NM Law

Menu

Corporate & Start Ups

CORPORATE DEFAMATION CASES: WHEN DOES NEGATIVE PUBLICITY CROSS LEGAL BOUNDARIES?

Leave a Comment / Blog, Corporate & Start Ups, Tech & AI /

– Aparna Iyer, Associate Introduction In today’s hyper-connected and digitally driven society, corporate reputations can be built or destroyed in a matter of moments. A single online post, tweet, or video can spark widespread criticism and public backlash against a company, sometimes even before facts are verified. While the right to express opinions and critique businesses is fundamental to a democratic society and a competitive market, not all negative publicity is lawful. Corporate defamation arises when false and damaging statements are made about a company, causing harm to its business interests, reputation, or goodwill. Determining when such publicity crosses legal boundaries requires a careful examination of intent, factual accuracy, and public interest. This article explores the evolving landscape of corporate defamation, highlighting key legal principles, notable cases, and strategies that businesses can adopt to safeguard their reputations without infringing upon freedom of speech. The Concept of Corporate Defamation Corporate defamation refers to the communication of false statements that are harmful to the reputation of a company. Unlike defamation directed at individuals, corporate defamation focuses on the damage caused to a business entity’s public standing or financial interests. Though a company is not a natural person, the law recognizes that it possesses a protectable reputation. Courts have consistently held that a corporation can initiate a defamation claim if it demonstrates that a false and defamatory statement has been made, that the statement referred to the company specifically, that it was communicated to a third party, and that it caused, or was likely to cause, injury to the company’s reputation or operations. The damage need not always be in the form of quantifiable financial loss; harm to business reputation alone may be sufficient for a claim to arise. Balancing Reputation and Free Speech However, not every unflattering comment or critical opinion gives rise to defamation. The law seeks to strike a balance between the protection of reputational interests and the fundamental right to freedom of expression, as enshrined under Article 19(1)(a) of the Indian Constitution. Criticism that is made in good faith, particularly when it relates to matters of public concern such as consumer rights, environmental violations, or unethical business practices, is often protected by legal defences such as fair comment or qualified privilege. These defences allow individuals, journalists, consumers, and even competitors to express opinions and share experiences, provided their statements are based on facts and are not driven by malice. The legal line is crossed when falsehoods are spread recklessly or deliberately, and with the intent to injure a company’s reputation. Courts usually examine whether the statement was presented as a fact or an opinion, whether there was sufficient factual basis for the opinion, and whether the speaker acted with due care or exhibited a malicious motive. The Role of Social Media in Defamation Dynamics With the rise of social media and digital platforms, the terrain of corporate defamation has expanded and become more complex. Today, dissatisfied customers, former employees, or even anonymous users can post reviews and comments that rapidly gain traction online. While many such posts may reflect genuine experiences and subjective opinions, others may involve misrepresentation, exaggeration, or malicious intent. The viral nature of digital content amplifies its reach and potential impact, making the damage to corporate reputation swift and often irreversible. Companies facing such defamatory content online can pursue various legal remedies. These include sending cease-and-desist notices to the individuals or platforms responsible, filing civil suits for defamation seeking damages and injunctions, and invoking provisions of the Information Technology Act and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 to compel takedown of objectionable content. In some instances, companies have also initiated criminal defamation proceedings under Section 499 of the Indian Penal Code. However, courts exercise caution in granting sweeping injunctions, especially when the content in question involves consumer feedback or issues of public interest. The judiciary is mindful of the need to preserve the right to dissent and to prevent the misuse of defamation law as a tool to silence legitimate criticism. Strategic Considerations for Businesses Before resorting to litigation, companies must carefully assess whether the negative publicity in question truly crosses the threshold of defamation. Initiating legal proceedings in haste can backfire, attracting greater media scrutiny and public backlash—a phenomenon known as the “Streisand effect,” where attempts to suppress information only led to wider dissemination. Legal action should be considered when the statements are clearly false, baseless, and made with malicious intent, and when they pose a real threat to the company’s reputation or operations. In many cases, alternative strategies such as issuing public clarifications, engaging with the aggrieved party, or employing reputation management techniques may prove more effective and less confrontational. Conclusion In conclusion, corporate defamation law plays a vital role in protecting businesses from unfair and malicious attacks, but it must not be wielded to stifle genuine criticism, public discourse, or consumer advocacy. The courts have consistently sought to maintain a balance between reputational protection and the principles of free expression, evaluating each case based on its context, content, and intent. As the digital landscape continues to evolve, companies must develop a nuanced understanding of these legal boundaries, adopting both strategic and legal measures that respect free speech while defending their brand integrity. The challenge lies not in suppressing dissent, but in addressing defamation without undermining the democratic values that make critique possible.

