Argus Partners

Introduction Clinical Trials have been critical to the healthcare sector, serving as the cornerstone of drug development and medical device safety. Without Clinical Trials, it would be impossible to characterize the benefits and risks of a treatment or evaluate the efficacy of a medicine. The market for Clinical Trials in 2024 has been valued at USD 1.42 billion and is expected to grow at a CAGR of approximately 8% (eight percent) until 2030.[1] The Indian government basis the trends of budgetary allocation has further been observed to have steadily increased its budget allocations for health research indicating a steady 11% increase in budgetary allocation in the past years currently making the sum total of the budgetary allocation to health research to INR 3,901 crores.[2]   Additionally, fiscal incentives under the Income Tax Act, 1961, such as allowing up to 100% tax deductions on expenditure for scientific research including clinical drug trials, coupled with the product patent regime under the Patents Act, 1970 ensuring strong protection for proprietary drugs, incentivized multinational corporations to establish and expand in-house research and development in India.   Foreign Direct Investments in India In lieu of the promotion of clinical research through financial incentives and requisite patent protection being provided, India has observed a steady influx of foreign direct investments in pharmaceutical and medical devices sector. For instance, in the previous financial year, India recorded foreign direct investment (“FDI”) inflows of INR 19,134 crores.[3] While the Consolidated FDI Policy, 2020 (“FDI Policy”), as well as the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (“NDI Rules”) do not provide a specific classification for clinical research organizations (“CRO”)[4] under any business sectors explicitly, resulting in such unclassified activities to fall under the residual category for which 100% FDI is permitted under the automatic route, subject to applicable laws, regulations, security, and other conditionalities.   Regulatory Framework With the growing emphasis on incentivizing clinical research in India, it became necessary to regulate and streamline clinical research processes with patient safety as the primary consideration. To this end, the licensing and regulatory framework in India was further strengthened through the introduction of the New Drugs and Clinical Trials Rules, 2019 (“NDCT Rules”). In the present regulatory framework, clinical research in India is primarily governed by the NDCT Rules, which have superseded the earlier provisions of Schedule Y of the Drugs Rules, 1945. These rules were introduced to streamline the regulatory process, enhance participant protection, and align India's clinical research regulations with international standards. This article provides an overview of the regulatory framework governing the conduct of clinical research under the NDCT Rules read with the Drugs and Cosmetics Act, 1940 and the emerging legal perspective and challenges in clinical research in India.   NDCT Rules regulates the following forms of clinical research: (i) clinical trials (as defined under NDCT Rules); (ii) bioequivalence and bioavailability studies; (iii) biomedical and health research.   Stakeholders of Clinical Research Clinical research refers to the systematic study of pharmaceutical products in human participants to evaluate their safety, efficacy, and overall risk–benefit profile prior to regulatory approval and commercial distribution. The conduct of such research typically involves three key entities: the pharmaceutical companies (“Sponsors”), contract research organizations (“CROs”), and ethics committee. With the increasing complexity and scale of clinical research, Sponsors engaged in the manufacture of drugs for global distribution are increasingly relying on CROs to assist in the design, management and conduct of clinical research. To ensure that CROs possess the requisite competence, including infrastructure, qualified personnel, and quality systems to undertake clinical research-related activities, the revised regulatory framework prescribes specific obligations such as appointing responsible and trained personnel, maintaining documented standard operating procedures, ensuring proper delegation of trial-related duties, implementing quality assurance and control mechanisms, regularly training staff, ensuring investigator preparedness, maintaining comprehensive trial records for prescribed periods, and upholding strict confidentiality and regulatory compliance throughout the conduct of the study. To regulate and streamline the operations of CROs, the new regulatory framework mandates registration of the CROs with the Drugs Controller, India before conducting any Clinical Trial, bioavailability/ bioequivalence study or biomedical and health research. Applications for such registration must be made in Form CT-07B. Registered CROs must comply with good clinical practices guidelines for the conduct of clinical studies in India, formulated by the Central Drugs Standard Control Organization and adopted by the Drugs Technical Advisory Board and maintain proper documentation.   Stages of Clinical Research Pre-clinical studies Prior to undertaking human clinical research in India, one of the general principles under NDCT Rules is to first undertake animal clinical testing, such testing may include animal pharmacology data and toxicology data. However, the Indian government to ensure ethical pre-clinical studies ensures that ethical standards with minimal animal cruelty are undertaken and has established the Committee for the Purpose of Control and Supervision of Experiments on Animals (“CPCSEA”), which has the authority to regulate and oversee all animal experimentation in the country under Prevention of Cruelty to Animals Act, 1960. For any pre-clinical studies requiring animal experimentation being undertaken, an entity requires the same to be registered with CPCSEA under the Breeding of and Experiments on Animals (Control and Supervision) Rules, 1998. Establishments registered under CPCSEA are further mandated to constitute an Institutional Animals Ethics Committee (“IAEC”). IAEC once constituted is required to review and approve all types of protocols for research involving small animal experimentation before the start of the study.[5] For approval of experimentation on large animals, the request should be forwarded to CPCSEA in the prescribed manner with recommendation of IAEC. The primary duty of IAEC is to focus mainly on ensuring ethical and methodical handling of animals during and after experiments, so that they have less suffering.   Furthermore, IAEC is required to maintain detailed records of experiments, including particulars about animals used, in specified formats and inspect the animal housing facilities from time to time.   Human Clinical Research Pharmaceutical Clinical Trials Phases of Clinical Trials Under NDCT Rules, ‘Clinical Trials’ are defined as systematic human studies that generate data on clinical, pharmacological, and adverse effects to determine safety, efficacy, and tolerance of new or investigational drugs. The development process consists of four phases as provided below: Registration Requirements Under the NDCT Rules, Clinical Trials require permission from the Drugs Controller, India. This centralized approval system ensures consistent application of standards across the country. Applications must be submitted in Form CT-04 with supporting documents as specified in the Second Schedule and fees as specified in the Sixth Schedule. Upon scrutiny, if the authority is satisfied that all requirements have been met, it may grant permission for conducting Clinical Trial. Such decisions must be taken within 90 working days, failing which the application shall be deemed to be approved. In such cases, the applicant must notify the Authority, which shall be taken on record as deemed approval and treated as legally valid authorization to initiate the Clinical Trial. All trials must be registered with the Clinical Trial Registry of India before enrolling the first subject. This registration requirement enhances transparency and allows public access to information about ongoing trials. Trials must follow the general principles and practices specified in the First Schedule of the NDCT Rules.   Role of ethics committees and informed consent Any entity intending to undertake Clinical Trials should obtain the approval of an ethics committee. Such ethics committees must be registered with the Drugs Controller, India in Form CT-01. This registration ensures that ethics committees meet minimum standards for protecting research participants. They must comprise at least seven members from diverse backgrounds including medical, non-medical, scientific, and non-scientific areas, with at least 50% (fifty) being non-affiliated with the institution. This composition requirement ensures independent oversight and diverse perspectives. The committee must include at least one lay person, one woman member, one legal expert, and one independent member from another related field. For reviewing protocols, a quorum of at least five specific members is required. Ethics committees are responsible for safeguarding the rights, safety, and well-being of trial subjects.   Additional types of clinical research  Regulatory framework for Bioavailability and Bioequivalence Under the NDCT Rules, any person, institution, or organization intending to conduct a bioavailability study or bioequivalence study of a new drug or investigational new drug in human subjects must obtain prior permission from the Drugs Controller, India. This centralized approval system ensures uniform standards of review and monitoring. Applications must be submitted in Form CT-05 with supporting documents as specified in the Second Schedule and the prescribed fees under the Sixth Schedule. Upon review, the Central Licensing Authority may grant permission in Form CT-07. In certain cases, deemed approval may arise under the proviso to the prescribed timelines, in which event the applicant must notify the Central Licensing Authority in Form CT-07A prior to initiating the study.   All bioequivalence and bioavailability studies must be reviewed and approved by a registered Ethics Committee before enrolment of the first subject. Ethics Committees are required to be registered with the Drugs Controller, India in Form CT-01 and must comply with the composition and quorum requirements under the Rules to ensure independence and adequate representation. The oversight of Ethics Committees is critical to safeguarding the rights, safety, and well-being of study participants. In addition, permissions granted under Form CT-07 remain valid for a period of one year, unless suspended or cancelled earlier, and all conditions applicable to Clinical Trials of new drugs apply mutatis mutandis to bioequivalence and bioavailability studies.   Regulatory Framework for Biomedical and Health Research For biomedical and health research not involving new drugs, the ethics committees must be registered with the National Ethics Committee Registry for Biomedical and Health Research. This separate registration pathway acknowledges the different risk profiles of such research.   ICMR Guidelines In addition to the above specified statutory regulations, ICMR has issued guidelines that govern research in specific domains such as stem cell research, gene therapy and other advanced biomedical areas. Where clinical research is undertaken in these specialised fields, the respective ICMR guidelines are required to be complied with, in addition to the general regulatory framework.   Alternative Medicine Research Ayurvedic, Siddha, and Unani Clinical Research: For traditional medicine systems, researchers must follow AYUSH guidelines including the Good Clinical Practice Guidelines for clinical research in Ayurveda, Siddha and Unani Medicine, 2013 and ICMR Guidelines for Biomedical and Health Research Involving Human Participants.   Inspection and Compliance Clinical Trial sites and bioavailability or bioequivalence is subject to inspection by authorized officers from the Drugs Controller, India. Non-compliance can result in suspension or cancellation of trial permissions, rejection of trial results, or debarment of investigators and Sponsors conducting future trials. Accordingly, CRO is required to ensure that all necessary documentation is maintained for at least 5 (five) years after trial completion or 2 (two) years after marketing approval, whichever is later.   Serious Adverse Events Under the NDCT Rules, an “adverse event” is defined as any untoward medical occurrence (including a symptom, disease, or abnormal laboratory finding) during treatment with an investigational drug or pharmaceutical product in a patient or trial subject, which does not necessarily have a relationship with the treatment. A SAE refers to any such occurrence during a trial or study that results in death, permanent disability, hospitalization (or prolongation thereof), life-threatening events, congenital anomaly, or other significant incapacity. India’s regulatory framework imposes stringent obligations on Sponsors, investigators, and Ethics Committees with respect to the reporting, review, and redressal of serious adverse events (“SAEs”), across all categories of clinical research including (i) Clinical Trials of new drugs or investigational new drugs, (ii) bioavailability and bioequivalence studies, and (iii) biomedical and health research.   Clinical Trials of new drugs or investigational new drugs Under the NDCT Rules, Sponsors are required to provide free medical management for any trial-related injury, for as long as required. In the event of a trial-related death or permanent disability, financial compensation must be paid to the subject or their legal heirs according to the formula specified in the rules. The initial report for serious adverse events must be reported to the Drugs Controller, India, Ethics committee within 24 (twenty four) hours and a detailed report would be required to be submitted within 14 (fourteen) days, in each case, from the time of occurrence of such event. This reporting requirement enables timely investigation and intervention. Further, post-trial access to investigational drugs may be provided free of cost under specific conditions.   Bioavailability and bioequivalence studies The same standards for medical management, SAE reporting, and compensation applicable to Clinical Trials will apply mutatis mutandis to bioavailability and bioequivalence studies.   Biomedical and health research Such research must comply with the National Ethical Guidelines for Biomedical and Health Research Involving Human Participants, 2017 issued by the Indian Council of Medical Research. This regulation mandates registration with the Clinical Trial Registry of India prior to conducting any clinical research for biomedical and health research, obtaining informed consent from each participant, and maintaining quality assurance throughout the trial. Sponsors are also obligated to report SAEs within prescribed timelines, provide free medical management for adverse events (where such events are causally linked to the research), and offer compensation for trial-related injuries.   Manufacturing Permission for New Drugs and Investigational New Drugs Under the NDCT Rules, no person may manufacture a new drug or an investigational new drug for the purposes of conducting a Clinical Trial, bioavailability or bioequivalence study, or for examination, test, and analysis, without prior permission from the Central Licensing Authority. An application for such permission must be submitted in Form CT-10, along with the documents prescribed in the Fourth Schedule and the applicable fee under the Sixth Schedule.   On receipt of the application, the Central Licensing Authority scrutinizes the information provided and may, if satisfied that the requirements of the Rules are met, grant permission in Form CT-11 within ninety working days. If deficiencies are noted, applicants are given an opportunity to rectify them within a specified period. Where no communication is received within ninety working days, permission is deemed to have been granted, subject to the filing of Form CT-11A for record. The permission remains valid for three years, extendable by one year in exceptional cases.   Emerging Legal Perspectives and Challenges in Clinical Research in India While NDCT Rules have modernized India’s clinical research ecosystem, new-age technologies and evolving research models bring fresh legal challenges. Policymakers, regulators, Sponsors, and CROs must anticipate and address these to sustain India’s competitiveness while ensuring participant protection:   Personal Data Protection Framework The present regulatory framework governs ‘sensitive personal data’ which includes medical records and history.[6]Sponsors and the CROs handling such sensitive personal data must obtain consent before collection, use the data only for the stated purpose, maintain reasonable security practices, and allow individuals to review, correct, or withdraw their data. They are also required to adopt a documented privacy policy, appoint a grievance officer, and ensure lawful transfer of such data outside India.   India has recently enacted the Digital Personal Data Protection Act, 2023 (“Act”) and issued draft Digital Personal Data Protection Rules, 2025 (“Draft Rules”), which together create a comprehensive framework for safeguarding personal data in the digital space. However, these provisions are not yet in force. Clinical research activities may qualify for an exemption under the Act, where personal data is processed solely for research purposes.[7] This exemption is not automatic, the Draft Rules clarify that such processing must comply with standards set out in the Second Schedule of the Draft Rules, including lawful use of data, collecting only what is necessary, ensuring accuracy, limiting how long data is kept, and adopting reasonable security safeguards.[8] Further, the entity processing such data must maintain accountability for effective observance of these standards while ensuring the data is not used to make decisions specific to a Data Principal.[9] If these conditions are met, Sponsors or CROs conducting clinical research may be eligible for exemption from the provisions of the Act.   These regulations further assume particular significance in the context of genomic data-based trials, which are expanding in oncology and rare diseases such as lysosomal storage disorders, thalassemia, muscular dystrophies, and other neuromuscular conditions. Under the present regulatory framework, genetic data is regarded as sensitive under Indian jurisprudence[10], requiring informed consent that expressly addresses long-term storage, secondary uses, and potential commercialization. Since many genomic datasets are analyzed abroad, their transfer will be subject to government whitelists and the safeguards prescribed under the present regulatory framework i.e., Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, as discussed above until the Act is brought into force. Moreover, because genomic findings may inadvertently reveal health risks for family members, such trials necessitate more sophisticated disclosure and counselling frameworks to uphold ethical standards.   Further, artificial intelligence (“AI”) is increasingly used in clinical research for patient screening, risk prediction, and monitoring, but raises concerns of bias, liability, and ethical compliance. Unlike the US FDA[11], India has yet to establish AI-specific accountability frameworks, making regulatory clarity urgent.   Decentralized Clinical Trials Another emerging concept within the landscape of Clinical Trials is decentralized clinical trials (“DCTs”) leverage digital technologies to conduct research remotely, reducing participant burden and expanding access. Several emerging start-ups are moving into the DCT landscape. However, this emerging approach faces a significant regulatory vacuum in India. The regulations governing Clinical Trials in India lack specific provisions for governing the specific challenges in relation to virtual trials such as confidentiality, data privacy, maintenance of digital trail, electronic consent, acceptable mode of digital Clinical Trials. While telemedicine gained regulatory recognition in 2020[12], these guidelines explicitly exempt research and evaluation activities, leaving DCTs without clear direction for remote participant interactions. While the regulations governing Clinical Trials do not specifically provide for safeguards of the sensitive data collected during the course of Clinical Trials, limited comfort can be drawn from the provisions of Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, which prescribes certain safeguards as specified in the preceding paragraphs. With the global shift toward decentralized methodologies accelerated by COVID-19, this regulatory void presents both challenges and opportunities. Further, the ICMR’s draft guidance on digital health and remote clinical trials (released in May 2025) is the first step toward recognizing e-consent, remote monitoring, and secure data storage as legitimate practices.[13] Yet, these are not binding, and hence, a lack of statutory recognition for e-consent raises enforceability concerns if challenged. Thus, companies must navigate uncertain requirements while regulators have the opportunity to develop forward-looking frameworks that balance innovation with participant protection in India's rapidly evolving clinical research landscape.   Technology-enabled trials tend to blur traditional lines of responsibility. As regards telemedicine trials, in case of an SAE, ambiguity continues to exist on whether liability rests with the principal investigator, the teleconsulting doctor, or the Sponsor. Further, malfunctioning of remote monitoring devices may raise product liability questions and thereby whether manufacturers, CROs, or Sponsors would need to bear responsibility for such liability remains to be clarified. Lastly, current Clinical Trial insurance frameworks may not adequately cover risks from digital interfaces and cross-border data handling[14], which may need to be considered while generally considering revision of frameworks to seamlessly adopt technology-enabled trials in India.   ESG and Responsible Innovation Globally, pharma companies are being evaluated on ESG metrics.[15] Regulators and investors expect evidence that trials recruit across diverse populations and do not exclude marginalized groups. Trial sponsors may soon be required to disclose the carbon footprint of their operations, including trial site infrastructure and digital data centres. Transparent reporting of trial outcomes, adverse events, and data practices is also becoming part of ESG accountability, influencing investment decisions.   Conclusion India’s evolving regulatory ecosystem supports pharmaceutical development through streamlined clinical research rules, structured FDI treatment, and ethical oversight mechanisms. The 2019 reforms ensure participant safety, while sector-specific FDI policies encourage both Sponsor-led and CRO-led research. Additionally, the Act offers research exemptions for entities meeting prescribed data safeguards. Together, these legal, fiscal, and compliance frameworks make India a competitive, secure, and transparent destination for clinical research, medical device testing, and pharmaceutical innovation. However, with the growing global shift towards decentralized clinical trials, India’s current regulatory framework remains silent on key aspects such as virtual participant engagement presenting both challenges and opportunities for policymakers to craft forward-looking regulations that enable innovation while ensuring robust participant protection. Given technological advancements world over, the future of clinical research will likely be shaped by the ability to integrate digital health technologies, AI, genomic safeguards, liability clarifications, and ESG principles. Policymakers must move quickly to align regulations with these global trends, ensuring India remains a hub for responsible and innovative clinical research.   [1]India Clinical Trials Market Size, Share & Trends Analysis Report By Phase (Phase I, Phase II, Phase III, Phase IV), By Study Design, By Indication, By Service Type, By Sponsor, And Segment Forecasts, 2025 – 2030, grandviewresearch (2024) https://www.grandviewresearch.com/industry-analysis/india-clinical-trials-market. [2]Demand for Grants 2025-26 Analysis, prs india (March 01, 2025) https://prsindia.org/files/budget/budget_parliament/2025/DFG_Analysis_2025-26-Health.pdf [3]FDI in India's pharma sector crosses Rs 19,134 crore during 2024-25, economictimes (April 14, 2025) https://cfo.economictimes.indiatimes.com/news/corporate-finance/fdi-in-indias-pharma-sector-crosses-rs-19134-crore-during-2024-25/120268260. [4] ‘Clinical research organization’ or ‘CRO’ wherever referred in this article means a legal entity by whatsoever name called, to which undertakes tasks, duties or obligations regarding clinical trial or bioavailability or bioequivalence study. [5] IAEC can only clear research project proposals that involve experiments on animals higher on the phylogenetic scale than rodents. [6]Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, R. 3. [7]Digital Personal Data Protection Act, 2023, S. 17(2)(b). [8]Digital Personal Data Protection Rules, 2025, Second Schedule. [9]Id. [10]Justice K.S. Puttaswamy v. Union of India 10 S.C.C. 1 (India). [11]US FDA Discussion Paper on AI/ML in Drug Development, 2023. [12]Telemedicine Practice Guidelines, 2020. [13]ICMR Draft Guidance on Digital Health Trials, May 2025. [14] IRDAI (Health Insurance) Regulations, 2016, Regulation 17; see also IRDAI Circular on Clinical Trial Insurance (2021). [15] World Economic Forum, ESG Metrics for Pharma & Biotech (2024).

