Navigating the Group of Companies Doctrine in the Indian Arbitration Framework

The group of companies (“GoC”) doctrine allows group entities who did not sign an arbitration agreement to be reached through the GoC doctrine and consequently be amenable to the arbitral process and award. In the recent decision of the Constitution Bench of the Supreme Court of India in Cox and Kings v. SAP India (P) Ltd, the GoC doctrine has been affirmatively declared as part of Indian arbitration jurisprudence.
In its practical application, the doctrine could present conflicts with the separate legal personality afforded to companies under Indian law. As such, the GoC doctrine has potentially far-reaching consequences for entities within a group of companies, and its applicability should be examined while structuring contractual arrangements involving group entities, to avoid unexpected outcomes later in the arrangement.


Short Selling in India

Short Selling in India

Short selling in India has been in the spotlight as highlighted by the events triggered by the publication of a report by Hindenburg Research in 2023 (the “Hindenburg Report”). The Indian Supreme Court considered short selling pursuant to petitions filed following the publication of the Hindenburg Report. This was followed by SEBI reissuing its framework for short selling.


Payments to Micro and Small Enterprises

Payments to Micro and Small Enterprises (MSEs): Implications under Section 43B(h) of Income-tax Act, 1961

To encourage prompt payment of dues to micro and small enterprises (“MSEs”), the Government of India introduced clause (h) in Section 43B of the Income Tax Act, 1961 with effect from financial year 2023-24. As per clause (h) of Section 43B, if an assessee makes payment to MSE after the time specified under the Micro, Small and Medium Enterprises Development Act, 2006, then deduction for such payment will be allowed in the year of actual payment. In this note we examine the stipulations outlined in Section 43B(h) of the IT Act and delve into its implications on the taxpayers.


Foreign Investment in Nuclear Energy in India

Foreign Investment in Nuclear Energy in India

Nations across the globe have announced their net zero targets and other climate action commitments. Each country is pursuing its own pathway to achieve the net zero goal considering the resources available to it. In this background, in December 2023, the Government of India announced that it has initiated steps to substantially increase India’s nuclear power capacity.
This note provides an overview of the current legal framework for private/foreign investment in nuclear energy in India and the increased level of screening for foreign investment globally in the energy sector.


Semiconductor Industry in India

Opportunities in the Semiconductor Industry in India

Semiconductors or ‘chips’ are the building blocks of electronic devices and are used in a variety of electronic devices from cars to drones as well as smartphones and computers and across various sectors, including the aerospace and defence, telecom and automotive sectors. Currently, a majority of the semiconductor manufacturing market is dominated by countries such as Taiwan, China, the United States, South Korea and Japan. India relies on semiconductor imports from these countries. While the semiconductor manufacturing industry is currently at a nascent stage in India, due to the worldwide shortage of semiconductors, over the last couple of years, India has taken active steps to tap this market.
This note outlines the key initiatives of the Government of India in relation to the semiconductor industry, regulatory framework for investment, setting up operations in India and recent developments/investments in the semiconductor industry in India.


India's Satellite Communication

Regulatory Shifts in India’s Satellite Communication Landscape

There is a rising interest in satellite-based connectivity in the Indian market among internet service providers. Eutelsat OneWeb India, Jio Satellite Communications, Elon Musk’s Starlink and Amazon’s Kuiper are in the process of obtaining the requisite licenses to provide satellite communication services in India. Satellite communications represent an inevitable technological development in response to a continued demand for better network quality and higher capacity.
In this background, the Telecommunications Act, 2023 (“Telecommunications Act”) which received the President’s assent on December 24, 2023 and provides for administrative allocation of satellite spectrum as well as liberalization of the FDI policy applicable to the space sector further spurs the gaining momentum in satellite-based communication technology in India. This note explores the regulatory shifts in the Indian satellite communications landscape.


Capital Gains and Beneficial Ownership Test

Indian Tax Treaties: Capital Gains and Beneficial Ownership Test

India’s double tax avoidance agreements (“DTAAs”) with certain countries (for e.g. Singapore, Mauritius and the Netherlands) provide that the capital gains on sale of shares is taxable only in the resident country of transferor and no tax is payable in India. However, the tax authorities have disputed the benefit available under the DTAAs by applying the “beneficial ownership” test. Further, they have also argued the sufficiency of tax residency certificate (“TRC”) to claim such benefit. In this note we analyze these aspects in light of the decision of Delhi High Court in Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd., appeal against which has been recently admitted by the Supreme Court.


Legal considerations of investing in india

Investing in India: An Overview of Legal Considerations

Foreign investment is a key contributor to India’s growth story and India continues to consistently experience growth in inflow of foreign direct investment (“FDI”). The Government of India has announced that the provisional figure of FDI inflow into India for the financial year ended March 31, 2023 was USD 71 billion and according to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report, India remains a favored destination for global investors.
In this note we discuss certain key legal considerations for a foreign investor investing in India.
 


Compulsorily Convertible Debentures

Compulsorily Convertible Debentures:
Whether ‘Debt’ or ‘Equity’?

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’.


Innovative Constructions

Innovative Constructions: Assessing the Investment Viability of New Construction Technologies

Every year, Indians require 10 million new homes. At the same time, global markets are increasingly focused on sustainability, climate change and ESG-related goals. The confluence of such factors has created various opportunities to employ climate-responsive construction techniques, including through the use of eco-friendly and sustainable material. Relatedly, the interplay of energy-efficient solutions, green-certified buildings, targeted investments and financing, key legislative changes, government incentives and a coordinated regulatory framework, as well as increased digitalization, may change this ecosystem in fundamental ways.