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Introduction Japanese operating lease with call option (“JOLCO”) is a financing structure that enables airline companies the ability to expand their fleet and optimize capital efficiency. JOLCO combines the benefits of an operating lease with the flexibility of a purchase option at the end of the lease term. Under JOLCO, a Japanese special purpose company (“Japanese SPC”) which is typically backed by a combination of Japanese small and medium enterprise equity investors and financial institutions, purchases the aircraft and leases it to a lessee. While in principle, JOLCO is viewed as an operating lease as it provides the lessee with a genuine right to return the aircraft to the lessor at the end of the lease term, in practice, JOLCO often resembles financial leases. Unlike traditional Japanese operating lease arrangements, JOLCOs may be recorded in the lessee’s balance sheet as the lessee typically exercises the call option at the end of the lease term, effectively acquiring ownership after having enjoyed most of the benefits and risks associated with ownership during the lease period. Potential structure in the Indian context The Japanese SPC, as borrower, shall enter into a loan agreement with lending institution(s) (“Lender(s)”). Pursuant to the loan agreement, the Lender(s) shall provide the debt portion of the aircraft acquisition cost (usually consisting of 70-75% debt) to the Japanese SPC. The Japanese SPC shall utilize the debt portion and the equity portion (usually consisting of the balance 25-30% equity) invested by Japanese small and medium enterprise investors, to acquire the aircraft from an aircraft manufacturer (“OEM”). The Japanese SPC shall then lease the aircraft to an entity incorporated in the Gujarat International Finance Tec-City (“GIFT City Entity”), and the GIFT City Entity shall onward sub-lease the aircraft to the airline company in India (“AOC Holder”). The lease rentals payable by the AOC Holder to the Gift City Entity and by the Gift City Entity to the Japanese SPC shall be assigned to the Lender(s) and other finance parties. The aircraft itself shall be secured by way of mortgage. Key challenges in adopting JOLCO structures in India Although there are instances of Indian airline companies using JOLCO structures (when in the mid-1990s, the then government owned Indian Airlines and Air India entered into JOLCOs with certain Japanese leveraged lessors as part of their fleet financing strategy for about 12 Airbus A320s), its adoption remains sparing in light of legal, regulatory, and structural hurdles. Some of these are as follows: Unfavorable tax withholding under the India-Japan double tax avoidance agreement (“DTAA”): Pursuant to the DTAA, lease payments are subject to a withholding tax of 10%, which has historically acted as a deterrent. Alternative leasing structures involving jurisdictions such as Ireland which has a more favorable tax treaty with India offers lower effective costs. However, with the option of leasing the aircraft to the Gift City Entity which in turn shall sub-lease the aircraft to the AOC Holder, the tax complications may now be mitigated. Complexity of multiple shareholder involvement: JOLCO transactions typically involve Japanese Tokumei Kumiai (“TK”) structures, which pool investments from multiple small and medium-sized investors. These shareholders often have voting rights and participate in key decisions, requiring their consent at various stages of the transaction. This adds a layer of governance complexity, especially in determining whether majority consent or unanimous approval is required, thereby often delaying processes. Classification as an operating lease: While JOLCO is economically akin to a financial lease, under applicable Indian foreign exchange laws, operating leases are not a recognized form of external commercial borrowing. Therefore, it is presently untested whether the Reserve Bank of India (“RBI”) would view such lease arrangements as operating leases or financial leases and whether prior approval of the RBI would be required for entering into such transactions. Structural incompatibility with current aviation lease models: Indian airline companies prefer setting up their own wholly owned subsidiaries in Gift City (“GIFT WOS”). The aircraft is typically leased to the GIFT WOS and then the GIFT WOS back-to-back leases the aircraft to the airline company in India. However, in a JOLCO structure, it is unclear whether the Japanese investors would be comfortable in leasing the aircraft to the GIFT WOS or would they rather set up their own GIFT City Entity. There are also complications surrounding the concept of beneficial ownership and foreign exchange challenges, which would need to be evaluated. Conclusion While JOLCO structures offer a compelling and tax-efficient leasing solution internationally, its adoption in India remains largely untested due to regulatory uncertainties, structural mismatches and the operational complexity of involving multiple Japanese TK investors. However, the emergence of GIFT City as a growing international financial hub, along with the tax exemptions and regulatory flexibility available to entities established within it, presents a promising pathway for the potential adoption of JOLCO structures in India.  As India continues to liberalize its leasing environment, particularly in the aviation sector, JOLCO may become a viable financing option for Indian airline companies in the times to come. Authors: Ankit SinhaPartner, Juris CorpEmail: [email protected] Yashassvi PeriwalAssociate, Juris CorpEmail: [email protected] Vaishnavi PanyamTrainee, Juris CorpEmail: [email protected] Disclaimer: This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein. About Juris Corp Founded in 2000, Juris Corp is a law firm adding value in Foreign Investments into India, Banking, Securities, Derivatives, Corporate Commercial, Joint Ventures, M&A Private Equity, Real Estate, Dispute Resolution and International Arbitration, Bankruptcy and Restructuring. Firms’ Objective Provide unbiased and unmatched legal services in our areas of practice. Be the Preferred Law Firm for our clients and take that relationship forward by becoming more than a legal advisor: Being their business advisors. Accolades And Recognition Juris Corp has been consistently ranked in the top tiers over the years in Banking & Finance, Capital Markets, Corporate M&A, Dispute Resolution, Foreign Direct Investment, Real Estate, Private Equity, Securitisation & Structured Finance and Taxation by several institutions. 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Introduction The Reserve Bank of India (“RBI”) has issued the Reserve Bank of India (Digital Lending) Directions, 2025 (“Directions”). These Directions came into effect on 8th May 2025, with the exception of provisions relating to multi-lender arrangements, which will be effective from 1st November 2025, and the reporting requirements concerning Digital Lending Apps (“DLAs”), which came into effect on 15th June 2025. These Directions aim to consolidate the regulatory framework governing digital lending, which is a remote and automated process that leverages seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and related customer services (“Digital Lending”). In addition to integrating various earlier circulars and guidelines that formed the Existing DL Framework (defined below), these Directions also repeal the Repealed Framework (defined below). Applicability  These Directions shall apply to: (i) all commercial banks; (ii) all primary (urban) co-operative banks, state-co-operative banks, and central co-operative banks; (iii) all non-banking financial companies (including housing finance companies); and (iv) all-India financial institutions (“AIFIs”) (collectively “REs”). Existing DL Framework and Repealed Framework Before the issuance of these Directions, the regulatory framework governing digital lending comprised the following key guidelines and circulars (collectively “Existing DL Framework”): Outsourcing of Financial Services - Responsibilities of Regulated Entities Employing Recovery Agents dated 12th August 2022; Key Facts Statement (KFS) for Loans and Advances dated 15th April 2024 (“KFS Circular”); Loans Sourced by Banks and NBFCs over Digital Lending Platforms: Adherence to Fair Practices Code and Outsourcing Guidelines dated 24th June 2020 (“Fair Practices Code and Outsourcing Guidelines”); Guidelines on Digital Lending dated 2nd September 2022, along with the FAQs issued on 14th February 2023 (collectively “Guidelines on Digital Lending Framework”); and Guidelines on Default Loss Guarantee in Digital Lending dated 8th June 2023, read with the FAQs dated 26th April 2024, and the updated version issued on 5th November 2024 (collectively, the “Guidelines on Default Loss Guarantee Framework”). Further, these Directions repeal the Fair Practices Code and Outsourcing Guidelines, Guidelines on Digital Lending Framework, and the Guidelines on Default Loss Guarantee Framework (collectively “Repealed Framework”). Newly added provisions by the RBI The RBI has incorporated the following provisions under the Directions in addition to the earlier instruction: Due diligence requirements with respect to Lending Service Providers (“LSP(s)”): LSPs act as agents of REs and perform digital lending functions such as customer acquisition, underwriting support, and servicing on behalf of the REs. These activities are carried out in accordance with the 'Outsourcing of Financial Services - Responsibilities of Regulated Entities Employing Recovery Agents' dated 12th August 2022, and other relevant instructions issued from time to time (collectively “Extant Outsourcing Guidelines”). The Directions further clarify that an RE may also act as an LSP for another RE. In addition to the Extant Outsourcing Guidelines, Paragraph 5 of the Directions outlines specific due diligence requirements applicable to engagements involving LSPs, which are as follows: There must be a contractual arrangement between REs and LSPs with definitive roles, rights, and obligations of the REs and the LSPs. Further, REs shall undertake due diligence before they enter into such contractual arrangement with LSPs, taking into account, inter alia such LSPs’ technical and statutory capabilities, robustness of data privacy policies and storage systems, and fairness in conduct with borrowers; REs shall review the conduct of LSPs as per the contractual arrangements and shall be fully responsible for guiding LSPs acting as recovery agents. REs must monitor their actions and omissions and take appropriate measures in case of any deviations; and REs must maintain, as part of their policy, monitoring mechanisms for loan portfolios originated with the support of LSPs. RE-LSP arrangements involving multiple lenders: The Directions introduce a dedicated framework for arrangements where an LSP partners with multiple REs. Paragraph 6 of the Directions outlines that in such cases, each RE shall be individually responsible for ensuring compliance with the following stipulations: The LSP must display a digital view on the DLA showing all loan offers that match the borrower’s request and