CORPORATE DEFAMATION CASES: WHEN DOES NEGATIVE PUBLICITY CROSS LEGAL BOUNDARIES? Read More »

SPECIAL PURPOSE ACQUISITION COMPANIES: ARE THEY A BUBBLE OR THE FUTURE?

Leave a Comment / Blog, Corporate & Start Ups /

Introduction to SPACs: A New Route to Market Access Special Purpose Acquisition Companies, or SPACs, have emerged in recent years as a disruptive innovation in capital markets, offering an alternative pathway for companies to go public without the rigours of a traditional Initial Public Offering (“IPO”). Though the phenomenon gained prominence in the United States, its ripple effects have been felt across international jurisdictions, including in India. The key debate in financial and legal circles today is whether SPACs represent a temporary speculative bubble or a transformative vehicle for the future of fundraising. With Indian companies increasingly looking to list overseas via SPACs, the relevance of this question for India’s regulatory and corporate landscape is growing rapidly. What is a SPAC and How Does it Work? A SPAC is constituted as a shell corporation devoid of commercial operations, formed for the express purpose of effecting a business combination with an operating entity. The SPAC itself has no operational business and is usually formed by sponsors such as experienced investors, industry professionals, or private equity firms, who contribute nominal seed capital. Once listed, the SPAC is given a time frame, usually 18 to 24 months, to identify and merge with a target company. If it fails to do so within the prescribed timeline, the SPAC is liquidated, and the capital raised is returned to investors. Once the acquisition is successful, commonly termed the “de-SPAC” process, the target company attains public company status by virtue of the SPAC’s pre-existing listing. Unlike traditional IPOs, SPACs facilitate a swifter route to public markets, allowing private companies to negotiate valuations and transaction terms directly with sponsors, thereby bypassing prolonged regulatory scrutiny and market volatility. The model offers considerable appeal to high-growth enterprises, particularly those in emerging or capital-intensive sectors, which may otherwise be ineligible for IPOs under existing profitability thresholds. Jurisprudential and Regulatory Evolution of SPACs Globally The use of SPACs increased significantly in the United States between 2020 and 2021, with over 250 SPACs listed in a single calendar year, aggregating over USD 80 billion in capital. This exponential rise was facilitated by historically low interest rates, abundant liquidity, and an insatiable investor appetite for speculative yet high-potential instruments. Prominent institutional investors, hedge fund managers, and public figures lent credence to the structure, thereby expanding its legitimacy. However, this rapid expansion also gave rise to significant legal and regulatory concerns. The U.S. Securities and Exchange Commission responded by proposing a series of rule-making initiatives aimed at enhancing investor protection and ensuring parity with traditional IPO disclosures. These included imposing liability on sponsors and underwriters, mandating enhanced forward-looking disclosure obligations, and subjecting financial projections to heightened scrutiny. Similar responses were observed in jurisdictions such as Singapore and the United Kingdom. The Singapore Exchange formalised a SPAC framework incorporating minimum market capitalisation, escrow requirements, and sponsor due diligence obligations. The United Kingdom followed suit by amending its listing rules to facilitate SPACs under a regime of heightened governance. These frameworks underscore the global regulatory consensus that while SPACs can serve legitimate economic purposes, they require rigorous safeguards to mitigate systemic risk. SPACs in India: A Regulatory Overview India, in contrast, has not yet accorded statutory or regulatory recognition to SPACs. Presently, the Companies Act, 2013 and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 do not permit listing of entities devoid of operational track records. Consequently, SPACs are impermissible under extant legal architecture. In March 2021, SEBI issued a consultation paper soliciting public feedback on the potential introduction of SPACs in India. The concerns flagged therein included the speculative nature of SPAC transactions, sponsor misalignment with investor interests, valuation opacity, and the need for adequate investor protection mechanisms. As of date, SEBI has refrained from enacting a definitive framework, citing the nascent state of India’s capital markets and the need for calibrated experimentation. Offshore Structuring by Indian Companies Despite the absence of domestic enabling legislation, several Indian-origin entities have accessed capital via foreign-domiciled SPACs. Noteworthy among them is ReNew Power, which consummated a USD 8 billion business combination with a U.S.-listed SPAC, and Grofers i.e., now Blinkit, which explored a similar route. These transactions reveal a growing trend of Indian issuers leveraging regulatory arbitrage to access foreign capital markets in a manner not permissible within India’s sovereign jurisdiction. However, such cross-border transactions raise a plethora of legal considerations, including compliance with the Foreign Exchange Management Act, 1999, transfer pricing implications, taxation under the Income Tax Act, 1961, and disclosure obligations under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The absence of direct regulatory oversight in these cases may leave Indian stakeholders—particularly minority shareholders and retail investors—exposed to asymmetric risk. Legal Risks and Concerns Inherent in the SPAC Structure The SPAC model is replete with structural concerns, foremost among which is the issue of sponsor compensation. SPAC sponsors are typically entitled to a “promote” of up to 20% of post-IPO equity, often acquired for nominal consideration. This embedded incentive structure may compromise fiduciary prudence, as sponsors may be incentivised to consummate transactions irrespective of the underlying commercial viability of the target company. Additionally, SPACs often rely on aggressive forward-looking projections to justify valuations, a practice that would attract closer regulatory scrutiny under traditional IPO norms. The jurisprudential lacuna surrounding the enforceability of such projections, and the relative immunity enjoyed by SPAC sponsors against liability for misstatements, undermines market discipline and investor protection. Numerous class actions filed in the United States alleging securities fraud and negligent misrepresentation in de-SPAC transactions bear testimony to these risks. Are SPACs Indicative of a Speculative Bubble? There is considerable academic and financial debate surrounding the sustainability of SPACs. Critics have likened the 2020–21 SPAC boom to speculative bubbles of the past, citing overvaluation, poor post-listing performance, and mass investor disillusionment. Empirical evidence suggests that a substantial number of de-SPACed entities underperform market benchmarks within the first year of listing, leading to wealth erosion for public shareholders. Nevertheless, it would be jurisprudentially flawed

