India

The Supreme Court’s judgment in Sonali Power Equipments Pvt. Ltd. v. MSEB & Ors. brings much-needed clarity to a long-contested issue under the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”): Can time-barred claims be referred to conciliation or arbitration under Section 18 of the Act? The Court’s nuanced view, outlines the procedural frameworks applicable to conciliation and arbitration, striking a judicious balance between the rights of MSMEs and the statutory framework of limitation. Genesis of the Case The appellants, small-scale industries registered with the District Industries Centre, Nagpur, being the manufactures of transformers had supplied transformers to the Maharashtra State Electricity Board (MSEB) between 1993 and 2004. Facing delays in payment, they initiated claims in 2005–2006 before the Industry Facilitation Council under the erstwhile Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 later subsumed by the MSMED Act. The Council passed an award in their favour on 28th January 2010, awarding interest on delayed payments. These awards were set aside by the Commercial Court in 2017 on the ground that the claims were barred by limitation. The High Court upheld this view in part, holding that while conciliation proceedings under the MSMED Act could not entertain time-barred claims, the Limitation Act,1963 applied to arbitration under Section 18(3) of the MSMED Act. The matter reached the Supreme Court for a definitive pronouncement. The law so far: Prior to this ruling, the jurisprudence around limitation under the MSMED Act was divergent: In Silpi Industries v. KSRTC[1], the Supreme Court held that the Limitation Act, 1963 applied to arbitration under the MSMED Act, relying on Section 43 of the Arbitration and Conciliation Act, 1996 (“ACA”). Conversely, some High Courts interpreted the term "amount due" narrowly, holding that time-barred debts fall outside the jurisdiction of the MSME Facilitation Council altogether. A full bench of the Bombay High Court in ___________ 2023 reiterated that conciliation under Section 18(2) could not be used to circumvent the bar of limitation, while arbitration remained subject to it. This divergence created uncertainty for MSMEs seeking to enforce delayed payment claims, especially where business relationships had lasted many years and documentation had aged. The Apex Court’s Findings The Bench comprising Justice P.S. Narasimha and Justice Joymalya Bagchi of the Apex Court has dealt with the issue in two parts: Does the Limitation Act, 1963 apply to conciliation under Section 18(2) of the MSMED Act? Held: No. The Court clarified that conciliation under Section 18(2) of the MSMED Act is a non-adjudicatory, voluntary, and non-binding mechanism. Since it does not result in a judicial or quasi-judicial determination, limitation law has no direct application. The Court held that the parties are free to negotiate and settle even time-barred debts during conciliation. Such settlements are legally valid under Section 25(3) of the Indian Contract Act, 1872 which enables parties to agree to pay time-barred debts. Does the Limitation Act apply to arbitration under Section 18(3) of the MSMED Act? Held: Yes. On arbitration, the Apex Court reaffirmed the view in Silpi Industries (supra), holding that once conciliation fails, and the matter proceeds to arbitration under Section 18(3) of the MSMED Act, the provisions of the ACA, including Section 43 fully apply. Arbitration under the MSMED Act is deemed to arise from an arbitration agreement under Section 7 of the ACA, invoking the entire framework of the ACA, including limitation. While the appellants argued that Section 2(4) of the ACA excludes Section 43 for statutory arbitrations, the Court held that Section 18(3) of the MSMED Act overrides this exclusion, due to its non-obstante clause and the overriding provision in Section 24 of the MSMED Act. Analysis of the Judgement. The decision of the Apex Court has rejected the High Court's reasoning that the definition of "amount due" excludes time-barred claims from the outset. The Supreme Court clarified that only adjudicatory proceedings (like arbitration) are barred by limitation and not conciliatory mechanisms. The Apex Court has also differentiated between "right" and "remedy" reiterating that limitation extinguishes the remedy, not the debt itself, thus preserving the creditor’s right to negotiate payment outside court. The Apex Court has also addressed concerns raised in earlier judgments like State of Kerala v. V.R. Kalliyanikutty[2], clarifying that their application is limited to coercive recovery mechanisms, not consensual dispute resolution like conciliation. The Court also rejected arguments that Silpi Industries (supra) was rendered per incuriam for failing to consider Section 2(4) of the ACA, it held that Section 18(3) and Section 24 MSMED Act prevail in the interpretive hierarchy. This ruling settles a previously contentious issue and brings much-needed clarity on the application of limitation to proceedings under the MSMED Act. For Suppliers: The judgment underlines the importance of initiating recovery proceedings within the limitation period. Suppliers cannot rely solely on the conciliation mechanism to preserve stale claims. For Buyers: The decision offers procedural safeguards against the enforcement of outdated claims and ensures that statutory conciliation/arbitration processes are not misused. For Facilitation Councils: The ruling guides Councils to scrutinize claims even at the conciliation