AQUILAW

A. Introduction What began as a criminal complaint in 2004, culminated in a landmark ruling by the Hon’ble Supreme Court on a key issue in the field of arbitration. On 30 April 2025, while delivering its judgment in Gayatri Balaswamy v. ISG Novasoft Technologies Ltd[1] [“Gayatri”], the Apex Court addressed the pivotal question of whether Indian courts are empowered to modify an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”]. By a 4:1 majority, led by (Retd.) Chief Justice of India Sanjiv Khanna, the Court held that a court may modify an award under Section 34 of the Arbitration Act, in limited circumstances. Contrary to the majority judgment, Justice K.V. Vishwanathan, in his dissenting opinion, categorically held that a Court, while exercising jurisdiction under Section 34, does not possess the power to modify, alter or vary the arbitral award unless explicitly permitted by law. B. Position of law prior to Gayatri Judgment The judicial approach towards modification of arbitral awards can be traced back to the Hon’ble Supreme Court’s decision in Mc Dermott International Inc. v. Burn Standard Co. Ltd[2], where the Court clarified the limited scope of judicial intervention under Section 34 of the Arbitration Act. The Court emphasized that in a Section 34 proceeding, courts did not possess the power to modify an award, except where the award was tainted with fraud or bias. However, the decision in Mc Dermott was silent on the broader question of whether arbitral awards could be modified by courts. It was only in Project Director, National Highway Authority of India v. M. Hakeem & Anr.[3], that the Hon’ble Supreme Court conclusively resolved this uncertainty by explicitly holding that Indian courts did not have the power to modify an arbitral award under Section 34 of the Arbitration Act. The Court made it clear that the only available recourse is either to set aside the award passed by an arbitrator or to remit the matter back to the arbitral tribunal for fresh consideration. Following the judgment of the Apex Court in M. Hakeem, several High Courts have clarified, that, although courts do not possess the power to modify an arbitral award, they do possess the authority to partially set aside severable portions of an award, which would not amount to modification, but only annulment to the extent possible. Reliance in this regard may be placed on the decision of the Hon’ble Delhi High Court in National Highway Authority Of India (NHAI) v. Trichy Thanjavur Expressway Ltd.[4], where a single bench of Justice Yashwant Varma, while adjudicating two cross petitions under Section 34 of the Arbitration Act opined that the term “modify” connotes a variation or modulation of the ultimate relief granted by an arbitral tribunal. However, when deciding an application under Section 34, the Court may exercise its power to partially set aside an award, which does not constitute modification or variation. Instead, it involves annulling only the offending portion of the award. Applying the doctrine of severability, The Court emphasized the distinction between modification and partial setting aside of an award and held that where an award addresses distinct claims separately, the Court is empowered to strike down the offending parts while allowing the remainder of the award to stand and remain enforceable. C. Modification of an award viz-a-viz Article 142 of the Constitution Notwithstanding the absence of a statutory framework permitting modification of arbitral awards in India, and despite consistent judicial precedent opposing such alteration, courts have, in exceptional circumstances, deviated from this norm in the larger interest of justice. This position is exemplified by the decision of the Hon’ble Supreme Court in Krishna Bhagya Jala Nigam Ltd. v. G. Harishchandra Reddy & Anr.[5], where the Hon’ble Court, while adjudicating a civil appeal arising from a judgment of the Division Bench of the Karnataka High Court under Section 37(1)(b) of the Arbitration Act, invoked its powers under Article 142 of the Constitution to reduce the future rate interest from 18% to 9%, keeping in view the prevailing economic reforms in the country at that time. Likewise, the Hon’ble Apex Court in S.V. Samudram v. State of Karnataka[6], relying on its judgment passed in M. Hakeem reiterated that modification of an award under Section 34 is impermissible, as the court lacks the authority to alter an arbitral award and any such attempt would amount to “crossing the Lakshman Rekha”. However, with respect to the dispute concerning the interest amount, the Hon’ble Court, once again invoked Article 142 to award pendente lite interest at 9% p.a. from the date of award till the date of payment.   D. The Gayatri Judgment: The much-awaited answer   I. Facts: Gayatri Balaswamy, then Vice President (M&A Integration Strategy) of ISG Novasoft Technologies Limited (Novasoft), tendered her resignation alleging sexual harassment by Novasoft’s Chief Executive Officer, Krishankumar Srinivasan. A criminal complaint was subsequently filed against Krishnakumar Srinivasan under the Indian Penal Code, 1860 and the Tamil Nadu Prohibition of Harassment of Women Act, 1998. As counter measures, Novasoft instituted proceedings alleging defamation and extortion. The parties engaged in prolonged legal battles before ultimately approaching the Hon’ble Supreme Court. The Hon’ble Supreme Court, in SLP (Cri) No. 8272 of 2009[7], taking into account the arbitration clause in Gayatri Balaswamy’s employment agreement, appointed the Hon’ble Justice (Retd.) T.N.C. Rangarajan as the sole arbitrator to resolve the dispute between the parties. Pursuant thereto, Gayatri filed her Statement of Claim seeking recovery of Rs. 28,88,55,500/-, under twelve (12) different heads of claims. The Ld. Sole Arbitrator, however, accepted just one head of claim (claim for severance benefit) and awarded a sum of Rs. 1.68 Crores, rounded off to Rs. 2 Crores, in Gayatri’s favour, while rejecting the remaining eleven claims. Aggrieved by the award, Gayatri preferred an application under Section 34 of the Arbitration Act, before the Hon’ble Madras High Court. II. Decisions of the Hon’ble Madras High Court: The Single Bench of the Hon’ble Madras High Court, by its order dated 2 September, 2014[8], observed that the decision of the Ld. Sole Arbitrator in so far as the 12th claim was concerned, was contradictory to the principle laid down by the Hon’ble Supreme Court in ONGC v. Saw Pipes[9]. Consequently, the Hon’ble Court modified the award passed by the Ld. Sole Arbitrator and granted an additional sum of Rs. 1.68 Crores, towards the 12th claim, directing Novasoft to make such payment within a period of two months from the date of receipt of the order. Dissatisfied and aggrieved by the order of the Single Bench, both parties preferred two separate appeals being, (i) O.S.A. No. 59 of 2015 by Novasoft, questioning the correctness of the order passed by the Hon’ble Single Bench and (ii) O.S.A. No. 181 of 2015 by Gayatri, seeking further enhancement of the compensation amount with respect to disallowed portion of the claim. By a common judgment passed on 8 August, 2019[10], the Division Bench of the Hon’ble Madras High Court dismissed the appeal preferred by Gayatri and partly allowed the appeal filed by Novasoft, by reducing the amount of Rs. 1.68 Crores awarded under Claim No. 12 to Rs. 50,000/- (Rupees Fifty Thousand Only). Dissatisfied with the decision of the Division Bench, Gayatri challenged the judgment before the Hon’ble Supreme Court by way of a Special Leave Petition under Article 136 of the Constitution. III. Litigation before the Supreme Court: The Special Leave Petitions [SLP(C) Nos. 15336-15337 of 2021] preferred by Gayatri, were first heard by a three-Judge Bench led by (Retd.) Chief Justice N.V. Ramana, J, on 1 October 2021. The proceedings were subsequently listed before multiple benches before it was finally taken up by a three-Judge Bench led by Justice Dipankar Datta. By its order dated 20 February 2024[11], the Hon’ble Bench noted that the proceeding raised a pivotal question of whether the Courts had the power to modify an arbitral award under Sections 34 and 37 of the Arbitration Act. Acknowledging the complexity of the issue and the potential implication for arbitration jurisprudence in India, the Hon’ble Bench referred the proceeding to a Five-Judge Constitutional Bench, led by (Retd.) Chief Justice of India, Sanjiv Khanna. E. Decision of the Constitution Bench. On 30 April 2025, the Hon’ble Supreme Court, by a 4:1 majority, led by (Retd.) Chief Justice of India, Sanjiv Khanna, J, held that Courts possess limited authority to modify an arbitral award, in specific circumstances, notwithstanding the absence of any express provision under the Arbitration Act. The majority reasoned that such authority is derived from the inherent powers of the Court wile exercising jurisdiction under Section 34 of the Arbitration Act, and in the case of the Hon’ble Supreme Court, from the extraordinary powers conferred under Article 142 of the Constitution. IV. Ratio of the Majority: The majority opinion, authored by the Chief Justice, observed that although Section 34 of the Arbitration Act does not expressly empower courts to modify or vary an arbitral award, yet such authority exists in a limited context as an inherent judicial power. While addressing the question of the extent to which the principles of equity and justice can be incorporated without transgressing the jurisdictional fabric of Section 34, the majority arrived at the following findings with regard to modification: a. Partial Setting aside of an arbitral award: Placing reliance on the judgment of the Hon’ble Delhi High Court in Trichy Thanjavoor and invoking the principle of omne majus continent in se minus, (the greater contains the lesser),  the majority reasoned that where an arbitral award contains portions that are invalid or beyond the scope of arbitration, courts are empowered to sever the offending portion and uphold the remainder of the arbitral award. The rationale being that a court which is vested with the authority to set aside an award under Section 34 of the Arbitration Act, also possesses the power to set aside an award partially. b. Addressing the principle of modification: The majority, departing from the view taken in M. Hakeem, acknowledged that although minimal judicial interference is an essential ingredient of arbitration, courts nonetheless play a crucial role in ensuring speedy and effective dispute redressal. It reasoned that in the absence of a limited power to modify arbitral awards, courts would be compelled to set aside such awards in entirety, thereby necessitating fresh arbitration proceedings and incurring additional cost. Such an outcome would undermine the very purpose of opting for arbitration as a mechanism for dispute resolution. The majority in the judgment held as follows: “42. Given this background, if we were to decide that courts can only set aside and not modify awards, then the parties would be compelled to undergo an extra round of arbitration, adding to the previous four stages: the initial arbitration, Section 34 (setting aside proceedings), Section 37 (appeal proceedings), and Article 136 (SLP proceedings). In effect, this interpretation would force the parties into a new arbitration process merely to affirm a decision that could easily be arrived at by the court. This would render the arbitration process more cumbersome than even traditional litigation.” c. Modification to what extent possible: The majority, while delineating the scope of modification permissible under Section 34 of the Arbitration Act, circumscribed the power in a manner that prevents re-evaluation of the merits of the dispute. The majority held that such power may be exercised only to rectify clear and obvious errors including computational, typographical, clerical and other manifest errors apparent on the face of the award. d. Modification of award by courts or remitting back to arbitral tribunal: The majority, while addressing this issue, held that under Section 34(4) of the Arbitration Act, a court may remit an arbitral award to the tribunal for correction of curable defects upon request. The majority further clarified that where the modification sought is straightforward and the error is apparent on the face of the award, the Court may itself carry out the necessary corrections. However, if the issue is complex and not amenable to simple correction, then the award should be remitted back to the tribunal. The Court also opined that these powers extend equally to an appellate court exercising jurisdiction under Section 37 of the Arbitration Act. e. Enforcement of foreign awards: The majority rejected the submissions that the power to remit an award back to the arbitral tribunal renders modification unnecessary, terming such an argument as misconceived. The majority held that recognising a limited power of modification under Section 34 is not conflict with the New York Convention 1958. The Court reasoned that once Section 34 is reinterpreted to encompass a narrowly circumscribed power of modification, the exercise of such authority would neither undermine the international commercial framework nor impede the enforcement of foreign awards. f. Interest portion in arbitral awards: The majority, while deciding on whether courts possessed the power to declare or modify interest, including post award interest, held that the courts do have the authority to modify post award interest granted under Section 31(7)(b) of the Arbitration Act. The provision prescribes a default rate of 2% above the prevailing interest rate in cases where the award is silent towards the interest amount. The majority reasoned that post award interest is future-oriented and may not be always be adequately determined by an arbitral tribunal, thereby justifying judicial correction at a later stage. However, the majority categorically clarified that the interest awarded for the period pendente lite lies beyond the scope of judicial alteration by courts under Section 34 and Section 37 of the Arbitration Act. g. Power vested under Article 142: With regard to the scope and applicability of the Hon’ble Supreme Court’ power under Article 142, the majority held that such power must be exercised with great care and caution, solely for the purpose of ensuring complete justice. It further emphasized that the exercise of Article 12 must remain consistent with the fundamental principle and objective underpinning the Arbitration Act. “82. As far as the applicability of Article 142 of the Constitution is concerned, this power is to be exercised by this Court with great care and caution. Article 142 enables the Court to do complete justice in any cause or matter pending before it. The exercise of this power has to be in consonance with the fundamental principles and objectives behind the 1996 Act and not in derogation or in suppression thereof. 83.********** While exercising power under Article 142, this Court must be conscious of the aforesaid dictum. In our opinion, the power should not be exercised where the effect of the order passed by the court would be to rewrite the award or modify the award on merits. However, the power can be exercised where it is required and necessary to bring the litigation or dispute to an end. Not only would this end protracted litigation, but it would also save parties' money and time.” IV. Dissenting Judgment: Hon'ble Justice K.V. Vishwanathan, in his dissenting opinion, took a contrary view to that of the majority. He held that Section 34 of the Arbitration Act does not confer upon courts the power to modify, alter and/or change an arbitral award. He observed that the term “modify” signifies a change or an alteration, which cannot be read into the limited framework of Section 34 of the Arbitration Act, particularly when the legislature has not been expressly vested such power. On the issue of partially setting aside of arbitral awards, Justice Vishwanathan drew a clear distinction between setting aside severable portions of an award and modifying an award, noting that the two operate in entirely different spheres and cannot be treated as of the same genus. Drawing reference to the Arbitration Act, 1940, which expressly permitted modification, he emphasized that the Arbitration Act, despite multiple amendments contains no such provision, reflecting deliberate legislative intent. Rejecting the majority’s reliance on implied powers, Justice Vishwanathan took a divergent view by holding that such power may only be invoked where it is necessary to enforce the final powers of the statute. Since Section 34 of the Arbitration Act embodies the principle of minimal judicial intervention, recognising an implied power to modify an award would, in his view, undermine the very foundation of the statute’s objective. In support of his decision, he laid emphasis on the legislations of other countries such as United Kingdom and Singapore, where the legislation itself has granted express power. On the applicability of Article 142, Justice Vishwanathan firmly rejected its use for modifying arbitral awards as he maintained that allowing the Apex Court to invoke its inherent powers to alter awards, would bypass the lucid statutory limits maintained by the Arbitration Act. Concluding his dissent, he underscored that arbitration is a distinct and self-contained mechanism of dispute resolution mechanism and permitting courts to modify an award at the final stage of the litigation would introduce significant uncertainty, contrary to the foundational objectives of the Arbitration Act. F. Conclusion By conclusively addressing the long-awaited question, the Hon’ble Supreme Court has attempted to settle one of the most complex questions in Indian arbitration jurisprudence viz. the permissible scope of judicial intervention in arbitral awards. For decades, courts and practitioners have grappled with the tension between the two competing objectives, the need to uphold the finality and sanctity of arbitration as a party driven dispute resolution mechanism, and the equally compelling necessity of ensuring that arbitral awards do not perpetuate patent errors or injustices. Through this judgment, the Hon’ble Supreme Court has delineated the narrow circumstances in which modification of an award may be undertaken, thereby creating a carefully balanced framework. On one hand, the Hon’ble Supreme Court reaffirmed that arbitration must remain largely insulated from judicial interference, preserving the principle of party autonomy and the efficiency that underpins the arbitral process, and on the other hand, the Hon’ble Supreme Court has recognized that a rigid bar against modification could compel courts to set aside entire awards even for limited defects, thereby triggering costly and time consuming arbitrations, an outcome that would defeat the very rationale of arbitration. The majority’s decision represents an attempt to reconcile efficiency with fairness, finality with flexibility. While it opens the door for limited judicial correction of manifest errors, it simultaneously reaffirms that courts cannot re-evaluate the merits of the dispute or sit in appeal over arbitral reasoning. The dissenting view, however, reminds us that the evolution of the law must remain grounded in legislative intent and constitutional principle, highlighting the delicate balance between judicial creativity and judicial restraint. In its broader significance, the judgment of Gayatri Balaswamy v. ING Novasoft not only settles a contentious legal debate but also reflects the dynamic and evolving nature of arbitration laws in India. It signals India’s gradual move towards a more mature arbitral regime, one that seeks to harmonise global best practices with the unique requirements of domestic jurisprudence, while reinforcing the judiciary’s role as a safeguard against manifest injustice. Authored by Swarajit Dey - Associate Partner & Saptarshi Kar - Associate This Update has been prepared by Swarajit Dey, and Saptarshi Kar, who can be reached at [email protected] and [email protected] respectively. This Update is only for informational purposes and is not intended for solicitation of any work. Nothing in this Update constitutes legal advice and should not be acted upon in any circumstance. [1] SLP (C) No. 15336-15337 of 2021 and reported in 2025 SCC Online SC 986. [2] Civil Appeal No. 4492 of 1998 and reported in (2006) 11 SCC 181. [3] SLP (C) No. 13020 of 2020 and reported in (2021) 9 SCC 1. [4] O.M.P.(COMM) 95 of 2023 and reported in 2023 SCC OnLine Del 5183. [5] Civil Appeal No. 149 of 2007 and reported in 2007 SCC OnLine SC 62. [6] Civil Appeal No. 8067 of 2019 and reported in 2022 SCC OnLine SC 19. [7] SLP (Cri) No. 8272 of 2009 [Gayatri Balaswamy v. Krishankumar Srinivasan] with SLP (Cri) No. 6135 of 2009 [Krishna Srinivasan v. Gayatri Balaswamy]. [8] Original Petition No. 463 of 2012 and reported in 2014 SCC OnLine Mad 6568. [9] (2003) 5 SCC 545 [paragraph 31]. [10] 2019 SCC OnLine Mad 15819. [11] Order dated February 20, 2024, in SLP(C) No. 15336 of 2021 and SLP(C) No. 15337 of 2021 and reported in 2024 SCC OnLine SC 1681.