Introduction On May 27, 2025, the Department of Land Resources under the Ministry of Rural Development invited suggestions and comments on the draft Registration Bill, 2025 (“Bill”). The Bill seeks to replace the existing 117-year-old Registration Act, 1908 (“Act”), with the intent to align the legislative landscape with the needs of today, especially considering the technologies that are available to achieve a near paperless system. The Bill has also proposed various modifications to the existing Act, which have been aimed at addressing certain legacy issues and harmonizing registration requirements across all States. This paper discusses some of the key changes that will come into effect once the Bill is enacted and the impact that these changes will have on transactions in the financing and real estate sectors. Equitable Mortgage Present Position: Pursuant to Section 58(f) of the Transfer of Property Act, 1882 (“ToPA”), a mortgage on a property, may be created by a mortgagor in a notified town, by depositing title deeds pertaining to such property with a creditor or its agent (“Equitable Mortgage”)[1]. The proviso to Section 48 of the Act clarifies that an Equitable Mortgage shall be effective against any registered mortgage deed subsequently executed with respect to the same property. This is an exemption to the rule that a registered document will take effect against any oral agreement relating to the same property.[2]  Proposed Position under the Bill: Under Section 12 of the Bill (which is a non-obstante provision), it has been proposed that a document which sets out the terms and conditions for an Equitable Mortgage shall be mandatorily registrable, except where such instrument is filed under Section 14(3) of the Bill. Under Section 14(3) of the Bill, all banks, financial institutions, and other creditors, in whose favour an Equitable Mortgage has been created, are required to file copies of the title deeds with the relevant registrar, notifying the registrar of the creation of such mortgage. Further, Section 17(2) of the Bill (which corresponds to the proviso to Section 48 of the Act) clarifies that, only an Equitable Mortgage which has been notified to the registrar under Section 14(3) of the Bill will take effect against a subsequently executed mortgage deed for the same property. Analysis and Impact: Typically, creation of an Equitable Mortgage is accompanied by a memorandum from the creditor recording such deposit of title deeds and a declaration made by the mortgagor acknowledging such deposit. While considering whether a document pertaining to an Equitable Mortgage is required to be registered under Section 17 of the Act, the courts in India have time and again drawn a distinction between a memorandum that merely evidences the deposit of title deeds and a memorandum that creates any rights or liabilities pertaining to the Equitable Mortgage[3]. It has been consistently ruled that the former is not required to be registered, but the latter would be a compulsorily registrable document under Section 17 of the Act.[4] This view of the courts has now been included in the provisions of the Bill. Interestingly, it may be noted that, States such as Maharashtra, Tamil Nadu and Gujarat have already incorporated amendments to Section 17 of the Act, mandating registration of all instruments relating to Equitable Mortgages, irrespective of whether such instrument merely records the creation of Equitable Mortgage.[5] Such strict requirements of registration may be diluted once the Bill is enacted, unless these States introduce fresh amendments. It may also be noted that, once the Bill is passed, lenders will have an additional obligation to notify the registrar under Section 14(3) of any Equitable Mortgage created in their favour. Power of Attorney Present Position: A power of attorney (“PoA”) has not been listed as a compulsorily registrable document under Section 17 of the Act. However States such as Gujarat, Kerala, Maharashtra, Madhya Pradesh, Orissa, Rajasthan and Tamil Nadu through their respective state amendments have mandated registration of a PoA relating to transfer of immovable property in certain instances.[6] Further, where the principal has executed the document and given a PoA to its agent for registration of the same, such a PoA must be registered under section 32(c)[7] read with section 33 of the Act[8]. Proposed Position under the Bill: Under Section 12 of the Bill, it has been proposed that a POA authorising transfer of immovable property (with or without consideration) shall be mandatorily registrable, thereby making this requirement uniform across all States. Analysis and Impact: The Supreme Court of India (“Supreme Court”) in the case of Rajni Tandon v. Dulal Ranjan Ghosh Dastidar[9], held that for the purposes of Section 32 and Section 33 of the Act, a PoA need not be registered in instances where a PoA holder himself executes a document on behalf of the principal and then presents that document for execution before the registering officer, as the agent in such cases becomes the executant for the purposes of the Act.[10] However, very recently, in the case of G. Kalavathi Bai v. G. Shashikala[11] the Supreme Court has taken a view which is contrary to its earlier decision in Rajni Tandon v. Dulal Ranjan Ghosh Dastidar[12] and held that, even if an agent signs a document on behalf of the principal, such an agent would still need to comply with the provisions of Section 32 and Section 33 of the Act. Presently, this matter has been referred to a larger bench. With the advent of the Bill, this distinction between the agent acting as an executant of the document (for transfer of immovable property) or simply presenting such document for registration, will become obsolete, since the Bill proposes that “any power of attorney authorising transfer of immovable property” is required to be registered. Lease Present Position: Under Section 17(1)(d) of the Act “leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent” are required to be compulsorily registered under the Act. Pertinently, the definition of ‘lease’ provided in Section 2 (7) of the Act includes “a counterpart, kabuliyat, and undertaking to cultivate or occupy, and an agreement to lease”. Proposed Position under the Bill: While Section 12(1)(d) of the Bill mirrors Section 17(1)(d) of the Act, the definition of lease has been considerably expanded to include amongst others: (i) any instrument by which tolls are let out; (ii) any writing on an application for a lease signifying the grant thereof by, inter-alia, specifying the premium/ rent payable; and (iii) a mining lease for minor minerals. Analysis and Impact: While the definition of a lease under the Act has always been inclusive, the significant expansion of the definition under the Bill brings within its ambit documents which are not strictly construed as leases, including, in certain cases, application letters for leases and acknowledgements thereof. Further, it may be noted that certain States such as Maharashtra, Andhra Pradesh and Bihar[13] have made registration of all lease agreements mandatory irrespective of the tenure of the lease; however, leases with a tenure of less than 1 (one) year are still excluded from registration requirements under the Bill. Agreement for Sale Present Position: Not all agreements for sale (each an “AFS”) are required to be registered under Section 17 of the Act. In fact, by virtue of Section 17(1A) of the Act, only an AFS accompanied by possession as provided in Section 53A of ToPA[14] is mandatorily registrable. Moreover, as per Section 17(2)(v), read with the Explanation to Section 17(2),[15] an AFS (if not covered under Section 17(1A)) has been specifically excluded from the purview of Section 17(1). Proposed Position under the Bill: Under section 12(f) of the Bill, it is proposed that “any document which purports or operates to effect any contract for sale of immovable property, including an agreement for sale” shall be compulsorily registrable. (emphasis supplied) Analysis and Impact: It may be pertinent to note that States such as Gujarat, Kerala, Madhya Pradesh, Uttar Pradesh and Tamil Nadu[16] have made necessary amendments to the Act to provide for mandatory registration of an AFS, irrespective of whether possession of the property is with the transferee. The menace caused by unregistered agreements for sale has also been recognised by the Supreme Court in T.G. Ashok Kumar v. Govindammal,[17] wherein the need for amending the Act to ensure compulsory registration of ‘agreements for sale’ was emphasised. On a separate note, under the Real Estate (Regulation and Development) Act, 2016 (“RERA”), for ‘real estate projects’ (as defined under RERA), promoters are required to execute and register an agreement for sale with the allottee of a unit prior to accepting any amounts exceeding 10% (ten per cent) of the total cost of such unit.[18] Since, the provisions of RERA override the provisions of the Act[19], an AFS for any unit/ plot/ apartment, etc. of a real estate project is already required to be registered. To ensure uniformity, the Bill now proposes to include all agreements for sale within the purview of mandatorily registrable documents under Section 12(1). Construction Contracts & Development Agreements Present Position: The Supreme Court in the case of Sushil Kumar Agarwal v. Meenakshi Sadhu,[20] has distinguished a construction contract from a development agreement as follows: “When a pure construction contact is entered into, the contractor has no interest in either the land or the construction which is carried out. But in various other categories of development agreements, the developer may have acquired a valuable right either in the property or in the constructed area.” (emphasis supplied) Accordingly, while a joint development agreement gets covered within the scope of Section 17(1)(b)[21] of the Act, a simple construction contract would, in ordinary circumstances, be excluded therefrom. It may, however, be noted that construction contracts are registerable in the State of Tamil Nadu pursuant to an amendment made to the Act to this effect.[22] Proposed Position under the Bill: It has now been proposed that “any document which purports or operates to effect any contract for sale of immovable property, including an agreement for sale, developer’s agreement, or promoter’s agreement, by whatever name called, for development of any property or construction of structure” is required to be registered under Section 12(1)(f) of the Bill. Analysis and Impact: As explained by the courts in India[23], typically a construction agreement, unlike a development agreement, does not involve the transfer of any right, title, or interest in the immovable property. However, the provisions of the Bill seek to mandate the registration of such construction contracts wherein the contractor receives not only fees, but also an interest in the property (for example contracts where the contractor receives units/ a share of area in the developed property). Other Notable Changes   Digitalisation The Bill has promoted digitalisation of the process of registration with the introduction of Aadhar based verification and electronic record-keeping. Further, actions required for presenting a document for registration (such as affixation of signatures, fingerprints, photographs etc.) may be done electronically/ digitally.[24] Refusal of registration Section 58 of the Bill proposes to introduce a list of additional grounds upon which a registering officer may refuse the registration of a document, provided that the registering officer is not empowered to adjudicate upon any questions of title or ownership of property. Importantly, there is a statutory bar preventing any other registering officer from registering a document once it has been endorsed with reasons for refusal, unless such officer is directed to do so in accordance with the provisions of the Bill.[25] Cancellation of registered documents Section 64 of the Bill proposes to empower the adjudicating authority to cancel the registration of documents on certain prescribed grounds, including where the instrument was registered based on false information or in contravention of the provisions of the Bill. Further, such an adjudicating authority may either act suo moto or upon receipt of a complaint.[26] Please find a copy of the Registration Act, 1908, here and a copy of the Registration Bill, 2025, here.   This paper has been written by Nidhi Arya (Partner), Rohan Mitra and Dharani Maddula (Associate).   [1] Section 58(f) of ToPA –“Mortgage by deposit of title-deeds.—Where a person in any of the following towns, namely, the towns of Calcutta, Madras, and Bombay, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.” [2] Section 48 of the Act. [3] Sundarachariar v. Narayana Ayyar, A.I.R. 1931 P.C. 36. [4] State of Haryana v. Navir Singh, 2014 (1) SCC 105. Also see Sir Hari Shankar Paul vs Kedar Nath Saha, A.I.R. 1939 P.C. 167, Ramchandra Laxman v. The Bank of Kolhapur A.I.R. 1952 Bom. 315, Chaina Ram v. Jai Roop AIR 2006 Raj 239, and Royal Printing Works v. Oriental Bank of Commerce, AIR 1990 AP 120. [5] Registration (Maharashtra Amendment) Act, 2010, Registration (Tamil Nadu Amendment) Act, 2012 and Registration (Gujarat Amendment) Act, 2008, respectively. [6] Registration (Gujarat Amendment) Act, 2016, Registration (Kerala Amendment) Act, 2012, Registration (Maharashtra Amendment) Act, 2010, Registration (Madhya Pradesh Amendment) Act, 2009, Registration (Orissa Amendment) Act, 2001, Registration (Rajasthan Amendment) Act, 2021, and Registration (Tamil Nadu Amendment) Act, 2012, respectively. [7] Section 32 of the Act – “Persons to present documents for registration.— Except in the cases mentioned in sections 31, 88 and 89, every document to be registered under this Act, whether such registration be compulsory or optional, shall be presented at the proper registration-office,— ….(c) by the agent of such person, representative or assign, duly authorised by power-of-attorney executed and authenticated in manner hereinafter mentioned.” (emphasis supplied) [8] Section 33 of the Act – “Power-of-attorney recognisable for purposes of section 32.—(1) For the purposes of section 32, the following powers-of-attorney shall alone be recognized, namely:— (a) if the principal at the time of executing the power-of-attorney resides in any part of India in which this Act is for the time being in force, a power-of-attorney executed before and authenticated by the Registrar or Sub-Registrar within whose district or sub-district the principal resides;…”. (emphasis supplied) [9] Rajni Tandon v. Dulal Ranjan Ghosh Dastidar, (2009) 14 SCC 782. [10] Also see Amar Nath v. Gian Chand, 2022 2 SCALE 52, and Ashok Kumar v. Sub Registrar Thrithala, 2018/KER/49123. [11] G. Kalavathi Bai v. G. Shashikala (2025 INSC 851). [12] Supra 9. [13] Section 55, Maharashtra Rent Control Act, 1999, Registration (Andhra Pradesh Amendment) Act, 1999 and Registration (Bihar Amendment) Act, 2010, respectively. [14] Section 53A of TOPA, “Part Performance- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has. in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed there for by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.” (emphasis supplied) [15] Section 17(2)(v) and Explanation to Section 17(2) of the Act, “Documents of which registration is compulsory- - Nothing in clauses (b) and (c) of sub-section (1) applies to […] (v) any document other than the documents specified in sub-section (1-A) not itself creating, declaring, assigning, limiting or extinguishing any right, title or interest of the value of one hundred rupees and upwards to or in immovable property, but merely creating a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish any such right, title or interest; […] Explanation - a document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money.” (emphasis supplied) [16] The Registration (Tamil Nadu Amendment) Act, 2012, The Registration (Madhya Pradesh Amendment) Act, 2009, Registration (Kerala Amendment) Act, 2012, The Uttar Pradesh Civil Laws (Reforms and Amendment) Act, 1976 and Registration (Gujarat Amendment) Act, 1982. [17] T.G. Ashok Kumar v. Govindammal (2010) 14 SCC 370. [18] Section 13(1) of RERA. [19] Section 89 of RERA. [20] Sushil Kumar Agarwal v. Meenakshi Sadhu, (2019) 2 SCC 241. Also see Rameshwar v. State of Haryana, (2022) 17 SCC 1, Ashok Kumar Jaiswal v. Ashim Kumar Kar, 2014 SCC OnLine Cal 3497, and SITAC Pvt. Ltd. v. Banwari Lal Sons Pvt. Ltd., 2019 SCC OnLine Del 9044. [21] Section 17(1)(b) of the Act, “Documents of which registration is compulsory- The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely,[…] (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property.” (emphasis supplied) [22] Registration (Tamil Nadu Amendment) Act, 2012. [23] Supra 20. [24] See inter-alia Chapters (VII), (VIII) and (XIV) of the Bill. [25] Section 59(3) of the Bill. Also see Sections 60 – 63 of the Bill. [26] Section 64(3) of the Bill.

I.    Background The real estate sector continues to play a pivotal role in India’s economic development, contributing to an estimate of 13% (thirteen percent) of the India’s GDP in the financial year 2024-25[1]. One of the crucial factors contributing to the growth of the real estate market in India has been the significant reform in the legal landscape, such as the enactment of the Real Estate (Regulation and Development) Act, 2016 (“RERA”), including the establishment of various Real Estate Regulatory Authorities (“Authorities”, each an “Authority”) thereunder, and bolstering of debt recovery laws such as the introduction of the Insolvency and Bankruptcy Code, 2016 (“IBC”). However, these regulatory reforms have also brought about some uncertainties for lenders, and hence, recovery of dues under the regulatory regime governing the real estate market continues to be a significant hurdle for banks and other financial institutions. When financing construction of a real estate project[2], a lender would typically require the promoter to provide security interest over such project, including mortgage over the units proposed to be constructed in such project, together with the undivided proportionate share of the underlying project land attributable to such units. For enforcement of such security interest, various statutory rights are available to lenders, including, inter-alia, under the Securitisations and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI”), the Recovery of Debts and Bankruptcy Act, 1993 and IBC. However, post the introduction of the RERA, lenders have been facing certain unique hurdles in enforcement of their security. One such issue is that lenders are being treated as ‘promoters’ under RERA in certain instances. Another issue is that the Authorities have been time and again imposing additional obligations on lenders to ensure compliance with the provisions of RERA, even though the original onus to comply with these requirements was on the promoters. This paper discusses the critical judicial decisions and the present regulatory environment that has led to the current predicament for lenders in the real estate market. II. Lenders as promoters under RERA It may be noted that a promoter has been defined under Section 2(zk) of the RERA to include “a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees.” (emphasis added)   In one of its earliest decisions on this issue, the Haryana Authority in the matter of Deepak Chowdhary v. PNB Housing Finance Limited.[3] (“Deepak Chowdhary Matter”), took a view that PNB Housing Finance Limited (“PNB”) who was the lender to Supertech Limited (“Supertech”), would fall within the definition of a ‘promoter’ under RERA, as Supertech had assigned its rights in the real estate project to PNB under the garb of the mortgage deed executed by Supertech in favour of PNB. The Haryana Authority interpreted the definition of ‘mortgage’ under Section 58 of the Transfer of Property Act to hold that:                 “By the very definition, vide a mortgage, a transfer of interest in specific immovable property is created for the purpose of securing payment of money. Therefore, by virtue of the definition of the word “assignment” as per Black’s law Dictionary, it includes any person on whom interest is transmitted by a transfer which could include vide mortgage. The definition of the promoter which includes the word “assignee” will therefore take in its purview a bank/financial institution on whom an interest is created by way of transfer i.e. mortgage.” Following the same logic, the Rajasthan Authority in Mukesh Agarwal v. SNG Real Estate Private Limited,[4] referred to the decision of the Haryana Authority in the Deepak Chowdhary Matter and held that the definition of promoter which includes an 'assignee' would take within its purview a lender is whose favour an interest has been created by way of mortgage. It was further held that: “53. Thus, being an assignee of the promoter, the respondent Bank falls within the ambit of the definition of promoter as provided under section 2(zk) of RERA Act. Accordingly, the respondent Bank shall be treated as promoter for all purposes of RERA Act; and, in that capacity, it is liable to fulfill all the obligations of promoter towards the allottees as provided under RERA Act and rules and regulations made thereunder. And, as the respondent Bank is held to be a promoter of the project for the purposes of RERA Act. this Authority has jurisdiction to issue directions to it under section 37 of RERA Act” This view of the Rajasthan Authority was also upheld in an appeal filed before the Rajasthan Real Estate Appellate Tribunal. [5] However, the Rajasthan High Court in the matter of Union Bank of India v. Rajasthan Real Estate Regulatory Authority[6] (“Union Bank Matter”), took a slightly narrower view than that of the Authorities and held that only a lender who has taken any action under Section 13(4) of SARFAESI[7] would be construed to be an assignee of the promoter under RERA The relevant excerpt of the judgement has been reproduced below: “35. Clauses (a), (b) and (c) of sub-section (4) of Section 13 vest power in the secured creditor to take all steps as the borrower himself could take in relation to the secured asset. Clause (d) goes a step further and enables the bank to recover its dues directly from a debtor or the borrower who has acquired any of the secured assets. For all purposes thus the secured creditor steps in the shoes of the borrower in relation to the secured asset. This is thus a case of assignment of rights of the borrower in the secured creditor by operation of law. In other words the moment the bank takes recourse to any of the measures under sub-section (4) of Section 13, it triggers statutory assignment of right of the borrower in the secured creditor. Till this stage arises the bank or financial institutions in whose favour secured interest may have been created may not be in isolation in absence of the borrower be amenable to the jurisdiction of RERA. However, the moment the bank or the financial institution takes recourse to any of the measures available in sub-section (4) of Section 13 of the SARFAESI Act, RERA authority would have jurisdiction to entertain the complaint filed by an aggrieved person.” (emphasis added) There are 2 (two) key takeaways from the decision rendered by the Rajasthan High Court in the Union Bank Matter; firstly as a consequence of taking any action under Section 13(4) of the SARFAESI Act, such as taking possession of secured assets or assuming control over the management of the borrower’s business, a lender would fall within the ambit of an ‘assignee’ of the promoter, and secondly, the Authorities would have the jurisdiction to entertain complaints against such lenders who are considered to be ‘assignees’ of the promoters. Interestingly, the judgment of the Rajasthan High Court in the Union Bank of India Matter was upheld by the Supreme Court of India (“Supreme Court”) in Union Bank of India v. Rajasthan Real Estate Regulatory Authority[8], with a clarification that the jurisdiction of the Authorities to entertain complaints against lenders who have taken any recourse under Section 13(4) of SARFAESI, shall be limited only to cases where such complaints have been filed the homer buyers to protect their rights. By way of this clarification, the Supreme Court has effectively barred promoters from forum shopping and initiating parallel proceedings against lenders under RERA. Following the afore-mentioned decision of the Supreme Court, the Authorities have been applying the principles laid down in the Union Bank Matter and holding lenders accountable for obligations of promoters under RERA.[9] Some of the decisions of the Authorities have been discussed in the subsequent paragraphs of this paper. In Yes Bank Limited v. Mega Resources Limited,[10] the West Bengal Real Estate Appellate Tribunal held that Yes Bank stepped into the shoes of the promoter and was therefore required to independently comply with all the pending obligations of the promoter under RERA and also under the agreements for sale executed with the allottees. In the case of Deepu Babu Abraham v. Ozone Homes Private Limited,[11] the Tamil Nadu Real Estate Appellate Tribunal (“TNREAT”) went a step further and took a view that, a lender who had advanced monies to the homebuyers (and not the promoter) acted as an assignee of the promoter, by placing reliance on a deed of guarantee entered between the lender, the promoter and the homebuyer, whereunder the promoter had guaranteed the obligations of the homebuyer. However, contrary to the decision of the TNREAT stated above, the Maharashtra Authority, in the case of Bharati Shah v. Better Builders & Infrastructure Private Limited[12], took a view that, in cases where the lender had advanced loans to allottees and not the promoter, if the lender decides to enforce its security under SARFAESI, the same will result in the lender stepping into the shoes of the allottee and not the promoter. Accordingly, in such instances the lender cannot be construed to be an ‘assignee’ of the promoter. III.            Additional Obligations on Lenders under RERA Several Authorities have issued circulars outlining specific compliance requirements for lenders who are transferees of promoters.[13] These include: (a) intimations to be given to each of the allottees of the enforcement of security which has resulted in a transfer of the project; (b) making necessary corrections of registration details; and (c) submission of an undertaking for complying with all obligations of the promoter under RERA and under the agreements for sale executed with the allottees. Interestingly, in the circulars, the Authorities have provided certain examples of such transfer to lenders, which include, inter-alia, takeover of secured assets under SARFAESI and invocation of pledge of shares of the promoter. Furthermore, some of the Authorities have imposed certain additional compliances on all lenders to real estate projects registered in such State. For instance, the Chhattisgarh Authority[14] has directed all banks to sanction loans to promoters only for projects registered under RERA. Similarly, the Telangana Authority has directed all lenders to disburse loan amounts only into the designated RERA account of the promoter.[15] IV.             Conclusion  To recap, if a lender has taken any actions for enforcement under Section 13(4) of the SARFAESI, such lender would step into the shoes of a promoter under RERA as its ‘assignee’ and is thereafter required to comply with the obligations applicable to promoters under RERA. The circulars issued by the Authorities as discussed above, also seem to suggest that a lender that has simply invoked a pledge of shares of the promoter would fall within the ambit of a transferee of a promoter for the purposes of RERA. It may be pertinent to recall that SARFAESI was introduced to enable lenders to facilitate timely recovery and enforcement of security without the intervention of the courts. However, once RERA came into the picture, the Supreme Court in Bikram Chatterji v. Union of India,[16] took a view that, in case of any conflicts between the provisions of SARFAESI and RERA, the provisions of RERA would prevail, thereby diluting rights of lenders. Now, holding lenders accountable as promoters, may be the final nail in the coffin, so far as taking enforcement action under SARFAESI is concerned. Consequently, IBC appears to be the only viable option left available for lenders in the real estate space to recover their dues. On a separate note, by including a lender that has invoked its pledge over shares of a promoter as a transferee, the Authorities have also failed to appreciate that a mere invocation of pledge of shares by a lender does not tantamount to actual sale of shares to itself, as explained by the Supreme Court in the case of PTC India Financial Services Limited v. Mr. Venkateshwarlu Kari.[17] This paper has been written by Nidhi Arya (Partner) and Umang Pathak (Associate).   [1] The Hindu: Outlook 2025: Emerging trends of real estate sector dated January 4, 2025. Refer: https://www.thehindu.com/real-estate/real-estate-properties-construction-buildings-2025/article69028297.ece#:~:text=India's%20real%20estate%20market%20is,by%20its%20centenary%20of%20independence. [2] 2(zn) “real estate project” means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto. [3] Deepak Chowdhary v. PNB Housing Finance Limited, Haryana Authority order dated September 11, 2020, in complaint case no. 2145 (earlier 2031) of 2020. [4] Mukesh Agarwal v. SNG Real Estate Private Limited, Rajasthan Authority order dated September 20, 2021, in Complaint No. RAJ-RERA-C-2020-3958. [5] Union Bank of India v. Mamta Kotia, Rajasthan Real Estate Appellate Tribunal order dated March 25, 2025, in Appeal No. 4/2022 & Others. [6] Union Bank of India v. Rajasthan Real Estate Regulatory Authority, AIR 2022 Raj 85. [7] 13(4). In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:— take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset; take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt; appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. [8] Union Bank of India v. Rajasthan Real Estate Regulatory Authority, 2022 (2) KHC 112. [9] Also see Vijaykumar Manubhai Ved v. Better Builders and Infrastructure Private Limited, Maharashtra Authority order dated February 6, 2025, in Complaint No. CC006000000429310; Jyoti Verma v. ARG Infra Developers Private Limited. Rajasthan Authority order dated January 9, 2023, in Complaint No. RAJ-RERA-C-2021-4459. [10] Yes Bank Limited v. Mega Resources Limited, West Bengal Real Estate Appellate Tribunal order dated September 20, 2024 in Appeal No. 010/2024. An appeal in this matter is pending before the Calcutta High Court. [11] Deepu Babu Abraham v. Ozone Homes Private Limited, Tamil Nadu Real Estate Appellate Tribunal order dated June 2, 2023 in CCP No. 121 of 2021. [12] Bharati Shah v. Better Builders & Infrastructures Private Limited., Maharashtra Authority order dated April 28, 2023 in Complaint Nos. CC006000000193783 and CC006000000303719. [13] Circular no. C/708/2024 titled ‘Procedure for transferring or assigning promoter’s rights and liabilities to a third party’ by the Telangana Authority dated October 19, 2024; Circular no. 01/RERA GGM Circular 2020 titled ‘Procedure for transferring or assigning of promoter’s rights and liabilities in a real estate project to a third party under section 15 of the Real Estate (Regulation and Development) Act, 2016’ by the Haryana Authority dated June 29, 2020; Circular No. KRERA/ circular/ 02/2019 titled ‘Procedure for transferring or assigning promoter’s rights and liabilities to a third party’ by the Karnataka Authority dated August 27, 2019; and Circular No. 24/2019 titled ‘Procedure for transferring or assigning promoter’s rights and liabilities to a third party’ by the Maharashtra Authority dated June 4, 2019. [14] Circular no. 99/RERA/2024 regarding ‘Instructions for Real Estate projects regarding withdrawal of fund from RERA designated accounts’ by the Chattisgarh Authority dated April 19, 2018. [15] Circular no. 989/TSRERA/2023 regarding ‘TS RERA – Certain complaints filed claiming that builders are not utilizing the amount given by them…..for mandatory deposit of money into the RERA designated bank account’ dated September 4, 2023. [16] Bikram Chatterji v. Union of India, (2019) 19 SCC 161. [17] PTC India Financial Services Limited v. Venkateswarlu Kari, Supreme Court order dated May 12, 2022 in Civil Appeal No. 5443 of 2019.

