Contractual Freedom vs. Insolvency Code: A Conundrum in View of Power Purchase Agreements

The Insolvency and Bankruptcy Code, 2016 (“Code”), has been a game-changer in the insolvency and recovery landscape as it replaces a host of overlapping legislations and simplifies the journey of the creditors seeking relief under a single umbrella mechanism. In addition to simplifying the recovery process, another noteworthy objective of the Code is maximizing the value of assets of a business undergoing insolvency. The Apex Court in Swiss Ribbons Pvt. Ltd. and Anr. vs. Union of India[1] has flagged the objective of the Code to bring back the corporate debtor into economic mainstream and efficiently run it as a going concern. The Code also has a non-obstante provision (Section 238) to enhance the efficacy and deliver on the promised objectives. In terms of the non-obstante clause, the Code has an overriding effect over any other law or an instrument, notwithstanding anything inconsistent therewith.

 This article identifies the contours of contractual freedom of parties vis-à-vis the objectives of the Code, in light of the non-obstante clause and as decided by the Supreme Court in the context of a power purchase agreement.

Interplay Between the Code and Freedom Under Contractual Arrangements

As per the standard business practice in India, parties include a clause in the contracts that allows one party to terminate the contract, if an insolvency process is initiated against the other party (corporate debtor) under the relevant laws. However, if we see the practical ramification of such a contractual clause, each time a termination happens on the aforesaid ground, the corporate debtor loses its value significantly.

Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to corporate legal consultancy and mergers & acquisitions, private equity and joint ventures.

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Shareholder Agreements & the Articles’ Conundrum

Articles of association are one of the charter documents providing for, inter alia, management of a company, its shareholders and other matters governing the relationship amongst shareholders and the company. As per Section 10 of the Companies Act, 2013, articles of association, when registered, bind the company and its members to the same extent as if they had been respectively signed by the company and by each member, and contained covenants on their respective parts to observe all the provisions contained in the articles. As such, any action undertaken by a company and its shareholders cannot be inconsistent with a company’s articles of association.

In this context, this article aims to analyze provisions relating to restrictions upon transferability of shares as agreed upon in shareholder agreements and the need for incorporation of such restrictions in the articles of association of the respective company.

Shareholder Agreements vis-à-vis Articles of Association

Shares are movable property, capable of being transferred, subject to reasonable restrictions under the Companies Act, 2013[1] and other contractually agreed restrictions such as put options, call options, buy-back clauses, affirmative votes and pre-emption rights, as usually incorporated in a shareholders’ agreement. However, in order for any share transfer restrictions to be valid and binding on the shareholders and the company, such restrictions need to be validly incorporated within the articles of association of a company.

 Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to corporate legal consultancy and mergers & acquisitions, private equity and joint ventures.

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The Case for Data under the Indian Competition Law Framework

The business model of the digital economy defies application of the traditional methods of evaluation of anti-competitive effects and dominance, as prescribed under the Competition Act, 2002 (“Act”). Further the financial thresholds prescribed for combinations present challenges, in terms of its application to data – driven mergers and acquisitions.

This article presents the case for incorporating access to data as a source of market power and explores the potential anti-competitive uses of such data.

Business Model of Digital Markets

Network Effects

The degree of competition in Internet markets is, often though not always determined by direct and indirect network effects and switching costs[1] Network effects essentially means the larger the user access a platform has, the more appealing the platform becomes to other users on the platform due to the utility they derive from it. For example, WhatsApp would provide greater value to an individual user, as its user base increases, since it would enable facilitation of communication between more contacts for that user. Similar would be the case for making payments through Google Pay.

In the Ola Case[2], Competition Commission of India (“CCI or Commission”) took note of the role of network effects in a two-sided market in determining dominance. While the Commission accepted the argument that network effects are an important aspect dictating competition dynamics in the radio taxi market, it ultimately came to the conclusion that despite OLA having the largest network, the network was not strong enough to adversely affect entry of new participants in the market.

The Draft E-Commerce Policy, 2019[3] also recognized the significance of network effects and recommended that due consideration be given to network effects in analyzing mergers and acquisitions (under the framework of combinations), given the competitive impact of network effects, in creating barriers of entry for smaller players in the digital market.

Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to corporate legal consultancy and mergers & acquisitions, private equity and joint ventures.

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The Case for Data under the Indian Competition Law Framework

The business model of the digital economy defies application of the traditional methods of evaluation of anti-competitive effects and dominance, as prescribed under the Competition Act, 2002 (“Act”). Further the financial thresholds prescribed for combinations present challenges, in terms of its application to data – driven mergers and acquisitions.

This article presents the case for incorporating access to data as a source of market power and explores the potential anti-competitive uses of such data.

