India

Historical Relationship and Economic Collaboration India and Japan share one of Asia's most enduring and philosophically grounded bilateral partnerships. Rooted in Buddhist cultural ties and a shared commitment to democracy, the rule of law, and an open international order, the relationship has evolved from a development-assistance dynamic into a full-spectrum "Special Strategic and Global Partnership"- a designation formalised in 2014 during Prime Minister Modi's landmark visit to Tokyo.[1] The "Japan and India Vision 2025", which was a roadmap for deep, broad-based collaboration across sectors[2] has been supplemented by the ambitious "Japan-India Joint Vision for the Next Decade", which encompasses increasing cooperation and collaboration in security, defence, clean energy, technology, space, and a landmark human resource exchange programme.[3] In 2025, the two sides set a new target of Japanese Yen (“JPY” or “Yen”) 10 trillion of private investment from Japan into India over the next decade, surpassing the earlier JPY 5 trillion target of 2022.[4] This expansion signals an extraordinary vote of confidence and creates an immediate commercial pipeline for legal, financial, and advisory work. Latest policy developments further underscore the commitment of both countries to deepen investment linkages. Japan has proposed the establishment of a dedicated investment facilitation cell in India, aimed at supporting Japanese companies in navigating regulatory processes, addressing operational challenges and accelerating market entry.[5] Further, the India-Japan Comprehensive Economic Partnership Agreement, in force since August 2011, governs goods, services, investment, intellectual property, and movement of persons, as well as provides for tariff elimination.[6] Collectively, these changes are indicative of an emerging investment corridor, one that is not just backed by capital investment, but institutionalized, legal frameworks that are meant to turn will into a long-term, scalable commercial activity. Infrastructure Financing and ODA Japan remains India's largest bilateral donor, having extended loans and grants since 1958. As of the latest available data, accumulated commitments exceed JPY 6.978 billion, with 84 ongoing projects across power, transportation, environment, and basic human-needs infrastructure.[7] In March 2025, the two governments signed six loan agreements worth JPY 191.736 billion, continuing a tradition of developmental financing that dates back over six decades.[8] The flagship infrastructure initiative remains the Mumbai-Ahmedabad High-Speed Rail Corridor - India's first bullet train project, largely funded through a Japan International Cooperation Agency (“JICA”) loan. Beyond the bullet train, Japan has financed over 750 kilometres of road infrastructure in India's northeast[9], extended Official Development Assistance (“ODA”) loans for Delhi Metro Phase IV, and is pursuing smart islands and port digitalisation projects in the Andaman & Nicobar and Lakshadweep islands.[10] Infrastructure projects financed through JICA and Japan Bank for International Cooperation (“JBIC”) carry specific procurement and contractual standards, including requirements around competitive bidding, environmental and social safeguard frameworks, and dispute resolution mechanisms often aligned with Japanese government procurement norms. Cross-border financing structures require careful navigation of India's exchange control laws and External Commercial Borrowing (“ECB”) regulations, and sector-specific regulatory approvals. As projects progress to construction and operations phases, legal practitioners in project finance, engineering, procurement, and construction contracting, land acquisition, and arbitration will find growing opportunities. Long-Term Joint Ventures Japanese corporate presence in India has become substantial and structurally diversified. As of October 2024, 1,434 Japanese companies operate in India through 5,205 business establishments.[11] Long-term JVs have been the dominant structural model. The Government of India has facilitated these arrangements through the "Japan Plus Desk" mechanism under the Department for Promotion of Industry and Internal Trade of India (“DPIIT”), a dedicated team with representatives from the Indian government and Japan's Ministry of Economy, Trade and Industry (“METI”) tasked with investment facilitation, regulatory liaison, and promotion of Japanese Foreign Direct Investment (“FDI”).[12] The India–Japan Industrial Competitiveness Partnership (“IJICP”), anchored in a 2021 Memorandum of Cooperation (“MoC”) between DPIIT and METI, provides the institutional framework for identifying and removing structural barriers to joint manufacturing competitiveness.[13]  In terms of the legal landscape, long-term JV structures generate work across the lifecycle: shareholder agreements, technology licence and transfer agreements, operational frameworks, IP ownership and confidentiality, and eventual exit or restructuring. Japanese FDI in India Japan is India's fifth-largest FDI source nation, with cumulative equity inflows of approximately United States Dollar (“USD”) 43.28 billion between April 2000 and December 2024 (representing approximately 6% of total cumulative FDI into India).[14] The JBIC's 2024 survey ranked India as the top promising country over the medium term (next 3 years).[15] Japanese annual direct investment in India's transportation sector alone increased more than sevenfold between 2021 and 2024, reaching nearly USD 1.91 billion, while simultaneously declining in China's transport sector.[16] Indian Investments in Japan As of 2022, the number of Indian companies working in Japan is increasing, with the number of such companies crossing 100, and India’s net foreign direct investment in Japan standing at 1.798 million.[17] The corporate footprint of Indian firms in Japan includes some major firms like Tata Consultancy Services, Canara Bank, ShimBi Labs, Tech Mahindra and Cyient.[18] Human Resource Exchange People-to-people movement has long underpinned the bilateral commercial relationship. Japan's JICA has sent 11,835 Japanese experts to India and trained 8,400 Indian professionals in Japan.[19] As of December 2024, approximately 53,974 Indian nationals reside in Japan, a community whose commercial importance in IT, engineering, and caregiving is growing rapidly.[20] The transformative moment came in August 2025 with the Action Plan for India-Japan Human Resource Exchange and Cooperation, announced at the 2025 Annual Summit.[21] The plan sets an aspirational target of facilitating the two-way movement of more than 500,000 personnel within five years. Japan and India also have a social security agreement, which eliminates double social security contributions for Indian workers in Japan, provided that the Indian worker is covered under the social security system of India and continues to pay his/her contribution during the period of overseas contract.[22] It will also enable them to repatriate or transfer their accrued social security benefits upon relocation to India or another jurisdiction.   Latest Economic Trends Japan’s changing monetary policy For decades, Japan’s monetary policy served as a primary engine for global "carry trades," where investors borrowed Yen at negligible interest rates to invest in higher-yielding assets abroad. However, as of early 2026, the Bank of Japan has decisively moved toward raising interest rates to combat domestic inflation. For Indian entities, this shift signals a potential rise in the cost of capital. As the Yen strengthens, Indian investments into Japan become more expensive and Indian companies with Yen-denominated ECBs may face increased repayment burdens. However, the rising Yen and falling rupee can accelerate long-term FDI in India, which will support Japan’s goals to invest 10 trillion Yen into India over the next decade.[23] Supply Chain Diversification: The "China +1" Strategy The "China +1" strategy has evolved from a defensive trend into a strategic mandate for Japan and India. Japan is actively de-risking its manufacturing base by establishing supply channels with friendly countries and decreasing reliance on China. India is emerging as an important "Plus One" destination, specifically in semiconductors, pharmaceuticals, and critical minerals sectors. This transition is codified through G2G frameworks like the India-Japan Digital Partnership 2.0, which facilitates "friend-shoring" of moving critical production to politically aligned partners to avoid the logistical vulnerabilities of over-reliance on a single country. Implications of the West Asia Conflict As the West Asia conflict intensifies, countries all over the world face supply chain crunches and economic uncertainties, India and Japan are focused on enhancing collaboration in key sectors such as critical minerals, semiconductors and AI, with a central theme of de-risking their economies from supply chain reliance and geopolitical shock.