I.  Introduction The financial technology (better known as ‘fintech’) landscape in India has been on an impressive growth trajectory over the past decade, spurred by a confluence of factors such as government initiatives championing digital payments, the rapid expansion and access to technology (including smartphone usage), and a surge in investment from both domestic and global backers. Recent forecasts suggest that the sector is set to maintain its momentum, and continue to grow at a compound annual growth rate of 30.55% (Thirty Point Five Five Percent), potentially reaching USD 550 billion by 2030.[1] India boasts a fintech adoption rate[2] of around 87% (Eighty Seven Percent) which is reportedly the highest worldwide, and is well clear of the global average which is estimated to be between 64% (Sixty Four Percent)[3] to 67% (Sixty Seven Percent)[4]. Coupled with the potential to leverage the world’s second highest digital population[5], fintech is poised for further growth and expansion in the coming years. The dawn of Fintech can be traced back to innovations like ATMs and credit cards in the 1960s, electronic stock trading in the 1970s, and online banking in the 1990s. Today, the fintech ecosystem in India represents a convergence of multiple disciplines including, banking, software development, data analytics, regulatory technology, and user experience design. These innovations seek to address inefficiencies in the financial space, such as in domestic and cross-border payments, credit access, insurance distribution, wealth management, pension distribution and servicing, and so on. India’s success in the fintech sector has been empowered by a robust digital public infrastructure and the increasing internet access and usage in India over the past decade. The Aadhaar biometric identification system alone has dramatically simplified customer onboarding for financial services, with over 1.3 billion enrolments[6]. India’s internet subscribers base has more than tripled in the past decade from 251.59 million subscribers in 2014 to 954.40 million subscribers in 2024.[7] Along with other agencies and initiatives such as the National Payments Corporation of India, Open Network for Digital Commerce, Open Credit Enablement Network and Ayushman Bharat Digital Mission, this has created a thriving ecosystem enabling businesses and startups to rapidly scale and serve diverse markets and customers across the country. Investment in Indian Fintech India’s fintech sector has benefitted from receiving significant financial backing from both domestic and foreign sources over the past decade with total investments from 2014 to 2023 amounting to approximately USD 30.9 billion across 3,257 funding rounds. It specifically peaked in the year 2021, during which it attracted approximately USD 8.3 billion in total funding.[8] Foreign Direct Investment (“FDI”) especially has played a crucial role in the fintech growth story in India. Between 2016 and 2023, India's fintech sector has attracted approximately USD 25-30 billion in cumulative FDI, making India one of the most attractive investment destinations in the financial technology space globally.[9] Despite the global funding slowdown that began around late 2022, India's fintech sector managed to attract approximately USD 3 billion in foreign investments in 2023, underscoring sustained investor confidence and interest.[10] Notable foreign investors invested in fintech businesses having operations in India include Sequoia Capital (now Peak XV Partners), Tiger Global, Y Combinator, SoftBank, Ribbit Capital, Accel and many more.[11] Payment companies and digital lending platforms have been the largest recipients of funding, accounting for nearly 55% (Fifty Five Percent) of all investments into fintech.[12] While payment companies traditionally dominated funding, attracting over USD 2.9 billion (~36% of total investments into fintech) in 2021, lending emerged as the preferred sector in 2022 with over USD 2.1 billion (~38.5% of total investments)[13] and accounted for more than USD 0.35 billion at the end of the first half of 2024 (~61.7% of total investments)[14]. Wealthtech and Insurtech businesses had also received approximately 4.86% (Four Point Eight Six Percent) and 1.9% (One Point Nine Percent) respectively at the end of the first half of 2024. Investments have also been received by businesses engaged in neo banking, blockchain enabled cryptocurrencies, digital assets businesses, and various other specialized segments. This article aims to provide an overview of the regulatory landscape for fintech businesses in India, across three broad parts (1) an overview of the key regulators that oversee different segments of the fintech space in India ; (2) an analysis of the major fintech business models and the legal frameworks applicable; and (3) an outline on the major sector agnostic and  cross-sectoral regulations such as outsourcing, know your customer (“KYC”) guidelines, consumer protection and data privacy governance that apply across the fintech ecosystem. II. Key Regulators of Fintech Business in India The fintech space in India is regulated by multiple authorities, and several areas of fintech involve an oversight of multiple regulators, creating a complex compliance landscape. This complex landscape often necessitates a comprehensive regulatory strategy that addresses requirements across multiple authorities based on the specific product offerings and business model. The principal regulators of fintech in India are: Reserve Bank of India (“RBI”): The primary regulator for banking, digital payments, lending, and non-banking financial companies (“NBFC”). It regulates fintech companies involved in payments, lending, peer-to-peer lending platforms, digital wallets etc. Securities and Exchange Board of India (“SEBI”): Regulates fintech companies dealing with financial instruments/securities, investment platforms, wealth management platforms, online mutual funds distributions, online bond platforms etc. Insurance Regulatory and Development Authority of India (“IRDAI”): Regulates fintech startups in the insurance space, including digital insurance platforms, web- policy aggregators, and online insurance brokers. Pension Fund Regulatory and Development Authority (“PFRDA”): Regulates the National Pension System and oversees fintech platforms that offer retirement and pension-related services. Financial Intelligence Unit (FIU-IND): Monitors anti-money laundering compliance for fintech entities including virtual digital assets. Apart from the above-mentioned key regulators, the National Payments Corporation of India (“NPCI”) operates and manages payments infrastructure in India, including Unified Payment Interface (“UPI”), Immediate Payment Service (IMPS), RuPay card network, Bharat Bill Payment System (BBPS), National Automated Clearing House (“NACH”), and other retail payment infrastructure. In addition to the above, fintech entities are also required to comply with other generally applicable laws and authorities such as data security (Ministry of Electronics and Information Technology (MeitY), taxation laws (Central Board of Direct Taxes/Central Board of Indirect Taxes and Customs), anti-trust laws (Competition Commission of India), data protection and privacy (the to-be established Data Protection Board of India under the Digital Personal Data Protection Act, 2023), and foreign investment laws (RBI and the Department for Promotion of Industry and Internal Trade). III. Major Fintech Business Models in India and Their Regulatory Framework India’s fintech ecosystem is marked by diverse business models spanning payments, credit, wealth management, insurance, digital assets, intermediary/broking/advisory services, cryptocurrencies and more. Each of these models are subject to different regulatory regimes depending on the nature of the activity and the financial product or service involved. In this section, we look to provide an overview of the key fintech verticals and the corresponding regulatory frameworks applicable to them. A. Payment Systems Payment systems form the backbone of India’s digital financial ecosystem, facilitating the transfer of funds between individuals, businesses, and institutions. The regulatory framework governing payment systems in India is primarily administered by the RBI under the Payment and Settlement Systems Act, 2007 (“PSA”) and its allied rules, regulations, and guidelines. The key categories of payment systems beyond the traditional payment systems include: Payment Aggregators and Payment Gateways Payment Aggregators (“PA”) Payment Aggregators are entities that provide payment solutions to merchants enabling them to accept various digital payment instruments. Importantly, PAs handle the actual flow of funds and settle transactions on behalf of the merchants. All non-bank entities operating as a PA are required to obtain specific authorization from the RBI to operate as such, as per the Guidelines on Regulation of Payment Aggregators and Payment Gateways[15][16] (“PA/PG Guidelines”). The regulatory framework mandates non-bank entities to have certain minimum net worth requirements at the time of application, and an increased requirement to be met within three years. PAs must undertake due diligence while onboarding merchants, maintain a designated escrow account (for non-bank entities) for handling customer funds, and ensure timely settlement with merchants without any commingling of funds. They are also required to implement a robust grievance redressal mechanism, comply with stringent information technology and cybersecurity norms (including local data storage requirements), and submit periodic reports to the RBI. Importantly, PAs are prohibited from offering credit facilities or using customer funds for any purpose other than settlement. On April 16, 2024, the RBI issued draft directions[17] to regulate offline PAs, specifically those facilitating face-to-face or proximity payments at physical points of sale which include PoS (as defined below) systems. The key amendments proposed include extending the applicability of PA guidelines to offline payment aggregators, establishing minimum net worth requirements for offline PAs, and introducing merchant onboarding standards for offline transactions. These draft directions aim to bring offline PAs under the regulatory framework previously applicable only to online PAs, ensuring a uniform standard across both online and offline payment aggregation activities. The RBI also published certain draft amendments to existing regulations for PAs. These draft guidelines are yet to be finalised or notified. Payment Gateways (“PG”) Payment Gateways[18] are technology service providers that offer back-end infrastructure for processing online payments. Unlike PAs, PGs do not handle funds directly. Their role is limited to the secure routing and encryption of payment information, ensuring transaction flow between the customer, the merchant, and the relevant financial institutions. While not directly regulated, PGs must adhere to certain data security and information technology governance standards and often operate in conjunction with licensed entities. Prominent PGs in India include Razorpay, PayU, Cashfree Payments, CCAvenue, Instamojo, BillDesk, PhonePe, etc. Some of these PGs also operate as PAs. b. Point of Sale (“PoS”) Systems PoS systems facilitate in-store digital payments by enabling acceptance of card-based or QR-code-based payments at physical retail locations. These systems are often deployed by banks or PAs and must comply with guidelines around device certification, data security, and merchant onboarding. Over the years, PoS systems have evolved from traditional card-swiping machines to sophisticated devices supporting contactless payments, UPI QR codes, and biometric authentication. c. Unified Payments Interface (“UPI”) UPI is a real-time payment system developed by the NPCI that enables instant peer-to-peer and peer-to-merchant fund transfers using mobile devices, underpinned by an interoperable infrastructure regulated by the RBI. UPI operates under a dual-layered regulatory structure, the RBI through the PSA provides overarching regulatory oversight, while NPCI manages the operational aspects, ensuring that UPI functions as a secure and efficient real-time payment system in India. Within the UPI ecosystem, several intermediaries play key roles, for example: Third-Party Application Providers (“TPAPs”) and Technology Service Providers (“TSPs”). TPAPs are fintech apps or platforms that offer the UPI interface to customers like Google Pay and PhonePe. TSPs are entities that support the backend connectivity between banks and TPAPs, ensuring reliable transaction processing, like JusPay, Setu, etc. Both TPAPs and TSPs must adhere to NPCI’s certification and compliance requirements, even though they may not be directly licensed by the RBI. Additionally, to foster an open and competitive ecosystem, the NPCI has implemented volume caps to ensure market concentration does not exceed 30% (Thirty Percent) for any single TPAP, which are required to be complied with latest by December 31, 2026. In addition to domestic payment innovations, India has been actively expanding its UPI for cross-border transactions. These arrangements are governed under the Foreign Exchange Management Act, 1999 and its allied rules, regulations and guidelines (“FEMA”) and relevant RBI directions on cross-border remittances. Such linkages, like those with Singapore (PayNow), UAE, Bhutan, and Nepal, enable real-time, low-cost person-to-person and merchant payments while ensuring compliance with FEMA, KYC, and anti-money laundering (“AML”) requirements. Separately, the NACH operated by the NPCI and regulated by the RBI under the PSA facilitates high-volume, recurring interbank transactions such as salary disbursements, government subsidies, EMIs, and utility payments. With its centralized clearing capability and uniform operating rules, NACH plays a key role in processing bulk transactions and furthering financial inclusion. d. Prepaid Payment Instruments (“PPIs”) PPIs are instruments that facilitate the purchase of goods and services, including financial services, remittance facilities, and fund transfers, against the value stored in them. PPIs in India are regulated by the RBI under the Master Directions on Prepaid Payment Instruments[19] (“MD-PPI”). PPIs as per the MD PPI can be classified into the following categories: (i) Full KYC PPIs: Issued post full KYC compliance of the PPI holder, these can hold up to INR 2,00,000 (Indian Rupees Two Lakhs), are reloadable, and can be used for purchases, funds transfers, and in some cases, cash withdrawals. Platforms like HDFC PayZapp, ICICI Pockets, Amazon Pay, and PhonePe are certain examples of the same. (ii) Small PPIs: Issued after collecting minimum customer details, these are capped at INR 10,000 (Indian Rupees Ten Thousand) in outstanding value and monthly load limit and amount to be loaded during the financial year shall not exceed INR 1,20,000 (Indian Rupees One Lakh Twenty Thousand). They can only be used for purchases at identified merchant locations and must be converted into full-KYC PPIs within 24 (Twenty-Four) months of issuance. Small PPIs, such as branded gift cards and employer-issued meal cards, are issued with minimal KYC and have restricted usage and lower transaction limits. (iii) Closed System PPIs: These can be used only for purchases from the issuing entity and are not permitted for third-party transactions or cash withdrawal. Since they are not classified as payment systems under the PSA, they are outside the direct regulatory purview of the RBI. Common examples include store value cards, gift cards restricted to a single merchant. Among the above, Full KYC PPI and Small PPIs require the prior approval/authorisation from the RBI. The MD-PPI also permits co-branding arrangements between PPI issuers and partners, subject to strict conditions. While the co-branding partner may facilitate customer acquisition or branding, the licensed PPI issuer remains fully responsible for regulatory compliance, including KYC, AML obligations, and customer grievance redressal. The co-branding partner's role is limited to marketing and distribution, with all financial aspects managed by the authorized PPI issuer. Co-branded prepaid cards, are generally issued in partnerships and offer targeted benefits like cashback, discounts, and expense tracking, such as ICICI Bank-Amazon Pay Card, Axis Bank-Flipkart Card, etc. On May 20, 2025, the regulatory framework governing payment systems in India underwent a significant overhaul with the replacement of the Board for Regulation and Supervision of Payment and Settlement Systems Regulations, 2008 by the Payments Regulatory Board Regulations, 2025[20]. This shift marks a strategic move towards strengthening oversight of the digital payments ecosystem. By institutionalising the Payments Regulatory Board (replacing the erstwhile Board for Regulation and Supervision of Payment and Settlement System) with assistance from the Department of Payment and Settlement Systems and by inviting persons with experience in the fields of payment and settlement systems, information technology, law, etc, the regulatory aim is to modernize the payments oversight structure, widen representation, and ensure a more agile and inclusive regulatory environment which is equipped to respond to rapid technological advancements in the financial sector. B. Lending Lending has emerged as one of the most dynamic verticals within India’s fintech ecosystem, offering fast, accessible, and data-driven credit products through web and mobile interfaces. These platforms leverage technology for credit assessment, onboarding, disbursal, and recovery, often targeting underserved or thin-file borrowers outside the traditional banking system. The RBI has progressively increased regulatory oversight over this space, especially in response to concerns around consumer protection, transparency, and regulatory arbitrage. a. NBFC-Digital Lending Platforms (Direct Lenders): These platforms are licensed as Non-Banking Financial Companies (“NBFC”) by the RBI and conduct lending operations on their own balance sheet. They undertake credit risk, determine lending terms, and handle the full loan lifecycle. NBFCs are currently regulated by the Master Direction on Non-Banking Financial Company – Scale Based Regulation Directions, 2023 (“MD-NBFC”)[21], which consolidates and harmonizes the regulatory framework for NBFCs. This directive introduces a four-tiered classification—Base Layer, Middle Layer, Upper Layer, and Top Layer—based on size, activity, and risk profile. It replaces the earlier system of categorizing NBFCs as systemically and non-systemically important. The Directions outline specific prudential norms, governance standards, and disclosure requirements for each layer, with stricter regulations for higher layers to mitigate systemic risks. Additionally, the directive mandates prior RBI approval for significant changes in shareholding and management, enhancing oversight and promoting financial stability in the NBFC sector. b. LSP Model and BNPL Platforms (i) LSP Model: Currently, most digital lending fintech platforms act as Lending Service Providers (“LSP”), offering technology, onboarding, and intermediary services to regulated lenders (banks or NBFCs). While they are not directly regulated, the Reserve Bank of India (Digital Lending) Directions, 2025[22] impose specific compliance obligations even on unregulated LSPs that partner with regulated entities. Some of the key obligations under the DLG is to ensure that (a) lending must be done in the name of the regulated entity; (b) all disbursals and repayments must flow directly between the borrower and the regulated lender’s bank account without any pass-through account/ pool account of any third party; (c) mandatory disclosures on annualized interest rates, fees, and grievance redressal mechanisms; (d) LSPs cannot access borrower funds or hold funds in their own accounts; (d) cap on the default loss guarantee arrangement, which restricts default loss guarantee  cover beyond five per cent of the total loan amount disbursed out of a loan portfolio at any given time by a non-regulated entity including LSP. (ii) BNPL Platforms: Buy Now Pay Later (“BNPL”) platforms offer short-term consumer credit at the point of sale and allows consumers to buy goods and services and pay for them in instalments over a certain period. Many operate under LSP models, partnering with NBFCs or banks for credit issuance. Some BNPL players have also sought NBFC licenses. While currently operating under existing regulatory frameworks, BNPL services may eventually receive specific regulatory attention as the segment grows. Some popular examples of LSP models and BNPL platforms are ZestMoney, LazyPay (by PayU), KreditBee, Jify. c. Peer-to-Peer (“P2P”) Lending Platforms These platforms match individual lenders with borrowers without using their own balance sheet. They must register as NBFC-P2P with the RBI and act purely as intermediaries. Unlike LSP models which assist regulated entities in underwriting, credit scoring, disbursement, and recovery, P2P platforms act as marketplaces that connect individual lenders with individual borrowers directly, without using their own balance sheets for lending. P2P platforms are regulated by RBI under the Master Direction - Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017[23] (“MD P2P”). Some of the salient features of MD P2P are as follows: (a) There is an overall cap of INR 50,00,000 (Indian Rupees Fifty Lakh) per lender across platforms which should be consistent with their net worth; (b) Exposure limit of INR 50,000 (Indian Rupees Fifty Thousand) per borrower across all P2P platforms; (c) Platforms must maintain escrow accounts (managed by a bank trustee) for fund transfers. Some examples of P2P platforms prevalent in India are Faircent, RupeeCircle, IndiaP2P, i2iFunding. d. Invoice Discounting Another prevalent model in the digital credit ecosystem is invoice discounting, where businesses (mostly micro, small and medium enterprises) raise short-term working capital by selling their unpaid invoices to investors or financiers at a discount. While this model resembles lending in economic substance, it is structured as a sale of receivables rather than a formal loan. As of now, invoice discounting is not governed by a dedicated regulatory framework in India. Platforms facilitating such transactions typically operate under bespoke contractual arrangements, including assignment agreements, trust structures, and escrow mechanisms to manage cash flows and mitigate risk. e. Account Aggregators Account Aggregators (“AA”) are RBI regulated entities that enable secure and consent-based sharing of financial data between users and financial institutions. Operating under the Master Direction Non-Banking Financial Company Account Aggregator (Reserve Bank) Directions, 2016[24], AAs act as data intermediaries and do not store or process the data themselves. Their primary role is to facilitate the transfer of financial information such as bank statements, tax data, pension details, and mutual fund holdings from financial information providers like banks to financial information users such as lenders, insurers, or investment advisors, upon the explicit consent of the user. This framework, built on data empowerment and privacy-by-design principles, is overseen by the RBI and supported by other financial sector regulators (SEBI, IRDAI, PFRDA) under the larger Financial Data Management Centre architecture. It aims to streamline digital lending, wealth management, and personal finance advisory services while ensuring user control and data security. Ancillary Laws: In addition to the primary regulatory frameworks governing payment systems and digital lending, entities operating in this space must also comply with a range of ancillary laws issued by the RBI that address operational, technological, and customer-related risks. These include the Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks[25], which lay down principles for risk assessment, confidentiality, and contractual safeguards in outsourcing arrangements. The Master Direction on Outsourcing of Information Technology Services governs the engagement of third-party Information technology service providers and emphasizes data security, business continuity, and audit access. Further, compliance with the Master Direction – Know Your Customer (KYC) Directions, 2016[26] is mandatory to ensure customer identity verification, AML compliance, and ongoing monitoring of transactions. These ancillary regulations play a critical role in safeguarding the integrity, security, and resilience of the payment ecosystem, particularly in a technology-intensive and customer-facing domain such as fintech. c. Digital Assets India’s regulatory approach to digital assets remains cautious but evolving. While there is currently no comprehensive legislation that regulates or prohibits the use of digital assets, the government has introduced a partial regulatory framework primarily focused on taxation and financial monitoring, while signalling plans for a more structured law in the future. a. Current Regulatory Treatment (i) Tax Compliance: Tax Framework under the Income-tax Act: The Finance Act, 2022 introduced a legal definition of Virtual Digital Assets (“VDA”) and imposed a flat 30% (Thirty Percent) tax on income from the transfer of VDAs along with 1% (One Percent) TDS (Tax Deducted at Source) on transactions for transfer of such VDAs exceeding specified thresholds under Section 115BBH and Section 194S of the Income Tax Act, 1961 (“IT Act”) Under the IT Act, VDAs include (i) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, providing a digital representation of value exchanged (e.g., cryptocurrencies like Bitcoin, Ethereum etc), (ii) Non-Fungible Tokens, and (iii) Other digital assets as determined by the central government. (ii) Anti-money laundering compliance: In March 2023, entities dealing in VDAs were brought under the Prevention of Money Laundering Act, 2002 (“PMLA”). This requires VDA service providers (exchanges, custodians, wallet providers) to follow KYC norms, maintain transaction records, follow reporting requirements and adhere to other obligations which also includes registration with the Financial Intelligence Unit. b. Regulatory Plan A comprehensive crypto regulation bill Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was listed for introduction in the Indian Parliament, but is yet to be tabled or passed as a legislation. Since then, no formal draft has been discussed or released publicly, and the government has indicated that any future legislation may depend on development of a global regulatory consensus. D. Investment and Wealth Management  India’s fintech ecosystem has seen rapid growth in digital platforms offering investment advisory, broking, portfolio management, and mutual fund distribution services. These entities operate as intermediaries between investors and capital markets, providing execution, research, and advisory functions through both direct-to-consumer apps and white-labelled business to business offerings. With the recent breakthroughs in artificial intelligence (AI), companies such as LotusDew and Capitalmind have already started offering AI leveraged/ automated stock analysis and portfolio creation; new services such as robo-advisory are also on the horizon. All such activities are regulated by the SEBI with strict registration, conduct, and disclosure requirements aimed at protecting investors and ensuring market integrity. a. Registered Investment Advisers (“RIA”) Platforms or individuals offering personalized investment advice for consideration must register as registered investment advisors under the SEBI (Investment Advisers) Regulations, 2013[27] (“RIA Regulations”). Investment advisers are individuals or entities that provide investment advice for a fee. The RIA Regulations govern registration, conduct, qualifications, and compliance requirements to ensure that investment advice is delivered in a fair, transparent, and client-centric manner. Key requirements under the RIA Regulations include mandatory registration, strict segregation between advisory and distribution services at a group level, and prescribed qualifications and NISM certifications for individuals offering advice. RIAs must follow detailed client risk profiling and suitability assessments, adhere to fee caps and maintain transparent disclosures, especially around conflicts of interest. They are also required to keep comprehensive records for at least five years, appoint a compliance officer (in case of non-individuals), undergo regular audits, and offer grievance redressal through SEBI’s SCORES platform. Some examples of digital RIA businesses in India are Kuvera, Scripbox, INDmoney. b. Stockbrokers and Trading Platforms Stockbrokers act as intermediaries between investors and the stock exchanges, facilitating transactions in listed securities, derivatives, and other market instruments. In India, they are regulated by the SEBI under the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992[28], along with rules prescribed by the respective stock exchanges (e.g., National Stock Exchange, Bombay Stock Exchange). While traditional stockbrokers typically operate through physical branches, relationship managers, and offline advisory services, digital stockbrokers rely on tech-enabled platforms to offer low-cost trading via mobile apps and web portals. Traditional brokers often cater to high-net-worth or institutional clients with personalized services, while digital brokers focus on scalability, ease of access, and low brokerage fees—appealing to a broad spectrum of retail and young and first-time investors. Despite the operational differences, both are regulated under the same SEBI framework and exchange norms, and must adhere to uniform compliance obligations around KYC, client fund segregation, disclosure, and cybersecurity. The regulatory emphasis remains consistent across both models: ensuring transparency, investor protection, and systemic stability. Some examples of digital stockbrokers and trading platforms in India are Groww, Zerodha, Upstox. c. Portfolio Managers Portfolio Managers are entities that manage the investment portfolios of clients on a discretionary or non-discretionary basis, in line with the client’s objectives and risk profile. They are regulated by SEBI under the SEBI (Portfolio Managers) Regulations, 2020[29] (“PM Regulations”) that prescribes detailed eligibility, operational, and disclosure norms. Key features of the PM Regulations include a minimum investment threshold of INR 50,00,000 (Indian Rupees Fifty Lakh) per client, a minimum net worth requirement of INR 5,00,00,000 (Indian Rupees Five Crore), mandatory registration with SEBI, and segregation of client assets through third-party custodians. Portfolio managers are required to provide quarterly performance and holding reports, disclose fee structures and conflicts of interest, and adhere to strict record-keeping and audit obligations. The regulations also distinguish between discretionary (where investment decisions are made by the manager) and non-discretionary (where the client directs decisions) services and impose robust fiduciary duties on the managers to act in the best interests of their clients. d. Research Analysts (“RA”) RAs are individuals or entities that prepare and publish investment research or provide recommendations concerning securities or public offers. They are regulated by the SEBI (Research Analysts) Regulations, 2014 (“RA Regulations”)[30], which aim to ensure transparency, independence, and integrity in securities research and to prevent conflicts of interest. Under the RA Regulations, RA’s must register with SEBI before publishing or disseminating investment research or recommendations. They are required to meet prescribed qualification and certification standards (including NISM Series XV), maintain independence from business and investment banking functions, and disclose any conflicts of interest or financial interests in the securities they cover. RAs must adhere to a SEBI-mandated code of conduct, ensure fair and unbiased analysis, and are restricted from trading in covered securities within a specified time window. Further, they must maintain detailed records of their research, sources, and internal review procedures for a minimum of five years and, in the case of entities, appoint a compliance officer and undergo periodic audits. Some examples of digital RAs in India are Stoxbox and Tijori Finance. e. Mutual Fund Distributors Mutual fund distributors play a crucial role in India’s investment ecosystem by facilitating the sale of mutual fund products to retail and institutional investors. Distribution may be carried out by individuals, banks, NBFCs, fintech platforms, or registered intermediaries. Entities distributing mutual fund products either directly or through digital platforms shall be registered with the Association of Mutual Funds in India (“AMFI”), and are also required to pass the NISM V-A certification to receive an AMFI Registration Number (“ARN”). They are bound by AMFI’s Code of Conduct, requiring transparency in commissions, avoidance of mis-selling, and mandatory product suitability disclosures. All distributors must comply with grievance redressal norms and ensure clear and fair communication of investment risks and charges. Some examples of mutual fund distribution in the fintech space include, Groww, Scripbox, Kuvera. f. Execution Only Platforms and Online Bond Platforms (i)Execution-Only Platforms (“EOP”) facilitate the buying and selling of mutual funds and other investment products without offering any investment advice or recommendations. These platforms operate under the SEBI framework. On June 13, 2023, SEBI introduced a regulatory framework for EOPs[31] facilitating transactions in direct plans of mutual fund schemes, classifying them into two categories: Category I EOPs, which act as agents of asset management companies and register with AMFI, and Category II EOPs, which act as agents of investors and must register as stockbrokers with SEBI. EOPs are restricted to direct plans and must not engage in distribution of regular plans. They may charge a flat fee payable by asset management companies (Category I) or investors (Category II)—subject to limits. The framework mandates strict investor-level segregation between advisory/distribution and execution services, prohibits scheme-specific advertising, and imposes KYC and cybersecurity compliance obligations. The goal is to ensure transparent, conflict-free, and technology-driven access to mutual fund investments for retail investors. Some examples of such platforms are Zerodha Coin and Kuvera. (ii) Similarly, Online Bond Platforms (“OBP”) which facilitate the digital listing and execution of trades in listed debt securities, including non-convertible debentures and government bonds—are also regulated by SEBI. As per the SEBI circular dated November 14, 2022[32], all OBPs must register as stockbrokers (debt segment) and operate only through Online Bond Platform Providers (“OBPPs”) recognized by SEBI. These OBPPs must comply with requirements relating to investor risk disclosures, listing eligibility, transaction confirmation, and KYC norms. The regulatory framework is aimed at enhancing investor protection, improving transparency, and ensuring orderly development of digital fixed-income marketplaces. Some examples of such OBP are WintWealth and Grip invest. g. Digital Gold  Digital gold refers to the online purchase, sale, and storage of gold through digital platforms, allowing users to invest in even fractional quantities of gold without taking physical delivery. It is typically offered by fintech platforms in partnership with entities such as MMTC-PAMP and Augmont which store the value of the equivalent physical gold in secure vaults. Currently, digital gold is not directly regulated by any financial sector regulator such as the RBI or SEBI. However, platforms offering digital gold are expected to comply with general consumer protection norms, and KYC requirements under the PMLA. SEBI has also recently warned and barred stockbrokers and RIAs from advising on or distributing digital gold, as it is not classified as a regulated financial product. The lack of formal regulation has prompted discussions around bringing digital gold under a unified regulatory framework, potentially overseen by SEBI or a dedicated commodities market authority in the future. h. Insurance Insurance sector has also seen a rapid growth in embracing technology. Insurtech refers to the use of technology and digital platforms to enhance the delivery, distribution, and servicing of insurance products. In India, the sector has seen significant growth through digital brokers, web aggregators, and embedded insurance offerings, with insurance companies now directly issuing e-insurance policies and undertaking digital sales of policies. These platforms are regulated primarily by IRDAI through a range of regulations depending on the business model—whether acting as brokers, agents, or web aggregators. (i) Insurance Web Aggregators: Insurance Web Aggregators are digital platforms authorized to provide a comparative interface for insurance products offered by multiple insurers. Their role is limited to displaying standardized product information and connecting prospective customers with insurers. They do not underwrite policies or provide advice unless separately licensed. Web aggregators have become an integral part of India’s insurance ecosystem by enhancing transparency, competition, and customer access to a wide range of insurance offerings regulated under the IRDAI (Insurance Web Aggregators) Regulations, 2017 (“Web Aggregator Regulations”)[33]. Key features of the Web Aggregator Regulations include mandatory registration with IRDAI, a requirement to display product information in a neutral and unbiased format, and strict controls on lead sharing and solicitation. Web aggregators are prohibited from ranking or promoting products based on commissions and must follow a prescribed display architecture approved by the IRDAI. They can only solicit leads online and are not permitted to offer offline advisory services unless licensed under another category. Additionally, the regulations impose limits on remuneration, mandate quarterly reporting, and require the appointment of a principal officer and compliance personnel. Some examples of insurance web aggregators are PolicyBazaar, Turtlemint, Quickinsure. (ii) Corporate Agents: Corporate Agents are licensed by IRDAI under the IRDAI (Registration of Corporate Agents) Regulations, 2015 (“CA Regulations”)[34] to solicit and distribute insurance products on behalf of insurers. Corporate Agents that are institutional entities such as banks, NBFCs, fintech companies, or other corporate bodies typically operate as part of a larger business (e.g., a digital finance platform or a lending company) whose principal business is not related to insurance and serve as a distribution channel for insurance companies. Corporate agents play a key role in embedded insurance models, especially in lending, e-commerce, and consumer tech ecosystems. Under the CA Regulations, corporate agents are permitted to tie up with a maximum of 9 (nine) insurers in each line of business, i.e., life, general and health. They must be registered with the IRDAI, appoint a Principal Officer, and fulfil minimum capital and net worth requirements. While corporate agents may distribute a range of products, they are restricted from providing comparative advice or advisory services unless separately licensed as brokers or investment advisers. This framework aims to promote reach and accessibility, while ensuring accountability and policyholder protection. Some examples of Corporate Agents are PayTM, Scripbox and PhonePe. i. Pension In India, the pension sector is regulated by the PFRDA, which governs the National Pension System (“NPS”) and other pension schemes. To facilitate the distribution and servicing of NPS to the public, PFRDA authorizes entities known as Points of Presence (“POP”). These entities act as the first point of contact for individuals seeking to open, manage, or contribute to NPS accounts. POPs include banks, NBFCs, insurance companies, mutual fund platforms, and fintech players. The POP framework plays a critical role in ensuring standardized service delivery, accountability and expanding NPS accessibility across India. POPs can operate (i) directly through their own branches or digital platforms, and (ii) through POP Sub-Entities (POP-SEs), which include entities such as fintechs, distributors, or wealth managers that act under the oversight of a registered POP to provide NPS related services. Under the PFRDA (Point of Presence) Regulations, 2018[35], entities seeking to act as POPs must register with PFRDA, meet prescribed net worth and fit-and-proper criteria, and be authorized to facilitate NPS account opening, contribution processing, KYC compliance, and subscriber servicing. POPs must also adhere to transparent fee structures, maintain robust grievance redressal mechanisms, and ensure compliance with reporting, audit, and information technology system requirements prescribed by PFRDA. Example of POP entities are CAMS and Zerodha. E, Neo-Banks Neobanks are digital-only financial service platforms that offer banking-like experiences through mobile apps or web interfaces—without operating as licensed banks themselves. They typically provide services such as digital savings accounts, payments, personal finance management, and small-ticket credit products. Currently, there is no specific license or regulatory classification for neobanks under Indian law and the RBI has not yet formally recognized standalone digital banks. As a result, neobanks tend to operate in a partner-led model, where banking services (e.g., account issuance, UPI access, cards), lending products, and payment services are provided in partnership with regulated and licensed entities. regulated While the RBI has acknowledged the innovation that neobanks bring to digital financial inclusion, it has maintained a cautious stance, preferring a model where full regulatory accountability remains with the regulated or licensed entities. There has been no formal indication of a licensing framework for full-fledged digital banks in India, although discussions around fintech licensing models, risk-sharing arrangements, and operational accountability continue to evolve. IV.  Other Key Laws and Regulations Critical in Fintech Business in India Today In addition to sector-specific regulations issued by the above-mentioned regulators, fintech businesses in India are also subject to several foundational legal frameworks that cut across all financial sectors and business models. These key frameworks influence aspects of ownership, data governance, and customer protection, and must be factored into both structuring and day-to-day operations of fintech platforms. FDI in India, including in any fintech businesses, is regulated under FEMA and the corresponding rules, regulations and policies (including the FDI policy released by the government from time to time). Accordingly, structuring of ownership, investments, and compliance with pricing and reporting norms are key considerations for fintechs receiving foreign capital. A snapshot of the relevant sectoral caps for FDI which fintech businesses traverse are as follows: (i)Banking – Private sector: FDI investment up to 74% (Sevent Four Percent)[36] is permitted under FEMA. Out of this 74% (Sevent Four Percent), up to 49% (Forty Nine Percent) is permitted under the Automatic Route and the rest is permitted under the Government Route[37]. (ii) Insurance Sector: FDI investment up to 74% (Sevent Four Percent)[38] is permitted under the Automatic Route. (iii) Insurance Intermediaries[39]: FDI investment up to 100% (One Hundred Percent) is permitted under the Automatic Route. (iv) Pension Sector: FDI investment up to 49% (Forty Nine Percent) is permitted under the Automatic Route. (v) Other Financial Services (which are regulated by any financial sector regulator)[40]: FDI investment up to 100% (One Hundred Percent) is permitted under the Automatic Route. While the Digital Personal Data Protection Act, 2023 (“DPDP Act”) has been enacted, it is not yet in force as of date. Until its commencement and notification of subordinate rules, fintech companies remain governed by the Information Technology Act, 2000, specifically the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. Under this framework, fintechs are required to implement reasonable security measures, obtain user consent for data collection, and disclose privacy policies, amongst others. Once the DPDP Act comes into force, it will introduce more granular obligations on fintechs as data fiduciaries or data processors, including consent-based processing, purpose limitation, data minimization, and enhanced grievance redressal mechanism, significantly reshaping data governance practices across the fintech sectors. Lastly, fintech platforms must adhere to the Consumer Protection Act, 2019, particularly in relation to digital services, advertising standards, and unfair trade practices. The Central Consumer Protection Authority has oversight over deceptive marketing, hidden charges, and misleading claim, such areas particularly relevant to fintech platforms offering credit, insurance, or investment products online. Ensuring transparency in fee structures, disclaimers, and customer communication is therefore essential. Collectively, these cross-cutting and sector-agnostic laws form the legal bedrock for responsible fintech innovation in India and are critical to long-term regulatory sustainability and consumer trust. V. Conclusion India’s fintech ecosystem is at a transformative juncture, characterized by rapid innovation and evolving regulatory frameworks. Regulators such as RBI, SEBI, PFRDA, and IRDAI have been largely proactive in their approach towards emerging business models and addressing risks and gaps. The RBI’s recognition of the Fintech Association for Consumer Empowerment as a self-regulatory organization in August 2024 underscores a collaborative approach to governance, aiming to enhance transparency and compliance within the digital lending sector. RBI’s regulatory sandbox, launched in 2019, allows fintech firms to test innovative products and services in a controlled environment under regulator supervision, especially in areas like retail payments, digital KYC, cross-border payments, and cybersecurity. Similarly, SEBI’s regulatory sandbox, introduced in 2020, enables testing of capital markets-related innovations. These frameworks provide a structured path for responsible experimentation, bridging the gap between innovation and regulation. India is currently home to around 24 fintech unicorns[41], third only behind USA and China in this regard, demonstrating robust growth and innovation within its digital payments and banking sectors.[42] Further, seven Indian companies featured in the CNBC’s list of top 200 fintech firms worldwide in 2023, and ten Indian companies featured in their top 250 list in 2024[43], showcasing the country's substantial role in the fintech sector.[44] As seen above, the fintech ecosystem covers a diverse range of products and services spanning from solutions for fundamental aspects of everyday commerce such as payments and lending, to specialized and niche segments such as embedded insurance products or earnings-linked credit solutions to gig workers and blue collar workers. Fintech startups that are revolutionizing access to credit, insurance, and investment services are a testament to the philosophy, reflecting on the broader startup ecosystem, and the recent growing philosophy of the government to focus on more matured and innovative start-ups. This evolution signifies India’s commitment to nurturing a dynamic and inclusive digital financial landscape, poised to set global benchmarks in fintech innovation and regulation As the fintech sector continues to evolve, there is a growing consensus on the need for a holistic regulatory framework that goes beyond traditional entity-based oversight. An activity-based regulatory approach, delineating clear guidelines based on the nature of financial services offered, could provide greater clarity and foster innovation while safeguarding consumer interests. Such a framework would enable fintech companies to navigate the regulatory landscape more effectively, aligning their operations with the national objectives of financial inclusion and building a robust digital economy. Whether a start-up aiming to introduce innovative solutions or an established business seeking to leverage its goodwill to expand their range of fintech offerings, a common theme is emerging: both are likely to be subject to oversight by a multiplicity of regulators and compliance requirements. In light of this, it is essential for such businesses to proactively plan and structure their compliance strategies at every stage of their operations. Doing so will become critical to mitigating regulatory risk and ensuring that potential compliance challenges do not come in the way of an otherwise promising fintech offering.   Contributed by Anindya Ghosh, Ashwin Krishnan (Partners), Jaidrath Zaveri (Principal Associate) and Siddharth Malakar (Senior Associate). [1] https://www.mordorintelligence.com/industry-reports/india-fintech-market [2] ‘Fintech adoption rate’ refers to the percentage of individuals who are actively using one or more fintech solutions in addition to or in place of more conventional alternatives. [3] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1759602 [4] https://www.npci.org.in/PDF/npci/chairman-speeches/2024/Special-Keynote-Address-delivered-by-Shri-Ajay-Kumar-Choudhary-Non-Executive-Chairman-and-Independent-Director.pdf [5] https://www.statista.com/statistics/262966/number-of-internet-users-in-selected-countries/ [6] https://in.nec.com/en_IN/case/uidai/index.html [7] https://pib.gov.in/PressReleasePage.aspx?PRID=2040566 [8] https://bfsi.economictimes.indiatimes.com/news/fintech/how-indian-fintech-funding-fared-in-last-10-years/106261047?utm_source=chatgpt.com [9] https://www.pwc.in/assets/pdfs/investing-in-indias-fintech-disruption.pdf [10] https://economictimes.indiatimes.com/tech/funding/india-ranks-3rd-globally-in-fintech-funding-despite-33-lower-infusion-in-2024-report/articleshow/117195060.cms?from=mdr; https://www.statista.com/topics/5666/fintech-in-india/#topicOverview [11] https://inc42.com/features/funding-fintech-indias-top-fintech-investors/ [12] https://www.pwc.in/assets/pdfs/investing-in-indias-fintech-disruption.pdf [13] https://www.pwc.in/assets/pdfs/investing-in-indias-fintech-disruption.pdf [14] https://www.ibef.org/news/india-ranks-third-in-global-fintech-funding-despite-33-drop-in-2024-report [15] Guidelines on Regulation of Payment Aggregators and Payment Gateways issued by the RBI dated March 17, 2020 [16] The PA/PG Guidelines define PAs as “entities that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own. PAs facilitate merchants to connect with acquirers. In the process, they receive payments from customers, pool and transfer them on to the merchants after a time period”. [17] Regulation of Payment Aggregators (PAs) – Draft Directions published by RBI dated April 16, 2024 [18] The PA/PG Guidelines define PGs as “entities that provide technology infrastructure to route and facilitate processing of an online payment transaction without any involvement in handling of funds” [19] Master Directions on Prepaid Payment Instruments (PPIs) issued by RBI on August 27, 2021 [20]https://egazette.gov.in/WriteReadData/2025/263277.pdf [21] Master Direction on Non-Banking Financial Company – Scale Based Regulation Directions, 2023 issued by the RBI on October 19, 2023 [22] Reserve Bank of India (Digital Lending) Directions, 2025 [23] Master Direction - Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017 issued by the RBI on October 04, 2017 [24] Master Direction - Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016 [25] Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks issued by RBI on November 03, 2006. [26] Master Direction - Know Your Customer (KYC) Direction, 2016 issued by RBI on February 25, 2016. [27] SEBI (Investment Advisers) Regulations, 2013 issued by SEBI on January 21, 2013 [28] SEBI (Stockbrokers) Regulations, 1992 issued by SEBI on October 23, 1992 [29] SEBI (Portfolio Managers) Regulations, 2020 issued by SEBI on January 16, 2020 [30] SEBI (Research Analysts) Regulations, 2014 issued by SEBI on September 01, 2014 [31] Regulatory framework for Execution Only Platforms for facilitating transactions in direct plans of schemes of Mutual Funds [32] Registration and regulatory framework for Online Bond Platform Providers [33] IRDAI (Insurance Web Aggregators) Regulations, 2017 [34] IRDAI (Registration of Corporate Agents) Regulations, 2015 [35] PFRDA (Point of Presence) Regulations, 2018 [36] Foreign banks regulated by the banking supervisory authority in the home country and meeting RBI’s licensing criteria will be allowed to hold 100% (One Hundred Percent) of the paid-up capital to enable them to set up a wholly-owned subsidiary in India. [37] Under the FEMA and the FDI policy, the Automatic Route refers to FDI investment by foreign investors to invest in specified sectors without prior approval from the government, subject to sectoral caps and conditions. Whereas the Government Route requires prior approval from the concerned ministry or department before making an investment in such. [38] In the Union Budget for 2025-26 presented on February 1, 2025, Finance Minister Nirmala Sitharaman announced a proposal to increase the FDI limit for insurance companies from 74% to 100% under the Automatic Route. At the time of writing, the implementation of this increased limit is yet to be notified. [39] Intermediaries include ancillary participants in the insurance sector such as brokers, consultants, third party administrators etc. [40] Financial services activities which are specifically regulated by a financial sector regulator such as RBI, SEBI, IRDAI, PFRDA, or any other financial sector regulator notified by the government would be covered under this sector. These would include activities of registered NBFCs, stockbrokers, payment aggregators, prepaid payment instruments, registered investment advisers, registered analysts, etc. [41] https://fintechnews.sg/108940/fintech-india/the-complete-list-of-india-fintech-unicorns-2025/ [42] https://www.cnbc.com/2023/10/26/top-fintech-companies-2023-us-china-lead-on-most-valuable-  firms.html [43] https://www.cnbc.com/the-worlds-top-250-fintech-companies-2024/ [44] https://www.cnbc.com/2023/08/02/here-are-the-worlds-top-200-fintechs-cnbc-and-statista.html

