India

Chandhiok & Mahajan and Shardul Amarchand Mangaldas, successfully defended BookMyShow before the Competition Commission of India which closed proceedings brought against BookMyShow in relation to allegations of abuse of dominant position in the market for online intermediation services for booking of movie tickets in India.  The Commission concluded that, despite BookMyShow holding a dominant position in the 'market for online intermediation services for booking of movie tickets in India,' there was no evidence of contravention of the Competition Act, 2002. Consequently, the matter was closed. C&M's competition team, comprising Mr. Karan Singh Chandhiok (Partner & Head of Competition & Regulatory Practice), Mr. Avinash Amarnath (Partner), Mr. Aakash Kumbhat (Managing Associate), Ms. Aileen Aditi Sundardas (Associate) and Mr. Jai Hindocha (Associate) and SAM's competition comprising Mr. Harman Singh Sandhu (Partner), Mr. Yaman Verma (Partner), Ms. Raveena Kumari Sethia (Principle Associate), and Ms. Pranika Goel (Associate) represented BookMyShow before the CCI.

INTRODUCTION The regulation of foreign investment in India is governed by the Foreign Exchange Management Act, 1999 ( the “FEMA”), the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“NDI Rules”), the Consolidated FDI Policy issued by the Department for Promotion of Industry and Internal Trade (“DPIIT”), and the Reserve Bank of India's (“RBI”) Master Direction on Foreign Investment in India (“Master Direction”), as amended from time to time. When a foreign investor directly acquires or subscribes to equity instruments or capital of an Indian entity, such acquisition or subscription constitutes foreign direct investment (FDI), subject to the conditions prescribed under these instruments as discussed below. A conceptually distinct but closely related mode of foreign investment is the indirect acquisition or subscription of equity or capital of an Indian entity through another Indian entity that is itself a recipient of FDI. This indirect mode is known as downstream investment and gives rise to what is termed indirect foreign investment (“IFI”) in the investee entity. This article examines the regulatory framework governing downstream investments made by FOCCs(as defined below), the conditions for classifying an investment as IFI, the compliance obligations that arise therefrom, and the pricing, consideration, and reporting framework applicable to such transactions. DOWNSTREAM INVESTMENT AND INDIRECT FOREIGN INVESTMENT A. Definition of Downstream Investment Under the NDI Rules, downstream investment is defined as an investment made by an Indian entity or an investment vehicle, having total foreign investment in it, in the equity instruments or the capital of another Indian entity. The term “total foreign investment” means the aggregate of direct foreign investment and indirect foreign investment in an entity, computed on a fully diluted basis. For this purpose, an “investment vehicle” means an entity registered and regulated under regulations framed by the Securities and Exchange Board of India (“SEBI”) or any other designated authority, and includes Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), Alternative Investment Funds (AIFs), and mutual funds. The term “Indian entity” refers to an Indian company or a limited liability partnership (“LLP”). B. Distinction between Downstream Investment and Indirect Foreign Investment Although the terms “downstream investment” and “indirect foreign investment” are frequently used interchangeably, they are conceptually distinct. Downstream investment refers to the investment made by an Indian entity or an investment vehicle (that has received foreign investment) into another Indian entity. Whereas, the IFI is a downstream investment received by an Indian entity from another Indian entity which has received foreign investment and the Indian entity qualifies as an FOCC (as defined hereinbelow). By way of illustration: where a foreign investor (Company A) invests in an Indian company (Company B) under the FDI route, and Company B thereafter invests in another Indian company (Company C), the investment by Company B into Company C is downstream investment from Company B's perspective. From Company C’s perspective, that same investment constitutes IFI, but only if Company B is an FOCC. FOREIGN-OWNED AND CONTROLLED COMPANIES A company owned or controlled by a non-resident is termed a Foreign Owned and/or Controlled Company (“FOCC”). The criteria for ownership and control differ as between Indian companies and LLPs. A. In the Case of an Indian Company Ownership: An Indian company is treated as “owned” by non-residents where more than 50% (fifty percent) of its paid-up capital is beneficially held by persons resident outside India. Control: An Indian company is treated as “controlled” by non-residents where non-residents hold the right to appoint a majority of its directors or to control the management or policy decisions of the company, whether by virtue of shareholding, management rights, shareholders' agreements, voting agreements, or otherwise. B. In the Case of an LLP Ownership: An LLP is treated as owned by non-residents where non-residents contribute more than 50% (fifty percent) of its capital and hold a majority profit share. Control: An LLP is treated as controlled by non-residents where non-residents hold the right to appoint the majority of its designated partners, and such designated partners (to the exclusion of others) exercise control over all the policies of the LLP. CONDITIONS APPLICABLE TO DOWNSTREAM INVESTMENT AND INDIRECT