Legal & Industry Updates - December 2024
SPECIAL EVENTS
Practical Insights Into Contract Drafting and Legal Referencing, 26th and 27th December, 2024
The team at Ivy Law participated in a webinar on the “Practical Insights into Contract Drafting and Legal Referencing” organised by the Lawctopus Law School. The webinar gave insights about the practical aspects of drafting contracts and legal research, while focusing on delving into the major clauses of drafting a contract with a specific emphasis on the Dispute Resolution clauses and Description of the Parties in contracts. The webinar also covered citation and referencing which is a crucial part of the legal research. It helped to understand the need for citations, techniques of accurate referencing and the different styles of citation prevailing in academia. The application of the clauses and how to elevate the legal skills were also discussed at length.
LEGAL & INDUSTRY UPDATES
Insolvency Professionals to Act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees (Recommendation) (Second) Guidelines, 2024 (“IBBI Guidelines, 2024”) (source)
The Insolvency and Bankruptcy Board of India (“IBBI”), on 2nd December, 2024, has released the IBBI Guidelines, 2024 for the appointment of Insolvency Professionals (“IPs”) as Interim Resolution Professionals, Liquidators, Resolution Professionals or the Bankruptcy Trustees under the Insolvency and Bankruptcy Code, 2016 (“IBC”). The guidelines are aimed at reducing administrative delays in the appointment of IPs, thereby ensuring timely resolution processes for corporate and individual debtors under the IBC. Further, the guidelines have specified the necessary requirements i.e. eligibility, consent requirements, sorting criteria and zonal categorization for appointments of IPs.
IBBI Chairman Calls for Reforms in the IBC Framework by Adopting Creditor Centric Model of IBC (source)
The IBBI Chairman, on 7th December, 2024, has announced that they are on the verge of developing a creditor centric insolvency framework by imposing a greater responsibility on the creditors and expedite the rescue of the stressed firms. The objective behind the key change is to encourage the out of court settlements and reduce the burden of the National Company Law Tribunal (“NCLT”) by enabling the committee of creditors to take on greater responsibility, which would eventually facilitate more recoveries for the lenders.
Security and Exchange Board of India (“SEBI”) Issues Consultation Paper on the Draft Circular Clarifying Associations Between Regulated Entities, Market Intermediaries (“MIs”), and Their Agents Involved in Prohibited Activities (source)
SEBI, on 6th December, 2024 has issued a draft circular for regulating the association between regulated entities, MIs and entities engaged in prohibited activities, wherein the circular aimed to regulate unregistered investment advice and unauthorized claim of returns prevailing in the market practices. Further, the draft circular also seeks to ensure strict compliance by defining the scope of association, responsibilities and consequences of violations. Regulated entities are mandated to sever its ties with such entities by 21st January, 2025 while the non-compliance with the draft would attract penalties including the cancellation of license or fines. The broader goal is to enhance compliance and investor protection.
SEBI Forewarns Investors Against Unauthorized Platforms for Unlisted Securities (source)
SEBI, on 9th December 2024, has warned the investors of using unauthorised electronic platforms and websites for conducting transactions of unlisted public limited companies as it is violative of the Security Contracts (Regulation) Act, 1956 and the SEBI Act, 1992 that has aimed to safeguard the interest of investors. The list of recognised stock exchange that are approved for raising funds through market are available on the website of SEBI. Further, SEBI has also warned that the investors who transact on unauthorised platforms risk losing investor protection benefits, grievance redressal mechanisms, and online dispute resolution mechanisms administered by exchanges or depositories.
SEBI Prohibits Foreign Portfolio Investors (“FPIs”) from Issuance of Offshore Derivative Instruments (“ODIs”) With Derivatives as Underlying (source)
SEBI, on 17th December, 2024, has notified that the FPIs can no longer issue ODIs with derivatives as underlying or use derivatives to hedge their ODI positions on Indian stock exchanges in order to bring transparency and reduce the risks in the functioning of the capital market. Further, strict regulations for disclosing ownership has been introduced by mandating detailed report if ODI subscribers hold more than 50% of their equity ODI positions in securities of a single Indian corporate group or if they have equity positions exceeding INR 25,000 crore in the Indian markets. The objective is to address regulatory arbitrage, implement tighter controls and bring parity in the treatment of ODIs and segregated FPI portfolios.
Supreme Court (“SC”) Issues Directions for Effective Implementation of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”) (source)
The SC, on 3rd December, 2024, has issued a comprehensive guideline for the enforcement of the POSH Act, with the aim to ensure its effective compliance to redress grievances of women at their workplace and assure that the POSH Act is uniformly implemented across states and union territories. The guidelines include constitution of Internal Complaints Committees (“ICCs”) for all government departments and public sector undertakings while also developing SheBox portals where women can lodge complaints. The court has further directed to constitute local committees under the supervision of the District Officers and Nodal Officers to deal with the complaints that have not been addressed by the respective ICC of the organization. As per the guidelines, the aggrieved women can approach the nearest legal service clinic or the helpline (15100) if the victim cannot access the local committees or the ICC.
SC: Arbitration Cannot be Optional When Agreement Provides for an Arbitration Clause (source)
SC, on 6th December, 2024, has ruled that the parties have to pursue the procedure for arbitration if the agreement has explicitly mentioned about the arbitration clause as there does not exist any concept of optional arbitration in a manner that renders it non-existent or requires unanimous consent from all parties to invoke arbitration. The court, however, does have the power to appoint an arbitrator under section 11 (Appointment of arbitrators) of the Arbitration and Conciliation Act, 1996, if the parties could not arrive on a consensus for the appointment of arbitrator. SC noted that the arbitration clause should not be narrowly interpreted limiting the scope and meaning of one part of the clause with other parts.
Central Government (“CG”) Proposes Banning of Unregulated Lending Activities Bill, 2024 (“BULA Bill”) to Curb Unregulated Lending (source)
The Department of Financial Services, on 13th December, 2024, has announced the draft BULA Bill, with the aim to regulate and set stringent rules for the unregulated digital lending by individuals that are not permitted or authorized by the RBI, and thereby protect borrowers from financial exploitation. The BULA Bill stipulates that lenders who engage in illegal lending practices, whether digital or otherwise, would face imprisonment for terms ranging from 2 to 7 years, along with fines between INR 2 lakh and INR 1 crore. Also, lenders who use unlawful methods to harass borrowers or recover loans could face imprisonment of 3 to 10 years as well as hefty fines. Unlawful methods for recovery of loan has also been prohibited by the bill. Further, cases involving interstate investigation or high value transactions would be investigated by the Central Bureau of Investigation under the BULA Bill.
Ministry of Finance (“MoF”) Urges Banks to Monitor the NCLT and National Asset Reconstruction Company Limited (“NARCL”) Cases to Reduce Procedural Delays (source)
The MoF has urged the banks to monitor the cases in NCLT and NARCL to reduce the delays due to the procedure and adjournment for effective resolution of the bad loans, as well as to enhance the efficiency of resolution mechanisms. Further, the Ministry of Corporate Affairs is also working on building an integrated portal for smoother communication, transparency and coordination between the banks on the NCLT cases. The MoF has advised the banks to closely monitor the top 20 accounts pending for admission at NCLT and take the required steps for speedy resolution of the loans, with the aim to strengthen the framework of IBC while ensuring that the issues faced by operational creditors during the proceedings are addressed.
National Company Law Appellate Tribunal (“NCLAT”) Ruling Elucidates Section 10A Applicability of the IBC in Corporate Debt Cases (source)
In a recent issue before the NCLAT, it has ruled that the parties cannot be barred under section 10A (Initiation of corporate insolvency resolution process by corporate applicant) of the IBC from initiating proceedings under section 7 (Initiation of corporate insolvency resolution process by financial creditor) of the IBC when the liability to pay interest arose before the 10A period and continued thereafter. The NCLAT thus overturned the decision of NCLT to reject the application made under section 7 and it also directed the adjudicating authority to admit the petition within 1 month of the order. Also, during the aforesaid 1 month period, it shall be open for the corporate debtor to negotiate and settle the disputes with financial creditor to discharge its debt and later it could be filed with adjudicating authority for the same.
Competition Commission of India (“CCI”) Directs Table Tennis Federation of India (“TTFI”) To Cease and Desist from Unfair Trade Practices (source)
The CCI has directed the TTFI and its affiliate bodies to cease and desist from indulging in anti-competitive practices with the aim to discourage the existing anti-competitive practices and create a level playing field. CCI probed into the matter and found out that TTFI and its affiliate bodies held a dominant position in the relevant markets for the organisation of table tennis leagues/events/ tournaments in India. It was alleged that they denied access to players to participate in tournaments, through whatsapp advisories, incorporating certain anti-competitive clauses in their bye-laws, and sought to prevent players from participating in the events, resulting in violation of certain provisions of sections 3(4) (Anti-competitive agreements) and 4 (Abuse of dominant position) the Competition Act, 2002.
India Surpasses Over 73,000 Startups With Atleast One Woman Director (source)
The Ministry of Commerce and Industry has reported that India is now home to more than 73,000 startups with at least one woman director, as recognised under the Startup India initiative, thereby highlighting the significant role of women in the startup ecosystem and how they play a crucial role in driving innovation and economic growth. India has further emerged as one of the most vibrant startup ecosystems globally, securing its position as the third-largest startup hub. Recognising this transformative potential of startups, CG has introduced several initiatives to support and nurture entrepreneurship.
Disclaimer: The updates provided in this document is not a legal opinion and does not claim to capture all legal developments related to the subject matter stated herein. It is advisable to seek legal advice for accurate applicability, prior to relying on the updates for any legal matter.