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Private unaided schools occupy a peculiar position in Indian education law, they are private enterprises delivering a public good, subject to both the Right of Children to Free and Compulsory Education Act, 2009 (RTE Act) and state-specific education laws. Historically, Delhi relied on a patchwork regime: the Delhi School Education Act, 1973 and periodic government orders. However, judicial interventions from time to time, most notably in Modern School v. Union of India (2004) have exposed the regulatory gaps, particularly in fee oversight. In light of this background, on 8 August 2025, the Delhi Legislative Assembly passed the much-anticipated Delhi School Education (Transparency in Fixation and Regulation of Fees) Bill, 2025 (“Bill”). The legislation intends to introduce stringent regulations and penalties to curb arbitrary fee hikes by schools, while also empowering parents to challenge unilateral decisions made by school managements. The Statement of Objects and Reasons under the Bill clarifies that the existing provisions under the Delhi School Education Act, 1973 has proven insufficient in preventing the free reign of private unaided school managements pertaining to arbitrary fee hikes and lack of financial transparency. Citing persistent complaints from parents and judicial limitations on the Directorate of Education's (DoE) power, the Bill seeks to establish a robust mechanism for fairness and accountability in school fee structures in Delhi. The Bill is applicable to all categories of private unaided educational institutions within the National Capital Territory of Delhi, from pre-primary to senior secondary level, whether recognised or unrecognised by the Government. Through the Bill, the legislature aims to: Establish independent committees to regulate school fee increases; Mandate prior approval of the committee for any fee revision based on financial statements; Promote transparency through mandatory audits and disclosures; Provide a grievance redressal mechanism for parents; and Impose strict penalties for profiteering and collecting capitation fees by the schools. At the core of the Bill sits a new three-level committee structure that shall manage the proposal, approval, and appeal of school fees in Delhi. The “School Level Fee Regulation Committee” or “SLFRC” forms the foundational body at individual school level which is responsible for the initial review and approval of fees. The Bill mandates every school to form an SLFRC by July 15th of every academic year. The SLFRC is designed to be an inclusive body, consisting of a chairperson, a secretary (which shall be the school’s principal), a member body consisting of three teachers and five parents from the school’s parent-teacher associated (selected at random through a draw of lots), and an observer (which shall be a nominee from the Department of Education). The school management must submit its proposed fee structure to the SLFRC by July 31st. The Bill mandates that the fee approvals by the SLFRC must be based on a unanimous agreement of all members, and once approved shall be the binding fee structure for the next three academic years. The approved fee details must also be displayed on the school's notice board and website. The timeline for SLFRC to decide on the amount of fee to be fixed has been fixed at 15th September of the relevant academic year and the management of the school can approach the District Fee Appellate Committee (DFAC) (formed under the Bill) before the 30th September. The Bill accords a statutory right to an aggrieved parents’ group—constituting no less than 15% of the total parents of students in the affected class or school—to prefer an appeal against a determination of the School Level Fee Regulation Committee (SLFRC) before the District Fee Appellate Committee. Such appeal must be instituted within thirty days from the date on which the SLFRC finalises the fee structure. The DFAC is mandated to communicate its decision on the fixation of fees to the concerned parties within thirty days of receiving the appeal, and in any case not later than forty-five days within the same academic year. Should it fail to do so, the matter shall stand automatically referred to the Revision Committee as provided under the Act. Furthermore, the Aggrieved Parents’ Group, the school management, or the Parents-Teachers’ Association, if dissatisfied with the decision of the District Fee Appellate Committee, may prefer a further appeal before the Revision Committee within thirty days from the date of such decision, in the manner prescribed. It further delineates a set of determinative parameters for fixing the fees leviable by a school, including: the geographical location of the institution; the quality, scale, and extent of its infrastructure and facilities; prevailing academic standards; expenditure on administration and maintenance etc.. Notably, the DFAC has been vested with the powers of a civil court for the purposes of conducting any inquiry under the Act, akin to the powers exercisable while trying a suit. In parallel, the Directorate of Education is conferred with civil court like authority for the imposition of penalties under the Bill. Importantly, the Bill contains an express bar on the jurisdiction of ordinary civil courts in respect of matters governed by its provisions, thereby channelling disputes exclusively through the statutory committees and authorities established under the legislation. Non-observance of the mandated procedure for fee approval vests in the Director of Education along with the authority to order the immediate rescission of the revised fees and to compel the refund of any excess amounts collected, within a maximum of twenty working days. The Director is further empowered to levy pecuniary penalties ranging from ₹1–5 lakhs for a first contravention and ₹2–10 lakhs for each subsequent contravention. Persistent defiance of such directives may expose the institution to a penalty equivalent to twice the originally prescribed amount and/or may result in cancellation of recognition of the school itself. The Bill’s introduction of a participatory committee system to govern the approval and appeal of school fees is laudable as an important intervention by the authorities, bringing uniformity and transparency to fee structures, and directly addressing long-standing parental concerns. For the first time, parents have been involved in the decision making process and the penalties prescribed have been high and serious enough to have a material impact on the violators. However, while the goals are valiant, the Bill also poses considerable challenges in implementation, particularly for schools, as the multi-layered approval processes, especially in relation to the need for unanimous approvals, may lead to frequent deadlocks and pushing most decisions to an appellate system. Requiring 15% of parents to initiate a DFAC complaint may also be onerous in large schools, effectively stifling individual grievances. Further, without statutory financial audits, committees may lack robust evidence to determine whether fee hikes are justified. Possible administrative delays and bureaucratic hurdles may also affect the ability of schools to meet dynamic financial requirements and unforeseen expenses. The Bill will also test the ability of the Government of Delhi to effectively execute it over roughly 1700 schools. From a legal standpoint, the Bill is well-intentioned but susceptible to legal and administrative law challenges. The Bill’s success therefore rests on a delicate balance; one which meets its intended fairness for parents while not imposing overly cumbersome administrative load on schools that may compromise their operational flexibility and financial health. Co-authored by Neeraj Vyas, Partner ([email protected]) and Abhishek Malhotra, Associate ([email protected])

INTRODUCTION The question of whether an improper or irregular arrest automatically entitles an accused to bail has been the subject of considerable judicial scrutiny. This issue has gained renewed significance with the enactment of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), particularly Section 483, which governs the grant of bail. While the Constitution of India and various statutory provisions lay down procedural safeguards to protect the liberty of individuals, the law also seeks to ensure that criminal investigations are not impeded by mere technicalities. Courts have consistently struck a delicate balance between safeguarding individual rights and preserving the integrity of criminal investigations. The jurisprudence that has emerged affirms that procedural irregularities in arrest, such as non-compliance with procedure, do not, by themselves, constitute a standalone ground for grant of bail. Rather, the decision to grant bail must be grounded in a holistic appreciation of the facts and circumstances of each case. This article examines the recent Karnataka High Court decision of Edwin Thomas v. State of Karnataka (Criminal Petition Nos. 101502/2025 and 101503/2025 – Judgment dated April 29, 2025), particularly in light of recent developments under the BNSS, and underscores the principle that procedural lapses alone do not ipso facto justify the release of an accused on bail. STATUTORY OVERVIEW REGARDING ARREST The right to life and personal liberty is enshrined under Article 21 of the Constitution of India, which mandates that no person shall be deprived of these rights except according to procedure established by law. This constitutional guarantee encompasses the right of an individual to be arrested only through lawful means and in strict adherence to statutory procedures. Furthermore, Article 22(1) of Constitution of India states that no person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest nor shall he be denied the right to consult, and to be defended by, a legal practitioner of his choice and Article 22(2) of Constitution of India states that every person who is arrested and detained in custody must be produced before the nearest Magistrate within 24 hours of such arrest. In furtherance of these constitutional safeguards, Chapter V of the BNSS outlines certain safeguards, such as informing the arrestee of the grounds of arrest, particulars of the offences for which arrest is made, and the right to bail, the right of an arrested individual to meet an advocate of their choice during interrogation, information as to the arrest of the person and where the arrested person is being held, to his relatives, friends or any other person mentioned by the arrested person, etc. These provisions, when read collectively, establish a comprehensive statutory framework designed to balance the powers of law enforcement authorities with the rights and liberties of individuals and echoes constitutional vision of fair procedure. Any deviation from these prescribed procedures can raise serious constitutional concerns and may invite judicial scrutiny regarding the legality of the arrest. KARNATAKA HIGH COURT’S RECENT DECISION In a recent judgment, the Hon'ble High Court of Karnataka addressed whether procedural irregularities during an arrest automatically grant bail under Section 483 of the BNSS. In the case of Edwin Thomas v. State of Karnataka (Criminal Petition Nos. 101502/2025 and 101503/2025), the Petitioners claimed their arrests were illegal due to the local police not being informed. The Karnataka High Court clarified that procedural lapses do not automatically entitle someone to bail. It ruled that the arrests were not illegal, noting that the only irregularity was a failure to notify the New Delhi police during the transfer of the Petitioners, which the investigating officer apologized for. Consequently, the Court concluded that the Petitioners were not entitled to automatic bail and could seek legal action regarding their arrest, but the arrests themselves were deemed proper. To substantiate their claim, the Petitioners placed strong reliance on two decisions of the Hon’ble Supreme Court, namely Vihaan Kumar v. State of Haryana (2025 SCC OnLine SC 269) and Directorate of Enforcement v. Subhash Sharma (2025 SCC OnLine SC 240). Both judgments pertain to instances where the Court found serious lapses in the process of arrest and recognized the breach of fundamental rights as a ground to grant relief to the accused and were considered to be misplaced. In the case of Vihaan Kumar, the Supreme Court intervened in light of a clear violation of the statutory safeguards and emphasized the protection of personal liberty under Article 21 of the Constitution of India. Similarly, in the case of Subhash Sharma, it was observed that the arrest had been carried out in flagrant disregard of procedural requirements mandated by the Prevention of Money Laundering Act, 2002, and the Accused was denied access to legal representation and basic rights. These cases involved egregious violations which were absent in the present matter. In the instant case, the Petitioners have not alleged any grave violation of their fundamental rights such as illegal detention, denial of legal counsel, or inhuman treatment in custody and neither have the Petitioners alleged that the grounds of arrest were not informed to them. Instead, the foundation of the Petitioners’ argument is based solely on a procedural lapse, which, by itself, does not render the arrest illegal in the absence of demonstrable prejudice or mala fide intent on the part of the police authorities. Furthermore, the Petitioners had earlier approached the Hon’ble High Court of Delhi by filing a habeas corpus petition concerning the very same arrest. During the course of those proceedings, the Investigating Officer had tendered an unconditional and voluntary apology before the Court, acknowledging the procedural oversight, which the Petitioners had accepted without any objection. The said habeas corpus petition was thereafter voluntarily withdrawn by the Petitioners without pressing any further claim of illegal arrest. Therefore, it is evident that the Petitioners had already waived any grievance related to the arrest by accepting the apology of the investigating authorities and by choosing not to pursue the habeas corpus remedy to its logical conclusion. Hence, the Petitioners could not raise the same contention as ag round for bail. This is in consonance with the concurring decision of Justice Bela Trivedi in the case of Radhika Agarwal v. Union of India (2025 SCC OnLine SC 449) where she voiced that, minor procedural lapse on the part of authorized officers may not be seen with a magnifying glass by the courts in the exercise of judicial review, which may ultimately end up granting undue advantage or benefit to the accused persons. The observation was made in relation to special acts and not with respect to offences under IPC / BNS. CONCLUSION The case of Edwin Thomas presents a significant judicial pronouncement that draws a fine line between procedural irregularity and illegality in the context of arrest and custody. While the Indian judiciary has time and again reiterated that violations of procedural safeguards, especially those impacting fundamental rights under Articles 21 and 22 of the Constitution of India, can render an arrest unlawful and illegal, this protection cannot be extended to cover every minor lapse or technical omission by the investigating agency. The Karnataka High Court, sends a clear signal that while procedural fairness is paramount, the same cannot be misused as a tool to escape prosecution. The Courts are duty-bound to protect individual liberty, but they must also prevent the dilution of criminal justice by frivolous or opportunistic claims framed on procedural grounds. The police authorities also have a duty to ensure that the arrest is conducted as per law and that the rights of the arrested person are not affected. More importantly, such lapses do not, by themselves, render the evidence adduced inadmissible, as courts are required to consider the totality of the facts and circumstances of each case. Hence, this serves as a reaffirmation of the principle that the grant of bail must be governed by a holistic assessment of facts, legal merit, and judicial conscience—not by technicalities devoid of substance. It also reinforces the judiciary’s balanced approach in ensuring that the rights of the accused are protected without compromising the integrity and efficiency of criminal investigations.