SPECIAL PURPOSE ACQUISITION COMPANIES: ARE THEY A BUBBLE OR THE FUTURE? Read More »

Investor-State Dispute Settlement (ISDS): Should India Reconsider Its Position?

Leave a Comment / Corporate & Start Ups /

Introduction Investor-State Dispute Settlement (ISDS) has become one of the most debated mechanisms in international investment law. It allows foreign investors to bring claims directly against host states for alleged violations of investment agreements. While proponents argue that ISDS protects investors from arbitrary state actions, critics highlight its potential to undermine national sovereignty and democratic processes. India, once a supporter of ISDS, has taken a cautious stance in recent years, opting to terminate several Bilateral Investment Treaties (BITs) and introducing a new model BIT in 2016. This essay examines whether India should reconsider its current position on ISDS, analyzing both the rationale behind its shift and the implications for future foreign investment. India’s Evolving Stance on ISDS India’s changing approach to ISDS is rooted in its experience with several high-profile cases. The White Industries case in 2011 marked a turning point. The Australian mining company successfully sued India under the India-Australia BIT, invoking the Most Favoured Nation (MFN) clause to benefit from more favorable provisions in India’s BIT with Kuwait. This case, and subsequent others, exposed India to unexpected legal and financial liabilities and prompted a reassessment of its BIT framework. In response, India drafted a new Model BIT in 2016, significantly narrowing the scope for ISDS. It limits investors’ rights to sue the state, requires exhaustion of local remedies for five years before initiating international arbitration, and restricts provisions such as the MFN and Fair and Equitable Treatment (FET) clauses. Moreover, India began terminating or renegotiating older BITs based on this model. Arguments Supporting India’s Cautious Approach India’s new stance is driven by legitimate concerns. First, the ISDS mechanism can infringe on a state’s regulatory autonomy. Developing countries like India need policy space to pursue economic, environmental, and social objectives. The fear of costly litigation and investor retaliation can result in “regulatory chill,” deterring governments from implementing legitimate public interest regulations. Second, ISDS has been criticized for its lack of transparency and consistency. Arbitral tribunals are often composed of private lawyers without accountability, and awards can be inconsistent, leading to unpredictability in outcomes. For a country with a complex and evolving legal framework like India, such uncertainty can be risky. Third, the financial burden of defending ISDS cases is significant. Legal costs can run into millions of dollars, even when the state prevails. For a developing country with limited public resources, this is a substantial concern. The Case for Reconsideration Despite these concerns, a complete retreat from ISDS may not serve India’s long-term interests. Foreign investors typically seek legal certainty and enforceable dispute resolution mechanisms. India’s restrictive model BIT may deter investment, especially in capital-intensive sectors like infrastructure and energy, where long-term commitments require strong legal protections. Moreover, India aspires to become a global manufacturing and investment hub under initiatives like “Make in India.” Competing economies such as Vietnam, Indonesia, and the UAE offer more investor-friendly dispute settlement mechanisms. By opting out of ISDS, India risks losing its competitive edge in attracting FDI. Instead of outright rejection, India could adopt a balanced approach by reforming rather than eliminating ISDS. This includes supporting multilateral efforts like the UNCITRAL Working Group III on ISDS reform, which aims to address concerns around transparency, independence, and coherence in arbitration. India could also consider incorporating mediation and state-to-state dispute mechanisms as alternatives to traditional ISDS. Conclusion India’s cautious approach to ISDS reflects valid concerns about sovereignty, legal uncertainty, and financial exposure. However, in an increasingly globalized economy where investor confidence is crucial, an overly restrictive stance may hinder India’s economic ambitions. A middle path—one that safeguards sovereign rights while providing credible legal protections to investors—might be the most pragmatic course. By engaging in international reform efforts and crafting balanced BITs, India can create a more stable and investor-friendly environment without compromising its national interests.

