In the backdrop of India’s growth story as a major IT-ITes hub in the last two decades, the Indian data centres industry is now emerging as the next attractive opportunity for investors and developers. The demand for data centres in India is being driven by the need for data storage given the Government’s Digital India and data localization policies, increased data consumption and 5G roll-out which is expected to enable adoption of data intensive technologies such as internet-of-things (IoT) and artificial intelligence (AI). The proliferation of data centres in India has also created growth opportunities in various sectors of the Indian economy, including real estate, manufacturing and renewable energy.
While the draft national data centre policy is yet to be implemented, various Indian states have adopted their respective state data centres policies to attract private investment in this capital and technology intensive sector. In this article, we compare the incentives offered under data centre policies adopted by certain Indian states which have received major investments in the data centre sector.
In September 2022, the Supreme Court of India in SEBI v. Abhijit Rajan interpreted the insider trading regulation in India to include a ‘profit motive’ as an essential requirement for establishing a charge of insider trading. This note analyzes the Supreme Court judgement and highlights certain issues that arise for consideration following such judgement.
The Insolvency and Bankruptcy Code, 2016 (“IBC”) ushered in a new era in the Indian insolvency regime by introducing a distribution waterfall mechanism under Section 53 of the IBC. The waterfall mechanism prioritizes dues owed to financial creditors over dues owed to operational creditors and government authorities.
The waterfall mechanism in the IBC is based on the recommendations of the Bankruptcy Law Reforms Committee. The preamble to the IBC also highlights its objective of balancing the interests of the stakeholders, including by alteration in the order of priority of payment of government dues.
There has recently been a rising trend of courts and tribunals seeking to deviate from the distribution waterfall under the IBC. Unfortunately, this tends to put the success of an insolvency resolution process at risk. In this note, we examine three recent examples and discuss why any such deviation could disturb the delicate balance sought to be achieved under the IBC.
In the US and elsewhere, ‘virtual’ power purchase agreements (VPPAs) have appealed to a wide variety of corporate buyers, including for the purpose of meeting renewable energy (RE) targets quickly. Further, compliance with ‘green’ mandates by procuring renewables through a VPPA has become an important element of business branding across the world. With regard to India, too, recent reports suggest that VPPAs are essential to meet corporate needs and wants, particularly in the country’s expanding commerce and industry (C&I) segment.
However, in response to investor demand with respect to environment, social, and governance (ESG) standards, if a company seeks to shift completely to RE, it may not be able to do so for various reasons, including on account of inherent risks in RE generation. Further, ‘physical’ PPAs are not viable for projects below a logistical minimum. Accordingly, C&I consumers with lower load requirements and/or fragmented demand may not yet have a cost-effective mechanism to procure RE, despite India’s newly democratized ‘open access’ regime. In this regard, VPPAs may still be the answer.
Nevertheless, given that your company needs/wants to acquire or generate RE – should, and can, you enter into a VPPA in India?
Although the objectives of the erstwhile restriction on “round tripping” were laudable, such restriction had an unintended chilling effect on legitimate transactions. The new overseas investment regime introduced in August 2022 eases such restriction to a large extent. However, certain interpretational issues remain.
The enactment of the Insolvency and Bankruptcy Code, 2016 (“IBC”) marked a historic shift in India’s insolvency regime shifting the focus from recovery to resolution. The Bankruptcy Law Reform Committee (“BLRC”) reports highlighted the need for the legislative policy to initiate a resolution process at the instance of default to prevent erosion of value. Keeping this objective in mind, the IBC lays out a party driven process which places the creditors at the helm of the resolution procedure.
The Supreme Court of India (“Supreme Court”) has repeatedly held that keeping in mind the objectives of the IBC, the adjudicating authority at the stage of admission into the corporate insolvency resolution process needs to restrict its analysis to: (1) the existence of debt and (2) default in payment of debt. However, on July 12, 2022, the Supreme Court in Vidarbha Industries Power Limited v. Axis Bank Limited (“Vidarbha”), relying on the use of the word “may” in the relevant statutory provision, applied the literal interpretation test and held that National Company Law Tribunal has the discretion to admit an application after it is satisfied regarding the existence of debt.
This judgment, which departs from precedent, could have serious consequences for the insolvency regime in India. This note discusses the implications of a literal interpretation test in context of Vidarbha and highlights the need for an intervention to avoid the mistakes of the past.
India appears to be on the right track in respect of its accelerated pivot towards renewable energy (RE). However, going by present trends, national capacity-addition with regard to RE is not even close to the annual rate required for achieving its ambitious climate-related targets. Even as the country remains poised to witness a massive increase in electricity demand over the next few decades, in order to remain on a sustainable path, it needs much more funding than what is available in the current policy environment. Further, significant foreign investment is essential to address a developmental change as paradigmatic as achieving carbon-neutrality, especially given the country’s fundamental anxieties related to local industry and energy security. While its climate-related initiatives have mainly been funded through domestic capital so far, India now requires, in addition, both capital and technology from outside. Accordingly, sovereign and international development finance institutions, as well as foreign lenders and investors, need to play a key role towards funding India’s clean energy transition, over and above the government’s own legislative and regulatory interventions.
Material Adverse Effect (“MAE”) clauses are once again in focus with the recent Musk-Twitter dispute arising from the termination of the transaction related to the acquisition of Twitter on MAE grounds. This note discusses certain issues relating to MAE clauses from a practical perspective in an M&A setting and how these clauses have been interpreted by courts in the past.
With the recent auction and sale of media rights of the Indian Premier League (“IPL”) by the Board of Control for Cricket in India (“BCCI”) for over INR 480 billion (approximately USD 6 billion), IPL franchises are in the spotlight. Reports suggest that certain IPL franchise owners may look to capitalize on an improved valuation, and either sell a part (or all) of their shareholding in the legal entity that has bid for and owns the IPL franchise, or may even consider a public listing of such legal entity. In this note, we look at key legal due diligence issues that may arise in connection with transactions involving IPL franchises.
Since the introduction of the concept of independent directors, it has been perceived as an easy remedy to poor corporate governance. Their efficacy in effectively monitoring company management is often taken at face value. Studying recent instances of corporate governance lapses provides an insight into the efficacy of independent directors. To plug gaps, regulators constantly strive to raise the bar on the relevant criteria for determining the independence, and the procedure for the appointment, of independent directors. However, the changes affected do not appear to address the problem at hand. In the United States, unlike in India, shareholders have often pursued derivative claims against independent directors. While these derivative actions are not always successful, they function as an additional check on independent directors’ actions. Derivative actions are also pursued by shareholders in India. However, they: (a) are rarely pursued against independent directors; and (b) typically arise out of situations where directors have committed a fraud on the shareholders rather than when they have simply failed to perform their duties. For independent directors in India to function as an effective check on management, the threat of shareholder action needs to be a real one.