Hammurabi & Solomon Partners

Digital platforms have become central to everyday life, whether for shopping, learning, or entertainment. While we believe that we are making informed choices, much of what we see and select is shaped by design choices engineered to influence behaviour. These manipulative and deceptive designs, now known as “dark patterns”, are being adopted up bye-commerce entities to guide users toward outcomes they may not have chosen freely. From one-click subscriptions with obscure cancellations to hidden fees at checkout and misleading urgency cues, these practices are not an accidental. They are conscious tactics that take advantage of user attention, manipulate competition, and require scrutiny under both consumer protection and competition law. Dark Pattern recognition under the Indian Legal Framework The Advertising Standards Council of India (ASCI) first officially acknowledged ‘dark patterns’ in 2022, defining them as misleading or deceptive practices that violate consumer rights under the Consumer Protection Act, 2019 (CPA). Their discussion paper [1] reported dark patterns in 52 out of 53 Indian apps, and that almost 29% of advertisements in 2021-22 involved disguised advertising, a typical dark pattern. [2] Guidelines for Online Deceptive Design Patterns in Advertising, 2023:  [3] Issued by ASCI, these Guidelines identify major manipulative tactics commonly used in digital advertising, such as drip pricing (where additional charges are disclosed only at the final stage of purchase), bait-and-switch tactics (where the advertised offer is substituted with another), false urgency (which induces unnecessary pressure on buyers in terms of time), and disguised advertising (where promotional content is presented without proper disclosure). Consumer Protection Act, 2019 (CPA): While the said Act addresses unfair trade practices and misleading advertisements,[4] but lacks express language dealing with deceptive user interface or user experience design strategies. Digital Personal Data Protection Act, 2023 (DPDPA, 2023): This Act provides a comprehensive framework for data privacy in India. In case of dark patterns, it considers “forced action” as forcing users to purchase more goods or provide more personal data than intended, often by making privacy settings difficult to change. The Act’s provisions are triggered by whenever any data fiduciary engages in such forced actions. Under Section 2(u) of the said Act, forcing users to share personal data without consent is deemed a personal data breach, punishable by fines up to ₹250 crores. However, the said Act only deals with the data privacy related aspects of dark patterns, thereby highlighting the need for a more comprehensive legislation covering all types of dark patterns. Guidelines for Prevention and Regulation of Dark Patterns, 2023 (Guidelines, 2023): Issued by the Central Consumer Protection Authority (CCPA),[5] these guidelines marked India’s first regulatory effort specifically targeted  at identifying and curbing deceptive digital design practices by platforms, sellers, and advertisers. Section 2(e) of the Guidelines, 2023 defines “dark patterns” as “any practices or deceptive design pattern using user interface or user experience interactions on any platform that is designed to mislead or trick users into doing something they originally did not intend or want to do, by subverting or impairing the consumer autonomy, decision making or choice, amounting to misleading advertisement or unfair trade practice or violation of consumer rights”. In addition to the definition, the Guidelines, 2023 recognized an illustrative list of thirteen dark patterns, namely, (i) false urgency; (ii) basket sneaking; (iii) confirm shaming; (iv) forced action; (v) subscription trap; (vi) interface interference; (vii) bait and switch; (viii) drip pricing; (ix) disguised advertisement; (x) nagging; (xi) trick questions; (xii) SaaS billing; and (xiii) rogue malware. [6] Though the Guidelines, 2023 are an important step towards formally acknowledging dark patterns in Indian law, they face significant enforcement limitations. Although Guideline 4 [7] bars all parties from engaging in dark pattern practices, the lack of a penal provisions renders these bans toothless, leaving no concrete mechanism for the Competent Authority to enforce them. In addition, the scope of protection remains ambiguous. Although the Guidelines, 2023 broadly refer to "users," their linkage to "consumer rights" under the CPA raises major concerns. This is so because the CPA recognises “consumers” as someone who buys goods or services for consideration, which would exclude the applicability of Guidelines, 2023 on users who only interact with a platform without making a purchase, thus creating a significant gap in protection. Interface Manipulation as Abuse of Dominance under the Competition Act, 2002 (Act, 2002). From Consumer Harm to Competitive Harm Dark patterns, when used by market-dominant enterprises[8], can go beyond consumer issues and pose serious competition law concerns. Where interface design is manipulated not simply to persuade, but to hinder users’ freedom of choice, manipulate choice architecture, and deny competitors' access to markets, it can be categorized as non-price exclusionary behavior and attract Section 4 of the Act, 2002. Section 4(1) of the Act, 2002 prohibits any enterprise or group from abusing its dominant position in the market. More specifically, Section 4(2) delineates instances of such abuse, including the imposition of unfair conditions on consumers,[9] denial of market access to competitors,[10] and practices that limit market development to the prejudice of consumers. [11]. Interface Design as a Tool of Exclusion A significant example of dark patterns is the widespread use of subscription traps by dominant streaming and retail platforms, such as Amazon and Netflix. Such platforms deliberately use “single-click” easy subscription techniques but make the cancellation equally difficult and complex through multi-step processes, hidden settings, or coersive prompts like “Are you sure you want to lose your benefits?”, a tactic known as confirm shaming. These techniques impose psychological and structural barriers to exit, effectively locking users into services and denying potential competitors market access, thereby invoking Section 4(2)(c) of the Act, 2002. Other interface practices, such as basket sneaking and drip pricing, commonly seen in dominant online marketplaces, violate price transparency and thus exploit consumer inertia and transparency. Ancillary costs, for instance, in the case of drip pricing, are revealed only at the point of payment, while basket sneaking entails pre-ticking add-on upgrades such as warranty extension or contributions that users need to opt out of. These design mechanisms capitalize on the asymmetry of information and stealthily manipulate the behaviour of users to the platform's benefit. User consent is engineered by dominant companies, thus gaining a competitive advantage, rather than through innovative efforts, but by exploitation of interface power, a practice arguably covered by Section 4(2)(a)(i) of the Act, 2002, as unfair imposition of terms. Emerging Regulatory Attention The evolving global and domestic regulatory responses underscore the growing recognition of interface manipulation as a locus of abuse. In the United States, Amazon US has faced multiple actions by the Federal Trade Commission (FTC), which accused it of employing deceptive interface designs to enroll users into auto-renewing Prime memberships without informed consent.[12] In India, the Central Consumer Protection Authority (CCPA) issued a notice to Amazon India for engaging similar practices involving Prime Subscriptions.[13] In another high-profile case, the Competition Commission of India (CCI) imposed a substantial penalty of approximately INR 1,000 crore against Google for abuse of dominance in the market for Android mobile operating systems. The CCI directed Google to stop mandating the pre-installation of its suite of applications, required that access to its Play Services APIs be made non-discriminatory, and prohibited exclusive arrangements with OEMs. Importantly, the CCI ordered Google to permit users to uninstall pre-installed apps and to offer them a choice of default search engine during device setup.[14] While the ruling did not explicitly identify dark patterns, it addressed interface-level restrictions and control mechanisms as aspects of dominance. Similarly, an action was taken by the U.S. government against Adobe for “subscription trapping,” with allegations that it concealed early termination fees and made the cancellation process unreasonably difficult, another instance of manipulative interface design contributing to market power and consumer lock-in. [15] While these instances reflect increasing regulatory awareness, the characterization of dark patterns as a separate form of exclusionary abuse under competition law remains limited. With digital platforms increasingly exercising interface design as a competitive tool, a more dynamic and purposive interpretation of Section 4 of the Act, 2002 is necessary to ensure that both user autonomy and market fairness are preserved. Conclusion and the Way Forward Dark Patterns must be viewed not only as consumer deception but also as market abuse. A coordinated regulatory response involving the CCPA, CCI, and the Data Protection Board is imperative. While the CCPA’s Guidelines, 2023 lack sufficient penal force, the CCI can intervene under Section 4 of the Act, 2002, to address interface-based exclusionary practices. The Data Protection Board, in turn, must proactively safeguard user privacy from such manipulative designs. Ultimately, as user interface becomes a competitive tool, the law must evolve to match. A dynamic interpretation of Section 4 of the Act, 2002 by the CCI can play a critical role in curbing these practices and protecting user autonomy. Authored by Mr. Rohit Jolly (Associate Partner), Mrs. Sonali Khanna (Senior Associate), Ms. Sukriti Verma (Associate) and Ms. Vanshika Gupta (Associate). Endnotes: [1] ASCI, Dark Patterns- The New Threat to Consumer Protection- Document Discussion, November 2022, available at: https://www.ascionline.in/wp-content/uploads/2022/11/dark-patterns.pdf [2] Ibid. [3] ASCI’s Guidelines for Online Deceptive Design Patterns in Advertising, 2023, available at: https://www.ascionline.in/wp-content/uploads/2023/05/Guidelines-for-Online-Deceptive-Design-Patterns-in-Advertising.pdf [4] Section 2 (28) of Consumer Protection Act, 2019 [5] Guidelines for Prevention and Regulation of Dark Patterns, 2023, November 30, 2023, available at: https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Draft%20Guidelines%20for%20Prevention%20and%20Regulation%20of%20Dark%20Patterns%202023.pdf [6] Ibid. [7] Ibid. [8] Section 4 (1)(a) of the Competition Act, 2002. [9] Section 4(2)(a)(i) of the Competition Act, 2002. [10] Section 4(2)(c) of the Competition Act, 2002. [11] Section 4(2)(d) of the Competition Act, 2002. [12] Jay Mayfield, FTC Takes Action Against Amazon for Enrolling Consumers in Amazon Prime Without Consent and Sabotaging Their Attempts to Cancel, June 21, 2023, available at: https://www.ftc.gov/news-events/news/press-releases/2023/06/ftc-takes-action-against-amazon-enrolling-consumers-amazon-prime-without-consent-sabotaging-their. [13] Our Bureau, CCPA sends notice to Amazon for tricking customers into purchasing Prime memberships, December 15, 2023, available at: https://www.telegraphindia.com/business/central-consumer-protection-authority-sends-notice-to-amazon-for-tricking-customers-into-purchasing-prime-memberships/cid/1987021#goog_rewarded. [14] Mr. Umar Javeed and Ors. And Google LLC and Anr, CCI, Case No. 39 of 2018. Available at: https://cci.gov.in/antitrust/orders/details/1070/0. [15] Supra note 13.  

As India marches toward its 100th year of independence in the year 2047, we have seen in the recent past that India is making attempts to shed off its colonial legacy. Be it replacing the Macaulay’s Indian Penal Code, 1860 and Sir James Fitzjames Stephen’s Indian Evidence Act, 1872 with Bharatiya Nyaya Sanhita and Bharatiya Sakshya Adhiniyam respectively; or highlighting our countries ancient name “Bharat” along with modern name i.e. “India” in the G20 Summit held in New Delhi in September 2023; or moving into the new “Sansad Bhawan” from the Parliament building of the British era.   In furtherance to ditching of its colonial heritage, India have made tremendous development in the infrastructure space post the liberalisation of the economy, which is further propelled by the recent government schemes such as Smart City Initiative and Bharatmala Pariyojana. This has not only improved the infrastructure of the Metropolitan cities, Tier 2 and Tier 3 cities but also contributed to the overall socio-economic upliftment of the population. Further, the government’s Digital India initiative has led to the penetration of the internet in far-fetched areas of our country, introduction of e-governance, digitisation of government records, improvement in authentication system, and augmentation of overall digital literacy. To address the emerging challenges resulting from advancements in both tangible and intangible infrastructure in the country, the century old Registration Act of 1908 has increasingly demonstrated its shortcomings. Recognizing the need for an updated legal framework, the Department of Land Resources under the Ministry of Rural Development has recently introduced the Registration Bill, 2025, aimed at replacing the outdated colonial era legislation. The new Registration Bill 2025 has tried to modernise the registration framework by reflecting the change in the country’s administrative structure and it is striving to bring greater uniformity across all states and union territories. Some of the key features of this registration bill, 2025 are as follows: Institutional Strengthening The role of the Inspector General of Registration (“IGR”) has been expanded in the new bill. In order to streamline the work flow depending upon the size of the jurisdiction and accordingly to determine the role and responsibility of the officer, the Appropriate Government has been given the power to appoint one or more Additional / Joint / Deputy or Assistant IGR, depending upon the territorial challenges in each jurisdiction. Further, the Appropriate Government may prescribe the terms and conditions of service and the duties of the officer appointed under section 4(4) and authorise them to exercise all powers and duties of the IGR. The IGR in line with the power of general superintendence over the registration offices in its territories, have now been exclusively entrusted with the responsibility to appoint a government officer to fill up the vacancy of the Registrar. Earlier the Judge of the District Court also had the power to make the appointment of Registrar, however, now the role of Judge of the District Court has been done away with. IGR has also now been entrusted with the power to cancel the registration of any document, if the same is registered on the basis of false information; in contravention of the provision of this bill; or if the transaction in the document is against provision of any applicable law by a competent court or authority, provided that he adhere to the principles of natural justice. Expansion of scope of compulsorily registrable documents The new Registration Bill 2025, expands the range of documents that must be compulsorily registered, compared to the previous legislation. This change takes into account the new kinds of transaction documents which are being executed among the parties to create rights, interest or title in an immovable property or otherwise. List of additional documents with respect to an immovable property, which are required to be compulsorily registered are as follows: Any document which purports or operates to effect any contract for sale of immovable property, including an agreement to sale, developer’s agreement, or promoter’s agreement, by whatever name called, for development of any property or construction of structure; Power of attorney authorising transfer of immovable property, with or without consideration; Documents setting out terms and conditions for a mortgage by deposit of title deeds; Sale certificate issued by the competent officer or authority under any Central Act or State Act for the time being in force; Instrument in respect of amalgamation, reconstruction, merger, and demerger of companies and transfer of immovable property at the time of formation of companies pursuant to any order passed under the Companies Act, 2013; and Instruments which purport or operate to create, declare, assign, limit, extinguish any right, title or interest, whether vested or contingent, in immovable property pursuant to any decree or order or any award made by a court. Digitization and E-Governance As discussed in the introduction of this Article, the changes in the Registration Bill 2025 from the previous legislation are proposed keeping in mind the adoption of the digital infrastructure in the governance setup. Some of modification made in the Registration Bill 2025 over the previous Act are as follows: For the registration of the document affecting immovable property, the option of appearance in the sub-registrar office through electronic means has been prescribed in addition to the requirement of physical presence, if necessary. Option of electronic signature under the Information Technology Act, 2000 or any other form of digital signature is also introduced for the person presenting any document for registration. Option for Aadhaar based authentication or consent based verification through officially valid e-documents under applicable law, are also introduced, along with the traditional ways of authentication for any person not having an Aadhaar number. Creation of necessary infrastructure such as computers, scanners, and cloud storage is also proposed for facilitation of registration through electronic means and for storage of the registration documents with the Registrar offices. Standardisation in the Registrable Documents It is proposed that the Appropriate Government will notify the standard templates of the documents which are compulsorily required to be registered under section 12 of this Bill. Further, the non-testamentary document relating to the immovable property shall contain the appropriate details for the correct identification of the immovable property like unique identification number; property bounded details; existing and former occupancies; number of houses on the street where the subject property is situated; government maps or surveys etc. Role of Banks and Financial Institutions In the Registration Bill 2025, all banks, financial institutions, and other creditors, who are granting loan on the basis of mortgage by deposit of title deeds, are now mandatorily will be required to file a copy of the title deed with the registering officer within the local limits of whose jurisdiction the whole or part of the property so mortgage is situated and notify such officer about mortgage on the property. Shortcomings and Suggestions: Although the Registration Bill 2025 is proposed to be aligned with the modern infrastructure and the e-governance framework and seek to be citizen-friendly in several respect, it still contains notable shortcomings which can be addressed before the final version of the Act is passed by the legislation. Some of the suggestions that could cater to the shortcomings of registration process are: Unlike section 18 of the Registration Act, 1908, section 13 of the Registration Bill, 2025 lacks clarity and certainty, as it is difficult for a common man to ascertain the instruments that are optionally registrable. Therefore, it is suggested that the language of the section 18 of the Registration Act, 1908 be retained in the bill as well. It is suggested that a provision be added requiring the Registrar/Sub-registrar to provide an opportunity to the registering parties to rectify any errors curable in nature, and then if the parties fail to do so, refuse registration of the document presented for registration. This will ensure that there are no unnecessary appeals under section 60 of the Bill. It is suggested to add a provision for providing English translated versions of documents written in regional language to ensure accessibility for persons all over India. It is suggested that the central govt. to prescribe a standard template with respect to every compulsorily registrable document as prescribed under section 12. Moreover, a table shall be prepared on the front page of each registrable document containing the details of both the parties; details of the transaction; consideration paid; details of the subject property; details of stamp duty and registration charges as paid on the transaction etc. Owing to the increase in digitalization, and further to curb the problem of changing unique property identification numbers upon every survey, it is suggested to add a provision mandating Geo Tagging as a part of the description of property. As any other address may be dynamic but Latitude-Longitude band information is permanent. As of now, there is neither a timeline prescribed to register/refuse any document presented for registration nor a timeline for disposing off the appeals arising out of an order for refusal of registration. Therefore, it is suggested to fix timelines with respect to the registration process, as well as the appellate process to eliminate any such delays. Even in the age of digitalization, it is very difficult to trace details of mortgages by deposit of title deeds. Therefore, it is suggested that a provision may be added mandating the registering officers to maintain record of all mortgages by deposit of title deeds in Book – 1 or a separate book may be created for the same, as undertaken by the banks, and financial institutions, to enhance transparency and prevent fraudulent or conflicting claims over the same property. It is suggested to bring a change in section 35 of the Bill, as the language understood by the registering officer can be different from that of the official language under Article 343 of the Indian Constitution, and vernacular/official language of that state. Therefore, the words “language not understood by the registering officer” shall be substituted with language that take into consideration the official language under Article 343 of the Constitution of India, vernacular language of the region or the official language of the State, which would be in better interest of the citizen of that region. Further, to strengthen the immovable property registration process, there can be a provision mandating the concerned registering officers to link all the immovable properties with the PAN Card or Aadhaar Card of the owner. This will reduce Benami properties and further will make it easy for the govt. departments and the banks/financial institutions to search for all properties registered in the name of a single person. Conclusion: The Registration Bill, 2025 symbolizes a noteworthy step in India's legal and administrative transformation journey, in consonance with the larger national vision of shredding its colonial legacy, e-governance, and a step towards transparent administration. By revitalizing the 1908 outdated legislation, the 2025 Bill endeavours to digitize, streamline, and modernize the current property registration process thereby increasing its scope considering contemporary transactions and infrastructural realities. Digitalization, institutional restructuring, standardization of the format of documents, and enhanced responsibility of financial institutions are longed-for changes that would provide better accountability and ease of doing business in India. Further, so long as the highlighted shortcomings are addressed, the Bill will serve to be truly effective and citizen-centric. Some of those include ensuring greater access, procedural safeguards, and time sensitive redressal mechanisms, incorporating suggestions such as linkage of properties to PAN, mandatory geo-tagging, adding multilingual accessibility, and exhaustive record-keeping for mortgages, shall not only be a significant step towards making the regime more transparent but shall also build a robust registration infrastructure for the future decades. Now, as our nation is in the “Amrit Kaal” phase, this new Registration Bill will be instrumental in catalysing change; eliminate in-efficiency; ensure justice; transparency and accountability in registration of transactions for the generations to come. Authored by Mr. Shantanu Malik (Partner), Mr. Aeshwarya Sisodia (Senior Associate) and Ms. Sukriti Verma (Associate).

