). This was the first-time efforts were made to strengthen national security by not allowing Chinese investors to go through the automatic route. Consolidating the FDI Policy against Border Sharing Countries After over two years of PN3, the MCA understood the FDI Policy 2020 to be insufficient in insulating Indian companies against opportunistic takeovers: it lacked protection regarding managerial aspects of the company. Thus, certain amendments have been made in 2022 to remedy the loophole and to insulate against managerial takeovers. Amendment related to Investment 1. Transfer of shares As of May 4, 2022, the Companies (Share Capital and Debentures) Rules, 2014 were amended. There is now a provision requiring transferees to furnish a statement regarding the application of the Foreign Exchange Management (Non-Debt Instrument) Rules, 2019 (“NDI Rules”) to transferred assets. Thus, if shares are being transferred to a citizen or legal entity of a country sharing a land border with India, said citizen or entity must first secure government approval in accordance with the NDI Rules. This approval must be submitted alongside Form SH-4, the appropriate form for transferring shares. 2. Private Placement As of May 05, 2022, the Companies (Prospectus and Allotment of Securities) Rules, 2014 were amended. Now, in cases of private placement, if the proposed allottee is from a country sharing a land border with India, it has to attach government approval along with the private placement offer-cum-application letter- “PAS-4.” A declaration regarding the applicability of NDI rules is to be given by the proposed allottee in PAS-4. Amendment related to Management 1. Appointment of Director in a company The MCA has made it mandatory to obtain security clearance from the Ministry of Home Affairs (“MHA”) for nationals of a country sharing a land border with India before becoming a director of an Indian company. The director has to attach the approval along with the consent letter i.e., DIR-2. This amendment is brought vide Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 effective from 01 June 2022. 2. Application for Director Identification Number (“DIN”) Where a national of a country sharing a land border with India applies for DIN, he has to attach the security clearance along with the DIN application i.e.,  DIR-3. A declaration in this regard has been inserted in the e-Form DIR-3 vide Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 effective from 01 June 2022. Analysis – Impact and the shortcomings in the present FDI regime The impact and reasons behind the Amendments made by the MCA While the amendment made by the MCA was done considering national security and the prevention of opportunistic takeovers by the investors or entities of bordering countries, FDI inflow is bound to be impacted negatively. Data indicates that FDI for 2021 fell 30% in comparison to 2020. One of the reasons for this fall is the restriction being imposed by the government on the use of the automatic route by bordering countries. It must be noted that this reduction in value must not be misunderstood as arising from Covid-19. During the same period, China, the country most affected by Covid-19, had a growth rate of 21%. In the coming months, with the present restrictions becoming more rigorous, FDI in India is only going to decrease. Moreover, imposing stringent restrictions on China and Hong Kong, the largest investors in the region, won’t benefit the Indian economy in the long run. It must be highlighted that the amendment through PN3 was insufficient to prevent opportunistic takeovers. To circumvent the PN3-imposed restrictions, the affected investors created a US or Cayman-based entity, using it to route the investment without any restriction. The same is suggested by the data released by the MCA where 490 foreign nationals are registered as active directors as of Feb 2022. Thus, to prevent managerial control over Indian companies, the amendment vide Notification dated June 01, 2022, in regard to security clearance was added. Loopholes in the present FDI