FOREIGN INVESTMENT A. General Conditions: Sectoral Compliance Any downstream investment must strictly adhere to the entry route (automatic or government approval), sectoral caps, pricing guidelines, and all attendant conditions including reporting requirements applicable to FDI in the relevant sector. The rationale, enshrined in the NDI Rules, reflects the principle that what cannot be done directly by a foreign investor shall not be permitted to be done indirectly through an FOCC. Two illustrative applications of this principle are as follows: Government Approval Route: Where a downstream investment is proposed in a sector subject to government approval (such as the print media sector), the FOCC must obtain prior government approval before making such investment, as would be required had a foreign investor invested directly. Sectoral Cap Restriction: In sectors subject to a sectoral cap, the aggregate foreign investment being the sum of direct and indirect foreign investment in the investee entity must not exceed the prescribed cap. For instance, in the For instance, in the power exchanges sector, where FDI is permitted up to 49% (forty-nine percent) under the automatic route, the total foreign investment (direct and indirect) in the investee company must not exceed 49% (forty-nine percent). B. Restriction on FOCC-LLPs Where the investing FOCC is constituted as an LLP, it may make downstream investment only in companies or LLPs operating in sectors where foreign investment up to 100% (hundred percent) is permitted under the automatic route and no FDI-linked performance conditions are prescribed. C. Conditions for Classification as Indirect Foreign Investment An investment received by an Indian investee entity from an FOCC will be treated as IFI upon satisfaction of the following conditions: (a) the downstream investment must be approved by the board of directors of the investing Indian entity (i.e., the FOCC). Where a shareholders' agreement exists, such agreement must also sanction the proposed downstream investment; and (b) for the purposes of making downstream investment, the FOCC must bring in requisite funds from abroad and shall not utilise funds borrowed in the domestic market. Downstream investment may, however, be made through internal accruals, which for this purpose means profits transferred to a reserve account after payment of taxes. Where debt is raised and utilised for any related purpose, such raising and utilisation must be in compliance with FEMA and the rules and regulations made thereunder. TREATMENT OF FOCCS: DEEMED FOREIGN INVESTMENT AND REGULATORY SYMMETRY Once an entity is classified as an FOCC, any investment made by it in the equity instruments or capital of another Indian entity is treated as 100% (hundred percent) foreign investment, regardless of the actual proportion of foreign ownership in the FOCC. Further, the NDI Rules read with the Master Direction, establishes a dual treatment for FOCCs: (a) for the purposes of pricing guidelines, an FOCC is treated at par with a person resident outside India; and (b) for the purposes of reporting requirements, an FOCC is treated at par with a person resident in India. While this dual treatment is intended to balance regulatory oversight with investor facilitation, it gives rise to certain interpretive inconsistencies that are discussed below. PRICING FRAMEWORK A. General Principles for Pricing under the NDI Rules The NDI Rules prescribes the following pricing norms for transfers of equity instruments: (a) a floor price not less than fair market value (“FMV”) applies to transfers from residents to non-residents; and (b) a ceiling price not more than FMV applies to transfers from non-residents to residents. FMV must be determined in accordance with arm length basis and internationally accepted pricing methodologies and certified by a SEBI-registered Merchant Banker, Chartered Accountant, or Cost Accountant. B. Pricing Norms for FOCC Transactions - Secondary Sales by FOCC The NDI Rules prescribes pricing norms applicable where an FOCC is the seller in a secondary transfer of equity instruments of another Indian entity. Where the transferee is a non-resident, or another FOCC, pricing norms do not apply and the parties are at liberty to agree on any consideration. Where, however, the transferee is a resident, pricing norms are attracted and the sale price must not exceed FMV. C. Pricing Norms for FOCC Transactions - Acquisitions by FOCC The NDI Rules do not expressly address the applicability of pricing norms where an FOCC is the acquirer in a secondary transaction. In the absence of explicit statutory guidance, market participants have relied on interpretations developed through authorised dealer banks (“AD Banks”), informed by informal consultations with the RBI. Historically, AD Banks generally treated FOCCs as equivalent to non-residents for pricing purposes, with the consequence that pricing norms applied when an FOCC acquired from a resident but not when acquiring from a non-resident. In recent years, the RBI has clarified that pricing norms must apply even where a FOCC acquires equity from a non-resident, with a view to preventing unregulated outflow of domestic funds. D. Pricing Matrix for FOCC Transactions The pricing guidelines applicable to transactions involving a FOCC can be understood more clearly when broken down based on the nature of the transaction and the counterparty involved. In the case of a primary investment, where the FOCC is subscribing to equity instruments or contributing to capital, the subscription price must be at or above the FMV. Similarly, where