requirements. The names of REs whose offers do not match must also be included in this view. The LSP may use any consistent method to match loan offers with borrower requests, provided that such method applies uniformly to similar borrowers and products. The methodology used and any update(s) in that regard must be properly documented. The matched loan offers must clearly show the RE's name, the sanctioned amount, loan tenor, annual percentage rate, monthly repayment, applicable penal charges, and a link to the key facts statements (“KFS”). The LSP must remain impartial and objective, and must not directly or indirectly endorse or promote the product of any specific RE. This includes avoiding the use of dark patterns or deceptive design practices[1] intended to mislead borrowers into selecting a particular loan offer. However, displaying loan offers ranked according to a publicly disclosed metric shall not be considered as promoting any specific product. Reporting of DLAs to the RBI via Centralised Information Management System (“CIMS”) Portal: DLAs are mobile / web-based applications, either standalone or part of a larger platform, used by REs or their LSPs to provide Digital Lending services, as per the Extant Outsourcing Guidelines; and To strengthen transparency, REs must report their DLAs, whether owner or operated via LSPs, on the RBI’s CIMS portal in the format prescribed in Annexure I therein. Board-approved chief compliance officers of the REs must certify compliance with RBI norms, covering disclosures, grievance redressal, data practices, and website publication. REs are solely responsible for the accuracy of submissions, and misuse suggesting RBI endorsement is strictly prohibited. Key provisions Borrower’s creditworthiness: As per Paragraph 7 of the Directions, REs shall obtain necessary information of a borrower for assessing its creditworthiness before extending any loans. Credit limits shall only be increased upon the explicit request of the borrower. Records of the borrower information, and any credit increase shall be recorded for audit purposes. Disclosure to borrowers: REs shall provide KFS to borrowers in line with the KFS Circular[2]. They shall ensure that digitally signed documents on their letterhead are automatically sent to the borrower's verified email / SMS upon loan execution. Additionally, REs must maintain an up-to-date public website with a single, easily accessible section detailing their Digital Lending products, DLAs, engaged LSPs and their roles, customer care and grievance redressal mechanisms, links to RBI’s complaint management system and Sachet Portal, and applicable privacy policies. DLAs and LSPs must be linked to the RE’s website. In case of loan default, details of the assigned or changed recovery agent must be communicated to the borrower via email / SMS before any contact is made. Loan disbursement, repayment, and servicing: Loan disbursement: REs must disburse loans directly into the borrower’s bank account, except in cases mandated by regulation, co-lending between REs, or disbursals for specific end-use where funds go directly to the end-beneficiary’s account. Disbursals to third-party accounts, including LSPs, are not permitted unless explicitly allowed. Loan repayment: Borrowers must make all repayments directly into the RE’s bank account. No third-party or LSP pass-through / pool accounts are allowed. Flow of Funds: Third-parties and LSPs must not control or influence the flow of funds between REs and borrowers. No direct payments to LSPs: All fees, charges, and reimbursements payable to LSPs must be paid directly to the REs. Delinquent loans: For delinquent loans, REs may use physical recovery and accept cash if necessary. These cash recoveries must be recorded in full in the borrower’s account the same day. Any fees to LSPs for such recovery must be paid by REs and not deducted from the recovered amount or charged to the borrower. Other changes introduced in the Directions Definition of LSP: The Directions explicitly recognise that an RE may serve as an LSP for another RE, while also clarifying that the functional scope of such LSP is restricted solely to the Digital Lending functions of the RE. Expanded scope of REs: These Directions introduce a consolidated and comprehensive regulatory framework applicable to all Digital Lending activities undertaken by REs, the scope of which has now been expanded to include AIFIs. Cooling-off period: These Directions permit borrowers to exit a digital loan during a cooling-off period without penalty, though REs may retain a disclosed one-time processing fee. The minimum cooling-off period is now at least 1 (one) day, regardless of loan tenor. Storage of data: The Directions now allow data to be processed outside India, provided it is deleted from foreign servers and transferred back to India within 24 (twenty-four) hours. Conclusion The Directions mark a notable evolution in the regulatory architecture for Digital Lending, aiming to unify a previously fragmented framework. While they introduce greater standardisation and borrower-centric safeguards, they also significantly expand the compliance burden on REs, particularly in relation to oversight of LSPs and DLAs. From a legal and operational standpoint, these Directions raise important considerations around contractual structuring, data governance, and liability allocation, especially in multi-lender and outsourced arrangements. Going forward, REs shall need to reassess existing partnerships, update internal policies, and ensure robust documentation and audit trails to remain compliant. These Directions, while progressive in intent, shall likely require careful implementation and ongoing legal review to mitigate regulatory oversight. Authors: Ankit Sinha Partner, Juris Corp Email: [email protected] Sangha Nath Associate, Juris Corp Email: [email protected] The authors have been assisted by Ms. Vaishnavi Panyam, a Trainee with the Firm, in the preparation of this article. Disclaimer:  This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein. [1] As defined under section 2(e) of the ‘Guidelines for Prevention and Regulation of Dark Patterns, 2023’ dated November 30, 2023, issued by Central Consumer Protection Authority, as amended from time to time. [2] Key Facts Statement (KFS) for Loans & Advances [Notifications - Reserve Bank of India]

1) Introduction Housing Finance Companies (“HFCs”) play an essential role in the Indian financial ecosystem by providing loans to individuals and businesses for purchasing, constructing, or renovating residential properties. HFCs are a significant contributor to the growth of the housing sector, and their role in boosting the economy is critical, especially in a developing country like India where the housing gap is substantial. The Reserve Bank of India (“RBI”) from the last few months has been working towards aligning the regulations for HFCs with the extant regulations applicable to non-banking financial companies (“NBFCs”). This initiative comes in response to the evolving financial landscape and aims to enhance the stability and operational efficiency of HFCs. One key aspect of this alignment is the stricter regulatory framework for accepting public deposits, which is already in place for NBFCs. By extending these provisions to HFCs, RBI seeks to maintain a uniform approach for managing systemic risks and improving the resilience of financial institutions that play an important role in the housing sector. One of the primary ways HFCs raise capital from the capital markets for their lending activities is through the issuance of non-convertible debentures (“NCDs”). This financial instrument has proven to be an efficient method of financing for HFCs, as they provide an avenue to attract both institutional and retail investors. However, in recent years, the regulatory framework governing HFCs and their ability to issue NCDs has undergone significant changes. This evolution reflects a broader transformation in India’s financial sector, as regulators seek to ensure a stable, transparent, and sustainable environment for both lenders and borrowers. This article examines the role of HFCs in India, the significance of NCDs in their capital structure, the changing regulatory landscape that governs their issuance and the future outlook of HFCs. 2) Regulatory Landscape for HFCs issuing NCDs The regulatory framework surrounding HFCs and their issuance of NCDs has evolved significantly over the years, shaped by changing economic conditions, market dynamics, and the need to maintain financial stability in the housing finance sector. In the early stages, there were limited regulations specifically addressing the issuance of NCDs by HFCs. The concept of HFCs began gaining popularity in the 1980s, and the National Housing Bank (“NHB”) was established in 1988 to regulate and promote the housing finance sector in India. The regulatory framework during that time was minimal, as the industry was still in its nascent stages. However, as HFCs started to grow, the need for clear and comprehensive regulations became evident. The government and regulatory bodies, including the NHB, took steps to ensure that HFCs operated within a structured framework to safeguard investors' interests and maintain financial stability in the housing sector. HFCs in India operate under a multifaceted regulatory framework that involves various institutions. The primary regulatory authority is the NHB, which governs the operations of HFCs under the National Housing Bank Act, 1987. The NHB issues guidelines related to capital adequacy, liquidity, asset quality, and other operational aspects. The NHB ensures that HFCs operate under prudent financial and regulatory guidelines, ensuring their sustainability and their ability to support the housing sector. The RBI plays an indirect but significant role in regulating the financial health and stability of HFCs and their issuance of NCDs. In addition to the NHB and RBI, the Securities and Exchange Board of India (“SEBI”) regulates the issuance of listed NCDs by HFCs, especially when these instruments are offered to the public. SEBI has regulations in place for public offers and private placements of debt securities, with a focus on protecting the interests of investors. Together, these institutions provide a comprehensive regulatory framework that governs the issuance of NCDs by HFCs in India, balancing financial stability, market integrity, and investor protection. 3) The Role of NCDs in the capital structure of HFCs HFCs require substantial capital to fund their core operations, which primarily involve disbursing loans for housing projects. The capital structure of HFCs typically includes a mix of equity, debt, and hybrid instruments, with NCDs being one of the most important debt instruments. The issuance of NCDs allows HFCs to raise significant amounts of capital without diluting ownership, as is the case with equity. This is particularly important for privately held HFCs that want to retain control over their operations while expanding their capital base. The issuance of NCDs strengthens the debt portion of the capital structure, helping HFCs to meet their liquidity and capital adequacy requirements. NCDs are particularly important during periods of high demand for housing finance, as they provide a stable and predictable source of funding.  