Saga Legal has recently announced the appointment of Vara Gaur as a Partner in the Litigation & Dispute Resolution practice. Vara will lead disputes related to Technology, Media & Telecom (TMT), given her extensive experience in technology-driven commercial litigation, platform liability, data privacy, and arbitrations. A graduate of the Faculty of Law, University of Delhi, Vara also holds a BBA degree from Amity University. Over the years, she has represented a wide spectrum of clients, from global technology majors to Indian digital startups, in complex, high-stakes disputes before the Supreme Court of India, various High Courts, arbitral tribunals, and sectoral regulators. She is also adept at navigating sensitive matters involving online content, intermediary regulations, and the evolving data protection frameworks. Welcoming her to the firm, Gaurav Nair, Managing Partner, said, “Vara is a welcome addition to the firm’s disputes practice and will be focusing primarily on further deepening our technology litigation practice. She has a comprehensive understanding of the technology and data protection landscape, which is the need of the hour, given the nuanced ways these sectors are evolving. We are looking to further deepen our work in these areas, backed by the breadth of her expertise and experience.” Sharing her thoughts on joining Saga Legal, Vara said, “Joining Saga Legal feels like the right step at the right time. The firm’s ambition, agility, and collaborative culture resonate strongly with me. I am particularly excited to build a specialised TMT disputes practice.” Founded in 2016, Saga Legal is a multi-service law firm with a strong presence in New Delhi, Bengaluru, and Mumbai, advising a diverse clientele on matters ranging from corporate-commercial advisory and transactions to complex litigation and regulatory compliance. The firm’s founding philosophy is rooted in clarity, collaboration, and client-first solutions, and its lawyers are known for their strategic acumen across sectors including fintech, infrastructure, energy, healthcare, and now, technology and media.

OVERVIEW In today’s tech-driven world, Artificial Intelligence (AI) is transforming the way businesses operate, innovate, and connect with consumers. With the emergence of AI, we also see new trends whereby people transform their photos to various animated styles. As AI-generated content becomes more common, it raises important questions about intellectual property (IP) rights. Who owns the work created by AI? Can these works be legally protected? How do we prevent AI from unintentionally copying existing work? These issues are at the heart of the ongoing discussion about AI and IP law. Governments around the world are trying to strike a balance between encouraging AI-driven progress and ensuring fair IP protections. The lack of a global standard makes this even more challenging, as different countries take different approaches. For example, New Zealand has chosen a minimal-intervention, risk-based strategy, trusting that existing laws provide enough safeguards. Other nations, however, are considering broader legal updates to address AI’s growing role in content creation and branding. As AI continues to redefine creativity and production, it also challenges long-standing legal principles like originality. Copyright and trademark laws have traditionally set a low bar for originality, allowing a wide range of works to be protected. But with AI-generated content, a key question arises—should simply providing an instruction or prompt be enough to claim ownership? This article explores the evolving relationship between AI and IP, the legal challenges it presents, and the possible solutions that businesses and policymakers must consider in an increasingly AI-driven world. NAVIGATING THE COPYRIGHT LAW IN THE AGE OF AI The Copyright Act, 1957 defines an “author” as the person who causes a work to be generated by a computer, excluding AI from claiming independent authorship. This means that the individual providing a prompt to AI may be considered the rightful author, while AI developers and the machine itself hold no legal claim. However, this interpretation raises concerns about co-authorship, especially considering AI’s evolving role in content creation. Indian copyright law currently protects only computer-aided works, not computer-generated ones, making it unclear whether AI-assisted creations qualify for protection. Another challenge is the requirement of originality under Section 13[1] of the Act. Indian courts follow the modicum of creativity standard, meaning a work must reflect human skill and judgment to qualify for copyright. AI, operating on algorithms and existing data, lacks human creativity, making it difficult to fit within traditional copyright principles. Additionally, AI’s reliance on large datasets raises ethical concerns about copyright infringement, as AI-generated works may unknowingly incorporate protected material without seeking prior consent. The question of liability—whether it falls on the AI developer, the user, or the copyright owner—remains unresolved. To address these issues, lawmakers could consider declaring AI-generated works ineligible for copyright protection or adapting global legal frameworks such as the EU’s Text and Data Mining exceptions and the US fair use doctrine. Another approach could involve creating a sui generis system for AI-generated content, tailored to address its unique challenges. Technologies like digital watermarking or audio steganography could help track AI’s use of copyrighted material. As AI’s role in content creation grows, India may need specialized legislation, similar to the EU’s proposed AI Act, to ensure copyright law evolves alongside technological advancements. LEGAL COMPLICATIONS OF AI-GENERATED WORK AND TRADEMARKS Trademarks protect the identity and reputation of businesses by preventing unauthorized use of names and logos. However, AI-generated content is challenging this protection, as AI systems, relying on publicly available data, can unintentionally create names or logos that closely resemble existing trademarks. This increases the risk of brand dilution and consumer confusion. The Trademarks Act, 1999, do not recognize AI as a legal entity, making it unclear who owns an AI-generated mark—the developer, the business using it, or the party commissioning the AI. Since AI-generated trademarks are derived from pre-existing data, their distinctiveness also comes into question, potentially making them ineligible for registration under Indian law. Legal gaps in AI and trademark protection are evident in controversies like Disney vs. Microsoft, where AI-generated movie posters imitated Disney’s trademarks, raising infringement concerns. While companies have responded by restricting AI access to certain brand names, users continue to bypass these limitations, exposing businesses to risks. To mitigate trademark conflicts, businesses using AI-generated marks must conduct thorough trademark searches before filing for registration. As AI continues to shape brand development, there is a pressing need for legal clarity on its role in trademark ownership and infringement. PATENT ELIGIBILITY OF AI-RELATED INVENTIONS AI innovations, like any technological advancement, require IP protection to ensure exclusivity, market advantage, and revenue generation. However, existing legal frameworks lack specific provisions for AI-driven inventions, raising key challenges in patentability and ownership. While AI-assisted and AI-generated inventions fall within the scope of patent law, determining the rightful inventor—whether the AI developer, user, or business—is still debated. Additionally, AI-generated works must meet statutory requirements such as subject matter eligibility and sufficient disclosure under the Indian Patents Act, 1970. Patentability of AI innovations in India hinges on demonstrating a “technical effect” rather than mere computational advancements. Courts and patent offices worldwide, including in the EU and UK, have taken differing approaches. While the European Patent Office emphasizes a technical purpose for AI-related patents, the UK courts have recognized artificial neural networks as patentable. In India, AI inventions must navigate Section 3(k)[2] of the Act, which excludes mathematical methods and computer programs from patent protection unless they provide a demonstrable technical contribution. As AI continues to evolve, Indian courts and patent offices must clarify their stance on AI-related patents to ensure balanced innovation protection. WAY AHEAD With the rapid advancement of technology in the field of AI, our dependency on technology has grown immensely from smaller needs such as buying groceries to bigger life decisions such as making and running businesses. As AI systems become increasingly capable of generating content—ranging from art and music to software code and written works—the traditional boundaries between human-created and machine-generated IP are becoming increasingly blurred. Considering these emerging complexities, there is a need of a sui generis legal framework. Such a system distinct from existing IP laws could specifically address the unique issues posed by AI generated content for establishing clear criteria of authorship, ownership, and liability. However, beyond enacting a sui generis statute there is also a pressing need to adopt a more flexible approach to examine the IP in the AI era. IP examiners, policymakers, and courts must be equipped to assess not only the technical and creative merit of AI-assisted works, but also the degree of human involvement and intention behind them. This broader perspective would help ensure that the legal system remains adaptive and equitable as we navigate the evolving intersection of human creativity and AI. Co-authored by Sanika Mehra, Partner ([email protected]) Shilpa Chaudhury, Principal Associate ([email protected]) and Sakina Kapadia, Senior Associate ([email protected]) [1] Section 13: Works in which copyright subsists-(1) Subject to the provisions of this section and the other provisions of this Act, copyright shall subsist throughout India in the following classes of works, that is to say- a. original, literary, dramatic, musical and artistic works, b. cinematograph films, and c. sound recordings. (2) Copyright shall not subsist in any work specified in sub section (1), other than a work to which the provisions of Section 40 or Section 41 apply, unless- (i.) in the case of published work, the work is first published in India, or where the work is first published outside India, the author is at the date of such publication, or in a case where the author was dead at that date, was at the time of his death, a citizen of India, (ii.) in the case of an unpublished work other than a work of architecture, the author is at the date of making of the work a citizen of India or domiciled in India, and (iii.) in the case of work of architecture, the work is located in India (3) Copyright shall not subsist- a. in any cinematograph film if a substantial part of the film is an infringement of the copyright in any other work, b. in any sound recording made in respect of a literary, dramatic or musical work, it in making the sound recording, copyright in such work has been infringed. (4) The copyright in a cinematograph film or a sound recording shall not affect the separate copyright in any work in respect of which a substantial part of which, the film, or as the case may be, the sound recording is made. (5) In the case of a work or architecture, copyright shall subsist only in the artistic character and design and shall not extend to processes or methods or construction. [2] Section 3(k): a mathematical or business method or a computer programme per se or algorithms;

INTRODUCTION Recently, the High Court of Karnataka in the case of Saraswathi Prakash & Others vs. State of Karnataka & Ors.[1], brought much-needed clarity to the legal framework governing management of residential complexes in Karnataka. The judgment addresses the long-standing conflict between the Karnataka Apartment Ownership Act, 1972 (‘KAO Act’) and the Karnataka Co-operative Societies Act, 1959, (‘KCS Act’) particularly concerning the governance and management of residential complexes. The Court reaffirmed the primacy of the KAO Act, holding that upon registration of a Deed of Declaration, the KAO Act becomes the exclusive statute governing such properties. The dispute arose when the Respondents i.e. certain residents of the apartment complex in question, approached the Registrar of Co-operative Societies, Bengaluru (‘Registrar’) for the formation of a cooperative society, and the Registrar allowed the chief promoter of the proposed society to collect share capital contributions from those residents/owners desirous of being part of such society. The Petitioners, also residents of the same residential complex, approached the High Court and contended that (a) their apartments were already governed under the KAO Act by virtue of a duly registered Deed of Declaration and (b) an Apartment Ownership Association as per the KAO Act was already in place. They argued that the formation of a co-operative society under the KCS Act, for the same residential complex was not only superfluous but also legally impermissible. The Petitioners maintained that the registration of the Deed of Declaration triggered the exclusive application of the KAO Act, thereby precluding the applicability of the KCS Act. The Respondents, however, argued that the execution and registration of the Deed of Declaration was not as per the terms of Section 2 of the KAO Act, further that the Deed of Declaration was not signed by all the 150 apartment owners. According to the Respondents, the absence of unanimous consent rendered the Deed of Declaration defective, justifying the creation of an alternative governance body. The Respondents also submitted that their right to form a society was a fundamental right under the Constitution of India.   