the FOCC acquires shares from a resident shareholder, the purchase price is required to be at or above FMV. On the other hand, where the FOCC acquires shares from a non-resident shareholder, the purchase price must be at or below FMV. This creates a contrasting requirement depending on the residency status of the seller. In a disinvestment scenario, where the FOCC sells shares to a resident, the sale price must be at or below FMV. However, if the sale is made to a non-resident, there are no prescribed pricing restrictions, and the parties are free to agree upon any mutually acceptable consideration. Further, in transactions involving transfers between two FOCCs, the pricing guidelines do not apply, and the parties may negotiate and agree upon any price without being bound by FMV constraints. E. Complexity in Multi-Seller Transactions The pricing guidelines become particularly complex in transactions involving multiple categories of sellers, such as a 100% (hundred percent) acquisition where the target company’s shareholders include both residents and non-residents. In such situations, different pricing rules apply depending on the status of the seller. For transfers by resident shareholders to a FOCC, the consideration must be not less than the FMVfloor. For transfers by non-resident shareholders to the FOCC, the consideration must be not exceeding the FMV. As a result of these pricing constraints, the parties are effectively constrained to transact at the FMV. This significantly limits the ability to negotiate different prices with different sellers and reduces overall commercial flexibility. Accordingly, this becomes an important practical consideration when structuring a 100% (hundred percent) acquisition transaction involving both resident and non-resident shareholders. CONSIDERATION STRUCTURE: SHARE SWAPS AND SETTLEMENT OF DOWNSTREAM INVESTMENT A. Share Swaps The NDI Rules permits an Indian company to issue equity instruments to non-residents against, inter alia, a swap of equity instruments, under the automatic route. On a principled reading, an FOCC being treated at par with a non-resident for pricing purposes should be able to undertake downstream investments through share swaps. Further, an Indian company may either issue its shares or transfer shares held by it (in India or overseas) against a swap of shares of an Indian or foreign company, subject to compliance with the applicable sectoral caps, FDI-linked conditionalities, the Overseas Investment Rules, 2022, and pricing guidelines. B. Divergent Interpretations and Practical Considerations Notwithstanding the above, divergent interpretations have emerged in practice. Certain AD Banks have taken the view that share swap transactions by FOCCs may fall under the government approval route, which requires downstream investments to be funded through either funds remitted from abroad or internal accruals. This has been interpreted by some as implying a preference for cash consideration, notwithstanding the absence of an express statutory prohibition on share swaps. In practice, a distinction is sometimes drawn between: (a) pure swap transactions which are viewed conservatively by certain AD Banks as requiring government approval; and (b) hybrid transactions involving part cash and part securities, which may be permissible under the automatic route. A further constraint is that an FOCC that lacks adequate foreign currency reserves or retained earnings may not, in such circumstances, be permitted to settle consideration by way of a share swap. The absence of uniform regulatory interpretation continues to introduce deal uncertainty and the requires the early and engagement with the relevant AD Bank at the transaction planning stage, for seeking clarity. DEFERRED CONSIDERATION, ESCROW ARRANGEMENTS AND INDEMNIFICATION The NDI Rules provides that, upon the transfer of equity instruments between a resident and a non-resident, up to 25% (twenty-five percent) of the total consideration may be: (a) deferred; (b) placed in an escrow arrangement; or (c) structured as an indemnity by the seller for a maximum period of 18(eighteen) months from the date of transfer or payment. This provision was previously applicable only to direct foreign investment and was silent on its applicability to downstream investments by FOCCs. The RBI has now clarified that the deferred consideration framework applicable to foreign investment extends equally to downstream investments made by FOCCs in other Indian entities. Scope of the Indemnity Limitation A significant interpretive question arises as to whether the 25% (twenty-five percent) cap and 18(eighteen) month limitation apply exclusively to deferred consideration, or whether they also govern any indemnity provided by the parties in the transaction such as business indemnities, tax indemnities, warranty claims, and the like. A careful reading of the NDI Rules suggest that indemnities arising from third-party claims, breaches of representation or warranty, or contractual obligations (including business and tax claims) may fall outside the scope of “consideration” as contemplated by the provision. Such indemnification obligations, being contractual in nature and arising from the conduct or representations of the parties, may not constitute consideration for the transfer of equity instruments. However, the applicability of such limitations would ultimately depend on the specific drafting of the indemnity provisions, including the scope of covered claims, trigger events, payment mechanics, and the overall transaction structure. Accordingly, indemnity provisions should be