stage and reject those that are clearly time-barred. Crucially, this decision balances the dual objectives of the MSMED Act i.e speedy resolution and fairness in recovery with the long-established principles of limitation law, thus preventing the reopening of long-forgotten disputes while preserving legitimate claims. Hence, the Apex Court has clarified that in conciliation proceedings, the law of limitation does not apply, and even time-barred claims may be raised since the parties are free to settle such debts by mutual agreement. In contrast, arbitration is an adjudicatory process, and the law of limitation strictly applies; hence, time-barred claims cannot be entertained, as arbitration attracts the applicability of Section 43 of the ACA. Our Thoughts and the Impact of the Ruling This ruling is both clarificatory and pragmatic. It prevents misuse of the MSMED framework to revive dead claims through arbitration, thereby protecting buyers from stale liabilities. At the same time, it upholds the protective intent of the MSMED Act by preserving a space for negotiated settlements even in time-barred situations. From a policy standpoint: MSMEs are incentivised to initiate conciliation early, yet retain an informal route to recovery of old dues. Buyers cannot be dragged into arbitration for stale claims, ensuring certainty and finality in commercial dealings. Financial reporting under Section 22 of the MSMED Act (disclosure of unpaid dues in balance sheets) does not revive limitation, but may assist suppliers during conciliation. Going forward, this judgment is likely to: Reduce unnecessary litigation on preliminary limitation objections in MSMED arbitration. Increase the use of conciliation as a meaningful step, rather than a procedural formality. Ensure speedy, cost-effective dispute resolution, aligned with the MSMED Act’s objectives. Conclusion: The Supreme Court has walked a fine line affirming legal discipline in arbitration, while allowing commercial flexibility in conciliation. This balanced interpretation reinforces the MSMED Act as a functional tool for MSMEs, without compromising procedural fairness for buyers. It is now incumbent on both MSMEs and buyers to manage their dispute timelines strategically and to engage with Facilitation Councils constructively. [1] Silpi Industries v. KSRTC, (2021) 18 SCC 790. [2] State of Kerala v. V.R. Kalliyanikutty (1999) 3 SCC 657. Authors: Mr. Ishwar Ahuja- Partner Ms. Nikita Lad– Associate Ms. Zenia Daruwala- Legal Intern.

Introduction: The power of courts to modify arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (“the Act”), has consistently been a matter of conflicting interpretation, with divergent views expressed by various High Courts and even the Supreme Court of India. The scope of interference with an arbitral award is narrowly defined, with Section 34 providing limited grounds for setting aside an award. However, courts have recently been confronted with situations where complete annulment of an award may not be warranted, but minor errors or unjust outcomes still demand redress. This has led to a gradual evolution in judicial reasoning, allowing for limited modifications in certain cases, raising critical questions about the finality of arbitral awards and the boundaries of judicial intervention. Judicial interference in arbitration has long been a subject of debate in India. The Hon’ble Supreme Court of India, in the case of S.V. Samudharam v. State of Karnataka[1], held that the powers of the court under Section 34 of the Act, are purely supervisory in nature and cannot modify the arbitral award.  It was held that the Court under Section 37 of the Act, where there are only three powers available to the Court, which includes confirming the award of the arbitrator, setting aside the award as modified under Section 34 and rejecting the application under Section 34 and 37 of the Act. The court cannot exercise appellate powers and, consequently, is not empowered to modify arbitral awards. The Hon’ble Supreme Court in the case S.V. Samudharam (supra) has followed the principle laid down in the judgement Project Director, National Highways No. 45 E and 220, National Highways Authority of India v. M. Hakeem and Another[2], wherein it was categorically held that courts are not permitted to modify arbitral awards. However, on the contrary in the case of M/S Oriental Structural Engineers Private Limited vs State of Kerala[3], the Court intervened to modify the rate of interest even though the arbitral award was within the scope of the contract. This illustrates the inconsistency in judicial reasoning, as there are several judgments taking divergent views on the extent of judicial interference. The Act, which is based on the UNCITRAL Model Law, reflects the limited scope of judicial intervention. Section 34 of the Act, adopted almost verbatim from the UNCITRAL Model, does not explicitly provide for or warrant judicial interference, but merely enumerates the specific grounds upon which an arbitral award may be set aside. Further, the interpretation of each clause of Section 34 which provides the grounds for interference has evolved over time, resulting in a dynamic and, at times, divergent judicial approach to the extent of interference permissible under the Act. Recent Supreme Court Ruling: Recently, a majority decision of a Constitution bench of the Hon’ble Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Limited[4], held that the courts can modify an arbitral award under certain circumstances under