[24] Sectoral Analysis It is in this context of growing economic convergence and changing world priorities that the India-Japan relationship is now being characterised by industry-specific cooperation. The relationship is no longer pegged on any single pillar like infrastructure or automobiles, but rather is playing out in a series of strategic areas that integrate capital, technology, policy support and long-term demand. At this stage, it is important to take a closer look at the major sectoral focus areas so as to know where the next stage of India-Japan interaction is going to culminate. Automobiles and manufacturing The most established and commercially entrenched pillar of the India-Japan economic relationship is the automobile and manufacturing industry. The total FDI equity inflow of Japan into India was USD 43.36 billion between January 2000 and December 2024, and the automobile industry was the largest recipient of Japanese FDI in India, 16.87% of the total.[25] What distinguishes Japanese investment in this sector is not just scale, but structure. Japanese participation in India has historically been long-horizon, manufacturing-led and vendor-network driven. That model persists to date; however, it is changing. The Embassy of Japan in India and Japan External Trade Organization indicated that as of October 2024, there are 1,434 Japanese companies and 5,205 business establishments in India, and over half of all Japanese companies and more than one-third of their operational bases are in the manufacturing sector.[26] This implies that the automotive relationship is part of a broader Japanese industrial presence, which encompasses components, machinery, and electrical equipment. The industry can thus not be viewed as a sole Original Equipment Manufacturer (“OEM”) narrative but as a whole manufacturing ecosystem with a huge bearing on supply contracts, localisation, industrial land, technology transfer and vendor compliance. The institutional structure of this ecosystem has been getting more organised in recent years on a bilateral basis. The formal mechanism is the IJICP, based on the MoC between the DPIIT and the METI.[27] The partnership is aimed at improving the industrial competitiveness of India and increasing the industrial and R&D collaboration between India and Japan. The current regulatory environment remains highly favourable to Japanese automotive and manufacturing investors. India’s FDI policy permits 100% foreign investment under the automatic route in manufacturing, and manufacturers are permitted to sell products manufactured in India through wholesale and/or retail, including e-commerce, without prior government approval.[28] This has been one of the central legal enablers for Japanese investment because it allows integrated manufacturing structures spanning production, distribution and exports. India’s policy is now explicitly geared toward moving the India-Japan automotive partnership beyond conventional assembly into electric mobility, batteries and advanced components. The centrepiece is the Production Linked Incentive (“PLI”) Scheme for Automobile and Auto Components, with an outlay of INR 25,938 crore.[29] The scheme is designed to promote domestic manufacturing of advanced automotive technology products, including electric and hydrogen-based mobility technologies and high-value auto components. For Japanese investors, this is highly material: Japanese OEMs and suppliers are well-placed in exactly the technologies- precision components, EV systems, power electronics, fuel-efficiency technologies and high-quality manufacturing processes that the scheme is designed to incentivise. The policy picture is reinforced by adjacent schemes relevant to the EV manufacturing chain, like the PLI Scheme for Advanced Chemistry Cell Battery Storage[30] and PM E-DRIVE Scheme.[31] Recent developments suggest that Japanese manufacturers continue to see India not only as a demand market, but increasingly as a production and export base. Suzuki’s latest announcement in March 2026 is a useful example: Maruti Suzuki approved an investment of INR 101.9 billion for the first phase of a new Gujarat plant with an annual capacity of 2,50,000 units.[32] Bilateral policy is also moving into mobility-tech cooperation: the 2025 India–Japan Economic Security Cooperation fact sheet records joint Vehicle-to-Everything demonstration experiments, annual technical workshops, and collaboration on intelligent transportation systems.[33] This indicates that the manufacturing relationship is beginning to merge with software, connectivity and smart-mobility regulation. From a legal and business-development perspective, that is the real takeaway. The India–Japan automotive and manufacturing corridor is no longer confined to legacy OEM investment. It now sits at the intersection of industrial policy, localisation, EV and battery incentives, cross-border technology transfers, smart-mobility systems and supply-chain restructuring. Critical Minerals The critical minerals sector is emerging as one of the most strategically important, though still relatively early-stage, pillars of the India–Japan economic relationship. Unlike automobiles and manufacturing, where Japanese investment is already deep and measurable, the critical minerals partnership is presently being shaped more by strategic policy alignment and supply-chain security concerns. As per data, the metallurgical industries account for 6.49% of cumulative Japanese FDI into India from January 2000 to December 2024.[34] That figure is relevant, but it does not fully capture the scale or trajectory of the critical minerals partnership now under formation. The strategic logic of cooperation is clear. Both India and Japan are seeking to reduce excessive dependence on concentrated overseas supply chains, particularly Chinese processing capacity for minerals that are essential to batteries, electric vehicles, semiconductors, clean energy equipment and defence manufacturing.[35] In this context, India and Japan are not merely pursuing a mining relationship; they are attempting to build a broader framework for ensuring resilient supply chains which are immune from Chinese dependencies. In August 2025, India’s Ministry of Mines and Japan’s METI signed a MoC on Mineral Resources.[36] This is the most important recent bilateral instrument in the sector. The memorandum covers cooperation in exploration, mining, extraction, processing, recycling, stockpiling and supply-chain resilience, and expressly contemplates joint investments in India as well as other resource-rich countries. It also provides for the establishment of a joint working group, indicating an intention to move towards a more institutionalised partnership. The most prominent example of India-Japan economic partnership in the critical minerals sector is the collaboration between Indian Rare Earths Limited and Toyota Tsusho, which led to the establishment of Toyotsu Rare Earths India in Andhra Pradesh, which has become a crucial supply chain node for critical minerals.[37] With the introduction of various schemes and measures, the emphasis of India-Japan partnership is slowly shifting from the export of raw or semi-processed mineral material toward the creation of a domestic “mines-to-magnets” ecosystem. The regulatory environment has evolved significantly to support this transition. India’s FDI policy permits 100% foreign investment under the automatic route for mining and exploration of metal and non-metal ores, subject to sectoral laws.[38] At the same time, certain strategically sensitive minerals remain subject to tighter conditions, including cases where government approval, domestic value addition or technology transfer requirements may apply. A particularly important enabling reform came through the Mines and Minerals (Development and Regulation) Amendment Act, 2023, which removed several minerals from the list of “atomic minerals”, thereby opening them to private participation and auction-based allocation.[39] That reform substantially widened the pathway for foreign strategic investors, including Japanese participants, to enter upstream resource projects in India. Government policy in this sector is being driven by the National Critical Mineral Mission (“NCMM”), approved in 2025 with an outlay of approximately INR 34,300 crore.