carefully structured to avoid any ambiguity regarding their nature and enforceability. COMPLIANCE AND REPORTING OBLIGATIONS Downstream investments by FOCCs give rise to a series of compliance and reporting obligations. Since IFI is treated as foreign investment for all regulatory purposes, the investee entity must comply with the full FDI regulatory framework, including the two-stage compliance mechanism prescribed by the RBI: Intimation to DPIIT: The downstream investment must be reported to the Secretariat for Industrial Assistance, DPIIT, within 30 (thirty) days of making such investment, even where equity instruments have not yet been allotted. Form DI Reporting: Form DI must be filed with the AD Bank within 30 (thirty) days from the date of allotment of equity instruments. iii. Form FC-TRS: Where a non-resident acquires equity from an FOCC, Form FC-TRS is required to be filed by the FOCC. Statutory Auditor's Certificate: The investing entity must obtain an annual certificate from its statutory auditor confirming compliance with the downstream investment regulations, and such compliance must be disclosed in the Board's Report forming part of the company's Annual Report. It is pertinent to note that while the RBI has amended its regulations to permit deferred consideration and share swaps in the context of downstream investments by FOCCs, the corresponding instructions and operational guidelines for the filing of Form DI through the RBI's firms portal are, at the time of writing, yet to be published. RIGHTS ISSUES OF SHARES The NDI Rules provides for the issuance of shares to non-resident shareholders of Indian companies that have received FDI, by way of a rights issue. The NDI Rules do not prescribe specific pricing guidelines for such issuances, requiring only that the value of such shares not be less than the price offered to residents. However, where an FOCC proposes to subscribe to a rights issue of shares in another Indian investee entity, the position is that the pricing guidelines applicable to downstream investments apply, and no exception has been carved out in this regard. Accordingly, the price at which an FOCC subscribes to such rights shares must comply with the FMV-based pricing norms applicable to downstream investments. PRACTICAL IMPLICATIONS FOR TRANSACTION STRUCTURING The regulatory framework governing downstream investments by FOCCs, while comprehensive, is attended by a number of interpretive ambiguities that have material consequences for transaction structuring: Absence of Proportionality: The requirement to treat all downstream investments as 100%(hundred percent) foreign investment regardless of the actual quantum of foreign ownership in the FOCC restricts structuring flexibility, particularly in sectors subject to sectoral caps or performance conditions. Mandatory FMV Pricing: In complex multi-seller transactions, the operation of floor and ceiling pricing norms effectively forces parties to transact at FMV, limiting the ability to negotiate commercial pricing arrangements. iii. Documentation Requirements: Transaction documents in particular, share purchase agreements must carefully account for differential pricing obligations, regulatory conditions, indemnity structures, and reporting timelines. Generic contractual provisions may give rise to inadvertent FEMA violations. Divergent AD Bank Interpretations: The absence of uniform regulatory guidance on issues such as share swaps and the pricing of non-resident-to-FOCC transfers may result in last-minute restructuring or delays at advanced stages of a transaction. Early and specific engagement with the relevant AD Bank is essential. Authors: Shramona Sarkar – Principal Associate Jaydeep Saha - Associate    

INTRODUCTION The Insolvency Bankruptcy Code (Amendment) Act, 2026[1] (hereinafter refereed as the “Act”) received the President’s assent on 6th April, 2026 and was subsequently notified by the legislative department of the Ministry of Law and Justice. It has been introduced to further amend the Insolvency and Bankruptcy Code (hereinafter referred to as the “Code”). The Code received the President’s assent on 28th May 2016. It was introduced for reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of values of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration on the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India (“Board”), and for matters connected therewith or incidental thereto. The provisions of the Code apply to the following in relation to their insolvency, liquidation, voluntary liquidation, or bankruptcy, as the case may be: i. Companies incorporated under the Companies Act, 2013 or under any previous company law. ii. Any other company governed by any special Act for the time being. However, it shall not apply to the company wherein the provisions of this Code are inconsistent with the provisions of such Special Act. iii. Any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008. iv. Such other body incorporated under any law for the time being in force. v. Personal guarantors to corporate debtors vi. Partnership firms and proprietorship firms vii. Individuals, other than personas referred to in clause (v). KEY HIGHLIGHTS OF THE ACT INTRODUCED i. The Act has introduced definitions of “registered valuer” and “service provider” under Section 3 (27A) and (31A) of the Code respectively. ii. Under the Section 3, an explanation has been inserted to clarify that the “security interest” exist only if it creates a right, title, or interest or a claim to a property pursuant to an agreement or arrangement, by the act of two or more parties, and shall