Co-authored by Mr. Rahul Jain (Partner) & Ms. Rushika Bakshi (Associate) INTRODUCTION In the rapidly evolving tech landscape, innovation and standardization are crucial for ensuring seamless interoperability between products and services. The Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS” or “Agreement”) is a multilateral agreement signed by all the member countries of the World Trade Organization (“WTO”). It establishes the minimum threshold for regulation of different forms of intellectual property (IP) by the national governments of member nations.[1] However, due to TRIPS being adopted in 1994 and Standard Essential Patents ("SEP(s)") being a relatively newer concept, emerging with the growth of Information and Communication Technology (“ICT”), there is no such explicit mention of the same in the Agreement. Nevertheless, SEPs are handled through respective national, competition (or antitrust) laws and further analysed by the courts. The SEP(s) and Fair, Reasonable, and Non-Discriminatory ("FRAND") terms play a vital role in facilitating the interoperability between products and services. SEPs cover technologies that are essential for compliance with industry standards, and companies seeking to implement these standards must use these patented technologies. Standard-Setting Organizations establish and maintain the technical guidelines for the regulation of SEPs and oversees that the companies who are contributing their patented technologies to the standards are licensing them on FRAND terms. FRAND terms make it mandatory for the SEP holders to license their patented technology in a manner that is fair, reasonable, and non-discriminatory. This entails equitable access to technology, avoiding excessive royalty demands, and ensuring uniform licensing terms for all. However, the ambiguity surrounding FRAND obligations has sparked numerous legal disputes, particularly pertaining to patent hold-up and hold-out. These issues underscore the need for a clear legal framework to govern SEP enforcement and licensing, ensuring that patent holders and implementers can navigate these complex issues with certainty. What is an anti-suit injunction? An anti-suit injunction is a form of injunction issued by the court of law to either restrain a party from continuing or initiating an action in a foreign jurisdiction. Anti-suit injunctions and SEP litigation In disputes associated with standard essential patents, issues mostly arise because of overlapping jurisdictions. And usually, these issues are solved by the issuance of an anti-suit injunction, barring one of the parties from continuing or initiating a proceeding in the same matter in a foreign jurisdiction. The landmark case between Ericsson and Samsung belongs to the telecommunications field, standardization of which has created a complex global market for standard essential patents. Reason being that patents rights are territorial in nature and most of the contributors hold SEPs across various jurisdictions, and therefore issues related to multi-jurisdictional Frand dispute arise[2]. And one way to get away with this problem is to issue an anti-suit injunction. And as discussed above the party against whom the anti-suit injunction is issued, are barred from continuing or initiating a case in a foreign jurisdiction, related to any kind of injunctive relief, setting a FRAND rate or any kind of antitrust complaints. Impact of an Anti-suit injunction The mutual respect among different jurisdictions is important for having international legal cooperation, and anti-suit injunctions may put this to test, by letting one court dictate the proceedings or the jurisdictional authority of the other court. This might lead to international legal conflicts and strained diplomatic relations between the nations. Anti-suit injunctions may also impede the enforcement of patent rights, which holds the potential of affecting the general as well as economic interests of the SEP holders. Therefore, the usage of anti-suit injunctions in SEP litigations creates a complex situation which calls for striking a balance between Patent holders’ rights and ensuring fair competition in the market. Cross Licensing of Standard Essential Patents Cross-licensing is a tool that is extensively used in cases involving SEPs, where the common goal is to ensure the building of a certain technology standard while at the same time making sure that patent holders are provided full compensation for their efforts. When SEPs are cross-licensed, the companies participate in a mutually beneficial process that helps in multiple standard implementations and, at the same time, avoids the possible infringement disputes. Through the exchange of patented technologies, cross-licensing can ensure that industries are collaborating which in turn promotes innovation and technological progress, a growth that would benefit the market. Cross licensing of standard essential patents facilitates a two-way exchange of rights to these vital technologies, thereby promoting interoperability, bringing down transaction costs, alleviating risks, and allowing for the creation of new technologies that lead to innovation within the industries, however, rules of competition and FRAND should not be neglected. Furthermore, the complexities surrounding SEP licensing and FRAND obligations have been highlighted in various legal disputes, such as the Samsung v. Ericsson case, which underscores the challenges in determining fair royalty rates and addressing allegations of patent hold-up and hold-out. FRAND & Standard-Essential Patents (SEP) In Ericsson Inc. v. Samsung Elecs. Co.[3], the US District Court at Eastern District of Texas granted Ericsson Inc. and its co-plaintiff an anti-interference injunction to stop Samsung Electronics Co., Ltd. and co-defendants from using an Anti-Suit injunction in the ongoing litigation in China which was filed by Samsung to prevent Ericsson from asserting its patent rights in the US and to preserve its jurisdiction to hear the FRAND case that Ericsson had filed in the Texas Court. The facts of the case were, Samsung (South Korean) and Ericsson (Swedish) are both giant telecommunication companies that are in the business of manufacturing cellular devices and products and have an extensive global portfolio of Standard Essential Patents (SEPs) relating to the 2G, 3G, 4G and 5G cellular standards. In the past, both these companies have entered into cross licensing agreements with respect to their SEPs and have negotiated a licensing rate and royalty fee amicably. The latest cross licensing agreement was entered into by the two companies in 2014 and the same was supposed to expire by the end of 2020. However, when the two companies started off their re-negotiations for cross licensing in 2020, they could not successfully agree on a licensing fee and royalty rate even after multiple attempts. As a result, the renewal of cross licensing agreement was not fruitful and what occurred in the aftermath of these futile negotiations is a very complicated procedural history wherein suits were filed by both these telecommunication giants in two different jurisdictions, thereby causing a disruption in the industry. On 7th of December 2020, Samsung filed a case in the Wuhan Intermediate People’s Court of Hubei Province on, for the Chinese court to decide on the global licensing terms and rate for Ericsson’s 4G and 5G SEPs. Samsung did not notify Ericsson of this filing. Unaware of the legal action initiated by Samsung, in pursuance to this, Ericsson filed a civil suit in the United States, Easter District court of Texas, on 11th of December 2020, to assert its patent rights and to address the alleged breach of FRAND obligations by Samsung as per the European Telecommunications Standards Institute. After getting notified about the action initiated against them in the United States, Samsung on 14th of December 2020, filed a Behaviour Preservation Application again in China’s Wuhan Intermediate People’s Court of Hubei province, requesting the court of law to issue an anti-suit injunction against Ericsson so as to prevent them from seeking relief in any other jurisdiction. Samsung also filed an ‘Application for Delaying the Serving of Behaviour Preservation Application to Ericsson’ which required the Chinese Court to not inform Ericsson about the Behaviour Preservation Application so that they would not file a suit in another country (like the one in US), thus preventing interference with the ruling of the Chinese Court. On 17th of December 2020, Samsung informed Ericsson about the Chinese action but did not provide any documents to Ericsson as Chinese suits are solely based on paper without any online documentation but finally on 22nd of December 2020, Samsung provided a copy of the complaint to Ericsson and nothing more. On 25th of December 2020, the Chinese court in Wuhan, (i) issued an anti-suit injunction against Ericsson, which barred Ericsson from initiating any suit against Samsung seeking injunctive relief in any of their SEPs related to 4G and 5G technology; (ii) hold service of certain materials pending the ASI ruling since other courts would likely seek to prevent the ASI’s enforcement in their respective jurisdictions; and (iii) the ASI granted for the duration of the action and until a future judgment in the action is effective, from seeking relief regarding the SEPs anywhere in the world, with violations punishable by substantial fines. The Wuhan court therefore barred Ericsson from seeking an Anti-Anti-Suit Injunction against Samsung so that it cannot prevent Samsung from using the Wuhan court to neutralize every legal remedy that Ericsson would try to seek from any other court, which also included the Eastern District Court of Texas. However, the anti-suit injunction issued by the Chinese court against Ericsson, did not stop the Swedish company from filing for an ex parte temporary restraining order against Samsung in the District Court of Texas on 28th of December 2020, in order to prevent Samsung from interfering with Ericsson’s attempt in asserting its patents rights in the U.S. Upon this filing, the District Court of Texas on 11th of January 2021, issued a Temporary Restraining Order (TRO), which later turned into a preliminary injunction in the form of an Anti-Anti-Suit injunction, but unlike the Chinese court’s order, the Texas court ruled that the civil cases filed by both the parties in different countries, i.e. the case filed by Ericsson in the U.S. and the case filed in China by Samsung, to proceed parallelly. The District Court therefore prohibited Samsung from taking any action in the Wuhan Court that would hinder the action in the US Court or any such action that would interfere with Ericsson’s right to assert their patents under the US law and Samsung was further ordered to indemnify Ericsson from any sort of penalties and fines imposed upon them by the Wuhan Court as a part of their anti-suit injunction ruling[4]. Subsequently, Samsung appealed to the Federal Circuit Court against the anti anti suit injunction sought by Ericsson from Texas Court wherein supporting briefs were submitted by amicus of both the parties.  For instance, according to the supporters of Samsung, “the anti-suit injunction issued by the Wuhan court was a legitimate exercise of the court’s jurisdiction.” Amidst the ongoing litigation, both the companies announced in May 2021 that they had mutually entered into a cross-licensing agreement relating to their 4G and 5G SEPs effective from 1st of January 2021, ending all the lawsuits pending in several jurisdictions. The companies hence finally went for an amicable out of court settlement thereby renewing the multi-year cross license agreement. As per Judge Gilstrap, the issues raised in Wuhan Court and the issues raised in the Texas Court are entirely different from one another even though the factual matrix was more or else similar[5]. The Intermediate Court of Wuhan had to determine the global licensing terms and ascertain the FRAND royalty rates applicable for all the cellular products of Samsung that implemented Ericsson’s 4G and 5G SEPs. On the contrary, US District Court of Texas was requested by Ericsson to look into the breach of contractual terms and FRAND obligations on Samsung’s part. While the Wuhan Court had to decide on a numeric value, the Texas Court had to evaluate whether the conduct of the parties was lawful or not. But the main issue for consideration in this multi-jurisdictional case would be to analyse as to what considerations should be kept in mind by one national court so that their rulings do not impact the jurisdiction and sovereignty of courts and agencies of other countries. Judge Gilstrap’s Anti-Anti-Suit injunction was a very well thought out and reasoned decision which also acts as an example of a ruling that respects the course of action and nature of legal proceedings in the Chinese jurisdiction. The first instance can be seen when he laid down the distinct nature of issues that both courts had to deal with and that each court acts very well within its jurisdiction while deciding upon those particular issues. The action in the Chinese Court was unilateral in nature as it was meant to act as a relief for Samsung by fixing a royalty rate on SEPs held by Ericsson while on the other hand the contentions raised by Ericsson in the US pertain to negotiating a cross-license as per FRAND terms wherein the potential licensee, i.e. Samsung in this case also grants a reciprocating license on its own SEPs. Judge Gilstrap also noted that the ruling of the Wuhan Court prevented the efficient and speedy action of the US Courts whereas the actions of the US Court had no possible implications on the efficient functioning of the Chinese Court, and it did not intend to frustrate or delay the case brought in Wuhan[6]. He was of the opinion that each Court should be allowed to adjudicate upon the issues brought before it pursuant to its legitimate jurisdiction without any interference and states that his order of anti-interference injunction in no manner poses to be a threat to the international concord but promotes the litigation to proceed parallely in both countries. Further, it would have been unfair and unjust if Ericsson was not permitted to assert its patent rights in the US and bring its claims under the laws of US just because of the anti-suit injunction ruling of the Intermediate People’s Court of Wuhan which had already placed Ericsson in a relatively much weaker negotiating position as compared to Samsung. Additionally, while studying the procedural history, it was understood that Samsung had appealed against the decision of the Texas District Court praying for injunctive relief and therefore, it would have been completely inadequate if Ericsson was not allowed to assert the rights over its SEPs due to the anti-suit injunction ruling in Wuhan. It would have been the height of hypocrisy if Samsung is freely proceeding in China as well as US, but Ericsson is completely deprived of any opportunity to claim its patents. Finally, while granting relief to Ericsson, Judge Gilstrap was very rational and did not grant the full relief as requested. He respected the procedures of the Chinese jurisdiction and therefore never ordered Samsung to provide Ericsson the documents filed by it in China as he was aware that this would interfere with the court procedures in China. He did not even bar Samsung from continuing the proceedings in China and allowed them to carry out in correspondence. The relief provided to Ericsson was by way of getting indemnified of all the penalties and fines imposed on them through the Chinese Court and thereby ensured that no one party is economically drained. Hence, through this order, the Texas Court signalled its intent to minimize Chinese interference in its procedures while allowing Chinese proceedings to continue without obstruction. Cross-Border Complexities in Standard Essential Patent (SEP) Litigation The increasing reliance on Standard Essential Patents (SEPs) in global technology industries has led to complex legal disputes spanning multiple jurisdictions. These disputes often involve conflicts over patent enforcement, royalty determination, and FRAND licensing obligations. The case of Samsung v. Ericsson exemplifies the jurisdictional challenges arising in SEP litigation, particularly the use of anti-suit and anti-anti-suit injunctions, which courts issue to prevent or counteract parallel litigation in different countries. These legal manoeuvres highlight the broader challenge of balancing patent rights, competition law, and international legal co-operation in the enforcement of SEPs. The Growing Importance of SEP Litigation and the Need for a Jurisdiction-Specific Approach The Samsung v. Ericsson case underscores the need for a jurisdiction-specific approach to SEP enforcement. Courts across different countries have taken varied positions—some prioritizing patent holders’ rights to fair compensation for their innovations, while others focus on preventing market abuse by dominant firms. This divergence raises a key legal and policy question: Should SEP enforcement follow a harmonized international framework, or should each country tailor its approach based on its economic and technological priorities? India's telecom market, with over 1.2 billion subscribers, is the second-largest globally, underscoring the growing significance of Standard Essential Patents (SEPs) in the country.[7] These figures demonstrate how crucial Standard Essential Patents (SEPs) and associated issues are becoming for the Indian subcontinent. As a rapidly growing tech hub, India has witnessed an increase in SEP-related litigation, with courts navigating complex issues like patent recognition, royalty determination, and licensing obligations. SEPs jurisprudence in India is not as developed as in other jurisdictions such as the US. In view of the numbers above, Indian courts aim to strike a balance between incentivizing innovation and ensuring technology accessibility, preventing excessive royalty demands and monopolistic practices while ensuring fair returns for SEP holders. Major telecom players like Ericsson, Intex, Micromax, Lava, and Interdigital have been involved in SEP disputes, highlighting the need for a well-defined SEP framework in India. INDIA’S STAND ON SEPS AND FRAND LICENSING India's judicial approach to Standard Essential Patents (SEPs) reflects a blend of global legal precedents and jurisdiction-specific considerations tailored to the domestic market. Commonly litigated areas concerning SEPs in India include injunctions, defining an unwilling licensee, calculating interim royalty rates and FRAND rate determination.[8] A large part of SEPs litigation involves SEP infringement and determining when it warrants the grant of an injunction. Implementers who utilise SEPs without authorisation run the risk of falling into one of four situations: i) The SEP holder may sue them, ii) they may pay royalties as demanded by the SEP holder, iii) they may eventually develop a non-infringing device that is not as effective than the SEP technology at complying to the standard or iv) they may avoid the relevant market.[9] A series of significant pronouncements demonstrate the development of India’s SEP jurisprudence. SEP Litigation in India The Koninklijke Philips Electronics N.V. v. Maj. (Retd.) Sukesh Behl & Anr.[10] case marks a significant milestone in Indian patent law, particularly in the realm of Standard Essential Patents (SEPs) and intellectual property enforcement. This judgment resolves three interconnected suits filed by the Plaintiff Philips relating to the infringement of Indian Patent No. 218255, which pertains to a “Method of Converting Information Words to a Modulated Signal”. The court validated Philips’ patent through technical evidence and claim mapping, aligning its approach with global standards on SEP enforcement. This ruling provided critical insights into the indispensability of the Eight-to-Fourteen Modulation Plus (EFM+) encoding method for DVD replication and compliance with the DVD standard. The court found that Philips had maintained a global FRAND licensing program, offering licenses at a standard royalty rate of USD 0.03 per DVD. The court held that the defendants' replication process utilized discs with the EFM+ modulated signal, proving infringement. The defendants' attempt to evade liability through third-party outsourcing was rejected, with the court concluding that they knowingly facilitated the production of infringing DVDs. The defendants were held liable for indirect infringement under Section 48 of the Indian Patents Act. To determine the quantum of damages, the court cited the seminal judgment of the Supreme Court of the United Kingdom[11] which maintained that FRAND rates are the best suitable foundation for determining damages in SEP infringement cases, to establish the amount of damages[12] [13]. The Indian Jurisprudence has acknowledged and reinforced this principle. The court emphasised that the rates were fair and in line with global norms, upholding Philips’ FRAND royalty structure of USD 0.03 per DVD. Further, the evidence indicated that Philips repeatedly and diligently attempted to provide the Defendants a license under FRAND conditions. Nevertheless, the Defendants, did not get a license or stop their replication activities despite being informed of the necessity of the Suit Patent and their duty to do so. The court noted that this reflects a classic example of willful infringement. Moreover, the defendants omitted to present records that would have disclosed the entire extent of their infringement actions and concealed DVD production sales statistics throughout the proceedings. The court imposed aggravated damages of ₹1 crore, deeming the defendants' actions a textbook example of willful infringement. This amount, equivalent to approximately $120,482, is recoverable jointly and severally from the defendants across the three suits. Furthermore, the court observed that by failing to secure a FRAND license, the plaintiff was forced into prolonged litigation, depriving them of timely compensation. Consequently, the court awarded 12% per annum interest on the total damages, spanning from suit filing to actual payment. Finally, the court awarded the full litigation costs in favor of the Plaintiff and against the Defendants. India's First Anti-Enforcement Injunction Order The concept of anti-suit injunction and anti-enforcement injunction is gaining prominence worldwide including in India. Recently, the Delhi High Court in Interdigital Technology Corporation vs. Xiaomi Corporation & Ors.