India

TLH Advocates & Solicitors acted as counsel to Patanjali Foods Limited (“PFL”)in a Special Leave Petition filed before the Supreme Court of India challenging the cancellation of its factory zone in the Suryapet district of Telangana, which had been allotted under the National Mission of Edible Oils – Oil Palm (“NMEO-OP”) scheme. The allotment, originally made by the Government of Telangana for oil palm cultivation and processing, was cancelled and re-allotted to a government-owned entity through Government Orders (“G.Os.”) issued in March 2025. Recently, the Division Bench of the Telangana High Court declined interim relief in the Writ Appeal filed against the Single Judge’s order disallowing the Writ Petition filed by Patanjali Foods Limited challenging the GOs. The Supreme Court, in SLP (Civil) No. 5434 of 2026, Patanjali Foods Limited v. Department of Horticulture (“SLP”), issued notice in the SLP and directed the parties to maintain status quo in relation to the cancellation and re-allotment of the Suryapet factory zone. TLH Advocates & Solicitors represented PFL in the SLP and advised on all aspects, including strategy in relation to challenging the G.Os. The firm also represented PFL in the Writ Petition and the Writ Appeal and earlier obtained interim relief for PFL in the Writ Petition. This dispute relates to the government’s power to cancel the allotment of the factory zone under an MOA, raising questions of contract law, fairness in government contracts, applicability of the provisions of the Telangana Oil Palm (Regulation of Production and Processing) Act, 1993 and tests the arbitrariness in issuing the GOs, including on the ground of discrimination under Article 14 of the Constitution of India. TLH disputes team was led by Prahastha Madapathi (Principal Associate) and included Priyanka Deshmukh (Senior Associate) and Saikat Mukherjee (Associate). Mr. Neeraj Kishan Kaul and Mr. Navin Pahwa, Senior Advocates, appeared for PFL in the SLP along with Mr Divyanshu Kumar Srivastava, counsel, and were instructed by TLH Advocates and Solicitors. M/s Agarwal Law Associates acted as the Advocate-on-Record in the SLP. This matter highlights TLH’s expertise in high-stakes commercial litigation with significant public law elements involving the interplay of government contracts and regulatory statutes.

Supreme Court In a recent Judicial pronouncement the Supreme Court came up with the decision supporting the implementation of an existing framework for early detection of financial stress of enterprises, particularly in relation to Macro, Small and Micro Enterprises (MSME) sector, before the Bankers/Lenders could to take up steps for classifying their debt as Non-Performing Asset (NPA) in order to assume coercive measures under SARFAESI Act, for recovery of dues. In fact, non-adherence to such framework was held as violative on the part of Lender/Banker, with the result that any steps taken for NPA declaration or resorting to SARFAESI Act measures, to be running the risk of being declared as null and void. The Supreme Court was called upon to decide the challenge to Bombay High Court judgment passed in exercise of its Writ Jurisdiction, wherein the action of Banker/Lender in declaring the Account of an MSME as NPA and subsequent actions of invoking the measures under SARFAESI Act, was impugned for not adhering to the framework of restructuring process contemplated in the Notification dated 29.05.2015 called, “Framework for Revival and Rehabilitation of MSMEs” (Notification), issued by Ministry of MSME, Govt. of India under MSMED Act. The Hon’ble High Court rejected the Writ holding that Bankers/Lenders are not obliged to adopt the restructuring process contemplated in the Notification on their own, when the MSME had not submitted any application for the same. The Supreme Court however setting aside the decision of the Hon’ble High Court of Bombay, noted that Section 9 of the MSMED Act, empowers Central Government to issue Notification prescribing measures for facilitating promotion, development and enhancing competitiveness of MSMEs and in that regard specify programmes, guidelines or instructions. It was further noted that Section 10 of the MSMED Act, requires implementation Policies/Practices ensuring timely and smooth flow of credit facilities to MSMEs in consonance with Guidelines/instructions of RBI, and minimize the incidence of their sickness and enhance their competitiveness. It was further noted that in support of the Notification of 29.05.2015, the RBI, in exercise of its powers under Section 21 read with Section 35A of Banking Regulation Act, issued Master Direction, called, the “Reserve Bank of India [Lending to Micro, Small and Medium Enterprises (MSME) Sector] Directions, 2016,” (Master Directions) vide the Notification dated 21st July, 2016, thereby advising all scheduled commercial banks to follow the guidelines/instructions pertaining to MSMEs. It was further noted from the scheme/arrangement in the Notification, that it required Bankers/Lenders to identify incipient stress in the account of the concerned enterprise registered as MSME by creating three sub categories as set out in the Notification, in order to explore various options to resolve the stress in the account, in terms of the said Notification. It was further noted, that the Bankers/Lenders stood obliged to implement the measures identified in the Notification, before proceeding to classify the account of the concerned MSME as NPA. It was also noted from the Scheme of the Notification