[Ayush Shandilya] The author is a student of National Law University, Odisha. Introduction The Initial Public Offering (“IPO”) of Life Insurance Corporation (“LIC”) was announced during the annual budget session of 2020 but it took the Government a little over two years to finally come up with the IPO. The delay in the IPO could be attributed to the pandemic situation that had disrupted the market along with the Russia-Ukraine war. After an unprecedented delay, the government entity Life Insurance Corporation of India or LIC filed its Red Herring Prospectus (“RHP”) with the Securities and Exchange Board of India (“SEBI”) for its IPO. The IPO was launched for trading in the grey market on May 4, 2022. The issue size of the IPO is around Rs 21,000 crore making it the biggest public issue in the Indian history. The previous biggest IPO was that of Paytm with an issue size of 18,300 crores followed by Coal India, Reliance Power, and General Insurance Corporation with an issue size of 15,475 crores, 11,563 crore,s and 11,372 crores respectively. The aim of this article is to put light on the rare support shown by the SEBI for LIC IPO. The article would begin by explaining all the relaxations that SEBI has offered to LIC in order to help the corporation to come up with the IPO followed by the LIC’s performance in the grey market and the reasons for such a performance. Lastly, the article would conclude with the author’s personal remarks on the entire scenario. Relaxations Provided By SEBI The issue size of the IPO has definitely drawn the interest of the investors but at the same time, there are various legal issues in the picture as well. To start with, there is a provision in the Draft Red Herring Prospectus (“DRHP”) that allows the LIC to reserve 10% of the issued shares for the policyholders. Another provision in the RHP allows the policyholders and the employees to apply for shares at a discount to the offer price. The discount given to the policyholders is Rs 60 per share and that to the employees is Rs 45 per share. As LIC has the largest customer base amounting to 282 million, this provision would attract a lot of them to invest in the IPO. The relaxations by the way of amendments and exemptions by SEBI have been discussed below. Amendment in the  LIC Act 1956  All kinds of public offerings including the initial public offerings are governed by the SEBI (Issue of Capital and Disclosure Requirements) Regulations (ICDR) 2018 which contains provisions in regulation number 30 under Part VII of the regulation that allows any company to issue shared at discount to its employees. It is thereby not a unique practice to offer shares at discounted rates to the employees but it is for the first time that a company is giving discounts on the shares to its customers i.e. the policyholders. There is no provision in the ICDR to do so. Section 5(9) of the Life Insurance Corporation Act,1956that went through an amendment in September 2021 provides the following and the same has been mentioned on page number 253 of the RHP.  The amended section said that regarding various categories of person in favor of whom the corporation might make reservations in relation to the IPO, it may also make a reservation upto 10% at any time during the 5-year period from the date of commencement of section 131 of the Finance Act 2021. It also allowed the corporation to offer a discount up to 10% on the above-mentioned reserved class The above mentioned amendment was bought into action just a few months before the filing of the RHP which clearly suggests that the purpose of this amendment was to make sure that the investors gets attracted to the IPO. Amendment in the SCRR 1957 Another amendment that was bought ahead of the LIC IPO was made in the Securities Contract (Regulations) Rules, 1957 (“SCRR”) in 2021. Rule 19(2) mandated the companies to offer at least 10% of their post issue capital and within a span of three years, dilute the shares to 25% from the above mentioned 10%. After the amendment in 2021, a new sub-rule (sub-rule iv) came into existence under the same rule and it now allows companies that have a post issue capital of more than one lakh crore to dilute at least 5% of their shares to the public while listing. This shareholding should be increased to 10% within two years of getting listed and upto 25% within 5 years of getting listed.  This amendment allowed the LIC (whose post issue capital is more than one lakh crore) to dilute only 5% of the share and not 10% as it was earlier. Additonaly, this amendment would encourage the large companies to come up with the IPO even during unstable market conditions as now the companies need not dilute a large amount of their capital to be able to offer shares to public. For LIC, the current market conditions are not favourable owing to rising oil prices and Russia-Ukraine war and hence diluting 10% of the capital might not be a good option. Therefore this amendment would help LIC in coming out with the IPO as now it has to only dilute 5% of its capital. Exemption from the Lock-In Period SEBI in its board meeting on December 28, 2021 had announced that it would continue the existing 30 day lock in period norm for the anchor investors. The norm stated that there shall be a 30 day lock in period for 50% of the allotted shares. A new addition was done to this norm which stated that for the rest 50% of the shares, the lock in period would be of 90 days. This norm was to come into force from April 1, 2022 but later the enforcement date was changed to July 1, 2022. This change in date of enforcement of lock in period was