[14] granted an anti-enforcement injunction. It was held that a foreign court cannot restrain a party from pursuing its cause before Indian Court when Indian jurisdiction is the only forum. The facts of the case as follows, the dispute arose when InterDigital, a U.S.-based SEP holder in 3G and 4G technologies, sued Xiaomi for patent infringement in India. However, Xiaomi had already obtained an anti-suit injunction (ASI) from the Wuhan Intermediate Court, China, restraining InterDigital from pursuing legal action in India. The Delhi High Court delivered its final judgment on 3rd May 2021, upholding and declaring India's first anti-enforcement injunction granted against Chinese multinational Xiaomi Corporation and in favour of US technology giant and pioneer interdigital. The High Court observed that the Wuhan Court did not take into account the fact that the cause of action arose in India because the proceedings involved alleged infringement of six specific Indian patents. Although India does not have any specific rules pertaining to the grant of anti-suit injunction, still the jurisprudence has been developed on the basis of considerable precedence. The Court held that a substantial part of the cause of action arose within its jurisdiction and that the parallel suit filed is oppressive, frivolous and keeps the Plaintiff from availing the remedies available to them.[15] Furthermore, the court pointed on the distinction between an Anti-Suit injunction; an Anti-Anti-Suit injunction, and an Anti-Enforcement injunction. It was also observed that because Wuhan Anti-Suit proceedings had already been concluded, the subsequent Indian injunction granted was in the nature of an Anti-Enforcement injunction. The High Court explained that although there is no reason for an anti-enforcement injunction to be seen as rarer than an anti-suit injunction, Courts must still proceed with caution while granting any such request owing to the delicate nature of the proceedings. The Court thus upheld the principle that Comity is a two-way street. Additionally court also pointed out that the copy of the anti-suit injunction application filed by the defendants in the Wuhan Court was never provided to the plaintiff and therefore the mere issuance of the notice to the plaintiff will not imply transparency of the proceedings. Furthermore, the Wuhan Court had no justification for preventing Interdigital from pursuing its claims for an injunction against Xiaomi in India unless there was a significant overlap between the proceedings in Wuhan and India that rendered the Indian proceedings oppressive and frivolous. Finally, the Court concluded that Xiaomi shall compensate plaintiffs by depositing a corresponding amount with the court in India, if the Wuhan Court upholds its anti-suit injunction order, and orders the plaintiff to deposit penalties for prosecuting its Indian suit. Comparative Analysis: FRAND Royalty Battles in India v. The U.S. In the realm of SEP licensing, India and the US diverge significantly in their approaches to determining FRAND royalty rates. In India, the jurisprudence surrounding SEPs is still in a formative stage. Recent cases like Ericsson v. Lava (2024) and Intex v. Ericsson (2023) show a growing reliance on judicial discretion and comparable licenses rather than a structured economic framework. In Ericsson v. Lava, the Delhi HC awarded damages approximately Rs. 2.44 billion (US $ 30 million) based on the end-product price[16] and adjusted royalty rates considering invalidated patents, reinforcing portfolio licensing as a legitimate practice. In Intex v. Ericsson, the court addressed the procedural threshold for interim relief in SEP disputes and clarified that the Nokia v. Oppo four-fold test, which required: (i) proof of prima facie infringement, (ii) demonstration of the patentee’s evidence of the implementer’s unwillingness or delay, and (iv) a showing that the terms offered were indeed FRAND, wasn’t mandatory for interim relief and instead prioritised prima facie infringement and the implementer’s willingness to negotiate. Contrastingly, the U.S. employs a more structured approach to FRAND royalty determinations, heavily relying on economic analyses and established legal frameworks, as established in Microsoft v. Motorola, where the court used a modified Georgia-Pacific framework to calculate FRAND rates based on the intrinsic value of the patent (excluding it from standardization)[17] and emphasised avoiding royalty stacking[18]. U.S. courts typically prefer using the smallest saleable patent-practicing unit (SSPPU) for royalty calculation, unlike Indian courts that use full device price. CONCLUSION The enforcement of Standard Essential Patents (SEPs) and Fair, Reasonable, and Non-Discriminatory (FRAND) principles remains a pressing concern globally, with landmark cases like Samsung v. Ericsson and Koninklijke Philips N.V. vs. Maj (Retd.) Sukesh Behl shaping the legal landscape. These cases underscore the delicate balance between protecting SEP holders' rights and ensuring fair competition and technological advancement. The Samsung v. Ericsson dispute highlights the complexities of multi-jurisdictional litigation, particularly regarding anti-suit and anti-anti-suit injunctions. Judge Gilstrap's measured approach in Texas allowed parallel proceedings to continue without interference, exemplifying the challenges of determining global licensing terms. In contrast, the Koninklijke Philips case showcases India's evolving stance on SEPs, with the Delhi High Court's recognition of Philips' patent as an SEP demonstrating the country's commitment to FRAND-based licensing. This ruling, coupled with InterDigital v. Xiaomi, positions India as a key player in global SEP disputes, asserting its judicial sovereignty in intellectual property enforcement. A recent landmark judgment in the Ericsson v. Lava case further solidifies India's position in global SEP disputes. The Delhi High Court's comprehensive analysis of FRAND principles, essentiality, and infringement sets a crucial precedent for future SEP cases. Key takeaways from this judgment include the court's emphasis on global licensing practices, the importance of claim mapping, and the rejection of the doctrine of exhaustion as a defense in SEP infringement cases. The Ericsson v. Lava judgment marks a significant milestone in India's evolving SEP jurisprudence. This decision underscores India's growing assertiveness in shaping global SEP disputes, aligning with international best practices while safeguarding judicial sovereignty. The court's adoption of the comparable license approach for determining FRAND rates and damages highlights the need for a balanced and predictable framework for SEP licensing. As India continues to refine its legal framework on SEPs, judicial clarity on licensing disputes will play a vital role in promoting a favourable environment for SEP holders and implementers alike. The convergence of international best practices and India's growing assertiveness in SEP disputes will likely shape the country's position as a key player in global SEP disputes. References: [1] TRIPS Art. 1(3). 2 Haris Tsilikas, ‘Anti-Suit Injunctions for Standard-Essential Patents: The Emerging Gap in International Patent Enforcement’ (2021) 16 Journal of Intellectual Property Law & Practice 729. 3 CIVIL ACTION NO. 2:20-CV-00380-JRG (E.D. Tex. Jan. 11, 2021) 4 Greg Ward and Milne, ‘A Secret Injunction – Ericsson Granted “Anti-Interference” Injunction Against Samsung in Global SEP Dispute’ (HLK, 19 January 2021) accessed 25 April 2024. 5 David Long, ‘Judge Gilstrap Preliminarily Enjoins Samsung From Using Parallel Chinese Case To Interfere With U.S. Case (Ericsson v. Samsung)’ (Essential Patent Blog, 12 January 2021) accessed 26 April 2024. 6 ibid. 7 https://www.aippi.org/news/frand-litigation-and-sep-dispute-indian-perspective/#_ftn1 8 Ameya Pant & Dipesh Jain, Complexities surrounding SEP cases in India: An overview of decisions by the High Court and Competition Commission of India,13 JIPLP 132, 132-142 (2018). 9  Yogesh Pai, The Rational Basis for FRANDly Courts Denying Injunctive Relief for SEPs Infringement, 19 JIPR 146, 146-156 (2014). 10 High Court of Delhi, CS(COMM) 423/2016 & I.As. 18701/2014, 20810/2014, 3550/2021 11 Unwired Planet International Ltd. and Anr. v. Huawei Technologies (UK) Co. Ltd. and Anr. UKSC/2018/0214. 12 Xiaomi Technology and Anr. v. Telefonaktiebolaget LM Ericsson (PUBL) and Anr. 2014 SCC OnLine Del 7688 13 Lava International Limited v. Telefonaktiebolaget LM Ericsson 2024 SCC OnLine Del 2497 14 A. 8772/2020 in CS(COMM) 295/2020. 15 Modi Entertainment Network &AnrVs W.S.G. Cricket Pte. Ltd. AIR 2003 SC 1177. 16 https://www.worldtrademarkreview.com/guide/india-managing-the-ip-lifecycle/2025/article/how-india-has-established-itself-key-venue-sepfrand-litigation 17 https://www.essentialpatentblog.com/2023/04/indias-high-court-of-delhi-issues-guidance-on-sep-licensing-that-seeks-to-harmonize-decisions-in-other-countries-intex-v-ericsson/ 18 https://patentblog.kluweriplaw.com/2023/10/23/recent-indian-case-law-on-standard-essential-patents-2/

In Gayatri Balaswamy v. M/S. ISG Novasoft Technologies Limited Bench: Chief Justice Sanjiv Khanna, Justice B.R. Gavai, Justice P.V. Sanjay Kumar, Justice A.G. Masih, Justice K.V. Viswanathan. Date of Judgement: 30/04/2025 INTRODUCTION In a recent ruling in Gayatri Balaswamy vs. M/S. ISG Novasoft Technologies Ltd[1], a Constitution Bench of five judges of the Supreme Court considered a reference made by a three-judge Bench to determine whether a court has the authority to modify an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. By a 4:1 majority, the Bench, headed by the Chief Justice, held that while such modification is not generally permitted, it can be allowed in certain "limited" scenarios. The dispute arose in the backdrop that the Act, does not specifically empowers the Courts to ‘alter’ or ‘modify’ an arbitral award Instead, Section 34 of the Act explicitly outlines the Court’s authority to set aside an arbitral award on specific, limited grounds. In this backdrop the Court framed the issue for consideration inter-alia: “Are Indian courts jurisdictionally empowered to modify an arbitral award? If so, to what extent?” Greater contains the Lesser: Deliberating on the issue, the Court considered the maxim “omne majus continent in se minus” (i.e. the greater contains the lesser), to arrive at the conclusion that the power to set aside an award includes the power to modify or partially set aside an award. In reaching this conclusion, the Court analyzed the proviso to Section 34(2)(a)(iv) and observed that it empowers the Court to sever parts of an arbitral award that pertain to issues not referred to the arbitral tribunal for adjudication. Holding thus, the Court observed that the authority to severe the invalid portion of the award from valid portions, is inherent, within the narrow jurisdiction under Section 34 of the Act, which prescribes for power to set aside an award. The Court further issued a cautionary note, emphasizing that the power of severability can only be exercised in cases where the valid and invalid parts of the award are both legally and practically separable, and where these portions are not interdependent. If such portions are not legally and practically separable then there cannot be partial setting aside of the award. Annulment v/s Modification: In this regard, the Court examined the difference between ‘modification’ and ‘setting aside’ of an arbitral award, highlighting that they lead to fundamentally different legal outcomes. Modification involves altering the terms of the award, whereas setting aside leads to its complete annulment. It was then highlighted that ‘modification’ signifies exercise of a limited power, whereas ‘setting-aside’ results in a severe consequence of cancellation of the award all together. It was thus emphasized that court can use the law of severability and can modify the award keeping the valid portion and setting aside the invalid portion. In this context the Court declined to concur with the argument that the exercise of modification of award will result into examination of the award on the merits of dispute. Power of Modification is in consonance with objectives of Arbitration: Justifying the Court’s power to modify the arbitral award, the Supreme Court highlighted that such power of modification signifies the objectives of arbitration, i.e. avoidance of delay and cost escalation. Indeed, the Court observed that restricting courts to merely setting aside an arbitral award—without the option to modify it—would impose unnecessary hardship and financial burden on the parties, as they would have to recommence the dispute resolution process from the beginning. This would ultimately make arbitration more burdensome and time-consuming than conventional litigation. Pertinently, while emphasizing that Section 34 does not restrict the range of reliefs to be granted by the Court, the Supreme Court observed that mere silence in the Act should not be read as complete prohibition with respect to grant of any relief. In fact, the Court went to the extent of examining and upholding the Court’s power to modify the award, despite existence of Section 33 of the Act, which empowers the arbitrator, to correct and issue additional award, on limited grounds. The Court held that, notwithstanding the provisions of Section 33, it retains inherent powers to modify an arbitral award, depending on the nature of the jurisdiction involved—be it appellate, reference-based, or the limited scope under Section 34. It further observed that these powers are intrinsically linked to the Court’s overall jurisdiction and form an integral part of its authority in such matters. Remand/remittance v/s modification of Award: The Supreme Court rejected the contention that the power to remand an arbitral award to the tribunal makes the Court’s power to modify the award redundant. It clarified that these powers are distinct in nature and serve different purposes within the framework of the arbitration process. Supreme Court observed these powers to be distinct and being used for different purposes. The Court observed that Section 33(4) prescribes discretionary power of the Court to remand the award to arbitrator, in case the award is defective in such manner that can lead to its setting aside. Therefore, to prevent the same, the Court may remit the award to arbitrator for limited consideration. The Court cautioned that remand of award under Section 33(4) does not permit the Arbitral Tribunal to re-write the award on its merits or set it aside. Such measure is a curative mechanism made available to the arbitral tribunal by remand exercise of Court. Court held that it is a means to preserve an award, and Court should not remand an award if it is inherently irreparable. Power of Modification not in derogation of New York Convention: Supreme Court was not impressed with the arguments against modification on the ground that a modified award gets subsumed/merged in the order of Court in modified form, whereas the structure of New York Convention contemplates for the enforcement of award award and not a court order; therefore, a modified award merged in the court order will be rendered unenforceable as per the Convention. In this regard, referring to Section 48 of the Act, the Supreme Court observed that enforceability of the foreign award shall be decided by the court by examining whether the arbitration's jurisdiction's laws have made the award legally binding. Thus, the Court maintained that it has limited authority under Section 34 to alter the award, and that such award shall be will be treated as modified by the Judgment/order. Other issues: Apart from above issues, the Court has deliberated on many other issues, including on the issue of grant of post award interest, post award settlement between parties, applicability of limitation under Section 34 read with Section 43(4) and application of SC power under Article 142 of Constitution. In the context of application of power under Article 142, SC held that such power should be exercised with caution and restraint, in appropriate cases and particularly with an objective to bring the litigation to an end. It was cautioned that such powers should not be exercised where it results in rewriting of award or modification of award on merits. CONCLUSION The judgement given in this case is a major development in the Alternative Dispute Resolution Jurisprudence particularly in Arbitration law in India. The ruling by the Hon’ble SC provides for spacious judicial intervention to modify the arbitral awards. The Judgment, while rendering prescriptions for modification based only on spacious principles, does not lay down any objective criteria for exercise of such power of modification. So far, the Judgment is likely to have a far-reaching impact in prompting the Courts to intervene into the arbitral awards, while exercising powers under Section 34 of the Act. In fact, in the dissenting Judgement of Mr. Justice K.V. Viswanathan adheres to literal interpretation of the statute by observing that unlike legislations of other jurisdictions like UK, New Zealand, Singapore, Kenya, the Indian legislation does not have specific prescriptions for modification of awards. He referred to amendments to the Act in the year 2015, 2019, and 2021, to highlight that Parliament had several opportunities to give the Courts the power to modify the awards, but it chose not to do so. Therefore, it would not be justified for the courts to assume such power. Even with respect to exercise of powers by Court under Article 142, the dissenting Judgment observes that such exercise of power is opposed to settled principles of law laid down in Supreme Court Bar Association v. Union of India,[2] where the honourable Court made it clear that Article 142 cannot be used to override or replace existing laws and Shilpa Sailesh v. Varun Sreenivasan,[3] wher the honourable Court again reiterated that powers under Article 142 must be used with caution and should not go against core principles of a law. Overall, the majority Judgment leaves spacious room for the Courts to intervene with the award stated after the arbitral proceedings in exercise of powers under Section 34 of the said Act. While Indian arbitration eco-system has of late seen a discouraging trend to opt for arbitration, particularly in view of Government’s deliberate act of avoiding arbitration in high value matters, this Judgment permitting Court’s increased power of intervention with the award, may witness further discouragement in promotion of arbitration in the sub-continent. ________________________________________ [1] Gayatri Balaswamy v. M/S. ISG Novasoft Technologies Limited, (2025) INSC 605 [2] Supreme Court Bar Association vs. Union of India and Another, (1998) 4 SCC 409. [3] Shilpa Sailesh v. Varun Sreenivasan, (2023) 14 SCC 231. Authored by Jyoti Kumar Chaudhary, Senior Partner and Svadha Shankar, Partner Designate  