COURT’S OBSERVATIONS The Court held that the KAO Act provides an exclusive and comprehensive legal framework for the governance of apartment complexes. The Court further held that, the KAO Act is triggered upon registration of a Deed of Declaration irrespective of whether all individual owners have signed it. Interpreting Section 2 of the KAO Act, which expressly applies to residential apartments, the Court clarified that registration of the Deed of Declaration alone suffices to bring the property within the ambit of the KAO Act. Furthermore, the Court referred to Section 5 of the KAO Act, which affirms that each apartment owner shall have exclusive ownership and control over their respective unit. Sub-section (2) of Section 5 of the KAO Act, mandates the execution of a Deed of Apartment by each owner, thereby signifying submission to the provisions of the KAO Act. Consequently, once the Deed is registered, all apartment owners are deemed to have submitted to the statutory scheme provided under the KAO Act and the intent to form an association to be governed by KAO Act becomes clear. The Court while referring to the landmark judgements in Shantharam Prabhu and Ors Vs. Dayanand Rai[2] , VDB Celadon Apartment Owners Association Vs. Mr. Praveen Prakash[3], and highlighting the relevant provisions of the KAO Act, held that the dispute was covered under the KAO Act and that the Petitioners and members of their association were entitled to registration under the KAO Act, and further that a society cannot be registered under the KCS Act solely for managing residential flats unless the aim is to achieve anyone/all of the acts listed under Section 3 of KCS Act. The Court also held that the Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act (‘KOFA’), 1972, and its Rules, 1975, apply only when a property includes both residential and commercial units, which is not the case at hand. It observed that since the project consisted only of residential flats, KOFA was not applicable, and registration under the KCS Act was not permissible. Concluding that the Petitioners' claims were valid, the Court allowed the petition and clarified that the Deed of Declaration, Deed of Apartment and Bye Laws would be registered before the Sub-registrar and an intimation about the same has to be sent to Registrar under the KCS Act. CONCLUSION This judgment reaffirms the well-established principle that where a special statute specifically regulates a particular subject matter, it will take precedence over general legislation that might otherwise also apply. The Court emphasized that the KAO Act provides a comprehensive and special code for apartment governance, specifically for properties used mainly for residential purposes. Therefore, any attempt to form a cooperative society in respect of such a project as intended by the Respondents was held to be legally impermissible. The Judgement provides long-awaited clarity on the issue of management and governance of residential complexes, affirming that once a Deed of Declaration is registered under the KAO Act, the property must be governed exclusively under its provisions. This eliminates the possibility of dual or conflicting governance structures such as the simultaneous operation of a co-operative society and a KAO Act compliant association. Further, this Judgment not only resolves ambiguity for apartment owners but also ensures orderly, uniform governance of residential complexes, avoiding overlapping jurisdictions and potential conflicts. This Judgement will also have significant implications for future apartment owners, builders, and developers across Karnataka. For apartment owners, it ensures greater legal certainty and protection by mandating that residential complexes must be governed solely under the KAO Act, once a Deed of Declaration is registered. This removes the risk of dual governance models and protects owners from being compelled to join cooperative societies that may not align with the statutory framework. For builders and developers, the Judgment imposes a clear obligation to structure the management framework of residential projects strictly within the KAO Act regime. They must ensure that a valid Deed of Declaration is executed and registered promptly and that the apartment association is properly formed in accordance with the KAO Act. Developers can no longer promote or facilitate the formation of cooperative societies for residential complexes where the KAO Act is applicable. This ruling will streamline apartment governance, reduce potential litigation, and bring much-needed clarity to the housing sector in Karnataka. However, it is noteworthy that when KOFA applies the Association would be registered under KCS and/or Companies Act, 2013. Authors are Mr. Ishwar Ahuja, Partner ([email protected]) and Ms. Bhairavi SN, Senior Associate  ([email protected]) assisted by Harsha Parakh, Intern. The views and opinions expressed in this Article are those of the author(s) alone and meant to provide the readers with the understanding of the judgment passed in Mrs. Saraswathi Prakash & Others vs. State of Karnataka & Ors. The contents of the aforesaid Article do not necessarily reflect the official position of Saga Legal. The readers are suggested to obtain specific opinions/advise with respect to their individual case(s) from professional/experts and not to use this Article in place of expert legal advice.   [1] 2025:KHC:9743 [2] CRP No.96/2021 D.D. 08.09.2021 [3] WA No.974/2019 & W.A.Nos.1206-1211/2019 D.D. 06.11.2019

The courts in India have time and again reaffirmed that selective capital reduction is a possibility. However, they continue to be debated and challenged by the shareholders who are impacted by it. Selective capital reduction is a process where the shares of some of the shareholders of a company are cancelled / extinguished by the company while the shares held by the other shareholders remain unaffected. This process is different from that of a voluntary buy-back where the company purchases back the shares issued by it to the shareholders on a proportionate basis. The shareholders whose shares are extinguished in a capital reduction tend to see this as a forced exit. This forced exit is what is objected to, and the aggrieved shareholders approach the NCLT with innovative objections surrounding the aspect of fairness on the part of the Companies. Background One of the companies that faced the heat from its shareholders was Bharti Telecom Limited (“BTL”), whose shares were delisted from the stock exchanges between 1999 and 2000. After a long time in 2018, BTL decided to extinguish 1.09% of its total shareholding belonging to 4,942 individual shareholders (“Identified Shareholders”). When the matter was under scrutiny by the NCLT bench in Chandigarh, some of these Identified Shareholders chose to object to the grant of approval by the NCLT. The NCLT nevertheless granted the approval to BTL[1] and BTL promptly extinguished the shares by informing the Registrar of Companies. The shareholders took the matter to appeal before the National Company Law Appellate Tribunal (“NCLAT”), which has now passed a judgment on the matter[2], making it a valuable precedent for more than one reason. To begin with, NCLAT has not only re-established the legitimacy of selective reduction of share capital as a mechanism for investor exit, but also delivered some guidance on the process involved in capital reduction. Grounds of challenge and the issues framed by NCLAT The grounds of appeal by the shareholders were as follows: The scheme of share capital reduction lacked transparency; The act of selective capital reduction is unfair, unjustified, coercive, discriminatory, and illegal; Since the majority shareholders held 98.91% of the shares of the Company, the votes of the public minority shareholders were rather rendered meaningless; There was a discrepancy in the price at which the shares were offered (valuation) to the Identified Shareholders by way of capital reduction in comparison to the price at which the same was offered only a few months ago to the SingTel Group. The NCLAT, after analysing the above grounds raised by the Appellants, identified several issues and sub-issues for determination. These covered issues pertaining to the validity of the selective capital reduction process followed by the Company, the fairness in the valuation and the consideration of the Discount for Lack of Mobility for arriving at the price, the transparency while taking the shareholder approval for the capital reduction. Findings The validity of Selective Capital Reduction :  The NCLAT had no difficulty in arriving at the conclusion that the selective reduction of share capital undertaken by BTL was in accordance with the provisions of Section 66 of the Companies Act, 2013 and that the statutory procedure provided therein was duly complied with.  The NCLAT also affirmed that the phrase “in any manner” as used under Section 66 is inclusive in nature and does not restrict the methods or modes of reduction and includes selective capital reduction which is a domestic and internal decision of the Company. With over 99% of the shareholders including majority of the minority shareholders approving the scheme, the NCLAT followed a plethora of judgments to uphold the prerogative of the majority shareholders to determine the mode and manner of capital reduction. Drawing a parallel with the commercial wisdom of the Committee of Creditors under the Insolvency and Bankruptcy Code, the Tribunal observed that shareholders, as the true owners of the company, are best placed to decide what serves the company’s and their interests. As such, the decision on capital reduction lies within the exclusive domain of shareholders, with minimal scope for judicial intervention. Forced exit of minority shareholders :  What the critical point of the judgment is its observation that the Companies Act, 2013 does not require a separate class resolution for capital reduction (unlike in a scheme of arrangement). Consequently, the unwillingness of minority shareholders alone cannot invalidate a duly passed special resolution for capital reduction, even if it results in their exit from the company. The law does not mandate that reduction must affect all shareholders equally or proportionately and that the minority shareholders do not have any vested rights for their continuation as shareholders of a company. Valuation : On the matter of share valuation, the NCLAT clarified that valuation is inherently a matter of commercial judgment based on assumptions, prevailing market conditions, and various empirical factors relying on the judgment of the Bombay High Court in In Re: Cadbury India Limited.[3] The role of courts is limited to ensuring that the valuation process has been fair, unbiased, and conducted by an independent and competent valuer. The fact that shares were previously allotted at a higher price does not by itself render the current valuation invalid. The NCLAT also observed that the shares of Bharti Airtel Ltd. (whose stock prices had a strong influence on the BTL share prices) was at a much higher price as opposed to when the capital reduction was approved and that this justified the difference in valuation. The Appellants’ challenge to the 25% Discount for Lack of Mobility (“DLOM”) while arriving at the offer price was also turned down by the NCLAT while clarifying that DLOM is appropriate for unlisted companies due to illiquidity of its shares. Fairness in the process : In so far as the fairness of the process followed by BTL, it was observed by the NCLAT that the valuation report was not required to be shared with the shareholders along with the explanatory statement in terms of Section 102 of the Companies Act and the provision only mandated BTL to allow for inspection of the said documents. The NCLAT also endorsed the NCLT’s view that virtual voting has enhanced participation, and this aligned with modern practices, dismissing the need for physical meetings. Analysis The NCLAT has reiterated that the ultimate authority in such matters lies with the shareholders, who, as true owners of the company, are deemed best positioned to act in the interest of the company and its members, provided such decisions are made within the legal framework. The judgment reinforces the legality of selective capital reduction under Indian law, and affirms the discretion of the companies in choosing the valuation and voting mechanisms. The judgment gives a glimpse of how a handful of minority shareholders can stall the majority will of the company through allegations of lack of fairness and impropriety, while in reality, there would be no basis for such arguments in law. However, since fairness and transparency in activities such as capital reduction and scheme of arrangements are necessary as they also involve approval from the majority shareholders, the tribunals cannot take such allegations at face value and will necessarily have to deal with them. Although objections, such as the objection to the application of DLOM and non-supply of valuation reports along with explanatory statements, are common objections that are being raised in most capital reduction matters, findings of binding nature to address these issues are not in abundance. This is partly the reason why the objectors continue to raise them. Hopefully, the detailed findings and observations with respect to the different allegations and objections raised through 14 separate appeals in this judgment would put a quietus to such issues in the future or at least help NCLTs to decide and dispose of capital reduction petitions at a much faster pace. The judgment would also help in overturning narrow interpretations being given to selective capital reduction by NLCTs such as the one adopted by the NCLT, Kolkata, in the Philips case[4], which held that capital reduction is permissible only under the specific scenarios listed in Section 66(1), thereby overlooking the inclusive and non-exhaustive nature of the statutory language. Conclusion The judgment sets a positive tone to state that companies can use capital reduction confidently, knowing that the law supports them against minority handouts. For investors, the lesson is that “your say grows with your stake”, whereas for those with smaller holdings, it is about the need to weigh the risks of being outvoted. The case serves as a critical reference for companies and shareholders navigating capital restructuring in an ever-evolving corporate landscape. [1] Order dated 27.09.2019 passed by the NCLT, Chandigarh Bench, in CA Nos. 226/2019 & 553/2018 in C.P No. 167/Chd/Hry/2018 [2] Judgment dated 03.04.2025 in Comp. Appeal (AT) 273 of 2019 [3] (2014) SCC OnLine Bom 4934 [4] CP/312(KB)2023 Authors: Atul N Menon, Partner and Antra Ahuja, Principal Associate.