that apart from the Bankers/Lenders adhering to the measures set out in the Notification, the borrower was also entitled to voluntarily initiate the process set out in the Notification by making an application to that effect. Keeping in view the scheme of the Notification read with Master Directions, the Supreme Court noticed that no doubt by virtue of Section 35 the SARFAESI Act shall prevail notwithstanding anything inconsistent in any other law in force; however, the provisions of SARFAESI Act gets triggered consequent to classification of the concerned account as NPA upon default in repayment of secured debt. It was observed that the Banks/Lenders are required to take up steps under the Notification, towards identification of incipient stress in the loan account and according categorization, on the basis of authenticated and verifiable material as furnished by the concerned MSME to establish that the loan account is of a MSME. It was accordingly, held that the implementation of the scheme prescribed in the Notification becomes very crucial, before any loan account of MSME can be classified as NPA. Therefore, until the exhaustion of measures under the Notificfation, the accounts of MSME cannot be classified as NPA, without which the measures under SARFAESI Act cannot be triggered. Taking note of the above position, the Supreme Court negated the findings of High Court that Bankers/Lenders of MSMEs were not obligated to follow the measures prescribed under Notification on its own, until MSME applies for initiation of said measures. While observing that it was mandatory for the Bankers/Lenders to follow the scheme prescribed in the Notification on its own, the Supreme Cour found it equally incumbent upon the concerned MSME to remain vigilant and follow the process set out in the framework of Notification. On that count, the Supreme Court cautioned that in case the MSME remains negligent and allows the process of enforcement of security under SARFAESI Act to get completed, such MSME could not be permitted to misuse process of Notification by taking a plea at belated stage. It is significant to highlight from the aforesaid that the Judgment of Supreme Court clearly weighs in favour of revival of an enterprise, before taking up of any coercive measures against it. In this backdrop, it is relevant to highlight that exactly the same objective can be traced with the scheme of the Insolvency and Bankruptcy Code, 2016 (IBC) as well. So far, eight years down the line from enforcement of IBC, the economic thought leaders and think tanks find tremendous reason to rejoice the successful implementation of IBC, while alluding such reasons to encouraging arithmetic figures of ‘debt resolution’ running into several lakhs of crores. However, the legislative objective of IBC towards ‘resolution of enterprises’ is yet to see a positive prospect, much less an encouraging number. In fact, the infrastructure for enterprise resolution is still struggling to settle and stabilize, and is dependent largely on ad-hoc measures, including interim finance support, for pulling on the sick enterprise as a going concern. The present Judgment of Supreme Court is a manifestation of legislative mandate towards ‘enterprise resolution’ (and not merely ‘debt resolution’), which need be implemented with support from an institutionalized infrastructure. It is high time that Policy framers and stakeholders join hands to implement an institutionalized infrastructure, to support the resolution measures of financially ailing enterprises, rather than leaving them on support of ad-hoc measures. Author: Mr. Jyoti K. Chaudhary

Introduction In the 1990s, India’s banking sector witnessed a notable rise in Non-Performing Assets (NPAs) due to factors like economic slowdown, liberalization, and new lending practices.To address the increasing NPAs, the Indian government, following the Narasimham Committee II's recommendations, introduced the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (“SARFAESI”) Act, 2002. The said act facilitated the creation of Asset Reconstruction Companies (ARCs) in India. ARCs are specialized financial institutions set up to acquire and manage the non-performing assets of banks and financial institutions, and they were established in India in 2003 under the SARFAESI Act, 2002. With the intention of better value realization and to improve the efficiency of ARCs, the Reserve Bank of India (RBI) in terms of the recommendation given by Sudarshan Sen committee, issued the regulatory framework titled “Review of Regulatory Framework for Asset Reconstruction Companies (ARCs)” RBI/2022-23-128 on October 11, 2022. Through the said framework, RBI allowed the ARCs to be resolution applicant entities under the Insolvency and Bankruptcy Code, 2016 (“IBC”). The said framework marked as the revolutionary step in terms of the asset valuation of the Corporate debtor as it focused on enabling the ARC to function in a “more transparent and efficient manner”. While the primary focus of Asset Reconstruction Companies (ARCs) has traditionally been on recovering bad debts, industry experts now anticipate a more proactive role for them. As the sector grows, ARCs are expected to take on a crucial role in reviving struggling companies at an early stage, which could significantly benefit India’s economy. This shift towards timely intervention will require regulatory support. The present article discusses the interplay between the new RBI Guidelines of 2024 and the evolving role of ARCs Significance of ARCs