Chandhiok & Mahajan, Advocates and Solicitors

Authored by: Lovejeet Singh (Partner, Corporate & Aviation) and Shivani (Senior Associate, General Corporate and Transactions) In the bustle of due diligence and preparation of transaction documents, the ‘Disclosure Letter’ often gets overlooked and surfaces at the eleventh hour just prior to signing or closing. Why is it a problem when you are focused on negotiating your rights under the transaction documents? It is due to following: When disclosures drop late, especially shortly before signing or closing, sellers typically lose their leverage to negotiate – there is little-to-no time to assess, clarify or renegotiate, which may lead to hasty acceptance of terms that may leave them exposed to liabilities post-closing. A rushed Disclosure Letter increases the probability of errors, omissions, and contradictory representations, which can trigger indemnity claims and lawsuits. Buyers rely on a Disclosure Letter to understand and validate disclosed issues, but when it is delivered late, they lack time to investigate and respond thoughtfully, undermining transparency and trust. A well-known pitfall in transactions is when a buyer discovers unknown liabilities, such as environmental issues or legal claims, that may not have been fully disclosed at the diligence stage – this increases the likelihood of renegotiation or walkaway. Incomplete and unclear disclosures raise red flags, putting the integrity of the entire transaction at risk. In addition to triggering last-minute renegotiations as mentioned above, in cases where key issues are obscured - or recklessly downplayed - the deal may even fall apart completely. In this Article, we analyse the concept, timeline and nuances of a ‘Disclosure Letter’ to highlight the key issues and subtle complexities which parties to a transaction should be conscious of. What is a Disclosure Letter and why is it crucial? To put simply, a Disclosure Letter is a document which qualifies or creates exceptions to the otherwise extensive representations and warranties (R&Ws) which are provided as part of transactions. Typically, it is provided by a seller at two stages – signing and closing. However, disclosures made at closing typically relate to issues arising between signing and closing – i.e., if a seller misses disclosing a non-compliance which existed at the time of signing, the buyer may not accept such disclosure after signing and resultantly, the seller will continue to be liable for all post-closing claims arising out of any related R&W given by it under the transaction document(s). For a buyer, a Disclosure Letter serves as a preview of the risks and liabilities which it will ultimately assume as part of the transaction – typically covering information relating to inter alia contracts, legal disputes, claims and non-compliances which, for the buyer, can ultimately have an impact on the valuation as well as future operations and therefore, may trigger re-negotiation of the deal terms. On the other hand, for a seller, a Disclosure Letter serves to ring‑fence against potential future/ post-closing claims. Key items in a Disclosure Letter Introduction The introductory section of a Disclosure Letter is as crucial as the special disclosures – the general disclosures usually form a part of the introductory part and at the same time, are as heavily negotiated as the specific disclosures. This section would, typically, also include a clause stating that the Disclosure Letter takes precedence in case of conflict with other transaction documents and representations regarding the information being provided being true and accurate. Inclusion of documents/ information provided in the Data Room One of the most contested and heavily negotiated parts of a Disclosure Letter includes as to whether or not the documents uploaded and disclosed in the data room (as part of due diligence exercise), would or would not form part of the disclosures. From a buyer’s perspective, agreeing to such clause can be a pandora’s box and a strong push back from the buyer can be anticipated. This is one of the terms which should be discussed and agreed at an early stage since it provides opportunities for both parties to assess the quality of data room created and then arrive at an informed and mutual decision. Specific Disclosures Specific disclosures are usually tied to the R&Ws which have been provided as part of the transaction. Therefore, a comprehensive and careful reading of the R&W schedule should be done. It is advisable to consult your legal advisors when in doubt. Buyers would usually include a provision in the Disclosure Letter stating that any disclosure will be treated as a disclosure against only the specific R&W against which such disclosure is made. Therefore, it is crucial to ensure that all such R&W which are impacted by a particular non-compliance/ fact, are clearly listed out while preparing the Disclosure Letter. Annexures While this is not required in all cases, in situations where any disclosure has extensive background and details that are material to it, such disclosures should be supplemented by supporting documents or correspondence that may be relevant for making such disclosure full and fair. The right time to kick things off Ideally, a seller’s cue regarding the matters/ issues which could be included in a Disclosure Letter, comes at the diligence stage itself. Therefore, for a seller, it is always advisable that the key employees from compliance team are actively involved at the diligence stage so that they can identify