In a significant ruling, the Hon’ble Delhi High Court reaffirmed the principle that accepting goods under an invoice constitutes acceptance of its governing terms and conditions, including an arbitration clause. The case of Radico Khaitan Limited v. Harish Chouhan [2025:DHC:1767] highlights the enforceability of arbitration agreements and the limited scope of judicial intervention in such matters where the arbitration clause is provided in an invoice issued by the service provider. Background The judgement stems from a petition filed by Radico Khaitan Ltd (‘Petitioner’) under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking the appointment of an arbitral tribunal to adjudicate the disputes between them and an individual - Mr. Harsih Chouhan (‘Respondent’). The Petitioner and Respondent were engaged in a business relationship wherein the Petitioner was supplying alcoholic beverages to the Respondent against purchase orders. In the course of these transactions, the Petitioner either directly or through its subsidiaries, associates, or sister concerns, issued several invoices in the Respondent’s name after supplying the agreed-upon goods. These invoices contained a section labeled "Terms & Conditions," with Clause 5 explicitly providing that any dispute arising between the parties would be referred to arbitration by a sole arbitrator, with Delhi designated as the seat of arbitration. The dispute arose when a cheque issued by the Respondent against the invoice, purportedly intended to fully discharge his outstanding liability toward the Petitioner, was dishonored. Consequently, the Petitioner issued a legal notice and initiated proceedings under Section 138(b) of the Negotiable Instruments Act, 1881. Subsequently, a dispute emerged regarding the respondent’s alleged outstanding liability. In response, the Petitioner invoked arbitration under Section 21 of the Arbitration and Conciliation Act, 1996, asserting that the dispute fell within the ambit of the arbitration agreement as contained in the tax invoices. Contentions and the issue before the Court The Petitioner contended that both parties had mutually agreed, at the inception of their commercial relationship, that all transactions would be governed by the terms and conditions printed on these invoices. It was further argued that Clause 5, being a part of these terms, constituted a binding arbitration agreement. The Petitioner also emphasized that the Respondent, having accepted and acted upon these invoices without protest, continued receiving supplies and making partial payments toward the outstanding liabilities in a running account maintained between the parties. The central legal question before the Court was; whether an arbitration clause contained in an invoice, unilaterally issued by one of the parties, constitutes a valid and enforceable arbitration agreement between the parties? Finding of the Court The Court while reiterating the Supreme Court’s decision in Concrete Additives and Chemicals Pvt. Ltd. v. S.N. Engineering Services Pvt. Ltd. [Civil Appeal No.7858 of 2023] held that that while an invoice is typically a document unilaterally prepared by the seller, its terms can still be binding if the recipient, through conduct, demonstrates an intention to be governed by those terms. The Court in the present case observed that the conduct of the parties is a determinative factor in assessing the existence of a valid arbitration agreement. In the case of the Petitioner, the Respondent and his sons had engaged in transactions with the Petitioner between 2020 and 2021 without raising any objections regarding the terms of the invoices. Furthermore, their partial payments toward outstanding liabilities evidenced an implicit acceptance of the invoice terms, including the arbitration clause. The bench underscored the pro-arbitration stance adopted in Indian jurisprudence, wherein courts are mandated to refer disputes to arbitration even if there is a slight doubt regarding the existence or validity of the arbitration agreement. The Court while referring to the decision of the Supreme Court in Cox & Kings Ltd. v. SAP India (P) Ltd. [ (2024) 4 SCC 1] also reiterated that when dealing with a petition under Section 11 of the Arbitration and Conciliation Act, 1996 the court's jurisdiction is limited to making prima facie opinion as to the existence of an arbitration agreement. It is within the power of the Arbitration tribunal to conduct a detailed examination and validate the existence of the agreement. If such an agreement is found to exist, even on a preliminary stage, the dispute must be referred to arbitration, leaving all further determinations to the arbitral tribunal. Analysis and implication Based on the above principle, and several precedents the bench held that a prima facie case had been made out in favor of the existence of an arbitration agreement between the parties. Consequently, it referred the dispute to arbitration in accordance with Clause 5 of the invoice terms. The subject decision serves as a reaffirmation of the Indian judiciary’s pro-arbitration approach and its commitment to minimizing judicial interference in arbitration proceedings. By recognizing an arbitration clause contained within an invoice as enforceable, the judgment reinforces the principle that commercial parties must honor their contractual obligations, even when those obligations arise from standard business documents like invoices. While Radico’s case is not the first case where the court has recognized the arbitration agreement which is issued by one party by way of an invoice, the issue is one that keeps coming up for consideration. The question that the court then has to check is how the other party has responded to the invoice. Where the parties have made part-payments or acted in furtherance of the invoices issued (which provide for an arbitration clause), the courts have been fairly consistent in upholding the existence of an arbitration agreement even though it may not have been signed by both parties. In some rare cases, the courts have taken a contrary stand like the one in Mr. Mohammad Eshrar Ahmed v. M/s Tyshaz Buildmart India Private Limited ;[2024 DHC 6809] where the Delhi High Court noted that there was no consent to the recitals of the agreement contained in the invoice which was sent only a few days before the arbitration notice was issued. Therefore, the conduct of the party receiving the invoice, upon receipt of the invoice becomes necessary to adjudicate whether there exists a valid arbitration agreement or not. This ruling is particularly significant for businesses that routinely conduct transactions based on invoices containing arbitration clauses. It underscores the importance of raising objections at the earliest opportunity if a party intends to dispute the applicability of such terms. The views and opinions expressed in this Article are those of the author(s) alone and meant to provide the readers with understanding of the judgment passed in Radico Khaitan Limited v. Harish Chouhan [2025:DHC:1767]. The contents of the aforesaid Article do not necessarily reflect the official position of Saga Legal. The readers are suggested to obtain specific opinions/advise with respect to their individual case(s) from professional/experts and not to use this Article in place of expert legal advice [1] Authored by Mr. Atul N Menon (Partner) and Ms. Bhairavi S N (Senior Associate) of Saga Legal

The Supreme Court in Saranga Anil Kumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors., 2025 SCC Online SC 493, has addressed a crucial legal question concerning the intersection of the Consumer Protection Act, 1986 (“CP Act”), and the Insolvency and Bankruptcy Code, 2016 (“IBC”). The case examined whether execution proceedings under Section 27 of the CP Act —which prescribes penalties for non-compliance—can be stayed when an interim moratorium under Section 96 of IBC is in effect. Rejecting the Appellant’s plea, the Court reaffirmed that regulatory penalties are distinct from debt recovery proceedings and do not fall within the protective scope of an interim moratorium under Section 96 of IBC. This judgment clarifies the extent of IBC’s moratorium provisions, ensuring that statutory penalties for non-compliance remain enforceable despite ongoing insolvency proceedings. BACKGROUND: The dispute arose on account of failure of real estate developer (Appellant) to deliver possession of flats to homebuyers. In response to multiple consumer complaints, the National Consumer Dispute Redressal Commission (“NCDRC”) directed the Appellant to complete construction, hand over possession and imposed penalties on the Appellant for deficiency in service. When homebuyers sought enforcement of these penalties, the Appellant contested the execution proceedings on the grounds of the interim moratorium imposed under Section 96 of IBC, triggered by ongoing insolvency proceedings which were initiated under Section 95 of IBC. PROCEDURAL HISTORY: The NCDRC vide its Order dated 07.02.2024 held that the interim moratorium under Section 96 of the IBC did not bar penalty proceedings under Section 27 of the CP Act against a personal guarantor. NCDRC’s ORDER: NCDRC while relying on State Bank of India v. V. Ramakrishnan & Anr., (2018) 17 SCC 394, observed that interim moratorium under Section 96 & 101 of IBC applicable to personal guarantors is distinct from the broader moratorium under Section 14, applicable to corporate debtors. The NCDRC observed that criminal proceedings under Section 27 of the CP Act are unaffected by the interim moratorium under Section 96 of the IBC and held that individuals associated with a Corporate Debtor remain liable. Additionally, the NCDRC emphasized that the penalties imposed were regulatory and did not constitute financial obligations, making them ineligible for protection under the IBC’s moratorium provisions. APPEAL BEFORE THE  APEX COURT (SC): The Appellant before the Supreme Court argued that the interim moratorium under Section 96 applies to all legal actions related to debt and that the penalties imposed by NCDRC should be considered financial obligations and be treated as a form of debt recovery proceedings. The Respondents countered that penalties under Section 27 of the CP Act are punitive and do not fall within the definition of “debt” under the IBC.  SUPREME COURT’s RULING: The Court upheld the NCDRC’s judgment and ruled that penalties imposed by the NCDRC are regulatory and arise from statutory obligations rather than financial liabilities owed to creditors. The Court emphasized that the IBC’s moratorium provisions are not intended to shield individuals from regulatory penalties-which are technical Excluded Debts. Unlike civil debt enforcement, Section 27 of the CP Act ensures compliance with consumer forum orders and carries the possibility of imprisonment for non-compliance, indicating its penal rather than debt-recovery nature. The Court clarified that the moratorium under Section 96 applies only to “debts” and does not extend to fines, damages for negligence, or penalties for statutory violations. The Court distinguished between the moratorium under Section 14 of the IBC, which applies to corporate debtors and is broader in scope, and the moratorium under Section 96(1)(b)(i) of IBC, which applies to individuals and personal guarantors. Citing P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 SCC 258, the Court reiterated that a distinction must be made between debt recovery proceedings and penalties imposed by regulatory bodies in the public interest cannot be stayed on account of pending insolvency proceedings. Furthermore, the Court emphasized that the legislative intent behind Section 96 of the IBC must be upheld, and a blanket stay on all penalties would undermine consumer protection laws. The IBC is designed to address financial insolvency and restructuring, not to nullify statutory obligations. Allowing consumer penalties to fall under the moratorium would create an unfair advantage for defaulting developers. The Court also clarified that damages awarded by the NCDRC arise from a consumer dispute and do not constitute ordinary contractual debts. Instead, they serve to compensate consumers. The  Supreme Court held that the NCDRC rightfully imposed penalties on the Appellant for failing to comply with consumer protection laws, reinforcing that these penalties serve a regulatory function rather than constituting debt recovery proceedings. Additionally, the Court distinguished between proceedings under Section 138 of the Negotiable Instruments Act, 1881, and Section 27 of the CP Act. Under the Negotiable Instruments Act, the presumption of debt is inherent, whereas Section 27 of the CP Act is remedial rather than criminal. CONCLUSION: This landmark judgment by the Supreme Court strengthens consumer rights and ensures that insolvency proceedings cannot be misused. By distinguishing between financial debts and regulatory penalties, the Court has provided clarity on the scope of the IBC’s moratorium provisions. This judgment reaffirms regulatory penalties which are distinct from debt recovery proceedings and do not fall under the protective shield of the IBC’s moratorium. This decision ensures that consumer protection laws remain effective, even in cases where insolvency proceedings are pending. The views and opinions expressed in this Article are those of the author(s) alone and meant to provide the readers with understanding of the judgment passed in Saranga Anil Kumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors., 2025 SCC Online SC 493. The contents of the aforesaid Article do not necessarily reflect the official position of Saga Legal. The readers are suggested to obtain specific opinions/advise with respect to their individual case(s) from professional/experts and not to use this Article in place of expert legal advice.