A. Introduction A recent survey in India found that 60% of children in urban areas spend up to 3 hours daily on social media and gaming platforms.[1] This exponential increase in the usage of internet for a multitude of activities ranging from recreational purposes like online gaming, usage of social media, OTT (Over-the-Top) platforms, to more serious tasks like schoolwork and research has highlighted the urgent need to regulate online exposure and ensure proper protection for children against dangers like cyberbullying and online sexual exploitation. This edition of Nota Bene delves into the vulnerability of children to online victimisation, while also focussing on the crime of child pornography. In doing so, it shall make a detailed reference to a recent judgement of the Supreme Court in Just Rights for Children Alliance & Anr. v. S. Harish & Ors.,[2] where the Court laid down the law pertaining to offences under Section 15 of the Protection of Children from Sexual Offences Act, 2012 (hereinafter also referred to as the “POCSO Act”) and Section 67B of the Information Technology Act, 2000 (hereinafter also referred to as the “IT Act”). The Court advocated for replacing the term ‘child pornography’ with ‘CSEAM’, raising awareness about child protection laws, and holding Internet Service Providers accountable for reporting abuse. The article calls for a balanced approach between punishing offenders and supporting child victims' reintegration into society. B. Who is a ‘Child’? The definition of a ‘child’ in international law under Article 1 of the United Nations Convention on the Rights of the Child, is “every human being below the age of 18 years unless, under the law applicable to the child, majority is attained earlier”.[3] In Indian law, Section 2(1)(d) of the POCSO Act defines the term ‘child’ as any person below the age of 18 years.[4] Therefore, the term under the POCSO Act is both, gender neutral and gender fluid.[5] Similarly, the Juvenile Justice (Care and Protection of Children) Act, 2015[6] and the Information Technology Act, 2000[7] also maintain the same age of majority, i.e., 18 years. India, being a signatory to the aforementioned Convention has duly enacted laws in consonance with the obligations imposed by it. Significant domestic legislations have been enacted in alignment with these international commitments, thereby ensuring uniformity for children in the criminal justice system. C. Analysing victimisation of children on the internet with special focus on ‘Adolescence’ Data suggests that in January, 2023, internet users in India alone were 692 million, out of which 30.4% happen to be children.[8] Children are amongst the most vulnerable groups of people prone to online victimisation to crimes like cyber bullying, cyber stalking, sexual exploitation and grooming. A recent study conducted at the University of Edinburgh concludes that as many as 12.6% of the world’s children are “victims of nonconsensual talking, sharing and exposure to sexual images and videos in the past year, equivalent to about 302 million young people.”[9] This vulnerability is often attributed to their immaturity, trusting nature and curiosity. The United Nations Committee on the Rights of the Child describes adolescence as “a life stage characterised by growing opportunities, capacities, aspirations, energy and creativity, but also significant vulnerability.”[10] However, given this vulnerability and the increasing availability of the internet, it becomes imperative to ensure that such usage is properly regulated to prevent exposure to individuals who may exploit or victimize children. This is important because the internet affords anonymity to predators, acting as a shield for their identity and protecting them from being revealed to potential victims. Moreover, social media platforms enable predators to engage in conversations with children and expose them to harmful content, including sexually abusive and exploitative material, violent scenes and other inappropriate content, which can be easily re-shared and amplified. ‘Adolescence’, a recent Netflix series, quickly secured a spot among the ‘Top 10 Most Watched English Series’ of all time in just three weeks from its release. It raises important questions on the influence exuded by social media on teenagers. Centered around the intersection of law, social media, and adolescence, the series revolves around a 13-year-old boy who falls victim to cyberbullying, leading to his exposure to the digital ‘manosphere’ (a collection of data on the internet promoting misogyny, toxic masculinity and opposing feminism), ultimately resulting in him committing a crime. The Netflix series, ‘Adolescence’ is centred on the profound impact that social media and the internet have on children and the consequences of excessive exposure to inappropriate content available online. In the series, Jamie, a 13-year-old boy stands accused of murder after allegedly stabbing another teenager. As the plot unfolds, the focus shifts to Jamie's family and their harrowing journey through grief, shedding light on the difficulties faced during their navigation towards leading a normal life. The primary focus of the series is on the compelling factors which push Jamie to stab a classmate. The investigation also revolves around social media communications between the accused and the victim, which help the investigating agency unravel the dynamics between the two. At the start, viewers perceive Jamie as innocent and unaware of the crime he is accused of. However, by the second episode, the show reveals the prevalence of ‘incel culture’ and the interpretation of common emojis among teens. It also delves into the 'manosphere', promoting toxic masculinity and misogyny, along with socially harmful concepts like the 80-20 rule (i.e., 80% women are attracted to 20% men and the consequent blaming of women for rejecting men). In the third episode, Jamie’s conversation with a psychologist unravels the unsettling truth about his exposure to toxic masculinity, offering an insight into his thought process which drove him to commit the crime. Towards the end, the series takes an emotional turn, highlighting the guilt and agony experienced by Jamie’s family as they grapple with the consequences of his actions. ‘Adolescence’ brings to the forefront, the far-reaching impact which social media has on the vulnerable minds of children, thus highlighting a pressing need to regulate exposure to social media. By exploring complex issues like cyberbullying, toxic masculinity, and the influence of harmful digital spaces, the series serves as a poignant reminder of the dangers lurking online, especially among the youth. The impact of the show has been felt globally, sparking conversations about the responsibility of both- society and technology in protecting children, leaving viewers with much to reflect on in regard to the digital age’s effect on youth. D. Legislative framework around sexual offences relating to children The POCSO Act is the principal legislation which affords statutory protection to children against sexual offences. Enacted to address gaps in existing laws and to specifically criminalize sexual offences against children, the POCSO Act reflects the country's commitment to upholding child rights, as outlined in the Constitution (notably Articles 15 and 39) and the United Nations Convention on the Rights of the Child (UNCRC). The Act broadens the scope of protection by categorizing sexual offences into three key chapters: Chapter II defines and punishes crimes such as penetrative sexual assault, aggravated sexual assault, sexual harassment, and sexual abuse; Chapter III penalises use of children in pornography; and Chapter IV criminalizes attempts to commit these offences and their abetments. The POCSO Act criminalizes the sexual exploitation of children in any form, including the representation of their sexual organs or involvement in real or simulated sexual acts or any indecent or obscene representation of child.[11] Penalties for such offences start at a minimum of five years of imprisonment for the first conviction, with subsequent convictions carrying a minimum of seven years.[12] A significant amendment to Section 15 of the Act in 2019 further strengthens protections by criminalizing the storage and transmission of child pornography, including possession for commercial purposes or with the intent to distribute or display such material. In addition to the POCSO Act, the Information Technology (Amendment) Act of 2008 introduced Sections 67A and 67B, which specifically address the rising concerns of online sexual exploitation of children. These provisions impose enhanced penalties for the transmission, creation, possession, and consumption of child pornography, recognizing the growing vulnerability of children in digital spaces.[13] The Act not only penalises the “electronic dissemination of child pornographic material, but also the creation, possession, propagation and consumption of such material as-well as the different types of direct and indirect acts of online sexual denigration and exploitation of the vulnerable age of children”. Together, these legislative efforts provide a robust framework aimed at protecting children from sexual abuse, both offline and online, and underscore the legal system’s increasing focus on tackling the exploitation and degradation of minors in the digital era. E. Just Rights for Children Alliance & Anr. v. S. Harish & Ors. In Just Rights for Children Alliance & Anr. v. S. Harish & Ors., the Supreme Court emphasised the necessity to protect children from social evils like child pornography. The case dealt with storage and possession of child pornographic material in the mobile phone of an accused person without any transmission or publication to a third person. The Supreme Court was faced with two major issues- Interpretation of the ambits of Section 15 of the POCSO Act (which specifies the punishment for storage of pornographic material involving a child) and Section 67B of the IT Act (which specifies the punishment for publishing or transmitting of material depicting children in sexually explicit act); and Whether mere possession or storage of child pornographic material could constitute an offence under the POCSO Act? The Court delved upon the definition of a ‘child’ under Section 2(1)(d) of the POCSO Act as any person below the age of 18 years. It made use of the criterion of ‘subjective satisfaction’ while expanding the interpretation of a ‘child involved in pornography’ to “any visual depiction of a sexually explicit act which any ordinary person of a prudent mind would reasonably believe to prima facie depict a child or appear to involve a child.” While deciding the scope and ambit of the offence under Section 15 of the POCSO Act, the Supreme Court delved into the concept of an ‘inchoate crime’, which means a crime which is done in preparation for another crime. These are ‘incomplete’ offences, and show mens rea for a further crime. These acts are criminalised to avoid further damage which may be caused by actual commission of crime, and that the mens rea for the commission of such an offence is to be gauged from the actus reus. Section 15(2) stipulates a situation where such storage or possession of child pornographic material is for further transmission, propagation, display or distribution. The court held that the doctrine of constructive possession would apply to situations where a person indulges in viewing child pornographic material, and that any form of intangible possession would also amount to ‘possession’ under Section 15 of the POCSO Act, and that a failure or omission to report the same would constitute an offence under Section 15(1). With regard to the interpretation of Section 67B of the IT Act, the Court held that it is a provision to cater to electronic abuse and exploitation of children. The section has a sweeping reach, and includes creation, possession, propagation, consumption and transmission of child pornographic material. The provision must be interpreted in a manner which gives effect to the legislative intent behind enacting it, i.e., penalising cyber-offences which exploit children through obscene or pornographic material involving children. In essence, the decision of the Court was that mere storage and possession of child pornographic material would also constitute a punishable offence. While considering the legislative intent behind the aforementioned enactments, the Court held that sexual exploitation of children is a pervasive issue and needs to be combated, keeping in mind the ultimate objective, i.e., welfare and protection of the child. The decision reflects a strong commitment to protecting children from sexual exploitation, emphasizing that such acts must be addressed proactively to ensure the welfare and safety of children in the face of growing online threats. F. Strategic steps for strengthening child protection and combating online exploitation Usage of the term Child Sexual Exploitation and Abuse Material (CSEAM) as an alternative to the term ‘Child Pornography’ While deciding Just Rights for Children Alliance & Anr. v. S. Harish & Ors., the Supreme Court emphatically held that the term ‘child pornography’ tends to trivialise the crime, and that it has a tendency to imply consensual acts between people. The Court deemed the term ‘Child Sexual Exploitation and Abuse Material (CSEAM)’ as an appropriate alternative, which also displays the true nature of the crime. The Court also stressed upon the necessity of imparting timely and positive sex education including the concepts of consent, gender equality and healthy relationships to children to promote safer practices amongst children. Initiatives to spread awareness about the POCSO Act Sections 43 and 44 of the POCSO Act obligate the State to disseminate information and awareness about the statute and to monitor appropriate implementation. The State must ensure to undertake awareness generating sessions in all regional languages across the country. In addition, the State must undertake two sets of measures to curb crimes which exploit children sexually- the first being measures which are traditionally aimed at protecting the child, and measures which are aimed at the reintegration of the child against whom a crime has been committed back into society. Imposing obligations on Internet Service Providers (ISPs) With regard to internet service providers (also called ‘ISPs’), there is an increasing need to enforce mandatory reporting of online child sexual abuse, in alignment with the IT Act and the POCSO Act. This has to be done without relieving the ISPs of their obligations to conduct regular due diligence. Recently, Meta (formerly, the Facebook company) announced that additional measures would be taken to safeguard Instagram Teen Accounts, so as to render them unable to go live or turn off protections from receiving obscene images in messages without approval of the teen’s parents. It was also announced that similar accounts would be created on Facebook and Messenger, thus adding automated protections to children’s accounts. While it is important to ensure that those guilty are punished, it is also important to afford adequate social support through welfare mechanisms undertaken by the State, so as to ensure their reintegration into the society. However, a balance must be struck between the best interests of child victims for reintegration into society and punishing perpetrators of such offences. G. Concluding remarks The intersection of law, technology, and the protection of adolescents in cyberspace highlights the pressing need for a comprehensive approach to safeguarding young people from virtual violence. As technology continues to evolve and digital spaces become increasingly integral to daily life, it is essential that legal frameworks keep pace with these changes to effectively address complexities of online exploitation, cyberbullying, and other forms of digital harm. The responsibility lies not only with lawmakers but also with tech companies, educators, and parents to ensure that the internet remains a safe space for adolescents to learn, grow, and interact. Ultimately, a collaborative effort is required to create an online environment that prioritizes safety and well-being of children while fostering a healthy digital culture.   This Update has been prepared by Astha Sharma, Mantika Haryani, Pratibha Yadav and Panistha Bhatt who can be reached at [email protected], [email protected], [email protected] and [email protected] respectively. This Update is only for informational purposes and is not intended for solicitation of any work. Nothing in this Update constitutes legal advice and should not be acted upon in any circumstance. [1] The Hindu Data Team, Social media, OTT, online gaming usage rises: 60% urban kids spend 3 hours daily| Data, The Hindu (September 28, 2023, 3:36 PM)  http://thehindu.com/data/social-media-ott-online-gaming-usage-rises-60-urban-kids-spend-3-hours-daily-data/article67352974.ece. [2] Just Rights for Children Alliance & Anr. v. S. Harish & Ors., 2024 INSC 716. [3] United Nations Convention on the Rights of the Child, Article 1. [4] Protection of Children from Sexual Offences Act, 2012. [5] Just Rights for Children Alliance & Anr. v. S. Harish & Ors., 2024 INSC 716. [6] Juvenile Justice (Care and Protection of Children) Act, 2015, § 2(12), Act No. 2, Acts of Parliament, 2016. [7] Information Technology Act, 2000. [8] Protection of Children from Sexual Offences Act, 2012, § 2(1)(d), Act No. 32 of 2012. [9] Haroon Siddique and agency, more than 300m children victims of online sexual abuse every year, The Guardian (Apr. 6, 2025, 6:30 PM), https://www.theguardian.com/society/article/2024/may/27/more-than-300m-children-victims-of-online-sexual-abuse-every-year. [10] Convention on the Rights of the Child, Nov. 20, 1989, 1577 U.N.T.S. 3. [11] Protection of Children from Sexual Offences Act, 2012, § 13, Act No. 32 of 2012. [12] Protection of Children from Sexual Offences Act, 2012, § 14, Act No. 32 of 2012. [13] Information Technology Act, 2000, § 67, 67A, Act No. 21 of 2000.

A. Introduction Significant quantum of land in the State of West Bengal, had been permitted to be retained in terms of S 6(1)(g) read with S 6(3) of the West Bengal Estates Acquisition Act, 1953 (“WBEA Act”), primarily for the purposes of mills and factories, however, over time, most of such 6(3) lands were lying substantially unutilised, despite attempts of revival and rejuvenation. After nearly six decades, the Government of West Bengal (“GoWB”), acknowledging the need to unlock the true potential of such unutilised 6(3) lands, introduced S 4B(2) of the West Bengal Land Reforms Act, 1955 which crystallised the grant of ‘lessee’ status to such retainers (or their transferees) upon payment of requisite salami and lease rent, and also widened the horizon of usage of such 6(3) lands to include, inter alia, residential projects and logistic parks. Whilst this move greatly boosted the land bank and growth of the State, there remained still, a considerable portion of valuable land, which was untapped. In such circumstances, the GoWB has exercised its discretionary power and resumed such lands, and on such power of the State, there has been long judicial scrutiny. B. Genesis S 6(1), being one of the watershed provisions of the WBEA Act, enabled an intermediary (whose rights in the estates were vested in terms of S 4 of the WBEA Act) to retain different categories of land, to the extent of the prescribed ceiling limits. One such category of land i.e. land comprised in mills, factories and workshops (S 6(1)(g) of the WBEA Act) was permitted to be retained only to the extent as may be determined by GoWB in its order passed under S 6(3) of the WBEA Act. The proviso to the said S 6(3) further goes on to say that, the GoWB is empowered, at its sole discretion, to revise any such order specifying the land permitted to be retained, after reviewing circumstances of the case and granting an opportunity of being heard to the retainer. C. Key Judicial Pronouncement and Consequent Legislative Amendment In State of West Bengal and Ors. vs. Ratnagiri Engg. Pvt. Ltd and Ors. (2009), the Hon’ble Supreme Court of India (“SC”), interpreted the proviso to S 6(3) of the WBEA Act to mean that, the power to revise any order of retention made under the said section, may be exercised only if: (i) some fraud or misrepresentation was made to the GoWB for obtaining such order; or (ii) there was a genuine and important mistake made by the GoWB in passing such order. Such power cannot be exercised merely on the ground that after the passing of such order by the GoWB, some subsequent developments have taken place. In the words of the SC: “…The use of the word "revise" in the proviso also supports the view we are taking. In other words, only the facts as existing at the time when the order under the main part of Section 6(3) of the 1953 Act was passed by the State Government can be taken into consideration while exercising the power under the proviso to Section 6(3) of the 1953 Act. Events subsequent to passing of the order under the main part of Section 6(3) cannot be seen for exercising the power under the proviso” A year thereafter, the GoWB introduced ‘Explanation II’ to S 6(3) of the WBEA Act (by way of an amendment deemed to be effective from date of commencement of the WBEA Act) which clarified the expression ‘revise any order’ in the proviso to the said S 6(3). The clarification was to the effect that, regardless of the extant law or any judicial pronouncement, an order of retention may be revised on the ground that, the retainer has failed/ceased to utilize the retained land or any part thereof for the specified purpose, so as to resume the land surplus to the retainer’s requirements. Whether the said Explanation was introduced to clarify or remove any defect in the pre-existing law, or to override and bypass the judgment of the SC in the aforesaid Ratnagiri case without amending the substantive portion of the section, has been much debated albeit without a clear judicial stance on the same. D. Recent Developments In a judgment dated 22 May 2025, subsequently affirmed by the SC, the Hon’ble High Court of Calcutta, in Hindustan Motors Limited and Anr. v. State of West Bengal and Ors. held that, the amendment introducing Explanation II to S 6(3) of the WBEA Act was within the legislative competence of the State since the said Explanation II was intended to address the lacunae highlighted in the said Ratnagiri judgment i.e. enabling revision of retained land quantum on the basis of subsequent events and was otherwise aligned with the objectives of the WBEA Act.  E. Conclusion Legislative evolution coupled with the judicial interpretations of S 6(3) of the WBEA Act are redefining the regulatory landscape for industrial land in West Bengal, with profound implications for industrial landholders and the State’s long-term economic and land-use policy. These developments serve to: Establish a precedent for GoWB’s authority to resume unutilised industrial landholdings; Signal increased scrutiny on large tracts of idle industrial land; Reinforce pro-active compliance with land utilisation and resumption conditions; Catalyse economic growth by reclaiming and unlocking economic value from dormant assets; Attract fresh investments to accelerate industrial activity in the State; and Strengthen the State’s revenue base, making land a key engine of sustainable development. This Update has been prepared by Tanya Sumana Das and Ankit Chhaparia who can be reached at [email protected] and [email protected], respectively. This Update is only for informational purposes and is not intended for solicitation of any work. Nothing in this Update constitutes legal advice and should not be acted upon in any circumstance.

