Tag: Litigation and Arbitration

Enforcement of Foreign Awards granting a Put Option despite objections under the FEMA

A ‘put option’ is a clause agreed in a contract whereby one party has the right (not an obligation) to sell its shares in a company to another person at an agreed price. Such price need not be an absolute number recorded in the contract and could be in the form of an agreed formula or may be left to determination by an expert (pre-agreed or subject to future agreement) using financial data as of an agreed date. A put option works as a means of exit for investor shareholders. Subject to a valid exercise of the put option and correctness of the valuation, once a put option is exercised, it entails a contractual obligation on the party upon which such option is exercised to purchase the shares at such price and acquire the shares.
This note seeks to briefly discuss the treatment of objections to enforcement of foreign awards on grounds that the put option clause granted through the foreign award violates the foreign exchange laws of India.

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Avoidable Transactions under the Insolvency and Bankruptcy Code: Key Considerations

For the success of any insolvency regime, it is critical that distressed companies are prevented from takings measures which could hamper recovery to creditors in the event insolvency proceedings were to commence. Such protective provisions assume particular importance in the Indian context, where companies are often closely held by promoter groups who may seek to transfer value from assets through opaque structures to other group companies for their own benefit. Accordingly, the National Company Law Tribunal (the “NCLT”) is empowered to undo any such transaction to protect the interests of creditors and other stakeholders under the Insolvency and Bankruptcy Code, 2016 (the “IBC”).

Recently, in the matter of Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited and others (“Jaypee Infratech”), the Supreme Court of India clarified certain key aspects in respect of preferential transactions under Section 43 of the IBC. Such preferential transactions are one of the four categories of “avoidable” transactions (i.e., those which may be annulled or disregarded) under the IBC, the others being undervalued, extortionate and/or fraudulent transactions.

This note briefly discusses the different types of avoidable transactions under the IBC, the guidance issued by the Supreme Court on certain aspects of such transactions in Jaypee Infratech and a few key considerations for parties to mitigate the risk of their transactions falling within the ambit of such avoidable transactions.

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COVID 19: Revised default trigger under the Insolvency and Bankruptcy Code

The COVID-19 pandemic has caused widespread disruption of businesses and daily life. As governments across the world struggle to contain the pandemic, a number of regulatory and policy measures are being implemented by the Government of India to minimize the impact of the disruption caused to several classes of persons and corporate bodies.

A recent measure is the increase in the threshold for default by corporate debtors under Section 4 of the Insolvency & Bankruptcy Code, 2016 (the “Code”) from INR 100,000 to INR 10,000,000 and a potential suspension of certain key provisions of the Code. These measures may have some positive and certain unintended consequences of concern to stakeholders.

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COVID-19: Coping with the Pandemic and the Changing Regulatory Regime in India

The outbreak of the coronavirus disease 2019 (COVID-19) pandemic has caused widespread disruption of businesses and daily life. As governments across the world struggle to contain the pandemic, a number of measures are being implemented aimed at minimizing its spread. In India, such measures are increasingly taking the form of mandatory social distancing through the imposition of a series of restrictions. As the situation evolves, the requirement for further restrictions is being constantly evaluated by governments and new measures are being implemented. The pandemic and the resulting measures raise a host of legal issues and concerns for businesses. This update analyzes certain legal and regulatory concerns arising in light of the COVID-19 pandemic and the consequent restrictions.

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A New Method of Minority Squ(ease) Out

On February 3, 2020, the Ministry of Corporate Affairs notified sub-sections (11) and (12) of section 230 of the Companies Act, 2013 along with also notifying the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2020 and the National Company Law Tribunal (Amendment) Rules, 2020 (collectively, the “Takeover Notification”), which would enable shareholders of unlisted companies holding at least 75% securities (including depository receipts) with voting rights to acquire the remaining minority shareholders pursuant to a court-approved compromise or arrangement that includes a takeover offer.

Certain other methods that are generally considered for buying-out minority shareholders, often termed as minority squeeze-outs, include undertaking a selective reduction of share capital under section 66 of the Companies Act and the purchase of minority shareholding by a majority shareholder holding 90% or more of the share capital under section 236 of the Companies Act, 2013.

This note briefly discusses the new method of minority squeeze-out introduced by the Takeover Notification and considers whether the Takeover Notification makes it easier to squeeze out the minority shareholders as compared to the other available options mentioned in the paragraph above.

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Reflections on Section 36 of the Indian Arbitration Act

The time taken and procedures involved in enforcement proceedings of arbitral awards in India have drawn substantial criticism over the years, paving the way for the amendments in 2015 and 2019 to the Arbitration and Conciliation Act, 1996. This note briefly examines the effect of the recent judgment of the Supreme Court of India in Hindustan Construction Company on the question of whether the operation of a domestic arbitral award is automatically stayed upon the filing of a challenge to the award and traces the development of the automatic stay rule through the amendments to the Arbitration and Conciliation Act, 1996 in 2015 and 2019 prior to the Supreme Court’s judgment.

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Goliath v. Goliath: The Supreme Court Verdict Putting an end to the Battle for Essar Steel

By a judgment dated November 15, 2019, the Supreme Court of India has put an end to the long drawn out battle for the acquisition of steel giant – Essar Steel India Limited (“Essar Steel”) under India’s newly introduced insolvency legislation.

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Drafting an Arbitration Agreement: An Indian Litigation Perspective

Listening to the speakers at a seminar on recent developments in arbitration law in India, it struck me that drafting arbitration agreements with an Indian counter party has become less about reflecting the intention of the parties and more about reflecting the state of the Indian judicial precedents and statutory amendments.

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India Chapter of the Chambers & Partners 2019 Global Practice Guide on International Arbitration

We are pleased to present the India chapter of the Chambers & Partners global practice guide on International Arbitration 2019 (Second Edition). The India chapter covers issues relating to, among others, enforcement of awards, court intervention in the arbitration process, jurisdiction of arbitral tribunals and recent amendments to the law governing arbitration in India.

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