In a step further towards its efforts to expand its services across key cities in India, Saga Legal is pleased to announce the appointment of Atul N. Menon as a Partner in its Bangalore office. Atul will lead the Litigation and dispute resolution practice in Bangalore, bringing significant experience in handling legal matters across various judicial and regulatory forums in India. With his addition to the firm, Saga Legal’s Partner strength goes to 5 (Five) Partners operating out of 3 (Three) Offices in Delhi, Mumbai and Bangalore. An alumnus of the National University of Advanced Legal Studies, Kochi and Queen Mary University of London, Atul is a highly experienced legal professional and has done a wide variety of matters in white-collar crimes, telecom litigation, arbitration, writ petitions, etc. He appears in various forums across India, including High Courts, Supreme Court and tribunals and advises and represents some of the leading multinational corporate entities. Atul has been a part of some of the path-breaking litigations across India, some of which have been widely reported and covered in legal circles. He brings experience of almost 13 years to the firm, and prior to joining Saga Legal, he worked at AZB & Partners as a Counsel. Atul is the second Partner to join the firm’s Bangalore office after the firm announced the hiring of Neeraj Vyas from Samvad Partners in November 2023, as a Partner to take charge of the firm’s General Corporate and PE-VC practice in Bangalore. Gaurav Nair, Managing Partner of Saga Legal, commented on Atul’s appointment, stating, “We welcome Atul to Saga Legal. His experience in litigation and dispute resolution will be valuable to our firm. Atul’s expertise will support our dispute resolution practice, particularly in Bangalore, and contribute to our ability to provide holistic legal services to our clients. With Atul taking charge of the litigation and dispute resolution vertical and Neeraj handling the corporate practice – we are fairly well-equipped to service almost the entire spectrum of legal requirements of our clients. Atul’s addition to the team brings wholesomeness and lends a holistic edge to the Bangalore office. ” Sanika Mehra, Co-Managing Partner, further stated, “Saga Legal has recently expanded its operations with the opening of new offices in Mumbai and Bangalore and the relocation to a larger, modern office space in New Delhi. All these are significant milestones for our firm. In the coming years, we aspire to serve a much wider range of clientele, and Atul’s onboarding is part of our plan to have talented individuals as a part of our leadership cohort, whether they specialize in our current practice areas or have the capacity to introduce new verticals to our repertoire.” Atul N. Menon also shared his perspective on joining the firm, saying, “I look forward to working with Saga Legal and leading the litigation and dispute resolution team in Bangalore. The firm’s structured approach and focus on client service make it a good platform to continue my professional journey. I look forward to collaborating with my colleagues and contributing to the firm’s litigation practice.” Saga Legal has been expanding its presence across India. In November 2024, the firm also announced the opening of its office in Mumbai, marking another step in its growth. The Mumbai office is headed by Ishwar Ahuja and is expected to serve as a hub for arbitration, litigation, and corporate-commercial matters. About Saga Legal: Headquartered in New Delhi and with a presence in Mumbai and Bangalore, Saga Legal was founded in 2016 and has solidified its reputation as a multi-service law firm providing a wide gamut of legal services in diverse areas of practice, ranging from dispute resolution to corporate advisory, the firm provides manifold legal solutions to its valued clients under one roof.  

On 10th January 2025, the Insurance Regulatory and Development Authority of India (“IRDAI”) published a press release stating that in the interest of maintaining an “agile, progressive, and forward-looking regulatory framework,”it has notified two new regulations along with three amendments to existing regulations. These are: IRDAI (Regulatory Sandbox) Regulations 2025; IRDAI (Maintenance of Information by the Regulated Entities and Sharing of Information by the Authority) Regulations 2025; IRDAI (Re-insurance Advisory Committee) (Amendment) Regulations 2025; IRDAI (Insurance Advisory Committee) (Amendment) Regulations 2025; and IRDAI (Meetings) (Amendment) Regulations 2025. Aiming to align with a principle-driven regulatory architecture, the IRDAI has introduced measures to support innovation, improve governance policies, and most notably referencing data security as a key facet in the increasing digitalized insurance sector. The new IRDAI regulations introduce several major changes and as it brings forth a forward-looking shift for the landscape. Here’s a comprehensive look into what the new reforms entails for the industry: Regulatory Sandbox Regulations The newly introduced Regulatory Sandbox Regulation, replacing the 2019 Regulations, governing experimental regulatory sandboxes has perhaps received the most benefit of all the notified Regulations. It expands on the scope of regulatory sandbox with the purpose of promoting innovation, adaptability, and operational efficiency, in the industry. The Sandbox Regulation now permits “Inter-Regulatory Sandbox Proposals” which cuts across more than one financial sector within the regulatory sandbox framework. The process and procedures in dealing with such inter-regulatory sandbox applications, along with other aspects of the Sandbox Regulation such as timelines (which has been entirely omitted from the repealed Regulation), have not yet been notified and shall be made operational later through an upcoming master circular. The Sandbox Regulation makes explicit mention of the Digital Personal Data Protection Act, 2023 (DPDP Act), specifying compliance with the not-yet implemented data privacy act as a mandatory prerequisite to be granted permission to establish a regulatory sandbox. By natural implication, this also subjects the sector to the authority of the Data Protection Board under the Act ensuring an added layer of digital personal data protection. Another change in the Sandbox Regulation is the formal shifting of powers and the creation of a distinction between “Authority” and “Competent Authority”. The IRDAI (“Authority”) is now considered a separate entity than the Chairman of the IRDAI (“Competent Authority”). Whole-Time Member(s) of the IRDAI or Officer(s) of the IRDAI, as may be decided by the Chairman, could also be considered as Competent Authority under the new Regulation. All matters pertaining to regulatory sandbox applications and operations are therefore now to be handled directly by such Competent Authority and decisions taken by the Competent Authority is considered final on all accounts. Maintenance of Information by the Regulated Entities and Sharing of Information by the Authority Regulations Although new by title, this Information and Records Regulation is essentially a consolidation and simplification of three existing regulations, which have respectively been split into three chapters of the new Regulation, namely: (I) IRDAI (Sharing of Confidential Information Concerning Domestic or Foreign Entity) Regulations, 2012; (II) IRDAI (Maintenance of Insurance Records) Regulations, 2015; and (III) IRDAI (Minimum Information Required for Investigation and Inspection) Regulations, 2010. The new Information and Records Regulation greatly streamlines the structural arrangement of provisions under the old Regulations, substantially improving readability and ease of reference, reducing clutter and overlap. With regards to the sharing of confidential information by the IRDAI concerning domestic or foreign entities, the new Information and Records Regulation features a few minor tweaks and additions which slightly expands on the powers of the IRDAI. Under the requirement of when the IRDAI is expected to disclose information available with it which is not available in the public domain, the new Information and Records Regulation adds an additional condition of all applicable laws permitting the sharing of such information, for the IRDAI to even consider such a request. This reads all applicable laws, most discernibly, emerging laws such as data privacy laws, to permit such sharing of information with regards to foreign entities. Similarly, the new Information and Records Regulation incorporates the requirement for maintenance systems to contain a data governance framework, also evidently in furtherance of the soon imminent implementation of the DPDP Act; however, explicit mention of the DPDP Act is not made in the Regulation. While the old Regulation permitted insurers to allow access to insurance records for inspections by the IRDAI, the new Information and Records Regulation also permits for such investigations, as well as “any other purpose” as deemed necessary by the IRDAI. This vague wording substantially widens the powers of the IRDAI to scrutinize insurance records. The regulation regarding maintenance of records have also been more widely expanded to also include insurers solely involved in the business reinsurance. Similarly, the IRDAI Board approved policy of the insurer relating to record maintenance now requires insurers to implement all appropriate security mechanisms necessary to protect electronically stored records and include “any other matters, as specified by the (IRDAI)” through the issue of circulars, guidelines, or instructions. Finally, the old Regulation relating to Minimum Information for Investigation and Inspection have been now expanded under the new Information and Records Regulation to incorporate the data collected to be stored in “ thFinally, the old Regulation relating to Minimum Information for Investigation and Inspection have been now expanded under the new Information and Records Regulation to incorporate the data collected to be stored in “data centres located and maintained in India”, apart from principal place of business, branches, and other offices of the insurer. This is yet a reflection that is incorporated in furtherance of India’s new data privacy regime ensuring data localization as the norm. Additionally, as opposed to the old Regulation’s permittance of information to be stored in “physical or electronic form”, the new Information and Records Regulation substitutes the word “physical” and instead permits information and records to be stored in “electronic form and if required, in any other form, as may be appropriate for its business” Why such substitution has been made and what other forms of record maintenance it incorporates apart from electronic and physical, has not been clarified by the Information and Records Regulation.   Re-insurance Advisory Committee [Amendment] The Re-insurance Advisory Committee Amendment Regulation now permits the IRDAI to remove any member of the Re-insurance Advisory Committee owing to insolvency, physical or mental incapability, conviction of any offence involving moral turpitude, acquisition of financial or other interests prejudicial to their being in the Committee, abuse of power, failure to attend three consecutive meetings of the Committee without cause, or if in the IRDAI’s opinion is no longer fit to be on the Committee. This essentially gives unfettered power to the IRDAI to remove a member from the Committee if it feels such member should no longer be on the Committee. Additionally, the Amendment permits online mode of meeting for the Committee. Insurance Advisory Committee [Amendment] The Insurance Advisory Committee Amendment designates the Secretary of the Insurance Advisory Committee as the “Designated Officer” who is responsible for circulation of notices and agenda of meetings as well as sending minutes of meetings. It changes the minimum requirement for meetings of the Committee to be conducted twice in a calendar year to twice in a financial year. It also permits online mode of meeting for the Committee. It provides for emergency meetings (with at least 24 hours’ notice) and permits for meetings to be conducted with less than 7 days’ notice if approved by the Chairman of the IRDAI. The Insurance Advisory Committee Amendment also permits the IRDAI to remove any member of the Committee owing to insolvency, physical or mental incapability, conviction of any offence involving moral turpitude, acquisition of financial or other interests prejudicial to their being in the Committee, abuse of power, failure to attend three consecutive meetings of the Committee without cause, or if in the IRDAI’s opinion is no longer fit to be on the Committee. Meetings [Amendment] The Meetings Amendment governing meetings of the IRDAI also sees certain procedural changes. It similarly designates the Secretary of the IRDAI Board as the “Designated Officer” entrusted with the responsibility of issuance notices, circulating agendas, and handling of meeting minutes. It changes minimum number of meetings for the Board from “six times in a year” to “4 times in a financial year”. It permits for online mode of meetings and permits meetings conducted with less than seven days’ notice with the Chairman’s approval along with emergency meetings called by the Chairman with at least 24-hours’ notice. Emergency meetings must be requisitioned in writing specifying purpose of the meeting, and signed off by not less than half of the total strength. Key Takeaways and Concluding Remarks The IRDAI’s latest regulatory reforms mark a notable shift towards a more agile and digitally-oriented insurance sector in India. Key changes under the new regulations and strategic amendments include the expansion of regulatory sandbox capabilities, enhanced data protection measures aligned with the DPDP Act, streamlined information management systems, and more flexible operational procedures for the various committees. These reforms collectively reflect the regulator's forward-looking approach in balancing technological advancement with robust oversight, setting a progressive foundation for the insurance industry's future growth while ensuring adequate consumer protection through improved data security and governance measures. Authors: Mr Neeraj Vyas, Partner, Ms Mona Gupta, Principal Associate, and Mr Sidharth S. Kumar, Intern