[Sourav Paul] The author is a student of West Bengal National University of Juridical Sciences. Tracing the Judicial Approach to Sale of Secured Assets: A Marked Shift Towards the Doctrine of Caveat Venditor Traditionally, the Indian courts have applied the caveat emptor doctrine while adjudicating the on the part of the secured creditors. The Indian courts adopted this position, i.e., to protect the secured creditors, primarily because it was a part of the larger policy plan to resolve the NPA crisis.[[i]] An ‘as is, where is, whatever is’ sale of the secured assets meant fast removal of NPAs .[[ii]] Consequently, the buyers of these secured assets in the auctions were denied relief. The courts have used caveat emptor as a ‘sword’ to deny any relief to the bonafide buyers. In United Bank of India v. Official Liquidators and Others, the buyer was not aware of the liens and encumbrances on the property. However, the SC rejected the claim of the buyer for compensation, price , or damages. The SC argued that the official liquidator did not provide any guarantee or warranty to the buyer that the asset had a marketable title, and it was the responsibility of the buyer to undertake due diligence. A similar line of reasoning was followed in Delhi Developmental Authority v. Kenneth Builders and Developers Ltd. In Babu Bindeshri Prasad v. Mahant Jairamgir, the bonafide purchaser claimed specific performance of the contract since the seller failed to guarantee a good title. The Privy Council, while dismissing the suit, held that the seller is not obligated to provide any guarantee regarding the marketability of the title. It observed that the preamble of the SARFAESI Act and the guiding principles enshrined under §55 of the Act must be read harmoniously. In essence, the SC incorporated the mandate under §55 of the Act in the scheme of the SARFAESI Act. However, gradually the judicial discourse changed in favour of the bonafide buyers when the courts started recognising that it has become an industry practice to use ‘as is, where is, whatever is’ clauses by the secured creditors. In Rekha Sahu v. UCO Bank, the Division Bench of the Allahabad High Court unequivocally held that the secured creditor is duty-bound to disclose all material information to the buyer while selling secured assets, as per §55 of the Act. Similarly, in Atishaya Construction Pvt. Ltd. v. Central Bank of India, while analysing the validity of ‘as is, where is, whatever is’ clauses, the Gujarat High Court noted that the clause could not grant immunity to the secured creditors and the buyers are liable to be compensated by the secured creditors. Formal recognition of the principle of caveat venditor in the context of auctioning of secured assets happened in Mandava Krishna Chaitanya v. UCO Bank, Asset Management Branch. The Andhra Pradesh High Court opined that the “concept of as is where is and as is what is basis has lost its significance in the current commercial milieu, and the principle of caveat venditor is more on the rise as compared to the outdated principle of caveat emptor.” In this case, the bank completely relied on this clause for immunity and did not undertake the basic due diligence on the secured asset before the auction. In this case, the bank completely relied on this clause for immunity and did not undertake the basic due diligence on the secured asset before the auction. It further ruled that the secured creditor is barred from dealing with the secured asset arbitrarily. It held that Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 are mandatory provisions, which means that informing the purchaser of the secured asset about the nature of the property, liability, encumbrances, etc., is also mandatory. In Jai Logistic v. The Authorised Officer, Syndicate Bank, the Madras High Court while ruling that the secured creditor must be aware and inform the buyer about all the material defects in the secured asset. However, it highlighted that if the auction notice specifically adds a certain additional due diligence burden on the buyer, such auction notice shall be deemed valid. Further, it also opined that delivery of encumbrance certificate post-execution of the transfer of the secured asset would not imply compliance with the principle of caveat venditor and §55 of the Act. In Capital Hotel and Developers Ltd. v. Delhi Development Authority, the Delhi High Court ruled that the secured creditor is duty-bound to disclose all pending