Investor-State Dispute Settlement (ISDS): Should India Reconsider Its Position? Read More »

BNPL (BUY NOW, PAY LATER) MODELS: ARE THEY LEGALLY SUSTAINABLE?

Leave a Comment / Banking & Finance, Corporate & Start Ups /

INTRODUCTION Buy Now, Pay Later (BNPL) has rapidly gained traction in India, offering instant credit without traditional banking hassles. It allows consumers to purchase goods and pay later in installments, often without interest. However, as BNPL platforms operate outside conventional lending frameworks, concerns around regulatory compliance, consumer protection, and financial stability are growing. HOW BNPL WORKS BNPL enables consumers to make purchases immediately and pay later in flexible installments. Unlike credit cards, it requires minimal documentation and offers quick approvals. BNPL providers typically partner with merchants, acting as intermediaries between consumers and financial institutions. However, many operate in regulatory grey areas, raising concerns about financial risks, consumer data security, and the absence of clear legal oversight. RBI’S PERSPECTIVE ON BNPL The Reserve Bank of India (RBI) has taken a cautious stance on BNPL’s rapid expansion. In 2022, it restricted the use of prepaid payment instruments (PPIs) for credit lines, affecting several BNPL firms. RBI views BNPL as a credit product that must adhere to digital lending norms, requiring providers to be regulated entities. The central bank is particularly concerned about unregulated lending, growing defaults, and consumer protection. It is now moving towards enforcing stricter compliance measures within India’s financial ecosystem. KEY LEGAL CHALLENGES Despite its benefits, BNPL faces several legal and regulatory hurdles: IMPACT ON CONSUMERS BNPL offers convenience but comes with financial risks: GLOBAL BNPL REGULATIONS COMPLIANCE & FUTURE REGULATIONS For BNPL to remain viable in India, providers must strengthen compliance by: Regulatory oversight will enhance consumer trust and long-term industry sustainability. THE FUTURE OF BNPL IN INDIA BNPL is at a crossroads—while stricter regulations are inevitable, they could also legitimize and strengthen the sector. Responsible lending, financial literacy, and compliance with RBI norms will be crucial. Fintech firms that adapt to regulatory changes can thrive, while non-compliant players may face legal roadblocks and market disruptions. The future of BNPL in India will depend on how well companies balance innovation with regulatory obligations.

BNPL (BUY NOW, PAY LATER) MODELS: ARE THEY LEGALLY SUSTAINABLE? Read More »

Impact of Group Insolvency on Holding & Subsidiary Companies: An Analysis in the Indian Context