I.    Introduction Over the last few years, the world at large has taken cognizance of India’s ability to deliver quality healthcare at an affordable price. Healthcare is now fast emerging as one of the largest industries in the Indian economy[1], generating significant employment opportunities as well as contributing substantially to India’s economic growth. India’s healthcare sector is expected to grow further in the coming years. The Indian government’s budgetary allocation for the healthcare sector for the FY 2025-26 is INR 95,957.87 crore (i.e., approximately USD 11.07 billion), reflecting a 9.46% rise from the previous FY 2024-25.[2] This upward trend is expected to consistently increase, with the National Health Policy 2017, recommending that public health expenditure must at least account for 2.5% of India's GDP for the coming years.[3] The ambit of healthcare is vast and includes myriads of operations and functions such as that of hospitals, telemedicine, drugs, diagnostics, clinical trials, pharmacies, medical devices and equipment. Consequently, understanding the nuances of the Indian legal system and variations across States is crucial for entities operating or intending to operate in the healthcare sector. In this article, we set out a brief overview of the regulatory framework governing the establishment and operation of hospitals, maternity homes and other healthcare establishments in India. II. Regulatory Framework As per the 7th Schedule of the Indian Constitution, ‘public health’ falls within the domain of the State List. This means that the State governments bear the primary responsibility for delivering healthcare services and regulating matters related to public health, sanitation, hospitals, and dispensaries. Further, the central government, through the exercise of its powers under the union and concurrent lists, is also empowered to formulate legislations on matters concerning ‘population control and family planning’, ‘medical and other professions’. Furthermore, in accordance with Article 252(1) of the Constitution, if two or more States consider it expedient, they may pass resolutions authorising Parliament to enact laws on matters otherwise within the State List. Such laws, once enacted, may subsequently be adopted by other States with such limited modifications as may be necessary. Consequently, certain facets of the healthcare sector in India are governed by a dual compliance framework, wherein entities seeking to establish and operate hospitals, maternity homes, and other healthcare establishments are required to comply with both State-level and central-level regulations. This often necessitates navigating overlapping legal frameworks and engaging with multiple regulatory authorities. One of the most significant segments within the healthcare sector is the hospital segment, which encompasses a broad range of entities, including multi-speciality and single-speciality hospitals, clinics, nursing homes, and other similar healthcare facilities. The hospital segment in India is currently valued at approximately USD 99 billion and is projected to grow to USD 193 billion by 2032.[4] This growth is driven by several key factors, including the modernization of healthcare infrastructure, the adoption of advanced medical technologies, and an increasing demand for high-quality healthcare services. This article presents a regulatory overview, outlining the key compliance considerations for businesses and investors looking to operate or invest in India’s hospital segment. A. Foreign direct investment in the hospital segment Between 2022 and 2024, India’s healthcare sector attracted approximately USD 30 billion in deal value, of which the hospital segment alone accounted for USD 15.3 billion—representing over 50% of the total deal value in the sector.[5] This concentration reflects the steady and robust growth of the hospital segment, driven by the consolidation of multispeciality hospitals and increasing adoption of healthcare technologies. In FY 2024–25 alone, the sector received USD 3 billion in foreign direct investment (“FDI”), with hospitals accounting for nearly half of that amount.[6] An overseas entity intending to make an FDI in the hospital segment, must comply with the Foreign Exchange Management Act, 1999, the Consolidated Foreign Direct Investment Policy of India, 2020 and the Non-Debt Instruments Rules, 2019 (collectively referred to as the “FDI Framework”). Under the FDI Framework, up to 100% FDI is permitted under the automatic route for investments in the hospital segment. However, the permissibility of such FDI may be subject to additional conditionalities depending on the business model and the intended end-use of the investment. For instance, hospital construction and development projects are governed by a set of critical regulatory requirements, including but not limited to: (i) such projects must be undertaken only in ‘developed plots’[7]; and (ii) the project being undertaken must conform with prescribed norms and standards, including land use requirements, provision of community amenities and common facilities, as laid down in the applicable building control regulations of the State government or municipal or local body concerned. Accordingly, any proposed FDI into the hospital segment must be preceded by a detailed assessment of the operational scope and business model of the investee entity to ensure compliance with the applicable provisions of the FDI Framework. B.  Certain specific licenses required by an entity operating healthcare establishment a. Registration as clinical establishments. The Clinical Establishments (Registration and Regulation) Act, 2010 (the "CE Act") defines a ‘clinical establishment’ to include facilities such as maternity homes, nursing homes, dispensaries, clinics, sanatoriums, or any institution, irrespective of its name, that provides services or facilities for the diagnosis, treatment, or care of illness, injury, deformity, abnormality, or pregnancy in any recognised system of medicine. Any healthcare establishment which qualifies as a ‘clinical establishment’ under applicable law must be registered with the relevant authorities to ensure compliance with prescribed healthcare standards. Registration accordingly is utilised to serve as a regulatory mechanism to maintain accountability, ensure oversight over patient safety across the healthcare sector. However, the applicability of CE Act depends on its adoption by individual State governments. Therefore, the definition and scope of what constitutes a clinical establishment as well as the standards for such establishments may vary from State to State based on the manner in which the CE Act has been adopted and modified by such State. At present all union territories (except the national capital territory of Delhi) and 12 states, including Haryana, Uttar Pradesh, and Uttarakhand, have either adopted the CE Act or enacted their own legislation that broadly aligns with the framework under the CE Act. Additionally, several other States have been requested by the Central government to adopt the CE Act for institutionalisation of quality monitoring of privatised hospitals.[8] In States where the CE Act has not been adopted, the categories of establishments that are required to register, and the corresponding regulatory frameworks may vary. The principal differences amongst States that have not adopted lies in the scope of healthcare establishments they intend to regulate, including whether the applicable laws extend to government facilities, diagnostic laboratories, and other entities that are not private hospitals but provide inpatient care. For instance, in Delhi and Maharashtra, which have not adopted the CE Act, the scope of healthcare establishments requiring registration is limited to those classified as nursing homes. These are governed by the Delhi Nursing Homes Registration Act, 1953, read with the Delhi Nursing Homes Registration Rules, 1953, and the Maharashtra Nursing Homes Registration Act, 1949, read with the Maharashtra Nursing Homes Registration Rules, 1973, respectively. Unlike the broader definition under the CE Act, the term ‘nursing home’ under these regulatory frameworks generally covers only hospitals and maternity homes, thereby excluding certain categories of healthcare establishments such as standalone diagnostic laboratories from the regulatory purview. b. Registration of genetic counselling and pre-natal diagnostics Any healthcare establishment that offers genetic counselling to patients, pre-natal diagnostic procedures or conducts laboratory analysis of samples related to such procedures including ultrasound clinic and imaging centre, are required to be mandatorily registered with the appropriate authority (which shall be as designated by the central government for union territories or by the respective State governments for their States), under the Pre-Conception and Pre-Natal Diagnostic Techniques (Prohibition of Sex Selection) Act, 1994, read with the Pre-Conception and Pre-Natal Diagnostic (Prohibition of Sex Selection) Rules, 1996 (collectively referred to as “PC-PNDT Framework”). These healthcare establishments under the PCPNDT Framework are required to strictly limit their diagnostic, laboratory, and counselling services to the detection of genetic abnormalities, metabolic disorders, chromosomal anomalies, or other medically relevant conditions in the foetus. However, under no circumstances may these services be used for determining the sex of the foetus given that pre-natal sex determination is prohibited due to long-standing socio-cultural and demographic preferences for male children in India. The PC-PNDT Framework imposes stringent record-keeping and reporting obligations to prevent the misuse of ultrasound and other diagnostic techniques for sex selection, thereby aiming to curb gender-based discrimination and female foeticide in India. c. License in relation to blood testing, banking and release of umbilical cord blood stem cells Healthcare establishments involved in the processing of whole human blood for components or the manufacture of blood products for sale or distribution including the collection, processing, testing, storage, banking, and release of umbilical cord blood stem cells are regulated under the Drugs Rules, 1945, framed under the Drugs and Cosmetics Act, 1940. These regulations mandate that such establishments obtain the requisite licence from the State Drug Controller/State Food and Drug Administration (as applicable) for activities involving the collection, testing, processing, storage, manufacture, distribution, import, or export of blood, blood components, and umbilical cord blood stem cells. Compliance with the Drugs Rules, 1945 is essential to ensure the safety, quality, and ethical handling of blood and related products. The regulatory framework prescribes stringent standards for donor screening, product testing, documentation, storage, and transportation, with the objective of preventing contamination and safeguarding patient health. d. Accreditation of healthcare establishments In India, many healthcare establishments opt for voluntary accreditation as a means to enhance their quality of care, standardize clinical practices, and build credibility among patients, regulators, and other stakeholders. Two of the most widely recognized accreditation bodies in the country are the National Accreditation Board for Testing and Calibration Laboratories (“NABL”) and the National Accreditation Board for Hospitals and Healthcare Providers (“NABH”). NABL accreditation is primarily applicable to laboratories involved in diagnostic testing, including clinical, pathological, and radiological services. It ensures that laboratories meet international standards in terms of quality assurance, technical competence, and accuracy of test results. NABH accreditation, on the other hand, is specific to hospitals and healthcare providers. It lays down comprehensive guidelines covering aspects such as patient rights and education, infection control, clinical outcomes, facility management, and staff qualifications. Accredited institutions are expected to demonstrate adherence to continuous quality improvement and patient safety protocols. While not mandatory, these accreditations serve as a hallmark of excellence and often provide a competitive edge in the healthcare sector. They are also increasingly becoming a prerequisite for empanelment with insurance providers, public health schemes, and corporate health programs. C. Procedure-based licenses and compliance requirement Various medical procedures are subject to compliance requirements under a wide array of laws to ensure ethical practices, patient safety, and regulatory oversight. Clinical establishment and healthcare facilities must adhere to these legal frameworks to conduct certain medical procedures lawfully. Some of the critical procedures requiring compliance under Indian healthcare laws are provided below: a. Organ and tissue transplantation A healthcare establishment may undertake the removal, storage, and transplantation of human organs or tissues for therapeutic purposes (“Transplantation Activities”), subject to strict compliance with the Transplantation of Human Organs and Tissues Act, 1994 (“THOTA”) and the Transplantation of Human Organs and Tissues Rules, 2014. Under THOTA, a healthcare establishment must first qualify as a “Hospital” (as defined under THOTA) and obtain mandatory registration as a Hospital and/or Tissue Bank (as defined under THOTA), as applicable, in order to lawfully conduct the Transplantation Activities proposed to be undertaken. The legislation is designed to prevent the commercial trade of human organs and tissues while upholding ethical standards in transplantation. It mandates that medical practitioners obtain informed consent from donors and further requires hospitals to maintain comprehensive records. However, it is important to note that THOTA has not been adopted uniformly across all States. Therefore, healthcare establishments must carefully assess and comply with the applicable State laws governing organ transplantation in such jurisdictions where they operate. b. Medical termination of pregnancy Procedures related to medical termination of pregnancy are regulated under the Medical Termination of Pregnancy Act, 1971 ("MTP Act"). The MTP Act provides a legal framework for the termination of pregnancies under specific conditions, ensuring that abortions are performed safely and within prescribed gestational limits. As per the MTP Act, medical termination of pregnancy is permitted (i) up to 20 weeks of gestation under the opinion of one registered medical practitioner, and (ii) beyond 20 weeks and up to 24 weeks in cases involving special categories of women (such as survivors of sexual assault, minors, or specially abled women) with the approval of two registered medical practitioners. Beyond 24 weeks, termination is only permitted in cases of foetal abnormalities diagnosed by a medical board constituted by each State government. c. Reproductive assistance-based technologies Assisted Reproductive Technology (Regulation) Rules, 2022, framed under the Assisted Reproductive Technology (Regulation) Act, 2021, requires registration of every ART Clinic[9] or ART Bank[10] which is utilising assisted reproductive technology (“ART”)[11] or rendering ART procedures such as In vitro Fertilization - Embryo Transfer and Pre-implantation Genetic Diagnosis, with the appropriate authority of the relevant State government. Other ongoing compliance requirements for ART Clinics and ART Banks include maintaining proper medical records, ensuring patient confidentiality, and adhering to prescribed medical and ethical guidelines such as that of obtaining an informed consent. ART Clinics and ART Banks must also undergo inspections and audits by regulatory authorities. d. Surrogacy clinics Surrogacy Clinics[12] intending to undertake surrogacy procedures in India are required to obtain registration under the Surrogacy (Regulation) Act, 2021 prior to commencing any operations. The primary objective of the Act is to prohibit the commercialisation of surrogacy and to permit only altruistic surrogacy, wherein no monetary remuneration or incentive is provided to the surrogate mother, except for medical expenses and insurance coverage. The Surrogacy (Regulation) Rules, 2022 supplement the Surrogacy (Regulation) Act, 2021 by prescribing additional compliance requirements relating to infrastructure and personnel. A registered surrogacy clinic must, at a minimum, engage qualified professionals including a gynaecologist, anaesthetist, embryologist, and counsellor, as per the prescribed norms. The clinic is also required to maintain essential equipment such as incubators, laminar airflow systems, ovum aspiration pumps, and ultrasonography machines, among others. D.  Laws applicable to medical professionals On May 12, 2023, the National Medical Commission (“NMC”) issued the Registration of Medical Practitioners and Licence to Practice Medicine Regulations, 2023 (“RMP Regulations”), which establish the guidelines for registering of medical practitioners in the National Medical Register (“NMR”) and obtaining a licence to practise in India. To be eligible for NMR registration, individuals are required to hold a recognised primary medical qualification under the National Medical Commission Act, 2019 (“NMC Act”) and clear the National Exit Test (“NEXT”) – which is yet to be operationalized. [13] Foreign medical graduates who clear the NEXT[14], subject to the conditions specified in the Foreign Medical Graduates Regulation, 2021, are also eligible for NMR registration. Furthermore, the RMP Regulations provide that any person who was already registered in the Indian Medical Register under the Indian Medical Council Act, 1956, before the enactment of the NMC Act and before NEXT became operational, shall be eligible to obtain registration under the NMC Act by updating their details in a designated web portal as a one-time measure, post which their names will be enrolled in the NMR. This ensures efficient continuity for previously registered medical practitioners without requiring them to undergo additional qualifications or examinations. Additionally, medical practitioners must also register with the respective State medical councils where they intend to practise. Further, speciality practitioners, such as dentists, psychologists, therapists, and nurses must obtain a registration and licence to practice under separate authorities established under specific laws such as the State Dental Council, Rehabilitation Council of India, and State Nursing Council. However, qualifications required for such speciality practitioners vary in each case and may be modified from time to time. For example, the recently notified National Nursing and Midwifery Commission Rules, 2024, prescribes qualifications required for nursing and midwifery leaders which includes (i) a postgraduate degree in any discipline of nursing and midwifery education, (ii) registration with the national register or State register, and (iii) at least 15 years of experience and holding administrative position for 4 years in the field of nursing and midwifery from a recognised institution or university or healthcare facility.[15] In India, professional bodies such as the Indian Association of Cardiothoracic Surgeons, Urological Society of India, Indian Orthopaedic Association, and Indian Association of Pediatric Surgeons play an important role in advancing the medical research and clinical practice. These organisations collaborate with specialists to promote cutting-edge research, organise training programs and set a standard to improve patient care. Furthermore, the Indian Medical Council (Professional Conduct, Etiquette, and Ethics) Regulations, 2002 set out the ethical and professional standards governing medical practitioners in India. These regulations include key compliance obligations including obtaining informed consent for medical procedures, maintaining strict confidentiality of patient data (except where disclosure is mandated by law), and upholding ethical standards in all aspects of medical practice. E.  Usage of medical equipment Given that healthcare establishments rely on a plethora of medical equipment for diagnostics, treatment, and patient care, they must adhere to several key regulatory and compliance requirements governing the use, maintenance, and safety of such equipment. Few key compliance requirements for procurement, usage decommissioning and disposal of materials/ medical equipment are provided below: a. Radiation based equipment and therapy The use of radiation-based equipment for diagnostic purposes (such as X-rays, CT scans, and Gamma Irradiation Chambers) and for therapeutic procedures (such as radiotherapy) is governed by the Atomic Energy (Radiation Protection) Rules, 2004 issued under the Atomic Energy Act, 1962. These regulations, enforced by the Atomic Energy Regulatory Board (“AERB”), are aimed at minimizing radiation-related risks and ensuring a safe and controlled environment for both healthcare professionals and patients. Any person procuring such equipment must source them either from importers holding a valid no objection certificate (NOC) from the AERB or from indigenous manufacturers licensed by AERB for commercial production. In addition to equipment-related approvals, myriad requirements in relation to procurement and handling of equipments such as (i) condition to obtain requisite authorisations and maintain comprehensive documentation, (ii) compliance with stringent safety standards, including installation of adequate radiation shielding, use of prescribed protective gear, and adherence to established radiation safety protocols, are prescribed under the rules. Further, an employer related to radiation equipment’s and installations, is required to appoint a designated Radiation Safety Officer (RSO) responsible for overseeing radiation protection measures, conducting periodic safety audits, and ensuring compliance with exposure limits. Importantly, no radiation installation may be decommissioned without prior approval from the AERB. The process of decommissioning, along with the management and disposal of radioactive waste generated must be carried out in accordance with the AERB safety guidelines and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987, to ensure that any discharge of radioactive effluents remains within prescribed safety limits. b. Equipment capable of detecting sex of foetus Healthcare establishments are required to procure ultrasound machines only from a manufacturer, importer, dealer or supplier registered under the PCPNDT Framework if the equipment is capable of detecting the sex of a foetus. For example, the sale of such machines, including those used in ultrasonography applications such as A Scan and B Scan devices for corneal imaging, has previously come under regulatory scrutiny in cases where entities failed to procure them from duly registered suppliers, particularly when the equipment was found to be capable of sex determination.[16] Accordingly, it is essential to assess whether a device employs any technology capable of determining foetal sex, and if so, to ensure that it is procured exclusively from suppliers registered under the PCPNDT Framework. c. Additional compliances Healthcare establishments must adhere to specialized compliance requirements governing medical gas cylinders, boiler safety, and the administration of narcotic drugs, among other regulatory obligations. Given the dynamic nature of the healthcare sector, regulatory frameworks are frequently updated, requiring continuous monitoring and proactive compliance to ensure seamless operations. F. General business compliances As is applicable to any commercial establishment, healthcare establishments, must also comply with laws that are applicable to any establishment conducting business operations. These include adherence to labour laws, municipal laws for trade, obtaining necessary building permits and approvals governing commercial premises, such as the relevant State’s shops and establishments legislations, trade licenses, and fire no-objection certificates (NOCs). Compliance with these regulations by the healthcare establishments is essential for the seamless operation of healthcare facilities, as non-compliance could lead to enforcement actions or operational disruptions by local authorities.   G.  Environmental laws A healthcare establishment will be required to obtain relevant environmental clearances and ensure ongoing compliances with respect to the disposal of ‘hazardous waste’ (such as chemicals, solvents and heavy metals). For instance, under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, an occupier of a facility engaged inter alia in the handling, generation, collection or storage of hazardous wastes must obtain an authorization from the relevant State’s pollution control board. A healthcare establishment may also be required to obtain a consent to establish and a consent to operate from the relevant State’s pollution control boards under the Air (Prevention and Control of Pollution) Act, 1981 and the Water (Prevention and Control of Pollution) Act, 1974 for discharging sewage or trade effluents into water bodies and/or for operating in an air pollution control area. In the context of biomedical waste management, healthcare establishments need to undertake pre-treatment (e.g., autoclaving, microwaving, or chemical disinfection) and categorization of biomedical waste. It is essential for healthcare establishments to enter into formal agreements with authorised waste treatment facilities, such as Common Bio-Medical Waste Treatment Facilities. These agreements are mandated under the Guidelines for Management of Healthcare Waste as per Biomedical Waste Management Rules, 2016 and are critical for ensuring the safe collection, treatment, and disposal of biomedical waste. Further, healthcare establishments are obligated to maintain comprehensive records including daily waste logs, annual reports, staff training registers, and incident records for a minimum of 5 years, and display key compliance information on their websites. III. Emerging technologies in healthcare   A. Telemedicine Telemedicine refers to the delivery of healthcare services using information and communication technologies to facilitate diagnosis, treatment, prevention of diseases, and patient education, particularly where ‘distance’ is a critical factor. It enables medical practitioners to provide consultations remotely, improving access to healthcare while ensuring continuity of care. Telemedicine encompasses various modes of communication, including audio, video, and text-based interactions, allowing healthcare professionals to assess patients, prescribe medications, and offer medical advice without requiring physical presence. To regulate the practice of telemedicine in India, the Telemedicine Practice Guidelines (“TPG”) were introduced on 25th March 2020, providing a structured framework for medical practitioners to offer remote consultations. The TPG: (i) outlines the appropriate modes of communication for different types of consultations, such as emergency, non-emergency, and peer-to-peer consultations between medical professionals; (ii) classifies medicines into List O, List A, List B, and the Prohibited List, prescribing the specific conditions in which such medications can be provided to ensure patient safety and responsible telemedicine practice; and (iii) specifies that telemedicine consultation must not be anonymous - both the patient and the registered medical practitioner must know and establish each other’s identities. In August 2023, the NMC introduced the National Medical Commission Registered Medical Practitioner (Professional Conduct) Regulations, 2023, which aims to govern the professional conduct of registered medical practitioners, including their involvement in telemedicine and social media interactions. However, these regulations are not yet in effect. Until they come into force, the practice of telemedicine continues to be governed by the Indian Medical Council (Professional Conduct, Etiquette, and Ethics) Regulations, 2002, read alongside the TPG. B.  Robotic Surgery The growing adoption of robotic technologies in surgical procedures raises complex legal questions concerning liability in cases of medical errors or adverse outcomes, particularly with respect to the attribution of liability. A key issue is whether such liability should rest with the healthcare establishment administering the procedure or with the manufacturer of the robotic technology involved. Under Indian law, medical negligence is typically assessed based on the Bolam Test[17], as adopted by Indian courts. This test evaluates whether a medical professional acted in accordance with a practice accepted as proper by a responsible medical professional. In the context of robotic surgery, where the procedure is conducted with the aid of robotic technology but operated by a medical professional, it may be argued that primary responsibility continues to vest with the medical professional overseeing and executing such medical procedure. In scenarios where the error is attributable to a malfunction or defect in the robotic system, product liability principles under the Consumer Protection Act, 2019 may attribute liability to the manufacturer. This could render the manufacturer or distributor of the robotic system liable for compensation if the product is found to be defective or unfit for its intended use. However, proving causation between the defect and the adverse outcome remains a significant evidentiary hurdle. This reinforces the importance of executing well defined medical equipment contracts, clearly identifying the indemnification events to ensure back-to-back indemnification as well as the need for healthcare establishments to obtain an appropriate malpractice insurance to mitigate any risks. IV.            Conclusion While this article focused on key legal frameworks pertaining to the hospital segment, it is important to note that other ancillary healthcare services such as the sale and distribution of drugs and medical devices, and the operation of pharmacies are governed by separate regulatory regimes. These include the Drugs and Cosmetics Act, 1940, read with the Drugs Rules, 1945 and the Medical Devices Rules, 2017, as well as the Pharmacy Act, 1948, read with the Pharmacy Practice Regulations, 2015. Accordingly, entities operating in the hospital segment must undertake a comprehensive assessment of all applicable central and State-level laws, along with evolving regulatory and quality standards. Such diligence is critical not only for legal compliance, but also for ensuring the delivery of safe, ethical, and accessible healthcare services to patients across the country. Contributed by Anantha Krishnan Iyer (Partner), Aishwaria Ramanan (Senior Associate) and Shubham Tiwary (Associate). [1] Investment Opportunities in India’s Healthcare Sector, NITI Aayog, 2021 (Available at: https://www.niti.gov.in/sites/default/files/2023-02/InvestmentOpportunities_HealthcareSector.pdf, last accessed on May 21, 2025). [2]Demand for Grants of Central Government 2025-2026, February 2025 (Available at: https://www.indiabudget.gov.in/doc/eb/alldg.pdf, last accessed on May 21, 2025). [3] National Health Policy, 2017 (Available at: https://mohfw.gov.in/sites/default/files/9147562941489753121.pdf, last accessed on May 21, 2025). [4] India Hospital and Healthcare Advancements, International Trade Administration (Available at: https://www.trade.gov/market-intelligence/india-hospitals-and-healthcare-advancements, ; last accessed on April 15, 2025). [5] Grant Thornton Bharat and the Association of Healthcare Providers of India (AHPI), Vitals for growth Decoding healthcare financing and funding in India (Available at: https://www.ahpi.in/wp-content/uploads/2025/03/Healthcare_Report___Vitals_for_Growth.pdf; last accessed on May 18, 2025). [6] Medical Buyer, Indian hospital sector attracts USD 1.5 B FDI in FY 24 (Available at: https://medicalbuyer.co.in/indian-hospital-sector-attracts-usd-1-5b-fdi-in-fy24/; last accessed on May 18, 2025). [7] ‘Developed plots’ means plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available. [8] Planning Commission, Twelfth Five Year Plan 2012-17: Volume III (SAGE Publications 2013) [¶20.109] (Available at: https://nhm.gov.in/images/pdf/publication/Planning_Commission/12th_Five_year_plan-Vol-3.pdf, last accessed on May 21, 2025). [9] “ART Clinic” under Section 2(1)(c) of the Assisted Reproductive Technology (Regulation) Act, 2021 means any premises equipped with requisite facilities and medical practitioners registered with the National Medical Commission for carrying out the procedures related to the assisted reproductive technology. [10] “ART Bank” under Section 2(1)(b) of the Assisted Reproductive Technology (Regulation) Act, 2021 means an organisation which shall be responsible for collection of gametes, storage of gametes and embryos and supply of gametes to the assisted reproductive technology clinics or their patients [11]“Assisted reproductive technology” or “ART” under Section 2(1)(a) Assisted Reproductive Technology (Regulation) Act, 2021 means all techniques that attempt to obtain a pregnancy by handling the sperm or the oocyte outside the human body and transferring the gamete or the embryo into the reproductive system of a woman. [12] “Surrogacy Clinic” under Section 2(1)(ze) of the Surrogacy (Regulation) Act, 2021 means surrogacy clinic, centre or laboratory, conducting ART services, invitro fertilisation services, genetic counselling centre, genetic laboratory, ART Banks conducting surrogacy procedure or any clinical establishment (as defined under CE Act), by whatsoever name called, conducting surrogacy procedures in any form. [13] Until the operationalization of the NEXT is officially notified, the NEET Postgraduate (NEET-PG) examination and equivalent examinations shall continue to be conducted. Existing equivalent examinations will be phased out or cease to be applicable for the purposes that NEXT is intended to serve. [14] Until the operationalization of the NEXT is officially notified, a foreign medical graduate is required to clear Foreign Medical Graduate Examination or such other mandated test or tests conducted by the NMC. [15] Regulation 3 of National Nursing and Midwifery Commission Rules, 2024. [16] Sonography machines used in ophthalmology, urology to come under legal purview, Times of India. ( Available at: https://timesofindia.indiatimes.com/city/pune/sonography-machines-used-in-ophthalmology-urology-to-come-under-legal-purview/articleshow/64578958.cms; last accessed on May 21, 2025). [17] Bombay Hospital & Medical Research Centre v. Asha Jaiswal, 2021 SCC OnLine SC 1149.