4) Recent Regulatory Changes Impacting NCD Issuance by HFCs In January 2025, RBI issued a circular to revise the regulations for the private placement of NCDs having maturity of more than one year by HFCs. The regulations for the private placement of NCDs by HFCs are now aligned with those applicable to NBFCs. Historically, HFCs have had their own set of guidelines under the Master Direction on Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021. However, the regulations governing HFCs and NBFCs were not fully aligned, despite the fact that both types of institutions operate in the broader financial ecosystem. The move to harmonize the regulatory guidelines for the private placement of NCDs aims to streamline these processes, ensuring a more uniform framework that can be applied across both sectors. Key Changes in the Regulatory Framework (a) Auditor’s certification One of the significant changes brought about by the revised guidelines is that the requirement to obtain a certification from an auditor to ensure compliance with certain financial norms has been removed. However, it is important to note that this does not mean auditors are no longer involved in the financial scrutiny of HFCs. Auditors will still perform other essential duties such as auditing financial statements and ensuring transparency, but the certification specifically related to compliance with certain regulations has been removed. The auditors will be required to provide a peer-to-peer certificate in respect of each issuance. (b) Categorization of NCDs This segmentation is made to differentiate between the smaller and larger investment group and the regulatory requirements will vary accordingly. (i) NCDs with a maximum subscription of less than INR 1 Crore per subscriber: Under this category, the number of primary subscribers are capped. This restriction ensures that the issuance is kept relatively controlled and manageable, reducing the risks associated with a large number of individual investors. Additionally, these NCDs must be fully secured, which means that investors will have some form of collateral or guarantee backing the NCDs, offering additional security in case of a default. (ii) NCDs with a minimum subscription of INR 1 Crore and above: Under this category, NCDs will be available to investors who are willing to make substantial investments. The higher minimum subscription ensures that only institutional or high-net-worth investors are involved in this segment, aligning the fundraising efforts with a more sophisticated investor base. Additionally, these NCDs can be unsecured and such NCDs will not be treated as a deposit. This categorization aims to prevent the dilution of regulatory oversight and ensures that appropriate safeguards are in place for different types of investors. The restriction on the number of investors reflects the RBI’s aim to balance investor access with the need for careful risk management and transparency. This approach also safeguards the interests of smaller investors by preventing them from getting involved in overly complex or high-risk financial instruments without appropriate safeguards. 5) Future outlook for HFCs and NCDs As the housing sector continues to evolve, the role of HFCs and NBFCs is likely to expand further. The demand for affordable housing is expected to remain strong, especially in developing economies where urbanization and population growth continue to drive the need for new housing units. Technological advancements in the financial sector are likely to have a significant impact on the issuance of NCDs. These innovations could make the process more efficient, transparent, and accessible to a broader range of investors. Digitalization may also lead to more efficient processes and better investor access. The regulatory trend seems to be heading toward more stringent norms for NCD issuances. This could include higher disclosure requirements, better risk management practices, and more conservative leverage limits. As the market continues to evolve, HFCs must adapt to these regulatory changes while leveraging new opportunities for growth. By aligning with these regulations and maintaining a strong focus on financial inclusion, HFCs can continue to play a key role in addressing India’s housing needs, ultimately contributing to the country’s economic development. 6) Key Takeaways The regulatory landscape for HFCs and the issuance of NCDs has evolved significantly in recent years. While these changes have posed challenges for HFCs, they also offer opportunities to strengthen financial stability, enhance investor protection, and promote transparency. By adapting to these regulatory shifts, HFCs can continue to play a crucial role in the capital structure of HFCs, providing them with the necessary funds to meet the growing housing needs of the population while maintaining a sustainable growth trajectory in an increasingly complex financial environment. As the financial sector continues to evolve, HFCs will need to adapt to these changes, ensuring that they remain competitive, transparent, and capable of managing the risks associated with issuing NCDs. With the continued support of regulators and investors, HFCs are well-positioned to drive the growth of the housing finance sector in the coming years. The RBI’s revised guidelines for the private placement of NCDs by HFCs mark a crucial step toward bringing more consistency, uniformity and transparency to the housing finance sector. By aligning these regulations with those of NBFCs, the RBI ensures that HFCs adopt better governance practices, stronger investor protections, and more structured fundraising approaches. This regulatory change ensures that HFCs adopt a structured and risk-reduced approach, similar to the NBFCs, when raising funds through private placements. By requiring a board-approved policy and investor protections, the RBI seeks to strengthen financial stability and boost investor confidence in the housing finance sector. Under the revised norms, HFCs will need to adjust their fundraising strategies to meet the revised regulatory framework, reinforcing governance and risk management practices within the industry. These changes are expected to benefit both investors and institutions, contributing to the overall stability and growth of the housing finance sector in India. Looking ahead, the demand for housing finance is expected to remain strong, and NCDs will continue to play a critical role in the capital structure of HFCs. Regulatory developments, technological innovations, and growing investor interest are likely to shape the future of NCD issuance in the housing finance sector, making it an exciting space to watch in the coming years. Authors: Apurva Kanvinde Partner, Juris Corp Email: [email protected]     Harshit Khandelwal Junior Associate, Juris Corp Email: [email protected]     Disclaimer:  This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein.

The insolvency framework in India has undergone many changes from time to time with the aim of developing an effective resolution mechanism for debt-ridden entities. Nearly a decade in existence, the framework continues to be a work in progress, with each amendment aimed at addressing the practical issues for an effective implementation and improve resolution of corporate debtors as well as address the interests of the stakeholders involved. Aligned with this intent, the Insolvency and Bankruptcy Board of India (“IBBI”) had released a Discussion Paper dated 7th November 2024[1] (“Discussion Paper”) shedding light on the practical challenges, issues and concerns surrounding the insolvency of real estate companies. Following the Discussion Paper, the IBBI has notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025 (“Amendment Regulations”)[2]. The Amendment Regulations have introduced significant changes to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) which focus on resolving the practical lacunae, protecting allottees' interests and improving transparency of insolvency process of real estate companies. In this article, we have highlighted the key changes in the CIRP Regulations, their practical repercussions for the stakeholders, as well as possible recommendations for the players involved. The Before and After: To put it succinctly, the Amendment Regulations have inter alia made the following key changes to the CIRP Regulations: Handing over possession of flats during insolvency[3] Where an allottee has fulfilled its contractual obligations under the relevant agreement with the corporate debtor, such allottees are now entitled to request the resolution professional (“RP”) for handover of possession of the flat as well as seek its registration, provided the committee of creditors (“CoC”) with at least 66% voting share approves such request. Given the CIRP Regulations were silent on the rights of allottees in such a scenario prior to the amendment, this insertion provides much needed clarity on the rights of allottees, who were previously left at the mercy of exercise of the inherent powers of the courts / tribunals on a case-to-case basis. This amendment will go a long way in protecting the interests of allottees and eliminate uncertainty regarding the procedure to be followed for the handover of possession and registration of flats to allottees thereby reducing the burden on allottees and courts / tribunals. Effective Representation of sub-classes through facilitators[4] The Amendment Regulations seek to bridge the gap in communication by providing for ‘facilitators’ in cases where there are more than 1,000 creditors in a sub-class within a class, provided it is requested by a minimum of 100 creditors after the first CoC meeting. A maximum of 5 (five) facilitators can be appointed whose fees would form part of the CIRP cost. Earlier, such class of creditors were represented through one authorized representative in the CoC meetings which often led to potential roadblocks in communication. By including a facilitator and defining their roles and responsibilities, the Amendment Regulations aim to improve communication and representation between the authorised representative and the creditors, ensuring that the voices of individual creditors are better heard. Inclusion of Competent Authorities in CoC Meetings[5] Given the substantial involvement of government authorities during allocation of land for development to real estate companies, there was a pressing need to include their perspective to aid and assist the decision-making process of the CoC in insolvency of real estate companies. The Amendment Regulations allow the RP to invite competent authorities to CoC meetings, if directed by the CoC, albeit without any voting rights. The competent authorities may provide their inputs on matters related to the development of real estate projects of the corporate debtor. Further, the RP is now required to submit a report on the status of development rights and permissions for real estate projects to the CoC for its comments and thereafter to the Adjudicating Authority within 60 (sixty) days of insolvency