not include a security interest created merely by operation of any law for the time being in force. The explanation makes it clear that a security interest exists only if it arises from an agreement or arrangement between two or more parties. It excludes interests created merely by operation of law, such as statutory charges or liens, unless backed by a consensual arrangement. This ensures that “security interest” is confined to contractual or negotiated rights, aligning with the Code’s purpose of protecting consensual creditors rather than elevating statutory claims. iii. Under Section 5 of the Code, definition of “avoidance transaction” and “fraudulent or wrongful trading” has been introduced. Avoidance transactions typically involve transfers or dealings that unfairly strip value from the debtor’s estate before insolvency (e.g., preferential payments, undervalued sales). Fraudulent/wrongful trading refers to directors or managers continuing business when insolvency is inevitable, thereby worsening creditor losses. Earlier, it was difficult to hold parties accountable or initiate avoidance actions effectively. The amendment empowers resolution professionals and liquidators to act decisively. iv. Pursuant to the amendment, the process for admission of applications under sections 7, 9 and 10 have been revised. Clause 4 substitutes Section 7(5) to mandate that the Adjudicating Authority shall pass orders within prescribed timelines, and shall record reasons in writing where such timelines are exceeded. Under the earlier framework, although the Code envisaged a time bound process, in practice the Adjudicating Authority often took months to admit or reject applications, leading to uncertainty, prolonged litigation, and erosion of asset value. There was also wide discretion in considering grounds beyond the statutory requirements, which created scope for inconsistent rulings. It further clarifies that upon satisfaction of the stipulated requirements, the application must either be admitted or rejected, and no extraneous grounds shall be considered. For this purpose, a record of default filed by a financial institution with an information utility shall be deemed sufficient to establish default. Clause 8 substitutes Section 12A to regulate the withdrawal of applications admitted under Sections 7, 9, or 10, and delineates circumstances under which withdrawal shall not be permissible. Clause 9 clarifies that the moratorium shall extend to proceedings initiated or continued by a surety against the corporate debtor under a contract of guarantee. Clause 10 modifies the procedure for appointment of the interim resolution professional. v. Additionally, with respect to claims, cooperation, committee of creditors, avoidance actions, and transfer of guarantor assets. Clause 11 stipulates that the interim resolution professional shall verify claims submitted and, where necessary, determine their value. Under the original framework, the interim resolution professional’s role in verifying claims was not expressly mandated, which often led to disputes over the accuracy and valuation of creditor claims. vi. Clause 12 expands the scope of the obligation to provide assistance, extending it beyond ‘personnel’ to encompass all categories of persons connected with the corporate debtor. In other words, Clause 12 expands the duty of cooperation beyond “personnel” to all persons connected with the corporate debtor because, in practice, critical information and assistance often lie with external advisors, affiliates, or connected parties who were not technically “personnel.” This expansion closes that loophole and guarantees that the resolution professional can access all necessary support to conduct the process effectively. vii. Clause 13 provides that, in the event of liquidation, the Committee of Creditors (“CoC”) shall exercise supervisory authority over the liquidator and shall continue to function in certain ongoing liquidation proceedings. This was needed because once liquidation commenced under the earlier Code, creditor oversight diminished, leaving the liquidator with wide discretion and sometimes resulting in opacity or inefficiency. By giving the CoC supervisory authority, the amendment ensures creditor interests remain protected, enhances transparency, and maintains continuity of oversight even in liquidation. viii. Further, Clause 15 mandates that the resolution professional shall file applications in respect of avoidance transactions, or instances of fraudulent or wrongful trading. Earlier, filing such applications was discretionary, leading to inconsistent enforcement. Further, ambiguity existed whether avoidance or fraudulent trading proceedings had to conclude before resolution or liquidation could proceed. Clause 16 clarifies that such applications shall not impede the conduct of the corporate insolvency resolution process or liquidation proceedings, and that the completion of those processes shall not preclude continuation of such applications. Clause 17 introduces a new Section 28A, enabling the transfer of assets of a personal or corporate guarantor in specified circumstances, subject to requisite approvals and the distribution framework prescribed therein. ix. Clauses 18 to 20 have modified the rules relating to resolution plans and liquidation. Clause 18 introduces a new requirement mandating payment to financial creditors who do not vote in favour of the resolution plan, prescribes a minimum standard for such payment, and affirms that such distribution shall be deemed fair and equitable to those creditors. It further provides that the requirement