We are pleased to announce that Argus Partners successfully represented L&T Finance before the National Company Law Tribunal (“NCLT”), Mumbai in commencing corporate insolvency proceedings against Tikona Infinet arising from defaults in connection with compulsorily convertible debentures (“CCDs”) held by L&T Finance and coupon rights attached to them. In a significant decision, NCLT, Mumbai agreed that “CCDs can be hybrid instruments and can have the effect of debt inherent in them.” The team at Argus Partners advising L&T Finance was led by Adity Chaudhury (Partner) and Murtaza Kachwalla (Partner) and also comprised S.M. Algaus (Principal Associate), Aarati Sonawale and Satvik Tejasvi (Associates). The team was assisted by Tanu Kankariya and Mahek Shivnani (Associates). Arka Majumdar (Partner) provided strategic inputs. The matter was supervised by Krishnava Dutt (Managing Partner). Read more at: Economic Times, BusinessLine.

We are pleased to announce that Argus Partners successfully represented Tata Steel Ltd. in an appeal before the Supreme Court challenging the National Company Law Appellate Tribunal’s ("NCLAT") decision to condone delay in filing an appeal against the resolution plan of Rohit Ferro-Tech Ltd. The Supreme Court held that the NCLAT has no jurisdiction to condone delay beyond the statutorily prescribed period of 15 days for filing an appeal under Section 61(2) of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The Court set aside the NCLAT’s order, reaffirming that statutory tribunals cannot extend limitation periods beyond what is explicitly permitted by the law. Emphasizing the strict nature of statutory timelines, the Court noted: “Even a delay of a single day is fatal if the statute does not provide for its condonation… Allowing condonation in such cases would defeat the legislative intent and open the floodgates to belated and potentially frivolous petitions.” This judgement sets an important precedent on the limited powers of appellate tribunals in condoning delays in IBC-related appeals. The team at Argus Partners representing Tata Steel comprised Udit Mendiratta, Arka Majumdar, Pooja Chakrabarti (Partners), Kiran Sharma (Principal Associate - Designate), Shivkrit Rai (Senior Associate) and Apeksha Singh (Associate). Read more at: Bar and Bench

We are pleased to announce that Argus Partners advised Infinx on its acquisition of the Healthcare Revenue Cycle Management (RCM) business of i3 Verticals, including its proprietary technology, for a total consideration of approx. USD 96 million. Founded in 2012, Infinx is a leading provider of scalable, AI-powered solutions that optimize the financial lifecycle of healthcare providers. Its cloud-based platforms support revenue cycle functions, from patient access to accounts receivable, serving clients across the United States, India, and the Philippines. This strategic transaction marks a significant step in strengthening Infinx’s presence in the healthcare RCM space. It expands the company’s customer base to include academic medical centres and large provider groups, while also bringing on board an experienced team and long-standing client relationships. The acquisition reinforces Infinx’s mission to deliver end-to-end, technology-enabled financial lifecycle solutions for healthcare providers. Commenting on the acquisition, Jaideep Tandon, CEO of Infinx, commented: "We’re thrilled to welcome the i3 Verticals Healthcare RCM team and their customers into the Infinx family. Their expertise in supporting academic medical centers and the strong relationships they’ve cultivated are a perfect complement to our technology-led model. By combining their trusted capabilities with our AI-powered RCM Insights, patient access, and automation platforms, we aim to deliver meaningful financial and clinical outcomes for healthcare providers nationwide." The team at Argus Partners advising Infinx consisted of, Abhinav Bhalaik, Jitendra Soni (Partners) and Samia Haider, Harsh Garg, Abhirami Retheev, Shivam Dubey (Associates). Read more at: The Hindu, BusinessLine, The Wire.

We are pleased to announce that Argus Partners advised Infinx Services Private Limited (ISPL) and its subsidiaries (“Infinx”) on the acquisition of the assets and operations of MedReceivables Advisor, LLC (“MRA”). This acquisition strengthens Infinx’s capabilities in pathology coding, billing, and revenue cycle management, while expanding its service offerings to include litigation support, managed care contracting, credentialing, payer contract reviews, and fee schedule monitoring. Founded in 2012, Infinx delivers scalable, AI-driven solutions that optimize the financial lifecycle of healthcare providers, spanning patient access and revenue cycle management. Its cloud-based software, powered by AI and automation, is utilized by experienced consultants and billing specialists across the U.S., India, and the Philippines. MRA specializes in hospital-based medical practices, enhancing profitability through expert revenue optimization and billing management. With extensive experience serving pathologists, radiologists, and emergency room physicians, MRA’s team of CPAs and MBAs streamlines managed care agreements and third-party billing. Commenting on the acquisition, Jaideep Tandon, CEO of Infinx, said: “We are excited to welcome MRA to the Infinx family. Their expertise in pathology billing and revenue cycle management aligns seamlessly with our vision to bridge providers, patients, and payers through technology. Together, we are well-positioned to empower our clients with more connected and powerful solutions.” The team at Argus Partners advising Infinx consisted of, Abhinav Bhalaik, Armaan Patkar (Partners), Ishita Agarwal, Sadia Akhter (Senior Associates), and Ayushi Khetan, Kanishk Gambhir (Associates). Read more at: Infinx Press Release, HinduBusinessLine, BW Healthcare World.

We are pleased to announce that Armaan Patkar has been elevated to the Firm's Equity Partnership, and Rahul Dev has been promoted to Salaried Partner, effective April 1, 2025. Armaan is a core member of the Firm’s Corporate Practice in Mumbai, specializing in advising corporates, private equity funds, and investment firms on complex cross-border and domestic transactions. His expertise spans public M&A, strategic transactions, and industries such as financial services, SaaS, digital media, technology, gaming, energy, and genomics. He also has significant experience in securities and financial regulatory matters, including regulatory disputes and settlement proceedings with SEBI and RBI. Rahul is a key member of the Firm’s Dispute Resolution practice in Mumbai, specializing in commercial and corporate disputes across judicial and quasi-judicial forums. He represents clients before the Bombay and Gujarat High Courts, National Company Law Tribunals, and arbitral tribunals. His practice covers shareholder and contractual disputes, insolvency, regulatory litigations, and arbitrations. He also advises multinational corporations and financial institutions on enforcement proceedings and regulatory settlements. “I am delighted to welcome Armaan Patkar to the Firm’s Equity Partnership as part of the lockstep structure. I also warmly welcome Rahul Dev to the Firm’s Partnership. I am confident that their expertise and leadership will further strengthen the Firm, driving its continued growth and success. I wish them both the very best in their new roles.” - Krishnava Dutt, Managing Partner  

We are pleased to share that Argus Partners advised the founders and management team of PeopleStrong, a leading human capital management SaaS provider, on the stake sale by Multiples P.E. to the private equity business of Goldman Sachs Alternatives for USD 130 million. Argus Partners also advised PeopleStrong`s existing investor, HDFC Bank on the stake sale. This acquisition marks a pivotal milestone for PeopleStrong, highlighting its significant role in the global HR technology landscape and accelerating its next phase of growth, particularly in AI-led product innovation. Commenting on the stake sale, Sandeep Chaudhary, CEO of PeopleStrong stated, “We have remained focused on balanced, sustainable growth and are proud to stand out today as one of the few EBITDA-positive SaaS companies with a leading market position, We are excited to join forces with Goldman Sachs.  With their global expertise in SaaS and AI, we look forward to driving the next phase of our growth together through continued innovation and operational excellence." The transaction team at Argus Partners advising the founders and management team of PeopleStrong, consisted of, Rachika Agrawal Sahay (Partner), Siddhant Satapathy (Principal Associate), Mrinal Mishra (Senior Associate), and Govind Sharma (Associate). The team at Argus Partners advising HDFC Bank consisted of, Adity Chaudhury, Arka Majumdar (Partners) and Pulkit Gera, Sakshi Mehta (Associates). The team at Argus Partners advising PeopleStrong on the data retention policy aspects consisted of, Udit Mendiratta (Partner) and Apeksha Singh (Associate). Read more at: PeopleStrong, Economic Times, MoneyControl, VCCircle, BWPeople.

