S&R Associates presents the fourth issue of its quarterly roundup series on clean energy, covering the months of November and December 2023.
Issue No. 4 comprises regulatory updates on renewable energy and electric vehicles, respectively, including central and state government notifications in this regard, along with India-related updates and international developments from within the reviewed period.
In addition, Issue No. 4 contains a note on the investment viability of innovative and/or clean construction technologies, as published in a Knowledge Brief of the Asia Pacific Real Estate Association (APREA).
India’s stance on AI regulation has grown more sophisticated over the past few months. On the one hand, the country’s unique requirements have been articulated in respect of making vast datasets available for AI training, as well as to enable rapid AI deployment, innovation and growth. On the other hand, including for the purpose of addressing global concerns (some of which have arisen locally pursuant to recent events like those involving ‘deepfakes’), the government may rely on external influence – such as the risk-based approach contained in a recent political agreement on the EU’s AI Act.
With respect to the latter, new national laws, such as the proposed Digital India Act, may soon establish a concrete compliance framework, including in terms of regulating new technologies, protecting digital users from harm, enhancing intermediary liability, promoting algorithmic accountability and transparency, as well as curtailing monopoly, discrimination and bias. Further, recent reports on AI provide a useful blueprint for India’s long-term vision on AI governance, intellectual property, compute infrastructure and ethical considerations.
Compulsorily convertible debentures (“CCDs”), as the type suggests, are debentures that are compulsorily convertible into equity shares. CCDs first became prominent in the foreign direct investment (“FDI”) context in 2007 when Indian foreign exchange laws expressly recognized them as the only type of debentures that Indian companies could issue to raise FDI. The reason to disallow other types of debentures for FDI purposes was to curb debenture issuances to foreign investors in the guise of equity. Since the foreign exchange laws had established a FDI regime for equity instruments and a separate external commercial borrowing (“ECB”) regime for debt instruments, it was felt that Indian companies were bypassing the ECB route by issuing hybrid debt instruments under the FDI route. Thus, CCDs have been regarded as equity instruments for FDI purposes.
In November 2023, the Supreme Court of India (“Supreme Court”) delivered its judgment in IFCI Limited v. Sutanu Sinha that dealt with the question whether CCDs are to be treated as ‘debt’ or ‘equity’ in a different context. This note analyzes the Supreme Court judgment and the ‘repayment of principal’ test that courts have consistently applied to determine whether convertible debt instruments are regarded as ‘debt’ or ‘equity’.