shall not apply to certain cases already at an advanced stage, and obliges the committee of creditors to record reasons for its approval. Before the amendment of the Code, creditors who did not vote in favour of a resolution plan often received little or no payment, which raised fairness issues and led to litigation over whether such distribution was equitable. x. Clause 19 amends Section 31 to permit staged approval, whereby implementation may be sanctioned first and distribution subsequently in specified cases. It also requires that notice be given to rectify defects prior to rejection, imposes a thirty day timeline for passing orders, safeguards licenses, permits and similar grants from suspension or termination during their subsisting period where obligations are duly met, and provides for extinguishment of prior claims against the corporate debtor and its assets upon approval of the resolution plan, subject to the explanations set forth therein. This amendment has been introduced because under the earlier Code, approval was treated as a single, all or nothing stage, which often led to delays if defects were found or if distribution arrangements were complex. The amendment has introduced streamline approvals, protect business viability, reduce delays, and ensure finality of claims, thereby reinforcing both creditor confidence and debtor rehabilitation. xi. Clause 20 amends Section 33 to expand the framework governing liquidation orders, authorizes restoration of the corporate insolvency resolution process in certain circumstances prior to the passing of a liquidation order, stipulates that such restoration may occur only once, and prescribes timelines for the passing of liquidation orders. Before this amendment, once liquidation was ordered, there was no statutory mechanism to restore the corporate insolvency resolution process, even if circumstances changed or a viable resolution plan emerged late in the process. This often led to premature liquidation, loss of asset value, and reduced recovery for creditors. xii. Clause 21 amends Section 34 to provide that, upon an order of liquidation, the Adjudicating Authority shall refer the matter to the Board for recommendation of insolvency professional to be appointed as liquidator. It further stipulates that the resolution professional engaged in the corporate insolvency resolution process shall neither be appointed nor replaced as liquidator for the same corporate debtor. This has been done because before the amendment, the resolution professional who managed the corporate insolvency resolution process could also be appointed as liquidator for the same corporate debtor, which raised concerns about conflict of interest and continuity of control. Further, the amendment has empowered the CoC to replace the liquidator by a vote of sixty six per (66%) cent, subject to prescribed conditions. xiii. Under the Code, before amendment, once liquidation was ordered, the liquidator had wide discretion with limited statutory obligations to keep claims updated or pursue avoidance and wrongful trading actions. This often led to disputes, incomplete recovery, and reduced confidence among creditors. Clause 23 amends Section 35 to require the liquidator to maintain an updated list of claims, authorizes the liquidator to continue or institute proceedings in respect of avoidance transactions or fraudulent or wrongful trading, and provides that the committee of creditors shall supervise the liquidation process. xiv. Clause 24 widens the scope of Section 36(3)(f) to encompass proceedings relating to avoidance transactions, fraudulent or wrongful trading, and matters under Section 47. Under the earlier Code, Section 36(3)(f) referred more narrowly to assets subject to certain proceedings, which left ambiguity about whether the liquidator could exercise control when such actions were pending or required. This gap often led to disputes over jurisdiction and hindered recovery efforts. xv. Clause 25 omits Sections 38 to 42. Clauses 26 to 30 revise the look back provisions and related language in Sections 43, 46, 47, 49 and 50. The need for this change arose because the earlier drafting left interpretational gaps about the period within which such transactions could be challenged and the precise scope of creditor or liquidator action. xvi. Clause 28 substitutes Section 47 to permit creditors, members, or partners to apply in cases where transactions or trading have occurred but were not reported by the liquidator or resolution professional and further provides for disciplinary action where such non reporting is established since the Code stated that the responsibility for reporting avoidance transactions or fraudulent and wrongful trading rested primarily with the resolution professional or liquidator, but there was no statutory recourse if they failed to discharge this duty. xvii. Clauses 31 and 32 amend Sections 52 and 53 to regulate realization of security interests, provide for deemed relinquishment where intimation is not given within fourteen days, require agreement among secured creditors in specified cases, mandate deduction and transfer of certain costs and dues, clarify treatment of part secured debts, and prescribe distribution of government dues. Clause 33 amends Section 54 to require that an application for liquidation and dissolution be filed within one hundred and eighty days, subject to limited extension. It further provides that the committee of creditors shall decide upon pending avoidance or fraudulent transaction proceedings, or pending suits, prior to dissolution; authorizes dissolution upon such decision