I.    Introduction On May 2, 2025, a 2 Judge Bench of the Supreme Court of India rejected JSW Steel’s (“JSW”) resolution plan for the insolvency resolution of Bhushan Power and Steel Limited (“BPSL”). The resolution plan had been approved by the Committee of Creditors (“COC”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”) and thereafter by the National Company Law Tribunal (“NCLT”) and was also upheld by the National Company Law Appellate Tribunal (“NCLAT”). Having found certain lapses and irregularities, not only did the Supreme Court reject the resolution plan, it invoked its extraordinary constitutional jurisdiction under Article 142 of the Constitution of India – not to provide an opportunity to remove any lacuna and allow continuation of the plan – but to direct liquidation proceedings against BPSL. Article 142 vests the Supreme Court with extraordinary constitutional jurisdiction to render “complete justice in any cause or matter pending before it”. The message from the Supreme Court is clear – all processes under the IBC must be strictly adhered to and corporate insolvency resolution process (“CIRP”) must be completed in a time bound process within the mandatory timelines. On the other hand, the Supreme Court has also held that just because a resolution plan has been implemented during the pendency of an appeal, it would not be fait accompli and the Court can still reverse the entire process and reject the implementation (even if it is after 5 years) particularly when the Court finds that the CIRP process had ex facie stood vitiated on account of non-compliance of the mandatory provisions of law etc. The decision has created ripples in corporate India on the certainty of the IBC process, specifically considering that it has been 5 years since JSW had implemented the plan, invested in BPSL and took steps for turning around the company. To be clear, there have been instances where the Supreme Court rejected a resolution plan which had been approved by COC and NCLT. For instance, on February 12, 2024, a 3 Judge Bench of the Supreme Court (Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, (2024)2 SCR 258), passed an order setting aside a resolution plan for JNC Construction (P) Limited which was approved by the COC and NCLT. The said order was passed on an appeal filed by Greater Noida Industrial Development Authority, a statutory body and a creditor of JNC Construction (P) Limited. Amongst other things, in that case, the Supreme Court found that the order approving the resolution plan did not envisage obtaining requisite approvals from the statutory body that owned the land utilised by the corporate debtor. Consequently, the plan was found infeasible and therefore, failed to satisfy the IBC’s requirement that a resolution plan be both feasible and viable. Further, the secured creditor was not served with notices of the meetings of the COC even though this was a requirement under IBC. However, unlike the JSW – BPSL decision where liquidation of BPSL has been directed, in earlier instances, typically the Supreme Court had sent the resolution plan back to the COC for resubmission after satisfying the parameters in the IBC, and in most cases the implementation of the plan had not yet begun. In fact, previously a 3 Judge Bench of the Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Limited (“Jaypee Case”) ((2022) 1 SCC 401), had discussed the scope of judicial review over a resolution plan approved by the COC and held that there is no scope for interference with the commercial aspects of the decision of the COC, and the jurisdiction of an appellate authority is limited to the 5 grounds specified in Section 61(3) of the IBC. These grounds include instances where the resolution plan does not comply with the requirements specified by the Insolvency and Bankruptcy Board of India (“IBBI”), or there has been a material irregularity in exercise of the powers by the resolution professional, or the resolution plan is in contravention of any law. The Supreme Court in the Jaypee Case held that within its limited jurisdiction, if the adjudicating authority or the appellate authority finds any shortcoming in the resolution plan vis-à-vis the specified parameters in the IBC, it would only send the resolution plan back to the COC, for re-submission after satisfying the parameters delineated by IBC. In the JSW – BPSL decision, the Supreme Court has acknowledged that the jurisdiction of an appellate authority is limited to only the 5 grounds specified in Section 61(3) of the IBC. However, having found that there were infirmities in the resolution plan, instead of sending the resolution plan back to the COC for re-submission, it directed liquidation proceedings against BPSL. This paper discusses the decision of the Supreme Court and some of the finer points of law that emerge. II.       A quick rewind CIRP commenced in respect of BPSL on July 26, 2017. After JSW’s resolution plan for BPSL was approved by the COC, the Resolution Professional (“RP”) filed an application before NCLT on February 14, 2019, seeking approval for the resolution plan. On September 5, 2019, NCLT approved the resolution plan but imposed several conditions. On October 10, 2019, the Enforcement Directorate (“ED”) issued a provisional attachment order for attaching the assets of BPSL under the Prevention of Money Laundering Act, 2002. JSW filed an appeal before the NCLAT against the decision of NCLT imposing conditions. On February 17, 2020, NCLAT passed an order removing almost all of the conditions imposed by NCLT. NCLAT also set aside the attachment order passed by the ED. On March 6, 2020, the Supreme Court admitted various appeals filed before it. On March 26, 2021, JSW paid INR 19,350 crore to the financial creditors. Operational creditors were paid in 2022. On May 2, 2025, the Supreme Court passed its final order rejecting the resolution plan and directing liquidation of BPSL. III.  Key points decided by the Supreme Court After discussing the factual background and preliminary objections, the Supreme Court’s order pointed out various flaws in the resolution plan as well as the process followed, concluding the following: The RP had utterly failed to discharge his statutory duties contemplated under the IBC and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“Regulations”). JSW wilfully contravened and did not comply with the terms of the approved resolution plan for a period of about 2 years, which had frustrated the very object and purpose of the IBC, and consequently had vitiated the CIRP of BPSL. The resolution plan of JSW as approved by the COC did not meet the requirements in the IBC and the Regulations and was liable to be rejected by the NCLT. The COC had failed to exercise its commercial wisdom while approving the resolution plan of JSW, which was in absolute contravention of the mandatory provisions of IBC and the Regulations. The judgment passed by the NCLAT in allowing the appeal of JSW and issuing the directions without any authority of law and without jurisdiction was perverse, coram non judice and liable to be set aside. The following paragraphs deal with some of the issues discussed by the Supreme Court. IV.   RP’s failure to discharge his statutory duty One of the grounds on which an order approving a resolution plan can be challenged is if there has been a material irregularity in exercise of the powers by the RP. The Supreme Court found various instances of the RP failing to discharge his duties. Delay in completing the insolvency resolution process and failure to file necessary applications for extension The Supreme Court, relying on an earlier decision in ArcelorMittal India Private Limited v. Satish Kumar Gupta (Civil Appeal Nos. 9402 – 9405 of 2018, decided on October 4, 2018), held that the requirement in Section 12 of the IBC to complete the entire insolvency process within 270 days from the date of admission of the CIRP is a mandatory requirement. Instead, the application seeking NCLT’s approval for the resolution plan was made by the RP after almost one and a half years. It also observed that the RP had not filed any application for extension before NCLT as was required under IBC. The RP’s contention that the reason for the delay was an appeal filed by Tata Steel which was pending before NCLAT, was not accepted by the Supreme Court on the ground that NCLAT had specifically permitted the RP to file an approved resolution plan before NCLT pending the appeal. Though it must be mentioned that there were orders of NCLAT which excluded the period of pendency of appeal for calculating the 270-day period. The required compliance certificate was not filed by the RP and JSW’s eligibility under Section 29A of the IBC was not verified Regulation 39(4) of the Regulations requires an RP to submit a compliance certificate in the prescribed Form H along-with the resolution plan submitted to NCLT for its approval. The said Form H specifically requires the RP to certify that the resolution applicant is eligible to submit a resolution plan under Section 29A of the IBC. Section 29A sets out certain disqualification criteria, and anyone disqualified under Section 29A cannot submit a resolution plan. In the present case, the Supreme Court observed that not only did the RP not file the compliance certificate as required, the RP did not even provide a certificate or make any statement to the effect that JSW’s affidavit regarding its eligibility was in order. There was also nothing on record to show that the RP verified compliance with Section 29A. However, in NCLAT’s order there was a specific observation that the RP had confirmed that JSW is not disqualified under Section 29A. The Supreme Court concluded that since the RP did not verify JSW’s eligibility under Section 29A, it raises doubts regarding the eligibility of JSW. Importantly, the order does not conclude that JSW was ineligible under Section 29A. It is not clear from the order as to whether the RP attempted to demonstrate to the Supreme Court that JSW is not ineligible under Section 29A. RP failed to make any application for avoidance of transactions in accordance with Chapter - III of the IBC The Supreme Court observed that when the Reserve Bank of India had issued directions to Indian banks to mandatorily initiate CIRP against corporates infamously known as ‘dirty dozen’ companies including BPSL, it was obligatory on the part of the RP to discharge his statutory duty cast upon him to file applications for avoidance of transactions in accordance with Chapter-III of IBC. It is not clear from the order whether the RP had made a determination that the criteria for filing applications for avoidance of transactions were not met and therefore he did not file any application, or whether the RP did not even assess whether such applications were required to be made. In case it is the former then it is not clear as to how there has been a failure by the RP because the RP can file an application for avoidance only if the relevant provisions apply. In case it is the latter, then there certainly has been a violation by the RP – however, even if that be the case, the question that arises is whether a default by the RP on this aspect would vitiate a resolution plan. The judgment does not have a detailed deliberation on this issue. RP failed to confirm that the resolution plan complied with the requirement regarding payment of debts to the operational creditors in priority As per Regulation 38(1) as it stood then, the amount due to the operational creditors under a resolution plan had to be given priority in payment over the financial creditors. In the resolution plan, the dues of financial creditors were given priority over the dues of the operational creditors. Thus, the RP failed to confirm compliance with the said requirement. Other matters The Supreme Court has passingly referred to some other non-compliances without elaborating on the same. The Supreme Court referred to objections raised by financial creditors and of the operational creditors as regards the manner in which the proceedings were being conducted, permitting JSW only to submit and amend the resolution plan submitted earlier; and the RP having not having checked the compliances of the revised resolution plan of JSW, though the COC had pointed out that the plan of JSW reviewed by the RP earlier was different from the resolution plan of JSW put forth subsequently for voting. However, as mentioned above, the Supreme Court did not delve further into this issue. Interestingly, while the Supreme Court pointed out the various instances of the RP failing to discharge his duties, there is no specific discussion in the judgment on whether all of these should be considered as ‘material irregularities’ in the exercise of powers by the RP for the purposes of Section 61(3) of the IBC. In other judicial decisions, not all non-compliances by an RP have been held to be ‘material irregularities’. For example, in another case before the Supreme Court, where the RP had not published Form G inviting EOIs on the designated website, but had published it on all newspapers and had also informed IBBI about technical issues in uploading the Form on the website, the Supreme Court had held that it was not a material irregularity for which the entire process would be vitiated. On the other hand, in a case where the COC had given its conditional approval to a resolution plan and the RP submitted a modified plan before the NCLT without receiving the final approval of the COC for the modified plan, it was held that it was a material irregularity by the RP. V.      The resolution plan of JSW was not in conformity with Sections 30(2) and 31(2) of the IBC and non-compliances by JSW The Supreme Court concluded that JSW’s resolution plan was not in conformity with Sections 30(2) and 31(2) of the IBC. Section 30(2) of the IBC as it stood at the relevant point of time provided that the RP should confirm that the resolution plan, inter-alia, does not contravene any provisions of law and confirms to the requirements specified by IBBI. Section 31(2) of the IBC provides that if the NCLT is satisfied that the resolution plan does not meet the requirements under Section 30(2) of the IBC, then it may reject the resolution plan. While discussing the non-compliances of mandatory provisions and misuse of process of law, the Supreme Court broadly identified the following grounds: Delay in completing the insolvency resolution process and delays in implementation by JSW This issue regarding delay in making an application before NCLT has already been discussed above. Additionally, the Supreme Court was not pleased that JSW did not implement the resolution plan within 30 days of NCLT passing the order approving the resolution plan as was mentioned in the plan, but instead took about ‘540’ days in respect of payments to the financial creditors and about ‘900’ days in respect of payments to the operational creditors. The Supreme Court held that the resolution plan as approved by the COC was an unconditional plan, and JSW was supposed to implement the same regardless of any unprecedented challenges or circumstances. The Supreme Court was also not convinced that the 30-day time period in the resolution plan to make the payment was validly extended by the COC. It did not help that the COC itself had filed an affidavit earlier before the Supreme Court raising serious grievances against JSW. The COC had contended that the conduct of JSW demonstrated ill-intent and mala fides to mislead the Court and misuse the process of the Court in order to delay and defer the implementation of the resolution plan (which was unconditional) and there was wilful breach of the plan by not implementing the same. The COC appears to have changed its stands once it received payment from JSW. Even though JSW did pay the amounts to the creditors eventually, this was not enough to convince the Supreme Court of JSW’s bona fide and it observed that “there was a dishonest and fraudulent attempt made by JSW, misusing the process of the Court by not making the upfront payments as committed by it for about two and a half years and thereby enriching itself unjustly, and thereafter considering the rising prices of steel in the market, JSW sought to comply with the terms of Resolution Plan at a very belated stage, in collusion with the CoC and the Resolution Professional”. The Supreme Court has made it clear that a resolution applicant must implement its resolution plan and make payments to the creditors strictly within the timeline mentioned in the plan submitted by it irrespective of whatever challenges or unforeseen obstacles it faces. It has also clearly stated that any contravention of the terms of the resolution plan would result in prosecution and punishment. On the other hand, the Supreme Court has also held that just because a resolution applicant implements a plan during the pendency of an appeal, it would not mean that it is fait accompli and the plan cannot be rejected later on by the court. Such a strict position will certainly not be viewed favourably by investors looking to invest in a distressed company. While ‘bad actors’ should not be allowed to get away by not implementing the plan, there may be bona fide reasons for waiting before implementation of a plan. An interesting point of law that also emerge from the order of the Supreme Court is the scope of appeal by a resolution applicant whose resolution plan has been approved by the NCLT. In the present instance, the NCLT had imposed certain conditions prior to approving the resolution plan. JSW filed an appeal before the NCLAT against some of these conditions. The Supreme Court held that such an appeal was not maintainable because JSW could not be said to be a person aggrieved entitling it to file an appeal, and one of the grounds under Section 61(3) of the IBC should necessarily exist. The resolution plan violated Regulation 38 of the IBBI Regulations as operational creditors were not given priority in payment As discussed above, as per Regulation 38(1) as it stood then, the amount due to operational creditors under a resolution plan had to be given priority in payment over the financial creditors. However, as per the Supreme Court, in the resolution plan, the said mandatory requirement was not complied with and the dues of financial creditors were given priority over the dues of the operational creditors. VI.   COC failed in its duty The Supreme Court questioned the bona fide of the COC and faulted the COC for approving the resolution plan without verifying the mandatory requirements of Regulation 38. The Supreme Court held that if a resolution plan does not comply with mandatory requirements and such plan is approved by the COC, then it cannot be said that COC had exercised its commercial wisdom. It was observed that the COC also did not discharge its duty to carefully examine the feasibility and viability of the plan, and the capacity and resources of JSW for the implementation of the plan proposed by it. Considering that JSW has already implemented the resolution plan, it is unclear which aspect of the plan did the Supreme Court find infeasible or why it doubted the capacity and resources of JSW to implement the plan. The Supreme Court was also not pleased that the COC had at one time raised serious grievances against JSW for the delay in implementing the plan, but once JSW made the required payments to COC after about 2 years, the COC accepted the payment without raising any objection, and also supported the stand of JSW about the implementation of plan during the course of arguments. The Supreme Court observed that “such a contradictory stands taken by the COC at various stages of proceedings clearly proves that COC had played foul”. Looking back - especially now that the Supreme Court’s ruling has taken 5 years - one wonders whether stakeholders would have gained anything if the COC had rejected JSW’s funds and kept BPSL running under a stop-gap monitoring committee. Many may agree that such a scenario would not have benefitted many. VII.Conclusion Supreme Court has attempted to deliver a powerful message that the IBC framework is not a box-ticking formality, and all processes and timelines need to be strictly followed. This is indeed a noble message, but the question is at what cost has this message been delivered. Also, to ensure that insolvency processes are completed in a time bound manner, not just stakeholders but even adjudicating authorities should decide matters in a time bound manner and not take years to decide a matter. This decision is certainly not the last word on this matter. There are a few avenues available for JSW including a review of the decision. This paper has been contributed by Adity Chaudhury (Partner).

We are pleased to share that Argus Partners advised Walchandnagar Industries Limited (“WIL”) on the acquisition of approximately 60.3% stake in Aicitta Intelligent Technology Private Limited (“Aicitta”). The investment will be made in multiple tranches over a period of 31 (thirty-one) months through a combination of equity shares and compulsorily convertible preference shares. Aicitta specializes in research and development within the defense industry, focusing on unmanned systems. Walchandnagar views this investment as a strategic move to expand its defense business by leveraging synergies with Aicitta’s expertise in unmanned technology. Commenting on the deal, WIL’s MD and CEO, Chirag Doshi, said “This deal marks an important inflection point in our journey in serving India’s defence needs through our enhanced capabilities. This acquisition opens up new avenues for growth through next generation defence technology development and a platform to create our own intellectual property (IP). The Aicitta deal signals our openness to adopting an inorganic growth approach in high-growth industries. Aicitta Technologies has already received a Project Sanction Order (PSO) with an opportunity size of close to Rs 1400 crores. We will have two working prototypes of the product ready for the trials in the coming 46 weeks.” The team at Argus Partners advising WIL consisted of, Abhinav Bhalaik, Armaan Patkar (Partners), Himani Shah, Ishita Agarwal, (Senior Associates), and Rohan Lodge, Vishakha Somani (Associates). Read more at: CNBC-TV18.

I.     Introduction An effectively functioning lending system often finds support from a strong collateral framework. Banks/ lenders typically extend credit to borrowers when such lending can be secured by an underlying collateral security, through which, the lender could satisfy its debt in case the borrower defaults. Collateral security or security interest may take multiple forms, such as mortgage of fixed assets, pledge of shares, corporate guarantees, etc. If the borrower discharges its debt, the collateral security interest is released, if the borrower defaults, the bank/ lender may seek to enforce its interest in the collateral security. In fact, creation of such security interests is statutorily recognized under the Indian Contract Act, 1872 and the Transfer of Property Act, 1882. An asset of a borrower can be charged with multiple creditors, creating an inter-creditor arrangement whereby certain creditors may have a first charge over the asset, and the other creditors may have a second or a subservient charge over the asset. In such a scenario, if the borrower defaults, the debts of the creditor having first charge would be satisfied first, by sale of the charged asset. Thereafter, the debts of the creditors having a subservient charge would be satisfied from the residual proceeds. The above inter-creditor arrangement between the first and subservient charge holders has time and again been recognized contractually as well as through judicial precedents. In the banking industry, valuation and priority of security is the most vital consideration at the time a bank undertakes any lending decisions. This plays an important factor in deciding not only the loan amount a bank undertakes to lend to the borrowers, but also other aspects like the nature of the loan, interest rates etc. All secured loans disbursed are sanctioned on an assumption that the priority of charge and value of security would be recoverable in each case, and that this ranking would be protected and preserved. Banking institutions, perform such due diligence towards ensuring that any amounts lent by them are adequately secured and recoverable, thereby, ensuring responsibility to the economic framework. However, it seems that the Insolvency and Bankruptcy Code, 2016 (“IBC”) does not recognize the said inter-creditor arrangement of priority of charge at the time of creditor payout. II.         Understanding Creditor Payout Under IBC Before delving into the aspect of how IBC does not recognize inter-creditor arrangements, it is important to understand how creditors’ payout under IBC is determined. There exist three possible scenarios based on which creditors can get a payout for the money lent/ disbursed to a Corporate Debtor (“CD”) undergoing a corporate insolvency resolution process (“CIRP”). The first two being in a situation where the CIRP of the CD is successful, i.e., when a resolution plan submitted by an eligible resolution applicant is approved by the Committee of Creditors (“CoC”) of a CD. The third being a case where a CD is pushed into liquidation. The first scenario is where the creditor has voted in favour of a resolution plan. Under Section 30(4) of IBC, a resolution plan is approved, if members of the CoC holding more than 66% share in the CoC vote in favour of approval of a resolution plan. The section further provides that the CoC while approving a resolution plan, may consider the manner of distribution proposed, and the order of priority amongst creditors as laid down under Section 53(1) of IBC including, the priority and value of the security interest of a secured creditor. This section allows the creditors who are assenting members of the CoC, to decide amongst themselves, the payout/ distribution of proceeds due to them. It is pertinent to note that, Section 30(4) of IBC is a “may” provision, and therefore, it is not mandatory for the assenting members of the CoC to distribute proceeds based on the order of priority and the value of security. The second scenario is where a resolution plan is approved, however, a creditor dissents to the approval of a resolution plan. In that scenario, the minimum entitlement of a dissenting creditor is based on the provisions of Section 30(2)(b) read with Section 53(1) of IBC.  Section 30(2) was introduced in IBC with the objective of ensuring that all creditors are treated fairly in a CIRP. This provision protects financial creditors who have not voted in favour of the resolution plan, by mandating the resolution plan to give dissenting financial creditors an amount equivalent to what they would have received, had the CD been liquidated. The raison d’etre behind such a provision is that a resolution plan cannot be crammed down on a dissenting financial creditor, unless they at the very least receive the amount they would have received in liquidation of the CD. Further, Section 30(2)(b) of IBC makes it clear that a dissenting financial creditor is to be paid “minimum liquidation value” as per Section 53 of IBC i.e., as per the waterfall mechanism. Section 53(1) of IBC states that all debts are to be paid in the “order of priority” as set out in the section, referring that debts of the class of creditors mentioned first must be satisfied in full, before proceeding to the next class of creditors as specified under Section 53(1). Resultantly, any resolution plan must conform to the mandate provided under Section 30(2)(b) read with Section 53(1) of IBC. The third scenario is in the case of liquidation, wherein a secured creditor has two options, i.e., the secured creditor may enforce its security, by taking it outside the liquidation estate as provided under Section 52 of IBC or the secured creditor could go under the waterfall mechanism as provided under Section 53 of IBC and receive its payout therein. III.     IBC’s Failure in Considering Inter-se Priority Amongst Secured Creditors Interestingly, in both the second and third scenarios, the IBC has linked payout to creditors based on the security held by them. However, the waterfall mechanism as envisaged under Section 53, IBC does not distinguish between secured creditors having first charge and secured creditors having a subservient charge. Resultantly, Section 53, IBC fails to consider inter-creditor arrangements between the secured creditors. Two judgments of the NCLAT demonstrate the same. The first being the case of Small Industries Development Bank of India v. Vivek Raheja (“SIDBI Judgment”). In this case, SIDBI was a secured financial creditor, having a first charge over certain assets of the CD and had opted to be a dissenting financial creditor. Based on this, it sought its entitlement/ payments under Section 30(2)(b) read with Section 53(1) of IBC. The argument put forth on behalf of SIDBI was straightforward, i.e., since it had a first charge over certain assets of the CD, the amounts owed to it as a dissenting financial creditor, were to be discharged first and in priority under the waterfall mechanism i.e., under Section 53(1) of IBC, and thereafter, the subservient charge holders would claim from the residual proceeds after discharge of debt owed to the first charge holder. It was contended on behalf of SIDBI that inter se arrangement amongst secured creditors has to be respected in the waterfall mechanism, even if IBC does not explicitly state the same. The NCLAT did not appreciate SIDBI’s argument. Instead, it relied on a Supreme Court judgment, i.e., India Resurgence ARC Private Limited v. Amit Metaliks Limited (“Amit Metaliks”), to conclude that a dissenting financial creditor can only claim its share in the liquidation value as per its voting share in the CoC and not as per the value of the security held by it, thereby dismissing SIDBI’s argument of inter-creditor arrangement and the priority of charge held by SIDBI in the assets of the CD. Resultantly, the SIDBI Judgment held that IBC did not recognize the priority of first charge over the assets of the CD and categorized all creditors, irrespective of their charge, to be considered under the single category of “secured creditors”. The second judgment is the case of ​​Technology Development Board v. Mr. Anil Goel (“TDB Judgment”). In this case, the NCLAT held that the secured creditors relinquishing the security interest under Section 52 of IBC are to be considered as ‘one class’ and are to be ranked equally for distribution of assets under Section 53(1)(b)(ii) of IBC. NCLAT also rejected the argument that there must be a sub-classification inter-se the secured creditors, thereby completely eliminating inter-creditor arrangements. Both, SIDBI Judgment and TDB Judgment have been challenged and are pending adjudication before the Supreme Court. The Supreme Court, on June 29, 2021, stayed the operation of the TDB Judgment. IV.      The Case of DBS Bank v. Ruchi Soya On January 3, 2024, a division bench of the Supreme Court passed its judgment in the case of DBS Bank Limited, Singapore v. Ruchi Soya Industries Limited (“Ruchi Soya”) wherein it held that dissenting financial creditors are to be paid the minimum value of its security interest. The judgment in Ruchi Soya is at odds with the judgment in Amit Metaliks. The issue has now been referred to a larger bench and is pending adjudication before the Supreme Court. V.        Need to Amend the Law There is an urgent need to amend Section 53 of IBC for it to recognize sub-classification inter-se the secured creditors for multiple reasons. First, Section 53 of IBC and its interpretation taken in various judgments are a deviation from the thumb rule wherein inter-creditor arrangements is often seen as a cornerstone for distribution of proceeds amongst creditors having different charge over an asset of the CD. Ignoring the inter-creditor arrangement between creditors and treating creditors of different class as one single class, will result in consolidation of all securities of the CD as one single security. If all the secured creditors are ranked equally irrespective of their inter-se priority, it would lead to perverse economic outcomes wherein a creditor secured by a weak security or a subordinate right will get benefits equivalent to a creditor secured by a strong and valuable security with exclusive rights. Second, the judgments passed by the NCLAT, SIDBI and TDB incorrectly hold that the ratio of ICICI Bank v. SIDCO Leathers (“SIDCO Leathers”)- a Supreme Court judgment, is inapplicable to IBC. In the case of SIDCO Leathers, the Supreme Court interpreted Section 529 and Section 529A of the Companies Act, 1956 i.e., provisions related to distribution of proceeds amongst creditors in the winding up regime. The Supreme Court in the case of SIDCO Leathers had observed that the claim of a first charge holder will prevail over the claim of a second charge holder and on occasions, where debts due to both the first charge holder and the second charge holder are to be realised from the property belonging to the mortgagor, the first charge holder will have to be repaid first i.e., the amounts would be distributed basis the security available with each of the creditors. Additionally, in SIDCO Leathers, the Supreme Court held that the principles of inter-se priority as envisaged under Section 48 of the Transfer of Property Act, 1882 (which is a general law) would be applicable to Section 529 and 529A of Companies Act (which is a special law). It was observed that a right to property being a constitutionally protected right cannot be presumed to be taken away unless expressly provided in the statute. Keeping in mind the express language of Section 529A, the purpose of the said provision and the constitutional principle contained in Article 300A of the Constitution of India, the Supreme Court held that Section 529A of the Companies Act, does not abrogate inter-se priority amongst the secured creditors. The ratio of the judgment passed by the Supreme Court in SIDCO Leathers was squarely applicable in the context of Section 53, IBC as well. Section 53(1)(b), IBC is pari materia to Section 529-A of the Companies Act and even in context of Section 53(1)(b), IBC, the legislature only intended to bring workmen dues and the secured creditor’s dues at par and did not intend to impact the inter-se rights of secured creditors. This provision certainly cannot be read to abrogate inter-se priority amongst secured creditors during liquidation. Third, Section 53 of IBC as well the NCLAT judgments are at odds with the best global practices which recognize and appreciate the importance of priority of charge. In fact, the UNCITRAL Insolvency Legislative Guide recognizes and recommends that creditor rights and ranking of priority claims existing prior to commencement of insolvency should be respected. Even the Bankruptcy Law Reforms Committee borrowed the above-mentioned principles and recommended their incorporation into the IBC. This shows that inter-se priority of charges, at all stages of the lifecycle of a loan, is a paramount practice, basis on which the global lending industry functions. Thus, there is an urgent need to amend Section 53 of IBC to formally recognize the inter-se arrangements between secured creditors. If such arrangements are not recognized by the legislature and the Courts, they will be made obsolete, thereby disrupting the existing lending eco-system in the country. Author:  Udit Mendiratta (Partner) and Shivkrit Rai (Senior Associate).

We are pleased to share that Argus Partners has advised Jungle Ventures on its US$ 18 million investment in Waterfield Advisors, an independent wealth advisory and multi-family office.The deal comprises of both primary and secondary transactions, with a primary infusion of $15 million.  The fresh capital will be deployed to enhance Waterfield’s technology infrastructure, expand its presence across key financial hubs, and deepen the client engagement across various segments within India’s affluent demographic. Commenting on the investment, Arpit Beri, Partner, India Investments at Jungle Ventures, stated, "Independent, conflict-free wealth advisory is more important than ever. Waterfield’s leadership in this space positions them uniquely for the next phase of growth, and we are thrilled to back their vision." "Beyond business families, this fundraise enables us to extend our proposition to a broader audience of founders, professionals and women, while also expanding our presence into India’s tier-2 and tier-3 cities and to key markets overseas catering to the Global Indian," said Soumya Rajan, founder and CEO of Waterfield Advisors. The team at Argus Partners advising Jungle Ventures consisted of: Transaction Team: Abhinav Bhalaik, Vallishree Chandra (Partners), Himani Shah (Senior Associate), and Kanishk Gambhir and Priya Gala (Associates) Due Diligence Team: Abhinav Bhalaik, Vallishree Chandra, Aayush Kumar (Partners), Himani Shah, Rohan Aneja (Senior Associates), Kanishk Gambhir, Priya Gala, Vishakha Somani and Rohan Lodge (Associates) Read more at: MoneyControl, Economic Times.  

Argus Partners is pleased to announce the relocation of its Bengaluru office to a larger, state-of-the-art workspace at 20th Floor, SKAV 909, Lavelle Road, Bengaluru – 560001. The new office has been meticulously designed to promote teamwork and innovation, offering a contemporary, expansive workspace with modern infrastructure and premium amenities. This transition reinforces the Firm’s dedication to enhancing efficiency and cultivating a dynamic and inspiring work environment for its people. This relocation represents a key milestone in Argus Partners’ ongoing growth, strengthening its presence in Bengaluru while complementing recent expansions in Mumbai, Delhi, and Kolkata. Please find a copy of the photographs of the Bengaluru office, here.  