litigations to the bidders who are participating in the auction, and “it was the bidders to consider whether the same was a cloud on the title or not.” The Court emphasised the need for ‘informed’ consent on the part of the bonafide buyer and argued that any pending litigation pertaining to the secured asset is a material fact. The Court, while relying on §55 of the Act, opined that “[e]ven if there was no impediment to the transfer, the cloud arising from pendency of the appeal entitle the purchaser for disclosure of such information and the non-disclosure would give a right to the purchaser to back out of the transaction.” Recently, in Medineutrina (P) Ltd. v. District Industries Centre, the Bombay High Court reiterated that mere mention of ‘as is, where is, whatever is’ basis shall not absolve the secured creditor of its duty to – (a) to make adequate enquiries about the encumbrances regarding the property; (b) to disclose such information in the auction notice, thereby enabling the buyer to make a ‘conscious’ decision. Conclusion This article was a modest attempt to get the dice rolling on changing the perspective regarding the auction of secured assets from caveat emptor to caveat venditor. The primary aim of the article was to focus on the rights and liabilities of the secured creditors while transferring the secured assets to the bonafide purchaser and holding them liable for any material defect in the title of the secured assets. The author’s argument was bolstered by the recent jurisprudence on this issue,

[Sourav Paul] The author is a student of West Bengal National University of Juridical Sciences. Introduction The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’) is one of the prominent laws in the long list of debt recovery and restructuring legislation enacted by the Indian Parliament. While introducing the Bill, the then Finance Minister said, “[t]his Bill is essentially for securitisation of financial assets so as to generate immediate liquidity, and it is also to enforce security because at the present moment, there are no powers. The commercial environment, both within the country as also globally, is changing. This results in what I would call an asset-liability mismatch as well as in mounting levels of Non-Performing Assets (NPAs). As a ratio of GDP, India’s Non-Performing Assets (NPAs) are really much lower than some of the countries. The Government is committed to constantly reviewing, constantly improving the provisions.”[[i]] In essence, the SARFAESI Act was brought in to tackle the mounting Non-Performing Asset (‘NPA’) crisis in the country, which was responsible for retarding the growth of the financial sector. The SARFAESI Act was also the sum total of the recommendations and concerns raised by the Narasimhan Committee II, the Andhyarjuna Committee, and the Reserve Bank of India (‘RBI’).[[ii]] In Mardia Chemicals v. Union of India, the Supreme Court of India (‘SC’) upheld the constitutionality of the SARFAESI Act, thereby solidifying its presence in the rich Indian debt recovery jurisprudence. Although the legislation played a pivotal role in clearing up the NPA mess created by the banks and financial institutions, it brought unique sets of problems with it. The architecture of the SARFAESI Act favours the speedy recovery of debts, which necessarily requires the relaxation of procedures and compliances in the sale of secured asset transactions. Over the years, the secured creditors have taken advantage of the loopholes of the SARFAESI Act and enjoyed impunity. The central argument of this article is that the secured of checks since the mechanism imposes an unfair obligation on the bona fide purchaser. Therefore, the author calls for adopting the principle of caveat venditor instead of caveat emptor. It also argues that ‘as is, where is, whatever is’ clauses are unenforceable in nature. In Section II of the article, the author explains the process of auctioning secured assets and the role of ‘as is, where is, whatever is’ clauses in auction notices. In Section III, the author analyses the duties of the seller in a transaction under §55 of the Transfer of Property Act, 1882 (‘Act’). In the next post, the author examines the paradigm shift in the judicial approach from caveat emptor to caveat venditor and provides recommendations. A Primer on ‘As is, Where is, Whatever is’ Clauses in Auction Notices and Sale of Secured Assets A debt gets converted into an NPA forwarded by any financial institution. . “holding any right, title or interest upon any tangible asset or intangible asset […]”, Since the property has been converted into an NPA, an auction takes place for selling these stressed assets post-issue of notice. Pursuant to §13(2) of