A. Introduction In the year 1834, the first Indian Law Commission was constituted under the Chairmanship of Lord Thomas Babington Macaulay to examine, inter alia, the existing laws in force in India at that time. The Commission’s recommendation led to the eventual enactment of the Indian Penal Code in 1860. The aim was to substantively define various offences and their subsequent punishments. Subsequently, a separate Code of Criminal Procedure was enacted which came into force in 1973. The Code enshrined   the gamut of various procedures which governed the registration of criminal cases, the process of investigation by law enforcement agencies, and thereafter the process of trial. These laws remained largely unchanged for about a century and a half, till the recent overhaul of criminal laws by the present government. Thereby, introducing the Bharatiya Nyaya Sanhita, 2023 (BNS, 2023) to replace the Indian Penal Code, 1860 and the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS, 2023) to replace the Code of Criminal Procedure, 1973. Be that as it may, the aforesaid penal statutes are generic in nature and largely encompasses all forms of crimes. However, over the years there has been a substantial increase in commission of various financial crimes across the nation. Such financial crimes include illegal activities like fraud (such as accounting, insurance, securities fraud, etc.), money-laundering, Ponzi schemes, counterfeiting, amongst others. To tackle this growing domain of financial crimes, the legislature introduced the Prevention of Money Laundering Act, 2002 (PMLA, 2002) to specifically curb money-laundering as an offence as well as provide provisions for arrest, attachment, and recovery of tainted assets. Therefore, the PMLA, 2002, unlike the BNS, 2023, and the BNSS, 2023, is a comprehensive legislation which comprises both, the substantive as well as the procedural law. While the intent of the legislature was to create a special statute in the form of PMLA, 2002, to tackle specific financial crimes, this unfortunately led to creation of parallel investigations conducted by separate law enforcement agencies, stemming from a common crime. This is because, on one hand, the police and/or a specialized investigating agency like the Central Bureau of Investigation (CBI) investigates the original crime, which in legal parlance is known as a predicate offence or a scheduled offence. On the other hand, any tainted money (black money) which is generated on the basis of the original crime, is investigated under the PMLA, 2002, by the Enforcement Directorate (ED). While the legislature intended that the specialized statute, i.e., PMLA, 2002, would streamline and fine tune the process of investigation, arrest, attachment, and recovery of tainted money, the real-world implications of overlapping jurisdictions created by parallel investigating agencies have led to unintended consequences. Such discrepancies and issues arise right from the very initiation of investigation by registration of a First Information Report (FIR) as per the BNSS, 2023 pertaining to a predicate offence vis-à-vis an Enforcement Case Information Report (ECIR) pertaining to an offence committed under the PMLA, 2002. This update aims to highlight various overlapping implications of dual/parallel investigations being conducted by separate law enforcement agencies arising from the same focal point. It further aims to set out the legal architecture of the PMLA, 2002, and the nature of an ECIR, contrasting it with the traditional role of an FIR. It then explores landmark judicial pronouncements that have either reinforced or questioned the legitimacy of such parallel proceedings. Through real-life case studies like Benoy Babu’s prolonged custody, this update highlights the inconsistencies and operational dilemmas that arise from uncoordinated investigative processes. Finally, it concludes with recommendations for reform, including statutory clarity on ECIRs and proposals for a more streamlined inter-agency framework.   B. Understanding the Legal Framework I. PMLA: A General Overview As stated above, the PMLA, 2002, is a special legislation enacted with an objective to identify, detect, and penalize offences related to the laundering of proceeds of crime. To facilitate this, officers of the ED have been entrusted with significant investigative powers, including arrest, custodial remand, search and seizure of property and persons, among others. The PMLA, 2002 criminalizes all dealings relating to the “proceeds of crime,” a term broadly defined under Section 2(1)(u). The term “proceeds of crime” refers to any property, like money, land, or assets, among other things, that someone has derived or obtained, either directly or indirectly, through illegal activities relating to a predicate offence. The said act further defines the commission of the offence of money laundering under Section 3 of the PMLA, 2002, as the direct or indirect attempt to indulge, assist, or be a party to an activity connected to the proceeds of crime. The attempt could be classified as either concealment, possession, acquisition, or use of the proceeds of crime. Notably, the taint of illegality attaches to the value of the asset itself, regardless of whether it has been converted, transformed, or transferred to another person. Where the original property is taken or held outside India, the law empowers authorities to trace and attach property of an equivalent value located domestically or abroad. In effect, any pecuniary benefit arising from unlawful activity, regardless of the form it assumes, or the methods employed to disguise it, can be pursued and penalized under the PMLA, 2002. II. Distinction between an FIR and an ECIR The primary distinction between a FIR and an ECIR lies in their legal status, procedural requirements, and subsequent obligations for disclosure of the same. An FIR, governed by the Bharatiya Nagarik Suraksha Sanhita, 2023, is a statutory document that initiates a police investigation into a cognizable offence and must be furnished to the accused, kept in the records of a Magistrate, and the proceedings arising therefrom are conducted under judicial oversight. In contrast, an ECIR is not defined in the PMLA, 2002 and is claimed by the ED to be an internal document. Despite its status, the ECIR serves as the foundation for initiating proceedings under the PMLA, 2002 much like an FIR which forms the foundation of a criminal case under BNSS, 2023. However, unlike an FIR, it is not mandatorily disclosed to the accused, raising concerns around procedural fairness and transparency. The ED often contends that making the disclosure of an ECIR mandatory would undermine the very objectives of the 2002 Act, particularly by frustrating the attachment of property identified as proceeds of crime, and executing arrests of the suspects/accused. Since the ECIR is essentially an internal document of the ED, its non-supply cannot be construed as a violation of Constitutional rights. Another issue which arises due to the non-disclosure of the ECIR is that when a person is named as an accused in an ECIR, he/she does not get access to the allegations drawn up against him/her by the ED. Such a disadvantage does not arise with regard to the related predicate offence, which is being investigated under the BNSS, 2023, by the police authorities. However, the ED contends that the PMLA, 2002 ensures that any person arrested is promptly informed of the grounds for their arrest under Section 19 of the PMLA, 2002, thereby satisfying the requirements of Article 22(1) of the Constitution of India. At the same time, since the PMLA, 2002 provides for its own arrest procedures, the ED is not required to adhere to the guidelines laid by the Hon’ble Supreme Court in the case of Arnesh Kumar v. State of Bihar & Anr.,[1] thereby empowering it to make arrests irrespective of the term of imprisonment. As a result, the opaque and non-transparent nature of the ECIR regime, particularly its non-disclosure and disregard for judicial precedents, continues to be a point of significant legal contention and policy debate. III. Distinction between bail under BNSS, 2023, and PMLA, 2002 One of the most debated divergences between general criminal law and the PMLA, 2002 lies in the bail regime. Under BNSS, 2023, the general principle governing bail is guided by the gravity of the offence, likelihood of the accused absconding, tampering with evidence, and other routine considerations. The presumption of innocence of the accused remains intact. Conversely, Section 45 of the PMLA, 2002 imposes what are popularly known as the “twin conditions” for bail, which are: (1) The public prosecutor must be given an opportunity to oppose the bail application; (2) The court must be satisfied that there are reasonable grounds to believe that the accused is not guilty and is unlikely to commit any offence while on bail. These twin conditions reverse the presumption of innocence at the pre-trial stage - an exception to settled bail jurisprudence. IV. Distinction between attachment under the PMLA, 2002 vis-à-vis attachment under the BNSS, 2023 Section 5 of the PMLA, 2002 empowers the ED to provisionally attach property if it has “reason to believe,” based on material in its possession, that such property constitutes proceeds of crime and is likely to be concealed, transferred, or otherwise dealt with in a manner that may frustrate its eventual confiscation. This attachment can be initiated even before the completion of investigation or the framing of formal charges in the predicate offence, thereby reflecting its preventive and pre-emptive character. In contrast, the Section 107 of the BNSS, 2023, mandates prior judicial approval, underlining the emphasis on judicial safeguards and procedural due process. This difference underscores the PMLA, 2002’s distinct legislative intent to provide officers of the ED with independent authority to provisionally attach property, based on an internal assessment, subject to confirmation by an Adjudicating Authority, as a form of rapid and preventive action against money laundering, which is procedurally more aggressive, when compared to the court-supervised, and comparatively restrained, attachment process under the BNSS, 2023.  C. Key Judicial Decisions and Courtroom Interpretations  I. Caught Between Two Agencies - The Parallel Pathway Puzzle In white collar crimes, recovery of assets is crucial. But when multiple agencies initiate parallel proceedings, it can complicate asset tracking and recovery. This multiplicity of forums results in inter-agency delays, conflicting claims, and frustration of victims’ interests. For instance, the parallel invocation of an FIR by the police or CBI and an ECIR by the Enforcement Directorate often gives rise to jurisdictional overlap, procedural confusion, and inconsistent treatment of the same individual across different proceedings. This duality not only burdens the accused with simultaneous legal battles but also undermines the coherence of the investigation itself. Without a harmonised legal framework to reconcile these concurrent powers, enforcement agencies risk working at cross-purposes, thereby affecting investigative outcomes and eroding judicial efficiency. The case of Benoy Babu v. Directorate of Enforcement[2] serves as a prominent example of this dilemma. This case illustrates one of the most legally fraught outcomes of parallel investigations by two independent investigating agencies regarding the conflicting statuses of the same individual. Benoy Babu, while merely named as a witness in the CBI’s investigation into the alleged liquor licence cartelisation, was simultaneously treated as an accused by the Enforcement Directorate, resulting in his custody for about 13 odd months on the basis of the ED’s independent ECIR. The Hon’ble Supreme Court, in ultimately granting him bail, criticised the excessive pre-trial detention and highlighted the legal incongruity of treating the same person as both witness and accused across overlapping proceedings. In a distinct but equally telling case, Arvind Kejriwal v. CBI[3], the Hon’ble Supreme Court, while enlarging Arvind Kejriwal on bail, was constrained to observe that the courts should be alive to both ends of the spectrum: the need to ensure proper enforcement of criminal law on the one hand, and the need to ensure that the law does not become a ruse for targeted harassment on the other hand. The Hon’ble Court further clarified that ‘the CBI did not feel the need and necessity to arrest Arvind Kejriwal until after the Learned Special Judge granted him regular bail in the ED case, only then did the CBI activated its machinery, and took him into custody. Such action, on the part of the CBI, raises a serious question mark not only on the timing of the arrest, but perhaps on the arrest itself. In the circumstances, a view may be taken that such an arrest by the CBI was perhaps intended only to frustrate the bail granted to him in the ED case.’ This shows that, at times, the investigating agencies working/operating under BNSS and PMLA may act in tandem to harass a particular individual for extraneous reasons. In this case, even though Arvind Kejriwal was successfully enlarged on bail under the more stringent PMLA regime, he faced further impediments under the general law governed by the BNSS, 2023. ii. The Domino Effect - FIR Quashed, ECIR at Risk? White collar crimes often involve offences that are, inter alia, recognized under general penal laws such as the Indian Penal Code, 1860 (IPC), or under special legislations like the Prevention of Corruption Act, 1988. These predicate offences are primarily investigated by the police or specialised agencies such as the Central Bureau of Investigation (CBI), among others. When such offences are suspected to have generated proceeds of crime, the ED is empowered to initiate action under the PMLA, 2002, marking a separate line of enquiry specifically targeting money laundering. The Supreme Court in the case of Vijay Madanlal Choudhary v. Union of India[4] held that the proceedings under the PMLA, 2002, are independent and supplementary to those concerning the predicate offence. This dual structure enables the ED to register an ECIR even while the trial or investigation concerning the predicate offence is ongoing. However, the Court also made it clear that if the accused is ultimately exonerated - whether by acquittal, discharge, or the quashing of the FIR - in relation to the predicate offence, then further proceedings under the PMLA, 2002 cannot be sustained against such accused persons. Despite this, divergent judicial interpretations have emerged. In the case of Vijayraj Surana vs The Directorate of Enforcement[5], the Hon’ble Madras High Court has held that the mere quashing of an FIR in the predicate offence on procedural or technical grounds may not, by itself, lead to the collapse of PMLA proceedings. These interpretations suggest that where the FIR is quashed without a substantive examination of the merits of the alleged offence, the ED’s investigation into money laundering may, in some circumstances, continue. Such findings represent a nuanced departure from the precedent set in Vijay Madanlal, and they raise important questions about the threshold required to sustain or terminate money-laundering investigations/proceedings in the absence of a conclusive finding in the predicate offence. D. Conclusion The legal framework to curb financial crimes in India exposes a significant gap between the general criminal procedure and the specialised regime established under the PMLA, 2002. While the ECIR plays a central role in money laundering investigations, its non-statutory status and lack of disclosure obligations raise legitimate concerns about transparency and due process. The coexistence of FIRs and ECIRs, often involving overlapping facts but divergent legal treatment, creates procedural ambiguity, risks arbitrary enforcement, and places undue strain on the suspect/accused. As observed in cases like Benoy Babu and Arvind Kejriwal, the absence of coordinated investigation protocols undermines both fairness and efficiency. Addressing these gaps through statutory clarity on ECIRs, stronger inter-agency coordination, and safeguards against potential overreach and misuse is essential to uphold constitutional rights without compromising the aim and objectives of the PMLA, 2002. Additionally, multiple agencies conducting parallel investigations create inconsistencies. Legislative reform is the sine qua non to resolve these overlaps and to ensure that enforcement actions remain unbiased, do not come at the cost of the constitutional rights of suspects/accused, and do not compromise procedural fairness. As these challenges continue, it will be up to the courts to gradually bring clarity and balance through their decisions, and only time will reveal how these developments unfold. This Update has been prepared by Soumen Mohanty, Piyush Ray, Agnish Basu, Syed Kishwar, Vipul Vedant, Upasana Mohanty and Gaurav Bose who can be reached at [email protected], [email protected] , [email protected], [email protected], [email protected], [email protected], [email protected] respectively. This Update is only for informational purposes and is not intended for solicitation of any work. Nothing in this Update constitutes legal advice and should not be acted upon in any circumstance. [1] Arnesh Kumar v. State of Bihar & Anr., AIR 2014 SC 2756. [2] Benoy Babu v. Directorate of Enforcement, 2023 SCC OnLine SC 1881. [3] Arvind Kejriwal v. CBI, 2024 SCC OnLine SC 2550. [4] Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1. [5] Vijayraj Surana v. The Directorate of Enforcement, 2024 SCC OnLine Mad 8404.

A. Introduction The Supreme Court of India, in its landmark ruling Rakesh Bhanot v. Gurdas Agro Pvt Ltd[1].  delivered on 01 April 2025, clarified the relationship between insolvency moratoriums and criminal liability for dishonoured cheques. The judgment clarifies a key legal conflict between the Negotiable Instruments Act, 1881 (“NI Act”) and the Insolvency and Bankruptcy Code, 2016 (“IBC”), specifically addressing whether the initiation of personal insolvency proceedings under the IBC triggers the temporary moratorium under Section 96, thereby pausing criminal prosecution under Section 138 of the NI Act. In this matter, the appellants, who were charged with dishonour of cheque under Sections 138 and 141 of the NI Act, contended that criminal cases should be put on hold because of the temporary moratorium under Section 96 of the IBC. While rejecting such argument, the Supreme Court highlighted the divergent objectives of the two laws- on one hand, Section 138 of the NI Act protects business trust by making cheque defaults illegal, whereas on the other hand, the IBC seeks to address insolvency through a common procedure. As the Court emphasized, under the NI Act, criminal liability is personal and arises from statutory violations, not merely from civil debt obligations. Therefore, directors, signatories, or guarantors cannot invoke insolvency proceedings as a shield against prosecution. This ruling strikes a balance between the deterrent function of the NI Act and the debtor protection framework under the IBC. By preventing the misuse of insolvency proceedings to evade criminal liability, it reinforces the integrity of the legal process. For creditors, the decision enhances legal certainty by clearly distinguishing between civil enforcement under IBC and criminal prosecution under the NI Act, affirming their right to pursue criminal remedies even during insolvency moratoriums. B. Factual Matrix The ruling by the  Supreme Court stemmed from multiple criminal appeals challenging decisions made by several High Courts, which had denied requests to stay proceedings under Section 138 of the NI Act in light of the interim moratorium imposed under Section 96 of the IBC. The petitioners/ appellants were being prosecuted under Section 138 and 141 for cheque dishonour, following which these individuals’ filed petitions under Section 94 of the IBC to begin personal insolvency resolution procedures, which automatically resulted in an interim moratorium under Section 96 of IBC. They argued that the current criminal proceedings against them under the NI Act should be halted by this moratorium. These applications were denied by the lower courts and high courts, which led to numerous appeals before the Supreme Court.[2] The question of law that was determined by the Supreme Court was whether criminal proceedings against individuals under Section 138 (dishonored cheques) and Section 141 (liability of company officers) of the NI Act should be stayed when an application under Section 94 of the IBC is filed, thereby triggering an interim moratorium under Section 96 of the IBC.[3] C. The Intersection of Criminal Liability and Insolvency: Understanding the NI Act and IBC The purpose of the NI Act was to regulate negotiable instruments, including cheques, bills of exchange, and promissory notes, in order to promote financial certainty and ease business transactions. Section 138 of the NI Act outlines the legal repercussions of dishonouring a cheque. This section holds the drawer criminally liable if payment is not made within the stipulated time after notice. Serving as an effective tool for maintaining trust in financial dealings, it penalizes default and deters misuse of cheques. It reinforces the credibility of negotiable instruments and safeguards the interests of recipients, ensuring that business transactions proceed with greater legal and financial assurance as well as accountability. On the other hand, IBC brought a major shift in India’s insolvency regime by consolidating laws governing both individuals and corporate entities. It aims to streamline resolution, promote entrepreneurship, and balance debtor-creditor interests. For corporate entities, the Corporate Insolvency Resolution Process (CIRP) offers a structured mechanism, and importantly, its initiation triggers an automatic moratorium, effectively staying all proceedings against the corporate debtor. For corporate entities, the IBC provides a comprehensive framework known as the Corporate Insolvency Resolution Process (CIRP). However, this case specifically pertains to partnership firms and is governed by Sections 94, 95, and 96 of the IBC. Under Section 94 of the IBC, a defaulting debtor can apply to the Adjudicating Authority to initiate insolvency resolution process, either directly or through a resolution professional, by submitting an application.[4]. Whereas, Section 95 of the IBC entitles a creditor to apply for initiating insolvency resolution process against a debtor, in the prescribed format. The creditor has three options for applying: independently, jointly with other creditors, or via a resolution professional.[5] Once an application is filed under Section 94 or 95, Section 96 provides for an interim moratorium. During this time, creditors are prohibited from bringing new legal actions against the debtor and any pending debt-related lawsuits are stayed. This temporarily halts all legal actions or proceedings relating to debts, including those already in progress, and applies to all partners in the case of a partnership firm. The goal is to maintain status quo and prevent creditor action while the application is under scrutiny before the Adjudicating Authority.Nonetheless, certain transactions which are notified by the Central Government, after consulting with financial regulators, shall be exempted from interim moratorium and Section 96 per se.[6] D. Navigating Inconsistencies in the Legal Framework Section 138 of the NI Act penalises cheque dishonour resulting from insufficient money in the drawer’s account and Section 141 creates vicarious culpability for those in charge of the company’s operations including directors and signatories.[7] Under Section 138, criminal charges are brought after: a) When a cheque gets dishonoured. b) Inability to pay the dishonoured sum within 15 days after being served with a demand notice. c) Complaint filing within a month of the cause of action emerging.[8] When a debtor files an application under Section 94 or a creditor files an application under Section 95 to begin the insolvency resolution process, interim moratorium under Section 96 of the IBC gets triggered. The filing of “any legal action or proceedings” for “any debt” against the debtor is prohibited during this time, as is “any legal action or legal proceeding pending in respect of any debt,” according to Section 96(1)(b).[9] In order to facilitate an orderly resolution of debts without the burden of concurrent legal processes, this moratorium is intended to give the debtor going through insolvency resolution some breathing room.