I. Introduction The Foreign Exchange Management Act, 1999 (the “FEMA”), along with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (the “NDI Rules”), constitutes the primary legal framework governing foreign equity investments (both direct and indirect) in India. Additionally, instructions issued on foreign investment in India and its related aspects under the FEMA in the ‘Master Directions on Foreign Investment in India’ (the “Master Directions”), issued by the Reserve Bank of India (the “RBI”) lay down the modalities as to how the foreign exchange business has to be conducted with a view to implementing the NDI Rules. The FEMA read with the NDI Rules, and the Master Directions, collectively forms the comprehensive "FDI Regime" for foreign investments in India. In the past years, both the Master Directions and the NDI Rules have undergone changes to attract foreign investment in India and ease out the processes of regulatory clearances, with emphasis on making India a hotspot for ease of doing business. II. Downstream Investment A downstream investment means investment by an Indian company which is either owned or controlled by a person resident outside India (an “FOCC”). It is an indirect foreign investment into equity instruments of Indian companies also conventionally termed as ‘downstre3am investment’. A downstream investment by an FOCC has always been governed by the underlying principle that “what cannot be done directly, shall not be done indirectly” (the “Guiding Principle”). Accordingly, the legislative intent of the FDI Regime is to prevent foreign investors from making investments indirectly through an Indian entity that would otherwise not be allowed under the FDI Regime directly. Accordingly, any downstream investment made has to be in compliance with entry routes, sectoral caps, pricing guidelines, and other attendant conditions as applicable for foreign investment. However, historically, there has been certain regulatory ambiguity due to the lack of explicit clarification regarding the scope of the Guiding Principles under the FDI Regime. For instance, overseas entities have been expressly permitted, to undertake foreign direct investments (“FDI”) through swap of equity instruments, as well as make deferred consideration payments for the transfer of equity instruments to a person resident outside India (a “PROI”) and a person resident in India (with certain conditionalities). At the same time, ambiguity persists as to, whether this flexibility for swap transactions or deferred considerations (as allowed for FDIs) can be extended to FOCCs. On January 20, 2025, the RBI updated the Master Directions (the “Updated Master Directions”), which provided clarifications on certain key aspects in relation to (i) downstream investment through swap of equity instruments, and (ii) deferred consideration in downstream investments, as detailed below. III. Key Updates Regarding Downstream Investments (a)Swap of Equity Instruments In a share swap transaction, generally, consideration is discharged through the issuance or transfer of securities by the acquiring company. This approach alleviates liquidity constraints and enables more effective allocation of resources towards operational needs of the business. Rule 6, and Rule 9A read with Schedule I of the NDI Rules, expressly allows a swap transaction, whereby equity instruments can be issued or secondary shares can be transferred to a PROI in exchange for equity instruments of another Indian company or equity capital of a foreign company, under the automatic route (wherever the sector of the relevant business allows it), subject to other conditionalities that may be applicable basis such sector of the business. Historically, owing to the Guiding Principle, it should have been implied that if a swap of equity instruments is allowed for FDI, it would also be allowed for downstream investments. However, in light of recent scrutiny by the RBI regarding specific swap transactions, several authorized dealer banks (“AD Banks”) had adopted a conservative approach. As per this approach, FOCCs utilizing the swap mechanism for downstream investment would be subject to the government approval route rather than the automatic route. This view seems to have stemmed from Rule 23(4)(b) of the NDI Rules, which states that “for the purpose of downstream investment, the Indian entity making the downstream investment shall bring in requisite funds from abroad and not use funds borrowed in the domestic markets. The downstream investments may be made through internal accruals, and for this purpose, internal accruals shall mean profits transferred to the reserve account after payment of taxes”. The above provision, combined with the RBI’s extensive scrutiny of swaps in downstream investments, seemed to have led to a conservative approach that the consideration for downstream investment should be solely in cash. Following the Updated Master Directions, this conflict has been sought to be resolved. It has now been expressly clarified under paragraph 9 of the Updated Master Directions that investment by way of swap of equity instruments is also allowed for downstream investment, provided that the transaction does not circumvent other provisions of NDI Rules in relation to downstream investment. III. Investment Limits on Deferred Consideration and the FOCC Dilemma Under the NDI Rules, deferred consideration is allowed for FDI under Rule 9(6) of the NDI Rules, which also stipulates that the deferment cannot exceed 18 months from the execution of the principal transaction documents. Furthermore, a PROI can defer, hold back, or place in escrow1 only up to 25% of the total consideration, for matters such as post-closing adjustments, earnouts2, or specific indemnity items under the principal transaction documents. Provided that the consideration paid as a final amount is required to be in adherence to the ‘fair value’ computed as per the pricing guidelines under the NDI Rules. However, in recent years, reports emerged in the media that notices were issued by the RBI for various downstream investments, as regards utilizing deferred consideration in transactions involving transfer of equity instruments, highlighting that such practices were in contravention of legal design of FDI Regime. Due to the regulatory ambiguity and the RBI’s practical approach, a conservative market view emerged, with the belief that FOCCs were prohibited from utilizing deferred consideration for structuring remittances for the purpose of transferring equity instruments. However, the inclusion of paragraph 9 of the Updated Master Directions, in line with the Guiding Principle, has expressly clarified that FOCCs can utilise deferred consideration for transfer of equity instruments. However, it must be noted that any utilisation of deferred consideration arrangement in relation to transfers requires to be explicitly provided under the transaction documents in relation to foreign investments (whether direct or indirect). Additionally, such arrangements should not circumvent the other provisions of NDI Rules in relation to downstream investment. IV. Issues Pending Clarity in Relation to FOCCs (a) Applicability of pricing guidelines and reporting requirements In relation to a transfer of equity instruments by a FOCC, the NDI Rules solely provide clarity on the scenarios where the FOCC is a transferor of equity instruments. In such cases, (i) when the transfer is made to a PROI, compliance with the reporting requirements is mandated and compliance with pricing guidelines is not mandated, (ii) when the transfer is made to a person resident in India, compliance with the pricing guidelines is mandated (that is, the consideration to be paid must not be above a ‘fair value’ computed as per accepted pricing methodology), and the compliance with reporting requirements is not mandated. However, the FDI Regime does not provide clarity for scenarios where an FOCC is a transferee of equity instruments of an Indian entity and lacks the necessary legislative clarity to address this scenario comprehensively. At present, FDI Regime is unclear on: (i) whether for a transfer of equity instruments by a PROI to an FOCC, only reporting requirements are applicable or whether any specific requirements in relation to fair value  exist owing to the pricing guidelines; and (ii) whether for transfer of equity instruments by a person resident in India to an FOCC if reporting requirements are applicable, or if such transaction is solely governed by the pricing guidelines apply (as there is no clear directive on whether the price per equity instrument must meet or exceed the fair value ). Therefore, such transactions are currently evaluated on case-to-case basis by each AD Bank. (b)Practicalities relating to swap of equity instruments through secondary transfers Previously under FDI Regime any swap of equity instruments required an Indian company to undertake ‘fresh issuance of equity instruments’ to a PROI in lieu purchase of equity instruments of another Indian company. A recent clarification3 added to the NDI Rules under Rule 9-A allows for a transfer of equity instruments of an Indian company, through swap transactions (involving equity instruments of an Indian company, or equity capital of a foreign company), subject to other applicable conditions.  Therefore now, in secondary transactions, the consideration for a secondary purchase of shares can be discharged by utilising shares of another entity (whether Indian or foreign). While there is no legislative ambiguity under NDI Rules, since this is a recent change, the manner of implementation and practical challenges around this are yet to be seen. Paragraph 9 of the Updated Master Direction clarifies that the swap of equity instruments as a method for concluding secondary transfers is also available for downstream investments, subject to the FDI regime. Since the Updated Master Directions have just been released, the modalities of implementation remain to be seen. V. Conclusion The Updated Master Directions provide much-needed clarity to the regulatory landscape governing downstream investments in India, specifically addressing certain key areas of ambiguity. While some ambiguities as mentioned above subsist, clarifications by the Updated Master Directions have resolved critical uncertainties by confirming that swap transactions can be used by an FOCC, as long as they comply with the FDI Regime. Similarly, the clarification on deferred consideration gives more flexibility to FOCCs, allowing them to structure transfer of equity instruments basis the said mechanism on deferment of consideration, again, provided they comply with the FDI Regime. This aligns the downstream investment framework with practices already allowed for FDI, making it easier for FOCCs to structure deals with a greater degree of certainty around the regulatory framework governing such investments. Overall, these updates enhance the foreign investment landscape by reducing ambiguity and providing a more predictable framework for downstream investments. This aligns with India's broader goal of becoming a leading destination for foreign investment and compliments its ambition to become a $5 trillion economy. This paper has been written by Anindya Ghosh, Anantha Krishnan Iyer (Partners), Jaidrath Zaveri (Principal Associate) and Shubham Tiwary (Associate). Recent Papers/ Articles January 2025 – The Draft Digital Personal Data Protection Rules, 2025 Key Takeaways – Technology & Data Privacy October 2024 – How NSE settled its case with SEBI – Corporate and M&A October 2024 – Interpretations Regarding ‘Look Out’ Circulars Issued By Investigation Authorities/Agencies – Disputes & ADR September 2024 – Regulating Green Hydrogen Transportation: A Constitutional Conundrum – Energy and Infrastructure September 2024 – Playing By The Rules: Why Self-Regulation Is Best For Fintechs – Finance; Technology and Data Privacy August 2024 - Exclusion Clauses In Contracts Barring A Claim For Damages: A Study On The Enforceability Of Such Clauses In India – Disputes & ADR 1Holdbacks or escrows: To account for potential price adjustments post-closing, investors often defer part of the purchase price by holding it back or placing it in escrow, with any reduction in purchase price deducted from this amount once the final valuation is determined. 2Earnouts: Deferred consideration, often structured as an earnout tied to milestones, aligns the interests of investors and founders, while being more tax-efficient for founders as it is taxed at a lower capital gains rate compared to a cash bonus. 3 Rule 9-A was introduced to the NDI Rules vide Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024 (August 16, 2024).

We are pleased to share that Argus Partners has advised Infra.Market (a construction materials solutions firm) on raising $121 million in fresh funding at a valuation of about Rs 24,147 crore (nearly $2.8 billion) in pre-IPO funding. Founded in 2016 by Aaditya Sharda and Souvik Sengupta, Infra.Market manufactures construction materials under its private-label brands. It has a B2B, retail, and B2C network and leverages technology to digitise the procurement process. The pre-IPO funding round saw participation from existing investors Tiger Global, Foundamental GmbH, Evolvence, among others. Nikhil Kamath, Ashish Kacholia, Abhijit Pai, Sumeet Kanwar, Nuvama, and Capri Global were also part of the round. The team at Argus Partners advising Infra.Market consisted of Anindya Ghosh, Anantha Krishnan Iyer (Partners), Aditya Prasad and Khushi Bhardwaj (Associates). Read more at: MoneyControl, Reuters, INC42, Times of India.

On January 3, 2025, the Ministry of Electronics and Information Technology, Government of India (“Ministry”) issued the draft Digital Personal Data Protection Rules, 2025 (“Draft Rules”) for public consultation. The Draft Rules are framed under the Digital Personal Data Protection Act, 2023 (“Act”), which was passed into law in August 2023, but is yet to come into force. The Ministry has invited stakeholders’ feedback on the Draft Rules by February 18, 2025. Following are the key takeaways from the Draft Rules[1]: How will the Draft Rules be enforced? The enforcement of the Draft Rules will be in tranches. The provisions relating to the Data Protection Board (“Board”) will take effect upon notification in the official gazette, and substantive/ operational provisions will be notified at a later, unspecified date. How the notice for consent must be given by a Data Fiduciary? Data Fiduciaries are required to provide a notice that: (a) is standalone and self-explanatory for the Data Principal to understand on its own; (b) is written in clear and plain language to enable the Data Principal to give specific and informed consent. At the minimum, notice must include an itemised description (or list) of (a) the categories of Personal Data being processed; and (b) the goods, services, or uses associated with Processing of such Personal Data, and also the Specified Purpose. Additionally, the notice must include a link to the Data Fiduciary’s website or app, and provide details on how the Data Principal can: (a) withdraw consent; (b) exercise rights under the Act; and (c) file a complaint before the Board. How should Personal Data be protected by a Data Fiduciary? Data Fiduciaries are required to implement “reasonable security safeguards” to prevent Personal Data breaches. At a minimum, these safeguards include: Data Security Measures: Encryption, obfuscation, masking or the use of virtual tokens mapped to that Personal Data; Access Control: Restrict access to the computer system used by the Data Fiduciary or Data Processor; Logging and Monitoring: Keep and review logs to detect unauthorized access to Personal Data and support investigations; Continuity Measures: Ensure data processing can continue in case of data loss, by way of maintaining data backups, etc.; Retention of Logs: Store logs for 1 year (unless required otherwise by any law) to detect unauthorized access and aid investigations; Contractual Measures: Include security requirements in contracts with Data Processors; Technical and Organisational Measures: Apply both technical solutions and organisational policies to ensure that security safeguards are effectively implemented.   How must a Data Fiduciary notify a Personal Data breach? In the event of a breach of Personal Data, the Data Fiduciary must take the following steps: Intimate Data Principal: Promptly (and within 72 hours of becoming aware of the breach) notify affected Data Principal of the breach by providing: (i) a description of the breach, including its nature, extent, timing, location; (ii) potential consequences of the breach; (iii) the measures taken (if any) to mitigate risk; (iv) the safety measures that the Data Principal can take to protect themselves; and (v) contact details of a person who is able to respond to the Data Principal’s queries. b. Intimate the Board: Promptly notify the Board of the breach, by providing: (i) a description of the breach, including its nature, extent, timing, location; and (ii) potential consequences; and Within 72 hours of becoming aware of the breach, the Data Fiduciary shall provide: (i) an updated and detailed description of the breach, including event and circumstances that led to it; (ii) actions taken to reduce risks; (iii) findings about the individual(s) responsible for the breach; (iv) steps taken to prevent similar breaches in the future; and (v) a report on the intimation sent to the affected Data Principals. How long can a Data Fiduciary retain Personal Data? An E-commerce Entity or Social Media Intermediary (with 2 crore registered users) and an Online Gaming Intermediary (with 50 lakh registered users) shall erase Personal Data within 3 years of the Data Principal’s last login into their account with such entity. However, before such erasure of Personal Data, the aforementioned entities shall provide a notice of 48 hours to the Data Principal.  How should a Data Fiduciary process the Personal Data of a Child? The Draft Rules require Data Fiduciaries to obtain “verifiable consent” from a parent before Processing the Personal Data of a Child. To comply with the foregoing, a Data Fiduciary must: verify and ensure that the individual identifying themselves as the parent, is in fact the parent; verify and ensure that such an individual is an Adult; obtain such individual’s reliable identity and age related credentials, such as a government issued ID card. Similar obligations are also introduced for Processing Personal Data of persons with disabilities. However, certain entities are exempted from the above-mentioned requirements. These include: healthcare professionals, educational institutions, childcare providers, and transportation facility providers for children. This exemption applies under defined conditions and only when the Processing of Personal Data is limited to the essential activities mentioned under the Draft Rules. What are the additional obligations of Significant Data Fiduciary (“SDFs”)? SDFs, as notified by the Central Government, must annually undertake a Data Protection Impact Assessment and audit, submitting a report containing significant findings to the Board. SDFs must also ensure that algorithmic software does not pose a risk to the rights of Data Principals. Can a Data Fiduciary process Personal Data outside India? The Central Government may lay down certain restrictions on the transfer of Personal Data processed either (a) within India; or (b) outside India, in connection with any activity related to offering goods or services in India. SDFs must ensure Personal Data and associated traffic data identified by the Central Government are processed in compliance with specific restrictions. How can Data Principals exercise their rights? To enable Data Principals to exercise their rights, Data Fiduciaries must: publish on its website and app (i) details of the means for submitting requests; and (ii) any identifiers required for verification; provide the duration within which their grievance redressal system will respond to the Data Principal’s grievances; and provide a mechanism for the Data Principal to nominate individuals to exercise their rights on their behalf. Authors:  Udit Mendiratta and Jitendra Soni (Partners), Apeksha Singh, Arushi Dokania, Nida Khan and Samia Haider (Associates). Footnotes [1] All capitalised terms shall have the same meaning as attributed to them under Section 2 of the Act or the Draft Rules.

We are delighted to announce that Pallavi Kanakagiri has joined Argus Partners' Bengaluru office as a Partner (Equity) in the Private Equity/ Venture Capital and Corporate and M&A practice, effective December 2, 2024. Pallavi Kanakagiri specializes in private equity, venture capital, and M&A transactions, with a focus on foreign direct investment. She advises clients on structuring deals, representing both buy-side and sell-side parties. Her clients include private equity funds, hedge funds, sovereign investors, and venture capitalists, across early-stage (seed and Series A) and late-stage investments. Pallavi also has expertise in technology, pharma, finance, education, and healthcare sectors. In addition to drafting and negotiating key documents, she has extensive experience in joint ventures, family offices, and trust settlements. Prior to joining Argus Partners, Pallavi was a Partner in Induslaw and has also acted as the Senior Vice President of Claypond Capital. “We warmly welcome Pallavi to our Firm. Pallavi will play a very key role in the Bangalore practice as well as the overall corporate practice of the Firm. Bangalore is an extremely important jurisdiction for our Firm as we strengthen our footprint there.” Krishnava Dutt, Managing Partner “I am excited to be a part of Argus Partners and look forward to the wonderful journey ahead. I would also like to take the opportunity to thank IndusLaw for 14 wonderful years.” Pallavi Kanakagiri    

We are delighted to announce that Priyanka Shetty has been elevated to Partnership in the Disputes & ADR practice of the Firm, effective November 1, 2024. With a decade of experience in commercial disputes, Priyanka specializes in succession and testamentary matters, arbitrations, mediations, insolvency, real estate, and commercial law. Her expertise includes representation in the High Court, City Civil Court, DRT, NCLT/NCLAT, and other judicial authorities for clients across diverse industries, including banking, construction, pharmaceuticals and offshore investment funds, among others. Priyanka graduated from KC College of Law in 2014 and joined the Bar Council of Maharashtra and Goa in the same year. In March 2018, she joined the Firm as an Associate.  

We are delighted to announce that Aseem Dhawan has joined Argus Partners' Delhi office as a Partner in the Banking and Finance practice, effective November 5, 2024. Aseem holds over 9 (nine) years of experience in the areas of project finance, debt capital markets, structured finance, and corporate lending. Prior to joining Argus Partners, Aseem was a Counsel in the Banking and Finance practice at Trilegal. He graduated from Symbiosis Law School, Pune in 2015. “We are pleased to warmly welcome Aseem to the Argus family in our Banking & Finance practice. His joining strengthens and adds significant depth to our finance practice in Delhi NCR and I am confident that Aseem’s expertise will be instrumental in further enhancing the value we bring to our clients in the banking and finance space.” Krishnava Dutt, Managing Partner “I’m excited to join Argus Partners as a Banking and Finance Partner in Delhi, contributing to the Firm’s strong finance practice and expanding our presence in this important market." Aseem Dhawan    

We are pleased to announce that Anindya Ghosh (Equity Partner), Ashwin Krishnan (Partner),and Anantha Krishnan Iyer (Partner) will be joining the Bengaluru office, strengthening our Corporate and M&A, Private Equity & Venture Capital, Technology, and Media/ Entertainment practices. Anindya, Ashwin, and Anantha will be accompanied by a team of seven, including 1 (one) Principal Associate and 2 (two) Senior Associates. As a vibrant center of innovation and technology, Bengaluru is a pivotal market for our Firm, offering unparalleled opportunities for growth and collaboration. Its dynamic business landscape and diverse industries are crucial for our strategic expansion and strengthened client relationships. We believe that the addition of our new team members will significantly enhance our footprint in the Bengaluru legal industry and will position our Firm as one of the leading law firms in Bengaluru. Anindya Ghosh: Anindya Ghosh is a seasoned corporate lawyer with 17 years of experience, specializing in general corporate advisory, mergers and acquisitions, joint ventures, strategic partnerships, private equity, and venture capital investments. His expertise has been instrumental in guiding clients across diverse sectors including e-commerce, IT/ITES, manufacturing, financial services, logistics, artificial intelligence, and healthcare. Anindya's hallmark lies in his command on complex deal structuring, meticulous due diligence, comprehensive regulatory compliance, and exceptional negotiation skills. Throughout his illustrious career, he has successfully steered clients through numerous high-stakes transactions, cementing his reputation as a trusted advisor. Anindya's strategic acumen, coupled with his deep industry knowledge, enables him to consistently deliver innovative solutions that align seamlessly with his clients' business objectives. His ability to navigate ever evolving complex legal landscapes while keeping sight of practical business goals makes him a vital partner for clients. Ashwin Krishnan: Ashwin Krishnan brings with him significant expertise in general corporate advisory, mergers & acquisitions, venture capital, and private equity transactions. Over the course of his career, he has advised a wide array of clients across industries including artificial intelligence, biotechnology, e-commerce, financial services, healthcare, technology, manufacturing, and logistics. His practice covers key areas such as corporate structuring, investments and acquisitions, joint ventures, business collaborations, intellectual property, commercial agreements, incentive structures, as well as general Indian law and regulatory compliance. He has also represented several leading investment funds, offering strategic advice throughout the lifecycle of their investments, from initial fundraising and acquisitions to exits and portfolio-level compliance. Anantha Krishnan Iyer: Anantha Krishnan Iyer has over 11 years of experience advising a diverse set of clients ranging from entrepreneurs, companies (early-stage as well as well-established enterprises) to domestic and international private equity/venture capital funds, specializing in general corporate advisory, cross-border and domestic M&A, joint ventures, restructurings and partnerships, financial and strategic investments (including private equity and venture capital), business transfers and asset purchases, coupled with in-depth due diligence, spread across a plethora of sectors including healthcare, pharmaceuticals, manufacturing, artificial intelligence, e-commerce, mobility, fitness, fashion, financial services, agri-tech, ed-tech, IT & ITES, logistics, media and entertainment, power and renewable energy, to name a few. Anantha is driven by a solution-oriented mindset and leverages his strategic insights and industry experience to craft innovative solutions tailored to his clients' business goals. Before joining Argus Partners, Anindya was an Equity Partner, and Ashwin and Anantha were Partners at IndusLaw, Bengaluru. “I am extremely delighted to warmly welcome Anindya, Ashwin, and Anantha and the team to the Argus family. Each of them brings a wealth of experience and dynamic expertise in their respective fields, which will undoubtedly enhance the depth and breadth of services we offer. Their joining marks a milestone for us, significantly expanding our presence in Bengaluru and strengthening our Corporate practice as a whole. We are confident that their addition will play a pivotal role in further establishing our Firm as one of the leading law firms in the city, allowing us to better serve our clients with enhanced capabilities and a stronger footprint in the region.” Krishnava Dutt, Managing Partner “I look forward to joining Argus Partners and contributing to its formidable corporate practice. The Firm's reputation for excellence in complex and high-stake corporate matters and transactions is well established, and I am eager to add my expertise to this strong foundation. As I prepare for this exciting new chapter, I'd like to express my heartfelt gratitude to IndusLaw. The experiences and opportunities I've had in IndusLaw have been instrumental in shaping my professional growth.” Anindya Ghosh "I am truly excited to be joining Argus Partners. This move represents a unique opportunity to collaborate with an incredibly talented team and enhance our collective capabilities. I am confident that together, we will continue to deliver the high-quality legal services and exceptional value that our clients expect. I look forward to contributing to the firm’s future success and growth. I would also like to express my sincere gratitude to the entire team at IndusLaw for their support over the years. I wish them continued success in the future." Ashwin Krishnan “I am elated to join Argus Partners and leverage our combined strengths to drive growth and value for our clients. By combining our perspectives and expertise, we hope to further strengthen the Firm's distinguished position while exploring new horizons in legal practice. I would like to thank my colleagues at IndusLaw and express my sincere gratitude for their unwavering support and mentorship. I wish them continued excellence and success.” Anantha Krishnan Iyer

We are pleased to announce that Argus Partners has successfully advised Henkel Adhesives India on its captive renewable energy arrangement with CleanMax,a Brookfield-backed company, aimed at accelerating its transition to carbon-neutral manufacturing processes. This deal involved a captive power purchase agreement in Maharashtra executed between Henkel Adhesives India and a special purpose vehicle (SPV) created by CleanMax to source solar energy. Additionally, Henkel has entered into a share purchase agreement to acquire 26% of the equity shares of the SPV from CleanMax, in accordance with Indian electricity laws. With India’s commitment to achieving net zero emissions under COP 26 of the UNFCCC, there is growing recognition among corporates of the importance of sourcing energy from green alternatives. The agreement between Henkel Adhesives India and CleanMax represents a significant step toward enhancing solar power utilization and advancing Henkel's RE100 goals. This partnership has the potential to enable Henkel to achieve annual CO2 savings of over 4,500 tonnes at its manufacturing sites in Kurkumbh and Thane, Maharashtra, with an impact equivalent to planting 300,000 trees each year. This deal underscores the commitment of the commercial and industrial sector to a sustainable future. The team at Argus Partners consisted of, Rachika Agrawal Sahay (Partner), Siddhant Satapathy (Principal Associate), Mrinal Mishra (Senior Associate), and Govind Sharma (Associate). Read more at: Henkel, Economic Times.  

We are delighted to announce that Aayush Kumar has joined Argus Partners' Mumbai office as a Partner in the Corporate and M&A practice including private equity and venture capital, effective September 9, 2024.                                                                                                                       Aayush is a notable transactions lawyer with over 11 years of post-qualification experience.  He specializes in both domestic and cross-border transactions, advising a diverse range of clients, including private equity funds, MNCs, and promoters. His expertise spans various sectors, including energy & infrastructure, pharmaceuticals, hospitals, manufacturing, and e-commerce. Prior to joining Argus Partners, Aayush was the Assistant General Counsel at Nayara Energy. He graduated from Symbiosis Law School, Pune in 2013. “We are pleased to warmly welcome Aayush Kumar to the Argus family in our Corporate practice. His diverse experience will be instrumental as we continue to enhance our services to our clients. I am confident that his leadership will strengthen our commitment to providing exceptional legal services, and we look forward to achieving great success together." Krishnava Dutt, Managing Partner “I am excited to be a part of Argus Partners and join its excellent team of lawyers. I believe that the vision, ambition and potential of the firm make it the right platform for my next innings. I hope to bring the best of my experience in corporate practice at Argus.” Aayush Kumar  