the gaps and in parallel, prepare a list of the matters which may need to be disclosed. But why does it matter when you can burn the midnight oil for a couple of nights and deliver the letter? It does – last minute disclosures may erode your leverage to negotiate the letter thoroughly and can lead to acceptance of unreasonable risks merely to achieve closure. Even worse, if a buyer is displeased with a last-minute disclosure and the parties are unable to reach an agreement, it could jeopardize the entire deal and months of negotiation. How specific should the disclosures be? The thumb rule for preparing a disclosure is always err on the side of caution – no one really benefits from vague and unclear disclosure. If you have a doubt on whether an information should be disclosed in the letter, always go ahead and disclose it and let your legal advisors take it from there. That said, your external legal counsel would not have access to the information which your inhouse counsel and team would – therefore, it is essential to ensure a smooth flow of information and identifying and placing such employees/ officers to coordinate with your legal advisors, who are aware of the business and operations. Best practices for drafting a Disclosure Letter When in doubt, over include – not under: It is always better to include minor issues upfront than risk a cash drain with an indemnity dispute later. Ensure clarity and completeness: A Disclosure Letter should communicate the exceptions clearly and legal jargon and complex drafting should be avoided. That said, a disclosure should be complete in all sense - an incomplete disclosure could potentially lead a party in a suit for misrepresentation and misleading the other party by hiding material facts. Involvement of Legal Advisors: Always run the Disclosure Letter past legal advisors who draft such documents on a day-to-day basis and can anticipate and point out the gaps and potential legal risks. Importance of Materiality and Knowledge Qualifiers Materiality and knowledge qualifiers are very crucial negotiating tools which shape the seller’s obligations as well as the buyer’s protection. A materiality qualifier narrows the representation to only those matters deemed significant – as a buyer, it should be considered to define ‘materiality’ under the transaction document because financial thresholds or material adverse effect standard shields the sellers from liability for trivial/ immaterial issues. Further, a knowledge qualifier limits representations to what the seller knows (or, if agreed, should have known), with disputes usually arising from whether the scope includes ‘constructive knowledge’ or relates solely to senior personnel. Therefore, buyers must carefully negotiate definitions - such as whose knowledge matters, whether “should have known” is included in the definition - especially to avoid being left exposed to undisclosed liabilities hidden behind semantic qualifiers. Our Two Cents A Disclosure Letter is not merely a formality – it is the keystone of risk allocation in a deal. It crystallizes the boundary between what the buyer has acknowledged and what the seller still guarantees, ensuring neither side is blindsided post-closing. Done thoughtfully – i.e., with clarity, comprehensive substance, timely updates, and qualified by materiality and knowledge, a Disclosure Letter transforms potential deal-breaking surprises into manageable, transparent covenants. Conversely, a rushed or vague disclosure letter invites disputes, indemnity claims, and in worst-case scenarios, transaction collapse. In essence, a well-orchestrated disclosure letter could be your first - and often the best - defensive line in any transaction. Disclaimer: The views and opinions expressed in this Article are those of the authors. This Article is for informational purposes only and does not constitute legal advice. Readers should consult their legal advisors regarding their specific facts and situation.

Introduction India’s company laws are a rare phenomenon in Asia as far as the codification of directorial duties are concerned. Section 166 of the Companies Act, 2013 (the “Indian Framework”), which prescribes the law on the duties of a company’s directors, places wide reliance on the virtues of good faith and diligence in dealing with the company – arguably creating statutory standards to measure directorial accountability. However, violations of such standards are dealt primarily with ascribing monetary liability to violating directors. It may well be that monetary penalties have not been that successful in addressing the issue of directorial responsibility and diligence – this has significant ramifications for not only companies but also the various stakeholders who interact with companies. Singapore offers some common-law guidance in this regard. On 24 April 2025, the Singapore High Court (“SHC”), revised the sentencing framework for breaches of a director’s statutory duty to act honestly and be diligent in their dealings with and towards the company. The judgment of the SHC in Public Prosecutor v Zheng Jia [2025] SGHC 75 (“Zheng Jia”) has escalated the degree of strictness with which courts are required to assess breaches of directorial duties. This is in stark contrast to the Indian Framework, which does not mention custodial sentencing for breaches. This thought-piece aims to dissect the rationale in Zheng Jia in the context of the Indian Framework and gauge the viability of a similar regime of custodial sentencing in India. For the sake of clarity, the authors will