Leave a Comment / Banking & Finance, Corporate & Start Ups /

Introduction Group insolvency refers to a situation where multiple entities within a corporate group face financial distress, leading to insolvency proceedings. In the Indian context, group insolvency is particularly significant given the intricate corporate structures comprising holding and subsidiary companies. While the Insolvency and Bankruptcy Code, 2016 (IBC) does not explicitly provide a framework for group insolvency, Indian courts and tribunals have attempted to address these issues through various judgments. This essay examines the impact of group insolvency on holding and subsidiary companies with reference to relevant Indian case law. Understanding Group Insolvency Corporate groups often consist of a holding company and multiple subsidiaries, which may be financially interdependent. When one entity within the group becomes insolvent, it can have cascading effects on the financial stability of other entities in the group. However, due to the principle of separate legal personality established in Salomon v. Salomon & Co. Ltd. (1897), courts generally treat each company as an independent legal entity. Despite this principle, Indian jurisprudence has evolved to recognize circumstances where the corporate veil may be lifted, especially in cases of fraud, intermingling of assets, or significant financial dependency between group entities. Impact of Group Insolvency on Holding & Subsidiary Companies 1. Consolidated Resolution Process Although the IBC does not explicitly provide for a consolidated insolvency resolution process for corporate groups, courts and tribunals have recognized the need for such an approach in certain cases. The National Company Law Appellate Tribunal (NCLAT) in Videocon Industries Ltd. & Ors. v. State Bank of India & Ors. (2020) observed that since multiple entities in the Videocon Group were financially interdependent, a consolidated Corporate Insolvency Resolution Process (CIRP) was necessary to maximize value for stakeholders. This case set a precedent for considering group insolvency under Indian law. 2. Piercing the Corporate Veil In cases where holding and subsidiary companies operate as a single economic unit or where subsidiaries are merely alter egos of the parent company, courts have lifted the corporate veil to extend liability. The Supreme Court in ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta & Ors. (2018) underscored the importance of looking beyond the legal entity in determining control and beneficial ownership, thereby setting a benchmark for cases involving holding-subsidiary relationships in insolvency proceedings. 3. Cross-Company Guarantees and Financial Interdependence A crucial aspect of group insolvency is the issue of cross-company guarantees. Often, subsidiaries provide guarantees for the debt obligations of their parent companies and vice versa. In IDBI Bank Ltd. v. Jaypee Infratech Ltd. (2019), the NCLAT examined the financial linkages between Jaypee Infratech and its parent company, Jaiprakash Associates Ltd. (JAL). Although insolvency proceedings were initiated against the subsidiary (Jaypee Infratech), the parent company was also scrutinized due to its financial involvement, demonstrating the interdependent nature of insolvency in group structures. 4. Intercompany Transactions and Avoidance Proceedings Group insolvency cases often involve related-party transactions, which may be scrutinized under Section 66 of the IBC (fraudulent and wrongful trading). In Swiss Ribbons Pvt. Ltd. & Ors. v. Union of India & Ors. (2019), the Supreme Court emphasized the necessity of preventing abusive transactions within group entities to protect creditors’ interests. Consequently, transactions between holding and subsidiary companies are examined closely during insolvency proceedings. 5. Challenges in Group Insolvency Despite judicial efforts, challenges persist in implementing a coherent group insolvency framework in India: · Lack of Explicit Legal Provisions: Unlike jurisdictions such as the UK and the US, India lacks statutory provisions addressing group insolvency comprehensively. · Jurisdictional Complexities: Different tribunals may oversee separate proceedings for different entities within the group, leading to inconsistencies in decision-making. · Stakeholder Conflicts: Creditors of individual entities may resist consolidation due to varying recovery prospects. Conclusion & The Way Forward The impact of group insolvency on holding and subsidiary companies in India is profound, particularly in cases of financial interdependence. While judicial decisions have paved the way for consolidated resolution processes and piercing the corporate veil in appropriate cases, there remains a pressing need for legislative intervention. The Insolvency Law Committee has proposed recommendations for a structured group insolvency framework, which, if implemented, could enhance efficiency and predictability in handling corporate group insolvencies. Until then, Indian courts and tribunals will continue to play a crucial role in shaping the jurisprudence of group insolvency.

Impact of Group Insolvency on Holding & Subsidiary Companies: An Analysis in the Indian Context Read More »

THE USE OF FORENSIC ACCOUNTING IN WHITE-COLLAR CRIME INVESTIGATIONS

Leave a Comment / Banking & Finance, Blog, Corporate & Start Ups /

– Somya Saxena, Associate White-collar crime refers to financially motivated, non-violent crimes committed by individuals, businesses, or government officials. In India, the rise of economic offenses, such as financial fraud, corporate scandals, and tax evasion, has necessitated the use of forensic accounting as a critical investigative tool. With increasing financial irregularities in banking, corporate, and government sectors, forensic accounting plays a pivotal role in maintaining transparency and accountability in financial systems. What is Forensic Accounting? Forensic accounting is a specialized field of accounting that involves investigating financial records, detecting fraud, and providing legal support in criminal and civil cases. It merges accounting, auditing, and investigative skills to uncover financial discrepancies and provide evidence in legal proceedings. The Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and other regulatory bodies rely on forensic accountants to detect financial crimes and enhance corporate governance. Recent Developments and Cases In a landmark decision, the Delhi High Court mandated an Amazon unit to pay $39 million in damages for infringing on the “Beverly Hills Polo Club” trademark. This ruling not only emphasizes the judiciary’s stance on protecting intellectual property rights but also highlights the necessity for meticulous financial scrutiny in ecommerce operations. Another significant case involves allegations against the Adani Group. U.S. authorities have charged members of the Adani family with orchestrating a $265 million bribery scheme to secure energy contracts in India. Forensic accountants have been instrumental in unraveling the complex financial transactions underpinning these allegations, showcasing the indispensable nature of forensic investigations in such high-profile cases. To bolster the fight against financial misconduct, the Institute of Chartered Accountants of India (ICAI) introduced the Forensic Accounting and Investigation Standards (FAIS), effective from July 1, 2023. These standards provide a structured framework for professionals, ensuring consistency and integrity in forensic accounting practices. By adhering to FAIS, auditors and investigators can enhance the reliability of their findings, thereby strengthening the overall financial reporting ecosystem in India. Role of Forensic Accounting in White-Collar Crime Investigations in India Key Techniques Used in Forensic Accounting Notable White-Collar Crime Cases in India and Related Case Laws Challenges in Forensic Accounting in India Future of Forensic Accounting in India With rising financial crimes and corporate frauds, forensic accounting will play a crucial role in safeguarding the Indian economy. Government initiatives such as the Fugitive Economic Offenders Act, 2018, and digital forensic advancements will enhance the effectiveness of financial investigations. Increased collaboration between forensic experts, law enforcement agencies, and regulatory bodies will strengthen fraud detection and prevention mechanisms. Conclusion Forensic accounting is an essential tool in white-collar crime investigations in India. By leveraging advanced investigative techniques, forensic accountants help uncover fraud, support legal proceedings, and enhance corporate governance. As economic offenses continue to evolve, forensic accounting will remain vital in ensuring financial integrity and legal accountability in India’s corporate and banking sectors.