On 8 May 2025 the Reserve Bank of India issued the Reserve Bank of India (Digital Lending) Directions, 2025,  a single rule-book that repeals and folds into itself every digital-lending circular since 2022, including the default-loss-guarantee (DLG) FAQ and the outsourcing norms for Lending Service Providers (LSPs). By unifying the regime, the RBI seeks to eliminate overlaps in definitions, tighten accountability and rebuild borrower confidence. This endeavour addresses the concerns arising from a series of mis-selling and data-privacy/digital scandals. Based on the recommendations of working group on digital lending, RBI has attempted to consolidate the existing regulations/instructions while incorporating few new measures such as LSP’s partnering with multiple regulated entities (RE’s) and creating a directory of digital lending app for credibility and public awareness.  Addressing the concerns of   unbridled engagement of third parties, breach of data privacy, unfair business conduct, charging of exorbitant interest rates, unethical recovery practices, the directions are aimed at enhancement of accountability and customer trust.  The said directions came into forced on 8th May, 2025 itself, whereas the multi-lender LSP arrangements and Digital Lending Apps shall come into force on 1st November, 2025 and 15th June, 2025 respectively. Wider Perimeter and demarcated Roles:  The Directions apply to all commercial banks, co-operative banks, NBFCs (including HFCs) and All-India Financial Institutions whenever they use a digital channel, whether their own or that of an LSP. “Digital lending,” “DLA” (digital-lending app), “LSP” and “DLG” now carry harmonized definitions, while a new category, multi-lender LSP arrangements, brings aggregator platforms explicitly inside the supervisory net. The terminology of ‘Digital Lending Apps/Platforms (DLAs)’ has been provided an exhaustive definition covering under its ambit all such mobile and/or web based applications with user interface facilitating digital lending services. Furthermore, Lending Service Provider (LSP) covers under its ambit an agent of RE as well, thereby furthering the scope of accountability and applicability.  The inclusive definitions are well received by the industry stakeholders, minimizing the scope of interpretation and subsequent confusion. Stricter Due Diligence of Lending Service Providers (LSPs):  Before outsourcing any part of the credit life-cycle, regulated entities (REs) must maintain a live register of all LSPs, assess each provider’s technical strength, data-protection posture and past conduct, and repeat the fit-and-proper test annually. Contracts must spell out roles, recovery conduct and audit rights; the RE remains “fully responsible and liable” for every act of its agent. The directions have further explicitly laid down that any such outsourcing agreement executed between RE with and LSP shall not immune the RE of its statutory and regulatory duties. In case where LSP has agreements with multiple RE’s for digital lending, LSP has to provide a digital view of the loan offers matching the borrower’s request, further the details of unmatched lenders shall also be disclosed. A consistent approach for similarly placed borrowers shall also be complied with and any such mechanism adopted shall be properly documented to ensure fairness and transparency. Any such usage of dark patterns/deceptive measures to misguide and mislead borrowers into opting of a particular loan offer is strictly prohibited. However, data depicting ranks of loan offers based on pre-disclosed metric available on public platform shall not be construed as promotion of a particular product. Customer-Protection Upgrades and Transparency: Borrowers receive a digitally signed Key Fact Statement showing the Annual Percentage Rate, all fees and a minimum cooling-off window (one day for very short loans, three days for tenors above a week) during which they may exit by paying only proportionate interest and a disclosed processing fee. Disbursal must flow straight to the borrower’s account and repayments straight back to the RE, blocking any LSP pass-through except for recovery of delinquent loans. Nodal grievance officers of both RE and LSP must be named on every DLA, with links to RBI’s Central Management System (CMS)  and Sachet portals. Further, in case of loan defaults, the borrower must be apprised in advance in case any recovery agent is authorized to approach the borrower in advance through email/SMS. Additionally, the borrower shall be provided with an opportunity to exit the digital loan by ensuing the payment to the principal and the proportionate Annual Percentage Range (APR) without any penalty during an initial cooling off period, as prescribed in the loan policy. However, even if the customer is willing to exit during the cooling off period, on –time processing fee may be retained by the RE subject to the fact that the same must be disclosed in KFS. Technology and Data Requirement: The directions have laid down the mandatory procedure of seeking consent from the borrowers before collecting any data by their DLA/LSP, however further recommending to desist from seeking any mobile phone resources such as media/contact list/call logs. Further, the borrower shall be well apprised of the purpose before obtaining their consent and in case of subsequent dissemination of personal information shall be subject to borrower’s explicit consent again. The RE is further mandated to ensure that LSP engaged with them do not indulge in storage of any data except for the basic minimal data. Any usage/storage of biometrics shall be done in accordance of the applicable statutory guidelines. The directions have further made it mandatory for the RE and LSP’s to have a comprehensive privacy policy and details of any third party employed to collect personal information through DLA to be disclosed in the policy and that such policy shall be made publicly available on the website of RE and LSP to ensure informed consent, accountability and transparency. Reporting of Credit Information and DLA’s:  In compliance with the Credit Information Companies (CIC) (Regulation) Act, 2005 and related rules and regulations, the RE is obligated to report it to CCI’s any such lending done through their DLA’s and DLA’s of LSP’s. Further, any such extension of the structured digital lending products by RE involving short term/unsecure/secured credits or deferred payments, needs to be reported to CCI’s too by the RE. One of the most significant and largely hailed provision is that of the mandate imposed upon the RE to ensure reporting of all DLAs deployed/ joined by them on the Centralized Information Management System (CIMS) portal of RBI in the requisite format provide[1]. The said information needs to be updated from time to time and further the Chief Compliance Officer of the RE/ other designated official by the Board of RE shall certify that the data submitted on the CIMS portal is correct. Further, the RBI shall not be responsible for verifying or validating the date submitted on CIMS, and any such concerns or grievances concerning DLA’s shall be dealt with by the RE directly. It is further clarified that any such inclusion of third party DLA’s deployed by RE as a part of such reporting, shall not be construed by the DLAs /entity that it’s conferring any registration, authorization or endorsement by the RBI.  These provisions have amplified the extent of liability and accountability that falls on the RE and its related entities with a larger objective of securing the borrowers interest and trust. Loss sharing arrangement in case of default: Through the said directions , it has been further explicitly clarified that RE can enter into DLG arrangements only with a LSP/other RE engaged as LSP and that such LSP providing DLG shall be incorporated as   a Company under the Companies Act. In addition to the RE-LSP arrangement enumerated the said directions, the accountability is fastened upon the RE to conduct a through due-diligence concerning DLG provider, such as eligibility criteria of DLG provider, nature and extent of DLG cover, process of monitoring and reviewing the DLG arrangement among others. The directions further specifies the restrictions imposed on DLG arrangements, structure of DLG arrangements, forms of DLG, treatment of DLG for regulatory capital and disclosure requirements, wherein the RE has to ensure the compliance with the said directions. Effective Dates and Compliance Window:  All provisions except two took effect immediately on 8 May. The DLA directory requirement (para 17 on Reporting of DLAs to RBI) activates 15 June 2025, and the multi-lender rules (para 6 on RE-LSP arrangements involving multiple lenders) activate 1 November 2025. REs therefore have a six-month runway to cleanse outsourcing contracts, remodel systems to generate uniform KFS/APR disclosures and restructure any DLG that breaches the new cap. Summary of Key Features: a. The ambit and applicability of these directions have been diversified, fastening its applicability on all such regulated entities involved in the process of digital lending, to ensure the ethics and values governing the digital lending landscape are upheld in letter and spirit. b. The accountability on RE has been amplified wherein any such subsequent contractual agreements involved in the digital lending process shall be backed by through due diligence, compliance of statutory and regulatory standards and consistent monitoring of loan portfolios. c. The transparency aspect has been further widened wherein the borrowers shall have access to exclusive Key Fact Statement (KFS) ensuring clear loan terms, disclosures and repayment obligations. d. The cooling off period further upholds the borrower’s right to exit the loan without any penalties subject to clear disclosures and one-time processing fee, if applicable. e. The collection of any necessary data collected from borrowers are in  strict  compliance of the DPDP Act, 2023 wherein informed consent of the borrowers plays a key factor, however with an exclusive right to the borrower to revoke the consent. Any such data collected shall be stored within Indian Jurisdiction and in case of any external processing of data, the same shall be deleted within 24 hours. Hence, strict adherence to existing data protections laws and regulations have been imposed upon the RE’s and its related LSP’s. f. The direction of mandatory reporting to of all DLA’s to RBI in a time bound manner is a key feature, ensuring that no such third party DLA’s shall misrepresent their association/authorization from RBI and the accountability to ensure the same falls on RE. g. The present directions are in addition to the existing regulatory and statutory norms and RE shall ensure compliance of all such applicable laws. However, the former circulars/guidelines issued by RBI on Digital Lending stands repealed. h. The regulation of multi-lender arrangements with strict deterrence to any such attempt on part of LSP to deceit the borrowers is a hailed and welcomed step, ensuring borrower friendly digital lending landscape aligning with the principle of dei sunt clietes (customer is king). i. The concept of public directory of DLA’s ensuring every RE to upload related details on CIMS portal further assist consumers distinguish legitimate apps from frauds. Conclusion: By formalizing first-loss guarantees, increasing transparency requirements for loan aggregators, and granting borrowers the right to exit early, the Directions impose a manageable compliance burden in exchange for clearer risk distribution and enhanced reputational benefits. Fintech LSPs lacking strong capital backing or operational transparency may be driven toward consolidation, while well-regulated platforms are better positioned to scale within a structured and consumer-trust-centric framework. Overall, these Directions are a positive development, reinforcing the principle of caveat emptor and promoting greater economic stability and integrity in India’s digital lending ecosystem.   Authored by Mr. Jyoti Kumar Chaudhary, Senior Partner and Ms. Pranshu Singh, Senior Associate. [1] Such reporting on CIMS shall be completed by 15th June, 2025 in a time bound manner.

In a significant and far-reaching pronouncement, the Hon’ble Supreme Court of India has rendered a watershed judgment under the aegis of the Insolvency and Bankruptcy Code, 2016 (“IBC”), which is poised to operate as a binding judicial precedent in the regime of corporate insolvency resolution processes. In the matter of Kalyani Transco v. Bhushan Power & Steel Ltd., the Apex Court exercised its plenary jurisdiction to implement literal interpretation of statute and accordingly, set aside the Resolution Plan submitted by JSW Steel, which had earlier received approvals from both the Hon’ble National Company Law Tribunal (NCLT) and the Hon’ble National Company Law Appellate Tribunal (NCLAT), and direct for initiation of liquidation proceedings against Corporate Debtor. The Hon’ble Court, while delivering its landmark verdict, found the resolution process adopted by the Committee of Creditors (CoC) and the Resolution Professional to be tainted with procedural irregularities, non-compliance with the mandatory provisions of the IBC, and a blatant abuse of the process of law at every stage of the Corporate Insolvency Resolution Proceedings (CIRP). The judicial scrutiny extended by the Supreme Court in this matter exposes critical lapses, reinforces the sanctity of statutory compliance under the IBC regime, and sets forth a cautionary framework for all stakeholders involved in the resolution process including Resolution Professionals, CoC, Adjudicating Authorities, as well as Appellate Authority. This judgment is not merely corrective but also reformative, providing much-needed jurisprudential clarity on the scope and limits of discretion vested in the CoC and the contours of judicial oversight under the IBC. The key issues deliberated by the Hon’ble Supreme Court in the instant case are highlighted as follows. Strict adherence to the timeline stipulated under Section 12 of the IBC: The Hon’ble Supreme Court has firmly reiterated that one of the primary objectives underlying the enactment of the IBC is the completion of the CIRP process within a strict timeframe. This legislative intent is expressly codified under Section 12 of the IBC, which stipulates a mandatory limit of 330 days for the conclusion of the CIRP, inclusive of any extensions granted and the time consumed in legal proceedings. The Supreme Court reiterated that the said provision is of a mandatory nature and does not permit indefinite or repeated extensions, so as to avoid any protracted or dilatory insolvency proceedings. The Hon’ble Supreme Court further cautioned that where the CIRP cannot be completed within the statutory timeframe, and if further delay threatens to frustrate the objectives of the Code, then the Corporate Debtor ought to be directed towards liquidation. The Code thus mandates a swift, structured, and outcome-oriented insolvency framework, wherein delay is treated as anathema to the resolution process. Mandatory requirement under Section 29 A of IBC The Apex Court has categorically held that there exists a statutory obligation upon the Resolution Applicant to make full and proper disclosure regarding their eligibility under Section 29A of the IBC. This obligation is not merely procedural but goes to the root of the insolvency resolution process, as ineligible applicants are barred from participating in the CIRP process. In terms of Section 30(1) of the IBC read with Regulation 39(1) of the CIRP Regulations, 2016, it is mandatory for every Resolution Applicant to submit, along with the Resolution Plan, an affidavit affirming compliance and eligibility under Section 29A. Thereafter, Section 30(2) casts a legal obligation upon the Resolution Professional (RP) to verify the eligibility of the Resolution Applicant and ensure that the Resolution Plan is in compliance with the provisions of the IBC and other applicable laws before it is placed before the CoC for consideration. Furthermore, under Regulation 39(4) of the CIRP Regulations, when the approved Resolution Plan is submitted before the Adjudicating Authority, the Resolution Professional is duty-bound to file a compliance certificate confirming that the plan satisfies all requirements under the Code and the CIRP Regulations. The Apex Court has emphasized that the question of eligibility or ineligibility under Section 29A being foundational in nature, it is incumbent upon the Resolution Professional to exercise independent scrutiny and verification of the affidavit filed by the Resolution Applicant. Failure on the part of the Resolution Professional to discharge this critical function may result in ineligible persons gaining entry into the CIRP, thereby compromising the integrity, transparency, and legality of the entire resolution process. Resolution Plan must be unconditional and enforceable post its approval: The Apex Court has unequivocally held that once a Resolution Plan is approved by the Adjudicating Authority, such a plan must be unconditional, legally binding, and capable of immediate enforcement. The Resolution Plan, upon approval by the NCLT, acquires the force of law and binds all stakeholders, including the corporate debtor, creditors, and the Successful Resolution Applicant. It is held that any Resolution Plan that remains contingent upon future events such as receipt of statutory approvals, changes in law, or prospective exemptions ought to be treated as inherently defective. It was further clarified that permitting such conditional plans would undermine the certainty and finality envisaged under the IBC, and potentially derail the objective of time-bound insolvency resolution. The Court held that although the IBC does not explicitly codify the mechanism for implementation of an approved Resolution Plan, neither the Adjudicating Authority nor Appellate Tribunal should extend excessive leeway to the Successful Resolution Applicant for implementation of approved Resolution Plan. The Court emphasized that allowing resolution applicants to act in disregard of the approved Plan would amount to frustrating the legislative intent of the IBC, which is predicated on speed, finality, and revival of the corporate debtor. Thus, strict adherence to the implementation timeline and obligations under the Plan is imperative to uphold the integrity and sanctity of the insolvency process. Judicial Scrutiny of Commercial Wisdom of CoC: The Hon’ble Supreme Court has clearly held that the CoC, while exercising its commercial wisdom under the IBC, is required to act within the framework of statutory obligations and with due diligence. The CoC must ensure that its decision is based on the commercial interest of reviving the Corporate Debtor and achieving the objective of value maximization of its assets/value. It is also obligated to strictly adhere to the timeline of 330 days prescribed under Section 12 of the Code for the completion of the CIRP. Additionally, the CoC must verify that the Resolution Applicant is eligible in terms of the statutory requirements and that the resolution plan is feasible, viable, and contains proper provisions for its implementation. It must also ensure that the Resolution Applicant has the capacity to implement the plan within a time-bound manner. The Court held that if such mandatory requirements are not complied with and the CoC nonetheless approves such a resolution plan, it cannot be said that the CoC has rightly exercised its commercial wisdom. In such cases, the decision of the CoC is open to judicial scrutiny. Scope of the word “Any Person Aggrieved” as provided under Section 61 of IBC: The Hon’ble Supreme Court, while interpreting the expression “any person aggrieved” under Section 61 of the IBC, has held that the said expression is not to be construed in a restrictive manner so as to include only those parties who were directly before the Adjudicating Authority, i.e., the NCLT or NCLAT. Rather, once the CIRP is triggered, the proceedings assume the character of proceedings in rem, thereby extending their impact to a broader class of stakeholders beyond the individual applicant or the corporate debtor. In this context, the Hon’ble Court has elucidated that the CIRP proceedings are inherently collective in nature, encompassing all financial and operational creditors, as well as former directors and officers of the corporate debtor. Therefore, the phrase “any person aggrieved” includes all those individuals or entities who have sustained a direct legal injury, or whose rights or interests have been materially prejudiced by the order under challenge. Additionally, the Apex Court underscored the significance of Section 61(3) of the IBC, which delineates the specific and narrow grounds on which an appeal can be preferred before the NCLAT against an order of the NCLT approving a resolution plan. In this regard, the Court reaffirmed that an appeal under this provision shall lie only upon showing that the resolution plan sanctioned by the NCLT is either in contravention of the provisions of the IBC or its allied regulations, or that the process of approval has not adhered to the due procedure established under law. Powers of Adjudicating Authority of Judicial Review over the decision of Statutory Authority under PMLA: The Apex Court has unequivocally held that NCLT and NCLAT are constituted under Sections 408 and 410 of the Companies Act, 2013, and derive their powers under the provisions of IBC. Pertinently, NCLT exercises powers under Sections 31 and 60 of the IBC, whereas the NCLAT is confined to the appellate jurisdiction conferred under Section 61 of the IBC. It has been categorically held that neither the NCLT nor the NCLAT is vested with the jurisdiction to exercise the power of judicial review over administrative or executive actions undertaken by the Government or any Statutory Authority, especially in matters falling within the ambit of public law. The adjudicatory authority under the IBC is not competent to examine or adjudicate upon decisions taken under distinct statutory regimes such as the Prevention of Money Laundering Act, 2002 (PMLA), which are governed by their own institutional mechanisms and judicial hierarchies. Further, it has been reaffirmed that a Corporate Debtor cannot circumvent the statutory framework and approach the NCLT to challenge action of statutory authority, which fall outside the purview of the IBC, particularly those entrenched in the domain of public law. Any such grievance must be agitated before the appropriate constitutional forum vested with the power of judicial review, and not before the NCLT or NCLAT, which lack such jurisdiction by design and legislative intent. Conclusion: The present ruling of the Hon’ble Supreme Court has decisively reinforced the foundational principles of IBC, by upholding procedural discipline, statutory compliance, and institutional accountability in the conduct of the CIRP process. The judgment sends a clear message that procedural irregularities, non-compliance with mandatory legal provisions, and abuse of process whether by Resolution Applicants, Resolution Professionals, or the CoC will not be condoned under the guise of commercial wisdom or judicial deference. This authoritative pronouncement has highlighted the key legal positions including the non-negotiable timeline for CIRP under Section 12, the mandatory verification eligibility of under Section 29A, the requirement for unconditional and compliant Resolution Plans, and the limited jurisdiction of NCLT and NCLAT in matters falling outside the scope of the IBC. It has also reaffirmed that the expression “any person aggrieved” under Section 61 must be interpreted in a purposive and inclusive manner. This Judgment not only rectifies the flawed approval of the Resolution Plan in the case at hand but also sets binding parameters for all future insolvency proceedings. It affirms that while commercial wisdom of the CoC enjoys primacy, such discretion must be exercised within the boundaries of legality, reasonableness, and due process. As such, this verdict stands as a critical precedent ensuring that the objectives of the IBC are fulfilled through transparent, time-bound, and lawful resolution processes that preserve both the letter and spirit of the IBC.   Authored by Mr. Jyoti Kumar Chaudhary, Senior Partner and Mr. Jatin Chadda, Associate