Social security serves as a crucial safeguard for individuals, ensuring access to healthcare and income security,particularly during circumstances such as old age, unemployment, illness, disability, maternity, or the loss of a primary breadwinner. However, gig workers—often referred to as “independent contractors,” “freelancers,” and “on-demand workers”—across the globe frequently find themselves unable to access social security benefits. These gig workers are connected with clients, customers, or service opportunities through platform aggregators who provide them with a certain fee on a case-to-case basis. As businesses increasingly rely on gig workers to meet their operational needs, there is a growing recognition of the need to protect the rights of these workers. In response, the government has been taking steps to formulate laws and frameworks aimed at safeguarding gig workers' rights and ensuring their social security. The Code on Social Security 2020 (“Code”) introduced the definition of “Aggregator" as a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller. The Government of Rajasthan, on July 24, 2023, passed the Rajasthan Platform based Gig Workers (Registration and Welfare) Act, 2023 (“Rajasthan Act”), which broadened the definition of Aggregators so as to include any entities that coordinate with one or more aggregators for providing the services. The Karnataka government followed suit, using a similar definition of Aggregators in drafting the Karnataka Platform based Gig Workers (Social Security and Welfare) Bill, 2024 (“Karnataka Bill”). This bill was made available to the public through a public notice dated June 29, 2024; however, it is yet to come into effect. Under all the foregoing legislations, the primary responsibility is of the Aggregators to register themselves as well as the gig workers by providing the information of the gig workers onboarded or registered with them. The state government has the authority, as per state laws, to set up a gig workers' welfare board to exercise the powers granted and fulfil the duties assigned to it. The aggregator then has to proactively update the gig workers welfare board of any change, including any increase or decrease in the number of gig workers. The registration has to be done on the e-Shram portal launched by the Ministry of Labour & Employment, Government of India, on August 26, 2021, with an aim to create a comprehensive National Database of Unorganised Workers verified and seeded with Aadhaar. Pursuant to this, the gig workers will be provided with a Universal Account Number (UAN). UAN can open the door to a plethora of opportunities for gig workers by enabling them to register themselves under various governmental schemes/portals including the National Career Service (NCS) Portal and Pradhan Mantri Shram-yogi Maandhan (PM-SYM) and also to provide them with skill enhancement and apprenticeship opportunities. Apart from the above, the Rajasthan Act introduced several key changes aimed at improving the welfare of gig workers. Some of the key changes/benefits are highlighted herein below: Welfare Board Establishment: The Rajasthan Act establishes a dedicated Gig Workers Welfare Board, tasked with overseeing the implementation of welfare measures for gig workers. Contribution to Welfare Fund: All platform-based gig workers shall have access to general and specific social security schemes based on contributions made as may be notified by the State Government from time to time. Welfare Fee: Aggregators are required to contribute a percentage of their transaction value to a welfare fund for gig workers. This fund is intended to finance various social security measures. Dispute Resolution Mechanism: A dedicated mechanism is established for resolving disputes of gig workers in relation to any grievance arising out of entitlements, payments, and other benefits. The Karnataka Bill goes a step further by offering additional benefits to platform-based gig workers. Some of these benefits are outlined below: It includes a provision ensuring that the contract to be entered between the aggregators and platform-based gig workers shall have simple language that is easily comprehensible. It shall contain an option in favour of the worker to allow them to terminate the contract if the change/amendment adversely affects their interests. State government shall lay down the guidelines, which will be specific to the sector in which the goods/services are being provided. Establishment of an Automated Monitoring and Decision Making System which is to be employed by the aggregators and gig workers will have a right to seek any information in relation to their engagement. Each gig worker will be provided with a human point of contact for all clarifications under the provision of the Karnataka Bill and will be provided on the respective account of the gig workers on the platform application. The Ministry of Labour and Employment, Government of India, recently published an advisory dated September 16, 2024, wherein the authorities emphasize the need for more aggregators to extend their support by ensuring registrations to take provide this agenda a big push and help it reach a fruitful stage. The advisory focuses primarily on the aggregators providing the following list of goods/services: Ride Sharing services Food and grocery delivery services Logistic services E-Marketplace (both marketplace and inventory model) for wholesale/retail sale of goods and/or services (B2C and B2B) Professional service provider Healthcare Travel and Hospitality Content and media services Any other goods and service provider platform The government further laid down a standard operating procedure for the online onboarding of platform aggregators on the e-Shram portal through proper verification and authentication using Aadhar eKYC. The inclusion of gig workers under social security frameworks is a vital step towards ensuring equitable protection and welfare for all workers in the evolving digital economy. The recent legislative efforts by the Rajasthan and Karnataka governments, along with the proactive measures by the central government, underscore the growing recognition of gig workers’ rights. As the gig economy continues to expand, the success of these initiatives will depend heavily on effective implementation, cooperation from aggregators, and continuous policy refinement. By addressing the gaps in social security for gig workers, India sets a promising precedent for other regions grappling with the complexities of protecting this dynamic workforce. Authors: Neeraj Vyas (Partner) & Abhishek Malhotra (Associate)

INTRODUCTION 1.     The principle of malicious prosecution serves as a crucial safeguard against the misuse of legal procedures. It offers redress to individuals subjected to unfounded legal actions initiated with malice and devoid of probable cause. This tort seeks to strike a compromise between two conflicting principles: the freedom individuals should have in holding criminals accountable and the necessity of preventing the initiation or continuation of false allegations against innocent individuals.  In the case of West Bengal State Electricity Board v. Dilip Kumar Ray [1], the Supreme Court defined ‘malicious prosecution’ as “a judicial proceeding instituted by one person against another, for wrongful or improper motive, and without probable cause to sustain it.” 2. In India, several instances of fraudulent litigation stemming from marital disputes and civil issues to white-collar crimes have been reported on various occasions. Additionally, instances of unlawful arrests by law enforcement agencies are also a part of the said scenario. Therefore, the need for a comprehensive legal framework to address malicious prosecution in India is the need of the hour. Although malicious prosecution as a tort and a criminal offence finds mention in the Indian legal framework, a comprehensive legislation to prosecute against those erring complainants and the State who investigate and pursue the malicious proceedings, does not explicitly exist as of date. In several instances, State officials and private complainants frequently get away with making false claims, which situation is worsened by the slow and ineffective process of prosecuting these offenses over trial, and the hesitancy of the overburdened trial courts to take quick and decisive action. 3. Pertinently, ‘malicious prosecution’ neither finds any mention in the new Criminal procedure law, i.e., Bhartiya Nagarik Suraksha Sanhita, 2023 (BNSS), nor was defined in the erstwhile Code of Criminal Procedure, 1973 (Cr.P.C.). However, Section 248 of the Bharatiya Nyaya Sanhita, 2024 (BNS) and Section 211 of the erstwhile Indian Penal Code, 1860 (IPC) prescribe punishment for the offence of falsely charging someone of an offence, with the intent to injure the said person. The said section enables a person to proceed against an individual who has falsely initiated a criminal proceeding against them, however, the said section does not enable a person to proceed against the State or public officials in such situations. Thereby, creating a vacuum in the legislative framework for malicious prosecution. Despite the recognition by the Hon’ble Supreme Court and various High Courts that malicious prosecution is an infringement on an individual's right to life and liberty, there has been little legislative action taken to address this issue. 4. It merits mention here that, a criminal proceeding can only be taken to its fruition by law enforcement agencies. Once a complaint is lodged with a law enforcement agency, it is up to them to decide whether or not the said complaint has any merits. However, we see several instances where the law enforcement agencies investigate complaints that have no basis, for reasons best known to them. Further, in the name of investigation, accused named in the malicious proceedings is harassed, suffers mental agony, reputational harm, unlawful incarceration, etc. Similarly, there are also instances where certain law enforcement agencies, due to ‘extraneous considerations’ suo moto initiate investigations against individuals, without a shred of evidence to corroborate such an offence and support the investigation. Hence, the liability of law enforcement agencies in malicious prosecution cannot and should not be overlooked. ELEMENTS FOR ESTABLISHING MALICIOUS PROSECUTION 5. As such, when pursuing a claim for malicious prosecution, the plaintiff or a person aggrieved of the malicious prosecution must establish certain essential elements. Firstly, he must prove that the defendant/complainant had initiated legal proceedings against him by following due process under law, as merely presenting a complaint or dispute with the competent authorities does not constitute prosecution, which also excludes proceedings like departmental investigations or inquiries by a disciplinary body[2]. Secondly, it must be shown that the defendant pursued such legal proceedings without a reasonable, probable, or rational basis/cause. The evaluation of the absence of reasonable or probable cause should be grounded on all the information presented to the court. It should be noted that the withdrawal of a prosecution or the acquittal of the accused does not automatically imply a lack of reasonable and probable cause, the same must still be proven by the Plaintiff. This principle was reaffirmed by the Madras High Court M. Abubaker v. Abdul Kareem[3].It is also to be noted that even if some accusations are backed by probable cause while others are not, the defendant can still be held accountable for malicious prosecution. The responsibility of proving this element rests on the aggrieved party/plaintiff.