[40] The mission is designed to support the full critical minerals value chain, including exploration, mining, beneficiation, processing, recycling, stockpiling and overseas asset acquisition. The NCMM is intended to streamline approvals, support value addition, and reduce strategic vulnerability in key minerals. The critical minerals sector, therefore, represents a different stage of India–Japan economic cooperation from automobiles. It is less mature in terms of visible FDI, but more strategic in policy significance. Nuclear energy India has recently opened its nuclear energy sector to the private sector. The target is to increase India’s nuclear energy capacity tenfold to 100 gigawatts by 2047[41], which requires an estimated investment of USD 226 billion.[42] The government has passed a bill to overhaul the regulatory landscape for nuclear energy in India, allowing private companies to: (i) build, own, and operate nuclear plant or reactor; and (ii) fabricate, transport, trade, and store nuclear fuel. India’s foreign investment policy continues to prohibit FDI in atomic energy. However, the government has clarified that there is no restriction on FDI in the nuclear industry for the manufacturing of equipment and providing other supplies for nuclear power plants and related facilities.[43] Japan, a global leader in nuclear technology, is well placed to bolster India's atomic energy sector. The potential for increasing collaboration and investment in the nuclear energy sector was highlighted by Prime Minister Narendra Modi in the India-Japan Economic Forum 2025.[44] Further, the India-Japan Agreement for Cooperation in the Peaceful Uses of Nuclear Energy, which came into force in 2017, provides a legal framework for Japan to export nuclear technology, equipment, and materials to India, therefore facilitating deeper strategic and commercial engagement in this sector. India’s growing emphasis on the development of nuclear energy, together with cooperation agreements between India and Japan, positions the sector as a viable avenue for India-Japan collaboration. Pharmaceuticals The Pharmaceutical sector is a key growth sector for India and Japan. While India is one of the leading countries in mass manufacturing of drugs (3rd largest producer of pharmaceuticals by volume and 13th largest producer of pharmaceuticals by value[45]), Japan is a global hub for research and innovation in pharmaceuticals. This sector draws 4% of India’s total FDI.[46] FDI in the pharmaceutical industry (including for the manufacturing of medical devices) is permitted up to 100% through the automatic route. For investment in brownfield projects, up to 74% is allowed through automatic route, after which government approval is required. Investment link conditions for this sector include: (i) prohibition of non-compete clause against promoters and existing shareholders; (ii) for brownfield investments, maintenance of the same production level of essential medicines and research and development expenses. The Indian government has introduced PLI schemes in the pharmaceutical sector, which are aimed at promoting domestic manufacturing of critical bulk drugs such as Active Pharmaceutical Ingredients (“APIs”), Key Starting Materials (“KSMs”), and drug intermediates, particularly those where India has high import dependence (notably on China). The scheme also supports the production of high-value products, including complex generics, biopharmaceuticals, and patented drugs, through financial incentives tied to incremental sales. By targeting these segments, the Indian government is trying to reduce supply chain vulnerabilities and enhance technological capabilities in essential medicines. These schemes align seamlessly with Japan and India’s China +1 strategy, with its focus on decreasing reliance on China for critical inputs like APIs and KSMs. India’s robust generic drug production, cost advantages, and government-backed incentives position it as an ideal “Plus One” destination for Japanese firms. Semiconductors India is aggressively positioning itself as a global semiconductor hub. The domestic semiconductor market, valued at approximately USD 52 billion in 2025, is projected to cross USD 100-110 billion by 2030.[47] To catalyse this, the Government of India launched the India Semiconductor Mission (“ISM”), which was expanded in the 2026 Budget as ISM 2.0 with an outlay of INR 10 billion.[48] This new phase pivots toward a comprehensive ecosystem approach, focusing on indigenous intellectual property (“IP”), semiconductor equipment, and speciality chemicals. India’s FDI policy for this sector allows 100% investment through the automatic route. Under the ISM, the central government provides fiscal support of up to 50% of the project cost on a pari-passu basis for setting up semiconductor and display fabs.[49] Complementing central schemes, several Indian states such as Gujarat, Uttar Pradesh and Odisha have introduced dedicated semiconductor policies to provide top-up capital incentives. These schemes inter alia offer additional state subsidies, capital assistance and power supply guarantee. Japan is a vital partner in this journey. In July 2023, India and Japan signed an MoC on the Semiconductor Supply Chain Partnership, focusing on design and manufacturing. This synergy was further emphasized in the India-Japan Digital Partnership 2.0 (2025), facilitating joint ventures like the Renesas-CG Power OSAT facility.[50] With access to India’s massive electronics market and state-backed fiscal subsidies, Japanese companies are well-positioned to lead the next wave of global semiconductor manufacturing from India. Global Capability Centres As of December 2025, the government reported that India has over 1700 Global Capability Centres (“GCCs”) and the sector is projected to grow to 2,400 GCCs and attract USD 105 billion investment by 2030.[51] These offshore units help multination companies in harnessing India’s skilled workforce and deploying it in key interest areas such as information technology, research and development, customer support, and other business operations. For GCCs involved in sectors such as IT/ITeS, research and development and outsourcing activities, 100% foreign investment is allowed through the automatic route. Key central and state-level policies promote GCCs include: (i) the Software Technology Parks of India scheme which offers single-window clearances and various tax incentives; (ii) Karnataka’s GCC Policy 2024-2029 which provides land subsidies, power rebates, and innovation grants up to INR 5 million; and (iii) Gujarat’s GCC Policy 2025 which targets IFSC units with zero stamp duty and 100% electricity duty exemption for 10 years, various tax exemptions and seamless forex operations. In the 2026 Budget, Finance Minister Nirmala Sitharaman proposed a national GCC framework to promote hubs in tier-2 cities[52] which may entail enhanced tax incentives. The government has implemented new labour codes designed to streamline regulatory compliance by removing duplicative requirements relating to registrations, returns, and maintenance of registers, which is expected to enhance the ease of doing business for GCCs. Japanese entities can significantly cut costs through access to 28% of the global STEM workforce and 23% of global software engineering talent[53] at competitive salaries while maintaining proximity (1.5-hour time gap). Artificial Intelligence The AI segment of the India–Japan relationship is comparatively recent, and unlike manufacturing or infrastructure, it is not yet reflected in clearly disaggregated FDI data. Instead, AI-linked investments are captured within broader sectors such as computer software and hardware, services, telecom and digital infrastructure- areas in which Japan already has a visible presence in India’s FDI inflows.[54] The absence of clean data is not indicative of weak engagement; rather, it reflects the fact that AI is still emerging as a cross-sectoral layer over existing industries. The India-Japan AI relationship is being driven by complementarity between India’s digital talent and Japan’s industrial and enterprise technology base, combined with a shared interest in developing trusted and secure digital ecosystems. The institutional foundation for this cooperation is the India-Japan Digital Partnership 2.0, formalised through a MoC in August 2025.[55] India and Japan have committed to developing safe, secure, and trustworthy AI systems that are human-centric and aligned with sustainable development goals. They will further intensify cooperation on the international level, including the Hiroshima AI Process, the UN, and AI Safety Summits, and enhance bilateral cooperation. The MoC is also concerned with the development of collaborative mechanisms of AI safety and security, such as constant monitoring, resilient protocols, and interoperable standards throughout the AI lifecycle. The India-Japan AI Cooperation Initiative offers a more dedicated platform to collaborate in the field of large language models, joint research and academic-industry collaboration.