not assess statutory provisions for the criminal breach of trust by directors under Indian company law or ancillary statutes. The Background and Judgment in Zheng Jia Background In Zheng Jia, the respondent was a chartered accountant (the “Respondent”) who offered accounting and corporate secretarial services through three companies. Their services ranged from incorporating companies in Singapore on behalf of foreign clients to advising on procedural matters. Interestingly, the Respondent would register himself as a local resident director for incorporated companies and also assisted in opening bank accounts in their names. Judgment In 2020, significant monetary sums – being the proceeds of frauds on foreign soil – were routed through the bank accounts of two such companies incorporated by the Respondent. The Respondent and a colleague (also a co-accused) were directors in these companies. A district judge convicted the Respondent of charges under Section 157 of the Companies Act, 1967 (the “Singapore Framework”) – ruling that, as director, they failed to exercise reasonable diligence in the discharge of their duties towards the respective company and aided similar activities on the co-accused’s part (the “DJ Ruling”). The prosecution appealed against the DJ Ruling, expressing their dissatisfaction with the non-imposition of a custodial sentence. The SHC, after hearing both sides, stated their displeasure with the former-extant ruling precedent in Abdul Ghani [2017] SGHC 125 and revised the guiding factors (the “Revised Guidance”) to impose custodial sentences for directors in Singapore. Previously, in Abdul Ghani, the SHC had held that directors breaching their duties would usually face fines, with jail reserved for more serious, intentional, or reckless breaches – Singapore courts followed this precedent until the judgment in Zheng Jia. In this regard, a relevant extract from Abdul Ghani reads as follows: “…I am of the view that the starting point for purely negligent breaches of the duty to exercise reasonable diligence is a fine (where there are no weighty aggravating factors) with custodial sentences being imposed where the director breaches this duty intentionally, knowingly or recklessly.” [emphasis supplied] That said, the Revised Guidance in Zheng Jia can be summarised as follows: Identifying the relevant offence-specific factors: Courts must assess elements such as the director’s level of due diligence, efforts to monitor company transactions, knowledge of the company’s affairs, how long the offending conduct lasted, whether there was any concealment, and if the misconduct was driven by profit. Situating the offence within the appropriate sentencing band: Based on the number of aggravating factors present, offences fall into one of three bands: Band 1: 1 to 3 factors, with imprisonment up to 4 months; Band 2: 4 to 5 factors, with imprisonment between 5 and 8 months; and Band 3: 6 or more factors, with imprisonment between 9 and 12 months. Calibrating the indicative sentence for offence-specific factors: After determining the band, courts adjust the sentence considering mitigating or aggravating circumstances, such as the director’s prior record, cooperation with authorities, or whether the breach was isolated or repeated. The SHC also extended the application of the Revised Guidance to offences of abetment, thereby extending liability to the co-accused in Zheng Jia. Finally, the SHC allowed the prosecution’s appeal and substituted the monetary penalty imposed through the DJ Ruling with a custodial sentence of ten months’ imprisonment. Custodial Sentencing under the Indian Framework Before assessing the Indian Framework, it would be prudent to underline the semantic similarities between the Indian and Singapore Frameworks. On a textual comparison, the two frameworks overlap on two markers: (a) both demand “honesty”/ “diligence” (India expands to “good faith” and “independence”); and (b) there is a strong alignment concerning the bar on profit-motives and conflicts of interest. Semantics aside, the Indian Framework diverges from the Singapore Framework when it comes to custodial sentencing for breaches of duty. The Singapore Framework, in Section 157(3)(b) explicitly mentions that a director will be guilty of an offence for breaching their duties and liable “…to imprisonment for a term not exceeding 12 months.” No such equivalent exists in the text of the Indian Framework. The absence of an explicit statement concerning custodial sentences presents a conundrum for directorial accountability in India. Is it a wise proposition to address directorial duty breaches through the sole force of a monetary penalty? How effectively are stakeholders protected if one can pay their way out? Recent Indian judgments such as Rajeev Saumitra v. Neetu Singh, (2016) 198 Comp Cas 359 and Rajeev Kapur v. Grentex and Co. (P) Ltd., (2013) 178 Comp Cas 28 (Bom), where the defendant directors were found in breach of their duties under the Indian Framework for incorporating new companies to compete with their primary companies, suggest that the Indian Framework ought to be reconsidered. What does the Indian Framework stand to gain through revisions? We believe that considering a revision to the Indian Framework would help initiate discourse about improving corporate governance measures, especially regarding the standards for directorial duties. This discussion will help the legislature, regulators and concerned stakeholders perceive the following consequences: Improving the Deterrent System: Introducing