[4] Thirdly, the plaintiff needs to establish that the defendant had malicious intentions when pursuing such legal proceedings. In the case of Bank of India v. Lekshmi Das[5], the Apex Court emphasized the importance of establishing malice in situations where there is no clear and logical purpose. Malice can be inferred from the absence of sincere conviction in the accusation. A cause of action for malicious prosecution may also arise if the prosecutor, initially innocent, later acts with malicious intent. Fourthly, the proceedings must have terminated in favour of the plaintiff. It is to be noted here that no action for malicious prosecution can be initiated while legal proceedings are ongoing. The termination of proceedings against the Plaintiff does not necessarily mean that the Court must come to a finding that the Plaintiff is innocent, rather it can be that the Court has not come to a finding that the Plaintiff is guilty. Finally, the Plaintiff must prove that the Plaintiff who was accused or related to the malicious prosecution had suffered injury, damage, or harm because of such prosecution. THE SAGA OF MISGUIDED PROSECUTION 6. Despite its intended purpose, this legal principle carries significant drawbacks such as its lack of power to proceed against the most distressing forms of legal harassment, which is the wrongful implication of innocent individuals in false cases by law enforcement agencies. 7. Recently, the Delhi High Court in the case of Ashish Bhalla v. Vishvendra Singh[6] while allowing an application for rejection of the Plaint instituted for seeking damages for malicious prosecution held that “For the purpose of the tort of malicious prosecution, it includes all criminal proceedings to which any oral obloquy is attached.” 8. Lord Wilson in Crawford Adjusters v. Sagicor General Insurance (Cayman) Ltd.[7] interpreted ‘Malice’ to state that “the malice is the foundation of all actions of this nature, which incites men to make use of law for other purpose than those for which it is ordained.” 9. The Police often justify this by claiming they are obligated to register and investigate any complaint they receive, suggesting they must scrutinize every detail reported to them. However, the law disagrees with the same as observed in various precedents. The Supreme Court, in the case of State of West Bengal & Ors. v. Swapan Kumar Guha & Ors.[8], clarified that police discretion is not unlimited and that they cannot investigate an FIR if it does not disclose a cognizable offence. Similarly, in the case of Lalita Kumari v. Govt. of U.P. & Ors.[9], the Apex Court ruled that while the police must register an FIR for cognizable offences, they are not required to investigate every such FIR if there are insufficient grounds. In the case of Joginder Kumar v. State of UP[10], it was established that arrests should not be routine and should be subjected to proper investigation. 10. An infamous instance of wrongful prosecution against law enforcement is the investigation into the plot that resulted in the unjust persecution of former ISRO scientist Mr. Nambi Narayanan during the 1994 spy scandal. The Supreme Court in the case of S. Nambi Narayanan v. Siby Mathews & Ors.[11]  had assigned Justice D. K. Jain to investigate the circumstances surrounding the false accusations against Mr. Nambi Narayanan by the Kerala Police, which labelled him as a "spy and traitor." The CBI had previously determined that the Kerala Police wrongly accused the scientist, who held a prominent position in ISRO during that period. The Supreme Court affirmed these findings and instructed the Jain committee to identify and hold the law enforcers responsible for fabricating the charges accountable, thereby highlighting the negative consequences of sensational journalism and political infighting, resulting in damaged reputations and ruined careers for multiple individuals. 11. In this context, it is relevant to note the critical observations of the Additional District and Sessions Judge, Bareilly, Uttar Pradesh in State v. Abhishek Gupta[12]. In the order dated 30.07.2024, the Ld. Judge while acquitting the accused on charges of unlawful conversion had expressed his anguish regarding the frivolity and vexatious basis of the charge sheet filed in the said case. Interestingly, the court directed the senior superintendent of police of the district to take “appropriate legal action” against the then station house officer, two case investigating officers, and the circle officer (deputy superintendent of police) for lodging the FIR against the two men “under some pressure,” on the basis of a “baseless, unfounded, fabricated, and fantastical” story, while also giving liberty to the accused to proceed against the said investigating officer under a suit for malicious prosecution. 12. The said case clearly vouches for the concerns of the authors, that malicious prosecution has a tangible effect on the life of the “victim,” notably since the accused had to suffer the stigma of ‘being a criminal’ from the time of registration of the FIR, which was in May, 2022. However, the observations of the Ld. Judge clearly reflects the need for filling the vacuum in the Indian legal system with regard to the rights of a person who has been maliciously prosecuted, to proceed against law enforcement agencies initiating such vexatious and malafide criminal proceedings which is contrary to the principles of free and fair investigation enshrined in the Constitution of India. INTERNATIONAL JURISPRUDENCE  A. The United States of America 13. In the United States of America (US), claims against malicious prosecution popularly known as ‘§ 1983 claims’, fall under Title 42, Section 1983 of the United States Code. The said section recognizes the right of a citizen to bring an action against state ‘actors’ who under any colour of law have violated their federal, statutory, or constitutional rights. The precedents and jurisprudence in the US have developed pursuant to the said section. In 1994, the Supreme Court of the US in the case of Albright v. Oliver[13] laid down the landmark principle that the Fourth Amendment, which barred unlawful search and seizure also had relevance to the deprivations of liberty that go hand in hand with criminal prosecutions. Following the dictum in the above case, the said principle of law has developed differently in various circuit courts. However, the elements to establish the malicious prosecution are more or less the same. In this pretext, it is important to observe that as per § 1983, a citizen can bring action to any state actor including the police for an instance of malicious prosecution; however, in India, such action is not legally sustainable. B. The United Kingdom 14. In the United Kingdom (UK), malicious prosecution is recognized as a Tort, and no separate legislation for the same has been enacted. The elements to establish malicious prosecution are similar to those of India. Section 88 of the UK Police Act, 1996 provides for liability of the police officer in respect of any unlawful conduct of constables under his direction and control in the performance of their functions. 15. The UK Supreme Court in the case of Willers v. Joyce[14], has enlarged the scope of the tort malicious prosecution to also apply to even the instances where malafide civil proceedings have been initiated against an individual. The said precedent lays down a deterrent for persons who initiate claims against individuals with malafide intent and without any reasonable cause. C. Germany 16. In Germany, Grundgesetz (GG)-The Constitution of Germany, 1949, The German Criminal Code, Bürgerliches Gesetzbuch (BGB)-The German Civil Code[15] and laws such as the Law on Compensation for Criminal Prosecution Proceedings, 1971 and Law on Compensation for Law Enforcement Measures, lay down the consequences of unlawful and culpable administrative acts and justifies a claim for damages. The official liability includes the personal liability of the person acting for the State whose liability is later transferred to the State.[16] 17. It can be observed from the laws of the USA, UK, and Germany, as to how foreign jurisprudence is developed and evolved for providing for malicious prosecution.  However, India still sits on the sidelines when it comes to protecting the rights of individuals against wrongful or malicious prosecution.  CONCLUSION  18. It is high time that the legislature debates on stricter actions that can be taken against individuals in circumstances of malicious prosecution, and it is pivotal that comprehensive legislation be enacted for the action of malicious prosecution that recognizes the role of the law enforcement agencies in such instances. It is crucial to have clear laws in place that specifically address the issue of compensating individuals who have been wrongfully prosecuted. These laws should establish a legal obligation for the state to provide restitution to these victims. In a criminal case, acquittal by a trial court or by the appellate court recording a finding that the accused had been wrongly implicated in a case must take away the stigma because the charges themselves stand washed off, i.e. in cases of honourable acquittal; An appropriate legislation would establish a specialized judicial system to handle cases involving wrongful prosecution. According to the authors, such an approach would discourage the abuse of legal procedures and safeguard individual rights from unjust actions by the state. 19. In Babloo Chauhan @ Dabloo v. State Govt. of NCT of Delhi[17], the High Court of Delhi while observing that the possibility of invoking civil remedies can by no stretch of the imagination be considered efficacious, affordable or timely… issued a directive to the Law Commission of India to undertake comprehensive examination of the issue of wrongful prosecution and incarceration of innocent persons; expressing concern over the many instances wherein innocent persons were subjected to prosecution for crimes they did not commit. Basis the same, the Law Commission of India through its then Chairman, Dr. Justice B. S. Chauhan, Former Judge, Supreme Court of India, submitted its report named “Wrongful Prosecution (Miscarriage of Justice): Legal Remedies”[18]. The said report pointed out the inadequacies in the existing laws in redressal of wrongful prosecution. Apart from recommending the amendment of the then prevailing Cr.P.C. by way of insertion of definitions of ‘malicious’ and ‘wrongful’ prosecution, enactment of specific laws for redressal of wrongful prosecution, along with instances where compensation can be granted to victims, the designation of special courts to adjudicate on the said compensations, timelines for deciding such claims etc. was also suggested. The Law Commission further drafted a draft bill, namely the Cr.P.C. (Amendment) Bill, 2018 containing the aforesaid recommendations. However, neither the said bill has seen the light of the day as of yet nor the said suggestions see any mention in BNSS. 20. Unfortunately, the way to justice is so tedious and expensive that, in practice, escaping the malicious manipulations of individuals or law enforcement is quite difficult. Even though an offence of falsely charging someone of an offence is recognized under Indian law, it still does not address the issues faced by individuals when they are wrongfully or maliciously prosecuted against. The victims are destined to endure the most horrible of situations for varied lengths of time including illegal arrest and torture (both physical and psychological), incarceration, and, of course, an agonizing trial.   Authors: Gaurav Nair (Managing Partner), Ishwar Ahuja (Principal Associate) & Bhairavi SN (Senior Associate) Footnotes [1] AIR 2007 SC 976 [2] Khagendra Nath v. Jacob Chandra 1976 Assam L.R. 379 [3] S.A. (MD) No. 122/2013 decided on 21.04.2021 [4] Antarajami Sharma v. Padma Bewa AIR 2007 Ori 107 [5] AIR 2000 SC 1172 [6]  CS(OS) 65/2020, order dated 28.08.2024 [7] (2014) AC 366 [8] 1982 AIR 949 [9] AIR 2012 SC 1515 [10] 1994 AIR 1349 [11] AIR 2018 SC 5112 [12] ST No. 813 of 2023 [13] 510 U.S. 266, 267 (1994) [14] [2016] UKSC 43 [15] § 839 of BGB [16] Article 34 of GG [17] 247 (2018) DLT 31 [18] Report No. 277 dated 30.08.2018