Business Model of Digital Markets

Network Effects

The degree of competition in Internet markets is, often though not always determined by direct and indirect network effects and switching costs[1] Network effects essentially means the larger the user access a platform has, the more appealing the platform becomes to other users on the platform due to the utility they derive from it. For example, WhatsApp would provide greater value to an individual user, as its user base increases, since it would enable facilitation of communication between more contacts for that user. Similar would be the case for making payments through Google Pay.

In the Ola Case[2], Competition Commission of India (“CCI or Commission”) took note of the role of network effects in a two-sided market in determining dominance. While the Commission accepted the argument that network effects are an important aspect dictating competition dynamics in the radio taxi market, it ultimately came to the conclusion that despite OLA having the largest network, the network was not strong enough to adversely affect entry of new participants in the market.

The Draft E-Commerce Policy, 2019[3] also recognized the significance of network effects and recommended that due consideration be given to network effects in analyzing mergers and acquisitions (under the framework of combinations), given the competitive impact of network effects, in creating barriers of entry for smaller players in the digital market.

Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to corporate legal consultancy and mergers & acquisitions, private equity and joint ventures.

Read More : https://tlegal.com/blog-details/the-case-for-data-under-the-indian-competition-law-framework

The Uber Emergence of Gig Economy

In a recent judgment delivered on February 19, 2021, the Supreme Court of the United Kingdom (“UK”) in Uber BV and Others vs Aslam and Others[1], upheld the judgment passed by the Employment Tribunal and held that drivers engaged by Uber were “workers” within the definition and not independent, third party contractors. The aforesaid judgment has significant implications upon the precarious treatment of gig workers, which may also have a bearing on treatment of such workers in India.

The UK Supreme Court’s Treatment of Gig Workers

In Uber BV and Others vs Aslam and Others[2] The Supreme Court of UK held Uber drivers to be “workers” basis inter alia the following predominant factors:

The remuneration paid to drivers for the work they do and the “service fee” is unilaterally fixed by Uber. Such control further extends to Uber’s right to decide in its sole discretion whether to make a full or partial refund of the fare to a passenger pursuant to a complaint about a driver or the service provided by him.

Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to corporate legal consultancy and mergers & acquisitions, private equity and joint ventures.

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Acknowledgement of Debt by Inclusion in Balance Sheet

Background

Determining the existence of an undisputed debt is one of the most crucial tests a tribunal must undertake under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

In March 2020, a five-member bench of the National Company Law Appellate Tribunal (“NCLAT”) rendered a decision in the case of V. Padmakumar vs. Stressed Assets Stabilization Fund (SASF) & Another.[1] (“Padmakumar”) wherein four out of five members held, inter alia, that entries reflected in the balance sheet of a company do not amount to acknowledgement of debt under the Limitation Act, 1963 (“Limitation Act”). On this question of law, the fifth member dissented with the opinion of the majority by relying on a catena of judicial precedents.

In September 2020, a three-member bench of the NCLAT had the occasion to consider the applicability of Padmakumar in the case of Bishal Jaiswal vs. Asset Reconstruction Company (India) Limited. & Another (“Referral Order”). The bench made a reference to a larger bench to reconsider the majority opinion in Padmakumar[2]. The referral was turned down by a five-member bench of the NCLAT[3] (“Rejection Order”). Subsequently, the Rejection Order was challenged before the Supreme Court (“SC”). Before we understand the decision of the SC on this issue, it is worthwhile to analyze the ratio in Padmakumar and the reasons why Padmakumar came to be referred.

Tatva Legal, Hyderabad, amongst other services, provides comprehensive dispute resolution related legal services and our team of experienced lawyers have advised on a plethora of complex arbitrations and litigations.

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Acknowledgement of Debt by Inclusion in Balance Sheet – Part 2

Background

In the case of V. Padmakumar vs. Stressed Assets Stabilization Fund (SASF) & Anr.[1] (“Padmakumar”), four out of five members held, inter alia, that entries reflected in the balance sheet of a company do not amount to acknowledgement of debt under the Limitation Act, 1963 (“Limitation Act”). Subsequently, in September 2020, a three-member bench of the National Company Law Tribunal (“NCLAT”) had the occasion to consider the applicability of Padmakumar in the case of Bishal Jaiswal vs. Asset Reconstruction Company (India) Limited. & Anr[2]. (“Referral Order”). The bench made a reference to a larger bench to reconsider the majority opinion in Padmakumar.

In December 2020, a five-member bench of the NCLAT rejected the Referral Order and held[3] (“Rejection Order”) that (a) in disagreeing with the ratio in Padmakumar, the three-member bench did not follow judicial discipline, and (b) The decision in Padmakumar was passed after consideration of precedents with respect to acknowledgement of debt, therefore, reflecting debt in a balance sheet does not amount to acknowledgement of debt for the purpose of the Insolvency and Bankruptcy Code, 2016 (“IBC”). This article attempts to analyse the reasons given by the NCLAT while rejecting the Referral Order.