Section 34 as well as Section 37 of the Act. The Bench, which has favoured the modification of arbitral awards, has observed that the principle of omne majus continet in se minus, “the greater contains the less”, is applicable. The rationale was that the power to set aside an arbitral award necessarily encompasses the lesser power to modify it. It was further observed that the court is empowered to sever the “invalid” portion of an arbitral award from its “valid” portion and that this lies within the inherent jurisdiction of the court. However, it was also pointed out that partial setting aside may not be feasible where the valid and invalid portions are so legally and practically intertwined that they cannot be separated. Importance of Reasoned Awards and Section 34(4) of the Act: The majority observed that a reasoned award, must satisfy three essential criteria; proper, intelligible and adequate[5]. Section 34(4) plays a vital role here, as it empowers the court to give the arbitral tribunal a chance to remedy shortcomings in the award’s reasoning before enforcement is refused. This provision is particularly relevant where the tribunal has either failed to explain its conclusions or left significant gaps in its reasoning, provided these defects are capable of being rectified. The aim is to correct fixable errors within arbitration, allowing limited modification of awards and preventing the delays and expense of starting the process all over again. Further, the Court has also observed that the power to modify the arbitral award under Section 34 of the Act would not render the regime under the New York Convention and the enforcement of foreign awards affected. Finally, the Court narrated the usage of the powers vested under Article 142 of the Constitution of India whereunder the Court cannot rewrite or alter an arbitral award on its merits. However, it may appropriately be invoked where doing so is essential to finally resolve the dispute and bring the litigation to a close, and saving both time and costs for the parties. Ultimately, the Courts have the limited power under Sections 34 and 37 of the Act, to modify the arbitral award under certain circumstances; when it is severable, by separating the ‘invalid’ portion from the ‘valid’ portion. It may also be corrected to address clerical, computational, or typographical errors apparent on the face of the record, and post-award interest may be modified in certain circumstances. Dissenting Opinion: On the contrary, the opinion of a Single Judge, observed that the maxim omne majus continet in se minus, is not applicable in the case of the powers vested under Section 34 of the Act. It was pointed out pointed out that appellate powers, which are entirely different from the powers under Section 34 of the Act, operate distinctly and belong to a different genus. The application of Section 34 must be limited to setting aside the award and must not vary at any point, as doing so would render the purpose of the arbitral proceedings futile. It was further pointed out in the dissenting opinion that the court under Section 34 and the courts hearing appeals thereafter have the power to “sever” parts of the award in exercise of the powers of setting aside awards under Section 34. The Court further observed that, before severing any portion of an award, a Section 34 court must undertake a thorough examination to determine whether the “good” part of the award can be distinctly identified both in terms of its liability and quantum without any correlation or dependence on the “bad” portion sought to be set aside. However, this was not same as modification of the arbitral award. International Perspective: Several jurisdictions following the UNCITRAL Model Law either fully or partially recognise limited judicial powers to modify or vary arbitral awards to avoid unnecessary re-arbitration. For instance, Kenya under Section 39, Arbitration Act empowers courts to confirm, vary or remit awards; Singapore, International Arbitration Act under Section 24(b) and Arbitration Act, 2001, Sections 47 and 49 allows remission, confirmation or variation; and Australia, International Arbitration Act, Section 34(4); domestic Act, Section 34A permits suspension, setting aside or limited appeals. The U.S. Federal Arbitration Act, 1925 under Sections 10 and 11 provides for vacating or modifying awards in cases of fraud, corruption or misconduct, while the U.K. Arbitration Act, 1996 under Sections 68 and 69 of the said Arbitration Act, 1996 enables courts to remit or vary awards in cases of defined serious irregularities. The consistent rationale across these jurisdictions is to prevent re-arbitration where defects are minor, ensure cost-efficiency, and promote speedy resolution which is a perspective also recognised by the Hon’ble Supreme Court of India while interpreting the powers of modification of arbitral awards under Section 34 and Section 37 of the Act. Conclusion: The fundamental objective of the Act is to secure the speedy and efficient resolution of disputes between parties. Permitting courts to modify arbitral awards, rather than remitting them or setting them aside entirely, furthers this legislative intent by avoiding unnecessary duplication of proceedings. If every defect in an award were to mandate re-arbitration, the process would become not only cumbersome and time consuming but could also end up being more prolonged than litigation. Such an outcome would directly undermine the very rationale behind the enactment of the Act. The Indian