[10] However, there has been legal dispute over the scope and extent of this protection, especially with reference to criminal prosecutions under the NI Act. While Section 138 of the NI Act rightly penalises cheque dishonour to uphold financial discipline and protect the interests of payees, its enforcement comes into conflict with the automatic moratorium imposed by Section 96 of the IBC. The punitive and compensatory objectives of Section 138 appear to conflict with the IBC’s intent to suspend all legal proceedings, including criminal actions, during the insolvency resolution process. This has led to ambiguity over whether criminal liability under Section 138 of the NI Act should also be stayed during the operation of moratorium in personal insolvency proceedings. E. Analysing The Relationship Between the IBC’s Moratorium Provisions and Criminal Liability Under the NI Act In this case, the Supreme Court undertook a detailed examination of the interplay between criminal liability under the NI Act and the moratorium provisions of the IBC. The Court ruled that criminal procedures are not covered by the moratorium under Section 96 of the IBC, which is limited to protection against civil claims. The Court’s earlier decisions concerning the corporate moratorium under Section 14 of the IBC are consistent with this approach. The judgement makes a distinction between a civil suit for debt recovery and a criminal action that upholds business integrity and address statutory infractions. The Court also underlined that although the IBC seeks to protect people from civil lawsuits pertaining to debt, it does not intend to absolve people of criminal responsibility for crimes they have committed in their individual capacities. The Court’s interpretation of the term “any legal action or proceedings” in Section 96 of the IBC was a crucial component of the ruling. When read in conjunction with “in respect of any debt,” the Court determined that this phrase relates to civil procedures for debt collection rather than criminal prosecutions.The statutory interpretation done by the Court rules to determine that the primary goal of criminal proceedings under Section 138 of the NI Act is to punish the statutory offense of issuing dishonoured cheques and not to recover debt. The fundamental goal goes beyond simply recovering the debt; it is to preserve the integrity of negotiable instruments in business dealings. The Court observed that, “For the foregoing discussion, we are of the opinion that the object of moratorium or for that purpose, the provision enabling the debtor to approach the Tribunal under Section 94 is not to stall the criminal prosecution, but to only postpone any civil actions to recover any debt. The deterrent effect of Section 138 is critical to maintain the trust in the use of negotiable instruments like cheques in business dealings. Criminal liability for dishonoring cheques ensures that 35 individuals who engage in commercial transactions are held accountable for their actions, however subject to satisfaction of other conditions in the N.I. Act, 1881. Therefore, allowing the respective appellants / petitioners to evade prosecution under Section 138 by invoking the moratorium would undermine the very purpose of the N.I. Act, 1881, which is to preserve the integrity and credibility of commercial transactions and the personal responsibility persists, regardless of the insolvency proceedings and its outcome.”[11] The Court reiterated that, regardless of any moratorium that may be in effect for a corporate debtor, statutory obligation against directors and signatories under Section 138 read with Section 141 of the NI Act is personal in nature and still binds natural individuals. Their position and function within the organization at the time of the offense give rise to this liability. The ruling makes it clear that these people cannot avoid criminal responsibility by later filing for personal bankruptcy. The Court underlined that permitting such an escape route would encourage misconduct in business interactions and weaken Section 138’s deterrent effect. The Court made it clear that prosecutions under Section 138 of the NI Act would not be impacted by the adoption of a Resolution Professional's Report under Section 100 or the approval of a Resolution Plan under Section 31 of the IBC. This implies that even if insolvency processes are successfully concluded, criminal liability endures.[12] The integrity of the criminal justice system and the insolvency code is preserved by this aspect of the decision, which guarantees that the conclusion of insolvency procedures cannot retroactively justify actions that were illegal at the time they were performed. F. Conclusion: Impact on Insolvency and Commerce The judgment provides much-needed clarity on the scope and limitations of the IBC’s moratorium provisions for both for corporate debtors under Section 14 and for individuals under Section 96. This judicial interpretation enhances the predictability of insolvency proceedings and enables stakeholders to make more informed decisions. By drawing a clear distinction between civil and criminal proceedings in the context of the moratorium, the Court has laid down a more nuanced framework for understanding the protective mechanisms embedded within the IBC. a) Balancing Conflicting Legal Objectives: The ruling carefully balances two conflicting legal objectives. The IBC's primary goal is to provide debtors facing financial distress with an opportunity for recovery, granting them a temporary reprieve from legal proceedings. b) Preserving Business Integrity: In contrast, the NI Act aims to uphold the integrity and legitimacy of negotiable instruments in commercial transactions, ensuring that violations such as cheque dishonour are effectively addressed. For both sets of rules to operate well, this balance is essential. The ruling preserves the deterrent effect of criminal penalties for cheque dishonour while guaranteeing that the insolvency resolution process can continue without being hampered by civil claims. It strengthens the standing of creditors who possess dishonoured cheques from debtors who subsequently file for bankruptcy. Regardless of the moratorium imposed by Section 96 of the IBC, these creditors may now pursue criminal remedies under Section 138 of the NI Act. In their interactions with possible debtors, creditors benefit from this dual-track strategy, which permits bankruptcy settlement to take place concurrently with criminal prosecution. In conclusion, by emphasizing the serious consequences of issuing dishonoured cheques, the ruling is likely to influence business practices significantly. Given that insolvency processes cannot protect them from criminal liability for dishonoured cheques, businesses and their directors will need to exercise greater caution when it comes to their payment practices. This improved deterrence may reduce the number of cheques that bounce and increase the trustworthiness of cheque as a payment method in business dealings. This Update has been prepared by Pritha Bhaumik, Ranjabati Ray and Ritika Ghosh who can be reached at [email protected], [email protected], and [email protected] respectively. This Update is only for informational purposes and is not intended for solicitation of any work. Nothing in this Update constitutes legal advice and should not be acted upon in any circumstance. [1] 2025 SCC OnLine SC 728 [2] Supra note 1 [3] Ibid [4] Insolvency and Bankruptcy Code, 2016, s. 94 [5] Id. S.95 [6] Id. S.95 [7] Negotiable Instruments Act 1881. S. 141 [8] Id. s.138 [9] Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth, 2025 SCC OnLine SC 493 [10] Supra note 1 [11] Supra note 1 at Para 17 [12] Id. Para 13

A. Introduction A recent survey in India found that 60% of children in urban areas spend up to 3 hours daily on social media and gaming platforms.[1] This exponential increase in the usage of internet for a multitude of activities ranging from recreational purposes like online gaming, usage of social media, OTT (Over-the-Top) platforms, to more serious tasks like schoolwork and research has highlighted the urgent need to regulate online exposure and ensure proper protection for children against dangers like cyberbullying and online sexual exploitation. This edition of Nota Bene delves into the vulnerability of children to online victimisation, while also focussing on the crime of child pornography. In doing so, it shall make a detailed reference to a recent judgement of the Supreme Court in Just Rights for Children Alliance & Anr. v. S. Harish & Ors.,[2] where the Court laid down the law pertaining to offences under Section 15 of the Protection of Children from Sexual Offences Act, 2012 (hereinafter also referred to as the “POCSO Act”) and Section 67B of the Information Technology Act, 2000 (hereinafter also referred to as the “IT Act”). The Court advocated for replacing the term ‘child pornography’ with ‘CSEAM’, raising awareness about child protection laws, and holding Internet Service Providers accountable for reporting abuse. The article calls for a balanced approach between punishing offenders and supporting child victims' reintegration into society. B. Who is a ‘Child’? The definition of a ‘child’ in international law under Article 1 of the United Nations Convention on the Rights of the Child, is “every human being below the age of 18 years unless, under the law applicable to the child, majority is attained earlier”.[3] In Indian law, Section 2(1)(d) of the POCSO Act defines the term ‘child’ as any person below the age of 18 years.[4] Therefore, the term under the POCSO Act is both, gender neutral and gender fluid.[5] Similarly, the Juvenile Justice (Care and Protection of Children) Act, 2015[6] and the Information Technology Act, 2000[7] also maintain the same age of majority, i.e., 18 years. India, being a signatory to the aforementioned Convention has duly enacted laws in consonance with the obligations imposed by it. Significant domestic legislations have been enacted in alignment with these international commitments, thereby ensuring uniformity for children in the criminal justice system. C. Analysing victimisation of children on the internet with special focus on ‘Adolescence’ Data suggests that in January, 2023, internet users in India alone were 692 million, out of which 30.4% happen to be children.[8] Children are amongst the most vulnerable groups of people prone to online victimisation to crimes like cyber bullying, cyber stalking, sexual exploitation and grooming. A recent study conducted at the University of Edinburgh concludes that as many as 12.6% of the world’s children are “victims of nonconsensual talking, sharing and exposure to sexual images and videos in the past year, equivalent to about 302 million young people.”[9] This vulnerability is often attributed to their immaturity, trusting nature and curiosity. The United Nations Committee on the Rights of the Child describes adolescence as “a life stage characterised by growing opportunities, capacities, aspirations, energy and creativity, but also significant vulnerability.”[10] However, given this vulnerability and the increasing availability of the internet, it becomes imperative to ensure that such usage is properly regulated to prevent exposure to individuals who may exploit or victimize children. This is important because the internet affords anonymity to predators, acting as a shield for their identity and protecting them from being revealed to potential victims. Moreover, social media platforms enable predators to engage in conversations with children and expose them to harmful content, including sexually abusive and exploitative material, violent scenes and other inappropriate content, which can be easily re-shared and amplified. ‘Adolescence’, a recent Netflix series, quickly secured a spot among the ‘Top 10 Most Watched English Series’ of all time in just three weeks from its release. It raises important questions on the influence exuded by social media on teenagers. Centered around the intersection of law, social media, and adolescence, the series revolves around a 13-year-old boy who falls victim to cyberbullying, leading to his exposure to the digital ‘manosphere’ (a collection of data on the internet promoting misogyny, toxic masculinity and opposing feminism), ultimately resulting in him committing a crime. The Netflix series, ‘Adolescence’ is centred on the profound impact that social media and the internet have on children and the consequences of excessive exposure to inappropriate content available online. In the series, Jamie, a 13-year-old boy stands accused of murder after allegedly stabbing another teenager. As the plot unfolds, the focus shifts to Jamie's family and their harrowing journey through grief, shedding light on the difficulties faced during their navigation towards leading a normal life. The primary focus of the series is on the compelling factors which push Jamie to stab a classmate. The investigation also revolves around social media communications between the accused and the victim, which help the investigating agency unravel the dynamics between the two. At the start, viewers perceive Jamie as innocent and unaware of the crime he is accused of. However, by the second episode, the show reveals the prevalence of ‘incel culture’ and the interpretation of common emojis among teens. It also delves into the 'manosphere', promoting toxic masculinity and misogyny, along with socially harmful concepts like the 80-20 rule (i.e., 80% women are attracted to 20% men and the consequent blaming of women for rejecting men). In the third episode, Jamie’s conversation with a psychologist unravels the unsettling truth about his exposure to toxic masculinity, offering an insight into his thought process which drove him to commit the crime. Towards the end, the series takes an emotional turn, highlighting the guilt and agony experienced by Jamie’s family as they grapple with the consequences of his actions. ‘Adolescence’ brings to the forefront, the far-reaching impact which social media has on the vulnerable minds of children, thus highlighting a pressing need to regulate exposure to social media. By exploring complex issues like cyberbullying, toxic masculinity, and the influence of harmful digital spaces, the series serves as a poignant reminder of the dangers lurking online, especially among the youth. The impact of the show has been felt globally, sparking conversations about the responsibility of both- society and technology in protecting children, leaving viewers with much to reflect on in regard to the digital age’s effect on youth. D. Legislative framework around sexual offences relating to children The POCSO Act is the principal legislation which affords statutory protection to children against sexual offences. Enacted to address gaps in existing laws and to specifically criminalize sexual offences against children, the POCSO Act reflects the country's commitment to upholding child rights, as outlined in the Constitution (notably Articles 15 and 39) and the United Nations Convention on the Rights of the Child (UNCRC). The Act broadens the scope of protection by categorizing sexual offences into three key chapters: Chapter II defines and punishes crimes such as penetrative sexual assault, aggravated sexual assault, sexual harassment, and sexual abuse; Chapter III penalises use of children in pornography; and Chapter IV criminalizes attempts to commit these offences and their abetments. The POCSO Act criminalizes the sexual exploitation of children in any form, including the representation of their sexual organs or involvement in real or simulated sexual acts or any indecent or obscene representation of child.[11] Penalties for such offences start at a minimum of five years of imprisonment for the first conviction, with subsequent convictions carrying a minimum of seven years.[12] A significant amendment to Section 15 of the Act in 2019 further strengthens protections by criminalizing the storage and transmission of child pornography, including possession for commercial purposes or with the intent to distribute or display such material. In addition to the POCSO Act, the Information Technology (Amendment) Act of 2008 introduced Sections 67A and 67B, which specifically address the rising concerns of online sexual exploitation of children. These provisions impose enhanced penalties for the transmission, creation, possession, and consumption of child pornography, recognizing the growing vulnerability of children in digital spaces.[13] The Act not only penalises the “electronic dissemination of child pornographic material, but also the creation, possession, propagation and consumption of such material as-well as the different types of direct and indirect acts of online sexual denigration and exploitation of the vulnerable age of children”. Together, these legislative efforts provide a robust framework aimed at protecting children from sexual abuse, both offline and online, and underscore the legal system’s increasing focus on tackling the exploitation and degradation of minors in the digital era. E. Just Rights for Children Alliance & Anr. v. S. Harish & Ors. In Just Rights for Children Alliance & Anr. v. S. Harish & Ors., the Supreme Court emphasised the necessity to protect children from social evils like child pornography. The case dealt with storage and possession of child pornographic material in the mobile phone of an accused person without any transmission or publication to a third person. The Supreme Court was faced with two major issues- Interpretation of the ambits of Section 15 of the POCSO Act (which specifies the punishment for storage of pornographic material involving a child) and Section 67B of the IT Act (which specifies the punishment for publishing or transmitting of material depicting children in sexually explicit act); and Whether mere possession or storage of child pornographic material could constitute an offence under the POCSO Act? The Court delved upon the definition of a ‘child’ under Section 2(1)(d) of the POCSO Act as any person below the age of 18 years. It made use of the criterion of ‘subjective satisfaction’ while expanding the interpretation of a ‘child involved in pornography’ to “any visual depiction of a sexually explicit act which any ordinary person of a prudent mind would reasonably believe to prima facie depict a child or appear to involve a child.” While deciding the scope and ambit of the offence under Section 15 of the POCSO Act, the Supreme Court delved into the concept of an ‘inchoate crime’, which means a crime which is done in preparation for another crime. These are ‘incomplete’ offences, and show mens rea for a further crime. These acts are criminalised to avoid further damage which may be caused by actual commission of crime, and that the mens rea for the commission of such an offence is to be gauged from the actus reus. Section 15(2) stipulates a situation where such storage or possession of child pornographic material is for further transmission, propagation, display or distribution. The court held that the doctrine of constructive possession would apply to situations where a person indulges in viewing child pornographic material, and that any form of intangible possession would also amount to ‘possession’ under Section 15 of the POCSO Act, and that a failure or omission to report the same would constitute an offence under Section 15(1). With regard to the interpretation of Section 67B of the IT Act, the Court held that it is a provision to cater to electronic abuse and exploitation of children. The section has a sweeping reach, and includes creation, possession, propagation, consumption and transmission of child pornographic material. The provision must be interpreted in a manner which gives effect to the legislative intent behind enacting it, i.e., penalising cyber-offences which exploit children through obscene or pornographic material involving children. In essence, the decision of the Court was that mere storage and possession of child pornographic material would also constitute a punishable offence. While considering the legislative intent behind the aforementioned enactments, the Court held that sexual exploitation of children is a pervasive issue and needs to be combated, keeping in mind the ultimate objective, i.e., welfare and protection of the child. The decision reflects a strong commitment to protecting children from sexual exploitation, emphasizing that such acts must be addressed proactively to ensure the welfare and safety of children in the face of growing online threats. F. Strategic steps for strengthening child protection and combating online exploitation Usage of the term Child Sexual Exploitation and Abuse Material (CSEAM) as an alternative to the term ‘Child Pornography’ While deciding Just Rights for Children Alliance & Anr. v. S. Harish & Ors., the Supreme Court emphatically held that the term ‘child pornography’ tends to trivialise the crime, and that it has a tendency to imply consensual acts between people. The Court deemed the term ‘Child Sexual Exploitation and Abuse Material (CSEAM)’ as an appropriate alternative, which also displays the true nature of the crime. The Court also stressed upon the necessity of imparting timely and positive sex education including the concepts of consent, gender equality and healthy relationships to children to promote safer practices amongst children. Initiatives to spread awareness about the POCSO Act Sections 43 and 44 of the POCSO Act obligate the State to disseminate information and awareness about the statute and to monitor appropriate implementation. The State must ensure to undertake awareness generating sessions in all regional languages across the country. In addition, the State must undertake two sets of measures to curb crimes which exploit children sexually- the first being measures which are traditionally aimed at protecting the child, and measures which are aimed at the reintegration of the child against whom a crime has been committed back into society. Imposing obligations on Internet Service Providers (ISPs) With regard to internet service providers (also called ‘ISPs’), there is an increasing need to enforce mandatory reporting of online child sexual abuse, in alignment with the IT Act and the POCSO Act. This has to be done without relieving the ISPs of their obligations to conduct regular due diligence. Recently, Meta (formerly, the Facebook company) announced that additional measures would be taken to safeguard Instagram Teen Accounts, so as to render them unable to go live or turn off protections from receiving obscene images in messages without approval of the teen’s parents. It was also announced that similar accounts would be created on Facebook and Messenger, thus adding automated protections to children’s accounts. While it is important to ensure that those guilty are punished, it is also important to afford adequate social support through welfare mechanisms undertaken by the State, so as to ensure their reintegration into the society. However, a balance must be struck between the best interests of child victims for reintegration into society and punishing perpetrators of such offences. G. Concluding remarks The intersection of law, technology, and the protection of adolescents in cyberspace highlights the pressing need for a comprehensive approach to safeguarding young people from virtual violence. As technology continues to evolve and digital spaces become increasingly integral to daily life, it is essential that legal frameworks keep pace with these changes to effectively address complexities of online exploitation, cyberbullying, and other forms of digital harm. The responsibility lies not only with lawmakers but also with tech companies, educators, and parents to ensure that the internet remains a safe space for adolescents to learn, grow, and interact. Ultimately, a collaborative effort is required to create an online environment that prioritizes safety and well-being of children while fostering a healthy digital culture. This Update has been prepared by Astha Sharma, Mantika Haryani, Pratibha Yadav and Panistha Bhatt who can be reached at [email protected], [email protected], [email protected] and [email protected] respectively. This Update is only for informational purposes and is not intended for solicitation of any work. Nothing in this Update constitutes legal advice and should not be acted upon in any circumstance. [1] The Hindu Data Team, Social media, OTT, online gaming usage rises: 60% urban kids spend 3 hours daily| Data, The Hindu (September 28, 2023, 3:36 PM)  http://thehindu.com/data/social-media-ott-online-gaming-usage-rises-60-urban-kids-spend-3-hours-daily-data/article67352974.ece. [2] Just Rights for Children Alliance & Anr. v. S. Harish & Ors., 2024 INSC 716. [3] United Nations Convention on the Rights of the Child, Article 1. [4] Protection of Children from Sexual Offences Act, 2012. [5] Just Rights for Children Alliance & Anr. v. S. Harish & Ors., 2024 INSC 716. [6] Juvenile Justice (Care and Protection of Children) Act, 2015, § 2(12), Act No. 2, Acts of Parliament, 2016. [7] Information Technology Act, 2000. [8] Protection of Children from Sexual Offences Act, 2012, § 2(1)(d), Act No. 32 of 2012. [9] Haroon Siddique and agency, more than 300m children victims of online sexual abuse every year, The Guardian (Apr. 6, 2025, 6:30 PM), https://www.theguardian.com/society/article/2024/may/27/more-than-300m-children-victims-of-online-sexual-abuse-every-year. [10] Convention on the Rights of the Child, Nov. 20, 1989, 1577 U.N.T.S. 3. [11] Protection of Children from Sexual Offences Act, 2012, § 13, Act No. 32 of 2012. [12] Protection of Children from Sexual Offences Act, 2012, § 14, Act No. 32 of 2012. [13] Information Technology Act, 2000, § 67, 67A, Act No. 21 of 2000.