“AI will be the best or worst thing ever for humanity.” - Elon Musk Just weeks ago, Geoffrey Hinton, widely regarded as the 'Godfather of Artificial Intelligence,' expressed his agreement with Elon Musk’s concerns and estimated that there is a 10 to 20 percent risk of AI eventually taking control away from humans. It is no surprise that Artificial Intelligence (AI) is advancing at a scorching pace and transforming the way businesses and industries operate is nothing short of phenomenal. Different organizations are deploying AI models in different ways to refine internal operations and upgrade offerings, sparking new waves of innovation. For instance, in transportation, AI is enabling self-driving vehicles, optimizing logistics and improving traffic management. In the manufacturing sector, AI is enhancing quality control, predictive maintenance and process automation. The retail sector is using AI for personalized marketing, inventory management and customer behavior analysis. In agriculture sector in India, AI is assisting with crop monitoring, precision farming and pest detection. In healthcare sector, AI is being utilized for diagnostics, imaging analysis, disease prediction and treatment recommendations. The National Cloud Initiative by National Informatics Center in India is providing different citizen centric services using AI technology. In the legal profession too, AI powered tools are assisting the lawyers in legal research, contract analysis and automating routine tasks, thereby boosting lawyers’ productivity. Even in the fast-paced world of M&A, AI-powered tools are being used by legal professionals to carry out due diligence of documents with unprecedented speed and accuracy. Supreme Court of India is using an AI tool ‘SUVAS’ to translate judgments from English language into different vernacular languages and as per an estimate of August 2024, around 36000 judgments have been translated into Hindi language. Other High Courts, such as Delhi High Court and Bombay High Court are also using AI tools to translate judgments into Hindi and Marathi, respectively. Yet, the expansive use of AI comes hand-in-hand with substantial responsibilities and emerging regulatory concerns. These AI tools gather information from online sources or existing literature on a specific topic and instantly generate content. The growing use of AI in content generation has sparked critical concerns around copyright, especially where such tools reproduce, adapt, or summarize copyrighted material without proper authorization. Must it be so? To address these challenges, it is imperative to assess whether India’s existing IP laws are adequately equipped to regulate the complexities introduced by generative AI models, or whether there is an urgent need for new, dedicated legislation to ensure that AI continues to serve as a catalyst for innovation rather than a threat to creators’ rights and interests. INTERPLAY BETWEEN AI AND INTELLECTUAL PROPERTY ​Arguably, in the absence of copyright laws in many countries specifically incorporating AI-focused provisions, courts around the world are increasingly witnessing a surge in cases where copyright owners allege that AI models infringe their rights, either by being trained on copyrighted works or by generating outputs that themselves constitute copyright infringement. As a result, courts are grappling with complex issues such as: (i) Who bears responsibility for infringement of third-party rights—is it the AI developer, the user who created the output, or the entity that trained the model? (ii) How can a balance be struck between protecting existing IP rights without hampering AI-driven innovation? and (iii) Whether AI-generated content can fall within the ambit of ‘fair use’ under copyright laws. Further, considering that both copyright and patent laws require the author or inventor to be a human being and that the work or invention must contain a sufficient degree of intellectual creativity or novelty, another critical question arises: whose copyright is actually being infringed when a generative AI tool creates entirely new content or works, whether in the form of images or text? While India has not yet introduced a dedicated regulatory framework that directly governs the development, deployment and utilization of AI models (akin to the EU Artificial Intelligence Act), the current laws pertaining to IP, data protection, IT and consumer protection are being considered to be adequate in regulating and managing certain aspects of AI technology. The central government is of the view that the existing copyright laws are well equipped to protect AI-created works. Additionally, the proposed Digital India Act is expected to address the gaps in the Information Technology Act, 2000 and provide a comprehensive legal framework that balances the need for innovation with principles of accountability. In India, this issue has come to the forefront with a recent legal dispute in the case of ANI Media Pvt. Ltd. vs. OpenAI OPCO LLC (CS (Comm) No. 1028/2024). ANI, a prominent Indian news agency, has filed a copyright infringement case against OpenAI, claiming that the OpenAI used its news content without authorization to train its large-language model (LLMs), ChatGPT. ANI contends that even though its news articles were publicly accessible online, OpenAI had no right to use them for commercial purposes or to generate responses from its proprietary content. OpenAI, however, has opposed these claims, arguing that its technology does not replicate specific articles but generates responses by analyzing linguistic patterns across publicly available datasets, therefore, not requiring prior permission. The case has garnered wider attention, with stakeholders from the music industry and book publishing sector also raising concerns about OpenAI’s use of copyrighted works in training its models. The outcome of the ANI Media case is expected to be a landmark ruling that could shape the future legal framework governing the development and deployment of AI in India. It may ultimately determine if current laws are sufficient to address AI related issues or if specific legislative reforms are needed to regulate the use of AI technologies more effectively. DATA PRIVACY Another pressing issue is the extent to which AI platforms are deploying safeguards when collecting, processing and utilizing personal data—an area that raises significant concerns under data privacy laws across various jurisdictions. The concerns include: (i) the use of compromised or unlawfully obtained data (such as information sourced from data breaches); (ii) unlawful sharing of personal data with third parties; (iii) cross-border data transfers that may contravene data protection regulations; (iv) processing personal data without obtaining the informed consent of the data principal; and (v) the failure to implement adequate legal and technical safeguards to ensure data confidentiality and security. In India, the Digital Personal Data Protection Act, 2023 (DPDP Act) aims to regulate the processing and storage of personal data, the manner of obtaining prior consent from data principals and the intended use of such data. However, the Act does not specifically address the challenges posed by AI. Justifiably, stakeholders developing AI platforms, in their capacity as data fiduciaries, ought to comply with the provisions of the DPDP Act and fulfil the legal obligations prescribed therein while processing personal data. The DPDP Act stipulates that a data fiduciary must provide a notice to the data principal, informing them of the nature of the personal data being collected, the purposes for which it will be processed, the procedure for withdrawal of consent, and other rights available to the data principal under the Act. Notably, while the DPDP Act introduces data localization requirements by restricting certain categories of personal data to India, it does not adequately address issues arising from the use of large-language models hosted or deployed abroad, thereby leaving significant gaps in cross-border data protection. No wonder, India’s data protection regime is still at a nascent stage and that there is currently no dedicated sectoral regulator or a comprehensive AI-specific legislation, numerous challenges are likely to emerge in tackling legal issues involving AI. EVOLVING GLOBAL FRAMEWORKS FOR REGULATION OF AI Several countries have taken proactive steps to regulate AI, offering valuable insights for India. Different international jurisdictions are adopting varied approaches to AI governance. For instance, rather than enacting specific legislation, countries such as Singapore, Japan, the United Kingdom, and Australia are focusing on providing industry guidance aligned with the OECD principles. In contrast, some jurisdictions are actively working towards formal legislation to regulate AI. For example, Canada, through its proposed Artificial Intelligence and Data Act, and the European Union, through its Artificial Intelligence Act, 2021, seek to regulate AI based on a risk-based classification system, ranging from minimal to unacceptable risk, with stringent compliance requirements for high-risk AI applications. Notably, China has implemented the world’s first regulations specifically targeting generative AI. In the United States, a risk-based approach is also being followed, with multiple regulatory frameworks under discussion to address various aspects of AI at both the federal and state levels. PARTING THOUGHTS As the global AI landscape continues to evolve, fueled by significant technological advancements and its growing adoption by both public and private sectors, the idea, rightly, is to establish a robust legal framework that addresses the legal, ethical, and security challenges posed by AI. It is time that law adapts swiftly to keep pace with rapid technological revolution driven by GenAI ensuring that while sufficient protection is afforded to copyrighted works, innovation is not unduly stifled. To this end, a carefully calibrated approach is essential—one that fosters the development of transparent and accountable AI practices while recognizing that the benefits of AI far outweigh the challenges it presents. By Mr. Sumit Jay Malhotra, Partner Designate and Ms. Nishi Rathore, Associate

Insolvency and Bankruptcy Code, 2016 (IBC), and the Prevention of Money Laundering Act, 2002 (PMLA), address different issues and were created for distinct purposes. PMLA was implemented to address the criminal act of legitimizing income or profits derived from illegal activities. It aims to curb money laundering, combat the diversion of funds into illegal activities, and confiscate property linked to money laundering. It also establishes penalties for offenders and sets up an adjudicating authority and appellate tribunal to handle related matters. IBC was enacted to simplify the existing legal framework and establish an effective system for debt recovery. It introduces a structured institutional setup and a two-step procedure for corporate insolvency. IBC aims to simplify and unify the legal framework for insolvency and bankruptcy, replacing complex processes with a more efficient mechanism for recovering dues from both corporate and non-corporate debtors. The Insolvency and Bankruptcy Board of India (IBBI) has played a vital role in raising awareness and regulating the process. The IBC's strength lies in its well-structured institutional framework, which includes the IBBI, insolvency professionals, information utilities, and adjudicatory bodies like the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT). It ensures timely, formal resolution of insolvency cases while promoting corporate governance. The Code outlines a two-step process for corporate debtors with a minimum default of Rs. 1,00,00,000: the Insolvency Resolution Process (Sections 6-32), where creditors assess the feasibility of business revival, and Liquidation (Sections 33-54), where assets are distributed among creditors if revival is not possible. Both the PMLA and IBC are specialized laws that include non-obstante clauses (PMLA under Section 71 and IBC under Section 238), which ensure that the provisions of these statutes take precedence over any other conflicting laws. In cases where there is a conflict between two statutes containing non-obstante clauses, the year of enactment of each statute is an important consideration as held by the Hon’ble Delhi High Court in Rajiv Chakraborty Resolution Professional of EIEL v. Directorate of Enforcement which clearly states that: “103. While there can be no doubt that where two special statutes incorporate non obstante clauses it is the later enactment which would ordinarily or normally prevail, the same cannot possibly be recognised as constituting the solitary principle of interpretation which would apply or an inviolable rule. It must be fundamentally borne in mind that a non obstante clause in any statute is looked at principally in case of an asserted irreconcilable conflict between statutes. However, that does not preclude courts from identifying or discerning the core objectives of the competing statutes. This would be manifest from the following pertinent observations that were made by the Supreme Court in Maruti Udyog Vs. Ram Lal- The said Act contains a non obstante clause. It is well settled that when both statutes containing non obstante clauses are special statutes, an endeavour should be made to give effect to both of them. In case of conflict, the later shall prevail…..” However, this rule isn't universally applicable, and other factors such as the purpose and intent of the statute must also be taken into account when resolving such conflicts.  Therefore, the resolution of conflicts between the provisions of the IBC and PMLA cannot be determined solely by the year in which these laws were introduced. Below are a few cases that highlight the conflict between the IBC and PMLA: NCLAT Mumbai, in the matter of Varrsana Ispat Limited Vs. Deputy Director, Directorate of Enforcement, observed that PMLA addresses the proceeds of crime and the offense of money laundering, which leads to the seizure of property linked to or involved in money laundering. As a result, it was concluded that Section 14 of the IBC does not apply to such cases. The NCLAT further pointed out that the punishment for money laundering, which includes a minimum of three years of rigorous imprisonment, applies to individuals such as former directors and shareholders of the corporate debtor, who cannot seek protection under Section 14 of the IBC. Additionally, the NCLAT noted that the attachments occurred before the initiation of the Corporate Insolvency Resolution Process (CIRP), meaning the Resolution Professional cannot benefit from Section 14. It was also highlighted that the PMLA and the IBC are distinct legal frameworks that do not override each other, leading to the rejection of the appeal. NCLAT Mumbai took a similar view in the matter of Rotomac Global Private Limited vs. Deputy Director, wherein the Hon’ble Tribunal observed that that the provisions of Section 14 of the IBC, which imposes a moratorium on legal actions against a corporate debtor during the Corporate Insolvency Resolution Process (CIRP), do not extend to proceedings under the PMLA. The Tribunal explained that the PMLA focuses on penal measures related to money laundering, while the IBC deals with corporate insolvency, meaning the two laws function in distinct areas. Additionally, the Tribunal clarified that penalties under the PMLA, including a minimum of three years imprisonment, apply to individuals such as former directors and shareholders of the corporate debtor, rather than the corporate entity itself. These individuals are not shielded by Section 14 of the IBC and cannot use the corporate insolvency process to evade or postpone punitive actions under the PMLA. Additionally, the Tribunal highlighted that the Directorate of Enforcement's attachments under the PMLA were made prior to the initiation of the CIRP, reinforcing the non-applicability of Section 14 to such proceedings. The appeal was ultimately dismissed, aligning with the judgment in Varrsana Ispat Limited, which affirmed that the provisions of the PMLA and IBC can proceed concurrently without one overriding the other. Although a different view has been taken by NCLAT Mumbai in the matter of The Directorate of Enforcement Vs Manoj Kumar Agarwal & Ors, wherein the Hon’ble Tribunal held: “42. In our view, there is no conflict between PMLA and IBC and even if a property has been attached in the PMLA which is 11 belonging to the Corporate Debtor, if CIRP is initiated, the property should become available to fulfil objects of IBC till a resolution takes place or sale of liquidation asset occurs in terms of Section 32A.” A similar view has been taken by the NCLAT New Delhi in Kiran Shah, RP of KSL and Industries Ltd. Vs. Enforcement Directorate, Kolkata, wherein the Hon’ble Tribunal held that the Adjudicating Authority (NCLT) lacks the jurisdiction to handle issues that fall under the authority of another body, such as those governed by the PMLA. Further in the matter of Nitin Jain, Liquidator, PSL Limited Vs Enforcement Directorate, the Hon’ble Delhi High Court held that: “102. Accordingly, and for all the aforesaid reasons, this writ petition shall stand allowed in the following terms. The Liquidator is held entitled in law to proceed further with the liquidation process in accordance with the provisions of the IBC. The respondent shall hereby stand restrained from taking any further action, coercive or otherwise, against the liquidation estate of the corporate debtor or the corpus gathered by the Liquidator in terms of the sale of liquidation assets as approved by the Adjudicating Authority under the IBC. The Court grants liberty to the petitioner to move the Adjudicating Authority for release of the amounts presently held in escrow in terms of the interim order passed in these proceedings.” Further, the Hon’ble Delhi High Court in Rajiv Chakraborty Resolution Professional of EIEL v. Directorate of Enforcement held that: “101…………..” The aforesaid discussion leads the Court to conclude that the provisional attachment of properties would in any case not violate the primary objectives of Section 14 of the IBC.’’ In conclusion, the issue at hand revolves around the potential conflict between the provisions of the PMLA and the IBC both of which have non-obstante clauses that could give rise to jurisdictional overlaps. PMLA focuses on the prevention of money laundering and the attachment of assets linked to criminal activities, while the IBC seeks to resolve insolvency and facilitate debt recovery. Courts have generally taken the stance that there is no inherent conflict between these laws. In cases where assets are attached under PMLA, the judiciary has upheld that such assets may still be available for resolution or liquidation under the IBC, provided the due process is followed. However, certain rulings, such as those from the Delhi High Court, have emphasized that the adjudicating authority under IBC cannot interfere with matters under the jurisdiction of PMLA authorities. Moving forward, a clearer framework or legislative clarification might be needed to streamline the interaction between these two laws, ensuring that both the objectives of combating money laundering and resolving insolvency are effectively achieved without undermining each other. Authors: Mr. Anil Tiwari, Partner and Ms. Nishi Kashyap, Associate.