courts, while dealing with cases requiring modification of arbitral awards, may lay down defined ground rules, as reflected in the Supreme Court’s ruling, to ensure that judicial interference remains restricted to specified circumstances. At the same time, the courts must safeguard the sanctity of the arbitral process, treating modification strictly as an exception. Every instance of modification must therefore be accompanied by clear and detailed reasoning, demonstrating why such interference was warranted at that particular stage. The evolving stance on modifying arbitral awards reflects a pragmatic shift towards efficiency and fairness in dispute resolution. While the foundational principle of minimal court interference remains intact, recognising a limited power of modification under Sections 34 and 37 ensures that curable defects can be addressed without undermining the autonomy of arbitration. This approach aligns India with progressive international practices, reducing unnecessary delays, avoiding repetitive proceedings, and reinforcing confidence in arbitration as a viable alternative to litigation. The approach of the Courts must ultimately navigate and maintain the sanctity of the arbitration proceedings. Co-authored by Atul N Menon, Partner ([email protected]) and Shilpa Gireesha, Associate ([email protected]). [1] (2024) 3 SCC 623 [2] (2021) 9 SCC 1 [3] (2021) 6 SCC 150 [4] (2025) 7 SCC 1 [5] Upholding the finding in Dyna Technologies Private Limited v. Crompton Greaves Limited; (2019) 20 SCC 1.

Introduction Today, the world has become a global village, at least in the economic sense. In this increasingly interconnected global economy, corporate distress rarely respects national borders. It is not unknown that every country has multinational enterprises that are operating across various jurisdictions, which inevitably requires that there should be an insolvency regime that cooperates internationally so that there can be preservation of the value of the assets and at the same time there is equitable treatment of the creditor, thereby leading to efficient resolution of cross-border insolvency. The Insolvency and Bankruptcy Code, 2016 (“IBC”) revitalized the domestic insolvency resolution as soon as it was brought into action. Prior to the IBC, the condition of the distressed entities was not so good because there was no consolidated law, but after the arrival of the IBC regime, the resolution process streamlined the insolvency process. While IBC has been appreciated for revitalizing domestic insolvency resolution, it remains silent on a formal mechanism to recognize and cooperate with foreign insolvency proceedings. This lacuna leaves Indian resolution professionals and foreign stakeholders in a precarious position: India benefits from having its Corporate Insolvency Resolution Processes (“CIRPs”) recognized abroad, such as in the recent decision in Singapore in Re Compuage Infocom Ltd. decision. Yet India itself offers no reciprocal framework to foreign proceedings. Current Legal Framework in India The IBC provides a regime for insolvency and bankruptcy of companies, limited liability partnerships, and individuals. It has the main objective of first doing resolution and then liquidation in the domestic proceedings to preserve the value of the assets and balance the interests of all stakeholders while providing a time-bound framework for resolving insolvency cases. However, it incorporates only two provisions addressing cross-border insolvency in a limited, reciprocal manner: Section 234 -Agreements with foreign countries. “(1) The Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code. (2) The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified.” As per this section, the Indian government can make a bilateral treaty with any other country to help enforce the rules of the IBC in that country. Once such an agreement exists, the government can officially notify that the IBC provisions will apply to the assets of the Indian companies or individuals, which includes debtors or guarantors that are located in that foreign country. However, this will only apply if the country agrees to do the same for the Indian authorities, which in simple terms means reciprocity. Section 235: Letter of request to a country outside India in certain cases. “(1) Notwithstanding anything contained in this Code or any law for the time being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the Adjudicating Authority that evidence or action relating to such assets is required in connection with such process or proceeding. (2) The Adjudicating Authority on receipt of an application under sub-section (1) and, on being satisfied that evidence or action relating to assets under sub-section (1) is required in connection with insolvency resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of such country competent to deal with such request.” In order to understand what Section 235 says, let's take an example wherein a company undergoing insolvency in India owns a building in Dubai. Now, if India and the UAE have a reciprocal arrangement under Section 234, then the Resolution Professional can apply in NCLT, asking to take action on the Dubai property, and if the tribunal agrees then it can send a formal request to UAE court to take the necessary action, like freezing or selling of the assets. However, even after almost a decade of IBC, no reciprocal agreements under Sections 234–235 have been concluded. Thus, these provisions remain inoperative. Further, in the absence of