Tatva Legal, Hyderabad, amongst other services, provides comprehensive dispute resolution related legal services and our team of experienced lawyers have advised on a plethora of complex arbitrations and litigations.

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ARBITRATION AMENDMENT ACT, 2021: A RIGHT STEP TOWARDS PRO-ARBITRATION JURISPRUDENCE IN INDIA?

The Government of India has undertaken many measures to ensure improved ranking in the ‘Ease of Doing Business Index’. Due to such efforts, India now stands at 63rd position in World Bank’s Report on Doing Business 2020[1] from a previous standing at 130th position. Enforceability of contracts along with the streamlined dispute resolution mechanism is a significant determining factor for ease of doing business in a country and to make it an attractive destination for investments as well. Realizing the importance of the aforesaid, multiple changes have been introduced in India’s arbitration regime in last decade.

As a result, increasing number of judicial decisions and legislative measures have been trying to exude the pro-arbitration approach of the Government of India. With a view to make India a hub for international commercial arbitration, the Central Government notified the Arbitration and Conciliation (Amendment) Act, 2021 (“Amendment Act”).[2]

Automatic stay on awards

The first prominent change brought about by the Amendment Act is regarding operation of an automatic stay on an arbitral award, in case a challenge is brought against the award before the Courts under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). Under the 1996 Arbitration regime, an automatic stay on an arbitral award was granted the moment an application for setting aside an arbitral award was made before a court. However, with the 2015 amendment to the Arbitration Act, it was clarified that the arbitral award would not be automatically stayed merely because an application is made to a court to set aside the arbitral award.

Tatva Legal, Hyderabad, amongst other services, provides comprehensive dispute resolution related legal services and our team of experienced lawyers have advised on a plethora of complex arbitrations and litigations.

MINORS’ RIGHT TO OBJECT TO SALE OF THEIR SHARE IN JOINT FAMILY PROPERTY

1.1     This article examines the right of a minor to (a) object to sale of his/her share in the joint family property, and (b) get the sale made in favour of a third party purchaser declared void.                              

Relevant Provisions Of Law:

2.1     Given below is a brief summary of the relevant provisions of the Law which govern matters relating to (a) joint Hindu family, and (b) joint Hindu family property:

(a)     Schools of Law:

The laws governing the Hindus, and their right to property are as follows:

Mitakshara Law; and

Dayabhaga Law.

The Mitakshara Law applies to the whole of India, except Bengal and Assam, where the Dayabhaga Law applies[1].

(b)     Joint Hindu Family:

Pursuant to the amendments brought by the Hindu Succession (Amendment) Act, 2005, a joint Hindu family consists of all persons lineally descended from a common ancestor, and includes their wives and unmarried daughters.

 Tatva Legal, Hyderabad has a specialized team of lawyers who, amongst other services, advise on real estate transactions covering various aspects of the transaction such as general real estate transation adviosry, cross border real estate transactions and title due diligence .

Mandatory Registration of Documents Relating to Immovable Property

The Registration Act, 1908 (the “Indian Registration Act”) was enacted for inter alia providing the procedure for registration of transactions related to immovable property, to provide notice/information to the public at large, to avoid multiple transactions with respect to the same property and to protect the interest of the purchaser.

Purpose of Registration

Section 3 of the Transfer of Property Act, 1882 provides that where any transaction relating to immoveable property is required by law to be and has been effected by a registered instrument, any person acquiring such property or any part/ interest thereof, shall be deemed to have notice of such instrument from the date of registration, provided the instrument has been registered as per the Indian Registration Act.

 Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to Indian Registration Act and mergers & acquisitions, private equity and joint ventures.

Restriction on Alienation / Transfer of Agricultural Land Under the Telangana Tenancy and Agricultural Lands Act, 1950

Restriction on Alienation / Transfer of Agricultural Land Under the Telangana Tenancy and Agricultural Lands Act, 1950 (the “Tenancy Act”) was enacted to inter alia, protect the rights of tenants of agricultural lands in the State of Telangana. It governs the alienation or transfer of agricultural lands by the land holder of agricultural lands.

 Sections 47 and 48 of the Tenancy Act (prior to their repeal) put restriction on the transfer of agricultural land by its land holder. Every land holder alienating the land agricultural land permanently was required to obtain a prior permission from the concerned Tahsildar.

  Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to Tenancy Act and mergers & acquisitions, private equity and joint ventures.