[56] The significance of such developments is that AI is no longer an implicit part of IT cooperation but a bilateral priority with a formal engagement mechanism. The Indian regulatory framework on AI is in the process of development, yet some of the foundational aspects have already been put in place. One of these projects is the India AI Mission, March 2024, with a budgetary allocation of INR 10,371.92 crore.[57] The mission seeks to establish a full AI ecosystem with public compute infrastructure, indigenous foundational models support, startup funding, datasets, and skilling and governance frameworks for safe and trusted AI. Simultaneously, AI operations in India are becoming more influenced by the larger digital regulatory system. Penetration into the AI industry in India is not so much about gaining production-related incentives as it is about positioning within the digital infrastructure, enterprise adoption, research partnership and platform development. A unique aspect of the India-Japan AI relationship is the contribution of Indian IT and digital services companies based in Japan. Indian companies, including TCS, Infosys and HCL, have established a long-standing presence in Japan, which has helped them to transform themselves with the advent of digital engineering and IT modernisation.[58] Concurrently, bilateral policy actions, like the 2025 human resource exchange scheme, are anticipated to increase the influx of Indian digital talent into Japan, which strengthens AI collaboration by people, rather than capital. Recent developments suggest that the AI partnership is moving from policy articulation to operationalisation. Formalisation of Digital Partnership 2.0, introduction of the AI Cooperation Initiative and the growth of data-centre and digital infrastructure investments all point to the idea that AI is becoming a fundamental component of India-Japan economic activity, not an adjunct layer of technology.[59] It is pertinent to note that India is still developing regulatory frameworks, and companies venturing into this area will have to negotiate a blend of data protection law, sector-specific regulations, and cross-border safety parameters. Defence The India-Japan defence relationship has developed to a more operational strategic alliance, which is a huge shift from usual diplomatic arrangements. What previously existed as dialogues and joint exercises is now extending into technology transfer, co-development and defence industrial cooperation, indicating a deeper convergence of security interests in the Indo-Pacific. Security engagement was established by the Joint Declaration on Security Cooperation (2008)[60], and since then, two key agreements were brought into effect in 2015: the Agreement Concerning the Transfer of Defence Equipment and Technology[61] and the Agreement on Security Measures for the Protection of Classified Military Information. These tools developed the legal foundation of technology transfer, co-development and safe information exchange. In 2021, this structure was reinforced by the Acquisition and Cross- Servicing Agreement, which allows both the Indian Armed Forces and the Japan Self-Defence Forces to provide logistical support to each other.[62] Recent ministerial engagements have reinforced this trajectory. The India-Japan 2+2 Foreign and Defence Ministerial Dialogue (August 2024) acknowledged progress in joint research programmes, including collaboration on unmanned ground vehicles, and signalled a willingness to expand defence-industrial cooperation.[63] The most significant recent development is the move from dialogue to actual co-development and co-production of defence technology. This is exemplified by the Memorandum of Implementation signed in November 2024 for the co-development and co-production of the UNICORN (Unified Complex Radio Antenna) mast system for Indian naval platforms.[64] The agreement marks Japan’s first transfer of advanced defence equipment to India under the 2015 framework and represents a substantive shift from a buyer–seller relationship to a collaborative production model. The structure of the UNICORN arrangement is instructive from a legal and commercial standpoint. Japan provides design, engineering and core technology inputs, while India, through entities such as Bharat Electronics Limited, is responsible for integration and domestic manufacturing.[65] This reflects the alignment between Japanese technology capability and India’s “Make in India” defence manufacturing policy, which prioritises domestic value addition and local production. Beyond specific projects, the regulatory and policy environment in India has evolved to support this model. The domestic industry has a chance to boost production in the sector with FDI in defence manufacturing being allowed up to 100% (up to 74% under the Automatic route and above 74% under the Government route).[66] The Defence Acquisition Procedure 2020 lays down categories of procurement that favour domestic manufacturing and an incrementally higher percentage of indigenous content. Complementing this, initiatives such as iDEX (Innovations for Defence Excellence) are designed to integrate startups and technology providers into the defence ecosystem, creating potential entry points for collaboration with foreign technology partners.[67] In both commercial and legal aspects, the defence sector stands out from other fields of India-Japan economic activity. Transactions and activities are mostly government-driven, highly regulated, technology sensitive, and they need to be carefully negotiated in terms of industrial licensing, export controls, classified information procedures, technology-transfer controls, procurement eligibility and localisation demands. The move towards co-development and co-production also brings about additional complications in terms of ownership of intellectual property, allocation of liability, governance of a joint venture and long-term supply arrangements.   Foreign Investment Framework in India: Key Legal Considerations for Japanese Investors As India-Japan economic engagement deepens across manufacturing, technology and strategic sectors, a clear understanding of India’s foreign investment regime becomes critical for structuring inbound investments. India’s FDI framework is largely liberalised, but remains rule-based and compliance-driven, requiring careful navigation of sectoral conditions, pricing norms and downstream investment restrictions. India permits foreign investment under two primary routes: Automatic Route - where no prior government approval is required; Government Route - where approval must be obtained from the relevant ministry or department. A significant majority of sectors, including manufacturing, services, infrastructure and technology, are open under the automatic route, making India one of the more accessible jurisdictions for foreign capital. This route now accounts for over 90% of total FDI inflows and covers the vast majority of sectors.[68] Several key sectors of interest to Japanese investors, including automobiles, auto-components, manufacturing and renewable energy, permit up to 100% foreign direct investment under the automatic route, subject to other applicable sectoral conditions.[69] However, certain sectors remain restricted or partially regulated, including defence, insurance, telecom, multi-brand retail and media, where caps and/or approval requirements apply. For Japanese investors, this distinction is important not only at the entry stage, but also for subsequent investments, restructuring and downstream investments, where sectoral caps and approval triggers must be continuously monitored. Legal Framework for Foreign Investors For Japanese companies and investors, India presents a well-structured, though layered foreign direct investment regime. The framework has been progressively liberalised over the past decade, and understanding its architecture is a prerequisite for any commercial engagement. Japan’s recent proposal to establish a dedicated investment facilitation cell in India is further expected to assist Japanese companies in navigating India’s regulatory landscape with greater ease and efficiency. This is part of a larger shift in the bilateral relationship which is now moving from investment promotion to active facilitation and institutional support, especially as Japanese investments become more sector diversified. The legal edifice rests on two interconnected instruments. The primary statute is the Foreign Exchange Management Act, 1999 ("FEMA"), which governs all cross-border capital transactions. Beneath it, the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 ("NDI Rules"), notified by the Ministry of Finance, set out the permitted instruments, sectoral caps, pricing guidelines, and reporting obligations applicable to foreign investment. Alongside these, the RBI’s foreign investment directions and India’s FDI Policy lay out sector-by-sector eligibility, caps, and conditions.