formal cross-border insolvency legislation, the Indian courts have only way of enforcing an insolvency decree is via section 13 of the Code of Civil Procedure for the recognition and the enforcement of the foreign judgment that relies on the fact that it satisfies the provisions therein. Why Recognition Without Reciprocity Is a Global Trend? The answer to the question as to why recognition without reciprocity is becoming a global trend is simple and identifiable; this is the era of globalized commerce, wherein businesses operate across jurisdictions and the corporate debtors hold assets and owe obligations not just in one country. Consequently, this gave rise to the need for national insolvency regimes to address the complexity of cross-border insolvency in a manner that is coordinated, efficient, and equitable. We have to understand that at the heart of the global trend lies the principle of modified universalism, which balances the need for a single, centralized insolvency process with the sovereignty and interests of local jurisdictions. This philosophy is embodied in the UNCITRAL Model Law on Cross-Border Insolvency (1997), which has now been adopted, with or without modification, in over 60 states and 63 jurisdictions, including the United States, United Kingdom, Singapore, Australia, Japan, and other multiple jurisdictions, enabling smooth cross-border insolvency. This model law is intentionally neutral on reciprocity, which means that it does not require the adopting countries to condition their recognition of the foreign insolvency proceedings on whether the initiating country would do the same or not. This is basically done with the approach that encourages open coordination and recognizes that the benefits of facilitating the efficient cross-border resolution outweigh the potential cost of asymmetry. However, it must also be recognized that despite the inclusive spirit of the model law there are few jurisdictions, such as Mexico, South Africa, and Romania, that have inserted reciprocity clauses that condition recognition on mutual treatment. These clauses have however been widely criticized for being counterproductive. As discussed in India’s 2018 Insolvency Law Committee (ILC) report and reinforced by comparative academic commentary, reciprocity creates regulatory fragmentation, slows down the legal process, and undermines the very goal of harmonization. Now, considering the Indian perspective, Sections 234 and 235 of the IBC have proven to be a bottleneck. It is to be noted that as of mid-2025, India has not signed any reciprocal agreement which renders the provisions ineffective in practice. The absence of an enacted cross-border insolvency law ultimately means that India remains a passive recipient of the recognition abroad while offering no equivalent legal certainty to the foreign investors or the insolvency practitioners operating in India. Considering the reasons for the recognition without reciprocity, there are three key drivers: 1. Value Preservation and Economic Efficiency: The individuals in these proceedings are obviously commercially driven, which ultimately makes their goal to be the preservation of the value of the assets and at the same time be economically efficient. It is no secret that multiple jurisdictions and local courts will lead to delay in the recognition and can lead to a “race to the courthouse,” where local creditors attempt to seize assets before foreign proceedings are acknowledged. 2. Enhancing Global Credibility and Investment Climate: Jurisdictions that extend recognition to foreign proceedings build their reputation as legally mature, creditor-friendly, and cooperative. 3. Judicial Predictability and Legal Certainty: A harmonized legal regime based on objective criteria simplifies litigation, reduces costs, and enhances procedural fairness. The Model Law’s framework (Articles 15–17) for recognition and relief provides a uniform path forward that is missing from India’s current ad hoc and discretionary mechanisms. The Re Camouflage Case and Its Implications Recently, Singapore High Court’s decision in Re Compuage Infocom Ltd [2025] SGHC 49 marked a moment in cross-border insolvency jurisprudence involving India. For the first time, a Corporate Insolvency Resolution Process was initiated under India’s IBC regime which was formally recognized as a “foreign main proceeding” in a jurisdiction that had adopted the UNCITRAL Model Law on Cross-Border Insolvency. Facts of the case were simple: Compuage Infocom Ltd (CIL), an Indian company, was undergoing CIRP under NCLT Mumbai and the appointed Resolution Professional, Mr. Gajesh Jain, sought recognition of the Indian proceedings in Singapore to access and administer assets held there. The Singapore High Court undertook a detailed examination of the criteria under the Model Law, including the definition of “foreign proceeding,” and considered the status of NCLT as a foreign court and whether India was CIL’s Center of Main Interest. The court of Singapore then concluded affirmatively on all counts that is a. CIRP was collective, judicial, and reorganization-focused; b. NCLT was deemed a competent adjudicatory body; and c. India was the COMI based on operational and managerial control. With this, RP got control over the assets that were situated in Singapore, but it imposed a moratorium on the local enforcement actions. The court withheld the automatic repartition, emphasizing the need to protect local creditors. With this, there was the exercise of modified universalism, which