THE USE OF FORENSIC ACCOUNTING IN WHITE-COLLAR CRIME INVESTIGATIONS Read More »

Emerging Role of MediationArbitration in Corporate Disputes

Leave a Comment / Blog, Corporate & Start Ups /

The Emerging Role of MedArb in Corporate Disputes Disputes are an inescapable part of corporate interactions in this dynamic world. Traditionally, they have been resolved through expensive and lengthy court proceedings. However, there is a new approach that is gaining momentum: Mediation-Arbitration, or Med-Arb. This hybrid form of dispute resolution is changing the way corporations handle disputes and resolve them, being more efficient, cost-effective, and relationship-preserving compared to traditional litigation. Understanding Med-Arb: A Hybrid Approach Mediation-arbitration is a sophisticated conflict resolution which, along with other processes, brings in two distinct processes: mediation in which a neutral third-party facilitator engages in exploring mutually acceptable solutions by attempting to help the disputing parties; and hence, going into arbitration if mediation fails, whereby a binding award will be given by the neutral arbitrator. Key Advantages of Med-Arb Legal Framework in India Industries Embracing Med-Arb Different industries are now largely embracing Med-Arb as a preferred method of dispute resolution for efficiency and the easy maintenance of relationships. Med-Arb vs. Traditional Arbitration Challenges in Med-Arb Conclusion Med-Arb has an influential future with corporate disputes. It is likely to be sought more by businesses seeking efficient, low-cost, and relationshippreserving means for conflict resolution. It would be a compelling alternative to litigation, since it combines the strengths of mediation and arbitration, and fulfils modern demands in flexibility for dispute management. With the evolution of this model, ethical considerations and procedural safeguards will be vital in assuring the integrity and effectiveness of this model vis-a-vis corporate disputes.

Emerging Role of MediationArbitration in Corporate Disputes Read More »

Implication of RBI’s Digital Guidelines for FinTech and NBFC

Leave a Comment / Blog, Corporate & Start Ups /

Introduction The Reserve Bank of India’s (RBI) Digital Lending Guidelines, introduced in September 2022, represent a significant regulatory shift aimed at ensuring not only responsible lending practices in the rapidly evolving digital lending landscape but also at enhancing consumer protection. These guidelines have profound implications for FinTech companies and Non-Banking Financial Companies (NBFCs) operating in India. Key Features of the Guidelines: The RBI’s Digital Guidelines will have a transformative effect on the way both fintech companies and NBFCs operate in India. While the guidelines impose certain compliance requirements, they also create an environment that supports responsible innovation and fosters growth in the digital finance ecosystem. Companies that can adapt quickly to these regulations while leveraging technology for customer benefit will be better positioned to succeed in the evolving landscape. However, those that fail to comply or integrate sound risk management practices may face penalties or operational difficulties, affecting their long-term sustainability. Implications for FinTech: RBI’s regulatory framework for fintech encompasses various aspects, including licensing, data protection, outsourcing, KYC, digital lending and customer due diligence Implication For NBFC Regulatory Scrutiny: NBFCs have to operate in a more stringent regulatory environment where adherence to the Digital Lending Guidelines is strictly monitored. Non-adherence may attract penalties or even restrictions on operations. Risk Management Enhancements: The requirement for NBFCs to follow sound credit assessment practices while utilizing FLDG arrangements may lead to improved risk management strategies, thereby reducing default rates and enhancing financial stability within the sector. Consumer Trust and Market Stability: These guidelines shall help build greater trust among borrowers by strengthening responsible lending practices and improved consumer protection measures, thus working towards market stability and growth in the digital lending ecosystem. Implementation Challenges: Conclusion RBI’s Digital Lending Guidelines represent a significant stride in making lending digitally transparent, accountable, and consumer-friendly. Challenging though these guidelines are to FinTechs and NBFCs, there’s a huge opportunity for growth in terms of innovation, thus winning the trust of customers for longterm use. Continued dialogue between regulators, financial institutions, and technology companies will be key to the success of these guidelines in finding a balance between financial innovation and consumer protection. Stay tuned for more legal insights!