in the resolution process As forecasted, ARCs played vital role in the resolution process than acting merely as the recovery agent. ARCs brought specialized expertise in asset management and recovery. Unlike traditional banks, ARCs employed professionals with experience in turnaround strategies, legal frameworks, and sector-specific knowledge. This expertise enabled them to devise innovative resolution strategies, negotiate with stakeholders, and maximize recovery values. The role of ARCs proved to be indispensable in ensuring that the distressed assets are efficiently managed and productive resources are optimally utilized, ultimately contributed to overall economic growth. Following are the key advantages of including the ARCs as resolution applicants under IBC: ARCs possess in-depth expertise in managing and resolving distressed assets, thus making it the best source for assets realization. Due to high number of NOF, ARCs have the ability to customize resolution plans specific to the needs of each case, enhancing the likelihood of achieving coherent and mutually beneficial outcomes. The ARCs, being are large firms are well equipped with the management which covers every aspect of the resolution process, thus their involvement ensures higher degree of governance in the resolution process. New role of ARCs ARC have primarily played a reactive role, focusing on recovering assets from non-performing assets (NPAs). With nearly 30 licensed ARCs currently operating in the country, this sector has seen significant growth since the Reserve Bank of India first introduced this licensing category. Now with the change in sector, it is expected that the ARCs play more proactive role in early detection of the distressed assets. At present, IBC only applies when businesses are struggling severely. However, with the evolving role of ARCs, the expectation is that they will intervene much earlier to prevent companies from reaching this critical stage. Consequently, in general parlance, ARCs comes into play when the assets of the company are termed as NPAs. While the model was satisfactory when it was first proposed, today ARCs can offer much more than simply reviving bad loans. With the proper setup, ARCs can gain much more by early identification of the assets from turning bad and subsequent repair them for maximum value. To prevent Companies from slipping into the vicious cycle of bad debts and loans, ARCs can use indicators and flags data to show lack of innovation, customer satisfactions, continue demands, future sustainability of the products etc as the early warning signs. By analyzing these warning signs and coordinating effectively with the bank, ARCs can play a more proactive role within the IBC framework. Regulatory Framework and Future Directions As the way to protect the interest stakeholders of the insolvency proceedings and to further strengthen and streamline the role of ARCs, RBI later in 2024 issued the Mater Direction on Asset Reconstruction Companies, 2024 (“Directions 2024”) RBI/DOR/2024-25/116. It is pertinent to mention that while the previous the RBI framework focused on the internal governance of the ARCs, this time the directions were elaborative and covered several aspects of the ARCs workings. Following are the Checks and Balances provision mentioned in the Directions, 2024 to prevent Collusion. Regulatory Oversight and Registration Requirements  Stringent Registration Norms: The RBI requires ARCs to obtain a certificate of registration before commencing operations. This involves a thorough vetting process, including an assessment of the promoters’ background, the company’s financial strength, and its proposed business plan. Continuous Monitoring: ARCs are subject to continuous monitoring and periodic inspections by the RBI to ensure compliance with regulatory norms and to detect any signs of malpractices, including collusion. Governance and Management Controls Fit and Proper Criteria: The RBI mandates that the directors and key management personnel of ARCs must meet the ‘fit and proper’ criteria, which includes assessments of their integrity, experience, competence, and financial soundness. Independent Directors: ARCs are required to have a certain number of independent directors on their boards to ensure impartiality and to provide an external perspective on the company's operations and decision-making processes. Valuation and Acquisition Practices Fair Valuation of Assets: The RBI has set guidelines for the fair valuation of NPAs to ensure that ARCs do not overpay or underpay for these assets, which could be a sign of collusion. As per the Directions, the valuation process should be uniform and is done in a scientific and objective manner. Independent Valuation: The Directions provides provision for engaging independent valuers to assess the value of NPAs before acquisition. This prevents any manipulation of asset prices that could facilitate collusion. Conflict of Interest Policies Code of Conduct: ARCs must adhere to a strict code of conduct that prohibits any activities that could lead to conflicts of interest, including collusion with corporate debtors. Whistleblower Mechanism: A robust whistleblower mechanism should be in place to allow employees and stakeholders to report any suspicious activities or potential collusion without fear of retaliation. Regulatory Penalties and Sanctions Penalties for Non-compliance: The RBI has the authority to impose penalties on ARCs for non-compliance with regulatory norms, including instances of collusion with