the SARFAESI Act, the secured creditor issues notice to the borrower, which contains the details of the debt, and requests the borrower to clear all the liabilities within 60 days of receiving such notice. If the borrower fails to clear their liabilities within the deadline, the secured asset is sold in an auction. The takeover of the secured asset is executed as per the directions mandated under §13(2) and §13(4) of the SARFAESI Act. For the sake of brevity, the author shall not discuss in detail the procedure under these provisions (see here for an overview of the SARFAESI Act). Often the sale of the secured assets occurs in an ‘as is, where is, whatever is’ manner which legitimises the sale of improper title, encumbrances, or any other undisclosed information pertaining to the secured asset. ‘As is, where is, whatever is’ is a clause inserted in the auction notices by the secured creditors, i.e., the banks and the financial institutions. The clause confers complete control of the secured asset to the highest bidder, including all the pending encumbrances, improper title, pending litigations, or any other defect. Consequently, the secured creditor sheds off its liabilities. The secured creditors ignore the bona fide buyers’ claims by arguing that it is the responsibility of the buyer to undertake adequate due diligence, thereby applying the principle of caveat emptor. Post-execution of the sale, when the bonafide buyer discovers the inherent defects in the property, the secured creditors invoke the ‘as is, where is, whatever is’ clause to deny any refund or compensation. Analysing §55 of the Transfer of Property Act, 1882: Understanding the Rights and Liabilities of the Seller § 55 of the Act imposes certain rights and liabilities on the buyer and the seller with respect to the sale of immovable property. The legislative intent behind the provision is to ensure fair dealing in property, thereby minimising fraud in these transactions.[[iii]] However, it is imperative to note that the provision applies only when there is no contract to the contrary. Nevertheless, the provision is a guideline for dealing with immovable assets in good faith. This segment shall analyse the duties of the seller in a sale transaction vis-à-vis §55 of the Act. Seller’s Duty to Disclose Material Facts The basic rule governing any sale transaction is that the seller is under an obligation to disclose all the material defects to the buyer, and where the buyer, with ordinary due care, was unable to find any defect.[[iv]] , as per the standard laid down in Flight v. Booth. In B.S. Oberoi v. P.S. Oberoi, it was held that pending litigation is a material fact. It further held that the decision of a bonafide purchaser might change if pending litigation pertaining to the property is brought to light. In Surendra Maneklal Kathia v. Bai Narmada, the Gujarat High Court ruled that a claim against the seller under §55(1)(a) of

[By Sanskriti Shrivastava]  The author is a student at UPES, Dehradun.  Introduction The Reserve Bank of India (hereinafter referred to as “RBI”) has lately issued new draft rules on 9th August 2021, namely, Draft Foreign Exchange Management (Non-debt Instruments- Overseas Investment) Rules, 2021 (hereinafter referred to as “Non-debt Instruments Rules”) and Draft Foreign Exchange Management (Overseas Investment) Regulations, 2021 (hereinafter referred as “Overseas Investment Regulations”)[i]. These regulations are an attempt to regulate the overseas investment market and to facilitate foreign investments. Consequently,  they have been revised with an underlying view to foster ease of doing business. The present article is an analysis of both these drafts. The article first provides an overview of the improvements/changes the non-debt Instrument Regulation and Overseas Investment Regulations try to make (1), which is followed by a critical analysis of the proposed drafts (2). (1) Overview of the RBI Drafts: Before critically analysing the two drafts proposed by RBI, it is pertinent to understand the issues this draft seeks to address, one by one. (1.1) Non-debt Instrument Regulations- The Non-debt Instrument Rules and the Overseas Investment Regulations are put forth to liberalize the existing framework concerning overseas investment and acquisition of (immovable) property by a resident of India when such property is situated outside India. The current regulations on the subject include the following two regulations, i.e., The Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004, and Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015. The Non-debt Instruments Rules have put forth certain restrictions on overseas investments. In pursuance of them, a person who is