commencement. This will not only refine the assessment of the corporate debtor’s assets but will also help in preparing the Information Memorandum to reflect the actual status of real estate projects, approvals, permits etc. Overall, it will assist the CoC in making informed decisions during the insolvency process. Facilitating participation of Association of Allottees as resolution applicants While association of allottees were allowed to act as resolution applicants, the Amendment Regulations now aim to relax certain requirements at the behest of the CoC. These relaxations extend to the eligibility criteria for submission of Expression of Interest, conditions regarding refundable deposit and submission of performance security. However, these relaxations can only be extended to an association of allottees which represents at least 10% or 100 creditors in a class, whichever is lower. This will remove the financial hurdle for association of allottees to arrange for high value deposits and encourage their active participation in the resolution process. Monitoring Committee for orderly implementation The Amendment Regulations have further expanded the provisions related to a Monitoring Committee making it mandatory for the CoC to consider setting up a Monitoring Committee for supervising the implementation of the resolution plan and require the Monitoring Committee to submit quarterly reports to the Adjudicating Authority on the progress. An amendment on paper or an actual game changer for allottees? An overview of the Amendment Regulations certainly reflects a step forward in securing the allottees’ interests and strengthening their participation in the rehabilitation of insolvent real estate companies. On the flip side, it cannot be overlooked that the amendments related to handing over of possession, inclusion of competent authorities in CoC meetings, relaxation for association of allottees participating as resolution applicants etc. are broadly CoC driven and not absolute in nature. Resultantly, these provisions increase the role of the CoC in making decisions which directly deal with the interests of allottees as well as the effective revival of the corporate debtor. Further, the discretion bestowed with the CoC to relax conditions for the association of allottees acting as resolution applicants will indeed contribute towards deciding the general quality of resolution applicants participating in the process; however, the type and extent of relaxations permitted by the CoC would only be tested with time. Additionally, while the preparation of reports on the status of development rights and permissions along with inputs received from the CoC would bring in more clarity to the stakeholders, the Amendment Regulations are silent on whether such reports can be made available to resolution applicants for their independent assessment. If such access is provided, it would undoubtedly benefit resolution applicants and place them on a better footing while preparing resolution plans. Be that as it may, the Amendment Regulations only set out a procedural framework whose efficacy is entirely dependent on the discretion of the CoC which will be at liberty to decide not to adopt the same without much consequence. Albeit a promising start, basis implementation of the Amendment Regulations on the ground level, further amendments may have to be introduced to balance the rights and powers of the CoC against the rights of allottees within the existing framework. Authors:  Madhura Kulkarn, Senior Associate, Juris Corp Email: [email protected] Aditi Sinha, Senior Associate, Juris Corp Email: [email protected] Viidhi Chopra, Senior Associate, Juris Corp Email: [email protected]  [1] https://ibbi.gov.in/uploads/whatsnew/c7ddc802e5b2c4f073fa0d419813844a.pdf813844a.pdf [2] Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025 dated 3rd February 2025 (F.No. IBBI/2024-25/GN/REG122) [3] Regulation 4E of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025. [4] Regulation 16C and 16D of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025. [5]  Regulation 18(4) and 30(C) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2025.

Introduction In a time when environmental degradation and climate change are becoming more widely recognised, sustainable investment practices have moved from the periphery to the mainstream of global finance. Sovereign Green Bonds (hereinafter referred to as, “SGBs”), one of the many tools causing this change, have become a crucial instrument for governments in regions where they are operational, enabling them to fund green initiatives and show their dedication to a sustainable future and climate commitment. This article delves into the rising prominence of SGBs, exploring their significance in fostering sustainable investment practices and examining their potential impact on economies and the environment. Key Features and Understanding Governments can raise money for environmentally beneficial initiatives by issuing SGBs. These bonds not only function similar to traditional government bonds but also include a promise that the money raised will go towards funding or refinancing initiatives that help mitigate the effects of climate change, adapt to them, and enhance the environment. Key characteristics of SGBs include: Use of Proceeds:Funds are allocated to eligible green projects such as renewable energy, energy efficiency, clean transportation, sustainable water management, biodiversity conservation, and green buildings. Project Evaluation and Selection:Issuers are required to set up a strong system for assessing and choosing projects that satisfy specified environmental standards. This process often involves a detailed review of the project's potential environmental benefits, its alignment with national and international sustainability goals, and its overall contribution to a greener economy. To ensure credibility and transparency, many issuers also seek third-party verification or certification to validate their project selection process and environmental impact assessments. This external review helps to build investor confidence and ensures that the projects funded by SGBs genuinely meet rigorous environmental criteria. Reporting and Transparency:Regular reports on the allocation of proceeds and environmental impact of financed projects are provided to maintain investor confidence. These reports detail how the proceeds from the bond issuance have been allocated across various eligible green projects. Going beyond mere allocation, they also strive to quantify the environmental impact of these projects. Global Trends and Case Studies Over the past ten years, the green bond market has grown exponentially and has become crucial. Among the elements causing this increase are: An increase in investor demand for assets that are in line with ESG (Environmental, Social, and Governance) principles. The Paris Agreement, adopted in 2015, is an international accord where countries committed to reducing greenhouse gas emissions and limiting global warming. The Paris Agreement's obligations made by governments to combat climate change. As part of their commitment, many governments are turning to SGBs as a way to finance projects that help them meet their emission reduction targets and promote sustainable development. The demonstration impact promotes the global adoption of green finance techniques. Impact and Challenges SGBs have the potential to make a significant impact however, they face certain challenges. Environmentally, SGBs can fund initiatives that improve ecosystem services, preserve natural resources, and lower greenhouse gas emissions. Economically, green investments can boost innovation, create employment opportunities and improve infrastructure. Socially, these initiatives can improve living circumstances and increase access to sanitation and clean water. Challenges to SGBs include risk of greenwashing, where issuers may misallocate funds to non-green initiatives or exaggerate environmental benefits. Another concern is ensuring that SGBs fund projects that would not have been possible otherwise. Finally, accurately evaluating a project's efficacy and demonstrating its contribution to sustainability objectives can be challenging. Further, SEBI vide circular titled “Dos and Don’ts Relating to Green Debt Securities to Avoid Occurrences of Greenwashing” dated February 3, 2023 i.e. “SEBI Greenwashing Circular”, mandates issuers to ensure accurate disclosures, transparent reporting of proceeds, and third-party verification of projects to prevent misleading claims about environmental benefits. This initiative safeguards investor trust and promotes credible sustainable development practices. The “Framework for Sovereign Green Bonds” by the Department of Economic Affairs addresses greenwashing through transparency and accountability. It emphasizes rigorous project evaluation, annual reporting of proceeds, and external reviews, ensuring adherence to environmental criteria and boosting investor confidence. Significance for Sustainable Investment Practices SGBs hold immense significance for promoting sustainable investment practices: Mobilising Capital: SGBs make it easier for money to go into environmentally friendly initiatives that might otherwise have trouble finding support; Improving Accountability and Transparency: SGB reporting standards increase public confidence in governmental actions; Fostering Market Development: By expanding the availability of green assets and drawing in a wider spectrum of investors, SGB issuance helps the green bond market grow; and Establishing Best Practices and Standards: By encouraging honesty and legitimacy, sovereign issuers frequently take the lead in creating standards for the green bond market. Legal Framework The legal landscape governing Sovereign Green Bonds is evolving, with increasing attention on transparency and comprehensive disclosure. The existing disclosure framework under the Securities and Exchange Board of India ("SEBI”) (Issue and Listing of Non-Convertible Securities) Regulations of 2021[1] (“NCS Regulations”) covers certain disclosures in the offer document for all kinds of non-convertible securities as defined under Regulation 2(1)(w) of the NCS Regulations. The Schedule I of the NCS Regulations provides the initial disclosures to be made in the offer document for public issuances and private placements of non-convertible securities. Further, the SEBI (Listing Obligations and Disclosure Requirements) Regulations of 2015 provide certain additional disclosures to be made by the issuer company on an ongoing basis[2]. Recently, SEBI has taken steps to broaden the scope of sustainable finance in the Indian securities market. On August 16, 2024, SEBI released a consultation paper[3] proposing an expansion of the sustainable finance framework. Implementing these proposals, SEBI amended the NCS Regulations of 2021 through the SEBI (Issue and Listing of Non-Convertible Securities) (Third Amendment) Regulations, 2024, issued on December 11, 2024 (“Amendment Regulations”). Pursuant to the Amendment Regulations, the framework for green debt securities was expanded to include the concept of yellow bonds and blue bonds. Yellow bonds focus on financing