in certain cases; and mandates that the Adjudicating Authority shall pass dissolution orders within thirty day. xviii. Clause 34 to Clause 38 amend Sections 54A, 54C, 54F, 54L and 54N, inter alia, by lowering certain approval thresholds from sixty six per cent to fifty one (51%) per cent and effecting related procedural modifications. Previously, the Code required a two thirds majority (66%) of the committee of creditors for certain key decisions in fast track or pre pack insolvency processes. This high threshold often made it difficult to secure approvals, especially in cases where creditor participation was fragmented or where a small minority could block progress. xix. Clause 39 omits Chapter IV of Part II. Clause 40 inserts new Sections 58A to 58K, which collectively establish the framework for a creditor initiated insolvency resolution process. These provisions specify the categories of corporate debtors eligible for such process, identify the persons entitled to initiate it, prescribe the requisite approvals, and recognize the right of the corporate debtor to object. They further delineate the period for completion, the duties and powers of the resolution professional, and provide that the board of directors or partners shall continue to manage the affairs of the corporate debtor subject to the oversight of the resolution professional. xx. The provisions also set out the moratorium rules, conditions for conversion into an ordinary corporate insolvency resolution process, circumstances permitting withdrawal of the public announcement, requirements for approval of resolution plans, and the application of other provisions of the Code to this Chapter with specified modifications. xxi. Clause 49 omits Section 74, and Clause 50 omits Section 76. Section 74 addressed punishment for contravention of moratorium provisions, prescribing imprisonment or fine for officers of the corporate debtor who knowingly violated the moratorium. Section 76 dealt with punishment for fraudulent or malicious initiation of proceedings, imposing liability on persons who filed insolvency applications with dishonest intent. These provisions were considered duplicative or overlapping with other penal and enforcement mechanisms already strengthened in the Amendment Act (such as the new Section 164A on transactions defrauding creditors, and Section 183A on frivolous or vexatious proceedings). Their omission was intended to streamline the penal framework, avoid redundancy, and consolidate enforcement under more precise and updated provisions. xxii. Clause 51 inserts a new sub section (4) in Section 96, providing that the moratorium under Section 96 shall not apply where an application is filed for initiation of an insolvency resolution process in respect of a personal guarantor to a corporate debtor. xxiii. Clause 52 amends Section 99 by substituting the period of ‘ten days’ with ‘twenty one days’ in sub section (1), and by replacing the words ‘or the creditor’ with ‘and the creditor’ in sub section (10). xxiv. Clause 53 amends Section 106 to stipulate that, where no repayment plan is submitted, the resolution professional shall report accordingly and the Adjudicating Authority shall terminate the insolvency resolution process, following which the debtor or the creditors may apply for bankruptcy. It further inserts a special provision governing meetings where the repayment plan relates to a personal guarantor to a corporate debtor. xxv. Clauses 54 and 55 make consequential amendments to Sections 121 and 124. Section 121 deals with the procedure for filing bankruptcy applications. The amendment ensures consistency with the revised framework for insolvency resolution and liquidation, particularly where new timelines, duties of resolution professionals, and creditor rights have been introduced, whereas Section 124 relates to the discharge order in bankruptcy. The consequential amendment harmonizes this section with the new provisions on extinguishment of claims, treatment of guarantor assets, and avoidance proceedings, so that discharge orders do not conflict with ongoing or parallel processes. xxvi. Clause 56 inserts a new Section 164A dealing with transactions defrauding creditors, empowering the Adjudicating Authority to restore the position as it existed prior to such transactions and to protect victims, subject to the safeguards prescribed therein. xxvii. Clause 58 inserts a new Section 183A, authorizing the imposition of penalty in cases of frivolous or vexatious proceedings under this Part. It has been introduced to deter the misuse of the insolvency framework and to preserve the integrity of proceedings. Before the amendment, there was no specific statutory penalty for parties initiating frivolous or vexatious applications, which often led to unnecessary litigation, delay, and increased costs for stakeholder. xxviii. Clause 72 amends Section 242 to insert a new sub section (1A), conferring upon the Central Government the power to remove difficulties arising in giving effect to the provisions of the Amendment Act, for a period not exceeding five years from its commencement. Earlier, the Central Government issued orders for resolving implementation issues but limited that power to a period of two years from the commencement of the Code. xxix. Following Section 240A, new Sections 240B and 240C are inserted. Section 240B empowers the Central Government to establish an electronic portal for the conduct of insolvency and bankruptcy procedures under the Code. Section 240C authorizes the Central Government to prescribe the manner and conditions governing cross border insolvency