The Indian legal framework concerning information technology and online activities is still largely shaped by laws and regulations that were designed in the pre-internet era. While India has made significant strides in the digital domain with initiatives such as the Digital India programme and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”), Indian laws have struggled to keep pace with the rapid evolution of the internet and online spaces. This is particularly evident in the context of online gaming, a domain that has seen substantial growth and is projected to reach a market of USD 20 billion by 2025 in India.[1] Existing laws governing online real money games, gambling and betting including the Public Gambling Act, 1867, contain numerous state-specific amendments resulting in lack of uniformity and creating further confusion when they fail to address the legal challenges that have emerged over time. In this context, the proposed Digital India Bill (“Proposed Bill”) has the potential to be a transformative piece of legislation. The Proposed Bill aims to consolidate and modernize India’s digital infrastructure, recognizing the need to regulate online activities and platforms since one of its provisions addresses online gaming, categorizing it as an intermediary and highlighting the necessity for a distinct set of rules. Further, the IT Rules represent a significant effort to regulate online games and self-regulatory bodies (“SRBs”), as SRBs must verify an online real-money game in order to make it permissible under the rules.[2] However, there is no definitive timeline as to when the Proposed Bill would be passed by the Indian Parliament. Additionally, the IT Rules have faced considerable criticism due to gaps in the definitions of key terms and a lack of forward-thinking approaches[3]. As a result, expected legislations and existing laws, especially those concerning gaming and gambling, are unclear and fail to adequately address the rapidly expanding online gaming sector. The evolving online gaming industry has sparked legal debates on whether certain games can be classified as ‘skill-based’ or ‘chance-based’. Traditionally, Indian courts, including the Supreme Court and High Courts, have applied tests such as predominance of skill[4], persistence of skill[5] and skill gradient[6] to ascertain this distinction. However, despite explicit guidelines articulated in judicial pronouncements, the application of qualitative criteria in determining permissible online real-money games remains largely subjective. To address this issue, renowned statistician and former chairperson of the National Statistical Commission, Dr. Bimal Roy, in collaboration with the Indian public policy think tank, The Dialogue, has released a report titled ‘An Objective Framework to Determine Permissible Online Real Money Games,’ (“Framework”) which aims to standardize the distinction between skill-based and chance-based games. The Framework combines legal principles with statistical methods and scientific methodology to ensure objectivity, clarity and consistency in classifying online games, incorporating both jurisprudential analysis and quantitative criteria to develop a dynamic tool for determining the legality of online real-money games in India. This artcle undertakes a comprehensive analysis of the Framework and the potential scope of its application within the current legal landscape. Our analysis explores the implications of incorporating this Framework into the legal system and how it can provide comparative regulatory clarity in what today is muddy waters with respect to the real-money online gaming industry in India. Indian Courts Grapple with Distinction Between Skill and Chance in Online Games Over the years, Indian courts have held that games of skill, such as rummy and poker, are not considered gambling, whereas games of chance, such as lottery and betting, are subject to gambling regulations. Indian courts have used three tests to identify the distinction: (i) predominance of skill, where skill outweighs chance; (ii) persistence of skill, where performance improves with practice; and (iii) skill gradient, where factors like knowledge and experience of the players affect outcomes. However, this distinction has been based largely on offline games, and various high courts in the country are divided on the fact that whether the same game in the online and offline formats would have the same criteria to determine a game is game of skill or game of chance. The issue highlighted above can be better understood through a recent order by the Supreme Court of India, which instructed the High Court of Andhra Pradesh to reconsider the eligibility of online rummy.[7] The Andhra Pradesh High Court had earlier ruled that physical rummy was a ‘game of skill,’ but it lacked sufficient evidence to decide whether online rummy should be classified as a ‘game of skill’ or a ‘game of chance’[8]. In contrast, around the same time, the Karnataka High Court[9] determined that the same criteria should apply to both online and offline games to assess whether they are games of skill or games of chance. These rulings emphasize the need for a more nuanced approach to how traditional legal principles should or should not be applied, or adapted, in the digital era. Introducing 'An Objective Framework for Classification of Online Real-Money Games’ To address the growing need for clarity and uniformity in the regulation of online real-money games, the adoption of the Framework is a crucial step forward. The authors of the Framework have developed scientific evaluation methods combining case law and empirical techniques to objectively assess the role of skill versus chance in online games. Key criteria include determining that in skill-based games, (i) past performance correlates with future outcomes, unlike games of pure chance where randomness prevails; (ii) the skill gradient, where a player's success depends on their ability compared to others, emphasizing skill over chance; consistency of skill, where experienced players show consistent success over time; (iii) refinement of skill, where practice enhances strategies and decision-making; and (iv) superior skill, where highly skilled players consistently outperform others, unlike in chance-based games where no player can achieve exceptional results consistently. These criteria offer a clear, objective framework for distinguishing skill-based games from chance-driven ones. Additionally, the Framework cites three tests that would standardize and quantify the evaluation of skill in games like online rummy, poker, and fantasy sports to accurately determine their classification. Each of these tests use statistical methods, starting with the Chi-Square test, which assess associations between attributes, followed by the Pearson Correlation test, which identifies positive correlations which are an indication of skill. Both these methods are applied to each of the three tests: (i) Persistence of Skill Test, which evaluates if a player’s skill remains consistent over time, confirming that in skill-based games, success is linked to skill rather than randomness; (ii) Experience Gap Test, which assesses whether more experienced players perform better, showing a positive correlation between experience and success, thus indicating a skill-based games; and (iii) Exemplary Skill Test, which evaluates how rare it is for players to consistently achieve outstanding results, with exceptional performance suggesting skill, as achieving such outcomes purely by chance is statistically improbable. Together, these tests provide an objective, data-driven method for classifying games based on their skill components. Standardizing Online Gaming Regulations: The Role of the Proposed Framework Adopting this Framework into Indian legislation would provide several benefits. First, it would create a standardized approach to classifying online games, ensuring that games with a predominant skill component are treated fairly while games of chance are properly regulated. Second, it would offer greater clarity to online gaming operators and consumers, helping them navigate the complex and fragmented legal landscape. Third, by relying on scientific methodologies, it would ensure that the classification process remains objective, transparent, and adaptable to future developments in online gaming. The Framework would also help to address one of the key challenges facing the Indian gaming industry today — ensuring that online gaming is not only legal but also safe, fair, and responsible. It could be the first step in creating a comprehensive regulatory regime for online gaming that goes beyond simply classifying games as skill-based or chance-based, and also includes safeguards to protect consumers and ensure the integrity of the industry. Conclusion In our view, there is no need for an entirely separate legislation to incorporate the Framework into Indian law. While there has been discourse around the gaps in the IT Rules vis-a-vis online gaming, they already lay the foundational groundwork for integrating the Framework’s tests into existing legislation. To move forward, it is recommended that established organizations, such as All India Gaming Federation or Federation of Indian Fantasy Sports, which are not officially recognized by the government, comply with the SRBs criteria set out in Rule 4A(2) of the IT Rules. This would allow these organizations to officially operate as SRBs under the IT Rules, empowering them with the authority to verify online games that are permissible under current regulations. In conclusion, the adoption of Framework is a positive step towards regulating online gaming in India, providing a much-needed structure for differentiating between games of skill and games of chance. However, further development is required to make the tests more adaptable to the rapidly evolving nature of online gaming and to ensure their alignment with India’s legal and regulatory environment. While the Framework represents a good starting point, much work remains to ensure its smooth adoption into legislation, and collaboration with all stakeholders will be key to achieving this goal. Authors: Suhana Islam Murshedd (Partner at AQUILAW); Rohan Suril Jhaveri (Senior Associate at AQUILAW); and Muskan Madhogaria (Associate at AQUILAW). Footnotes [1] ‘An Objective Framework to Determine Permissible Online Real Money Games’ by The Dialogue and Dr. Bimal Roy [2] Rule 4A of the IT Rules [3] Anay Mehrotra and Puneet Srivastava, Online Gaming Platforms and Self-Regulation: Exploring the Feasibility of the Mechanism, 6 Nov 2024, Vidhi - Centre for Legal Policy [4] RMD Chamarbaugwala v. Union of India [(1957). S.C.R. 874] [5] Dr. K.R. Lakshmanan v. State of Tamil Nadu [AIR (1996) SC 1153] [6] Varun Gumber v. UT of Chandigarh [CWP No.7559 of 2017] [7] State Of Andhra Pradesh v. Play Games 24 And 7 Private Limited [Special Leave Petition (Civil) Diary No(s). 30851/2023] [8] State of Andhra Pradesh v. Play Games 24 and 7 Private Limited & Anr. (WP No. 19659/2020, WP No. 19571/2020  and WP No. 19732/2020 passed by the High Court of Andhra Pradesh at Amravati) [9] Gameskraft Technologies Private Limited v. Directorate General of GST & Ors. [(2023) 116 GSTR 53]

INTRODUCTION: The year 2024 saw an exponential rise in influencer economy with Tik Tok being ranked the most downloaded app in the world, closely followed by Instagram.  With about 50% of the total time spent on mobile phones being attributed to social media[1], the importance of these social media apps, the rise of content creators and the extent of their reach, cannot be ignored. “With great power comes great responsibility” and with a long list of followers comes a long list of precautions that a content creator needs to take while uploading content on social media. In the wake of recent controversy surrounding the top influencers, podcast hosts and social media voices of India, this lesser-regulated sector is grabbing the attention of media and authorities alike. Albeit the landscape of social media has perpetuated a framework for influencers to freely circulate content on social media platforms, a grudging reality is that often times, the content creators fall into avoidable controversies due to their unfamiliarity with the legal domain. This article attempts to create a handbook which could serve as a guide for sharing content online and help the content creators understand their rights, should they face any legal action. Depending on the type of content they create, their style of content and their audience, the content creators can take the following into consideration while publishing content: A: General content Penal Offences- A piece of content published by an influencer can attract criminal laws if appropriate content restrictions are not put in place. For example, a sexually inappropriate comment, though may seem to be humorous, may be seen as offensive and can attract legal action. Offences pertaining to publication of obscene content: Content creators or influencers must avoid publishing any work/content which would be considered as “obscene”. Under Section 294, Bharatiya Nyaya Sanhita, 2023, any work or content that is “lascivious or appeals to prurient interest” or it could “tend to deprave and corrupt” a person can be considered obscene. With the evolving penal jurisprudence, the Apex Court has travelled from Ranjit D. Udeshi vs. State of Maharashtra[2] which applied Hicklin test, wherein obscenity was to be judged from the lens of ‘standard of a group of susceptible or sensitive 'persons’, to the decision passed in Aveek Sarkar vs State of West Bengal[3], where the Apex Court applied ‘Roth Test’ and thus substantially diluted the earlier standard and brought the threshold of test of obscenity to ‘an average person perspective or contemporary community standards’. So, what would be considered ‘obscene’ would depend upon the average perspectives from contemporary mores and national standards. Additionally, the content creators are also governed by the provisions under the Information Technology Act, 2000, which prohibits any person from publishing or transmitting obscene material in electronic form which has the effect of depraving and corrupting people. Further, content creators must ensure that their content does not violate public decency standards or spread fake news. Offences which objectify women: A content creator must be wary of publishing any work/ content which depicts a woman, her form, or body, or any part thereof in such a way, that is indecent, or derogatory to, or denigrating women and thus has the effect of depraving, corrupting or injuring the public morality or morals. In the past, there have been many singers who have been booked under Indecent Representation of Women (Prohibition) Act, 1986, for publishing songs which contain “indecent” lyrics and construe women in bad taste. Offences against the State: Many comedians and reporters have been booked under the laws of sedition for making remarks against the ruling government of the country. While the law of sedition was very strict under the erstwhile penal code, the recent changes show a paradigm shift in the law whereby the ‘intent’ of the person is taken into account. Under the present law, if a person, knowingly or purposefully makes remarks which can excite rebellion, separatist movement or endanger the sovereignty of India, could be charged with criminal offence. In the wake of upholding freedom of speech, the Rajasthan High Court[4] has recently stated that “laws restricting speech must be narrowly tailored. There must be a direct and imminent connection between the speech and the likelihood of rebellion or secession to invoke such provisions. Legitimate dissent or criticism cannot be equated with sedition or anti- national acts.” Offences relating to religion: Section 196, BNS (erstwhile Section 154A, Indian Penal Code) prescribes punishment for a person who insults or attempts to insult the religion or the religious belief of a particular class. While several comedians and content creators have faced backlash under these provisions, it is important to mention that these provisions are applicable basis constructive knowledge. Thus, the intention or knowledge to incite the people to violence is a sine qua non for the offence to be made out under Section 196, BNS and the burden of the same lies on the prosecution to prima-facie prove the existence of mens rea on the part of alleged accused[5].This means that while making such statements, if a person knew that such statements could be considered as offensive by a particular religious group, then such person can be charged with the crime. Defamation: If a content creator, especially with a large subscriber base, makes a false or damaging statement against an individual or business that harms their reputation, then they may be booked for criminal or civil defamation. Intellectual Property Rights: A content creator must ensure that he/she does not use protected content (music, photo, video etc.), without obtaining prior permission from the owner/licensor of such content, and vice versa. This violation often happens when content creators use parts of songs or pictures without the owner’s consent. The Indian legal system protects ‘unique’ and ‘distinct’ works such as copyright in a song, video or voiceover, trademark or brand name. Such intangible rights cannot be used without a license or prior consent. Further, the content creators can also register their own work with the copyright office, if they want a formal protection.   Data Privacy: In the event that an influencer stores or manages data of his/her subscribers (whether on digital social media or their personal platforms and websites), then appropriate steps should be taken to manage the said data securely and to keep such data private, as they can be held responsible in the event of breach.   Age restriction and viewer discretion: All content creators must ensure that the content reaches the right audience- the right audience would have the right to choose what they can view and they exercise such right. While uploading all content, it is advisable that the influencer specifies that such content is made for a specific age group and viewer discretion should be advised if the content contains scenes of violence, abuse or nudity. Platforms such as Youtube and TikTok provide categories of viewer access when the content is being uploaded. While the influencers thrive on the shock value and viewership of viral content, it can be ensured that the content becomes viral for the right reasons. B: Specific content on personal finance, stock market, financial advice Financial Influencers: In addition to the above, the financial influencers are also required to abide by the guidelines issued by Securities and Exchange Board of India (SEBI) from time to time. Financial influencers or finfluencers are people who provide information, advice and/or recommendations on various financial topics and have the ability to influence the decisions of their followers. While SEBI does not regulate the finfluencers directly, it has issued directions to all regulated entities (registered stock brokers, mutual funds, registered entities) to not associate directly or indirectly with finfluencers unless they are registered with SEBI. Further, such SEBI regulated entities are also prohibited from sharing real time market data with any third party including finfluencers. In the wake of these regulations, certain finfluencers were banned from securities markets and others have applied for registration with SEBI. It is important to note that finfluencers can still make and publish content related to financial topics if (a) such content is made for investor education; (b) the influencer does not directly or indirectly provide any advice or recommendation; (c) the content creator makes no express or implicit claim on return from any stocks; and (d) such content does not use/ rely upon the market data of 3 preceding months to predict future trend. C: Sponsored content Advertising guidelines: Influencer marketing is now seen as an essential part of marketing strategies and marketing budget at all organizations. In 2023, the Advertising Standards Council of India (ASCI) had issued guidelines for influencers setting out the criteria for advertisements on digital media. The ASCI guidelines regulate such people who have access to an audience and power to affect their decision or opinion about product, service, brand or experience. THE ASCI guidelines require that all advertisements and sponsored content should be prominently disclosed, such disclosure should be made in a manner which is commonly understood and should be displayed for specified time depending on the length of the video/audio content. The ASCI guidelines also require that a virtual influencer (AI generated avatars) declare that the audience is not interacting with real humans.   Consumer protection measures: Instagram has seen a growing trend, where brands team up with influencers to promote their products and services, for brand or product endorsement. In case of such endorsement, a content creator has to necessarily disclose and add a “Paid Partnership” label along with their content. Further, the Consumer Protection (E-Commerce) Rules, 2020 prohibits influencers from promoting products with exaggerated claims or misleading information. Additionally, influencers sharing information on health related claims, have to mandatorily provide clear disclaimers, for ensuring that their subscribers/ audience understand that their endorsement cannot be seen as a substitute to professional medical advice or diagnosis or treatment. Furthermore, content creators are expected to be certain of information and advice they share, thus are corroborated and substantiated by facts. II. LEGAL REMEDIES: While the aforementioned precautionary measures can be taken by content creators, in the event there is any legal action against such influencers, following recourse can be kept in mind: Seek legal advice: Many influencers and content creators have faced backlash in the past and consequently issued ‘apology videos’ or ‘apology posts’ to avoid controversy. These apology videos and posts could constitute as admission of guilt and have potential effect of hampering a legal proceeding. Therefore, before taking any action against a legal notice or criminal complaint, it is always advisable to seek legal opinion and guidance. Intermediary action: Any website/portal hosting information or content from multiple users acts as an intermediary such as Youtube, Instagram, facebook, Tiktok. All such intermediaries are empowered to conduct due diligence on the content posted on their platform and may take down inappropriate content on complaint received from a third party. On an FIR being registered: Once an FIR is lodged against an influencer, depending on the allegations in the FIR, a lawyer can suggest whether an anticipatory bail application is to be filed or High Court is to be approached with a quashing petition. Registration of multiple FIRs – In case of initiation of multiple FIRs for the same content, the best way forward is to move an application for clubbing of legal proceedings. In case of immediate arrest – In case of arrest, the following rights should be noted: Every person arrested has a right to be informed of grounds of arrest and has a right to bail[6]. For offences less than 7 years of imprisonment, the police officer must record his satisfaction in writing that arrest is necessary to prevent him or her from committing any further offence or to prevent such person from influencing the witness and if such compliance is not met, the arrest is vitiated[7]; After the arrest, the police officer is obligated to inform his/her relative or a friend regarding the arrest[8]; After the arrest, if a person is interrogated, he/she shall be entitled to meet an advocate of his choice during interrogation[9]; It is mandatory that arrested person be produced before the magistrate within 24 hours of his/her arrest[10]; In case of arrest of a woman, a male police officer, cannot touch the person of a woman and the right to search is available to a woman police officer only[11]. f. Seizure of electronic devices by Police: The accused cannot be coerced to disclose their passwords or any other similar details of electronic devices seized during investigation, in view of constitutional protection guaranteed against self-incrimination[12]. III. CONCLUSION This handbook gives the “Dos’ and Don’ts” for the influencer and content creator community, which may be considered while uploading or publishing of content on social media. While this prescriptive guide is only based upon limited scenarios it cannot act as a substitute for taking active legal advice from time to time. The content creators should get appropriate legal advice for content vetting, understanding their contract terms entered with various businesses, measures for safeguarding intellectual property, compliance with advertising regulations, the way ahead in case of legal action. Authors: Anju Thomas, Kanchan Modak and Simranjeet Singh Footnotes [1] https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/insights/media-entertainment/ey-state-of-influencer-marketing-in-india-03-04-2024.pdf [2] AIR 1965 SC 881. [3] (2014)4SCC257 [4] Tejender Pal Singh v. State of Rajasthan & Anr. Rajasthan HC, S.B. Criminal Misc (Pet.) No. 5005/2024 decided on 16 December 2024 [5] Manzar Sayeed Khan vs. State of Maharashtra (2007)5SCC1; Javed Ahmad Hajam vs State of Mahrashtra and Anr. (2024)4SCC156 [6] Section 47 of Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 [7] Section 35 of Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 [8] Section 48 of Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 [9] Section 38 of Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 [10] Section 58 of Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 [11] Proviso to Section  43(1) of Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 [12] Sanket Bhadresh Modi vs. Central Bureau of Investigation’ Delhi High court, Bail Application No. 3754 of 2023, decided on 18 October 2023.