I.   Introduction Section 73 of the Indian Contract Act, 1872 (“Contract Act”) is a statutory declaration of the right of a party to claim damages for a loss or damage caused by breach of the contract.[1] Prior to its statutory incorporation in the Contract Act, the right to claim damages was a common law remedy for common law wrongs such as torts and for breach of contract.[2] Section 73 of the Contract Act reads as under: “73. Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.  Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.  Compensation for failure to discharge obligation resembling those created by contract.—When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.  Explanation.—In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.” For ease of understanding of the scope and ambit of Section 73 of the Contract Act, the section can be sub-divided into 5 (five) separate parts as under: The first part is where a contract is broken, the aggrieved party is entitled to receive compensation from the party who has broken the contract for loss or damage which naturally arose in the usual course of things from such breach. This is commonly referred to as ‘general’ or ‘normal’ damages. The second part is where a contract is broken, the aggrieved party is entitled to receive compensation from the party who has broken the contract for loss or damage which the parties knew at the time they made the contract as likely to result from such breach. This is commonly referred to as ‘special damages’.[3] The third part is that no compensation is payable for any remote or indirect loss or damage sustained by reason of breach. The fourth part is about applying the same principles where the breach occurs out of obligations resembling contracts. The fifth part incorporates the rule of mitigation while assessing the loss or damage arising out of breach of contract. Having set out the scope and ambit of Section 73 of the Contract Act, the question that arises is what is the measure of damages that can be claimed by a non - defaulting party who suffers a loss or damage on account of breach of contract. The issue has far reaching importance in today’s world where large and complex commercial transactions are entered into in relation to specialized works and services involving substantial amounts of money and investments in valuable assets/properties. In large high stake value transactions, the parties must always be conscious of possible risks that they undertake and the potential losses they can suffer in the event of any unexpected deviation from the contract. For instance, there may be situations where on account of breach of a contract, the non – defaulting party claims compensatory and punitive damages far exceeding the overall contractual benefit that the party in breach would have received had the contract been performed. In such situations, any uncertainty in regard to measure of damages that the defaulting party may have to pay can have disastrous impact on the overall commercial health of such party. In view of uncertainties regarding the measure/ quantum of damages that a party could claim upon breach of a contract, the contracting parties started to include clauses providing for limiting, restricting or even completely excluding their liability towards damages which could be claimed by the non-defaulting party under Section 73 of the Contract Act. For instance, in certain cases, the parties may contractually agree to limit/ restrict their liability towards a claim for damages to the extent of a maximum limit/ cap set forth in the contract. In other cases, the parties may decide to completely exclude their liability by contractually prohibiting a claim towards damages or compensation in the event of breach of a contract. Thus, the limitation of liability clause or an exclusion clause usually act as a necessary security and risk reduction mechanism to deal with prospective liability of a party in the event of breach of contract.[4] With the widespread incorporation of exclusion clauses in contracts, there were concerns about the validity and enforceability of such clauses, particularly where the exclusion clause was made applicable even in the event of breach of a fundamental term of the contract. As such, the question that arises is whether the parties have an unfettered contractual right to completely exclude their liability towards a claim for damages. In other words, can the parties contract out of provisions of Contract Act or contractually waive the rights created under Section 73 of the Contract Act to claim damages. From a purely classical understanding of contractual law, exclusion clauses can be said to be valid in law as they stem from the underlying principle of freedom of parties to enter into contracts. Further, in commercial contracts where both parties are of equal bargaining power, such exclusion/ limitation of liability clauses have the effect of managing and apportioning the risk between the parties. As stated above, these clauses act as a necessary security and risk reduction mechanism to deal with prospective liability of the parties and bring about certainty in enforcement of contracts. However, very often, the party imposing the condition of an exclusion clause is at an economically superior position and can dictate its own terms to the other party.[5] In cases where parties do not share equal bargaining power, one of the parties have no option but to accept the terms imposed by the party who is at an economically superior position, including a prohibition on claiming damages in the event of breach of contract. In such situations, can the courts refuse to enforce exclusion clauses merely because it may be unfair or unreasonable for one of the parties to the contract? This paper discusses whether parties have an unfettered right to exclude their liability towards a claim for damages under the Contract Act and whether the courts in India have enforced such exclusion of liability clauses from a purely contractual law point of view. This paper also proposes some suggestions that the legislature and/ or the courts may consider while dealing with the question of validity and enforceability of exclusion clauses. II.      Recognition of ‘exclusion clauses’ by courts in India The question whether damages otherwise claimable under law can be contractually restricted was considered by the Supreme Court in the case of, Sri Chunilal V. Mehta and Sons Limited v. The Century Spinning and Manufacturing Company Limited[6]. In this case, clause 14 of the agreement between the parties specified a liquidated sum to be paid as damages to the claimant (Chunilal) on account of early termination of the agreement by the company (Century Spinning). While answering whether the claimant could have claimed amounts over and above such specified sum named in the agreement, the Supreme Court held that by providing for compensation in express terms, the right to claim damages under the general law was necessarily excluded and therefore, in the face of a clause specifying a fixed sum payable, it was not open for the claimant to claim damages under the general law. In terms of the above, the Supreme Court held that contractual clauses which stipulate specific amount that can be claimed as damages has the effect of excluding the right of a party to claim damages under the general law. It is, however, important to note that the clause in question in this case did not restrict or exclude the right of a party to claim damages for breach of the contract but merely specified a liquidated sum to be paid as damages on account of early termination of the agreement by one party. The Supreme Court, as far back as in the year 1955, in Seth Thawardas Pherumal v. Union of India[7] was faced with the question as to whether a contractual clause exonerating a party from any claim arising out of breach of the contract is valid and enforceable. In this case, clause 6 of the contract between the parties provided that the public works department (PWD) shall not be responsible for a claim “for idle labour or for damage to unburnt bricks due to any cause whatsoever”. The Supreme Court held that the contractor cannot claim compensation for damage caused to unburnt bricks due to a breach committed by the PWD as the same was expressly excluded from the contract. It was held that the contractor cannot go back on his agreement and claim compensation for breach of contract merely because it was unsuitable for it to abide by the terms of the contract. In essence, the Court recognized the freedom of parties to incorporate exclusion clauses and held them to be valid and enforceable. In Bharathi Knitting Company v. DHL Worldwide Express Courier Division of Airfreight[8], the Supreme Court was called upon to decide whether the liability of a courier company was limited to the extent specified in the consignment note which was also counter signed by the customer. In this case, a clause in a consignment note limited the liability of the courier company for any loss or damage to the consignment to US $100 along with further limitation on liability for any consequential or special damages or any other indirect loss. The Supreme Court held that, where the contract limits the liability of a party for any loss or damage, the courts cannot give relief for damages in excess of the limits specified under the contract. Accordingly, the courier company was held liable only to the extent of US $100 being the extent of liability undertaken under the consignment note/ contract. The Supreme Court accepted the validity of the limitation of liability and exclusion clause by recognizing that contractual terms are binding on parties who have signed the contract document even though they may not be aware of the precise legal effects of such terms. Thereafter, in ONGC v. Wig Bros. Builders and Engineers (P) Limited[9], the Supreme Court set aside an award passed by an arbitrator which granted compensation to the contractor while ignoring a contractual clause providing that the contractor was only entitled to an extension of time for completion of works but was not entitled to any compensation or damages in the event of any delay by the employer. The Supreme Court held that the arbitrator could not have granted compensation to the contractor in disregard to the exclusion clause contained in the contract. The Supreme Court also relied on its earlier judgements in Ramnath International Construction (P) Limited v. Union of India[10] and Rajasthan State Mines and Minerals Limited v. Eastern Engg. Enterprises[11] wherein similar claims of a contractor for compensation or damages were rejected by the Supreme Court. Similarly, the Bombay High Court, in the case of, Maharashtra State Electricity Board, Bombay v. Sterlite Industries (India) Limited,[12] held that where the parties to a contract agree for special terms and provisions regarding the measure of damages that can be claimed in the event of breach of contract, the parties shall be bound by such provisions and Section 73 of the Contract Act shall not have any application. The Court relied on Section 62 of the Sale of Goods Act, 1930[13] terming it as a statutory recognition of the right of parties to vary or modify any liability that would arise under a contract of sale by implication of law. Thus, it is evident from the above judgements that exclusion clauses are generally accepted to be binding and enforceable in India. The courts have treated exclusion clauses like any other clause in the contract and have recognized validity of such exclusion clauses by linking it to freedom of parties to contract and their power to commercially negotiate the terms of the contract. The courts have also approved the principle that a person who signs a document containing certain contractual terms is normally bound by them even though he has not read them and even though he is ignorant of their precise legal effect.[14] The general approach appears to be that unless a party challenges an exclusion clause on the ground of coercion, fraud, misrepresentation, mistake etc. at the time of executing of contract, the parties must be held liable to abide by the terms of the contract. It is interesting to note that in almost all cases where there was a bar to claim any compensation or damages under the contract, the underlying contract was between a private contractor as one of the parties and the State or an instrumentality of the State as the other party. Invariably, in such contracts, the State (or its instrumentality) is at an economically dominant position which has standard forms of contract where the contractors have little or no bargaining power to negotiate the terms of the contract. Even in cases where the State (or its instrumentality) is not involved, an exclusion clause is usually contained in standard forms of contract between a consumer and the commercial entity/ company providing goods or service. In such contracts as well, a consumer does not have equal bargaining power and ultimately has no option but to accept the terms imposed by the seller/ service provider which may include a complete prohibition on claiming damages in the event of breach of contract. What is relevant to note in such cases is that while there may not be any ‘procedural unfairness’[15] at the time of entering into the contract, one of the parties, by virtue of its economic standing, may be in a position to impose exclusion clauses on the other party. III.    Invoking ‘Public Policy’ to challenge ‘exclusion clauses’ As noted above, since exclusion clauses do not fall within the existing vitiating elements of a contract like coercion, undue influence, fraud, misrepresentation or mistake (essentially denoting procedural unfairness)[16], the courts in India have enforced such exclusion clauses even when the contract prima facie appears to have been executed between economically unequally situated parties. However, the Delhi High Court in the case of Simplex Concrete Piles (India) Limited v. Union of India[17] deviated from this generally accepted position and tested the effect of exclusion clauses from a different perspective. In that case, the standard clause of contract between the Union of India (Employer) and Simplex (Contractor) provided that in case there was any delay on the part of Union of India, Simplex shall only be entitled to an extension of time for completion of works and no claim for compensation on account of such delays shall be entertained. The Delhi High Court was faced with the question - “can a person who is guilty of breach of contract and is consequently liable in law to pay damages under Section 73 of the Contract Act or other charges under Section 55 of the Contract Act, 1872, can prevent the aggrieved party from claiming the same by contractually so providing.” While adjudicating on the issue, the Delhi High Court was also confronted with two conflicting decisions[18] of the Supreme Court wherein the same clause had been interpreted differently. The Delhi High Court, however, decided the issue independent of the two Supreme Court decisions by observing that clauses which bar and disallow a party from claiming its rightful claims, damages, or monetary entitlements to which such party is otherwise entitled to by virtue of Sections 73 and 55 of the Contract Act are void by virtue of Section 23[19] of the Contract Act. The Delhi High Court held that, Sections 73 and 55 of the Contract Act are the very heart, foundation and basis for existence of the Contract Act and therefore, it is a matter of public policy that the sanctity of the contracts and the bindingness thereof should be given precedence over the entitlement to breach the same by virtue of contractual clause with no remedy to the aggrieved party. It was held that, provisions of the contract which sets at naught the legislative intendment of the Contract Act to provide for remedy of claiming damages to an aggrieved party in the event of breach of the contract is void being against public interest and public policy.[20] About a year back, the Delhi High Court in the case of MBL Infrastructures v. Delhi Metro Rail Corporation[21], followed the judgement of Simplex and observed that clauses which prohibits the right of a party in claiming damages is a restrictive clause which will defeat the purpose of the Contract Act. It was held that under Section 55 and 73 of the Contract Act, the aggrieved party is entitled to claim damages, and there cannot be any prohibition exercised by the other party merely by incorporating a clause in the contract. The Delhi High Court further held that such kind of clauses are also not in public interest since they hinder the smooth operation of commercial transactions and create an environment which is not conducive for the purpose of business transactions. The Court went as far as saying that such clauses which prohibit the right of the party to claim damages are also contrary to the fundamental policy of Indian law. It is relevant to note that in Simplex, the Delhi High Court has held only such clauses as void under Section 23 of the Contract Act, 1872 where there is an absolute prohibition on claiming damages as opposed to a clause (i) which merely limits the liability of the defaulting party upto a specified threshold or (ii) excludes liability towards indirect or consequential losses. Interestingly, the Madras High Court, much prior to the above decision of the Delhi High Court, had invoked public policy doctrine to refuse enforcement of a clause printed at the reverse side of an invoice limiting the liability of the service provider to a fixed amount.[22]  The Madras High Court held that courts must not enforce clauses which are not in the interests of the public and which are not in accordance with public policy. However, in view of a catena of judicial precedents recognizing and enforcing limitation of liability clauses in a contract, the preposition laid down by the Madras High Court may longer be considered as a good law. Also, more recently, the Delhi High Court in PLUS 91 Security Solutions v. NEC Corporation India Private Limited,[23] clarified that where parties have agreed that particular type of damages (such as indirect or consequential or loss of profits) are excluded under a contract, such an exclusion clause is required to be enforced and is not hit by ratio laid down in Simplex. Thus, while courts in India have generally accepted the validity and enforceability of exclusion clauses, the Delhi High Court in Simplex has tested the issue from a different perspective by terming the right of a party to claim damages under Section 73 of the Contract Act as the very heart, foundation and basis of the Contract Act. The Delhi High Court, in Simplex has given a wide interpretation to the term ‘public policy’ appearing in Section 23 of the Contract Act and declared contractual clauses which absolutely prohibit a claim for damages under Section 73 of the Contract Act as void. In essence, the Delhi High Court moved from the classical theory of ‘procedural unfairness’ and independently tested the exclusion clause on the touchstone of public policy and ‘substantive unfairness’[24]. Since the Delhi High Court declared an exclusionary clause to be void under the ‘public policy’ exception of Section 23 of the Contract Act, it is relevant to consider whether exclusionary clauses between two contracting parties can be tested on the touchstone of ‘public policy’. In the landmark case of Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly[25], the Supreme Court, inter-alia, tested the conditions of employment between the employer (Corporation) and its employees on the principles of law of contracts. The Supreme Court examined the development of law in the United States and the United Kingdom with regards to unreasonable contractual clauses against an economically weaker party and held that unconscionable, unfair and unreasonable clauses in a contract entered into by parties who do not enjoy equal bargaining power are void under Section 23 of the Contract Act. The following observations made by the Supreme Court is relevant to be reproduced: “It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be….”[26] It is clear from the above that the Supreme Court has recognized that unfair or unconscionable clauses can be declared as void under Section 23 of the Contract Act thereby enlarging the scope of the term ‘public policy’ under the Contract Act. While setting out the above principles, the Supreme Court remained mindful of the fact that the said principles cannot be made applicable where the bargaining power of the contracting parties is equal or almost equal and where both parties are businessmen and the contract is a commercial transaction.[27] This exception carved out from the principles of unfairness and unconscionability in a contract is extremely crucial for commerce and industry in as much as it gives commercial entities/ parties the freedom to negotiate on commercial terms and apportion the risks associated with a contract by excluding or limiting the liability of a party in the event of a breach of contract. It is important to note that while the ruling in Central Inland is not applicable to cases where the bargaining power of the contracting parties is equal or almost equal, it still provides an opportunity to a contracting party to challenge an exclusion clause in a contract as being unconscionable, unfair and unreasonable and thereby void under Section 23 of the Contract Act. Although in a different context, the Supreme Court in the case of LIC of India v. Consumer Education and Research Centre[28], held that if a contract or a clause in a contract is found unreasonable or unfair or irrational, one must look at the relative bargaining power of the contracting parties. In dotted line contracts, there would be no occasion for a weaker party to bargain or to assume to have equal bargaining power and he will have to accept or leave the services or goods in terms of the dotted line contract. In such situations, the courts are well entitled to strike down such offending term/ clause of the contract. Thus, the Supreme Court affirmed the principle that the courts are entitled to declare an unfair or unreasonable or unconscionable contractual provision as void if it is found that the contract was vitiated by ‘substantive unfairness’ by reason of parties not having equal bargaining power. As evident from the above, it can be argued that an exclusion clause can be tested on the touchstone of ‘public policy’ under Section 23 of the Contract Act. If on an inquiry, the court finds that the parties did not have equal bargaining power at the time of entering into the contract and as a result thereof, one party was in a position to dictate terms to the other party, the court may strike down an exclusion clause as being unfair, unreasonable and unconscionable under Section 23 of the Contract Act. While a strong case is made out for invoking the ‘public policy’ exception where certain terms of a contract, including an exclusion clause, appear to be unfair, unreasonable or unconscionable, an argument can also be made that the primary duty of a court of law is to enforce a promise which the parties have made and to uphold the sanctity of contracts. As held by the Supreme Court in the case of Gherulal v. Mahadeodas[29], the doctrine of public policy should only be invoked in clear cases in which harm to the public is substantially incontestable and though theoretically it may be permissible to evolve a new head of ‘public policy’ under exceptional circumstances, it is advisable in the interest of stability of society not to make any attempt to discover new heads. It can also be argued that where contracting parties incorporate a term in the contract exempting one party from liability in the event of breach of contract, such term in the contract may not be said to be opposed to ‘public policy’. The term ‘public policy’ contemplates grounds which influences public interest at large and therefore invoking ‘public policy’ exception for voiding exclusion clauses may strike at the very root of freedom of parties to enter into contracts. Further, the courts may not be inclined to invoke ‘public policy’ exception in cases where State or its instrumentality is not involved since there may not be any public interest involved in purely private contracts. Hence, invoking ‘public policy’ exception to strike down exclusionary clauses may not be commercially conducive and may hamper free flow of business between contracting parties. This may also give rise to uncertainty regarding enforcement of contracts leading to unnecessary disputes and subsequent litigation. IV.    Way forward and Conclusion The Contract Act has several provisions dealing with ‘procedural unfairness’ wherein a contract may be vitiated by undue influence, coercion, fraud, misrepresentation etc. However, there is no express provision in the Contract Act providing for right of a party to challenge unfair or unreasonable or unconscionable contracts which essentially denote ‘substantive unfairness’. This is because the parties are expected to be bound by contracts signed by them on their free will and the courts have also generally avoided to interfere in the contractual bargain of the parties. However, in view of the need to protect consumers and to protect small businesses from extensive use of standard terms of contract imposed by large commercial entities, the courts recognized the right of parties to challenge an unfair or unconscionable term or clause of a contract as being violative of ‘public policy’ doctrine under Section 23 of the Contract Act. With regards to exclusion clauses in a contract, the decisions in Central Inland (Supra), LIC (Supra) and Simplex (Supra) give enough leeway to a party to challenge such exclusion clauses as void for being against public interest and public policy under Section 23 of the Contract Act. Needless to say, in order to challenge an exclusion clause as being void under Section 23 of the Contract Act, the party shall necessarily have to prove that the clause was clearly unfair, unreasonable or unconscionable and that the contracting parties were having substantially disproportionate bargaining power such that one party was enjoying significant economic dominance over the other at the time of entering into the contract. With regards to the illustrative cases where a party can be held to be at an economically dominant position, the following observation of the Supreme Court in Central Inland is relevant: “…In today's complex world of giant corporations with their vast infra-structural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances.”[30] In view of the above preposition of law, it is difficult to comprehensively set out cases which will result in unfair and unreasonable bargains between parties and each case shall have to be decided on its own facts and circumstances. Recently, there has been development of law in so far as ‘unfair contracts’ are concerned in relation to consumer contracts. The Consumer Protection Act, 2019 now expressly recognizes an “unfair contract”[31] which includes imposing any unreasonable charge, obligation or condition on the consumer which puts such consumer to disadvantage. The Supreme Court in the case of Ireo Grace Realtech Private Limited v. Abhishek Khanna[32] has observed that under the Consumer Protection Act, 2019, powers have been conferred upon the consumer courts to declare contractual terms which are unfair as null and void. It can be argued that an exclusion clause may fall within the ambit of an “unfair contract” under the Consumer Protection Act since it imposes an unreasonable condition on the consumer which puts such consumer to a disadvantage. Obviously, the ambit of Consumer Protection Act, 2019 is restricted to ‘consumers’ and is not applicable to business transactions undertaken by commercial entities and therefore the said Act cannot be invoked in a purely commercial transaction where unfair clauses (including exclusionary clauses) are involved. In so far as other contracts are concerned, the Law Commission of India in its 199th Report has suggested that a new law be introduced to address general substantive unfairness wherein a contract or a term thereof shall be deemed to be unfair if the contract or terms thereof are by themselves harsh, oppressive or unconscionable along with a set of guidelines to adjudge substantive unfairness.[33] The Law Commission of India further proposed that a contract or term thereof shall be deemed to be substantively unfair and void if it (a) excludes or restricts liability for negligence or (b) excludes or restricts liability for breach of express or implied terms of contract without adequate justification.[34] Thus, the Law Commission of India has also identified that an exclusion clause which excludes liability for breach of contract shall be deemed to be substantively unfair unless it is shown that the exclusion clause was inserted with adequate justification.[35] In essence, the Law Commission is of the view that an exclusion clause providing for exemption from a claim for damages for breach of contract is substantially unfair unless such clause is inserted with adequate justification. Given the above discussion and the position in law, the authors are inclined towards suggestions of the Law Commission that substantive unfairness is required to be statutorily recognized with a set of guidelines to adjudge substantive unfairness on a case-to-case basis. The authors believe that ‘exclusion clauses’ in a contract prohibiting/ excluding right of only one party to the contract to claim damages for breach of contract may be an unfair and unreasonable term in a contract and the courts must have a statutory mechanism to strike down such exclusion clause as illegal and void. This will also ensure that courts shall not be required to decide a challenge to the validity of an exclusion clause by invoking vague, uncertain and undefined concepts like ‘public policy’. Till such statutory safeguards are provided, the authors believe that while there is a duty of the courts to uphold the freedom of contracting parties to enter into binding contracts, courts must also be mindful of protecting the rights of contracting parties who, in reality, did not have any equal bargaining power at the time of entering into contracts. This will ensure that while the sanctity of the binding nature of contracts is maintained, a party shall not be in a position to take undue and unfair advantage of its commercial position by incorporating unfair, unreasonable or unconscionable clauses in the contract. Since it is difficult to comprehensively set out cases where an exclusion clause can be struck down, the courts ought to consider the overall economic position, commercial standing and extent of actual negotiating power of parties to decide the legitimacy and validity of exclusion clauses and interfere in legitimate cases where the exclusion clause is inserted solely to absolve only one party from liability for breach of its contractual obligations It is emphasized that the courts may not strike down ‘exclusion clauses’ where the benefit of such clauses is available to both parties or where such clauses were inserted after entering into good faith negotiations or where the bargaining power of the contracting parties is equal or almost equal. Authors:  Rahul Dev (Principal Associate), with strategic inputs from Ranjit Shetty (Partner). Footnotes [1] A.K.A.S. Jamal v. Molla Dawood Sons & Co., AIR 1915 Privy Council 48. [2] Andrew Tettenborn and David Wilby QC, The Law of Damages, 2nd Edition, at ¶ 1.12. [3] The first and second part under Section 73 of the Contract Act is incorporated from the principles laid down in the landmark English decision of Hadley v. Baxendale (1854) 9 EX 341. [4] MP Ram Mohan and Anmol Jain, Exclusion Clauses under the Indian Contract Law: A need to account for unreasonableness, NUJS Law Review, 13 NUJS L. Rev. 4 (2020). [5] Chitty on Contracts, London Sweet and Maxwell, 26th Edition 1989, Chapter 14 (Exemption Clauses) at ¶ 941. [6] AIR 1962 SC 1314. [7] AIR 1955 SC 468. [8] (1996) 4 SCC 704. [9] (2010) 13 SCC 377. [10] (2007) 2 SCC 453. [11] (1999) 9 SCC 283. [12] AIR 2000 Bom 204. [13] “62. Exclusion of implied terms and conditions.— Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind both parties to the contract.” [14] Supra note 8 (Bharathi Knitting Company). [15] Extract from Report No. 199 of Law Commission of India, Report on Unfair (Procedural and Substantive) Terms in Contract, (August 2016) at p. 10,11 – “What we mean by ‘procedural unfairness’ is whether there is unfairness in the manner in which the terms of the contract are arrived at or are actually entered into by the parties, or in the circumstances relating to the events immediately before the entering into the contract, or in the conduct of the parties, their relative position, or literary knowledge, or whether one party had imposed standard terms on the other or whether the terms were not negotiated. These and other circumstances relate to procedural unfairness.” [16] Supra Note 4 (Exclusion Clauses under the Indian Contract Law: A need to account for unreasonableness) [17] ILR (2010) II Delhi 699 [18] In Ramnath International Construction (P) Limited v. Union of India (2007) 2 SCC 453, the Supreme Court took a view that even if the employer/Union of India was at fault, yet the clause bars the entitlement of the contractor to damages; while the Supreme Court in Asian Techs Limited v. Union of India (2009) 10 SCC 354 held that the said clause only prevents employer from granting damages but does not prevent an arbitrator from awarding damages which were otherwise payable by employer on breach of the contract. In both these judgements, the Supreme Court did not go into the legality and validity of the said clause under the Contract Act per se. [19] “Section 23 - The consideration or object of an agreement is lawful, unless— it is forbidden by law ; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent ; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.” [20] Supra Note 17 at ¶ 15, 16 (Simplex). [21] 2023:DHC: 9067. [22] Lilly White v. R. Munuswami, AIR 1966 Mad 13. [23] 2024 SCC OnLine Del 5114 (Decided on July 29, 2024). [24] Extract from Report No. 199 of Law Commission of India, Report on Unfair (Procedural and Substantive) Terms in Contract, (August 2016) at p. 11 – “What we mean by ‘substantive unfairness’ is that a term by itself may be either one-sided, harsh or oppressive or unconscionable and therefore unfair. One party may have excluded liability for negligence or for breach of contract or might have imposed terms on the other which are strictly not necessary or might have given to himself power to vary the terms of the contract unilaterally etc. Such terms could be unfair by themselves.” [25] (1986) 3 SCC 156. [26] Ibid at ¶ 89. [27] Ibid at ¶ 89. [28] 1995 (5) SCC 482. [29] AIR 1959 SC 781 [30] Supra Note 25 (Central Inland) at ¶ 89 [31] “Section 2(46) - "unfair contract" means a contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer, including the following, namely:-- (i) requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or (ii) imposing any penalty on the consumer, for the breach of contract thereof which is wholly disproportionate to the loss occurred due to such breach to the other party to the contract; or (iii) refusing to accept early repayment of debts on payment of applicable penalty; or (iv) entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or (v) permitting or has the effect of permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent; or (vi) imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage;” [32] (2021) 3 SCC 241. [33] Report No. 199 of Law Commission of India, Report on Unfair (Procedural and Substantive) Terms in Contract (August 2016) at p. 4,5. [34] Ibid (Law Commission Report) at p. 213. [35] Ibid (Law Commission Report) at p. 5.

We are pleased to announce that Argus Partners has advised Conscient Sports on their landmark collaboration with the Real Madrid Foundation to develop Real Madrid's Educational Football Program for 4,500 students in the Indian cities of New Delhi, Mumbai, Pune, and Bengaluru. This initiative aims to nurture young footballers at the grassroots level by combining the legendary football philosophy of Real Madrid and the Real Madrid Foundation with Conscient Sports' extensive expertise and dedication to Indian football. The Real Madrid Foundation’s training methodology blends traditional football ethos with modern coaching philosophies, offering unique experiences tailored for young footballers and their families, which complement mainstream education. This approach aims to enhance developmental goals, including leadership skills. The platform not only advances sporting abilities but also fosters high-performance individuals inspired by Real Madrid's ethos. The program’s curated experiences create an enriching environment for student growth, instilling positive life values. Speaking on the collaboration, Real Madrid`s Director of Institutional Relations, Emilio Butragueño, stated, “Real Madrid’s legacy of excellence finds a perfect partner in Conscient Sports, whose unparalleled expertise and dedication to grassroots development in India are second to none,…. Conscient Sports’ extensive knowledge of the Indian football landscape and their relentless pursuit of excellence make them the ideal ally for our mission. There is no better partner in India to help us realize our vision of nurturing young football talent.” According to Kriti Jain Gupta, Director of Conscient Sports, “Over the last 14 years, football has evolved dramatically, with new emphasis on physicality, speed, tactical flexibility, and high-intensity pressing. Our young athletes need training that aligns with these advancements and prepares them for the future. Conscient Sports has continually adapted coaching philosophies to meet the evolving needs of players and their families. And this is in sync with the philosophy of the club. Our goal is to stay ahead of the curve, ensuring our athletes are not only prepared for global challenges but also inspired to excel. We are dedicated to driving the growth of football in India, aspiring to host championships and tournaments that will shine a spotlight on our homegrown talent," The team at Argus Partners comprised Namitha Mathews (Partner) and Tarini Shivhare (Associate). Read more at: LiveMint, Hindustan Times.  

We are pleased to announce that Argus Partners has advised Conscient Sports on their landmark collaboration with the Real Madrid Foundation to develop Real Madrid's Educational Football Program for 4,500 students in the Indian cities of New Delhi, Mumbai, Pune, and Bengaluru. This initiative aims to nurture young footballers at the grassroots level by combining the legendary football philosophy of Real Madrid and the Real Madrid Foundation with Conscient Sports' extensive expertise and dedication to Indian football. The Real Madrid Foundation’s training methodology blends traditional football ethos with modern coaching philosophies, offering unique experiences tailored for young footballers and their families, which complement mainstream education. This approach aims to enhance developmental goals, including leadership skills. The platform not only advances sporting abilities but also fosters high-performance individuals inspired by Real Madrid's ethos. The program’s curated experiences create an enriching environment for student growth, instilling positive life values. Speaking on the collaboration, Real Madrid`s Director of Institutional Relations, Emilio Butragueño, stated, “Real Madrid’s legacy of excellence finds a perfect partner in Conscient Sports, whose unparalleled expertise and dedication to grassroots development in India are second to none,…. Conscient Sports’ extensive knowledge of the Indian football landscape and their relentless pursuit of excellence make them the ideal ally for our mission. There is no better partner in India to help us realize our vision of nurturing young football talent.” According to Kriti Jain Gupta, Director of Conscient Sports, “Over the last 14 years, football has evolved dramatically, with new emphasis on physicality, speed, tactical flexibility, and high-intensity pressing. Our young athletes need training that aligns with these advancements and prepares them for the future. Conscient Sports has continually adapted coaching philosophies to meet the evolving needs of players and their families. And this is in sync with the philosophy of the club. Our goal is to stay ahead of the curve, ensuring our athletes are not only prepared for global challenges but also inspired to excel. We are dedicated to driving the growth of football in India, aspiring to host championships and tournaments that will shine a spotlight on our homegrown talent," The team at Argus Partners comprised Namitha Mathews (Partner) and Tarini Shivhare (Associate). Read more at: LiveMint, Hindustan Times.