solar energy projects, while blue bonds are dedicated to sustainable water management and ocean conservation initiatives, reflecting SEBI’s commitment to promoting a broader spectrum of sustainability-focused investments. Previously, Regulation 2(1)(q) of the NCS Regulations defined ‘green debt securities’ to cover securities financing specific project types, including renewable energy, clean transportation, climate-resilient infrastructure, sustainable waste management, pollution control, blue bonds for sustainable water management, yellow bonds for solar energy, and transition bonds. The Green Bond Principles (“GBP”), developed by the International Capital Market Association (“ICMA”), serve as voluntary guidelines promoting transparency, disclosure, and reporting in the green bond market. Prior to the SEBI Greenwashing Circular, the GBP were widely followed to ensure credibility. SEBI has since incorporated elements of the GBP into its regulatory framework, mandating issuers to adhere to stringent disclosure norms and align with global best practices. This alignment has strengthened India’s position in the global green bond market, fostering investor trust and market growth. The Amendment Regulations have expanded this framework by introducing the concept of ‘Environmental, Social and Governance Debt Securities’ (“ESG Debt Securities”) under Regulation 2(1)(oa) of the NCS Regulations. This broader category encompasses securities such as social bonds, sustainable bonds, sustainability-linked bonds, in addition to green debt securities. On a global scale, the GBP, developed by the ICMA, serve as widely recognized voluntary guidelines for issuing green bonds. The GBPs promote integrity in the green bond market through recommendations for transparency, disclosure, and reporting. While not legally binding, the Green Bond Principles have become a benchmark for best practices in the global green bond market, promoting transparency and investor confidence. Several jurisdictions and stock exchanges reference the GBP in their listing requirements for green bonds. SEBI Greenwashing Circular mandates issuers of green debt securities to adhere to stringent disclosure norms, ensuring transparency and accountability. It emphasizes the need for accurate reporting on the use of proceeds, environmental impact assessments, and third-party verification of funded projects. By setting clear guidelines, SEBI aims to prevent the misallocation of funds and misleading claims about the environmental benefits of projects, thereby safeguarding investor trust and promoting genuine sustainable development practices. Conclusion A major advancement in the shift to a more resilient and sustainable global economy is the growing emphasis on SGBs. They are positioned to grow in importance as a means of funding the shift to a low-carbon, ecologically sustainable future as governments throughout the world step up their efforts to combat climate change and accomplish the Sustainable Development Goals (“SDG”) which were adopted by the United Nations in 2015. are a collection of 17 (Seventeen) interlinked global goals designed to be a "blueprint to achieve a better and more sustainable future for all" by 2030. The Future of Sovereign Green Bonds The future of SGBs looks promising, with several trends likely to shape its evolution such as (a) standardisation of green bond frameworks and reporting requirements aims to improve transparency and comparability, (b) provides innovation which delivers new kinds of green bonds that tie bond interest rates to predetermined sustainability goals such as sustainability-linked bonds and (c) expansion and growth of the SGB market to reach new nations and areas, especially in developing countries with high need for green investments. The long-term viability and prosperity of the SGB market will depend heavily on regulators' capacity to uphold transparency and encourage market stability. As the market develops, SGBs will remain essential in raising funds for environmentally friendly initiatives, improving accountability and transparency, and encouraging sustainable investment methods around the world. It is crucial to address the risk of greenwashing and provide repetitive checks and assessments for any potential threat and evaluate whether the existing framework will require any stringent measures. Regular evaluations will help reinforce the framework and adapt it to the evolving dynamics of the green bond market. Authors: Apurva Kanvinde, Partner, Juris Corp, Email: [email protected]   Aditya Tanwar, Associate, Juris Corp, Email: [email protected] [1]  NCS Regulations, 2021 [2] Listing Obligations and Disclosure Requirements Regulations, 2015 [3] SEBI - Consultation Paper dated August 16, 2024

Introduction In a vast economy like India, every transaction carries an anticipated or unanticipated risk that determines the existence of the company (and its guarantors!) and has the potential to lead the company (and its guarantors!) into insolvency. Our credit markets which are dominated by banks and financial institutions play a pivotal role in determining the fate of distressed companies in the not so new insolvency regime brought by the Insolvency and Bankruptcy Code, 2016 (“I&B Code”). Creditors in control has been the mantra to keep the company a going concern and the formation of the Committee of Creditors (“CoC”) serves as a mechanism to ensure fair representation in the decision-making processes. The CoC institutionalizes the of collective action in the Corporate Insolvency Resolution Process (“CIRP”) and is entrusted with the fundamental role of reviving, resurrecting, and restructuring the Corporate Debtor (“CD”). In the game of CIRP, there are various players, but it is the CoC is the umpire as well as the king maker of the game. However, in order to ensure the creditors in control do not act uncontrollably, judicial intervention has led to a wide interpretation of the decisions, powers, and ambit of commercial wisdom of the CoC. This article delves into what constitutes and what does not constitute the commercial wisdom of CoC and how! Pivotal role of the CoC The CoC is decision-making body for the CD, its composition includes those who are interested in revival of the CD and not only recovery. Thus, it comprises only financial creditors of the insolvent entity[1] and in the case where no financial creditors are present, operational creditors of the said entity[2]. The suspended board of directors of the CD are also members of the CoC albeit with no voting power[3]. CoC in its commercial wisdom holds absolute power for making decisions during the CIRP, however, with great power, comes great responsibility. CoC is entrusted with the responsibility of of ensuring that CD continues as a going concern during the CIRP. CoC must ensure that no inordinate delays occur during the CIRP and there should be no unreasonable deviation from the timeline of the CIRP. The CoC also oversees the Resolution Professional’s (“RP”) activities while ensuring that the I&B Code’s provisions are followed. If the CoC believes that the RP is not carrying out the responsibilities outlined under the I&B Code, the CoC may replace the RP[4]. To ensure transparency and guidance to the CoC, the Insolvency and Bankruptcy Board of India (“IBBI”) has time and again introduced amendments in its rules and regulations which act as guiding principles for the CoC. The amended IBBI Regulations also direct the RP to conduct a CoC meeting every 30 days, and on approval by the CoC, such meeting may be held once every quarter. Moreover, unreasonably arbitrary decisions or resolution plans approved by the CoC have been kept in check through Section 31 of the I&B Code, under which the adjudicating authority can strike down any such decision. The Wise CoC Since the inception of the I&B Code, it has been made clear that the decisions of the CoC are to be seen as paramount and are not to be subjected to the judicial review[5], unless explicitly provided by the I&B Code[6]. This ‘commercial wisdom’ of the CoC has time and again been reaffirmed through various measures and the scope of the commercial wisdom has increased by far to what was intended initially. The Hon’ble Supreme Court (“Supreme Court”) has clarified that the legislature propounded the I&B Code with an inherent assumption in place that financial creditors are well-acquainted with the position of CD and the decisions taken during the CIRP and deliberations thereon are a collective business decision and hence has been treated as non-justiciable[7]. Further, the Supreme Court has reaffirmed that the law upon the wisdom of the CoC is stricto sensu and well-settled that it is well within the CoC’s domain as to how to deal with the entire debt of the CD[8].  With a position so concrete, the scope of the CoC's wisdom has left almost nothing for adjudicating authorities to interfere with barring any contravention of the I&B Code. While the above is settled, the Courts have lately indulged in depth to see what lays out of the wide horizons of CoC’s commercial wisdom as ultimately this wisdom can revive or even liquidate a company. The Hon’ble National Company Law Appellate Tribunal (“NCLAT”) in a recent judgment held that Section 33 (2) of the I&B Code empowers the CoC to decide to initiate liquidation even before inviting Resolution Plans[9]. It is the commercial wisdom of the CoC to approve what is to be the best resolution plan. To empower the CoC even further, the NCLAT in a separate judgment held that the Adjudicating Authority with the limited powers of judicial review available to it cannot substitute its views with the commercial wisdom of the CoC, when the CoC had deliberated at length on this issue and had decided against the option of having other potential resolution applicants from joining the fray[10]. NCLAT has even gone to the extent of noting that while sanctioning the scheme of arrangement if the Court comes to a conclusion that the provisions of the statute have been complied with; and that there is no violation of any provision of law, or the proposed scheme of compromise or arrangement is not unquestionable, unconscionable or contrary to public policy, then the NCLT has no further jurisdiction to sit in appeal over the commercial wisdom of the class of person who with their eyes open have given their approval, even if, the Court is of the view that better scheme could have been framed[11]. In fact, a Resolution Plan approved by CoC is binding on CoC and it cannot review its own decision or pray for a review of its opinion[12]. Vice CoC v. Wise CoC I&B Code[13] lays the grounds for challenging the approval of the resolution plan; (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the CD have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. The Supreme Court recently held that while the commercial wisdom of the CoC in approving a resolution plan may not be justiciable under judicial review, the adjudicating authority must examine any shortcomings in the resolution plan in terms of the parameters specified in Section 30 (2) of the I&B Code, and upon such shortcoming in the resolution plan, it may send the resolution plan back to the CoC for reconsideration after satisfying the parameters so laid down[14]. Further, the Supreme Court in the case of M.K. Rajagopalan v. Dr. Periasamy Palani Gounder & Anr.