a resident of India is prohibited from making Overseas Direct Investment in an entity belonging outside India that is engaged in the business of any of the following- Real estate, or Gambling (whatsoever form it may be), or Offers financial products which are linked to Indian Rupee (an exception has been made for products offered through Indian Financial System Code) Additionally, special restrictions have been posed over overseas investment in a foreign entity, when such entity is located in jurisdictions or countries outside the Financial Action Task Force (Financial Action Task Force stands for a list of binding standards which prevent misuse of the virtual assets concerning terrorist financing and money laundering) and the International Organization of Securities Commissions (This body is a global standard setter concerning matters of securities). (1.2.) Overseas Investment Regulations- Pursuant to this draft, an entity incorporated in India is allowed to lend or invest in any debt instrument which may be issued by any entity incorporated outside India, provided that, such loan or investment (whatever the case may be) is backed by clear agreement in that regard specifying the rate of interest, which must be charged on an arm’s length basis. Critical Analysis upon the two drafts: 2.1 The Draft Rules attempt to clarify the concepts present in the existing legislature: The existing legislation on the subject failed to define pertinent concepts and authorities which were significant in the application of the legislation. The definitions were either absent, (like, oversees direct investments) or were open-ended (like authorized dealer branches).[ii]. This can be substantiated as- Previously, the “authorized dealer” includes an Authorized Dealer Category-I Bank as defined under Section 10 of the Foreign Exchange Management Act. The draft rules now clarify that t only the domestic branches of a such are included within its meaning[iii]. Meaning thereby, branches of authorized deals in IFSC are unqualified to be included within its ambit. The new draft rules have made an attempt to define “control” which has far-reaching implications since it would wider the ambit of the applicability of these regulations.[iv]. The definition provides that “control” may exist where the entity or a person or a people acting in concert holds either control management, or controls policy decision, or holds the right to appoint the majority directors. The rules also define “overseas direct investment” and lists certain types of investments that may be included within its ambit. As per the definition, overseas direct investment is said to include an investment made by way of acquisition of certain equity capital in a foreign entity which is not listed, or, where an entity or person subscribes to the memorandum of association of such entity, or where an Indian resident has acquired control in such foreign entity by way of his investment within it[v]. Doing away with the existing ambiguities with respect to the definition of “disinvestment”, the draft rules provide a much more inclusive definition and also includes transfer by way of liquidation[vi]. This inclusion will wider the interpretation of the extant ODI Regulations. Regarding rules on Prohibitions and restrictions on Investment: The present rules provide for a comprehensive prohibitory clause. It includes both prohibitions on the transfer of foreign security by an Indian resident and a general clause for outbound investments, except when it is specifically allowed by law[vii]. The application of these rules provides that a foreign entity must change its structure within 6 months to come in compliance with the new definition. Where the Indian residents are concerned, overseas investments (i.e. purchase and sale of Foreign Asset)which are made through Resident Foreign Currency account will be only be accepted within the limit prescribed under the Liberalised Remittance Scheme. Meaning thereby, all other conditions stipulated in the FEMA 120 will apply to the Indian Residents except the Liberalized Remittance Scheme (the scheme allows the residents to freely remit up to USD 2,50,000 per year for any transaction permissible by the RBI). The restriction with respect to entities involved in the real estate business has remained intact in the new draft rules. The restriction with respect to entities involved in the business of gambling and the entities which offer financial products linked to the Indian Rupee is newly introduced in the new draft rules[viii]. The draft rules provide for a more elaborative extant general permission clause for making an overseas investment: The clause was not very elaborative in the existing legislature.