cooperated with the other jurisdiction without sacrificing local interest, which is located and reflected in the heart of the Model Law’s philosophy. It also exposed India’s policy gap: Singapore recognized Indian proceedings, yet India has no reciprocal framework to do the same, owing to its reliance on outdated provisions under Sections 234 and 235 of the IBC, which are dependent on bilateral treaties that have not materialized. With this comes practical and reputational consequences for India which are as follows: a. First, Indian RPs can benefit from global recognition, but foreign insolvency professionals cannot access Indian jurisdictions with equivalent clarity or certainty. b. Second, while the ruling enhances confidence in India’s domestic procedures, it may also pressure India to adopt the Draft Part Z based on the Model Law, currently pending legislative action. Missed Opportunities in Indian Jurisprudence It is undeniable that the insolvency regime in India has improved significantly, but with regard to the cross-border insolvency regime, it still lacks, and here are the missed opportunities in Indian jurisprudence: a. The insolvency bankruptcy code was enacted in 2016, and soon after that, the need for cross-border was realized, and therefore, the Insolvency Law Committee recommended Draft Part Z’s inclusion to address the complexities of insolvency cases involving assets and creditors across different countries. Although Draft Part Z promised structured recognition of both foreign main and non-main proceedings, automatic moratoria, and clear standards for cooperation, it remains unnotified nearly seven years on, forcing stakeholders into ad hoc bilateral protocols rather than a uniform statutory regime. b. Second, the Jet Airways case, which depicts the judicial hesitation to embrace cross-border coordination. In this case the Mumbai NCLT initially rejected the Dutch trustee’s recognition, but the NCLAT partially rectified this by admitting the trustee “without voting rights” and sanctioning a bespoke Cross-Border Insolvency Protocol . This case highlighted the potential for cooperation and the risk that, absent clear law, courts will default to a territorialist posture, delaying asset pooling and value maximization. c. Third, in Videocon Industries, the NCLT sought to “lift the veil” over four foreign subsidiaries to include their assets, but the NCLAT stayed that order and, in effect, excluded significant overseas value from the resolution pool. Now this happens because there is no explicit statutory authority to administer. d. Fourth, India’s reliance on Sections 234–235 IBC (reciprocal treaties and letters of request) continues to be sterile, as there have been no bilateral agreements concluded, rendering these provisions dormant. India’s Draft Framework and Why It Remains Stalled India’s Draft cross-border insolvency framework is based on the UNCITRAL Model Law and remains inexplicably stalled despite growing global integration and increased foreign investment. The delay is not just about the bureaucratic sluggishness; it highlights other issues such as India's persistent consciousness towards relinquishing control in the transnational insolvency matters. The government has hesitated to implement it, citing concerns over judicial discretion, regulatory overlap, and potential misuse. However, one major reason is the fear of giving too much power to the foreign courts in matters involving Indian creditors and assets. Also, the Draft lacks certain clarity on the reciprocity that triggers the uneasiness about enforcing the Indian judgments abroad which might lead to the gap between the global north and global south as well. The Indian government might also be focused upon the sovereign rights that it can realize while keeping the insolvency regime to itself, particularly safeguarding the public interest. Without stronger political will and trust in institutional mechanisms, India risks remaining an outlier in global insolvency cooperation, which is repulsive to investor confidence and cross-border trade. Conclusion The global trend toward recognition without reciprocity reflects an international consensus that efficient cross-border insolvency mechanisms are relevant to economic stability, investor protection, and legal predictability. By continuing to insist on reciprocity and bilateral treaties, India risks isolating itself from this cooperative framework because legislative inertia not only hampers Indian creditors’ ability to recover abroad but also disincentivizes foreign participation in Indian restructurings. It is, therefore, essential that India align itself with the Model Law’s principles and become a proactive contributor to the global insolvency architecture. While at the same time protecting the local and the domestic interests of the creditors. Authored by Mr. Vipul Maheshwari, Managing Partner

