Legal & Industry Updates - November 2024
SPECIAL EVENTS
Techade of Generation (“Gen”) Artificial Intelligence (“AI”): Scaling AI at Work for Legal Professionals, November 7, 2024
The team at Ivy Law participated in a webinar on the “Techade of Gen AI: Scaling AI at Work for Legal Professionals” organized by the ET LegalWorld. The webinar gave an insightful knowledge about the necessary technological changes and talked about how generative AI can complement legal professionals, especially in-house counsels and external counsels in the day to day work. It focused on how AI is gradually turning into an indispensable tool and its benefits in contracts, document creation, modification and analysis, thereby easing the clerical tasks. Further, the speakers brought their expertise to bring to light how AI should be strictly used with caution as legal professionals deal with confidential and sensitive issues.
LEGAL & INDUSTRY UPDATES
The Reserve Bank of India (“RBI”) Introduces New Framework For Reclassification of Foreign Portfolio Investors (“FPIs”) to Foreign Direct Investment (“FDI”) (source)
The RBI, on 11th November, 2024, has published an operational framework to allow foreign FPIs to convert their investments to FDI when equity holdings in Indian companies surpass the prescribed 10% limit. Prior to this framework, FPIs exceeding this cap were required to either divest the surplus shares or reclassify them as FDI. Further, the new framework mandates that the reclassification to FDI must be completed within five trading days and would be subjected to both government and company approvals. This regulatory change aims to enhance clarity and transparency for foreign investors in the Indian market.
The Securities and Exchange Board of India (“SEBI”) Simplifies Registration Process of Certain Categories of FPIs (source-)
SEBI, on 12th November, 2024, has issued a circular on simplified registration for FPIs with the aim to ease onboarding for FPI applicants and reduce duplication of available information. SEBI has permitted the applicants to fill only the fields that are unique to them. In order to avoid duplication of information, it has announced that candidates can complete either the entire Common Application Form (“CAF”) or an abridged version with unique features. If the abridged form is selected, the remaining fields will be either auto-populated from the depository system or deactivated, based on information in the CAF module. Further, SEBI has ordered Designated Depository Participants to ensure that all information in the CAF module is accurately represented
The Insolvency and Bankruptcy Board of India (“IBBI”) Proposes Mediation Option for Operational Creditors (“OCs”) Before Filing Insolvency Under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC”) (source)
The IBBI has proposed a new mediation option for OCs wherein they can exercise the option of mediation before filing insolvency applications under section 9 (Application for initiation of corporate insolvency resolution process by operational creditor) of the IBC. Under this scheme, the OC can undergo mediation with the aid of a mediator, as provided under the Mediation Act, 2023. However, on failure, the mediator will prepare a non-settlement report to be annexed with the application for initiation of the corporate insolvency resolution process before the adjudicating authority (“AA”). IBBI suggests mediation as an effective technique for resolving issues between the OCs and corporate debtors (“CDs”), allowing for faster admission by AA.
IBBI Proposes Amendments to Liquidation Regulations (source)
The IBBI has recommended changes to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 (“Regulations, 2017”), with the aim to strengthen governance, transparency, and accountability in the liquidation process, protect stakeholder information, and allow the IBBI to maintain and manage the Corporate Liquidation Account indefinitely. Further, its objective is to improve the regulatory framework and ensure that all stakeholders are adequately informed. The proposal also considers amending Regulation 33 (Liquidator to realize uncalled capital or unpaid capital contribution) of Regulations, 2017 to allow the liquidation procedure to be completed even if there is uncalled money.
The Ministry of Corporate Affairs (“MCA”): Regular IBC Tweaks Needed to Address Bankruptcy Challenges (source)
The MCA has requested the Central Government (“CG”) for the IBC to be continuously refined in order to properly meet future corporate restructuring difficulties. The MCA's statement comes ahead of the CG's plan to amend the IBC during the 2024 winter session of Parliament. A creditor-led resolution structure and a group insolvency mechanism are among the possible alterations. The IBC law was last amended in August, 2020 in order to introduce, among others, a compact and largely informal bankruptcy settlement process known as the pre-packaged mechanism to expedite the rescue of stressed micro, small and medium enterprises.
Supreme Court (“SC”) Advances Reforms in IBC (source)
The SC advocated the policy improvements in the IBC, concentrating on the Committee of Creditors’ (“CoCs”) commercial wisdom and encouraging the National Company Law Tribunals and National Company Law Appellate Tribunals (“NCLATs”) to reconsider their approach to insolvency proceedings, requiring timely hearings and resolutions. The NCLAT has ruled that creditors have broad authority to liquidate a company under IBC and further clarified that the CoC can choose liquidation at any point even before resolution plan is confirmed, without exploring resolution options first. The court also stressed on the Successful Resolution Applicant's responsibility to carry out the resolution plan, indicating that their involvement extends beyond a transactional duty to creditors or stakeholders.