The Year That Wasn’t – Tatva Legal Hyderabad

In March 2020, a full bench of the Hon’ble Supreme Court of India (“SC”) vide In Re: Cognizance for Extension of Limitation[1] (“Extension of Limitation”) took suo moto cognizance of the difficulties faced by litigants on account of the nation-wide lockdown due to the COVID-19 pandemic. Given the practical problems in filing suits, applications, petitions, appeals and any other proceedings within the limitation period, the SC on March 23, 2020, passed an order extending the limitation period prescribed under the general and special laws with retrospective effect from 15.03.2020, until further orders (“Order dated 23.03.2020”). The SC exercised this power under Article 142 read with Article 141 of the Constitution of India and declared that this order is binding within the meaning of Article 141 on all Courts/Tribunals and authorities across the nation. Although the SC extended the Order dated 23.03.2020 from time to time, there were certain issues/lacunae that were bound to come up.

 Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to Dispute Resolution and mergers & acquisitions, private equity and joint ventures.

The 2021 Information Technology Rules and the OTT Platform

Immediately upon its release on Amazon Prime Video on January 15, 2021, “Tandav” has been surrounded by controversy, contention, and conflict. This show has been under fire and has garnered several complaints from various factions of the Indian society. Even though an apology was issued by the creators of the show, and steps were taken to remove the controversial portions from the show, it appears that it did not quell the controversy at all.

 Thereafter, the Justice for Rights Foundation filed a public interest litigation petition in the Delhi High Court wherein a plea was made for separate guidelines to regulate content such as Tandav, Sacred Games etc., on online streaming platforms, and the Ministry of Information and Broadcasting (“MIB”) and Ministry of Electronics and Information Technology (“MEIT”) informed the Delhi High Court that the Information Technology Act, 2000 (“IT Act”) is a robust enough legislation, and on February 8, 2019, the High Court agreed with such submission and dismissed the said petition[1].

 Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to Information Technology and mergers & acquisitions, private equity and joint ventures.

Payment of Rent under Commercial Leases during COVID-19

Organisations in India often lease out workplaces to run their business and provide workspace to their employees. However, the sudden outbreak of COVID-19 led to a lockdown imposed by Government of India from March 24, 2020,[1] due to which organisations have not been able to utilise their leased workspaces for approximately 2 (two) months. As such, many organisations are exploring the possibility of exemptions from their rental obligations under their lease deeds.

 In India, unlike the Coronavirus Act of United Kingdom,[2] there has been no government order or notification granting exemption to lessees from payment of rent in respect of commercial properties. In light of the above background, this article discusses the approach which may be considered by lessees in case of commercial rent payments as per their respective contracts and under the Transfer of Property Act, 1882 (“TPA”).

Tatva Legal, Hyderabad has a specialized team of lawyers who, amongst other services, advise on real estate transactions covering various aspects of the transaction such as drafting contracts for commercial leasing, real estate advisory services and conducting title due diligence.

Captive Generating Plants in the States of Telangana and Andhra Pradesh

A captive generating plant is a power plant  set up by any person to generate electricity primarily for his own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such co-operative society or association (“CGP”). CGPs are primarily regulated under the Electricity Act, 2003 (“Act”) and the Electricity Rules, 2005 (“Rules”) and are developed for the purpose of collective usage of electricity by a group of commercial consumers.

Tatva Legal, Hyderabad has wide experienced team of corporate lawyers who, amongst other services, advise on a wide range of issues in relation to the infrastructure legal services and energy sector including structuring and negotiating private sector participation in various projects, assisting in the tender and bidding process.

Privacy Shield Set Aside by CJEU – A Guidance for India

The European Union (“EU”) is a major source of revenue for the information technology and business process outsourcing industry in India. However, there are several challenges that India faces with respect to transfer of personal data from EU to India.

Presently, the data protection regime in India does not provide the same level of protection as the data protection regime in the EU, in particular because the Personal Data Protection Bill, 2019 has not been enacted yet. Further, Article 3 of the EU General Data Protection Regulation (“GDPR”) states that provisions of GDPR will be applicable even in a case where the processing of personal data takes place outside the EU.

As such, in case of transfer of personal data from EU, it becomes relevant for Indian entities to comply with the provisions of the GDPR as non-compliance or breach of its provisions may attract a fine of up to 20,000,000 EUR (Twenty Million Euros) or 4% (four percent) of the total worldwide annual turnover of the preceding financial year, whichever is higher.

 Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on matters involving data privacy and other such areas involving [TL1] information technology law.

Cryptocurrency: A Legal Perspective on a Misunderstood Technology

If we apply the aforesaid definition to a simple cryptocurrency transaction[TL1] , where the two parties involved in the exchange of value are the payer and beneficiary, and the mining of blocks to validate the transaction between these two parties, this effectively serves as a clearing mechanism which triggers the settlement upon which the funds in question are then transferred from one party to another.

Tatva Legal, Hyderabad has an experienced team of corporate lawyers who, amongst other services, advise on niche areas of law involving crypotocurrency, blockchain technology, AI and machine learning and other such areas involving [TL2] information technology law.

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