proceedings, including recognition, relief, judicial cooperation, assistance, and coordination, with enabling power to adapt provisions of the Code or the Companies Act, 2013, as may be required. CONCLUSION The Insolvency and Bankruptcy Code (Amendment) Act, 2026 introduces a wide ranging set of reforms designed to strengthen the efficiency, transparency, and fairness of insolvency and liquidation proceedings in India. By revising admission and withdrawal procedures, expanding the supervisory role of creditors, clarifying treatment of guarantor assets, and streamlining resolution and liquidation frameworks, the Act seeks to ensure time bound outcomes and equitable distribution among stakeholders. The amendments also modernize the Code by lowering approval thresholds, introducing creditor initiated resolution processes, empowering the Central Government to regulate group and cross border insolvencies, and enabling electronic platforms for procedural management. Provisions addressing fraudulent transactions, frivolous proceedings, and government dues further reinforce accountability and creditor protection. Taken together, these changes reflect a deliberate legislative effort to balance creditor rights with debtor protections, enhance institutional oversight, and align India’s insolvency regime with evolving global standards. The Act thus represents a significant step toward a more robust, predictable, and internationally harmonized insolvency framework. Authors: Ms. Jyotsna Chaturvedi, Head – Corporate Practice and Navya Saxena, Associate [1] https://ibbi.gov.in/legal-framework/act

Background The Indian government is currently evaluating a landmark policy shift that could allow Foreign Direct Investment (“FDI”) in inventory led e-commerce models, specifically for export purposes. Historically, India has maintained a strict prohibition on FDI in inventory-based e-commerce, permitting 100% investment only under the marketplace model where platforms act as neutral facilitators between buyers and sellers. The proposed reform seeks to bridge the gap between India’s continuously expanding e-commerce sector and its global export potential, which currently stands at just US$ 4-5 billion, a mere 1% of total exports. Key Highlights of the Proposed Export Policy   The proposed framework for the export-oriented e-commerce policy seeks to boost national exports while maintaining tight guardrails to protect domestic retailers from unfair competition. Under this planned shift, foreign funded e-commerce companies may be permitted to operate an export only inventory model, allowing them to hold stock for sale exclusively to international customers. To prevent any spillover into the domestic market, the policy considers mandating the physical segregation of goods through dedicated, ringfenced warehouses for export inventory. Additionally, the government is evaluating requirements for foreign platforms to establish separate Indian entities tasked with purchasing goods from domestic sellers solely for international markets. Another point being considered is to permit such entities to buy from Indian sellers only after an international order has been confirmed, ensuring a clear distinction from prohibited domestic inventory-led retail.   Economic Impact   The primary objective of this regulatory shift is the integration of India’s 63,000,000 Micro, Small, and Medium Enterprises (“MSMEs”) into the global supply chain. Approximately 70% of Indian MSMEs currently selling online are expected to be the biggest beneficiaries of this plan, particularly those operating in high-demand sectors such as fashion and apparel, gems and jewellery, and handicrafts. Furthermore, by partnering with large FDI-funded entities, these smaller enterprises may see a significant reduction in their individual compliance burdens in attempting to reach international markets. With global e-commerce trade projected to reach US$ 8 trillion by 2026, this policy strategically aligns with the government’s goal of establishing India as a premier global manufacturing and export hub.   Analysis   The move toward an export-only inventory model reflects a broader regulatory recognition that the current “100% automatic route” for marketplaces is often illusory and highly conditional in practice. According to a research paper published by the Institute of Company Secretaries of India (ICSI), the binary distinction between marketplace and inventory models has collapsed into a “spectrum of grey,” where logistics and captive payment gateways allow platforms to exercise constructive control over sellers even without legal title to goods. By proposing a limited inventory relaxation for exports aligned with the Foreign Trade Policy 2023, the government is adopting a strategic middle path that encourages innovation and volume in international trade while maintaining protectionist safeguards for the domestic retail landscape.   In conclusion, the government’s proposed plan represents a major step towards making India a global export hub. By allowing foreign funded companies to own and manage inventory specifically for international orders, the policy aims to significantly grow India’s e-commerce exports beyond the current US$ 4-5 billion mark. To protect the local market, the plan includes strict safeguards, such as separate warehouses and export-only entities that do not comingle with entities catering to the domestic market. While the government is still consulting with various ministries and stakeholders, this thinking highlights a clear, positive shift, which will aid this sector in leapfrogging exponentially.