The 55th GST Council meeting was held in Jaisalmer, Rajasthan on December 21st, 2024 under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council has inter-alia made the following recommendations relating to changes in GST rates on Goods and Services and other measures for facilitation of trade. The key highlights of the meeting are as under: A.   Key Changes for Trade Facilitation   Amendment to Schedule III of the Central GST Act (CGST Act), 2017 Background – Currently, transactions involving a supply of goods warehoused in special economic zones (SEZs) or free trade warehousing zones (FTWZs) are subject to differing interpretations regarding their taxability because it was unclear whether goods warehoused in SEZs or FTWZs are covered under entry 8(a) or 8(b) of Schedule III of the CGST While customs bonded warehouses have clear exemptions for such transactions, SEZ or FTWZ transactions faced ambiguity, leading to compliance challenges and dispu GST Council recommendation – Clause (aa) in entry 8 of Schedule III of the CGST Act recommended to be inserted retrospectively from 1 July 2017 and hence supply of goods warehoused in SEZ or FTWZ to any person before clearance (for export or a Domestic Tariff Area use) will be treated as a supply of neither goods nor services. AQUILAW COMMENTS This will be a welcome amendment to the CGST Act which will simplify compliance for businesses operating in the SEZ and FTWZ zones and reduce the tax liability for the companies having their business set ups in these zones. 2.       Taxability of Vouchers Background – The GST treatment of vouchers has been a contentious issue since the introduction of the tax. Sections 12(4) and 13(4)5 of the CGST Act, and rule 32(6)6 of the Central Goods and Services Tax Rules, 2017 (CGST Rules), created ambiguity regarding the classification of vouchers as goods or services. Businesses have also faced issues regarding the taxability of income from unredeemed vouchers. GST Council recommendation – Legislative changes – Omit sections 12(4) and 13(4) of the CGST Act, and rule 32(6) of the CGST Rules, to eliminate ambiguities. Clarifications proposed – Non-taxability of vouchers: Transactions involving vouchers are a supply of neither goods nor services. Principal-to-agent transactions: GST is payable only on commissions or fees charged by agents for distributing vouchers. No GST on distribution of vouchers on a principal-to-principal basis. Ancillary services: Activities like co-branding, advertisement and technical support related to vouchers attract GST. Unredeemed vouchers: No GST is payable on income from unredeemed vouchers. AQUILAW COMMENTS The taxability of vouchers has been a pain point in the GST regime. There have been divergent views on the issue considering the specific time of supply provisions thereof under the CGST Act. The Indian courts have concluded vouchers to be mere payment instruments and not an independent subject matter of levy [Sodexo Svc India Private Limited v. State of Maharashtra & Ors (2015-TIOL-293-SC-MISC); Tvl. Kalyan Jewellers Limited v. UOI (TS-704-HC(MAD)-2023-GST); Premier Sales Promotion Private Limited v. Union of India (2023 -VIL-67-Kar)]. The proposed changes would align with the aforesaid jurisprudence and will help mitigate unwarranted litigation on the issue. 3.       Clarification regarding requirement to reverse ITC by E-commerce operators (ECOs) regarding supplies made under section 9(5) of the CGST Act Background – Previously, disputes arose as tax authorities sought ITC reversals on supplies made by ECOs, even when ECOs were required to pay GST directly. GST Council recommendation – ECOs paying tax under section 9(5) of the CGST Act, are not required to reverse ITC proportionally under sections 17(1) or 17(2) of the CGST Act. 4.       Clarification regarding ITC availability as per section 16(2)(b) of the CGST Act, 2017, for ex-works contracts Background – There was ambiguity regarding the eligibility of ITC where the goods were delivered at a place other than the recipient’s place of business, especially in case of ex-works contracts. GST Council recommendation – Goods delivered to the recipient or transporter at the supplier’s business location (under ex-works contracts) to be deemed to be ‘received’ by the recipient under section 16(2)(b) of the CGST Act. Moreover, ITC to be eligible subject to fulfilment of other conditions under sections 16 and 17 of the CGST Act. AQUILAW COMMENTS This recommendation resolves long-standing ambiguities about the physical delivery of goods versus the transfer of property. By establishing that the transfer of ownership at the location of the supplier, the recommendation by the Council satisfies the “receipt” condition while simplifying compliance and aligns tax practices with industry norms. 5.       Clarification regarding applicability of late fees for delay in furnishing Form GSTR 9C and providing a waiver of late fees on delayed filing of Form GSTR 9C for the period 2017–18 to 2022–23 Background – Taxpayers faced delays in filing reconciliation statements (Form GSTR 9C) due to the complexities in GST implementation during initial years. GST Council recommendations – The GST Council has clarified that late fees under section 47(2) of the CGST Act, are leviable for a delayed filing of the complete annual return which includes both Forms GSTR 9 and GSTR 9C (wherever applicable). The GST Council also recommended issuing a notification under section 128 of the CGST Act to waive late fees exceeding those applicable until the filing of Form GSTR 9C for financial years 2017–18 to 2022–23, which are in excess of the amount of late fees payable till date for the non-filing of Form GSTR 9, provided Form GSTR 9C is filed by 31 March 2025. AQUILAW COMMENTS This relief aims to ease the compliance burden for earlier periods. B.   Key Changes relating to Policy and Procedures Amendment to section 17(5)(d) of the CGST Act – A retrospective amendment w.e.f. 1st July, 2017 is recommended to section 17(5)(d) of the CGST Act to replace the phrase ‘plant or machinery’ with ‘plant and machinery’ which otherwise has been made due to the important and landmark decision of the Apex court in the Safari Retreat case (Civil Appeal No. 2948 of 2023 dated 3 October 2024). The key highlights on this matter released by the PIB have stated that this particular amendment will allow the phrase to be interpreted in accordance with the explanation at the end of Section 17 of the CGST Act, 2017 and CBIC chairman has made it clear that it was a drafting error and that ‘and’ was supposed to be used instead of ‘or ‘. AQUILAW COMMENTS The retrospective amendment, if passed, would have a major impact on the Safari Retreats ruling and close the door on similar ITC claims for construction costs of rental properties. Real estate companies and other taxpayers who had hoped to benefit from the judgment would be affected, as they would no longer be able to claim ITC on construction-related expenses for immovable properties, even if they were used for taxable business purposes. As the legal battle continues, businesses, especially those involved in the construction and leasing of commercial properties, will need to keep a close eye on the developments. The ultimate resolution of the Safari Retreats case will depend on the Orissa High Court’s review and the final decision on the retrospective amendment. Until then, companies may find themselves in a state of uncertainty, with the possibility of ongoing legal challenges over the eligibility of ITC on construction-related expenses. 7.         Reduction in financial burden and easing the process of filing appeals involving only penalties Pre-deposit requirement for appeals before an appellate authority reduced from 25% to 10% for cases involving only penalties. New proviso recommended to be added to section 112(8) of the CGST Act, setting a 10% pre-deposit requirement for appeals before an appellate tribunal in penalty-only cases. 8.       Definition of local fund and municipal fund - Explanation to be inserted in section 2(69) of the CGST Act, to define ‘local fund’ and ‘municipal fund’. 9.       Amendment in Input service distributor (ISD) mechanism under CGST Act – Effective from 1 April 2025, sections 2(61) and 20(1) of the CGST Act will explicitly include inter-state reverse charge mechanism transactions under the ISD mechanism, referencing supplies taxed under sections 5(3) and 5(4) of the IGST Act, 20 Section 20(2) of the CGST Act and rule 39(1A) of the CGST Rules will be amended to align with these chang 10.   Streamlining the payment process for non-registered persons – A new rule 16A has been proposed to be inserted to allow tax officers to generate a temporary identification number for persons not required to register under GST but who need to make payment as per rule 87(4) of the CGST Rule 87(4) of the CGST Rules to be amended to reference the new rule, along with modifications to Form GST REG 1 11.   Composition taxpayers – Rule 19 of the CGST Rules to be amended to allow composition taxpayers to modify their ‘category of registered person’ through Table 5 of Form GST CMP-02. This is now being done using Form GST REG-1 12.   Amendments to enhance the functionality of the Invoice Management System (IMS) – Section 38 of the CGST Act and rule 60 of the CGST Rules to be amended to provide for a legal framework for generating Form GSTR-2B based on taxpayer actions on Section 34(2) of the CGST Act to be amended to provide for a reversal of ITC (attributable to a credit note) by the recipient, facilitating a reduction in the supplier’s output tax liability. Rule 67B to be inserted to prescribe a method for adjusting the supplier’s output tax liability against issued credit notes. Section 39(1) of the CGST Act and rule 61 of the CGST Rules to be amended to ensure the filing of Form GSTR-3B for a tax period only after Form GSTR-2B is available on the por C.    Key Changes relating to Taxability and Definitions Definition of ‘pre-packaged and labelled’ to be amended and linked to the definitions under the Legal Metrology Act, 2009. AQUILAW COMMENTS This is definitely very important, as this decision includes all the commodities intended for retail sale, which will definitely boost the sales of the country. With the help of this initiative, the amendment will affect bulk packages weighing more than 25 kg or 25 litres to make necessary declarations. It is to be noted that “pre-packaged commodity,” as that term is defined under section 2(l) in the Legal Metrology Act of 2009. The amendment’s goal is to redefine “pre- packaged and labelled” to encompass all goods intended for retail sale, regardless of size or number. In order to provide transparency and help consumers make educated decisions, manufacturers, packers, and importers would be obliged to give thorough labelling on all pre- packaged goods meant for retail sale. 14.     Definition of ‘declared tariff’ omitted and that of ‘specified premises’ amended for hotel accommodation and restaurant services to link to the actual value of supply of any unit of accommodation provided by a hotel on and from 1st April, 2025) AQUILAW COMMENTS The definition of declared tariff has been omitted, and the definition of specified premises has been recalibrated to link it with the actual value of supply. From April 1, 2025, if the value of supply for hotel accommodation in the preceding financial year exceeds INR 7,500, it will attract Goods and Services Tax (GST) at 18% (with Input Tax Credit). Otherwise, a 5% GST (without ITC) will apply. Additionally, hotels may opt to pay 18% GST with ITC by submitting a declaration at the beginning of the financial year. Levy of a reverse charge on sponsorship services provided by body corporates recommended to be withdrawn. Such services to be liable to a forward charge post issuance of the requisite amendment notification to this effect GST under reverse charge was introduced vide Notification No. 09/2024-CTR dated 8 October 2024 on renting of any commercial or immovable property (other than a residential dwelling) by an unregistered person to a registered person. It has now been recommended to exclude composition dealers from paying a reverse charge on such services. It has also been recommended to regularise the past on an ‘as-is-where-is’ basis. It has been clarified that the explanation in S No. 52B in the notification regarding ground clearance is applicable with effect from 26 July 2023. D. Key Changes relating to Compliance Introduction of section 148A in the CGST Act – A new provision, section 148A, will empower the government to enforce a Track and Trace mechanism for specified commodities identified as evasion prone. This system will be based on a unique identification marking (UIM) to be affixed on goods or their packages. AQUILAW COMMENTS Operational adjustments: Businesses dealing in specified commodities will need to implement systems for affixing and maintaining UIMs. Compliance burden: Although this system increases initial compliance efforts, it will reduce future litigation and disputes due to clearer traceability. Improved credibility: Enhanced traceability may improve supply chain transparency and build trust among stakeholders. 19.     Clarification on recording correct state details for online services to unregistered recipients – Suppliers of ‘online services’ must record the state of the unregistered recipient on the tax invoice and the same will be considered as the recipient’s address on record for compliance with section 12(2)(b) of the IGST Act, 2017, read with proviso to rule 46(f) of the CGST Rules. E.    GST Rate Changes GST Rate Reduction on Fortified Rice Kernel (FRK): The GST rate on Fortified Rice Kernel (FRK), classifiable under HSN 1904, reduced to 5% from existing GST rate of 18%. GST Exemption on Gene Therapy: To exempt GST on gene therap IGST Exemption on Long Range Surface to Air Missile System (LRSAM): To extend IGST exemption to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, and software meant for the assembly/manufacture of LRSAM system under Notification 19/2019- Customs. Compensation Cess Reduction for Merchant Exporters: Rate of compensation cess to be reduced to 0.1% on supplies to merchant exporters. Reduction recommended to bring the compensation cess rate at par with the GST rate. IGST  Exemption  for  International  Atomic  Energy  Agency  (IAEA)  Imports:  IGST  to  be exempted on import of all equipment and consumable samples by the inspection team of the IAEA subject to specified conditions. Concessional GST on Food Preparations for Government Programs: Concessional 5% GST rate to be extended to food inputs of food preparation for free distribution to economically weaker sections under government programmes subject to the existing conditions. Increase in GST Rate on sale of old and used vehicles: GST rate on the margin on the sale of all old and used vehicles, including electric vehicles, to be increased from 12% to 18%. No GST applicable on ‘penal charges’ levied by banks and s (NBFCs) for non-compliance with loan terms. Pepper and raisins supplied by agriculturists not to be liable to GST. F.    Others Resolution of Integrated GST (IGST) settlement issues Background – States raised concerns regarding the formula and methodology used for IGST settlement, which directly affects their revenue distribution. The allocation of IGST between the centre and states has often been controversial, with certain states claiming unfair treatment in settlement mechan GST Council recommendation – The GST Council approved recommendation on forming a committee of officers to suggest improvements to the IGST settlement process and such changes will be finalised and implemented by March 2025. 21.   Operationalisation of GST Appellate Tribunal (GSTAT) Background – Operationalisation of the GSTAT, established under the GST framework, has been delayed due to procedural and structural challenges, leaving taxpayers without a dedicated forum for resolving GST disputes. GST Council recommendation – The GST Council took note of procedural rules proposed by the Law Committee for the internal functioning of These rules will be notified after examination and app 22.     Extension of time frame for GST compensation restructuring Background – The GST compensation cess mechanism was initially designed to compensate states for revenue losses due to GST implementation. However, its restructuring has been under deliberation. GST Council recommendation – The GST Council extended the deadline for the Group of Ministers (GoM) on GST compensation restructuring to finalise their recommendations by 30 June 2025. 23.     GST on municipal charges (floor space index (FSI) and Additional FSI) Background – Municipalities levy charges for FSI, including additional FSI. The applicability of GST on these charges, especially on a reverse charge basis, has been unclear and contentious. GST Council recommendation – The GST Council deferred the matter for further examination at the request of the Central Government, emphasising the need for clarity as these charges relate to municipalities or local authorities. AQUILAW TAKE-AWAYS The industry had high expectations from the 55th GST Council meeting on certain clarifications which have been long demanded. Though the GST Council has provided certain other measures related to tax rate rationalisation and trade facilitation measures, certain key decisions including those on GST compensation cess, tax rate on health and life insurance and tax rate on delivery for food delivery apps have been deferred. Additionally, it has been announced that these deliberations will require more analysis. Authors: Rajarshi Dasgupta and Dimple Jogani

The much-awaited draft Digital Personal Data Protection Rules, 2025 (“Draft DPDP Rules”) have been released which will operationalise the Digital Personal Data Protection Act,2023 (“DPDP Act”) enacted in August 2023 which is yet to come into force. The Ministry of Electronics and Information Technology has released the Draft DPDP Rules along with an explanatory statement on 3 January 2025 for public consultation and stakeholder comments, which can be submitted through the MyGov portal on or before 18 February 2025. The DPDP Act provides a framework for consolidation of all matters relating to privacy in India and establishes Data Protection Board of India (“Board”) for regulating the compliances under the DPDP Act. However, the implementation of the DPDP Act is subject to the rules as several key provisions of the DPDP Act were left to be prescribed by the central government. Hence, the Draft DPDP Rules have clarified (albeit to a limited extent), the implementation mechanism of the DPDP Act. In this issue of nota bene, we have endeavoured to give a bird’s eye view of the compliances as per the present form of Draft DPDP Rules. Who is amenable to compliances under DPDP Act and Draft DPDP Rules? The DPDP Act and the Draft DPDP Rules are applicable to the following: Data Principal: Individual to whom the personal data relates and where such individual is a child, includes the parents or lawful guardian of such a child and where a person with disability, includes her lawful guardian, acting on her behalf. Data Fiduciary: Person who alone or in conjunction with other persons determines the purpose and means of processing of personal data. Data Processor: Person who processes personal data on behalf of a data fiduciary. Consent Manager: Person registered with the Board, who acts as a single point of contact to enable a data principal to give, manage, review and withdraw her consent through an accessible, transparent and interoperable platform. How will the data fiduciary give notice to the data principal for obtaining consent regarding personal data? The data fiduciary is required to ensure that the consent provided by data principals must be free, specific, informed, unconditional, and clearly expressed through an affirmative action. The data fiduciary has to provide a consent notice in a clear and plain language to the data principal constituting the following: Presentation Requirement: The notice has to be provided in a clear, standalone, and understandable format. Fair Account of Data Processing: The consent notice should contain the following minimum information: an itemised description of personal data; and specific purpose of, and an itemised description of the goods or services to be provided or uses to be enabled by such processing. c. Information about Rights: The consent notice should provide website and/ or application link for: easy withdrawal of consent (ease of doing so being comparable to that with which such consent was given); exercise of rights under the DPDP Act; and filing of complaints with the Board. What baseline security safeguards should data fiduciaries and data processors adopt to secure data principal’s personal data? DPDP Rules prescribe the following minimum safeguards for protection of personal data under the control of data fiduciary (and data processors engaged by such data fiduciary): Security of personal data through encryption, obfuscation or masking or the use of virtual tokens mapped to that personal data; access control measures over the computer resources; maintenance, monitoring and review of access logs of personal data to enable detection of unauthorised access, its investigation and remediation to prevent recurrence; reasonable measures like data back-ups to ensure continuity in terms of confidentiality and integrity of personal data in case of destruction/ loss of access to personal data or otherwise; and To enable detection of unauthorised access, retention of prescribed logs and personal data for a period of 1 (one) year, unless compliance with any law for the time being in force requires otherwise. What is the procedure to be followed by the data fiduciary in case of breach of personal data? In event of a personal data breach, the obligation to notify data breach to both affected data principal and the Board does not have any materiality qualifier under the Draft DPDP Rules which implies that data fiduciaries will have to follow the notification requirement for all kinds of data breaches, whether big or small. The two-step intimation requirement is as follows: Step 1:  Intimation to the Affected Data Principal: The intimation will be done without delay in a concise, clear and plain manner through data principal’s user accounts including email/ mobile number/ or other means of accessing a data fiduciary’s services mentioning: A brief description of the breach including timing and location of occurrence; risk mitigation measures implemented by data fiduciary; and contact details of designated person of data fiduciary to respond to related queries. Step 2:  Intimation to the Board: Upon becoming aware of the data breach, a 2-step notification by the data fiduciary has been prescribed: Initial Notification: Immediate notification containing basic information like description, nature, timing, location of breach, etc. Detailed Notification: To be done within 72 (seventy-two) hours (may be extended by Board basis a request in writing by data fiduciary) of becoming aware of a breach. The detailed notification must inter alia contain information on who caused the breach, remedial measures taken to prevent reoccurrence and report about intimations to data principals. What is the timeline for retention of personal data by a data fiduciary? The data fiduciaries of the following category: e-commerce entities having not less than 2,00,00,000 (two crore) registered users in India; online gaming intermediaries having not less than 50,00,000 (fifty lakh) registered users in India; and social media intermediaries having not less than 2,00,00,000 (two crore) registered users in India, shall retain the personal data for a period of 3 (three) years from the date on which the data principal last approached the data fiduciary for exercising their rights or commencement of the draft DPDP Rules, whichever is the latest. What steps shall data fiduciary undertake prior to data erasure?  