[70] Investment Options- Choosing the Right Structure The foreign investment policy in India allows non-resident entities to invest in India, subject to certain sector-specific restrictions and conditions. Investments can be made in Indian companies formed under the Companies Act, 2013, and Limited Liability Partnerships (LLPs) formed under the Limited Liability Partnership Act, 2008.[71] Although LLPs can also be used as an investment vehicle, their application is limited because FDI in LLPs is permitted only in sectors where 100% FDI is allowed under the automatic route, and there are no FDI-linked performance conditions.[72] The same condition also governs downstream investment by LLPs with foreign investment and company–LLP conversions.[73] Where a foreign investor establishes an Indian holding company or a joint venture that then invests in a second-level Indian operating entity, that second-level investment is classified as "downstream investment" under Rule 23 of the NDI Rules.[74] The guiding principle, recently reaffirmed by RBI's updated Master Direction, is unambiguous: what cannot be done directly shall not be done indirectly. Downstream investments by foreign-owned or controlled companies must comply with the same entry routes, sectoral caps, pricing guidelines, and reporting obligations as direct FDI.[75] In cases where the intended presence is more limited in scope, foreign entities may also establish branch offices, liaison offices or project offices under the foreign exchange framework. However, there are restrictions on their operations (liaison offices can only perform representational functions; branch offices can undertake approved commercial activities; and project offices can only undertake a specific project and generally cease to exist on completion of the project). Pricing Guidelines Indian exchange control laws require pricing guidelines to be followed while making inbound and outbound investments: for inbound investments, the price of equity instruments must not be less than the fair market value (FMV) as determined by a chartered accountant, cost accountant, or a registered merchant banker using any internationally accepted pricing methodology. Conversely, for outbound investments, the transaction must be conducted at an arm’s length price, per any internationally accepted pricing methodology. Round Tripping Round-tripping is generally prohibited in India as it may be sued for money laundering or tax evasion. Indian exchange control laws prohibit an Indian resident entity from investing in an overseas entity that directly or indirectly invests in India or has invested in India at the time of making such investment, which will result in a structure having more than two layers. Future Pathways The India-Japan relationship is shifting towards becoming a structurally compatible economic corridor, which is being shaped by the convergence of policies as much as commercial opportunity. What is different today is not the size of capital or sectoral dispersion, but the level of integration within manufacturing, technology, supply chains and talent. To India, Japanese involvement translates into long-term capital, technology and execution discipline; to Japan, India provides market size, a strong and low-cost labour pool and a plausible diversification platform in a global economy that is becoming fragmented. Meanwhile, the growing human resource exchange system, facilitated by the social security agreement, provides a parallel dimension of integration to connect capital flows with the permanent mobility of talent and skills between the two economies. The India-Japan alliance will not be characterised by the speed of deals in real time, but rather the stability and complexity of the ecosystem that it is focused on developing in the upcoming decades.   [1] https://www.mofa.go.jp/region/asia-paci/india/data.html [2] https://www.mofa.go.jp/s_sa/sw/in/page3e_000432.html [3] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2161986®=3&lang=2 [4] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2161986®=3&lang=2 [5] https://economictimes.indiatimes.com/news/economy/foreign-trade/japan-to-create-special-cell-to-push-fdi-into-india/articleshow/129933023.cms?from=mdr [6] https://www.indembassy-tokyo.gov.in/eoityo_pages/NjA [7] https://www.indembassy-tokyo.gov.in/eoityo_pages/NjQw [8] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2116250®=3&lang=2 [9] https://www.jica.go.jp/english/information/topics/2023/20231004_01.html [10] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2133323®=3&lang=2 [11] https://www.e-j.org.in/post/japan-s-strategic-investment-surge-in-india-a-new-era-of-economic-partnership-in-2025 [12] https://www.indembassy-tokyo.gov.in/public_files/assets/pdf/FifthWaveofIndiaJapanRelations.pdf [13] https://www.mea.gov.in/Portal/LegalTreatiesDoc/JP22B3789.pdf [14] https://www.indembassy-tokyo.gov.in/eoityo_pages/NjQw#:~:text=2.%20Japanese%20Investment%20in%20India,wholesale%2C%20retail%20and%20services%20sectors. [15] https://www.jbic.go.jp/en/information/press/press-2024/press_00110.html [16] https://www.ibef.org/news/japanese-automakers-shift-gears-to-india-with-us-11-billion-investment-push#:~:text=Japan's%20investments%20in%20India's%20transport,policies%20under%20Prime%20Minister%20Mr. [17] https://www.indembassy-tokyo.gov.in/eoityo_pages/NjQw#:~:text=They%20include%20liaison%20and%20branch,%2D23%20is%20%E2%80%93%201.798%20million. 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Since the notification of commencement of the new labour codes in November 2025, the provisions relating to the maternity benefit under the Code on Social Security, 2020 (“SS Code”) were challenged on the basis of a pending writ under the erstwhile Maternity Benefit Act, 1961 (“MB Act”). In this Part III of the labour law series of Nota Bene, we have discussed the recent Supreme Court judgement of Hamsaanandini Nanduri v. Union of India which has fundamentally altered the landscape of maternity benefit protection for adoptive mothers in India. A. Background Under Section 5(4) of the MB Act (which corresponds to Section 60(4) of the SS Code), maternity benefit of 12 (twelve) weeks was available to a woman who legally adopts a child below the age of 3 (three) months. This 3 (three) months age requirement was challenged by the petitioner who is an adoptive mother of two children through a writ petition filed under Article 32 of the Constitution, contending that the provision was discriminatory and violates Articles 14 and 21 of the Constitution. B. Issues for Consideration The primary issue brought before the Supreme Court was whether the 3 (three) month age limit prescribed for in case of an adoptive child for determining qualification for maternity benefit is arbitrary and violative of Articles 14 and 21 of the Constitution. C. Findings of the Court Rationale of Maternity Benefit The court laid down the following three aspects of maternity benefit: physical recovery of mother following birth of child; time required to nurture and develop the emotional bond between the mother and the child; and time necessary to attend to the physical and emotional needs of the child. In case of adoption while the first component is absent, the second and third component are present and significant, more particularly when the need for the same could not be said to be solely dependent on the age of the adopted child. Lack of Permissible Classification In terms of Article 14 of the Constitution, the 3 (three) months rule for adopted child does not satisfy the test of permissible classification which requires that any classification must be based on clear distinction that sets apart groups. The court observed that women who adopt a child aged 3 (three) months or above are similarly situated to women who adopt a child below the age of 3 (three) months, insofar as their roles, responsibilities, and caregiving obligations are concerned. Therefore, the classification between a woman adopting a child aged less than 3 (three) months and a woman adopting a child aged 3 (three) months or more is artificial and violative of Article 14 of the Constitution. Absence of Rational Nexus Constitutionality of a provision is also judged against the touchstone of rational nexus between the provision and underlying object of the statute. Instead of relying on a narrow yardstick of “caregiving responsibilities” towards an infant, the court approached the issue in a