2024 - S&R Associates

SEBI’s New Framework for Sustainable Finance: A Review Beyond Environmental Sustainability

In order to expand the asset class for which Indian entities can issue and list debt securities with a purpose of using the proceeds for developing sustainable projects, the Securities and Exchange Board of India recently amended the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Recently Securities) Regulations of 2021 (“NCS Regulations”) on December 11, 2024. Previously, the framework under the NCS Regulation only covered issuances of green debt securities. The amendment has introduced the concept of ESG debt securities, which now includes a framework for issuances of social bonds, sustainability bonds, sustainability linked bonds and green debt securities under its ambit.
This note discusses the amendment in light of India’s commitment towards reducing its intended nationally determined contributions together with the implications for listed issuances of the ESG debt securities by Indian corporates to potential domestic and foreign investors as well as highlights the gaps in the current form of the NCS Regulations.

Addressing Legal Challenges on AI Development and Use

Insights | December 23, 2024 | Practice Area: Data, Intellectual Property, Litigation and Arbitration, Regulatory, Technology; Media and Telecommunications

The recent lawsuit by Asian News International against OpenAI in the Delhi High Court mirrors global trends involving allegations that large language models (“LLMs”) are being trained on copyrighted material without authorization or licenses, leading to copyright infringement. For the purpose of balancing innovation with compliance, artificial intelligence (“AI”) developers in India must take proactive measures to navigate the complex interplay of copyright, data protection and liability issues. By securing licensing agreements, clarifying the scope of ‘fair use’ under copyright law, offering indemnities to users, and preparing for court-directed compliance actions, AI developers can mitigate risks and build legally compliant AI systems.

Jurisdiction of the National Company Law Tribunal in Corporate Restructurings: Protecting Tax Revenue as Public Interest

Insights | December 23, 2024 | Practice Area: Mergers and Acquisitions, Tax

In India, the National Company Law Tribunal (“NCLT”) has, on several occasions, rejected or scrutinized schemes of corporate restructurings based on objections raised by the Income Tax Department (“ITD”). These objections often focus on whether the scheme is structured primarily to avoid taxes, taking advantage of set-off of losses or avoidance of tax liabilities by overvaluation of assets. This note discusses case law where the NCLT has taken into account tax matters and evaluated the impact of the General Anti Avoidance Rules (“GAAR”) as a matter of ‘public interest’, thus setting important precedents in Indian corporate jurisprudence.

Branded Residences: An Overview of the Legal Framework in India

Insights | December 19, 2024 | Practice Area: Real Estate, Regulatory

The rise of mixed-use development platforms has prompted hospitality brands to diversify their offerings, expanding into residential spaces such as resort villas and luxury apartments to cater to a broader audience. This note provides an overview of the concept of Branded Residences and explores how the Indian market is adapting and evolving with this trend. As the hospitality sector in India is still relatively new to Branded Residences, this note highlights key features, incentives, and regulatory considerations, serving as a guide for both the hospitality and real estate sectors to make informed decisions.

Regulatory Landscape for Specialized Investment Fund: A New Asset Class

Insights | December 19, 2024 | Practice Area: Capital Markets, Investment Funds, Regulatory

The Securities and Exchange Board of India (“SEBI”) amended the SEBI (Mutual Funds) Regulations, 1996, to introduce a new asset class, the Specialized Investment Fund, effective December 16, 2024. The amendment aims to bridge the gap between Mutual Funds (“MFs”) and Portfolio Management Services (“PMS”) by offering a product suited for sophisticated investors with a risk-return profile between that of MFs and PMS.

SEBI Revitalizes the Indian Rights Issue Framework

Insights | December 17, 2024 | Practice Area: Capital Markets, Regulatory

A new rights issue framework proposed to be introduced by SEBI will allow timely access to capital and allow public shareholders to participate without significant dilution of their shareholding. Allowing promoters to renounce their rights entitlements in favor of select investors makes rights issues an attractive alternative to other methods of fund raising that may require shareholders’ approval. The SEBI proposal streamlines the rights issue process, significantly shortens timelines and rationalizes compliance requirements while introducing flexibility for companies to raise funds from select investors. This note provides an overview of the SEBI proposal for the new rights issue framework.