[By Rishika Sharma & Rishi Raj]  The authors are students at the Maharastra National Law University, Aurangabad.     Introduction To achieve the goal of safeguarding the interests of the investors, the Securities Regulators around the globe have consistently imposed stricter insider trading regulations to ensure and sustain capital market transparency and fairness. It was given broad powers, including the ability to enact regulations prohibiting insider trading as it deemed fit but not enough which can include mens rea as an essential of insider trading. Before we proceed to examine the role of mens rea in insider trading it is essential to elucidate this topic. The watchdog of the Indian securities regulator i.e., Securities and Exchange Board of India (SEBI) prohibits the practice of insider trading under SEBI (Prohibition of Insider Trading) Regulations, 2015 (SEBI Regulations). The SEBI Regulations define insider trading as an offence against dealing with a company’s securities on the basis of unpublished price sensitive information (UPSI) to gain an undue advantage over the other people who do not have such information. Regulation 2(1)(n) of the SEBI Regulations provides that information that is related to a company or its securities, that is not generally available to the public, which upon disclosure is likely to affect the price of securities can be termed as UPSI. A comparative study of the need for inclusion of mens rea This article seeks to examine the necessity of mens rea in the provisions of insider trading in the USA and India. These regimes were chosen because the United States, as one of the world’s largest financial markets, may serve as a model for India’s securities market. Further, the authors are of the opinion that India needs adequate penal laws to protect investors’ interest in the securities market which prohibits the practise of insider trading and those laws must meet the regulations of developed nations. 2.1 The Indian position  It would be very prudent to start analysing the Indian regulatory framework where mens rea has not been recognised as an essential of insider trading. Regulation 3(1) of SEBI Regulations states that any person who is in the possession of UPSI shall be considered to be an “insider” irrespective of how the person gained such information. In addition to this, Section 15G of the Securities and Exchange Board of India Act, 1992 (SEBI Act) lays down the penalty for violation of the provisions of Insider trading. In Hindustan Lever Limited v. SEBI wherein it was contended that for imposing any penalty under insider trading it is essential to prove that the purchase was made for making profit or to avoid loss. While rejecting the contentions Securities Appellate Tribunal observed that information or knowledge is irrespective of Insider trading. It is noteworthy here to observe that the SEBI Act does not recognise the need for the inclusion of mens rea in insider trading. It is not considered an essential element in insider trading and a person can be convicted regardless of his intentions. The Securities Appeal Tribunal, however, did not always have the same view. A contrary view was taken by it in Rakesh Aggarwal v. SEBI wherein it held that intention or knowledge has to be taken into cognizance in case of insider trading even though the statute doesn’t particularly bring mens rea as an essential criterion but it was subsequently overruled. However, in SEBI v. Cabot International Capital Corporation, the Bombay High Court held that the punishment prescribed in the SEBI Act and SEBI Regulations are for the non-compliances of the provisions. The proceedings relating to Section 15G are neither criminal nor quasi-criminal, as the Act and The Regulations provides that there is no question of proof of mens rea is required as a fundamental component for the imposition of penalty. The SEBI Act and SEBI Regulations were enacted to punish those individuals who are in default of statutory provisions and hence the intention of the parties committing such violation becomes wholly irrelevant. Therefore, it is noteworthy to observe that the statutory provisions contradict the principle of “no mens rea, no punishment” which is a settled principle in common law countries. Further, the authors are of the opinion that the present provisions make somehow mens rea is not an essentials of insider trading. This negates the purpose of criminalising insider trading as a means of gaining an unfair advantage based on price-sensitive information. The mere possession of unpublished price-sensitive information should not be considered as sufficient grounds for insider trading. Further, it is noteworthy to observe that the views adopted by the Indian judiciary and regulatory authorities is wrong and hence, mens rea must be included as a fundamental of insider trading. 2.2 The US position  The US frequently acts as the “gold standard” for many emerging economies, it is necessary to understand what constitutes mens rea in order to attract criminal responsibility for insider trading offences committed within the jurisdiction of the US. The U.S. Securities and Exchange Commission (SEC) defines Insider trading in a much broader sense when compared to the Indian provisions. Instead of only buying or selling securities on the basis of UPSI, SEC also includes “breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, non-public information about the security” under the ambit of insider trading. In 1984, for the first time, the US Supreme Court in Dirks v. SEC observed that the mens rea must be considered while determining the Insider trading proceedings. Further, in deciding whether or not the insider has violated a fiduciary obligation, the Court reached its conclusion by using a test to determine if the tippee committed the insider trading offence. The Court laid down a test to determine the Insider’s knowledge by [i] insider’s personal benefit from his disclosures [ii] absence of personal gains and [iii] absence of breach by the insider. Hence, after the Dirks judgement, in US v. Newman, the Court ruled out the term “mens rea” and made it far more difficult