holistic manner and considered aspects of adjustment and integration of the adopted child with the adoptive family. Therefore, age-based distinction had no rational link to the goal of child welfare or maternal support which provisions relating to maternity benefit aim to address. Right to Motherhood under Article 14 Section 20(4) of the SS Code fails to recognize the right of reproductive autonomy of those adoptive mothers who adopt a child aged 3 (three) months or more because adoption also represents a conscious and meaningful exercise of the choice to create and nurture a family, and is within the broader spectrum of reproductive decision-making. Therefore, apex court reiterated right to motherhood as essential component of Article 21 of the Constitution. Further, the reality of situation is that for an adoptive mother, the critical phase of care begins the moment the child enters the home; denying support during this period is an arbitrary interference with the dignity of both mother and child. Therefore, such age based artificial distinction denudes such adoptive mothers of the ability to meaningfully exercise and enjoy their right to decisional autonomy, dignity, and bodily integrity under Article 21 of the Constitution. The Supreme Court, therefore, read Section 60(4) of SS Code to conclude that all adoptive mothers are eligible for availing maternity leave for 12 (twelve) weeks, irrespective of age of their adopted child. D. Implications of the judgement Employers must proactively review and amend employee handbooks, leave policies, and appointment letters to decouple maternity benefits from the age of the child, ensuring the 12 (twelve) week entitlement is triggered solely by the date of legal handover of the child, irrespective of the age of such child.   This series has been prepared by Parag Bhide, Subarna Saha and Mitali Kshatriya who can be reached at [email protected], [email protected] and [email protected] respectively. This series is only for informational purposes and is not intended for solicitation of any work. Nothing in this series constitutes legal advice and should not be acted upon in any circumstance.

On March 11, 1930, Mahatma Gandhi, in his speech at the Sabarmati Ashram, Ahmedabad, India, said “Let no one commit a wrong in anger. This is my hope and prayer”. But conflicts are as old as human society itself, evolving alongside our political systems and the ideas of power, thereby restructuring the configurations of political, social and economic structures. This decade is also being shaped by confrontations arising from divergent beliefs about power and influence. The Russia-Ukraine war, Israel-Hamas/Gaza war, and the Israel-US-Iran conflict, to name a few, have reformatted geo-politics and geo-economics. The top consolidated economic impact of the above three conflicts is that they have turned the global economy into a higher cost, slower growth and more disjointed system. Together, they are pushing the world away from efficiency and globalization and towards security-driven economics. Conflicts ostensibly deplete the peace dividend, which aids the financing of social expenditures, making rebalancing of fiscal priorities challenging even in advanced economies. The impacts, simply put, are : (a) energy insecurity and inflation; (b) trade disruption and higher logistics cost; (c) weakening of global growth by rising  uncertainty and depressing investment; (d) increasing food and facilities vulnerability, especially for poorer import dependent countries; (e) acceleration of the fragmentation of the global economy; (f) huge reconstruction and fiscal burden and also (g) environmental degradation. The result is a more inflation-prone, less predictable and more geo-politically segmented global economy. The conflicts have reshaped economics and consequently have augmented costs of doing business in terms of uncertainty, time, negotiation effort, monitoring and dispute resolution. Global trade, commerce, operations, supply chains, global value chains, and global production networks are underpinned by commercial - legal contracts. With the increasing complexities, modern legal contracts must be made further robust in the backdrop of the changing global economics influenced by the conflicts discussed above. One of the most vital aspects of a contract has emerged as “risk allocation”, which is an economic decision embedded in legal language. Wars, price fluctuations, supply disruptions, and sanctions – these are all economic risks. Contracts allocate these risks through clauses such as: i. Force Majeure clauses which should explicitly include war, armed conflicts, hostilities, sanctions, embargoes, export restrictions, blockades, and shipping disruptions. The clause must have a clear causation standard; for example, how directly the war must cause the failure or delay in performance for the clause to be validly invoked. Ideally, a well-drafted force majeure clause should define the causation threshold explicitly and include mitigation obligations, evidence requirements, notice procedures, and timelines. ii. Sanctions which are increasingly becoming non-military tools of war, sovereignty, and commercial law. Financial sanctions, trade sanctions, entity/individual sanctions, sectoral sanctions, and secondary sanctions are some of the types that can not only make performance of contracts difficult , but also illegal or impossible to perform. The imposition of sanctions can be made part of the force majeure Additionally, a representation and warranty that no sanctions are applicable at the time of execution of the contract may be incorporated. iii. Material Adverse Change/Material Adverse Effect clauses, which should cover war or geo-political tension as a trigger impacting business viability, ability to perform the contract and financial condition and a renegotiation or exit strategy when the conditions materially worsen. iv. Hardship clauses which are prudent to be incorporated to take care of fundamental changes in the economic equilibrium, with an obligation to renegotiate in good faith, falling back on termination or arbitration if renegotiation fails. v. Change in circumstances clauses which may also be additionally incorporated for renegotiation of the contract if need be, on the occurrence of such change which may make the performance of the contract difficult and/or unviable. vi. Supply chain and delivery disruption clauses which need to have as many specifics as possible because war unsettles logistics more than anything else. The clause should focus on flexibility in delivery timelines, alternate routes, substitute suppliers with allocation for freight cost increases and delay risks. This clause should also have a notice process embedded in it and an eventuality in the event of a prolonged disruption. vii. Price adjustment and/or Price escalation clause, as conflicts amplify volatility across every cost component. Wars, inter alia, give rise to energy shocks, logistics and freight disruptions and escalation of insurance premiums. Further, there is supply chain disruption, currency volatility and cost increase induced by sanctions. Wars may not always make performance of a contract impossible, but may make it expensive and thus commercially unfeasible to be performed. Thus, modern contracts should have a price adjustment clause detailing that if there is a material increase or decrease in the cost of performance of the contract due to the events specified therein, fixing a cost variation threshold, then either party may invoke the said clause. A price correction mechanism including indexed adjustment, that is, an agreed formula of adjustment moving in line with a recognised benchmark/ index; can be incorporated in the contract along with a mechanism for the consequences of failing to agree to a specific adjustment, which may include reference of the matter to an independent expert for determination, or even arbitration or termination. viii. Payment and currency clauses which can be drafted in some detail, addressing currency fluctuations, delay in payments due to restrictions, and suggesting an alternate payment mechanism such as escrow or alternate currencies. ix. Termination clauses which need to tie up to the war realities, including termination for prolonged force majeure, sanctions illegality, or triggers material adverse change or others. x. Governing Law and Dispute Resolution mechanism which must be clearly detailed by selecting neutral and stable jurisdictions, preferably international arbitrators with a seat of arbitration outside conflict zones. xi. Insurance and Risk Allocation is another crucial aspect of modern contracts, providing for insurance for political risk and war risks. Geo-political risks must be addressed with as much rigour as commercial risks in modern contracts. The past decade has reinforced that we are living in a VUCA world marked by volatility, uncertainty, complexity and ambiguity. Thus, contracts also cannot be static documents which merely set out rights and responsibilities. Today, contracts will have to incorporate dynamic risk allocation frameworks. Renegotiation is becoming more common, shifting the focus from enforcing performance regardless of circumstances to preserving the commercial relationship under stress. In today’s reality of conflicts, contracts have to go further, possibly even beyond risk allocation to maximal risk anticipation and from rigid governance to adaptive performance. The modern contract transcends its role as a legal instrument, serving instead as a pragmatic, living framework capable of withstanding disruption, absorbing shocks, and adapting to an increasingly dynamic environment. Authored by : Sucharita Basu, Managing Partner, AQUILAW and Aadidev Basu, Research Associate, AQUILAW