Himachal Pradesh High Court (“HC”): Using Telephone Conversation as Evidence Violates Right to Privacy (source)
The Himachal Pradesh HC denied a request to record a private phone conversation as evidence in a marital case, claiming a violation of the fundamental right to privacy. The court claimed that the right to have a private talk is part of the right to privacy and any recorded telephonic conversations are inadmissible as evidence if obtained without consent, as their use would infringe on an individual's right to privacy. Thus, the HC dismissed the plea, citing a landmark 1997 Supreme Court decision in PUCL v. Union of India, which determined that such illicit evidence collection violated Article 21 (Protection of Life and Personal Liberty) of the Constitution of India.
CG Proposes Dedicated Commercial Courts At District Level (source)
The Ministry of Law and Justice has presented a draft Commercial Courts (Amendment) Bill, 2024 with the goal of providing faster and more specialized adjudication of commercial disputes, as well as simplifying court conflict settlement procedures and streamlining legal processes. The proposed revisions include the establishment of dedicated commercial courts at the district level, an additional 30-day window for those wanting to appeal commercial court decisions, and a provision for appeal of a commercial court's judgment or order to the level of district judge. It also includes provisions for expedited appeals, with the Commercial Appellate Court and the Commercial Appellate Division intending to resolve cases within six months.
CG to Release Digital Personal Data Protection (“DPDP”) Rules by November, 2024 (source)
The CG is anticipated to disclose the DPDP Rules by the end of November, 2024, with the final enactment expected by 2025, with the aim to define exemptions for specific data fiduciaries, including startups, based on the volume and form of processed data, as well as clarify ambiguities in data protection and to unfold aspects such as data transfer outside the country. In the hindsight, the DPDP Act, 2023, which is yet to be implemented operationally, seeks to safeguard individuals' rights to data protection and authorized processing. Also, the law would apply to all companies, regardless of how they acquire data.
Newly Elected United States of America (“US”) President Donald Trump’s Victory Could Aid Indian Startups in Fostering Better Collaboration (source)
The Indian startup and venture investor ecosystem is expecting greater economic relations and increased financial flow between India and the US under the newly elected US President, Donald Trump. The US Federal Reserve's low interest rate environment in 2021 boosted economic activity, bringing Indian startup funding to an all-time high of $536 billion. Further, Trump's anti-China posture may assist the Indian venture ecosystem, which might become a preferred destination for long-term investment capital. On the other hand, Trump’s opponent Kamala Harris’ stance on increasing taxes on US companies had created a sense of anxiety among Indian startups that are registered in the US, with various financial technology unicorns planning to move their registered offices to India.
India Launches Updated National Biodiversity Strategy and Action Plan (“NBSAP”) at the 16th meeting of the Conference of Parties (“COP 16”) (source)
India's Union Minister of State for Environment, Forest, and Climate Change recently presented India's updated NBSAP at the COP 16, to the Convention on Biological Diversity. The modified NBSAP aspires to prevent and reverse biodiversity loss by 2030 and achieve a future of living in harmony with nature by 2050. The plan acknowledges environmental issues and proposes solutions such as ecosystem restoration, species recovery initiatives, and community-led conservation efforts. The NBSAP further stresses on a transformative approach that prioritizes ecosystem-based management, bottom-up implementation strategy, biodiversity mainstreaming into various sectors, inter-agency cooperation and financial solutions.
Gujarat Becomes India's First State to Implement a Dedicated Semiconductor Policy (source)
The Gujarat government has issued the first 'Gujarat Semiconductor Policy 2022-2027' to encourage semiconductor self-reliance. The Gujarat State Electronics Mission is being developed to ensure proper execution of this landmark policy. Major investments by various semiconductor players are being made across various cities in Gujarat with a view to generate a wave of high-skilled job opportunities across the state. The Gujarat government has been a consistent partner in promoting the expansion of the semiconductor industry, providing strong assistance for capital investment and local manufacturing facilities. Further, four prominent semiconductor companies plan to invest INR 1.24 lakh crore in new projects, resulting in around 53,000 new job opportunities.
The Competition Commission of India (“CCI”) Probe Finds Various Renowned Meal Delivery Businesses Breaching Antitrust Laws (source)
India's antitrust authority has determined that various eminent meal delivery businesses have breached competition regulations by promoting specific restaurants on their websites. One of them, entered into exclusivity contracts with partners in exchange for lower commissions, whilst another guaranteed business growth to specific players who listed solely on its website. The investigation began in 2022, following a complaint from the National Restaurant Association of India regarding the impact of alleged anti-competitive practices. As per CCI, exclusivity arrangements between these delivery businesses and their respective restaurant partners prevents the market from becoming more competitive.
NCLAT: OCs Cannot Claim Interest Without Prior Agreement with CD (source)
In a recent ruling, the NCLAT has observed that the invoices from the OCs with interest terms cannot be used against the CD unless there is an agreement for interest or another document indicating that CD has accepted the obligation for interest. The appellate authority found the clause from the work order to not be read as an obligation for payment of interest by the CD. The tribunal further determined that the OC did not originally accept the settlement offer, in fact, the entire principal amount had already been paid, and therefore no claims can be decided under section 9 (Application for initiation of corporate insolvency resolution process by operational creditor) of the IBC.
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.