With the changing world order and the economic uncertainties the corporates have been facing since the pandemic, there have been a significant rise in unconventional and idiosyncratic corporate restructuring scenarios all over the world for various reasons. Nowadays corporates are aligning towards a different kind of corporate restructuring, in contrast to the traditional ways of restructuring, like a ‘Private Limited’ Company purchase a ‘Public Limited’ Company; or a ‘Subsidiary Company’ acquires its ‘Holding Company’; or a small company in share capital acquiring a large share capital company. Recently Hon’ble National Company Law Tribunal (NCLT) has allowed amalgamation via Reverse Merger of a Quick-commerce company Kiranakart Technologies Private Limited a.k.a Zepto[i] with its Singapore based Holding Company Kiranakart Pte. Ltd, enabling the transfer of its domicile from Singapore to India. Further, Ashok Leyland is also planning to get its vehicle finance unit, Hinduja Leyland Finance (HLF)[ii] listed on the stock exchange via a reverse merger with NXTDigital, a listed media company of the Hinduja Group in order to unlock the true potential of the business. These unconventional types of arrangements are gaining more and more traction among the corporates, wherein such corporate restructurings not only provides for traditional benefits like economies of scale of production, reduction in cost, entrance to new markets, diversification, increase in market shares, etc but also opens new possibilities wherein the corporates can bypass the large web of compliances and regulations, can benefit themselves of opportunities of tax benefits, or can piggyback on the existing goodwill and reputation of the existing large company. Such eccentric and atypical form of corporate restructuring is known as ‘Reverse Merger’ or ‘Reverse Takeover’. Although ‘Reverse Merger’ or ‘Reverse Takeover’ is not defined anywhere in the statutes per se, it can be referred to as a type of acquisition where a financially sound, smaller private company acquires a sick public company by purchasing its majority shares in their attempt to bypass the costly, cumbersome, and complex process of “going public” or getting into the process of Initial Public Offers (IPOs). In this process, the healthy private company loses its identity, whereas the unfruitful public company retains its name and identity. In India, the first ever situation of the arrangement of reverse merger bid under section 394 of the Companies Act, 1956 was observed in the case of ‘Bihari Mills Limited ([1985]58COMPCAS6(GUJ)’. Hon’ble Gujarat High Court, while hearing the petition of amalgamation of Maneklal Harilal Spg. & Mfg. Co. Ltd. ("the transferor company") with the Bihari Mills Ltd. ("the transferee company"), observed that this is not a usual amalgamation of a sick unit which is non-viable with a healthy or prosperous unit, but precisely the reverse of it. Under such scheme, the entire undertaking of the transferor company is to be merged and vested in the transferee company. Subsequently, in the year 1994, one more case was observed where a financial sound ‘Godrej Soaps Ltd’ merged with its loss making subsidiary namely ‘Gujarat Godrej Innovative chemical’, and adopted its original name ‘Godrej Soaps Ltd’ after the said restructuring. As deliberated above, a ‘reverse merger’ as an atypical and unorthodox form of corporate structuring is alluring more and more corporates nowadays for following reasons: Quick access to Stock Market Reverse merger is in effect, offer a more cost-effective way to tap into these public market benefits than going for IPO route. There is a growing trend of companies scouring for listed entities admitted for corporate insolvency before the Hon’ble NCLT, with intentions to acquire them through reverse merger, with an intension to have access to security market in a cost effective and less cumbersome way. Recently, a defunct publicly listed company namely Precision Containeurs Ltd (“Target Company”) which deals in manufacturing of steel and plastic containers, reappeared in news when it was acquired by East India Drums & Barrels Manufacturing Company (“Acquirer Company”)[iii]  in order to avail the benefits of easy access of the security market. Tax Planning and Saving As per Section 72A of the Income Tax Act, 1961, it provides for carrying forward and setting off accumulated loss and unabsorbed depreciation allowance amalgamation or demerger, etc., although, this benefit is not exclusive for corporate restructuring through Reverse Merger, however financially sound small companies acquire loss making big companies in order to avail the benefit of losses and unabsorbed depreciation of the loss making company by setting off the same with the profits of the Transferee Company. Recently Hon’ble NCLT Chandigarh have overruled the objections raised by the Income tax Department that the proposed merger between the loss-making company, Panasonic India Private Limited (Transferor Company) with the profit-making company, Panasonic Life Solutions India Private Limited (Transferee Company)[iv] is designed with an intention for tax avoidance by claiming benefit of carry forward losses and unabsorbed depreciation as provided under the provisions of the Income Tax Act, 1961 and approved the merger of both the companies. Hon’ble NCLT while allowing the scheme of the merger have taken into consideration the commercial wisdom of the shareholders who have sanctioned the scheme and also considered the fact that all the terms and conditions will be satisfied by the Transferee Company while availing the benefits of Section 72A of the Income Tax Act, 1961. Benefits of a Public Company Once a small private company becomes public by way of reverse merger, it in turns avails the benefits of any public limited in a shorter period of time compared to a traditional Public Company, like access to capital market, better liquidity, transparency in the transfer of shares, Capital appreciation, possibility of growth, enhanced creditability etc. Generating Goodwill For the small private companies looking to grab eyeballs, it tends to capitalize on the past goodwill of now sick or loss-making public companies. By choosing the path of the Reverse Merger, the small companies try to revive the lost reputation of the now unlucrative companies rather than make efforts to build up their own reputation and credibility in the market. As a marketing tool, it is less costly and less tedious to resuscitate the name of a company which was once familiar to the public at large than to aggressively build its own credibility in the market.   REGULATIONS IN INDIA In the global scenario, corporate restructuring through Reverse Merger is seen as back door access to the security capital market by avoiding the lengthy and cumbersome process of an Initial Public Offer (IPO) and is perceived to be a quicker and cheaper method of “going public”. In the United States of America, Regulation 7050 of the Securities and Exchange Commission (SEC) covers cases where a private operating company acquires an equity interest in a SEC registered company. Whereas, in China, their China Securities Regulatory Commission (CSRC) have clearly defined ‘Reverse Merger’ in CSRC Order No. 73 of 2011 and in the subsequent regulations, the CSRC have raised the regulatory standards on Reverse Mergers to the same level as IPOs. In India, the term “Reverse Merger/Reverse Takeover” is nowhere mentioned specifically in the rules and regulations as issued by the Ministry of Corporate Affairs (MCA) or Securities and Exchange Board of India (SEBI) and is treated on similar lines with the other forms of Corporate Restructuring. However, there are few rules and regulations concerning corporate restructuring which may fall under the definition of the ‘Reverse Merger’. Details of the same are as follows: a. As per Section 232(3)(h) of the Companies Act, 2013[v], where the Transferor Company is a Listed Company and the Transferee Company is an Unlisted Company, the Transferee Company shall remain Unlisted Company until the process of corporate restructuring is completed. It further states that, if the shareholders of the Transferor Company decides to opt out of the Transferee Company, they shall be paid for the value of their shares in accordance with the valuation as carried out under corporate restructuring. b. The SEBI issued a Master Circular SEBI/HO/CFD/DIL1/CIR/P/2020/249 Dated 22.12.2020[vi], which provides for regulation for merger of a listed company or its division into an unlisted entity, the entire pre scheme share capital of the unlisted issuer seeking listing shall be locked in as follows: (i) Shares held by Promoters up to the extent of twenty percent (20%) of the post-Merger paid-up capital of the unlisted issuer, shall be locked-in for a period of three years from the date of listing of the shares of the unlisted issuer; (ii) The remaining shares shall be lock-in for a period of one year from the date of listing of the shares of the unlisted issuer; (iii) No additional lock-in shall be applicable if the post scheme shareholding pattern of the unlisted entity is exactly similar to the shareholding pattern of the listed entity. c. More recently, the MCA brought amendments in the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024[vii] in September 2024. Wherein rule 25A was amended to include that the Transferor Foreign Company incorporated outside India being a holding company and the Transferee Indian Company being a wholly owned subsidiary company incorporated in India, enter into merger or amalgamation, – (i) Both the companies shall obtain the prior approval of the Reserve Bank of India(RBI); (ii) The transferee Indian company shall comply with the provisions of section 233; (iii) The application shall be made by the transferee Indian company to the Central Government under sect ion the Act and provisions of rule 25 shall apply to such application; and (iv) The declaration referred to in sub-rule (4) shall be made at the stage of making application under section 233 of the Act. CONCLUSION Despite the upsurge and growing inclination of new startups and reasonably big unlisted companies for choosing this mechanism for going public in a time-saving manner by bypassing the compliances under the Companies Act, 2013, SEBI Act, 1992, Securities Contract (Regulation) Act, 1956 and Issue of Capital and Disclosure (Requirements) Regulations, 2018, the Central Government and the regulatory authorities are yet to frame proper laws and regulation in this respect. Although as mentioned above, there are few compliances specially for ‘Reverse Merger’ kind of corporate restructuring like getting approval from RBI for cross border transactions or putting restrictions on the usage of share capital after merger of a listed company with an unlisted company. However, these compliances are far few and between and these provisions are not as cohesive and harmonized as the rules and regulations as developed by the larger economies countries like the USA or China. The regulatory authorities need to study the acclivity towards the ‘Reverse Merger’ kind of corporate restructuring and it is an opportune moment to frame rules and regulation specifically for this kind of corporate restructuring. Based on the trends and analyzing the reasons for the paradigm shift towards corporate opting for ‘Reverse Merger’, the Central Government may either bring these compliances at par with the compliances as specified for raising money through an IPO by Unlisted Companies or may relax the regulations to provide for a cohesive alternate route for new-startups and unlisted companies in their efforts to go public in a timely fashion. Authored by: Ashutosh Das, Sr. Partner Aeshwarya Sisodia, Sr. Associate Research: Kriti Arora, Intern, 4th year, Symbiosis Law School, Pune Footnotes [i] Article in CNBC18. Click Here [ii] India Today Article. Click Here [iii] Article. Click Here [iv] Panasonic India Private Limited and Panasonic Life Solutions India Private Limited. CP(CAA) No. 8/Chd/Hry/2021. Click Here [v] Section 232(3)(h) of the Companies Act, 2013. [vi] Master Circular SEBI/HO/CFD/DIL1/CIR/P/2020/249 Dated 22.12.2020. Click Here [vii] Gazetted Notification bearing No. G.S.R 555 (E) dated 09.09.2024. Click Here

Introduction In the 1990s, India’s banking sector witnessed a notable rise in Non-Performing Assets (NPAs) due to factors like economic slowdown, liberalization, and new lending practices.To address the increasing NPAs, the Indian government, following the Narasimham Committee II's recommendations, introduced the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (“SARFAESI”) Act, 2002. The said act facilitated the creation of Asset Reconstruction Companies (ARCs) in India. ARCs are specialized financial institutions set up to acquire and manage the non-performing assets of banks and financial institutions, and they were established in India in 2003 under the SARFAESI Act, 2002. With the intention of better value realization and to improve the efficiency of ARCs, the Reserve Bank of India (RBI) in terms of the recommendation given by Sudarshan Sen committee, issued the regulatory framework titled “Review of Regulatory Framework for Asset Reconstruction Companies (ARCs)” RBI/2022-23-128 on October 11, 2022. Through the said framework, RBI allowed the ARCs to be resolution applicant entities under the Insolvency and Bankruptcy Code, 2016 (“IBC”). The said framework marked as the revolutionary step in terms of the asset valuation of the Corporate debtor as it focused on enabling the ARC to function in a “more transparent and efficient manner”. While the primary focus of Asset Reconstruction Companies (ARCs) has traditionally been on recovering bad debts, industry experts now anticipate a more proactive role for them. As the sector grows, ARCs are expected to take on a crucial role in reviving struggling companies at an early stage, which could significantly benefit India’s economy. This shift towards timely intervention will require regulatory support. The present article discusses the interplay between the new RBI Guidelines of 2024 and the evolving role of ARCs Significance of ARCs in the resolution process As forecasted, ARCs played vital role in the resolution process than acting merely as the recovery agent. ARCs brought specialized expertise in asset management and recovery. Unlike traditional banks, ARCs employed professionals with experience in turnaround strategies, legal frameworks, and sector-specific knowledge. This expertise enabled them to devise innovative resolution strategies, negotiate with stakeholders, and maximize recovery values. The role of ARCs proved to be indispensable in ensuring that the distressed assets are efficiently managed and productive resources are optimally utilized, ultimately contributed to overall economic growth. Following are the key advantages of including the ARCs as resolution applicants under IBC: ARCs possess in-depth expertise in managing and resolving distressed assets, thus making it the best source for assets realization. Due to high number of NOF, ARCs have the ability to customize resolution plans specific to the needs of each case, enhancing the likelihood of achieving coherent and mutually beneficial outcomes. The ARCs, being are large firms are well equipped with the management which covers every aspect of the resolution process, thus their involvement ensures higher degree of governance in the resolution process. New role of ARCs ARC have primarily played a reactive role, focusing on recovering assets from non-performing assets (NPAs). With nearly 30 licensed ARCs currently operating in the country, this sector has seen significant growth since the Reserve Bank of India first introduced this licensing category. Now with the change in sector, it is expected that the ARCs play more proactive role in early detection of the distressed assets. At present, IBC only applies when businesses are struggling severely. However, with the evolving role of ARCs, the expectation is that they will intervene much earlier to prevent companies from reaching this critical stage. Consequently, in general parlance, ARCs comes into play when the assets of the company are termed as NPAs. While the model was satisfactory when it was first proposed, today ARCs can offer much more than simply reviving bad loans. With the proper setup, ARCs can gain much more by early identification of the assets from turning bad and subsequent repair them for maximum value. To prevent Companies from slipping into the vicious cycle of bad debts and loans, ARCs can use indicators and flags data to show lack of innovation, customer satisfactions, continue demands, future sustainability of the products etc as the early warning signs. By analyzing these warning signs and coordinating effectively with the bank, ARCs can play a more proactive role within the IBC framework. Regulatory Framework and Future Directions As the way to protect the interest stakeholders of the insolvency proceedings and to further strengthen and streamline the role of ARCs, RBI later in 2024 issued the Mater Direction on Asset Reconstruction Companies, 2024 (“Directions 2024”) RBI/DOR/2024-25/116. It is pertinent to mention that while the previous the RBI framework focused on the internal governance of the ARCs, this time the directions were elaborative and covered several aspects of the ARCs workings. Following are the Checks and Balances provision mentioned in the Directions, 2024 to prevent Collusion. Regulatory Oversight and Registration Requirements  Stringent Registration Norms: The RBI requires ARCs to obtain a certificate of registration before commencing operations. This involves a thorough vetting process, including an assessment of the promoters’ background, the company’s financial strength, and its proposed business plan. Continuous Monitoring: ARCs are subject to continuous monitoring and periodic inspections by the RBI to ensure compliance with regulatory norms and to detect any signs of malpractices, including collusion. Governance and Management Controls Fit and Proper Criteria: The RBI mandates that the directors and key management personnel of ARCs must meet the ‘fit and proper’ criteria, which includes assessments of their integrity, experience, competence, and financial soundness. Independent Directors: ARCs are required to have a certain number of independent directors on their boards to ensure impartiality and to provide an external perspective on the company's operations and decision-making processes. Valuation and Acquisition Practices Fair Valuation of Assets: The RBI has set guidelines for the fair valuation of NPAs to ensure that ARCs do not overpay or underpay for these assets, which could be a sign of collusion. As per the Directions, the valuation process should be uniform and is done in a scientific and objective manner. Independent Valuation: The Directions provides provision for engaging independent valuers to assess the value of NPAs before acquisition. This prevents any manipulation of asset prices that could facilitate collusion. Conflict of Interest Policies Code of Conduct: ARCs must adhere to a strict code of conduct that prohibits any activities that could lead to conflicts of interest, including collusion with corporate debtors. Whistleblower Mechanism: A robust whistleblower mechanism should be in place to allow employees and stakeholders to report any suspicious activities or potential collusion without fear of retaliation. Regulatory Penalties and Sanctions Penalties for Non-compliance: The RBI has the authority to impose penalties on ARCs for non-compliance with regulatory norms, including instances of collusion with corporate debtors. Revocation of Registration: In severe cases of malpractice, including proven collusion, the RBI can revoke the registration of an ARC, effectively ceasing its operations. Disclosure Requirements and Transparency Transparency in operations is critical for ARCs to maintain trust with stakeholders and regulators. Key disclosure requirements include: Annual Reports: ARCs must publish detailed annual reports that include financial statements, details of asset acquisitions, recoveries, and resolution strategies. Periodic Filings: Regular filings with the RBI, including quarterly and half-yearly reports on operational metrics and financial performance  Conclusion The inclusion of ARCs as part of the resolution process has undoubtedly contributed to quicker and more effective company resolutions. By acting as resolution applicants, ARCs bring their specialized expertise in asset management, which helps in maximizing the recovery of distressed assets and improving governance during the resolution process. This shift from a reactive to a more proactive role is expected to significantly enhance the overall effectiveness of the insolvency framework in India. As ARCs begin to intervene earlier, their ability to identify potential distress signs before assets turn non-performing can help prevent companies from entering the vicious cycle of bad debts and insolvency proceedings. This proactive approach can not only improve asset recovery but also reduce the economic burden of distressed businesses on the broader economy. However, the success of this initiative will largely depend on the pecific policies and operational frameworks that each ARC establishes, particularly with regard to sectoral exposure limits and their ability to manage early-stage distressed assets. The regulatory changes outlined in the RBI's Directions 2024 are a crucial factor in determining how effectively ARCs can perform their new role. These guidelines, which include stringent registration norms, transparency in operations, and conflict-of-interest policies, will ensure that ARCs operate in a sound and ethical manner, safeguarding the interests of all stakeholders involved in the resolution process. Looking forward, it is essential for ARCs to effectively implement these regulatory directions, focusing not only on financial outcomes but also on ensuring fair, transparent, and efficient resolution procedures. If these guidelines are adhered to, ARCs can play a transformative role in India's insolvency landscape, promoting faster economic recovery and enabling a healthier business environment for the future. References The Securitisation and Reconstruction of Financial Assets And Enforcement Of Security Interest Act, 2002 Insolvency and Bankruptcy Code, 2016 RBI/2022-23/128 DoR.SIG.FIN.REC.75/26.03.001/2022-23. RBI/DOR/2024-25/116 DoR.FIN.REC.16/26.03.001/2024-25. Yash Gupta, Asset Reconstruction Company- A way ahead as a Resolution Applicant under IBC, IBC Laws. Report of the Committee to Review the Working of Asset Reconstruction Companies. Abhizer Diwanji and Srinath Sridharan, Asset reconstruction companies should change their orientation.