Before erasing personal data, a data fiduciary must ensure that retention of such personal data is not necessary for compliance with any applicable laws and no data principal has approached them for the performance of the specified purpose or exercising their rights concerning the data within a period of 3 (three) years for entities mentioned in FAQ 4. In the event, both the aforementioned pre-requisites are satisfied, the data fiduciary must notify the data principal, at least 48 (forty-eight) hours before the scheduled erasure, that unless they log into their user account or otherwise initiate contact with the data fiduciary for the performance of the specified purpose or exercise their rights in relation to the processing of such personal data, their data will be erased. What is the eligibility requirement for registration as a consent manager? The data fiduciary has to be onboarded on the platform maintained by the consent manager who will facilitate consent between data principal and data fiduciary. The Draft DPDP Rules have now prescribed inter alia the following eligibility requirement for registration as consent manager: a company incorporated in India with sufficient financial, technical and operational capacity; company has a minimum net worth of INR 2,00,00,000 (Indian Rupees Two Crore only); the directors/ KMPs/ senior management of the company are individuals with a general reputation for fairness and record of fairness and integrity; the charter documents of the company should contain provisions to mitigate conflict of interest with data fiduciaries; the interoperable platform of the company is certified to be consistent with prescribed standards of the Board; and the company has in place technical and operational measures to display on its website/ application prescribed information regarding its shareholders and directors. How can data fiduciaries obtain verifiable consent of a parent/ lawful guardian before processing the personal data of children or individuals with disabilities? To safeguard the personal data of children and person with disabilities, the DPDP Act prescribes obtaining verifiable consent from their parents/ lawful guardians. The Draft DPDP Rules mandates data fiduciaries to adopt appropriate technical and organisational measures to verify the identity and age of a parent or lawful guardian before processing any child’s personal data. To ensure that the individual identifying herself as the parent is an adult who is identifiable by reference to: reliable details of identity and age as available with the data fiduciary; or voluntarily provided details of identity and age or a virtual token (e.g., token verified and made available by a Digital Locker) mapped to the same. Separately, data fiduciary has to observe due diligence to verify that such guardian is appointed by a court of law, a designated authority or a local level committee, under the law applicable to guardianship. What are the additional obligations for significant data fiduciaries? Under the DPDP Act, a specific class of data fiduciaries will be designated as significant data fiduciaries basis certain prescribed conditions. These significant data fiduciaries are required to adhere to the following additional compliances beyond those imposed on general data fiduciaries: Data Protection Impact Assessment (“DPIA”): A DPIA and audit to ensure effective observance of the DPDP Act has to be conducted every 12 (twelve) months from the date when the entity is notified to be significant data fiduciary. Reporting to the Board: The significant data fiduciary shall cause the person undertaking the DPIA and audit to submit a report to the Board containing the key findings from these assessments. Due Diligence: Due diligence to be conducted to ensure that the software deployed for data hosting, display, uploading, storage, and sharing personal data, does not jeopardize the rights of data principals. Data Localisation: Significant data fiduciary to ensure that both the personal data and any ancillary traffic data remains within the territory of India. Will all businesses be required to store personal data within India? Only such data fiduciaries who fall under the category of significant data fiduciaries will have to store certain specified data in India. The eligibility criteria for significant data fiduciary and the specific category that will be subject to localisation, will be notified by the central government at a later date. What information will a data fiduciary be required to publish on its website/ application? The following are the publishing requirements of data fiduciaries as per the Draft DPDP Rules: business contact information of data protection officer/ any person who can answer queries of data principals on behalf of data fiduciaries regarding processing of personal data; method of making a request by data principal for the exercise of their rights; the particulars, if any, such as the username or other identifier of such a data principal, which may be required to identify them; and timeline for grievance redressal. While the Draft DPDP Rules are a welcome step in the right direction, there still exists ambiguity and the industry will look forward to a more comprehensive and clear set of rules, once the stakeholders’ recommendations are considered for finalising the rules. Authors: Rajarshi Dasgupta, Subarna Saha and Muskan Madhogaria

A. Setting the Context While technological innovations have undeniably enriched our existence by offering conveniences which were once thought unimaginable, they have also put before us certain unforeseen challenges.A spurt in innovations has led to an increase in exposure of one’s personal data, however at the same time, it has led to growing concerns about its potential misuse, thereby increasing data privacy disputes. The courts in India have time and again recognised the importance of personal data and have made protection of personal data the cornerstone of individual privacy. In a landmark ruling, the Hon’ble Supreme Court, in the case of Justice K.S.Puttaswamy (Retd) vs Union of India[1], in 2019, recognised the right to privacy as a fundamental right for the first time. The Hon’ble Court therein also highlighted the necessity of enacting a comprehensive law on data privacy, broadened the concept of privacy to include personal spaces, and emphasised its significance as an intrinsic value. Consequently, the legislature introduced The Personal Data Protection Bill, 2019 which was, however, withdrawn due to extensive changes made in it by the Joint Parliamentary Committee[2]. Thereafter, in 2022, the draft Digital Personal Data Protection Bill, 2022 (“DPDP Bill, 2022”) was introduced by the Government and released for public consultations. The DPDP Bill, 2022 was further revised and subsequently the Ministry of Electronics and Information Technology introduced another version of the DPDP bill in 2023 which culminated in the enactment of the present legislation i.e., Digital Personal Data Protection Act, 2023 (“DPDP Act”).[3] It is important to point out here that, with the evolution of data protection laws, arbitration as a mechanism of dispute resolution has also seen substantial growth in India. Over the past few years, India’s arbitration landscape has gone through several key developments, with an ongoing effort to refine the mechanism and align it with the international arbitration framework. According to a PwC report, 91%[4] of the Indian companies surveyed consider arbitration over traditional litigation as the preferred choice of dispute resolution. It was also found that 82%[5] of the companies with arbitration experience indicated that they would continue to use arbitration in future disputes. Therefore, it is seen that there is an increasing tendency to refer disputes to arbitration by the parties as opposed to traditional mechanism of dispute resolution through protracted litigation. In this edition we discuss the interplay between data privacy framework in India and arbitration as a preferred mechanism for dispute resolution on data privacy matters. B. Discussion, analysis and prevailing positions in the data privacy and arbitration laws in India Firstly, the question that arises is whether disputes related to data privacy fall within the purview of private arbitration or are exclusively under the jurisdiction of statutory bodies under the DPDP Act. While the DPDP Act does not explicitly exclude arbitration, its provisions, read alongside established arbitration jurisprudence in India, reveal a nuanced interplay between data privacy disputes and arbitral mechanisms. Arbitration in data privacy matters may arise from relevant terms and conditions, data-processing agreements etc. which frequently include arbitration, in matters of breach of confidentiality, non-compliance with security obligations, or data breach, as a standard practice for resolving disputes. Section 18 of the DPDP Act, empowers the Central Government to establish the Data Protection Board of India (“DPB”), as a statutory body entrusted with quasi-judicial powers to determine contraventions of the provisions of the DPDP Act[6], receive complaints[7] and impose penalties[8]. However, the enactment does not preclude the use of Alternate Dispute Resolution (“ADR”) mechanisms, on the contrary, it actively encourages the use of the same. Section 31 of the DPDP Act provides that the DPB may refer any complaint to mediation, where it is of such opinion. While the DPDP Act explicitly bars the jurisdiction of Civil Courts, there is no express bar on reference of disputes to arbitration[9]. Furthermore, it is well settled that an arbitral tribunal cannot be considered a “court”, and arbitral proceedings are not civil proceedings.[10] Thus, there exists no bar as such on referral of disputes to arbitration under the DPDP Act. Nextly, whether data privacy disputes are arbitrable at all or not depends upon their nature and context. Indian courts, through landmark judgments, have clarified the arbitrability of a dispute. In the recent case of Vidya Drolia v. Durga Trading Corporation[11], the Hon’ble Supreme Court laid down a four-fold test to determine arbitrability of disputes and held that disputes are non-arbitrable when - (i) the dispute involves rights that affect the public or third parties, not just private rights between the parties, (ii) the dispute requires a centralized decision, and mutual resolution between parties isn't suitable or enforceable, (iii) the dispute relates to the state's sovereign functions or public interest, making mutual resolution unenforceable, (iv) the dispute is explicitly or implicitly prohibited by law from being arbitrated. Data privacy disputes by their very nature involve a mix of rights in rem (rights enforceable against public at large) and rights in personam (right enforceable against a person) and therefore may seem unsuitable for arbitration. Data privacy disputes typically involve contractual obligations and specific rights between parties, which could be considered rights in personam and therefore might be considered arbitrable in such contexts. Disputes limited to contractual obligations, such as breaches of terms and conditions, data-sharing agreements, can fall within the domain of arbitration as they pertain to rights in personam. However, there may be instances where the dispute could be argued to fall under the category of rights in rem, in light of the four-pronged test laid down in the Vidya Drolia (supra) case thus making the dispute non-arbitrable. Once the dispute passes the muster, the next question revolves around the feasibility of opting for arbitration, looked at from three key perspectives of, (i) compensation, (ii) confidentiality, and (iii) party autonomy, which are discussed below:   Compensation: A significant limitation of the DPDP Act is the absence of provisions for awarding compensation to aggrieved parties. While the earlier draft bills provided for compensation, the DPDP Act focuses exclusively on penalties for contravention. In the absence of any such specific provision providing for compensation, the aggrieved party whose personal data has been breached has no other remedy but to file a complaint with the DPB under the DPDP Act which only provides for imposition of penalties and does not provide for compensation to the aggrieved party. As a result, contractually induced arbitration becomes a viable alternative for the parties to seek compensation. Having said that, it is important to mention that Clause (a) of Section 27 (1) deals with power of DPB to direct urgent remedial measures in the event of personal data breach, which in the absence of necessary clarification or rules framed, does not clarify whether such urgent remedial measures may be in the nature of compensation.   Confidentiality: Confidentiality in arbitration encourages resolution of disputes privately by limiting access to the details of the dispute, the proceedings and the final decision. By safeguarding such critical information, arbitration provides a secure framework that encourages parties to engage in open discussions without the fear of reputational harm or competitive disadvantage. Section 42A of the Arbitration and Conciliation Act 1996 (A&C Act), establishes a binding obligation on the arbitrator, the arbitral institution, and the parties to the proceedings to refrain from disclosing or utilizing any documents submitted or utilized during the arbitration, in stark contrast to judicial proceedings, where records and hearings are generally accessible to the public, thereby exposing sensitive information to a broader audience. Confidentiality being one of the cornerstones of arbitration, it provides for a crucial avenue to the parties to keep the proceedings private, especially in cases of data privacy disputes where often sensitive information is involved. Since the DPDP Act is all about protection of personal data, arbitration appears to be a secure environment for such sensitive matters. The DPDP Act establishes data fiduciaries as entities that determine the purpose and means of processing personal data, who are obligated to ensure the protection of personal data in their possession or control. However, by virtue of section 17(1)(b) of the DPDP Act of arbitral tribunals enjoy benefit from exemptions from a number of compliance requirements. Nevertheless, they remain bound by the obligation to provide reasonable safeguards against data breaches, as stipulated under Section 8(5) of the DPDP Act. This is particularly relevant where arbitral records contain personal data related to parties, witnesses, or other individuals involved in arbitration proceedings.   Party Autonomy: Another advantage of arbitration is party autonomy which allows the party to choose the arbitration process and the arbitrator. In the context of data privacy disputes, this would enable the parties to select experts with specialized knowledge in data protection laws ensuring that disputes are handled by arbitrators with the requisite expertise.   C. Conclusion The intersection of data privacy and arbitration presents both challenges and opportunities for India’s dispute resolution landscape. The growing complexity of digital data usage alongside the enactment of the DPDP Act underscores the importance of a robust mechanism that not only protects individual’s privacy but also ensures efficient and effective redressal of grievances. Arbitration with its inherent advantages of confidentiality, expertise, faster resolution, emerges as a promising mechanism for resolving such data privacy disputes. While the DPDP Act provides for a centralized watchdog through the DPB, the absence of provisions for compensation on one hand, and the growing preference for arbitration on the other present compelling reasons for preferring arbitration as a viable alternative. However, a significant challenge in this context arises with regard to the high costs associated with arbitration. These types of disputes often come with intricate technical details and legal complexities, driving up arbitration costs significantly. This financial burden can discourage individuals from enforcing their rights, highlighting the importance of making the arbitration mechanism more affordable and accessible in these contexts. The evolving jurisprudence around arbitrability of disputes highlights the need for a balanced approach, one that respects the statutory framework of data protection laws, while also embracing arbitration’s potential to offer private, quick and effective resolution. The focus on confidentiality within the arbitration framework aligns seamlessly with the protection of sensitive data as envisaged under DPDP Act and it becomes necessary to explicitly incorporate data privacy considerations within the arbitration framework. It is incumbent to implement an ecosystem where parties can trust that their data is protected and any disputes arising out of it can be resolved fairly and privately. However, it will be interesting to observe how the jurisprudence around arbitrability of data privacy disputes evolves in the Indian legal context where parallel arbitral proceedings may take place alongside the traditional DPB route, albeit on separate grounds. Nevertheless, the ever-evolving arbitration framework holds a cautiously optimistic future in the data disputes landscape. Authors: Swarajit Dey, Ronodeep Dutta and Kushagra Sharma Footnotes [1]      (2019) 1 SCC 1 [2] Explained: Why the Govt has withdrawn the Personal Data Protection Bill, and what happens now: https://indianexpress.com/article/explained/explained-sci-tech/personal-data-protection-bill-withdrawal-reason-impact-explained-8070495/ [3]      It is important to note that although the DPDP Act has received the President’s assent, the provisions of the DPDP Act are not yet in force as on the date of publishing this article and shall come into force on such date as the Central Government may appoint by notification in the Official Gazette. [4]      Corporate Attitudes & Practices towards Arbitration in India: https://www.pwc.in/assets/pdfs/publications/2013/corporate-attributes-and-practices-towards-arbitration-in-india.pdf [5]     Ibid. [6] The Digital Personal Data Protection Act, s. 27. [7] The Digital Personal Data Protection Act, s. 27. [8] The Digital Personal Data Protection Act, s. 34. [9] The Digital Personal Data Protection Act, s. 39. [10] Union of India v. Vedanta Limited, (2020) 10 SCC 1 [11] (2021) 2 SCC 1

A. Introduction  The landmark decision of the Hon’ble Supreme Court in Mineral Area Development Authority & Anr. versus M/S Steel Authority of India & Anr.resolved a prolonged legal conundrum concerning distribution of legislative powers between the Union and the States over taxation of mineral rights. A bench headed by Chief Justice D.Y. Chandrachud delivered a majority judgment (8:1), ruling that legislative power to tax mineral rights vests with State legislatures.  A brief history of the present dispute can be traced back to the enactment of the Mines and Minerals (Development and Regulation) Act, 1957 (“MMDR Act”) by the Parliament to effectuate Entry 54 of List I of the Constitution. Section 9 of the said Act provides that the holder of a mining lease shall pay royalty with respect to any mineral removed or consumed from the leased area at specified rates. The litigation spurred when States started imposing cess and taxes on top of the royalty levied by the Central Government. Two divergent views were rendered by the Hon’ble Court in the cases of India Cement Ltd. v. State of Tamil Nadu[1] and State of West Bengal v. Kesoram Industries Ltd.,[2] which led to the convening of a nine-judge bench to resolve the dispute. The core issue before the bench was to examine whether royalty, as imposed by MMDR Act is tax and if so, whether the State Legislature is competent to impose tax on mineral rights. B. Royalty is not tax  The Hon’ble Supreme Court, in India Cement (supra) held that royalty is tax and the imposition of cess on royalties has the effect of amending the Second Schedule (rates of royalty in respect of minerals) of the Act. The same was found to be ultra vires Section 9(3) of the MMDR Act. In contrast, the latter decision rendered by the Hon’ble Supreme Court in Kesoram Industries (supra) held that the decision in India cement (supra) was based on a typographical error and that royalty is not tax, but rather, is a payment made to the owner of land, who may or may not be the State. Owing to these divergent views, the first issue before the nine-judge bench was whether royalty is tax. As per the majority opinion, the fundamental difference between tax and royalty lies in the source from which each of them flow. While the power to charge/levy royalty flows from the lease instrument, the power to tax flows from a law. Further, royalty is paid by the lessee to the lessor/proprietor as consideration, since the lessor parts with his right to utilise the minerals sourced from the mine. On the other hand, imposition of tax requires the sanction of the sovereign and is preceded by the occurrence of a taxable event as determined by law. While the rates of royalty are decided by the Central Government, the rates of royalty are to be paid to the lessor as per the rates agreed to in the lease instrument. In a plethora of decisions, ranging from State of H.P. v. Gujarat Ambuja Cement Ltd.[3] and Indsil Hydro Power & Manganese Ltd. v. State of Kerala,[4] the court has consistently reiterated the settled principle that royalty is a consideration which is paid for enjoyment of rights flowing from the agreement between the lessor and the lessee. Therefore, the royalty does not satisfy the constituent elements of a tax. Hence, the law laid down in India Cement (supra) was overruled to the extent to which it held that royalty constitutes tax. Hon’ble Justice B.V. Nagarathna penned a contrary view in her dissenting opinion. She propounded that royalty fulfils all requisite elements for it to be classified as tax, since the rates thereof were determined by the Second Schedule to the MMDR Act. She held that legislative competence can either flow from List I or List II of the Seventh Schedule. Hon’ble Justice B.V. Nagarathna held that despite the fact that the language of Section 9 of the MMDR Act does not resemble the language of a legislative provision imposing tax, the legislative intent behind the same is exactly that of it being a taxation provision. C. Fiscal Federal Relation  Federalism is one of the basic features of the Indian Constitution. Indian States are sovereign to legislate within the legislative competence assigned to them. Therefore, it is the duty of Constitutional courts to interpret the scheme of distribution of powers and maintain a delicate balance of power between the federal units. True interpretation of the relationship between Entry 54 of List I, Entry 23 and 50 of List II was another issue for consideration before the Hon’ble Court. The majority was of the view that though it is now settled that the subject of regulating mines and mineral development as enumerated in Entry 23 of List II is subject to the laws enacted by the Parliament under Entry 54 of List I, such limitations shall not limit the taxing competence of the State under Entry 50 of the List II in absence of any specific law. The reasoning given by the majority was that Entry 54 of List I has three prerequisites: (i) Parliament must enact a law, (ii) the law must declare that it is in public interest to regulate mines and mineral development, and (iii) the law must specify the extent of such regulation. When such a law is enacted, it only limits the State Legislature’s power under Entry 23 of List II to the extent of Parliamentary coverage and not Entry 50 of List II, which is a special entry. The Supreme Court in MPV Sundararamier & Co. v. State of Andhra Pradesh[5] held that legislative powers relating to taxation are distinct from general powers to legislate on a subject. In the Seventh Schedule, entries are categorized into two, i.e., general and taxing entries. Relying on this principle, the majority held that Entry 50 of List II does not constitute an exception to the position of law laid down in MPV Sundararamier (supra). The legislative power to tax mineral rights vests with State legislatures. Parliament does not enjoy legislative competence to tax mineral rights under Entry 54 of List I, for the reason that it is a general entry. Since the power to tax mineral rights is enumerated in Entry 50 of List II, the Parliament cannot employ its residuary powers with respect to that subject-matter either. However, Hon’ble Justice B.V. Nagarathna in her dissent has stated that the expression “subject to any limitations imposed by Parliament by law relating to mineral development” in Entry 50 of List II pro tanto subjects the entry to Entry 54 of List I. The use of the term “any limitations” implies that the taxing entry under Entry 50 of List II would be subordinate to a non-taxing or regulatory entry like Entry 54 of List I. Given the significance of Entry 54 of List I, which also overrides Entry 23 of List II, Entry 50 of List II though is distinct, since it is the only taxation entry in Lists I and II where the taxing power of State legislatures is provided however, it is still subject to “any limitations imposed by Parliament by law relating to mineral development.” In the opinion of Hon’ble Justice, the dictum in M.P.V. Sundararamier(supra) does not address Entry 50 of List II and, therefore, has no bearing on the present issue. D. Scope of the MMDR Act: A Constraint on States' Taxing Authority?  