WHAT HAS HAPPENED? In a significant decision on the interplay between insolvency and telecom laws, the Supreme Court in State Bank of India v Union of India[1] (“Aircel judgment”), has held that the spectrum allocated to Telecom Service Providers (“TSPs”) and shown in their books of account as an ‘asset’ cannot be subjected to proceedings under the Insolvency and Bankruptcy Code, 2016 (“Code”/ “IBC”). BACKGROUND The TSPs Aircel Limited, Aircel Cellular Limited and Dishnet Wireless Limited (collectively, the “CDs”) were granted Unified Access Service Licences under the License Agreements by the Department of Telecommunications (“DoT”) under Section 4 of the Indian Telegraph Act, 1885. Each License was valid for a term of twenty years. CDs acquired the right to use spectrum in various auctions conducted by DoT upon payment of ₹6249.27 crores. The CDs subsequently defaulted in payment of licence fee and spectrum usage charges to the DoT. When DoT attempted to recover its dues, the CDs filed applications under Section 10 of the Code, voluntarily seeking initiation of corporate insolvency resolution process (“CIRP”). The National Company Law Tribunal, Mumbai (“NCLT”) admitted these applications in March 2018. DoT filed its claims in respect of unpaid licence fee and spectrum usage charges as ‘other creditor’, which were admitted by the resolution professional of the respective CDs.   A resolution plan submitted by UV Asset Reconstruction Company was approved by the Committee of Creditors of the CDs and thereafter by the NCLT. The resolution plan treated the dues of DoT as ‘operational debt’ and did not provide for payment to DoT. Further, the plan allowed CDs to transfer spectrum.   Appeals were filed by DoT challenging the resolution plan and its treatment under the resolution plan.   During the pendency of CIRP of CDs, the Supreme Court delivered its judgment[2] affirming the definition of Adjusted Gross Revenue (“AGR”) under the UASL. In subsequent proceedings concerning payment of AGR dues, it was brought to the Court’s attention that certain TSPs, including the CDs were undergoing CIRP and that the DoT cannot take recovery actions against them pursuant to Section 14 of the Code.   Recognising the wider implications of the issue, the Supreme Court framed specific questions concerning the legal character of spectrum and its treatment under the Code and referred those questions to the NCLAT, which culminated in passing of the order dated 13 April 2021 by the NCLAT. The order was challenged by various stakeholders, including State Bank of India (lead financial creditor), the RP of CDs and DoT. KEY OBSERVATIONS AND FINDINGS OF SC Spectrum is a Natural Resource Held in Public Trust   ·      Spectrum has consistently been recognized as a public resource, and it is precious also since it is finite and limited.  The SC reaffirmed the doctrine of “public trust” in the context of allocation and distribution of spectrum, as recognised in CPIL Judgement[3].   ·      The Constitutional framework mandates that the ownership and control of this material resource of the community be distributed so as to best subserve the common good and to ensure that access and use of such resource is regulated in a transparent, non-discriminatory manner, for the benefit of the nation rather than being treated as objects of private ownership or unfettered commercial exploitation. Nature of Telecom License and Spectrum – no proprietary interest in TSPs   ·      Section 4 of Telegraph Act vests exclusive privilege in the Central Government to grant License subject to terms and conditions, which includes payments towards the Universal Service Obligations.   ·      The grant of a Licence including the right to use spectrum is in the nature of State largesse and does not translate into a transfer of ownership or proprietary interest in favour of Licensee but confers a limited, conditional and revocable privilege to use spectrum for specified purposes and for a defined duration.   ·      SC traced the evolution of laws/ policies relating to spectrum allocation and trading and held that spectrum trading is not a private commercial arrangement, but part of privilege vested in the Government. The Government, as Licensor has retained comprehensive supervisory and corrective control over spectrum trading and access, even after spectrum being unbundled with license and private enterprise permitted to develop spectrum.   ·      Whilst the License has contractual attributes, the Licensor's powers and obligations do not arise solely from contract but flow concurrently from the Constitution and the statute, and in the event of conflict, obligations flowing from constitutional and statutory mandate necessarily prevail over contractual stipulations.   ·      After referring to various provisions of the License Agreement, SC noted the effective and pervasive control of the Licensor (DoT) and held that ownership, particularly as a trustee of natural resource by the Licensor, coupled with power to suspend or terminate license, negates any claim of proprietary ownership in the Licensee. Where Licensee has defaulted in payments or performance, the very substratum of right to use spectrum stands impaired.   Assignment/ transfer of License and Spectrum - subject to fulfilment of conditions   ·      Guideline 11 of the Spectrum Trading Guidelines reinforce control of DoT by mandating that all outstanding dues of the seller be cleared prior to conclusion of any spectrum trading agreement and vesting discretion in the Government to recover any subsequently discovered dues from either or both parties, jointly or severally. Trading is conditional subject to adherence to financial and regulatory obligations owed to the State.   ·      The Licensee has no independent right to assign or transfer the license under the License Agreement and Spectrum Trading Guidelines, without prior consent of the Licensor (DoT) and such assignment/ transfer is permissible only upon fulfilment of prescribed conditions including complete clearance of dues.   ·      The obligation to clear dues prior to trading is absolute and default by either seller or buyer disqualifies them from effecting a valid transfer including under insolvency proceedings.   ·      The Tripartite Agreement between the DoT, the TSP and the Bank is a contractual mechanism devised to enable TSPs to secure financial assistance and enables license to be treated as security. However, the Tripartite Agreement underscores that while the license may be conditionally transferable to a Selectee to safeguard lender interests, such transfer remains subject to the Licensor’s paramount authority and regulatory control.   Is Spectrum an “Asset” of the CDs that can be restructured in IBC?   ·      While spectrum licensing right are recognized as an “intangible asset” in the balance sheet of the TSPs under the Indian Accounting Standards - this only indicates control over future economic benefits flowing from the grant of the right to use spectrum - but is not determinative of recognition/ transfer of ownership of spectrum to TSPs.   ·      Even if the right to use spectrum exhibits property-like features such as longer licensing terms, exclusivity and transferability, they merely represent different sticks in the bundle of rights and fall short of conferring complete ownership of the spectrum on TSPs.   ·      Section 18(f), Section 36 (3) and 36 (4) of IBC specifically excludes from its scope, assets over which CD does not have ownership or that are owned by a third party in possession of the CD under trust or under other contractual arrangements. The IBC only includes those tangible and intangible assets within the insolvency framework over which CD has ownership rights including all rights and interests therein as recorded in the Balance Sheet.   ·      Even assuming that licensing and spectrum rights is one among the bundle of rights, in the absence of transfer of title over the spectrum, no ownership rights are created in TSPs either in the spectrum or in its right to use as governed by licensing conditions. Under the IBC framework, spectrum licensing rights are therefore not part of the pool of assets for insolvency or liquidation.   Harmonious Construction between IBC and Telecom Laws   ·      Relying on Embassy Judgement[4], the SC held that where the dispute relates to the exercise of statutory or sovereign power by the State, particularly in matters involving public interest and natural resources, such issues fall outside the domain of the insolvency adjudicatory framework, and the Code cannot be invoked to usurp or neutralise powers vested in the State under special statutes.   ·      Scope of IBC is to speed up process providing for insolvency and achieving maximization of assets – the focus is on the company. On the other hand, the Telegraph Act, Wireless Telegraphy Act and TRAI Act form a complete and exhaustive code for all matters relating to the telecom sector, including declaration of the nature of the rights and liabilities arising out of holding and using spectrum, and taken together, the Union as the owner and trustee of spectrum and TRAI as the regulator occupy the entire province of telecommunications.   ·      The statutory regime under IBC cannot be permitted to make inroads into the telecom sector and re-write and restructure the rights and liabilities arising out of administration, usage, and transfers of spectrum which operate under an exclusive legal regime concerning telecommunications.   ·      Merely because spectrum can be treated as an “asset” on the basis of certain attributes, the entirety of the telecom sector cannot be brought under the sweep of IBC. Constitutional courts must recognise the respective provinces of two laws and ensure that they operate in harmony and without conflict. PRACTICAL IMPLICATIONS The judgment makes it clear that neither the telecom license nor the right to use spectrum are assets of the CDs which can be subject to the insolvency or liquidation process. These are in the nature of State largesse, which is granted subject to various terms and conditions, which must be followed for their transfer or assignment. Thus, a resolution plan for revival of a telecom company cannot deal with telecom license or spectrum as though it were an asset of the company. Any proposal in the plan involving transfer, assignment or continued use of license/ spectrum must independently satisfy the conditions imposed under the Licence and relevant guidelines, including clearance of dues and prior approval of the DoT. Approval of a resolution plan under Section 31 of IBC does not displace these requirements.   The judgment does not delve into the issue of nature of ‘dues’ owed to DoT. However, classification of DoT dues as “Operational Debt” or “Financial Debt” or “Other Debt” under the resolution plan becomes secondary – these dues would nevertheless be required to be paid in full to DoT as a condition for continued use or transfer of license/ spectrum. Section 30 (2) of IBC or the waterfall under Section 53 of IBC cannot be invoked to restructure or reduce such dues. Further, while the judgment does not specifically deal with priority of payment of DoT dues in case of liquidation (without sale of license/ spectrum), it notes that under the Tripartite Agreement, if the license stands terminated and assets of the Licensee are to be disposed-off, the Licensor (DoT) enjoys first charge over the proceeds, followed by adjustment of Lenders’ due.   The judgment will have a massive impact on the resolution of insolvency of telecom companies. Without the ability to restructure dues to DoT (if owed), it is unlikely that telecom companies would be seen as attractive targets by resolution applicants. The insolvency resolution of these companies is only possible where the resolution applicant is willing to abide by all conditions of the License (contractual or statutory), pays all dues to the DoT and further, gets approval of the DoT as an assignee/ transferee of the license/ spectrum.   Further, the implications of the judgment are not confined to telecom sector alone but may extend to insolvency of all companies that are either regulated or that have critical licenses or right to use from the Government such as petroleum exploration licenses, mining licenses and even leases given by the Government/ authority. However – the interplay of the judgment, in the context of proposed amendments in the IBC[5] remains to be seen.   Interplay with the proposed IBC amendments The amendments to the IBC propose insertion of Section 31 (5) to provide that once NCLT approves a resolution plan, any license, permit, registration, quota, concession, clearance or similar right granted by the Central Government, State Government, local authority, sectoral regulator or any other authority, which forms part of the resolution plan, shall not be suspended or terminated for the remainder of its validity period, provided the company continues to comply with its obligations during such period. Further, the amendments also propose insertion of Section 31 (6) in the IBC to clarify that the claims not dealt with under the resolution plan shall be deemed to be extinguished. From a reading of the Select Committee Report[6] on the IBC amendments, it is evident that the amendments will clarify that the obligations of the CD in respect of the pre-CIRP/ past debts of Government/ authorities under such license, permit etc. can be dealt with under the resolution plan. Notably, there are other proposed amendments to the IBC for clarifying that government dues fall under the fifth order of priority under Section 53 of IBC in support of the legislative intent to assign a lower priority to government dues. At the same time, as far as compliance with other technical terms of license, permit etc. is concerned, the Select Committee Report acknowledges that the scope of IBC does not extend to interfering with the powers of the Government/ regulator to ensure compliance with other technical requirements and that the right of the government/ regulator to examine the new parent company's capability to fulfil its obligations under the license/agreement are requirements specific to law governing that sector and do not fall under the domain of IBC. Thus, while the amendments acknowledge Government/ regulator’s role in ensuring compliance with laws specific to the sector, they also note that past dues of the Government/ regulator can be dealt with under the resolution plan and so long as there is compliance with “remainder” of the validity period, the licenses, permits etc. cannot be terminated or suspended for non-payment of past dues. Given the Aircel judgment, interesting questions are likely to arise in cases where CD has a critical license, permit etc. and where change in control of the CD or transfer of the license, permit etc. is linked to payment of the past dues of the Government/ regulator. The questions will range from “what is meant by asset” to “is the asset a material national resource” to what is meant by “compliance with the remainder of the validity period of an asset” and whether past dues linked with license, permit etc. can be extinguished at all, if the relevant contract, law or policy mandates payment of such dues as a condition. It may also be added that the Aircel judgment proceeds on the fundamental assumption of spectrum being a scarce and finite resource covered under the public trust policy. Hence, eventually, given the proposed amendments to the IBC, the application of Aircel judgment may depend on specific facts of the case including the nature of asset, the nature of license/ permit and the provisions of the relevant contract, law or policy applicable to the sector. Pooja Mahajan Partner, Head of Insolvency and Restructuring Savar Mahajan Managing Associate, Insolvency and Restructuring   Srivatsav Reddy Beerapalli Associate, Insolvency and Restructuring     ©2026 Chandhiok & Mahajan, Advocates and Solicitors This alert is for information purposes only and does not constitute legal advice. [1] Civil Appeal No. 1810 of 2021 [2] Union of India v Association of Unified Telecom Service Providers of India, (2020) 3 SCC 525 [3] Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1 [4] Embassy Property Developments (P) Ltd. v. State of Karnataka, 2020 (13) SCC 308 [5] https://ibbi.gov.in/uploads/publication/3694d8874ee2ac5802de48d293ad5802.pdf. [6] https://prsindia.org/files/bills_acts/bills_parliament/2025/IBC_Select_Comm_Report.pdf