Supreme Court In a recent Judicial pronouncement the Supreme Court came up with the decision supporting the implementation of an existing framework for early detection of financial stress of enterprises, particularly in relation to Macro, Small and Micro Enterprises (MSME) sector, before the Bankers/Lenders could to take up steps for classifying their debt as Non-Performing Asset (NPA) in order to assume coercive measures under SARFAESI Act, for recovery of dues. In fact, non-adherence to such framework was held as violative on the part of Lender/Banker, with the result that any steps taken for NPA declaration or resorting to SARFAESI Act measures, to be running the risk of being declared as null and void. The Supreme Court was called upon to decide the challenge to Bombay High Court judgment passed in exercise of its Writ Jurisdiction, wherein the action of Banker/Lender in declaring the Account of an MSME as NPA and subsequent actions of invoking the measures under SARFAESI Act, was impugned for not adhering to the framework of restructuring process contemplated in the Notification dated 29.05.2015 called, “Framework for Revival and Rehabilitation of MSMEs” (Notification), issued by Ministry of MSME, Govt. of India under MSMED Act. The Hon’ble High Court rejected the Writ holding that Bankers/Lenders are not obliged to adopt the restructuring process contemplated in the Notification on their own, when the MSME had not submitted any application for the same. The Supreme Court however setting aside the decision of the Hon’ble High Court of Bombay, noted that Section 9 of the MSMED Act, empowers Central Government to issue Notification prescribing measures for facilitating promotion, development and enhancing competitiveness of MSMEs and in that regard specify programmes, guidelines or instructions. It was further noted that Section 10 of the MSMED Act, requires implementation Policies/Practices ensuring timely and smooth flow of credit facilities to MSMEs in consonance with Guidelines/instructions of RBI, and minimize the incidence of their sickness and enhance their competitiveness. It was further noted that in support of the Notification of 29.05.2015, the RBI, in exercise of its powers under Section 21 read with Section 35A of Banking Regulation Act, issued Master Direction, called, the “Reserve Bank of India [Lending to Micro, Small and Medium Enterprises (MSME) Sector] Directions, 2016,” (Master Directions) vide the Notification dated 21st July, 2016, thereby advising all scheduled commercial banks to follow the guidelines/instructions pertaining to MSMEs. It was further noted from the scheme/arrangement in the Notification, that it required Bankers/Lenders to identify incipient stress in the account of the concerned enterprise registered as MSME by creating three sub categories as set out in the Notification, in order to explore various options to resolve the stress in the account, in terms of the said Notification. It was further noted, that the Bankers/Lenders stood obliged to implement the measures identified in the Notification, before proceeding to classify the account of the concerned MSME as NPA. It was also noted from the Scheme of the Notification that apart from the Bankers/Lenders adhering to the measures set out in the Notification, the borrower was also entitled to voluntarily initiate the process set out in the Notification by making an application to that effect. Keeping in view the scheme of the Notification read with Master Directions, the Supreme Court noticed that no doubt by virtue of Section 35 the SARFAESI Act shall prevail notwithstanding anything inconsistent in any other law in force; however, the provisions of SARFAESI Act gets triggered consequent to classification of the concerned account as NPA upon default in repayment of secured debt. It was observed that the Banks/Lenders are required to take up steps under the Notification, towards identification of incipient stress in the loan account and according categorization, on the basis of authenticated and verifiable material as furnished by the concerned MSME to establish that the loan account is of a MSME. It was accordingly, held that the implementation of the scheme prescribed in the Notification becomes very crucial, before any loan account of MSME can be classified as NPA. Therefore, until the exhaustion of measures under the Notificfation, the accounts of MSME cannot be classified as NPA, without which the measures under SARFAESI Act cannot be triggered. Taking note of the above position, the Supreme Court negated the findings of High Court that Bankers/Lenders of MSMEs were not obligated to follow the measures prescribed under Notification on its own, until MSME applies for initiation of said measures. While observing that it was mandatory for the Bankers/Lenders to follow the scheme prescribed in the Notification on its own, the Supreme Cour found it equally incumbent upon the concerned MSME to remain vigilant and follow the process set out in the framework of Notification. On that count, the Supreme Court cautioned that in case the MSME remains negligent and allows the process of enforcement of security under SARFAESI Act to get completed, such MSME could not be permitted to misuse process of Notification by taking a plea at belated stage. It is significant to highlight from the aforesaid that the Judgment of Supreme Court clearly weighs in favour of revival of an enterprise, before taking up of any coercive measures against it. In this backdrop, it is relevant to highlight that exactly the same objective can be traced with the scheme of the Insolvency and Bankruptcy Code, 2016 (IBC) as well. So far, eight years down the line from enforcement of IBC, the economic thought leaders and think tanks find tremendous reason to rejoice the successful implementation of IBC, while alluding such reasons to encouraging arithmetic figures of ‘debt resolution’ running into several lakhs of crores. However, the legislative objective of IBC towards ‘resolution of enterprises’ is yet to see a positive prospect, much less an encouraging number. In fact, the infrastructure for enterprise resolution is still struggling to settle and stabilize, and is dependent largely on ad-hoc measures, including interim finance support, for pulling on the sick enterprise as a going concern. The present Judgment of Supreme Court is a manifestation of legislative mandate towards ‘enterprise resolution’ (and not merely ‘debt resolution’), which need be implemented with support from an institutionalized infrastructure. It is high time that Policy framers and stakeholders join hands to implement an institutionalized infrastructure, to support the resolution measures of financially ailing enterprises, rather than leaving them on support of ad-hoc measures. Author: Mr. Jyoti K. Chaudhary

DARK PATTERNS India has one of the world's largest internet bases which makes it a crucial market for global online platforms.With the increasing online population, there is also an increase in online fraud and deceit against various customers in the form of dark patterns. Keeping the origin of Dark Patterns in mind, the Ministry of Consumer Affairs, Food and Public Distribution, Government of India have recently established a 17-member task force that could delve into and develop guidelines for consumer protection to address the issue of Dark Patterns. The Ministry had also taken inputs from the Advertising Standards Council of India (ASCI) and consulted with various stakeholders like E-Commerce companies on the issuance of the guidelines that could curb the increasing menace of the dark patterns in India. Accordingly, in the exercise of powers conferred under section 18 of the Consumer Protection Act, 2019, the Central Consumer Protection Authority (Ministry of Consumer Affairs) issued the “Guidelines for Prevention and Regulation of Dark Patterns, 2023”. According to these guidelines, "Dark Patterns" shall mean any practices or deceptive design patterns using UI/UX (user interface/user experience) interactions on any platform; designed to mislead or trick users into doing something they originally did not intend or want to do; by subverting or impairing the consumer autonomy, decision making or choice; amounting to misleading advertisement or unfair trade practice or violation of consumer rights.[1] The guidelines list the following dark patterns: False urgency: Falsely stating or implying the sense of urgency or scarcity to mislead a user/consumer into making an immediate purchase or taking immediate action. This leads to a purchase made by manipulating user decisions by showing false popularity of a product or more limited quantities of a product than they actually are. Basket sneaking: Additional items such as payments to charity, products, or services are added at the time of checkout without the consent of the user. For example, the automatic addition of travel insurance while purchasing flight or train tickets. Confirm shaming: Using a phrase, video, audio, or any such means that creates a sense of fear, shame, or guilt in the mind of the user to manipulate them into continuing a particular service or buying a product. For example, organizations such as Ketto or adding a charity in the users' cart with the phrase “Charity is for the rich, I don’t care”. Forced action: Forcing a user to take an action that would require them to buy an additional good or service to buy the product or service originally intended by the user. Subscription trap: This kind of dark pattern includes making the cancellation of a subscription a very lengthy and complex procedure, hiding the cancellation option for a subscription, forcing a user to provide payment details to enable auto-debit for subscriptions, and making the instructions for cancellation confusing and ambiguous. Interface interference: Manipulates the user into making a decision favorable for the platform by obscuring the relevant, important information and highlighting only specific instructions. Bait and switch: Advertises a particular outcome based on users' actions but deceptively serves an alternative outcome. Drip pricing: Elements of prices are not revealed upfront or are revealed post confirmation of the purchase and a higher amount is charged than what was disclosed at the time of the checkout, advertising a product or service as free and not disclosing the other requirements or conditions attached to it or preventing a person from using a service already paid by him unless an additional purchase is made. Disguised advertisement: Masking advertisements or showing false advertisements. Nagging: An overload of requests, options, and interruptions are posed to the user. Trick Question: Deliberate use of confusing or vague language like confusing wording, double negatives, or other similar tricks, in order to misguide or misdirect a user from taking desired action or leading consumer to take a specific response or action. SaaS Billing : The process of generating and collecting payments from consumers on a recurring basis in a software as a service (SaaS) business model by exploiting positive acquisition loops in recurring subscriptions to get money from users as surreptitiously as possible. Rogue Malwares: Using a ransomware or scareware to mislead or trick user into believing there is a virus on their computer and aims to convince them to pay for a fake malware removal tool that actually installs malware on their computer. IMPLICATIONS OF THE EXISTING LAWS ON DATA PATTERNS The introduction of the draft guideline is a significant action for the protection of the interests of internet users however there has been an existing framework for prohibiting the dark patterns in the form of various legislation like the Consumer Protection Act 2019, Guidelines for Prevention of Misleading Advertisements 2022, the Digital Personal Data Protection Act 2023 (“DPDP”), etc. Although the DPDP Act, 2023 has been notified in the official Gazette of India on 11.08.2023, the date on which this Act will come into effect has yet to be notified. The existing legislation although does not specifically mention dark patterns, however, it offers protection against unfair trade practices and misleading advertisements by using similar tactics, particularly in the realm of Data Protection as well as Consumer rights. Some of the existing legislation are as follows- (A) Digital Personal Data Protection Act, 2023 The Digital Personal Data Protection Act, of 2023, unequivocally decrees that individuals provide their free and clear consent before their data is processed unless it is being used for one of the designated "legitimate uses." A notice outlining the purpose of processing the requested data and outlining the rights of the individual—among which is the ability to withdraw consent at any time—must be included with the request for consent. In addition, this Act stipulates that obtaining consent from a data fiduciary should not be more difficult than withdrawing consent. As a result, a Data Fiduciary may only use personal information for the purposes for which it was collected and cannot "hold hostage" an individual's consent or data. Within the provisions of the newly introduced guidelines, the businesses will have to audit their user interfaces, eliminate any dark patterns they may be employing, safeguard personal information, utilize it only for "legitimate purposes," and obtain users' agreement in clear language through explicit affirmative action. Keeping a balance between user privacy and data access for personalization may prove to be the most difficult task. Additionally, businesses will need to spend more money to make sure that their individualized marketing complies with the strict data protection guidelines set forth by the Act. (B) The Consumer Protection Act, 2019 According to the Consumer Protection Act, 2019 the ‘consumer rights’[2] include- the right to be protected against the marketing of goods, products, or services which are hazardous to life and property; the right to be informed about the quality, quantity, potency, purity, standard, and price of goods, products, or services, as the case may be, to protect the consumer against unfair trade practices; the right to be assured, wherever possible, access to a variety of goods, products, or services at competitive prices; the right to be heard and to be assured that consumer's interests will receive due consideration at appropriate fora; the right to seek redressal against unfair trade practices restrictive trade practices or unscrupulous exploitation of consumers; and (vi) the right to consumer awareness; Forcing or manipulating a consumer into making choices that are against their interest amounts to unfair trade practices as defined under section 47 of the Consumer Protection Act, 2019 For the purpose of regulating the cases concerning unfair trade practices, violation of the rights of the consumers and misleading advertisements, the Central Government formed the Central Consumer Protection Authority (“CCPA”). CCPA has been established as a regulatory body within the provisions of the Consumer Protection Act, 2019. This regulatory body protects the rights of the consumers and takes necessary steps to ensure enforcement and protection of consumer rights such as: Conducting inquiries and investigations into violations of consumer rights and unfair trade practices on receiving a Complaint or Suo moto. Upon investigation, if the CCPA is satisfied that the rights of the consumers have been infringed or amount to unfair trade practices, the authority can directly to pass an order for the removal of such product or discontinuation of the service. Granting compensation or reimbursement to the consumer for the price paid for the product or service. Section 88 of the Consumer Protection Act, 2019 imposes a penalty for non-compliance with the direction of the Central Authority with an imprisonment for a term which may extend up to 6 months or a fine extending up to 20 lakh rupees, or both. Section 89 of the Consumer Protection Act, 2019 punishes for false or misleading advertisement which is prejudicial to the interest of the consumers with imprisonment for terms up to 2 years and a fine extending up to ten lakh rupees and for every subsequent offense, imprisonment up to 5 years and a fine of up to fifty lakh rupees. (C) GUIDELINES FOR PREVENTION OF MISLEADING ADVERTISEMENTS AND ENDORSEMENTS FOR MISLEADING ADVERTISEMENTS, 2022[3] Section 21 of the Consumer Protection Act, 2019 sets forth requirements for "non-misleading and valid advertisements" and "bait advertisements," which draw customers by lowering the cost of a good or service. The Central Consumer Protection Agency released Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022. According to the Guidelines, advertisements cannot be referred to as "free" if the customer must pay for the packing or delivery, purchase another item at a higher cost to take advantage of the offer, or purchase a lesser quality or quantity in order to take advantage of the offer. (D) THE ADVERTISING STANDARDS COUNCIL OF INDIA (“ASCI”) GUIDELINES FOR ONLINE DECEPTIVE DESIGN PATTERNS IN ADVERTISING[4] Online Deceptive Design Patterns can also be described as 'dark patterns'. As stated hereinabove, these patterns refers to a wide range of practices in online user interfaces that manipulate customers into making choices that are not in their best interest. Chapter 1 of the ASCI code mandates ads to be honest and not abuse the trust and lack of expertise of the consumers. It should not be misleading in any way and there should be no ambiguity in the language of the advertisements. The ACSI guidelines are to be applied to all digital advertising platforms. It recognizes the 4 key dark patterns such as (i) Drip pricing, (ii) Bait and Switch, (iii) False urgency and (iv) Disguised Ads. IMPACT OF THESE GUIDELINES Who will be impacted? Sellers, advertisers, and all platforms that "systematically" offer goods and services in India will be subject to the Draft Guidelines. Interestingly, the Draft Guidelines apply not only to companies established in India but also to companies established abroad that sell goods or services to Indian nationals. What will be the impact? At the outset, the Ministry’s attempt to regulate the dark patterns should be appreciated, however, the introduction of these guidelines can impact various stakeholders as well as businesses operating in the global setup. The Dark Patterns can have an impact on the e-commerce industry as well as the fintech industry. The E-Commerce industry is constantly evolving and the introduction of these guidelines on dark patterns can pose a challenge. One of the significant impacts for such industries will be to amend their user interfaces and make them more consumer-friendly so that the menace of dark patterns can be controlled and regulated. However, the whole process can be costly as well as time-consuming which can discourage the budding e-commerce businesses as well as the existing businesses. It is significant to mention herein that Asia Internet Coalition (“AIC”) which represents tech giants such as Google, Apple, Amazon, and Twitter has categorically suggested that the introduction of such guidelines can deteriorate the growth of the country's digital economy and urged the Government of India to contemplate the existing self-regulatory framework as the primary measure to restrict the use of dark patterns. The industry group also said online platforms are already regulated under the various existing laws. The group stated that while online platforms in India qualify as online intermediaries and are regulated under the Information Technology Act 2000, e-commerce platforms are administered under the Consumer Protection Act 2019 rules. However, clause 6 of the Draft Guidelines specifically provides that the provisions contained in these guidelines shall be in addition to and not in derogation of the existing laws and regulations, hence the worries of AIC can be squarely covered. Nonetheless, the e-commerce or fintech industries can take the following steps to improve their practice and to be in line with the newly introduced guidelines on dark patterns: The businesses can create communication and systems that will respect the autonomy of the users and improve transparency which will enable the consumers to make well-informed choices; With the introduction of the guidelines, the Businesses can teach their Customers how to spot dark patterns. Industry standards for dark pattern-free user interfaces should be developed; To maintain compliance, businesses have to incorporate consent documentation or pop-up notifications on digital platforms; Businesses should provide thorough and personalized user experiences on digital platforms; Implementing encryption, multi-factor authentication, and regular security precautions which can also go a long way in improving the user interfaces; Businesses should also communicate their data privacy practices and attain explicit consent for the collection of the data; REDRESSAL MECHANISM FOR AFFECTED CONSUMERS The newly introduced guidelines do not provide any provisions for filing complaints against the dark patterns. However, the existing regulation such as the Consumer Protection Act 2019 and the DPDP Act 2023 provides the provision for regulating unfair trade practices by any organizations who are dealing in both online and offline interface. (i) Complaint under the Consumer Protection Act, 2019- Under Section 9(v) of the Consumer Protection Act, 2019, the consumer has the right to seek redressal against Unfair Trade Practices or restrictive trade practices. Consumers can file a complaint against unfair trade practices or misleading information and advertisements before the Consumer Commission as prescribed under the Consumer Protection Act, 2019. The