Implication of RBI’s Digital Guidelines for FinTech and NBFC Read More »

Litigation Checklist for Startups and Tech Companies

Leave a Comment / Blog, Corporate & Start Ups, Legal Updates /

– Somya Saxena, Associate Launching a Startup in India is without doubt an exciting and an exhilarating experience, it has emerged as one of the most sought-after professions. Startups play an important role in our Indian society, at large, in terms of growth of country’s economy, promoting innovation, technological growth, and employment opportunities and finding solutions to various technological and daily problems. In short, Startups are seen to have a positive impact on the overall growth of the country. Amidst, all the excitement and challenges in starting a new business, one such very crucial challenge is to comply with all the legal compliances, most importantly the criteria laid down by the Department for Promotion of Industry and Internal Trade (DPIIT), to ensure a smooth and successful working of the business with no unwanted litigation or legal problems. Hence, it is imperative for the founders to understand the complex nature of such legalities and to simplify the same a comprehensive checklist of legal compliances for startups and tech companies is provided hereunder: Incorporation and Process- Legal Requirements: The first and foremost step is to decide on its modus operandi, what would be the purpose of the business and what does it cater to in the Indian society or even outside. Accordingly, it must be decided whether the Startup would be a partnership, sole proprietorship, limited liability partnership (LLP), public limited company or a private limited company under the Companies Act, 2013, or the Partnership Act, 1932, or the Limited Liability Partnership Act, 2008 as per the business structure. Thereafter, a business must have a unique name or an identity to be distinctive from the others in the market which can be checked in the MCA (Ministry of Corporate Affairs) Website. It must acquire a Digital Signature Certificate (DSC), obtain a Director Identification Number (DIN), draft a detailed MOA and AOA inclusive of the company’s purpose, objectives, rules and regulation, acquire a Certificate of Incorporation, apply for PAN and TAN number, register for the GST, if relevant, and most importantly open a company bank account. These are the initial basic requirements a business and its founders need to keep in check before laying the groundwork in their Startup. Co-founders’ agreements: A Co-Founder Agreement is imperative to decide on the roles and responsibilities of each person for the smooth working of the Startup. Such Agreement helps in the business and relations being transparent and organized. In order to avoid unorganized nature of distribution of funds, roles, and responsibilities leading to various inter personal disputes which could hampering the overall working of the business, a Co-Founder Agreement becomes a necessity. Such Agreement mostly includes, decision making and how the disputes are to be resolved, the exit strategy, IP rights (if any), equity shares and confidentiality. Specific Registration and Licenses: This is a fundamental step when working towards starting a business and not just a mere formality. It is mandatory to procure certain licensees and to register your company with the MCA or the Registrar of Companies. This includes obtaining a certificate of enrolment and certificate of registration, a Permanent Account Number (PAN) under the Income Tax Act, 1961 and registering for Goods and Services Tax (GST) under the central and state goods and services tax statutes and TDS for payments to employees, vendors, contractors etc. Intellectual Property and Data Protection: A startup is a product of brilliant innovative ideas and even technological inventions and to attract investment and gain an edge in the market, protection of a company’s uniqueness is important. It can be a unique name, a distinctive process, a new invention of a product and to protect the same from being used by another in the market, IP registrations are imperative and the founders must be aware of the same. Depending upon the type of Intellectual Property different registrations can be done in accordance with the IP laws in India. For protection of brand names, logo, and symbols, one must register their trademark in accordance with the Trade Marks Act, 1999. To protect their innovative process or products, or an invention, one must file patent application in accordance with the Patent Act, 1970. Startups or tech companies developing a particular software, a design, etc can register for copyright of their work in accordance with the Copyright Act, 1957. New business must also protect their data and must adopt a strong data protection and privacy policy in accordance with the Information Technology Act, 2000 and the Information Technology Rules, 2011 and DPDP Act, 2023. A startup must implement a reasonable security practice in their company and must adopt strict Data breach protocols in order to avoid fraud, cheating, and to maintain trust in the market and most importantly in the consumers. Employment Laws, HR policy and other Legal compliances: In order to protect the best interest of both the Employer and the Employee and an efficient work environment, it is crucial to comply with the labour laws in our country by incorporating various legal essentials. This includes conditions of employment, employment agreement, code of conduct, Data protection, Non Disclosure Agreement, reimbursement of expenses, working hours, leave structure and termination clauses. Certain mandatory policies would be Employment Contracts, Provident Funds, Employee State Insurance, Prohibition of Sexual Harassment at Workplace, Maternity Benefits etc. Lastly, Regulatory Compliance: Depending on the nature and scope of the business, one may have to comply with the regulations imposed by regulatory authorities’ such as Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), or Insurance Regulatory and Development Authority of India (IRBAI). Additionally, environmental regulations must be complied with by a startup and must procure necessary permits and clearances if the nature of the business may have the potential to have an impact on the environment. Thus, in order to avoid pitfalls and serious legal consequences in a Startup or a tech company, it best to ensure that the you tick all the heads in the litigation checklist. The common problems faced by the Startups are