With the aforesaid interpretation of the entries, the issues which were to be decided by the Hon’ble Supreme Court were whether the MMDR Act satisfies the requirement of “any limitation” under Entry 50 of List II and whether it restricts the taxing powers of states under the same Entry. The majority in their opinion, has held that the MMDR Act prescribes the methods and processes for the exercise or grant of rights to mines and minerals by the owner of these rights. Although it significantly reduces the states' legislative powers regarding the regulation of mines and mineral development under Entry 23 of List II, Entry 50 of List II specifies that states’ taxing powers over mineral rights are subject to “any limitations” imposed by the Parliament through a law related to mineral development. However, the majority was of the view that inability of state governments to alter mining lease terms should not be interpreted as a complete erosion of their powers over mineral regulation and taxation. While Entry 50 of List II allows the Parliament to limit the states' taxing authority, it must do so “by law” relating to mineral development. This means that the Parliament must explicitly specify any limitations on states' taxing powers by way of a statutory framework. The MMDR Act lacks specific provisions which limit the states' power to tax mineral rights, and its structure cannot be interpreted to imply such restrictions. Arguments based on the theory of implied limitations and constitutional silences were held to be inapplicable in this case, as Entry 50 of List II clearly outlines the conditions under which limitations can be imposed. Therefore, it was held that the MMDR Act does not impose any limitations on the states' taxing powers over mineral rights under Entry 50 of List II. Hon’ble Justice B.V. Nagarathna dissented and clarified that the use of the term "any limitations" as envisaged under Enty 50 of List II must be given the widest possible interpretation, indicating that such restrictions on taxing power can take any form, so long as they are enacted by Parliament through provisions of the MMDR Act and the rules made thereunder. This effectively limits the scope of the taxing power as enshrined under Entry 50 of List II. E. Power of States to tax mineral bearing land under Entry 49 of List II  Ordinarily, the rights of the owner of a piece of land extend to everything in, on, or over land. In English law, therefore, the owner of a piece of land is entitled to all mines that lie beneath their land. Under the Seventh Schedule, Entry 49 to List II deals with the levy of a tax on land and buildings, though it does not mention of any use to which the land or building is put. The majority was of the view that competence of States to legislate over land under Entry 49 of List II would, in no circumstance, be affected by the provisions of the MMDR Act. The Hon’ble Supreme Court held, in consonance with English law, that while the expression ‘land’ as used in Entry 49 includes all land, regardless of the use to which it is put. Land shall also include everything under and over the surface. Further, legislative competence of the States to tax would not be hampered by the use to which the said land is put. Therefore, the Hon’ble Supreme Court re-affirmed the principle that the contents of Entries 49 and 50 of List II are distinguishable from one another, and that the term ‘land’ as used in Entry 49 encompasses within itself, ‘mineral bearing lands’. The yield of mineral bearing land, in terms of the quantity of mineral produced or the royalty, can be used as measure to tax the land under Entry 49 of List II. In her dissent, Hon’ble Justice B.V. Nagarathna held that Entry 49 of List II of the Seventh Schedule has to be given the widest meaning. However, State Governments cannot enjoy legislative competence to tax land as well as mineral rights, which specifically is a domain of the Central Government under the MMRD Act. The reasoning behind the said decision was that since there was no value attributable to simply the land of a mineral bearing area, after subtracting the minerals. The land bearing minerals could not be taxed twice, under Entries 49 and 50 of List II, since taxation entries are mutually exclusive of one another when they fall under the same List. Entry 49 cannot act as a fall-back mechanism to escape the provision of Entry 50. F. Retrospective Application of the Judgement  The Hon’ble Supreme Court rejected the prayer of the Respondents/assessee to invoke the principle of prospective overruling, stating that it does not apply in cases where competence of legislatures to enact certain laws is upheld. However, considering the possible impact on the industry, the Hon’ble Court has arrived at a pragmatic solution and has also set a cut-off date for retrospective application of its judgment under Article 142 of the Constitution. It allowed the levy of taxes on transactions occurring only after 1 April 2005. This cut-off date corresponds with the judgment in Kesoram Industries (supra). Additionally, the Court ruled that no interest or penalties could be imposed on taxes due before 25 July 2024. To further alleviate the financial burden on taxpayers, the Court directed that tax payments be staggered in instalments over twelve years, starting from 1 April 2026.  G. Potential Impact on Industries and revenue of the States  The Hon’ble Court, while deciding the retrospective application of the judgment was cognizant of the fact that due to pendency of the instant case, interest on the pending demands due from assessees may be substantial in comparison to their total net worth. Therefore, to ease the burden on the industry, interest and penalty on the assessees have been waived off. Though the Hon’ble Court has tried to balance equities by such waiver and has provided a window of twelve years for clearing dues, it is an undeniable fact that in States where the legislation imposing taxes/cess on mineral rights was struck down in view of India Cement (supra), neither have taxes been charged, nor have they been recovered from the consumer. Giving States the right to renew their demand will surely put unnecessary financial strain on mining companies, who will in turn have to coup up monies from their current revenue. Furthermore, under the new regime, States are allowed to levy taxes on mineral rights and mineral bearing land which will add to the cost of mineral extraction, thereby affecting the consumers and global competition in mineral supply. Another potential impact is that the Central Government had significantly increased royalty rates manifold since 1991, in order to compensate states for revenue losses post the India Cement judgment.[6] This makes the retrospective application of the judgment contentious, as States had already endeavoured to address these losses through increased amounts of royalties, which have already been paid by mining companies. On the other hand, the judgment has brought great relief to mineral-rich States, most of which were under financial distress and were compelled to depend upon the Central Government for funds. Further, post-Kesoram Industries (Supra), states like Chhattisgarh, Madhya Pradesh and West Bengal enacted laws to collect tax on royalty which still remain in force.  On the contrary, similar laws in Bihar and Odisha were struck down by the respective High Courts due to legislative incompetence, thus creating an imbalance between States in terms of revenue generation. With the ruling of this Hon’ble Court in the instant case, all States may levy or renew demands of tax, if any, pertaining to Entries 49 and 50 of List II, which will bring States at par with one another. Lastly, it can be said that the dissenting view of Hon’ble Justice B. V. Nagarathna leaves room for future discussion on the subject. Pertinently, the Central Government had filed a petition seeking review of the judgment on the ground that the Hon’ble Supreme Court has ignored practical implications of the judgment at the macroeconomic level, which is an error apparent on the face of the record. The Centre, in the review, had also contended that if the interpretation of Entry 49 of List II is to be accepted, the entire federal regime as enshrined under the Constitution would collapse[7].  However, the Supreme Court dismissed the petitions seeking review of the judgment, in which the majority bench observed that there is no apparent error on the face of the record citing the Supreme Court Rules, 2013 with the sole dissent of Justice B.V. Nagarathna. The far-reaching implications of this judgement will open new avenues for interdisciplinary research, bridging the gap between legal theory, environmental economics and public policy. Authors: Astha Sharma, Shreyas Awasthi, Upasana Mohanty and Panistha Bhatt Footnotes [1] (1990) 1 SCC 12. [2] (2004) 10 SCC 201. [3] (2005) 6 SCC 499. [4] (2021) 10 SCC 165 [56]. [5] 1958 SCC OnLine SC 22. [6] Centre can lower royalties to minimise impact on mining companies post Supreme Court ruling: Ambit Capital, THE ECONOMIC TIMES (Aug.20, 2024, 02:32 PM), https://economictimes.indiatimes.com/industry/indl-goods/svs/metals-mining/centre-can-lower-royalties-to-minimise-impact-on-mining-companies-post-supreme-court-ruling-ambit-capital/articleshow/112649543.cms [7] Centre seeks review of Supreme Court’s 8:1 ruling upholding power of states to tax minerals: ‘Ignores macro-economic impact’ : https://indianexpress.com/article/india/centre-supreme-court-review-mineral-royalty-judgment-9563559

A. Introduction  On 3rd October 2024, the Hon’ble Supreme Court in Civil Appeal No. 2948 of 2023, in the case of Safari Retreats Pvt. Ltd.,has given its verdict on the Constitutional Validity of Section 17(5)(c) and (d) of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), and availability of Input Tax Credit (ITC) on construction services construed to be ‘Plant and Machinery’.  B. Key Issue  The case focuses on the constitutional validity of Section 17(5)(d) of the CGST Act, 2017, which restricts ITC on goods and services used for constructing immovable property, such as malls, even if the property generates taxable income through leasing or renting. C. Safari Retreats' Argument Safari Retreats Pvt. Ltd. argued that they should be allowed to claim ITC on the construction costs of a shopping mall, as the property is used to generate taxable rental income. They challenged Section 17(5)(d) of the CGST Act, 2017, contending that it leads to a cascading effect of taxes, which contradicts the fundamental principles of GST. D. Government’s Argument The GST Department maintained that Section 17(5)(d) of the CGST Act, 2017 explicitly disallows ITC for the construction of immovable properties, except for plant or machinery, to prevent potential tax leakage. They argued that ITC is a statutory right, not a fundamental right, and the restriction is valid under the CGST Act, 2017. E. Debate on "Plant and Machinery" vs. "Plant or Machinery" While dealing with the above issues, the Hon’ble Supreme Court observed that the expression “Plant or Machinery” has not been defined under the CGST Act, 2017. It is pertinent to note that Clauses (c) and (d) of Section 17(5) of the CGST Act, 2017 do not altogether exclude every class of immovable property from the eligibility of IT In the case of Clause (c) of Section 17(5) of the CGST Act, 2017, if the construction is of “Plant and Machinery” as defined, the benefit of ITC will accrue. Similarly, under Clause (d) of Section 17(5) of the CGST Act, 2017, if the construction is of a “Plant or Machinery”, ITC will be available. The Court further observed that when the legislature uses the expression “Plant and Machinery,” only a plant will not be covered by the definition unless there is an element of machinery or vice versa. Hon’ble Court further observed that the expression “Plant or Machinery” has a different connotation. It can be either a Plant or a Machinery. Section 17 (5) (d) of the CGST Act, 2017 deals with the Construction of an Immovable Property. The very fact that the expression “Immovable Property” other than “Plants or Machinery” is used, shows that there could be a Plant that is an Immovable Property. As the word ‘Plant’ has not be en defined under the CGST Act, 2017 or the rules framed thereunder, its ordinary meaning in commercial terms will have to be attached to The Hon’ble Court held that if it is found on facts that a building has been so planned and constructed as to serve an Assessee’s special technical requirements, it will qualify to be treated as a plant for the purposes of investment allow The word ‘Plant’ used in a bracketed portion of Section 17 (5) (d) of the CGST Act, 2017 cannot be given the restricted meaning provided in the definition of “Plant and Machinery”, which excludes Land, Buildings or any other Civil Structures. Therefore, in a given case, a building can also be treated as a plant, which is excluded from the purview of the exception carved out by Section 17 (5) (d) of the CGST Act, 2017 as it will be covered by the expression “Plant or Machinery”.  F. Supreme Court’s Observations  The Supreme Court acknowledged the difference between "plant and machinery" (used in Section 17(5)(c) of the CGST Act, 2017) and "plant or machinery" (used in Section 17(5)(d) of the CGST Act, 2017). It emphasized that Section 17(5)(d) of the CGST Act, 2017 should be read strictly, as it is an exception to the general rule of ITC availabilit In CIT Anand Theatres (2000) [[2000] 110 Taxman 338/244 ITR 192 (SC)] the Supreme Court ruled that hotels and cinema buildings cannot be classified as "plants" for the purpose of depreciation under tax law. The Court made a clear distinction between buildings and plant. The Court further observed that each case will have to be tested on merits as the question whether an immovable property or a building is a plant is a factual question to be decide The challenge to the constitutional validity of clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act, 2017 is not establi The question of whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression “plant or machinery” used in Section 17 (5) (d) of the CGST Act, 2017 is a factual question, which has to be determined keeping in mind the business of the registered person and the role that building plays in the said business. If the construction of a building was essential for carrying out the activity of supplying services, such as renting or giving on lease or other transactions in respect of the building or a part thereof, which are covered by Clauses (2) and (5) of Schedule II of the CGST Act, 2017, the building could be held to be a plant. Then, it is taken out of the exception carved out by clause (d) of Section 17(5) to sub-section (1) of Section 16 of the CGST Act, 2017. Functionality test will have to be applied to decide whether a building is a plant. Therefore, by using the functionality test, in each case, on facts, it will have to be decided whether the construction of an immovable property is a “Plant” for the purposes of clause (d) of Section 17(5) of the CGST Act, 2017. The Court did not make a final ruling on whether the mall qualifies as a plant, instead remanded the case back to the Orissa High Court to apply a functional test: determining whether the mall functions as an essential business tool (like a plant) or is merely a passive ass  G. Points to be Considered The functionality test set by the Court means that if an immovable property (e.g., a mall) is actively used for providing taxable services (such as leasing), it could be considered a "plant" under Section 17(5)(d) of the CGST Act, 2017, potentially making ITC allowa ITC on goods or services used for repairs, construction, works contract, etc to such buildings, which have not been capitalized in the books, is as it is available and not blocked under Section 17(5) of the CGST Act, 2017. This ruling opens the door for further cases where other commercial buildings may be treated as "plants" if they are essential to business operations, setting a broader interpretation for Section 17(5)(d) of the CGST Act, 2017 in the futur Business, needs to review their ITC positions, based on the interpretation and judgement, particularly those involving construction related expenses. Other ITC under the purview of Section 17(5)(c) and Section 17(5)(d) of CGST Act, 2017 would stand blocked. Author: Rajarshi Dasgupta and Vedika Agarwal

A.            Introduction The Insolvency and Bankruptcy Code 2016  (“Code”) is one of the most important and significant reform which has reshaped corporate India in the last decade. The IBC as noted by the Hon’ble Apex Court in the Swiss Ribbons1 case has ensured that ‘the defaulters paradise is lost’2. This, the IBC achieves by separating the promoters and the management of a company from the company itself and enabling the revival of the company by replacing its management with a new management, thus having  a salutary effect on the credit culture in the country through entrepreneurship, fostering economic growth and revitalization. According to recent data from the Insolvency and Bankruptcy Board of India (“IBBI”), as reported by TOI, out of 1,005 cases valued at Rs 3.4 lakh crore, the 153 cases with claims exceeding Rs 1,000 crore represent a realisable value of Rs 3.05 lakh crore, accounting for 90% of the total recoverable value thereby demonstratively displaying 5% of insolvency cases (claims over Rs 1,000 crore), making up 90% of recoverable value3. Equally concerning is the fact that the number of days taken for resolution have increased from 611 days in March 2023 to 680 days in March 2024 and further to 761 days in June 20244. Similarly, for cases where the borrower has entered liquidation, the time for obtaining an order has risen from 455 days in March 2023 to 493 days a year later, and to 680 days by June 20245. Anxious with the growing delays in the resolution process prompted the Hon’ble Finance Minister  to  announce  targeted  reforms  in  her  recent  full  budget  by  establishment  of specialized tribunals, creation of dedicated benches and technological enhancements in the tribunals and the appeallate tribunal systems, to fast track the resolution process. B.            Need for an integrated technology platform So far the IBC ecosystem works in silos and have their separate fragmented technological platforms. There is a need for a comprehensive end-to-end Information Technology platform to serve as a single source of information and record. Presently, the disintegrated platforms are run and maintained individually and separately by the core institutions such as the tribunals, IBBI, IPs etc. and are restricted to their respective individual mandates. A quick look of the technology platform(s) used by the core institutions reveal the following: National Company Law Tribunal (“NCLT”): The NCLT has ‘e-filing’ platform for parties to submit their petitions/ applications online and the Registry carries out scrutiny of these submissions and confirm the same before allotting the filing number. The system also shows the status of each petition/ application in a ‘Case Status Report’ for stakeholders in the public domain. IBBI: The IBBI portal hosted by the National Informatics Centre (“NIC”) acts as a repository of orders, resources, compliance reporting, claims received/ admitted/ verified, publications, registered valuers, IBBI committees, IP information and performance matrix et for use by the public at large as well as information on public announcements and expression of interests (“EoIs”), auction etc. Insolvency Professional Agency (“IPAs”): IPAs have websites and online portals for their IP members for registration and other compliance requirements such as list of assignments, fees and cost disclosures, relationship disclosures e Ministry of Corporate Affairs (“MCA”): Debtor companies incorporated under Companies Act 2013 are a part of the MCA 21 portal which contains company information, directors information, charges, whether under insolvency process etc. Information Utility (“IU”): National e-Governance Services L (“NeSL”) being the only IU registered under the Code acts as the repository of all the debt information and record of defaut (“RoD”) provided by creditors offering verification and authentication of debt and default as well as auction notices, IBBI public announcements etc. IPs: Case management soft Therefore it is seen that there is litte to no technological interaction between these institutions. The information is disparate and the platforms mostly work in silos  with limited exchange of information. Placed thus, there is need for these systems to be integrated and inter-linked in a structured way to streamline and bring about an uniformity of information. C.            Way Forward Integration of the present systems starting from filing of insolvency applications based on RoD generated by the IU, online filing of replies and template based forms, communication of IPs with stakeholders, reporting of process outcomes to the IBBI, inter-creditor intereaction etc. have become the need of the hour. One of the challenges faced by IPs is, in obtaining records/ information from the promoters of the corporate debtor. The promoters of the corporate debtor turn hostile and abstain from cooperating with the IPs which thereby delays the resolution process significantly. It also leads to disputes between the parties regarding what information has been submitted and what is pending to be submitted. Therefore, if there is a single platform where information is to be submitted by the various stakeholders, there shall be a single source of truth which can be accessd by all parties. Not only that, it would also enable the tribunals to quickly have the facts established and curtail delays. NCLTs can quickly ascertain the violation of compliances and decide a case. The government endeavours to set up an integrated technology platform, to provide a common information technology highway connecting all stakeholders involved in the debt resolution of distressed companies including  the IBBI, lenders and tribunals,  for quick, uniform and efficient rescue of companies. Resultingly, on 23 July 2024, the the Hon’ble Finance Minister in her full budget speech, introduced a transformative proposal aimed at reforming the landscape of insolvency and bankruptcy through the establishment of an ‘Integrated-Tech Platform’. The Integrated-Tech Platform is envisioned as a centralized hub, which will consolidate and integrate a diverse assemblage of information critical to insolvency proceedings. It will bring together structured and unstructured data from multiple sources so to say the various databases, technology applications, and external datasets. The platform will leverage advanced digital tools and automation systems to manage and process this data. By automating repetitive and procedural tasks, the platform aims to significantly reduce human errors and streamline the insolvency resolution process. The introduction of this technology-driven approach is also expected to have a positive impact on the banking sector. By accelerating the debt recovery process and improving the efficiency of insolvency proceedings, the platform will enhance the ability of banks and financial institutions to recover distressed assets. This, in turn, will contribute to a more stable and resilient financial system, as banks will be better positioned to manage and mitigate the risks associated with distressed assets. It is expected that such steps will facilitate ease of doing business. Authors: Ronodeep Dutta and Manvi Goel Footnotes 1 Swiss Ribbons Pvt. Ltd. vs Union Of India, (2019) 4 SCC 17, 2 ibid 3 ET Online, ‘Insolvency cases over Rs 1000 cr hold 90% of recoverable value despite representing just 15% of total cases’ (Aug 24, 2024, 12:12:00 PM IST), https://economictimes.indiatimes.com/industry/banking/finance/banking/insolvency- cases-of-rs-1000-cr-hold-90-of-recoverable-value-despite-representing-just-15-of-total- cases/articleshow/112757180.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst accessed 25 August 2024 4 ibid 5 ibid