On August 20, 2024, the Securities and Exchange Board of India (“SEBI”) took a major step towards improving the cybersecurity landscape in India’s financial sector by releasing the Cybersecurity and Cyber Resilience Framework (“CSCRF”) for SEBI Regulated Entities (“Regulated Entities/RE”), including but not limited to: Alternative Investment Funds (AIFs) Bankers to an Issue (BTI) and Self-Certified Syndicate Banks (SCSBs) Clearing Corporations Collective Investment Schemes (CIS) Credit Rating Agencies (CRAs) Custodians Depositories and Depository Participants Investment Advisors and Research Analysts KYC Registration Agencies Merchant Bankers The applicability of various standards and guidelines of  CSCRF is based on different categories of Regulated Entities. CSCRF follows a  graded approach and classifies Regulated Entities  in the following five broad categories: (i) Market Infrastructure Institutions (MIIs) (ii) Qualified REs (i) Midsize REs (ii) Small size REs (iii)Self certification REs The Need for CSCRF Indeed, nothing is more imperative than developing a foolproof cybersecurity structure that can meet the requirement of the emergent and dynamic financial sector of India. SEBI has also noted the dynamism and ever growing nature of the threat from cyber incidents and has put in place the CSCRF to tackle the challenges and enhance the security of Regulated Entities. Banks and other financial institutions across the world in the last few years have been on the receiving end of cyber threats, ranging from theft of clients’ data to complex and dangerous hacking executed on the financial markets. The CSCRF is thus an indication of SEBI’s strategy on how to address cyber risks and improve protection from cyber threats. The CSCRF is designed to be comprehensive, addressing a spectrum of cybersecurity issues from preventive measures to response strategies The CSCRF is divided into four main parts to facilitate ease of compliance and implementation: iv. Part I: Objectives and Standards: This section outlines the goals that security controls need to achieve and the established principles for compliance. v. Part II: Guidelines: This part provides recommendations and measures for complying with the standards. Some guidelines are mandatory and must be adhered to by the REs. vi. Part III: Structured Formats for Compliance: This section includes standard formats for compliance, ensuring uniformity and ease of reporting vii. Part IV: Annexures and References: This part contains additional resources and references to support the implementation of the framework. Key Provisions under the CSCRF a. Governance Under the CSCRF, SEBI mandates a dedicated cyber security committee responsible for formulating and overseeing the implementation of cyber security policies be established by all Regulated Entities and such a committee shall include senior management and IT experts to ensure that cyber security considerations are integrated into all the processes of the Regulated Entities. b.Cyber Capability Index  SEBI has also provided for a Cyber Capability Index (“CCI”) under the CSCRF, which is a comprehensive framework intended to evaluate the resilience of cyber security framework. Market Infrastructure Institutions are mandated to undergo a third-party cyber resilience assessment biannually, while Qualified Regulated Entities are required to perform an annual self-assessment. c. Incident Management and Response An important aspect of the CSCRF is the emphasis on effective incident management. Regulated Entities are required to implement procedures for responding, detecting and recovering from cyber incidents. This includes the establishment of an Incident Response Team (“IRT”) along with a communication protocol for reporting incidents to SEBI and other relevant authorities. The CSCRF also stipulates that entities must maintain detailed records of all cyber incidents and their resolutions. d. Risk Management- Third Parties The CSCRF also takes into account the risks associated and posed with third-party vendors and service providers. The Regulated Entities are required to assess and manage the cyber security readiness of their third-party vendors and service providers making sure that they have in place and comply with similar security standards. e. Compliances and Audits SEBI has provided consistency in auditing Regulated Entities by creating and providing an auditors’ checklist under the CSCRF. This shall ensure a more effective audit process, ensuring that all Regulated Entities are held to the same standards. f. Risk Management Regulated Entities under the CSCRF are required to carry out regular risk assessments to identify any cybersecurity threats. This shall enable the Regulated Entities to implement appropriate strategies to mitigate any threats. g. Data Protection and Privacy Protecting sensitive data is the most important part of the CSCRF. It requires that Regulated Entities implement robust data encryption, access controls, and privacy measures to safeguard sensitive information. This includes ensuring compliance with data protection regulations and maintaining transparency in data handling practices. Implementation and Compliance The introduction of the CSCRF is a significant step taken SEBI, however, its effectiveness shall depend on its implementation. Regulated Entities have been provided with clear guidelines for to follow by SEBI, along with a timeline for compliance.  Regulated Entities are required to submit reports regularly on their cyber security preparations and planning. Impact on the Financial Sector By setting high standards for cyber security and resilience, the CSCRF is expected to have a profound impact on the financial sector. SEBI is not only enhancing the protection of data but also reinforcing confidence in India’s financial markets. The CSCRF aligns with best practices all over the world in cyber security, making the Indian financial institutions at par with international standards. This alignment is important as India continues to grow, integrate more deeply into the global financial system and attract international investments. Conclusion While the CSCRF is a crucial initiative by SEBI, the implementation of CSCRF may present challenges as smaller entities may face difficulties in meeting the stringent requirements under the CSCRF due to resource constraints. Therefore, to mitigate this, SEBI may need to provide additional and continued support to help such small entities comply with the CSCRF. Moreover, the fast evolving nature of cyber threats will require that the CSCRF is regularly updated to address all the new challenges presented. The commitment of SEBI towards continuous improvement and engagement with the Regulated Entities will be crucial in ensuring the CSCRF remains relevant and effective. Author: Sanika Mehra (Co-Managing Partner & Head-Corporate Practice) & Antra Ahuja (Senior Associate)

The Reserve Bank of India (“RBI”) through its notification dated April 10, 2015 (“RBI Notification”) amended Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions,2007 whereby it mandated all Non-Banking Financial Institutions (“NBFC”) (having an asset size of 100 crores or above) to maintain an LTV (Loan to Value) ratio of 50% (fifty percent) at all times. In other words, NBFCs are prohibited from granting a loan worth more than 50% (fifty percent) of the value of the assets against which the loan is being granted. One class of security which is sometimes provided by the borrowers is a pledge of shares. Where any such pledge is taken as a security, the NBFCs are required to report to stock exchanges on a quarterly basis, the details of the shares pledged in their favour, by the borrowers for availing loans. The RBI also released a clarification dated April 10, 2015 stating that these guidelines do not apply to unlisted shares. The legal framework surrounding NBFCs offering loans against unlisted shares presents a nuanced picture. While the Banking Regulation Act, 1949 empowers banks to grant such loans subject to specific restrictions, there's an absence of explicit legislation governing this practice for the NBFCs. This distinction underscores a critical gap in regulatory oversight concerning the NBFCs and the use of unlisted securities as collateral.  This situation leads to ambiguity regarding whether an NBFC has the authority to issue loans against unlisted shares. Therefore, in this article, we aim to explore the feasibility of obtaining a loan from an NBFC using shares of an unlisted company as collateral. We did notice that there have been some instances where NBFCs have granted loans to borrowers against unlisted shares. One such instance is when PTC India Financial Services Limited (an NBFC registered with the RBI) granted a loan to NSL Nagapatnam Power and Infratech Limited upon pledging 31,80,678 shares of NSL Energy Ventures Private Limited. Similarly, IFCI Limited, another RBI-registered NBFC, has recurrently offered loans to borrowers against shares of unlisted companies. However, it is not very common for NBFCs to go down the pledge route, especially, in relation to the unlisted companies. There are certain risks involved. In the next section, we have highlighted some of the risks that the NBFCs face and how such risks could be mitigated by the NBFCs: Clear title of securities – Prior to accepting unlisted securities as collateral from any borrower, the lender must first ensure that the securities have a clear and free title. This entails verifying whether the borrower holds undisputed ownership of the securities being pledged and confirming that all the compliances were undertaken for acquiring them as per the applicable law, and verifying that there are no ongoing disputes related to their ownership. Further, the lender needs to ensure that the securities are free of any prior claims or liens or any other type of encumbrances. This includes verifying that there are no existing debts or legal restrictions on the borrower's ability to sell or pledge the securities. Share valuation from an independent valuer as these are unlisted securities – The shares of a private company carry a great risk against the recovery of a disputed loan amount as no ready value of these shares is available due to these stocks not being listed on any stock exchange. Further, the valuation of these shares may not be accurate as the same is determined based on the data/information provided by the Company. Therefore, it is of pertinent importance that the NBFC gets a valuation of the pledged securities determined by an independent valuer to get a fair and correct market value. This requirement might be subject to the general lending policy of the NBFC. NBFCs must also assess their potential for conversion into cash if the need arises. Since unlisted shares lack the transparency and liquidity of their listed counterparts, a rigorous evaluation becomes imperative to ascertain their true worth as collateral. Restrictive terms in transaction documents governing pledged securities – Securities of any private limited company are governed by the terms outlined in either its articles of association or the shareholders’ agreement executed between the company and its shareholders. One such restrictive clause could involve preventing the transfer of pledged securities to any competitor of the company or the pledge of shares may not be allowed without the prior written approval of the shareholders. Additionally, another common restriction could be a lock-in period, during which the shares of the company are locked in for a specific duration. Lenders must exercise caution regarding these limitations and reassess whether taking the shares of such a company as a pledge is advisable. If such a decision is made, it's crucial to ensure that any existing restrictions are set to expire in the near future. Furthermore, any additional restrictions imposed should necessitate consent from the lender. This approach helps mitigate risks and ensures that the lender retains the necessary flexibility in managing its investments. Credit appraisal - When it comes to extending loans secured by unlisted shares, NBFCs must tread carefully and employ meticulous due diligence processes. This includes conducting comprehensive credit appraisals to evaluate critical risk factors which includes assessing the financial stability of the borrower, and scrutinizing their financial history, current financial standing, and repayment capabilities. By conducting a comprehensive risk assessment, NBFCs can better gauge the probability of default and devise strategies to mitigate potential losses. By diligently conducting thorough credit appraisals and due diligence, NBFCs can mitigate risks and make well-informed lending decisions. In conclusion, while there appears to be no legal barrier for NBFCs to offer loans against unlisted shares, it's a practice fraught with risks such as the illiquid nature of securities, restrictions of transfer, unstable valuations and the lack of transparency. Considering the risks associated with the transaction, the practice seems uncommon in the market. However, by conducting a thorough verification encompassing a title check of share ownership, credit appraisals, independent valuation of the pledged securities, and careful scrutiny of the material documents of the borrower, which is essential to mitigate potential defaults, could open up a viable option for private company and other entities holding shares of private companies in raising funds and could also open up an investment sector for the NBFCs. Authors: Neeraj Vyas (Partner) & Abhishek Malhotra (Associate)