Group of Companies Doctrine

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.

Approval of Resolution Plan

Bombay High Court: Enforcement Directorate Should Necessarily Release Attachment over Assets of a Corporate Debtor after Approval of Resolution Plan

In the matter of Shiv Charan and Others v. Adjudicating Authority and Others, a division bench of the esteemed Bombay High Court has pronounced upon the legal status pertaining to attachments made by the Enforcement Directorate over assets belonging to a corporate debtor which has obtained approval for a resolution plan under the provisions of the Insolvency and Bankruptcy Code, 2016.

India-EFTA Agreement

Investments under the India-EFTA Agreement: Re-writing the Rules of the Game?

On March 10, 2024, India entered into a trade and economic partnership agreement (the “TEPA”) with the European Free Trade Association (“EFTA”). The Investment Chapter of the TEPA requires the EFTA States to aim towards (i) increasing foreign direct investment (“FDI”), and (ii) facilitating new jobs in India by specified numbers and timeframes, in exchange for India enhancing market access and simplifying customs procedures. This unique formulation could provide a new template for negotiating international investment agreements in the future – especially between developed and developing countries – given that it deviates from traditional treaty design by providing for non-reciprocal rights and differentiated responsibilities. This anomaly, in turn, could have far-reaching consequences for foreign investors and global FDI flows. However, the TEPA’s novel provisions also raise certain legal and practical concerns. In this note, we analyze such provisions of the Investment Chapter.

Deficiently Stamped Arbitration Agreements

Deficiently Stamped Arbitration Agreements: The Supreme Court Finally Decides

In April 2023, a five-judge bench of the Supreme Court issued a decision in N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited (“NN Global 2”) which held that a deficiently stamped agreement is void, unenforceable and cannot exist in law. Further, the Supreme Court in NN Global 2 held that such an agreement must be impounded by a court called upon to appoint an arbitrator.
NN Global 2 was met with criticism as it would lead to inordinate delays in the appointment of arbitrators and the commencement of arbitration proceedings, if stamping of agreements was made a pre-condition to these actions. It also impacted the manner in which legal practitioners summarized their due diligence findings of deficiently stamped agreements.
On December 13, 2023, a seven-judge bench of the Supreme Court revisited NN Global 2 in Re Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899. This decision overruled NN Global 2, and provided much-needed clarity on the issue of admissibility and the enforceability of deficiently stamped agreements.
This note discusses the key findings of the decision of the seven-judge bench of the Supreme Court.

Arbitration Clause in an Unstamped or Insufficiently Stamped Agreement

An Arbitration Clause in an Unstamped or Insufficiently Stamped Agreement: The Supreme Court Decides

A five-judge bench of the Supreme Court of India has in N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited & Others held by a 3:2 majority that an arbitration clause contained in an instrument that is not duly stamped is non-existent in law until such agreement is validated by payment of the requisite stamp duty following the procedure laid down under the relevant legislation for payment of stamp duty, particularly the Indian Stamp Act, 1899. The minority was of the view that non-payment of stamp duty on an agreement liable to stamp duty, being a curable defect, would not render the arbitration clause contained within such agreement to be void.
The following are the key takeaways from the decision. First, if an arbitration agreement (either standalone or contained as a provision in a contract) is found to be unstamped, it would be impounded immediately and returned only upon payment of the requisite stamp duty and penalty. Second, if such arbitration agreement is insufficiently stamped and the deficit in stamp duty is nominal, parties may undertake a self-assessment and pay the deficit stamp duty and penalty. Should parties not be able to self-assess the deficit in stamp duty, they are required to formally submit the agreement for adjudication with the relevant authority. Third, the judgment expressly notes that it does not comment on Section 9 of the Arbitration Act and Conciliation Act, 1996, as amended, in relation to application by parties to the courts for interim reliefs.

Government Dues and IBC Waterfall

Government Dues and IBC Waterfall: Are We Heading Towards a Non-uniform Approach Across Sectors?  

The waterfall mechanism under the Insolvency and Bankruptcy Code, 2016 (“IBC”) gives priority to debts owed to financial creditors over operational dues, including statutory dues. However, certain recent case law and proposed statutory amendments have questioned this principle. In particular, a proposal has emerged that government dues secured pursuant to a transaction or an agreement should have priority over other dues (including financial dues). The Telecommunication Bill, 2022 proposes that the spectrum of telecom companies under insolvency should be returned to the central government on failure of payment of dues. This note discusses certain implications of such proposed changes.

Emergency Arbitrations in India

Emergency Arbitrations in India: Viability and Enforceability

Interim measures are often required at early stages in an arbitration to protect the parties’ respective positions for the duration of the arbitration proceedings, including by way of orders to preserve evidence, prevent dissipation of assets and secure the amount in dispute (including costs of the arbitration). Emergency arbitration offers a disputing party an avenue to obtain urgent interim relief from an arbitrator appointed exclusively for the purpose, on an expedited basis before the arbitral tribunal is constituted and without having to resort to court proceedings for interim relief. We discuss the efficacy of, and challenges in relation to, decisions of an emergency arbitrator in disputes involving Indian parties or where any relief granted is required to be enforced in India.

Enforcement of Securities Law

Global Investigations Review: The Guide to International Enforcement of the Securities Laws (Second Edition)

We are pleased to present the India chapter of the Global Investigations Review’s Guide to International Enforcement of the Securities Laws (Second Edition). The India chapter has been authored by Niti Dixit, Shahezad Kazi, Zahra Aziz and Gladwin Issac, all lawyers at S&R.
The India chapter provides information on relevant statutes and the government authorities responsible for investigating and enforcing them, conduct most commonly the subject of securities enforcement, and legal issues that commonly arise in enforcement investigations in India.   

free trade agreements

Bilateral Courts: Wooing Europe with Investor-friendly Free Trade Deal

Negotiations between the EU and India in respect of a significant trade and investment deal are currently ongoing. This EU-India deal involves three separate agreements: (1) a free trade agreement (FTA), (2) an investment protection agreement (IPA), and (3) an agreement on geographical indications. Of particular interest is the proposed investment court system (ICS) in the IPA. Although ICS marks a break from standard dispute-resolution mechanisms under investment treaties, it has been used by the EU in the past across FTA-plus deals signed with Canada, Vietnam, and Singapore. Previously, investor-state arbitration (ISA) was the standard template for resolving international investment disputes. Now, the EU wants to include ICS in all its future treaties. While it remains to be seen whether ICS offers a superior paradigm relative to ISA, the EU itself has argued, including before UNCITRAL, that ICS will ensure a more consistent jurisprudence and improve judicial accountability. Nevertheless, as India looks to export more capital in the future, whether ICS will be able to protect investors better in the long run is something that India needs to think about.