[15], restricted the CoC from overstepping their commercial wisdom, and observed that CoC should not be “over-expanded to brush aside a significant shortcoming in the decision making of CoC when it had not duly taken note of the operation of any provision of law for the time being in force.” The plan stood in contravention of Section 88 of the Indian Trusts Act, 1882, The wisdom of the CoC was questioned with respect to multiple aspects of the CIRP (such as the ineligibility of the resolution applicant, as well as the failure to place the resolution plan before the CoC), SC held that the status of the CoC would not be a sufficient reason to ignore such shortcomings. In furtherance to this, it has been reiterated time and again that even though the commercial wisdom of the CoC is paramount the Adjudication Authority cannot act as a mute spectator to endorse and put its seal of approval on whatever decision the CoC takes in the name of exercising its "commercial wisdom"[16]. This principle of judicial scrutiny over the CoC's wisdom was further highlighted by the Hon’ble Madras High Court[17] wherein it was held that the adjudicating authority could reject a CoC approved resolution plan if there is incomplete information, lack of transparency, failure to ensure operational creditors receive at least the liquidation value, or inequitable treatment of operational creditors per Section 30(2) of the I&B Code. Thus, while the CoC's commercial wisdom is respected, it must comply with legal and procedural requirements to ensure fairness. Acts such as cancellation of lease deeds during CIRP do not fall within the ambit of commercial wisdom of CoC[18]. CoC unchained by I&B Code - chained by Judicial Intervention? The independence that the CoC possesses must have checks and balances placed to ensure that the provisions of the I&B Code are adhered to. It is the responsibility of the CoC to ensure that the resolution is aimed at restructuring the CD within the framework of the I&B Code. By upholding principles of balanced representation, informed decision-making, and stakeholder engagement, creditors’ committees can play a crucial role in facilitating the resolution of distressed assets while safeguarding the interests of creditors and promoting the overarching objectives of the insolvency framework.   Authors: Jinal Shah Principal Associate, Juris Corp Email: [email protected] Palak Nenwani Senior Associate, Juris Corp Email: [email protected] Ronit Chopra Associate, Juris Corp Email: [email protected]   Disclaimer:  This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein. [1]  Section 21(2), I&B Code 2016. [2] Section 21(8), I&B Code 2016. [3] Section 24(3), I&B Code 2016. [4] Section 27, I&B Code 2016. [5] Ramkrishna Forgings Limited v. Ravindra Loonkar & Anr., Civil Appeal No.1527 OF 2022, Supreme Court. [6] Kalpraj Dharamshi & Anr. v. Kotak Investment Advisors Ltd.& Anr., (2021) 10 SCC 401, Supreme Court. [7] K Sashidhar v. Indian Overseas Bank, Civil Appeal No.10673 of 2018, Supreme Court; Valla RCK v. Siva Industries & Holdings Ltd, (2022) 9 SCC 803, Supreme Court. [8] Pratap Technocrats Private Limited v. Monitoring Committee of Reliance Infratel Limited & Anr., 2021 SCC OnLine SC 661, Supreme Court. [9]  Sunil Surendra Kumar Kakkad Vs. Sujyot Infrastructure Pvt. Ltd., 2024 SCC OnLine NCLAT 1316, National Company Law Appellate Tribunal, Principal Bench, New Delhi. [10] Jatinder Pal Singh Hanjra Vs. Vivek Raheja and Ors., 2024 SCC OnLine NCLAT 224, National Company Law Appellate Tribunal, Principal Bench, New Delhi. [11] Marathon Nextgen Townships Pvt. Ltd. and Anr. Vs. Regional Director, Western Region, Ministry of Corporate Affairs, 2024 SCC OnLine NCLAT 1670, National Company Law Appellate Tribunal, Principal Bench, New Delhi. [12] Nivaya Resources Pvt. Ltd. v. Asset Reconstruction Company (India) Ltd. and Anr., 2022 SCC OnLine NCLAT 390, National Company Law Appellate Tribunal, Principal Bench, New Delhi. [13] Section 61(3) of the I&B Code. [14] Greater Noida Industrial Development Authority v. Prabhjit Singh Soni and Anr, (2024) 6 SCC 767, Supreme Court. [15] M.K. Rajagopalan v Dr. Periasamy Palani Gounder & Anr., (2024) 1 SCC 42, Supreme Court. [16] Shankar Mukherjee and Ors. Vs. Ravi Sethia, Resolution Professional of Suasth Healthcare Foundation and Ors., 2023 SCC OnLine NCLT 1209, National Company Law Tribunal, Kolkata Bench. [17] The National Sewing Thread Co. Ltd. v. The superintending Engineer, TANGEDCO and Ors., 2024 SCC OnLine Mad 2330, High Court of Madras. [18] UCO Bank v. M/s. GIT Textiles Manufacturing Limited, I.A. (IB) No. 849/KB/2023 in C.P. (IB) No. 600 of 2019, National Company Law Tribunal, Kolkata Bench.

Introduction Housing Finance Companies (“HFCs”) play an essential role in the Indian financial ecosystem by providing loans to individuals and businesses for purchasing, constructing, or renovating residential properties.HFCs are a significant contributor to the growth of the housing sector, and their role in boosting the economy is critical, especially in a developing country like India where the housing gap is substantial. The Reserve Bank of India (“RBI”) from the last few months has been working towards aligning the regulations for HFCs with the extant regulations applicable to non-banking financial companies (“NBFCs”). This initiative comes in response to the evolving financial landscape and aims to enhance the stability and operational efficiency of HFCs. One key aspect of this alignment is the stricter regulatory framework for accepting public deposits, which is already in place for NBFCs. By extending these provisions to HFCs, RBI seeks to maintain a uniform approach for managing systemic risks and improving the resilience of financial institutions that play an important role in the housing sector. One of the primary ways HFCs raise capital from the capital markets for their lending activities is through the issuance of non-convertible debentures (“NCDs”). This financial instrument has proven to be an efficient method of financing for HFCs, as they provide an avenue to attract both institutional and retail investors. However, in recent years, the regulatory framework governing HFCs and their ability to issue NCDs has undergone significant changes. This evolution reflects a broader transformation in India’s financial sector, as regulators seek to ensure a stable, transparent, and sustainable environment for both lenders and borrowers. This article examines the role of HFCs in India, the significance of NCDs in their capital structure, the changing regulatory landscape that governs their issuance and the future outlook of HFCs. 2. Regulatory Landscape for HFCs issuing NCDs The regulatory framework surrounding HFCs and their issuance of NCDs has evolved significantly over the years, shaped by changing economic conditions, market dynamics, and the need to maintain financial stability in the housing finance sector. In the early stages, there were limited regulations specifically addressing the issuance of NCDs by HFCs. The concept of HFCs began gaining popularity in the 1980s, and the National Housing Bank (“NHB”) was established in 1988 to regulate and promote the housing finance sector in India. The regulatory framework during that time was minimal, as the industry was still in its nascent stages. However, as HFCs started to grow, the need for clear and comprehensive regulations became evident. The government and regulatory bodies, including the NHB, took steps to ensure that HFCs operated within a structured framework to safeguard investors' interests and maintain financial stability in the housing sector. HFCs in India operate under a multifaceted regulatory framework that involves various institutions. The primary regulatory authority is the NHB, which governs the operations of HFCs under the National Housing Bank Act, 1987. The NHB issues guidelines related to capital adequacy, liquidity, asset quality, and other operational aspects. The NHB ensures that HFCs operate under prudent financial and regulatory guidelines, ensuring their sustainability and their ability to support the housing sector. The RBI plays an indirect but significant role in regulating the financial health and stability of HFCs and their issuance of NCDs. In addition to the NHB and RBI, the Securities and Exchange Board of India (“SEBI”) regulates the issuance of listed NCDs by HFCs, especially when these instruments are offered to the public. SEBI has regulations in place for public offers and private placements of debt securities, with a focus on protecting the interests of investors. Together, these institutions provide a comprehensive regulatory framework that governs the issuance of NCDs by HFCs in India, balancing financial stability, market integrity, and investor protection. 3. The Role of NCDs in the capital structure of HFCs HFCs require substantial capital to fund their core operations, which primarily involve disbursing loans for housing projects. The capital structure of HFCs typically includes a mix of equity, debt, and hybrid instruments, with NCDs being one of the most important debt instruments. The issuance of NCDs allows HFCs to raise significant amounts of capital without diluting ownership, as is the case with equity. This is particularly important for privately held HFCs that want to retain control over their operations while expanding their capital base. The issuance of NCDs strengthens the debt portion of the capital structure, helping HFCs to meet their liquidity and capital adequacy requirements. NCDs are particularly important during periods of high demand for housing finance, as they provide a stable and predictable source of funding.  