provisions of the 2019 Act provide for the establishment of Consumer Commissions at various levels which enables the individual complainant or a group of complainants to approach these commissions and register their complaint against such unfair practices and misleading advertisements. As stated above, these Commissions can impose punishments for false or misleading advertisements within the scope of section 89 of the Consumer Protection Act, 2019. (ii) Complaint to Central Consumer Protection Authority- In case, a large set of consumers are being affected through practices such as violation of consumer rights such as unfair trade practices, or false and misleading advertisements, then such a complaint can be forwarded to the District Collector or the Commissioner of regional officer or the Central Authority. Moreover, under Section 21 of the Consumer Protection Act 2019, the Central Authority also has the power to issue penalties against false and misleading advertisements. (iii) Complaint under DPDP Act 2023- The DPDP Act 2023 provides that the consent given by the Data Principal shall be free, specific informed, unconditional, and with a clear affirmative action. The Data Fiduciary under the newly formed act should ensure that the data of the consumers is not breached and misused. The Data Principal under Section 27 of the Act has the right to approach the Data Protection Board and file a complaint in case the Data Principal feels that its data has been misused and breached by the Data Fiduciary. However, it is significant to mention that the Act has not come into effect yet. CONCLUSION Dark patterns are a form of misleading design that can harm consumers. Attentiveness of the different types of dark patterns and taking steps to protect the business and consumers can aid in reducing the risk by focusing on offering consumers the information and experience needed to make fully informed decisions. India has already geared in implementing the laws and procedures that can guide customers and people around the nation to not fall into the trap of dark patterns as well as a way to protect their data. Since the area is comparatively new, more jurisprudence will be required to ascertain whether the implementation of such guidelines is actually affecting the ease of doing business in India. Up until now, only the fields of marketing and advertising have been able to control the psychological and behavioral inclinations of their customers through online manipulation. The draft guidelines now aim to broaden the regulatory scope to address more consumer concerns. However, it remains to be seen how the draft guidelines will supplement the current situation without causing regulatory overlap and arbitrage, given that the DPDP Act and the forthcoming Digital India Act have the potential to protect users from dark patterns. Footnotes [1] https://www.mondaq.com/india/dodd-frank-consumer-protection-act/1379670/understanding-dark-patterns-guidelines-for-consumer-protection#:~:text=The%20term%20'Dark%20Patterns'%20has,by%20subverting%20or%20impairing%20the [2] https://www.indiacode.nic.in/bitstream/123456789/15256/1/a2019-35.pdf [3] https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/The%20Guidelines%20for%20Prevention%20and%20Regulation%20of%20Dark%20Patterns%2C%202023.pdf [4] https://www.ascionline.in/wp-content/uploads/2023/05/Guidelines-for-Online-Deceptive-Design-Patterns-in-Advertising.pdf

DARK PATTERNS India has one of the world's largest internet bases which makes it a crucial market for global online platforms.With the increasing online population, there is also an increase in online fraud and deceit against various customers in the form of dark patterns. Keeping the origin of Dark Patterns in mind, the Ministry of Consumer Affairs, Food and Public Distribution, Government of India have recently established a 17-member task force that could delve into and develop guidelines for consumer protection to address the issue of Dark Patterns. The Ministry had also taken inputs from the Advertising Standards Council of India (ASCI) and consulted with various stakeholders like E-Commerce companies on the issuance of the guidelines that could curb the increasing menace of the dark patterns in India. Accordingly, in the exercise of powers conferred under section 18 of the Consumer Protection Act, 2019, the Central Consumer Protection Authority (Ministry of Consumer Affairs) issued the “Guidelines for Prevention and Regulation of Dark Patterns, 2023”. According to these guidelines, "Dark Patterns" shall mean any practices or deceptive design patterns using UI/UX (user interface/user experience) interactions on any platform; designed to mislead or trick users into doing something they originally did not intend or want to do; by subverting or impairing the consumer autonomy, decision making or choice; amounting to misleading advertisement or unfair trade practice or violation of consumer rights.[1] The guidelines list the following dark patterns: False urgency: Falsely stating or implying the sense of urgency or scarcity to mislead a user/consumer into making an immediate purchase or taking immediate action. This leads to a purchase made by manipulating user decisions by showing false popularity of a product or more limited quantities of a product than they actually are. Basket sneaking: Additional items such as payments to charity, products, or services are added at the time of checkout without the consent of the user. For example, the automatic addition of travel insurance while purchasing flight or train tickets. Confirm shaming: Using a phrase, video, audio, or any such means that creates a sense of fear, shame, or guilt in the mind of the user to manipulate them into continuing a particular service or buying a product. For example, organizations such as Ketto or adding a charity in the users' cart with the phrase “Charity is for the rich, I don’t care”. Forced action: Forcing a user to take an action that would require them to buy an additional good or service to buy the product or service originally intended by the user. Subscription trap: This kind of dark pattern includes making the cancellation of a subscription a very lengthy and complex procedure, hiding the cancellation option for a subscription, forcing a user to provide payment details to enable auto-debit for subscriptions, and making the instructions for cancellation confusing and ambiguous. Interface interference: Manipulates the user into making a decision favorable for the platform by obscuring the relevant, important information and highlighting only specific instructions. Bait and switch: Advertises a particular outcome based on users' actions but deceptively serves an alternative outcome. Drip pricing: Elements of prices are not revealed upfront or are revealed post confirmation of the purchase and a higher amount is charged than what was disclosed at the time of the checkout, advertising a product or service as free and not disclosing the other requirements or conditions attached to it or preventing a person from using a service already paid by him unless an additional purchase is made. Disguised advertisement: Masking advertisements or showing false advertisements. Nagging: An overload of requests, options, and interruptions are posed to the user. Trick Question: Deliberate use of confusing or vague language like confusing wording, double negatives, or other similar tricks, in order to misguide or misdirect a user from taking desired action or leading consumer to take a specific response or action. SaaS Billing : The process of generating and collecting payments from consumers on a recurring basis in a software as a service (SaaS) business model by exploiting positive acquisition loops in recurring subscriptions to get money from users as surreptitiously as possible. Rogue Malwares: Using a ransomware or scareware to mislead or trick user into believing there is a virus on their computer and aims to convince them to pay for a fake malware removal tool that actually installs malware on their computer. IMPLICATIONS OF THE EXISTING LAWS ON DATA PATTERNS The introduction of the draft guideline is a significant action for the protection of the interests of internet users however there has been an existing framework for prohibiting the dark patterns in the form of various legislation like the Consumer Protection Act 2019, Guidelines for Prevention of Misleading Advertisements 2022, the Digital Personal Data Protection Act 2023 (“DPDP”), etc. Although the DPDP Act, 2023 has been notified in the official Gazette of India on 11.08.2023, the date on which this Act will come into effect has yet to be notified. The existing legislation although does not specifically mention dark patterns, however, it offers protection against unfair trade practices and misleading advertisements by using similar tactics, particularly in the realm of Data Protection as well as Consumer rights. Some of the existing legislation are as follows- Digital Personal Data Protection Act, 2023 The Digital Personal Data Protection Act, of 2023, unequivocally decrees that individuals provide their free and clear consent before their data is processed unless it is being used for one of the designated "legitimate uses." A notice outlining the purpose of processing the requested data and outlining the rights of the individual—among which is the ability to withdraw consent at any time—must be included with the request for consent. In addition, this Act stipulates that obtaining consent from a data fiduciary should not be more difficult than withdrawing consent. As a result, a Data Fiduciary may only use personal information for the purposes for which it was collected and cannot "hold hostage" an individual's consent or data. Within the provisions of the newly introduced guidelines, the businesses will have to audit their user interfaces, eliminate any dark patterns they may be employing, safeguard personal information, utilize it only for "legitimate purposes," and obtain users' agreement in clear language through explicit affirmative action. Keeping a balance between user privacy and data access for personalization may prove to be the most difficult task. Additionally, businesses will need to spend more money to make sure that their individualized marketing complies with the strict data protection guidelines set forth by the Act. The Consumer Protection Act, 2019 According to the Consumer Protection Act, 2019 the ‘consumer rights’[2] include- the right to be protected against the marketing of goods, products, or services which are hazardous to life and property; the right to be informed about the quality, quantity, potency, purity, standard, and price of goods, products, or services, as the case may be, to protect the consumer against unfair trade practices; the right to be assured, wherever possible, access to a variety of goods, products, or services at competitive prices; the right to be heard and to be assured that consumer's interests will receive due consideration at appropriate fora; the right to seek redressal against unfair trade practices restrictive trade practices or unscrupulous exploitation of consumers; and (vi) the right to consumer awareness; Forcing or manipulating a consumer into making choices that are against their interest amounts to unfair trade practices as defined under section 47 of the Consumer Protection Act, 2019 For the purpose of regulating the cases concerning unfair trade practices, violation of the rights of the consumers and misleading advertisements, the Central Government formed the Central Consumer Protection Authority (“CCPA”). CCPA has been established as a regulatory body within the provisions of the Consumer Protection Act, 2019. This regulatory body protects the rights of the consumers and takes necessary steps to ensure enforcement and protection of consumer rights such as: Conducting inquiries and investigations into violations of consumer rights and unfair trade practices on receiving a Complaint or Suo moto. Upon investigation, if the CCPA is satisfied that the rights of the consumers have been infringed or amount to unfair trade practices, the authority can directly to pass an order for the removal of such product or discontinuation of the service. Granting compensation or reimbursement to the consumer for the price paid for the product or service. Section 88 of the Consumer Protection Act, 2019 imposes a penalty for non-compliance with the direction of the Central Authority with an imprisonment for a term which may extend up to 6 months or a fine extending up to 20 lakh rupees, or both. Section 89 of the Consumer Protection Act, 2019 punishes for false or misleading advertisement which is prejudicial to the interest of the consumers with imprisonment for terms up to 2 years and a fine extending up to ten lakh rupees and for every subsequent offense, imprisonment up to 5 years and a fine of up to fifty lakh rupees. GUIDELINES FOR PREVENTION OF MISLEADING ADVERTISEMENTS AND ENDORSEMENTS FOR MISLEADING ADVERTISEMENTS, 2022[3] Section 21 of the Consumer Protection Act, 2019 sets forth requirements for "non-misleading and valid advertisements" and "bait advertisements," which draw customers by lowering the cost of a good or service. The Central Consumer Protection Agency released Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022. According to the Guidelines, advertisements cannot be referred to as "free" if the customer must pay for the packing or delivery, purchase another item at a higher cost to take advantage of the offer, or purchase a lesser quality or quantity in order to take advantage of the offer. THE ADVERTISING STANDARDS COUNCIL OF INDIA (“ASCI”) GUIDELINES FOR ONLINE DECEPTIVE DESIGN PATTERNS IN ADVERTISING[4] Online Deceptive Design Patterns can also be described as 'dark patterns'. As stated hereinabove, these patterns refers to a wide range of practices in online user interfaces that manipulate customers into making choices that are not in their best interest. Chapter 1 of the ASCI code mandates ads to be honest and not abuse the trust and lack of expertise of the consumers. It should not be misleading in any way and there should be no ambiguity in the language of the advertisements. The ACSI guidelines are to be applied to all digital advertising platforms. It recognizes the 4 key dark patterns such as (i) Drip pricing, (ii) Bait and Switch, (iii) False urgency and (iv) Disguised Ads. IMPACT OF THESE GUIDELINES Who will be impacted? Sellers, advertisers, and all platforms that "systematically" offer goods and services in India will be subject to the Draft Guidelines. Interestingly, the Draft Guidelines apply not only to companies established in India but also to companies established abroad that sell goods or services to Indian nationals. What will be the impact? At the outset, the Ministry’s attempt to regulate the dark patterns should be appreciated, however, the introduction of these guidelines can impact various stakeholders as well as businesses operating in the global setup. The Dark Patterns can have an impact on the e-commerce industry as well as the fintech industry. The E-Commerce industry is constantly evolving and the introduction of these guidelines on dark patterns can pose a challenge. One of the significant impacts for such industries will be to amend their user interfaces and make them more consumer-friendly so that the menace of dark patterns can be controlled and regulated. However, the whole process can be costly as well as time-consuming which can discourage the budding e-commerce businesses as well as the existing businesses. It is significant to mention herein that Asia Internet Coalition (“AIC”) which represents tech giants such as Google, Apple, Amazon, and Twitter has categorically suggested that the introduction of such guidelines can deteriorate the growth of the country's digital economy and urged the Government of India to contemplate the existing self-regulatory framework as the primary measure to restrict the use of dark patterns. The industry group also said online platforms are already regulated under the various existing laws. The group stated that while online platforms in India qualify as online intermediaries and are regulated under the Information Technology Act 2000, e-commerce platforms are administered under the Consumer Protection Act 2019 rules. However, clause 6 of the Draft Guidelines specifically provides that the provisions contained in these guidelines shall be in addition to and not in derogation of the existing laws and regulations, hence the worries of AIC can be squarely covered. Nonetheless, the e-commerce or fintech industries can take the following steps to improve their practice and to be in line with the newly introduced guidelines on dark patterns: The businesses can create communication and systems that will respect the autonomy of the users and improve transparency which will enable the consumers to make well-informed choices; With the introduction of the guidelines, the Businesses can teach their Customers how to spot dark patterns. Industry standards for dark pattern-free user interfaces should be developed; To maintain compliance, businesses have to incorporate consent documentation or pop-up notifications on digital platforms; Businesses should provide thorough and personalized user experiences on digital platforms; Implementing encryption, multi-factor authentication, and regular security precautions which can also go a long way in improving the user interfaces; Businesses should also communicate their data privacy practices and attain explicit consent for the collection of the data; REDRESSAL MECHANISM FOR AFFECTED CONSUMERS The newly introduced guidelines do not provide any provisions for filing complaints against the dark patterns. However, the existing regulation such as the Consumer Protection Act 2019 and the DPDP Act 2023 provides the provision for regulating unfair trade practices by any organizations who are dealing in both online and offline interface. Complaint under the Consumer Protection Act, 2019- Under Section 9(v) of the Consumer Protection Act, 2019, the consumer has the right to seek redressal against Unfair Trade Practices or restrictive trade practices. Consumers can file a complaint against unfair trade practices or misleading information and advertisements before the Consumer Commission as prescribed under the Consumer Protection Act, 2019. The provisions of the 2019 Act provide for the establishment of Consumer Commissions at various levels which enables the individual complainant or a group of complainants to approach these commissions and register their complaint against such unfair practices and misleading advertisements. As stated above, these Commissions can impose punishments for false or misleading advertisements within the scope of section 89 of the Consumer Protection Act, 2019. Complaint to Central Consumer Protection Authority- In case, a large set of consumers are being affected through practices such as violation of consumer rights such as unfair trade practices, or false and misleading advertisements, then such a complaint can be forwarded to the District Collector or the Commissioner of regional officer or the Central Authority. Moreover, under Section 21 of the Consumer Protection Act 2019, the Central Authority also has the power to issue penalties against false and misleading advertisements. Complaint under DPDP Act 2023- The DPDP Act 2023 provides that the consent given by the Data Principal shall be free, specific informed, unconditional, and with a clear affirmative action. The Data Fiduciary under the newly formed act should ensure that the data of the consumers is not breached and misused. The Data Principal under Section 27 of the Act has the right to approach the Data Protection Board and file a complaint in case the Data Principal feels that its data has been misused and breached by the Data Fiduciary. However, it is significant to mention that the Act has not come into effect yet. CONCLUSION Dark patterns are a form of misleading design that can harm consumers. Attentiveness of the different types of dark patterns and taking steps to protect the business and consumers can aid in reducing the risk by focusing on offering consumers the information and experience needed to make fully informed decisions. India has already geared in implementing the laws and procedures that can guide customers and people around the nation to not fall into the trap of dark patterns as well as a way to protect their data. Since the area is comparatively new, more jurisprudence will be required to ascertain whether the implementation of such guidelines is actually affecting the ease of doing business in India. Up until now, only the fields of marketing and advertising have been able to control the psychological and behavioral inclinations of their customers through online manipulation. The draft guidelines now aim to broaden the regulatory scope to address more consumer concerns. However, it remains to be seen how the draft guidelines will supplement the current situation without causing regulatory overlap and arbitrage, given that the DPDP Act and the forthcoming Digital India Act have the potential to protect users from dark patterns. Footnotes [1] https://www.mondaq.com/india/dodd-frank-consumer-protection-act/1379670/understanding-dark-patterns-guidelines-for-consumer-protection#:~:text=The%20term%20'Dark%20Patterns'%20has,by%20subverting%20or%20impairing%20the [2] https://www.indiacode.nic.in/bitstream/123456789/15256/1/a2019-35.pdf [3] https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/The%20Guidelines%20for%20Prevention%20and%20Regulation%20of%20Dark%20Patterns%2C%202023.pdf [4] https://www.ascionline.in/wp-content/uploads/2023/05/Guidelines-for-Online-Deceptive-Design-Patterns-in-Advertising.pdf