The Promotion and Regulation of Online Gaming Bill, 2025 was passed by the Parliament on August 21, 2025, and received Presidential assent on August 22, 2025, thereby becoming the Promotion and Regulation of Online Gaming Act, 2025 (“ Online Gaming Act ”). This marks a significant step towards regulating the online gaming sector in India. The Online Gaming Act will come into force once notified by the Ministry of Electronics and Information Technology. While positioning online gaming as one of the most dynamic and fastest-growing segments of the digital and creative economy, the Online Gaming Act simultaneously imposes for a blanket ban on online money gaming. The industry, presently valued at USD 3.7 billion and has been projected to expand to USD 9.1 billion by the year 2029, is expected to undergo significant restructuring, as the prohibition on online money gaming may curtail a large segment of the market.[1] Concerns over online money gaming, including threats to public safety and national security like youth addiction, mental health issues, financial losses that have led to suicide in extreme cases, and the potential abuse of gaming platforms for money laundering or terrorism financing, prompted the introduction of the Online Gaming  Act. Despite being home to an estimated 400-420 million gamers and gaming platforms[2], India presently lacks a uniform regulatory environment, resulting in numerous policy, legal and consumer protection concerns. The Online Gaming Act seeks to establish a comprehensive legal framework for India's online gaming sector by formally recognising e-Sports and online social games, while prohibiting and criminalising online money gaming services in line with constitutional provisions such as Article 21 (Right to Life and Personal Liberty) and Article 47 (Duty of the State to raise the level of nutrition and the standard of living and to improve public health). Key definitions The Online Gaming Act rests on a precise set of definitions, the interpretation of which is crucial to effectively demarcate boundaries and the structure proposed by the legislature. It defines an "Online Game" as any game played on an electronic or digital device and managed through the internet or other technology facilitating electronic communication. This broad definition covers a wide range of digital gaming experiences, irrespective of format or genre, while drawing a clear distinction between "e-Sports", "Online social games", and "online money games." "e-Sports" are defined as online games that form part of multi-sport events, involving organised competition conducted under predefined rules, where outcomes are determined by participants' skills. Importantly, this definition specifically excludes any element of monetary stakes such as betting or wagering. In contrast, an "Online Money Game" has been defined as any digital game that involves a payment or stake (in money or its equivalent) with the expectation of winning a monetary return. Notably, e-Sports are explicitly excluded from this definition. The Online Gaming Act further brings within its ambit all "Persons", a term that extends to include individuals, companies, and foreign entities offering services to Indian users. It is pertinent to note that, until recently, courts and local gaming laws permitted games of skill but forbade games of chance. Once notified into force, all Online Money Games, whether they are skill-based or chance-based will stand completely prohibited. Salient Features of the Online Gaming Act As part of a policy shift that strikes a balance between prohibition, regulation, and promotion, the Online Gaming Act recognises e-Sports, while restricting Online Money Games. It also creates an enabling framework for the government to promote and regulate the industry. Blanket Ban on Online Money Games, Online Money Gaming Services and any related Advertisements The Online Gaming Act provides that no Person shall provide, aid, abet, induce or otherwise facilitate the provision of Online Money Gaming Services. This provision covers not only direct operators, but also third-party intermediaries and facilitators that provide assistance in any shape or form. The prohibition also applies to aiding, abetting, inducing, or otherwise facilitating the making of any advertisement which in any medium of communication, including electronic communication, directly or indirectly invites or induces a person to play or participate in Online Money Games. As per the Online Gaming Act, any information generated, transmitted, received or hosted in any computer resource in relation to an Online Money Gaming Service in contravention of the provisions of the Online Gaming Act will be blocked for access by the public under the Information Technology Act, 2000. Promotion of e-Sports In contrast to its strict stance on Online Money Games, the Online Gaming Act expressly recognizes e-Sports as a legitimate competitive sport. It empowers the Central Government to frame guidelines for the promotion and development of e-Sports which include establishing academies and research centers, implementing incentive schemes for e-Sports innovation and coordinating with state governments and sporting federations. This marks a significant shift in policy, positioning e-Sports as an organized and regulated sector. The official recognition and growth of e-Sports presents tremendous opportunities, opening an emerging market and encouraging investment in sports infrastructure to support its growth, even though the ban on online money games will cause enormous economic losses. Prohibition on Transfer of Funds The Online Gaming Act places restrictions not only on Online Gaming Platforms, but also on financial intermediaries. Banks, financial institutions and any other Person involved in the facilitation of transactions or authorisation of funds pertaining to Online Money Games would all be seen to permit, aid, abet or induce those prohibited activities. Hence, they will be brought directly within the scope of regulatory and penal provisions. Establishment of a Central Authority A cornerstone of the Online Gaming Act provides for the establishment of a central authority to supervise the online gaming industry. In 2023, the Ministry of Electronics and Information technology introduced provisions under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, for the appointment of self-regulatory bodies (“ SRBs ”) to oversee online games. However, no such SRBs have been appointed till date.