4. Recent Regulatory Changes Impacting NCD Issuance by HFCs In January 2025, RBI issued a circular to revise the regulations for the private placement of NCDs having maturity of more than one year by HFCs. The regulations for the private placement of NCDs by HFCs are now aligned with those applicable to NBFCs. Historically, HFCs have had their own set of guidelines under the Master Direction on Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021. However, the regulations governing HFCs and NBFCs were not fully aligned, despite the fact that both types of institutions operate in the broader financial ecosystem. The move to harmonize the regulatory guidelines for the private placement of NCDs aims to streamline these processes, ensuring a more uniform framework that can be applied across both sectors. Key Changes in the Regulatory Framework a) Auditor’s certification One of the significant changes brought about by the revised guidelines is that the requirement to obtain a certification from an auditor to ensure compliance with certain financial norms has been removed. However, it is important to note that this does not mean auditors are no longer involved in the financial scrutiny of HFCs. Auditors will still perform other essential duties such as auditing financial statements and ensuring transparency, but the certification specifically related to compliance with certain regulations has been removed. The auditors will be required to provide a peer-to-peer certificate in respect of each issuance. b) Categorization of NCDs This segmentation is made to differentiate between the smaller and larger investment group and the regulatory requirements will vary accordingly. NCDs with a maximum subscription of less than INR 1 Crore per subscriber: Under this category, the number of primary subscribers are capped. This restriction ensures that the issuance is kept relatively controlled and manageable, reducing the risks associated with a large number of individual investors. Additionally, these NCDs must be fully secured, which means that investors will have some form of collateral or guarantee backing the NCDs, offering additional security in case of a default. NCDs with a minimum subscription of INR 1 Crore and above: Under this category, NCDs will be available to investors who are willing to make substantial investments. The higher minimum subscription ensures that only institutional or high-net-worth investors are involved in this segment, aligning the fundraising efforts with a more sophisticated investor base. Additionally, these NCDs can be unsecured and such NCDs will not be treated as a deposit. This categorization aims to prevent the dilution of regulatory oversight and ensures that appropriate safeguards are in place for different types of investors. The restriction on the number of investors reflects the RBI’s aim to balance investor access with the need for careful risk management and transparency. This approach also safeguards the interests of smaller investors by preventing them from getting involved in overly complex or high-risk financial instruments without appropriate safeguards. 5. Future outlook for HFCs and NCDs As the housing sector continues to evolve, the role of HFCs and NBFCs is likely to expand further. The demand for affordable housing is expected to remain strong, especially in developing economies where urbanization and population growth continue to drive the need for new housing units. Technological advancements in the financial sector are likely to have a significant impact on the issuance of NCDs. These innovations could make the process more efficient, transparent, and accessible to a broader range of investors. Digitalization may also lead to more efficient processes and better investor access. The regulatory trend seems to be heading toward more stringent norms for NCD issuances. This could include higher disclosure requirements, better risk management practices, and more conservative leverage limits. As the market continues to evolve, HFCs must adapt to these regulatory changes while leveraging new opportunities for growth. By aligning with these regulations and maintaining a strong focus on financial inclusion, HFCs can continue to play a key role in addressing India’s housing needs, ultimately contributing to the country’s economic development. 6. Key Takeaways The regulatory landscape for HFCs and the issuance of NCDs has evolved significantly in recent years. While these changes have posed challenges for HFCs, they also offer opportunities to strengthen financial stability, enhance investor protection, and promote transparency. By adapting to these regulatory shifts, HFCs can continue to play a crucial role in the capital structure of HFCs, providing them with the necessary funds to meet the growing housing needs of the population while maintaining a sustainable growth trajectory in an increasingly complex financial environment. As the financial sector continues to evolve, HFCs will need to adapt to these changes, ensuring that they remain competitive, transparent, and capable of managing the risks associated with issuing NCDs. With the continued support of regulators and investors, HFCs are well-positioned to drive the growth of the housing finance sector in the coming years. The RBI’s revised guidelines for the private placement of NCDs by HFCs mark a crucial step toward bringing more consistency, uniformity and transparency to the housing finance sector. By aligning these regulations with those of NBFCs, the RBI ensures that HFCs adopt better governance practices, stronger investor protections, and more structured fundraising approaches. This regulatory change ensures that HFCs adopt a structured and risk-reduced approach, similar to the NBFCs, when raising funds through private placements. By requiring a board-approved policy and investor protections, the RBI seeks to strengthen financial stability and boost investor confidence in the housing finance sector. Under the revised norms, HFCs will need to adjust their fundraising strategies to meet the revised regulatory framework, reinforcing governance and risk management practices within the industry. These changes are expected to benefit both investors and institutions, contributing to the overall stability and growth of the housing finance sector in India. Looking ahead, the demand for housing finance is expected to remain strong, and NCDs will continue to play a critical role in the capital structure of HFCs. Regulatory developments, technological innovations, and growing investor interest are likely to shape the future of NCD issuance in the housing finance sector, making it an exciting space to watch in the coming. Authors: Apurva Kanvinde and Harshit Khandelwal    

 1. INTRODUCTION Securitization is gaining momentum in India and is developing and enhancing the financial markets. Boost in securitization is a sign of developed and advanced financial market of a country. In securitization, when the instrument gets listed on the stock exchange, it is governed by Securities and Exchange Board of India (“SEBI”). SEBI has recently released a consultation paper[1] proposing a review of the SEBI (Issue and Listing of Securitized Debt Instruments and Security Receipts) Regulations, 2008[2] (“SDI Regulations”), to address the evolving landscape of listed securitization in India and to capture changes pursuant to the developments in this dynamic finance market since the issue of SDI Regulations. This review aims to update existing regulations with the master direction issued by the Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021[3] (“RBI SSA Directions”) issued in 2021 for pass through certificates (“PTCs”), enhance transparency, safeguard investor interests and enhance the regulatory framework governing securitized debt instruments (“SDI”) in India. Securitization is a process in which receivables / assets are pooled together and then re-packaged into instruments known as PTCs. PTCs when listed on the stock exchange are known as SDIs and are governed by the norms and framework as prescribed by SEBI including SDI Regulations. The cash flow from the underlying receivables / assets is passed on to the investors or holders of PTCs / SDIs. Securitization allows the originator to convert illiquid assets into liquid ones, providing an alternative source of funding. SDIs provides access to these originators to the capital markets. As per the market study, not only banks and financial institutions, but a lot of corporates and businesses (including start-ups) have opted SDIs as a mode of raising funds. From a reading of the consultation paper, it appears that SEBI intends to make this product available to only institutional investors despite retail investors being an integral investor class for this product. Further, while setting out guidelines of listed securitisation and ensuring investor protection and transparency in the capital markets, SEBI has gone a step forward in regulating a product that is already regulated by RBI for securitisation by financial institutions. This may lead to inconsistencies in the two regulations and overlap as regards securitization transaction of financial institutions. 2. ANALYSIS (a) Ticket Size Another proposal by SEBI is the introduction of a minimum ticket size of INR 1,00,00,000/- (Indian Rupees One Crore Only) for investments in SDIs. This proposal will make the investments in SDIs less attractive for retail investors and will eventually reduce / halt the retail participation in SDIs. While the intention of SEBI may be to only make this product available to sophisticated institutional investors that understand this product, retail investors being a key class of investors in this product, this move could reduce the overall depth and diversity of market participants, potentially leading to lower demand and less liquidity in the market for SDIs. The minimum ticket size may not be a vital factor for consideration for the institutional and sophisticated investors to invest in SDIs. Considering how SEBI has been active in making changes in the debt space to make a conducive environment for retail participation, the high-ticket size for SDIs wipes out the interest of the retail investors all together. In fact, in cases of public issue of debentures, the ticket size is as low as INR 1,000/- (Indian Rupees One Thousand Only). The consultation paper lacks in recognising the difference between public and private issue of SDIs and makes no distinction for a varied ticket size. Further, the alternative investment funds that accepts investment from sophisticated and institutional investors have a ticket size as high as INR 1,00,00,000/- (Indian Rupees One Crore Only). (b) Track Record and Operational Experience Requirements SEBI proposed that the obligors and originators must necessarily have a track record of operations of 3 financial years which resulted in the creation of the type of debt or receivables that the originator is seeking to securitize. It also requires originator and obligor to have a business relationship for at least 3 years. This proposal lacks in identifying the difference between the business model of an RBI regulated entity (like banks and financial institutions) and non-RBI regulated entity (like a manufacturer, distributor, developer, etc.). Use of SDIs by both such entities differ in purpose and business and accordingly there cannot be uniform rules applicable for operations. For a RBI regulated entity, where securitization is also governed by RBI SSA Directions, there is no such requirement of 3 years track record of operations or a lending relationship. These kinds of restrictions create practical challenges at the time of pool selection/building relationships and eventually leads to discouragement for opting capital markets route out of the fear of scrutiny, non-compliance and penalty by the regulators. For non-RBI regulated entities, the meaning of debt or receivables is quite distinct. These entities undertake securitization of lease rental receivables, trade receivables, warehousing, etc. and not of loans and advances. The obligors in case of a non-RBI regulated entities are businesses and corporates unlike in an RBI regulated entity where an obligor is usually an individual / corporate taking loans and advances. In such circumstances, it can be difficult for obligors and originators to showcase performance history and business relations for 3 years. It can prove to be more complex for obligors and originators to develop a pool that can be securitized keeping in mind the costs, compliances and liabilities for issue of SDIs.  