corporate debtors. Revocation of Registration: In severe cases of malpractice, including proven collusion, the RBI can revoke the registration of an ARC, effectively ceasing its operations. Disclosure Requirements and Transparency Transparency in operations is critical for ARCs to maintain trust with stakeholders and regulators. Key disclosure requirements include: Annual Reports: ARCs must publish detailed annual reports that include financial statements, details of asset acquisitions, recoveries, and resolution strategies. Periodic Filings: Regular filings with the RBI, including quarterly and half-yearly reports on operational metrics and financial performance  Conclusion The inclusion of ARCs as part of the resolution process has undoubtedly contributed to quicker and more effective company resolutions. By acting as resolution applicants, ARCs bring their specialized expertise in asset management, which helps in maximizing the recovery of distressed assets and improving governance during the resolution process. This shift from a reactive to a more proactive role is expected to significantly enhance the overall effectiveness of the insolvency framework in India. As ARCs begin to intervene earlier, their ability to identify potential distress signs before assets turn non-performing can help prevent companies from entering the vicious cycle of bad debts and insolvency proceedings. This proactive approach can not only improve asset recovery but also reduce the economic burden of distressed businesses on the broader economy. However, the success of this initiative will largely depend on the pecific policies and operational frameworks that each ARC establishes, particularly with regard to sectoral exposure limits and their ability to manage early-stage distressed assets. The regulatory changes outlined in the RBI's Directions 2024 are a crucial factor in determining how effectively ARCs can perform their new role. These guidelines, which include stringent registration norms, transparency in operations, and conflict-of-interest policies, will ensure that ARCs operate in a sound and ethical manner, safeguarding the interests of all stakeholders involved in the resolution process. Looking forward, it is essential for ARCs to effectively implement these regulatory directions, focusing not only on financial outcomes but also on ensuring fair, transparent, and efficient resolution procedures. If these guidelines are adhered to, ARCs can play a transformative role in India's insolvency landscape, promoting faster economic recovery and enabling a healthier business environment for the future. References The Securitisation and Reconstruction of Financial Assets And Enforcement Of Security Interest Act, 2002 Insolvency and Bankruptcy Code, 2016 RBI/2022-23/128 DoR.SIG.FIN.REC.75/26.03.001/2022-23. RBI/DOR/2024-25/116 DoR.FIN.REC.16/26.03.001/2024-25. Yash Gupta, Asset Reconstruction Company- A way ahead as a Resolution Applicant under IBC, IBC Laws. Report of the Committee to Review the Working of Asset Reconstruction Companies. Abhizer Diwanji and Srinath Sridharan, Asset reconstruction companies should change their orientation.

Introduction Gujarat International Finance Tec-City (“GIFT City”) located at Gandhinagar, Gujarat is India’s first International Financial Service Centre (“IFSC”) and the first operational smart city designed with an unequivocal focus to be a game-changer for India’s financial services market aims at becoming a global financial hub at par with international financial zones.With an objective to “onshore the offshoring of business”, the idea of GIFT City was envisaged back in 2008 and became operational in 2015. The simplified regulations bundled with various tax & other advantages offer an inviting ecosystem making it a promising destination for both local and global investors. With a specific attention on financial services, it also becomes a propitious landscape for both domestic and international financial giants. An IFSC is a specific location within the mainland of the country treated as a foreign location with an intent to enable global business offering a worldwide regulatory regime. IFSC at GIFT City gives an opportunity to global and domestic businesses to set up a company, limited liability partnership, subsidiary in the GIFT City under various business verticals including but not limited banking, insurance, stock exchange, alternate investment funds, aircraft leasing, ship craft leasing, etc. Investment in GIFT City: Game-changer for Investing in India Unified Regulator & Single Window Clearance  IFSC in India are governed by a unified regulator named  IFSC Authority (“IFSCA”) which encompasses regulatory powers of four financial services regulators in India namely Reserve Bank of India (“RBI”), Securities Exchange Board of India (“SEBI”), Insurance Regulatory Development Authority of India (“IRDAI”), Pension Fund Regulatory & Development Authority of India (“PFRDAI”) enabling it to provide single window clearance for all necessary approvals under one umbrella  in an easy manner. State-of-the-art infrastructure & easy setting up The spectacular and unparalleled urban planning done by the Government of Gujarat and Government of India gives heads up to the next- gen ‘plug & play’ infrastructure, facilitating quick and hassle-free business setup with all the infrastructural clearances in place. GIFT City Special Economic Zone(“SEZ”) The SEZ is created to encourage exports and foreign investment especially for multinational corporations. SEZ offers benefits to the businesses operating in this zone, including duty-free imports and exports, easy regulatory processes, tax benefits. GIFT City is the first IFSC in India and to make it all the more alluring and enticing the Government of India also declared it as a SEZ. Deemed Foreign Jurisdiction  GIFT IFSC has been designated as a foreign jurisdiction of a non-resident zone under the Foreign Exchange Management Act (“FEMA”) Regulations enabling affability for carrying out foreign exchange transactions in liberal manner. The entities setup in the GIFT IFSC can transact in, retain, repatriate the foreign currencies without limitations which are otherwise applicable to the mainland India. Easy movement of foreign capital  The offshore status of the GIFT IFSC bundled with various relaxations and less restrictive financial regulations makes it an attractive destination for foreign investors allowing unrestricted movement of fund invested in the form of repatriation of profits, dividends and investments back to the home country of the foreign investors. Liberal policies and business friendly regulatory framework  The regulatory regime of GIFT IFSC is formulated to parallel the best practices accepted globally facilitating flexibility and reduced compliance burden. Amongst the plethora of such benefits a few noteworthy relaxations includes exemption to non-residents from obtaining permanent account number (“PAN”) or filing return of income in India in certain circumstances. Tax Benefits in GIFT IFSC Tax benefits to the IFSC Units setup in GIFT City: The IFSC units setup in the GIFT City, India offers various tax benefits like exemptions on corporate tax, tax holiday for ten years, reduced Minimum Alternative Tax (“MAT”) etc increasing the profitability and hence growth of the business houses. It also offers numerous indirect tax benefits such as no Goods and Service Tax (“GST”) on services received by unit in IFSC, no GST on services provided to IFSC units / SEZ units / offshore clients. If the services are provided to the Domestic Tariff Area of mainland India then the GST is applicable under Reverse Charge Mechanism.   2. Tax benefits to the Investor investing in IFSC GIFT City: The investor investing in the GIFT IFSC gets numerous fiscal benefits including but not limited to the benefits such as interest income paid to non-residents on money lent to IFSC units in GIFT city are exempted from tax, transfer of specified securities listed on IFSC exchanges by non-residents are not treated as a transfer and  hence gains arising from such transfers are not treated as capital gains and are taxable in India , exemption from Securities Transaction Tax (“STT”) , exemption from  Commodity Transaction Tax (“CTT”), dividend received by investor in IFSC unit is subjected to concessional rate of tax, no GST on transactions carried out in IFSC exchanges. Various financial benefits and incentives The Government of Gujarat provides various state incentives in the form of financial incentives support schemes to attract companies and investors to GIFT IFSC. These incentives include grants, subsidies, and reduced operational costs due to OPEX support, CAPEX support, employment generation incentives. The government has also announced various state level incentives and subsidies to Information Technology (IT) and Information Technology Enabled Services (ITeS) Companies. Global IT & financial hub  GIFT City India provides distinguished benefits to the financial, IT/ ITeS companies making it a pivotal bedrock at par with the various global financial and IT hubs. GIFT City is a vision of the Government of India and Gujarat aiming to serve as a centre for global banking, trade, and business. Benefits of GIFT City for startups To promote the innovation of ideas and entrepreneurship IFSC-GIFT City provides dedicated FinTech sandboxes and requisite startup friendly environment with an aim to shape and fulfill the aspirations and ambitions of start-ups and entrepreneurs. Exemptions under the Companies Act of India for the companies set up GIFT IFSC There are various exemptions and relaxations given to the companies being setup in the GIFT IFSC with respect to the regulatory requirements under Companies Act in India. Few are enumerated as follows: The requirement of having minimum one resident director is waived in a company setup in GIFT IFSC, making it more empirical for the foreign entities to set up in India with the management people they are familiar with; Exemption for applicability of secretarial standard which lays down the procedural aspect of in relation to the board meeting and general meeting; Relaxation in compliance with regards to loans, advances, guarantees and investment by the companies setup in GIFT IFSC; Exemption in relation to appointment of internal auditor. Conclusion The Government of India recognizes and reinforces that tapping the global capital and global market are the key drivers for the development of businesses across the borders and plays a pivotal role in the overall economic growth and to strengthen the position of the country in the global economy. GIFT City accoutered with immense potential and growth opportunities is a magnum opus of the Government of India. Setting up a business entity at GIFT City will help international and domestic businesses to capitalize on the above-mentioned benefits and strategically unlock the growth opportunities and thrive in dynamic and conducive environment offered by the GIFT City. Author: Guneet Mayall (Senior Associate)