[3] Under the Online Money Gaming Act, the Central Government is empowered to vest such the Online Gaming Authority (which is yet to be established), or any such pre-existing body so designated, with the responsibility of performing the following functions, namely registering and classifying online games, issuing operating and compliance guidelines, determining whether a game is an online money game, managing complaints, and ensuring compliance in the industry by providing an industry-wide unified and transparent regulatory framework. The establishment of a central authority is a positive development and brings a much-needed consistency to the online gaming space that has been inconsistent to date due to different state level policies. Offences and Penalties Violation of the provisions of the Online Gaming Act will attract strict criminal liability and substantial monetary penalties. A Person who offers any Online Money Gaming Service may face imprisonment of up to 3 (Three) years and/or a fine which may extend to INR 10 million (USD 1,14,611). Further, any Person who makes or causes to make an advertisement in contravention of the provisions of the Online Gaming Act in any media faces imprisonment of up to 2 (Two) years and/or a fine which may extend up to INR 5 million (USD 57,310). Banks, financial institutions or any Person enabling Online Money Games or financial transactions will be subject to imprisonment for a term of up to 3 (Three) years and/or a fine of up to INR 10 million (USD 1,14,611). The Online Gaming Act also provides for harsher penalties for repeat offenders. Companies will also be included in the scope of liability, as every individual who is in charge of, or who is responsible for, the conduct of the company at the time of the offence will also be liable to punishment. According to the Online Gaming Act, anyone who provides an online money gaming service or game, as well as any bank, financial institution, or intermediary that provides funds for such activities, will be deemed guilty of an offence that is both cognisable and non-bailable. This gives the police the authority to register, investigate, and make an arrest without a warrant, with bail being entirely up to the court's discretion. Existing Laws Governing Gaming Prior to the enactment of the Online Gaming Act, India's legal framework on gaming was fragmented and outdated. Gambling is assigned as a state subject in Entries 34 and 62 of the State List, and regulations varied widely on a state-by-state basis, creating ambiguity. The only central law was the Public Gambling Act, 1867 "PGA", which focused on physical gaming houses and was unfit for digital platforms. Although the PGA allowed for games of "mere skill" to be exempt from consideration, with the rise of online gaming, these gaps became stark. States like Nagaland and Sikkim introduced licensing laws for online skill games, but their effect remained territorially limited. Judicial interpretations on key questions, such as the classification of rummy, poker, or fantasy sports remained varied, with different High Courts and the Supreme Court offering divergent rulings on what constituted a game of skill. The interplay between the current state-level gaming laws and the federal framework is still up for debate. However, since online gaming is not limited to a single territorial jurisdiction and by its very nature operates across state borders, it is anticipated that central legislation will prevail guaranteeing consistent regulation and enforcement throughout India. Conclusion Industry stakeholders like the All-India Gaming Federation, E-Gaming Federation, and the Federation of India Fantasy Sports, have raised serious concerns over the blanket ban on online money gaming and warned that such a law, once brought into force, could cause considerable damage to what they claim is a legitimate, job-creating industry. The Online Gaming Act is poised to spark a constitutional showdown in India. By providing for a ban on Online Money Gaming, it intends to change the established jurisprudence on game of skill vs. chance. One will have to wait and watch whether this legislation threatens prominent gaming companies and jeopardizes India's broader fintech industry or if it practically realises the objectives it professes, such as to establish a safe, innovative, and robust online gaming environment. It will be critical for the financial intermediaries like banks and financial institutions to prepare for and implement appropriate checks and balances to ensure they are not implicated in the prohibited activities. Disclaimer: The contents of this article are as on August 23, 2025, and may change subject to further notifications or updates issued by the Government of India. [1] https://www.indiatoday.in/business/story/game-over-for-online-gaming-firms-industry-in-shock-over-proposed-blanket-ban-2773881-2025-08-20#:~:text=India's%20online%20gaming%20market%20is,to%20%249.1%20billion%20by%202029. [2] https://gamingshow.in/gamingindustry.php [3]https://www.hindustantimes.com/india-news/online-gaming-rules-are-not-enforceable-govt-tells-court-101743202910764.html Author: Rahul Deodhar, Partner and Rencie Rodrigues, Associate