Besides, the track record of operations and timeline of business relations cannot be a criteria to determine and anticipate the possibility of performance of the pool of assets. These proposals will lead to market participants rather opt for other financing options like direct assignment, securitization by issue of unlisted instruments, Trade Receivables Discounting System, traditional methods of fund raising etc. (c) Minimum Risk Retention (“MRR”) SEBI proposes to align the MRR requirement with that as provided in the RBI SSA Directions. However, it fails to provide the exemptions introduced over a period of time after acknowledging the development in the market, leading to inconsistencies between the regulations. It proposes that the originators must maintain MRR of 10%, however where receivables have a scheduled maturity of 24 months, the originator must maintain an MRR of 5%. While SEBI attempts to align the MRR requirements with the RBI SSA Directions, in our view it must also consider in providing the exemptions for residential mortgage-backed securities as identified and evolved in the RBI SSA Directions of 2021 after a lot of deliberation and analysis from the market performance. Further, while aligning the MRR requirements by SEBI for RBI regulated entities, SEBI seems to have disregarded securitisation transactions by non-RBI regulated entities that get listed. SEBI must consider acknowledging the securitization by non-regulated entities and addressing the issues of maintaining MRR in different forms by such entities. For example, in a securitization of asset lease rental, the asset is owned by the originator at all times. In some cases, the asset may also be secured by the originator Thus, prescribing MRR over and above the asset ownership or asset collateralisation can be quite onerous for these originators. As long as the economic interest is retained by the originator in any form, the MRR must be recognised with a distinctive understanding and not in the manner it is viewed for RBI regulated entities. SEBI, as the capital markets regulator, may instead focus on setting out norms for adequate disclosures, accountability and transparency and appointment of intermediaries to conduct due diligence to protect the investors in listed securitisation. (d) Minimum Holding Period (“MHP”) SEBI proposes to align the MHP requirement with that as provided in the RBI SSA Directions. This can be aligned for an RBI regulated entity for uniformity between the PTCs and SDIs, however SEBI must exempt non-RBI regulated entities from complying with the MHP requirement as the fund raising by non-RBI regulated entities outside the debt capital market is more relaxed and with lesser compliance burden. Having MHP requirements for such entities will incentivise non-RBI regulated originators for opting other methods of fund raising and discourage use of SDIs. The assets of these originators are not as freely transferable and liquid like in the originators belonging to the finance market, and accordingly, the ‘skin in the game’ can be showcased by the MRR itself and MHP requirements can prove to be quite redundant for the non-RBI regulated entities. (e) Modification in the definitions of Debt / Receivables The proposal calls for a definition of “debt” and “receivables,” terms that are critical in the context of SDIs. SEBI has suggested to specifically and exclusively include listed debt securities and trade / rental / leasing receivables in the definition. The definition seems to be quite restrictive, and SEBI must consider providing a green flag for allowing securitization of any such mechanism that has a predictable cashflow. This will enable unique structures to be formed in the market and more creative innovations to be explored that will lead to development of new asset classes for investors. Further, in order to protect investors, SEBI may instead set out higher thresholds for disclosures and due diligence or consider introducing a minimum rating requirement for certain type of trades or a requirement of mandatory appointment of SEBI registered intermediaries or mandatory thresholds for anchor investor participation etc. instead of removing certain sectors and type of receivables from the purview of listed securitisation. (f) Limitation on exposure of Obligor SEBI proposes that no single obligor i.e., the party responsible for repaying the debt shall contribute more than 25% (twenty-five percent) to the overall asset pool, however this provision is not in line with the RBI SSA Directions which expressly permits single asset securitization. In fact, securitization is a key liquidity option available for non-RBI regulated entities in the business of huge equipment, land leasing etc., or even RBI regulated entities desirous of doing single bond securitisation and prohibiting the same from the listed markets can be a hit for deepening the listed debt market in India. This can also be a loss of opportunity for these entities to seek more liquidity by restricting the wide gamut and ambit of the listed markets of India. Additionally, the essence of securitisation lies in redistribution of risks. In cases of huge and concentrated asset pools, securitisation will serve as a tool to redistribute risk. Depriving the market of single asset securitisation or highly concentrated asset securitisation will lack in serving the purpose of redistribution of risk. Further the proposal that requires the pool to be homogenous is not favourable for the new participants and non-RBI regulated entities, as it will make their entry very restrictive in the market. Even the RBI SSA Directions permits the securitization of heterogenous assets and prohibiting the same hereunder shall not be a positive move for this evolving and developing market. (g) Limitation on number of investors SEBI proposed limiting the number of persons to whom invitation or offer can be made for issuance of SDIs on a private placement basis to 200 persons for both primary and secondary market. This proposal is restrictive in nature and is also not in line with RBI SSA Directions, which specifically restricts the number of investors in primary market and not in secondary market. In fact, no other regulatory authority has prescribed limitation on the secondary market. While the proposal seems to be an attempt to align with the requirements of the Companies Act, 2013 (“Act”) which prescribes that an offer for private placement must be made to not more than 200 people in a financial year, it is pertinent to note that this is only in case of primary market offering. The Act further stipulates that in case offer is made to more number of people than the prescribed limit within a given period of time, then the same shall be deemed to be a public issue. However, the proposal is further restricting the transactions in the secondary market as well. The very essence of the instrument being listed gets defeated if such cap of maximum number of investors is imposed in the secondary market. Additionally, this can provide difficulties in giving exit to investors, especially if the ticket size shall be as high as INR 1,00,00,000/- (Indian Rupees One Crore Only). (h) Dematerialization One of the cornerstone proposals is the mandate to issue SDIs in dematerialized form only. This recommendation comes in response to the growing need for greater transparency, ease of trading, and reduction in the operational risks associated with physical securities. The move is also expected to help in better monitoring and tracking of SDI ownership. As the entire process becomes electronic, it would be easier for regulators to track ownership changes and prevent fraudulent activities. Steadily, SEBI is ensuring that all listed capital market instruments are issued and traded in dematerialised form only. This proposal directly supports the mandatory dematerialisation requirement of the government and the notification issued by the ministry of corporate affairs[4] that is encouraging dematerialisation of securities. (i) Appointment of Trustee SEBI has proposed to appoint only a SEBI registered debenture trustee to act as the trustee for the securitization transaction. Proposals are made for aligning the provisions for removal and obligations of a trustee with that of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. Removal of scope of appointing non-SEBI registered trustees shall make the process of securitization more secured and investor friendly. It will ensure that the trustees are at all times under the scrutiny and audit of the regulator. 3.KEY TAKEAWAYS SEBI’s proposals to the framework for SDIs aims to standardize and regulate the process, but it introduces several challenges that could potentially stifle market growth and innovation. While the intent of these proposals is to streamline the securitization process and ensure greater transparency, the lack of differentiation between RBI-regulated and non-RBI-regulated entities poses significant concerns, particularly in terms of the eligibility criteria and operational requirements for originators and obligors. While the consultation paper has identified the gaps and grey areas in the SDI market faced by the market participants, some of the proposals fail to resolve the issues and make SDI a more attractive product. The business model of RBI regulated, and non-RBI regulated entities differ in nature and therefore, certain provisions cannot be applied to RBI regulated, and non-RBI regulated entities in the similar manner, which eventually makes this proposal less effective / unfavourable in nature. The need to regulate an already regulated product by RBI in a manner that at some places is non consistent may lead to chaos and overlap between regulations. These changes are expected to attract institutional investors however, it will eventually reduce / halt the retail participation in SDIs and will make the instrument less attractive. SEBI’s proposals aim to bring uniformity and structure to the securitization process, they do not seem to adequately address the unique challenges faced by non-RBI regulated entities and could inadvertently reduce the attractiveness and effectiveness of SDIs as a financing tool. A more nuanced approach, recognizing the differences between regulated and non-regulated entities, and offering flexibility in areas like track record requirements, MRR and MHP, is crucial for fostering a robust and inclusive securitization market in India. Authors: Apurva Kanvinde,Smit Parekh and Harshit Khandelwal Footnotes [1]  SEBI Consultation Paper dated November 1, 2024 https://www.sebi.gov.in/reports-and-statistics/reports/ nov-2024/consultation-paper-on-review-of-sebi-issue-and-listing-of-securitised-debt-instruments-and-security-receipts-regulations-2008_88172.html [2]  SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 - https://www.sebi.gov.in/legal/regulations/aug-2023/sebi-issue-and-listing-of-securitised-debt-instruments-and-security-receipts-regulations-2008-last-amended-on-august-18-2023-_76336.html [3] SSA Directions https://www.rbi.org.in/scripts/bs_viewmasdirections.aspx?id=12165 [4]  MCA Notification dated 27th October 2023 - https://www.mca.gov.in/bin/dms/getdocument?mds=Zv NqoKdfvPrRcqeoGzGdDg%253D%253D&type=open