Litigation Checklist for Startups and Tech Companies Read More »

LEGAL COMPLIANCE FOR START-UPS IN INDIA

Leave a Comment / Blog, Corporate & Start Ups, Legal Updates /

ESSENTIAL BUSINESS REGISTRATIONS Company may be incorporated as a legal entity under the Companies Act, Indian Partnership Act or a LLP, which requires registration with the MCA by filing SPICe+ form, which combines multiple registrations including PAN/TAN. The process typically takes 5-7 working days and requires at least two directors and one registered office address. GST registration becomes mandatory when your turnover exceeds ₹40 lakhs (₹20 lakhs for some states). Registration can be done online through the GST portal with necessary business documents. LABOUR LAW COMPLIANCES Provident Fund (PF) registration is mandatory once you have 20+ employees. You’ll need to contribute 12% of basic salary for each employee, with a matching contribution from the employee’s side. Monthly returns must be filed through the EPFO portal. Companies with 10+ employees must register for Employee State Insurance (ESI), providing medical benefits to employees. The current contribution rate is 3.25% from employer and 0.75% from employee. TAX COMPLIANCE FRAMEWORK GST returns must be filed regularly based on your turnover. GSTR-1 (monthly/quarterly) for outward supplies, GSTR-3B for summary returns, and annual returns. Late filing results in penalties of ₹50-100 per day of delay. Income Tax compliance includes quarterly advance tax payments if liability exceeds ₹10,000, and annual returns filing by September 30th. Maintain proper books of accounts and financial statements. INTELLECTUAL PROPERTY PROTECTION Trademark registration protects your brand identity for 10 years (renewable). The application process involves trademark search, filing, examination, and publication. Early registration prevents brand disputes and unauthorized use. Copyright registration automatically exists from creation but formal registration provides stronger legal standing. Essential for protecting software code, content, and creative works. DIGITAL COMPLIANCE ESSENTIALS Privacy policy and terms of service must clearly state data collection practices, usage policies, and user rights. Regular updates needed to align with changing regulations and business practices. Implement reasonable security practices including encryption, access controls, and regular security audits. Maintain documentation of security procedures and incident response plans. EMPLOYMENT DOCUMENTATION Formal employment agreements must specify roles, compensation, working hours, leave policy, and termination terms. Include clear non-compete and confidentiality clauses to protect business interests. HR policies should cover workplace conduct, antiharassment measures, grievance procedures, and performance evaluation systems. Regular updates and communication are essential. GST registration becomes mandatory when your turnover exceeds ₹40 lakhs (₹20 lakhs for some states). Registration can be done online through the GST portal with necessary business documents. INDUSTRY SPECIFIC REGULATIONS FSSAI license is mandatory for food businesses, with different categories based on turnover. Annual renewal required with regular food safety audits and maintenance of hygiene standards. Fintech startups need RBI registration/approval based on service type. Additional compliances include KYC norms, transaction monitoring, and periodic reporting to regulatory authorities. ANNUAL COMPLIANCE CALENDAR Hold board meetings quarterly (gap not exceeding 120 days), with proper documentation of minutes. Annual General Meeting must be conducted within 6 months of financial year end. File annual returns including MGT-7, financial statements, and other statutory forms with ROC. Directors must update KYC annually through DIR-3 KYC form. Appoint first statutoru auditor within 30 days of the company’s incorporation in the firest board meeting and then conduct periodic internal audits to assess compliance with legal requirements and identify any areas of non-compliance. Stay tuned for more legal insights.

LEGAL COMPLIANCE FOR START-UPS IN INDIA Read More »

Scroll to Top