Restriction on Stock Brokers from Engaging in Other Businesses

Insights | December 12, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

Regulators in India are increasing looking at the businesses of entities and seeking to restrict the business activities to specified categories that they believe should be carried out by such regulated entities. One such interesting case relates to the permissible business activities of a stock broker. This note discusses the proposed amendment by the Government to Rule 8(1)(f) and Rule 8(3)(f) of Securities Contracts (Regulation) Rules,1957 in light of the enforcement actions taken against stock brokers and highlights the need to strike a balance between the commercial requirements of the stock broker and protecting the interests of its clients.

Proactive Pathways to Navigate Emerging Carbon Taxes

Insights | December 11, 2024 | Practice Area: International Trade, Regulatory, Tax

The global focus on mitigating climate change has spurred the swift development and implementation of policies aimed at curbing greenhouse gas emissions. Among these measures, carbon taxes and mechanisms such as the European Union’s Carbon Border Adjustment Mechanism (“EU CBAM”) have emerged as pivotal tools for integrating environmental accountability into global economic activities. These policies are poised to bring substantial changes to the dynamics of international trade.

For Indian exporters, particularly those in carbon-intensive sectors like iron and steel, cement, fertilizers, aluminum, electricity, and hydrogen, the EU CBAM represents both a challenge and an opportunity. While the regulation primarily imposes compliance obligations on EU importers, Indian businesses must act swiftly. The need to monitor evolving CBAM regulations, forecast financial impacts, optimize supply chains, and establish robust governance frameworks has never been more critical.

This note delves into the framework of the EU CBAM, examines its implications for Indian exporters, and highlights practical strategies businesses can adopt to navigate this shift towards a carbon-conscious trade landscape.

Levelling the Playing Field: Supreme Court Decides on Unilateral Appointment of Arbitrators

Insights | November 26, 2024 | Practice Area: Litigation and Arbitration

State-owned enterprises (“SOEs”) in India have historically stipulated in their commercial contracts that arbitrators must be chosen from a panel pre-determined by the SOEs. These clauses have been challenged as being unfair, but Indian courts have taken differing views in the matter. A five-judge bench of the Supreme Court of India has, however, attempted to put these issues to rest in the case of Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV). The Supreme Court has ruled that unilateral appointments of arbitrators, including in the public-private contracts, are invalid. The Supreme Court has further held that while SOEs are not prohibited from curating a panel of arbitrators, an arbitration clause cannot mandate that the other party selects its arbitrator from such curated panel. In this note, we discuss the key findings of the decision and analyze the challenges which may arise.

From Rescue to Ruin: The Supreme Court’s Judgment in Jet Airways and the Future of Airline Insolvencies

Insights | November 21, 2024 | Practice Area: Banking and Finance, Litigation and Arbitration, Restructuring and Insolvency

In a recent judgment, the Supreme Court of India ordered the liquidation of Jet Airways (India) Limited, bringing an end to the five-year-long saga of efforts to revive the distressed airline. Two years after the airline entered the corporate insolvency resolution process, the National Company Law Tribunal, in June 2021, approved the resolution plan submitted by the Jalan Fritsch Consortium, the successful resolution applicant. However, various challenges arose with implementation of the resolution plan, which led the successful resolution applicant to seek multiple extensions and concessions from the adjudicating authority. Finally, the Supreme Court set aside the March 2024 order of the National Company Law Appellate Tribunal and used its inherent powers under Article 142 of the Constitution to order the airline’s liquidation.

The Supreme Court’s judgment is significant as it underscores the importance of implementing resolution plans within agreed upon timelines and identifies certain gaps and shortcomings in the Insolvency and Bankruptcy Code, 2016 as far as implementation of resolution plans are concerned. This note analyzes the judgment to discuss its implications for the implementation of resolution plans as well as specific challenges in the context of insolvencies in the aviation industry.