custodial sentences for breaches of directorial duties would serve as a strong deterrent (relative to monetary penalties) to violations, improving the force of company law and allied regulations in reducing negligent or reckless conduct among directors. This will become increasingly important as the roles of shadow directors and observers get further entrenched under Indian company law. Addressing Professional Nominee Directors: Revising the Indian Framework would directly address professional directors who act as “resident directors” for multiple companies without exercising actual oversight—a model that has enabled financial crimes and money laundering in other jurisdictions. As is true with most jurisdictions, India too has a large number of company-structures that use nominee directors. Addressing this aspect would increase awareness concerning the perils of employing tokenistic board representatives, encouraging thoughtful conversations on effective corporate governance. More importantly, it would align Indian company law with India’s money laundering laws in this regard; India’s Prevention of Money-laundering Act, 2002 was amended in 2023 to include individuals “acting as directors” of a company within its scope.  Protecting Stakeholders: Stricter enforcement of directorial duties, through explicit legislative force, lessens the likelihood of scenarios where shareholders, creditors, and the public are harmed by corporate misconduct, potentially leading to greater trust in the corporate sector. Considerations before Revising the Indian Framework Having discussed the perceived benefits of revising the Indian Framework, it would only be appropriate to ‘weight’ our suggestions on the basis of practical realities. These may be understood as follows: Risk of Overreach: The Singapore framework is tailored to cases of egregious, repeated, or professional misconduct. If not carefully implemented, there is a risk that Indian courts could apply custodial sentences too broadly, potentially penalizing directors for isolated or minor lapses rather than willful or reckless breaches. Potential for Deterring Talent: The threat of imprisonment for breaches of duty—even for non-malicious errors—could deter qualified professionals from accepting directorships, especially in startups and SMEs where resources for compliance are limited. Judicial Capacity and Consistency: Indian courts are already overburdened, and adding complex sentencing frameworks may lead to inconsistent application and further delays unless accompanied by targeted judicial training and clear guidelines on how to deal with cases concerning breaches of directorial duties. Enforcement Realities: India’s enforcement mechanisms and corporate culture differ from Singapore. Without parallel improvements in investigation, prosecution, and regulatory oversight, stricter sentencing may not achieve the intended deterrent effect. Conclusion A move towards explicit custodial sentencing for breaches of directorial duties would mark a significant shift in India’s corporate governance landscape. The Singapore experience shows that monetary penalties alone may not deter failures in upholding responsibilities among directors. While careful calibration is needed to avoid overreach and unintended consequences, introducing imprisonment as a potential sanction could strengthen accountability, help align with global best practices, and provide stakeholders with a globally-tested standard to benchmark directorial misconduct, thereby setting the stage for reimagined corporate governance measures that foster a culture of self-regulation from within the profession. Authors: Sujoy Bhatia, Head of Corporate & M&A Bhaskar Vishwajeet – Associate

New Delhi, May 2025 — Chandhiok & Mahajan (C&M) is pleased to announce the return of Vikram Sobti, who rejoined the firm today as Head of the Real Estate Practice at our Delhi office, effective May 2025. New Delhi, May 2025 — Chandhiok & Mahajan (C&M) is pleased to announce the return of Vikram Sobti, who rejoined the firm today as Head of the Real Estate Practice at our Delhi office, effective May 2025. Vikram’s return marks a significant step in the continued expansion of C&M’s real estate capabilities. He brings a rare blend of experience from both private practice and in-house roles, having led high-value real estate transactions, complex commercial disputes, and regulatory strategy at scale. An alumnus of Campus Law Centre, Delhi University, Vikram began his legal career at Luthra & Luthra Law Offices and was one of the founding members of Chandhiok & Mahajan, where he helped establish and shape the firm’s Dispute Resolution practice. In 2023, Vikram transitioned to the corporate side as General Counsel at Emaar India, where he headed the legal function. At Emaar, he oversaw strategic litigation, regulatory engagement, and high-stakes real estate deals, giving him a deep understanding of business needs, operational risk, and legal execution. “We are thrilled to welcome Vikram back to the firm,” said Managing Partner, Pooja Mahajan. “C&M been involved in a wide range of transactions, disputes, and regulatory investigations in the real estate sector. With Vikram rejoining the firm, we are excited to bring our cross-practice expertise together under an industry-focused approach to better serve our clients.” “We are delighted to welcome Vikram back to C&M. His extensive experience across real estate regulatory, transactional, and disputes matters will further strengthen our capabilities, particularly in disputes, competition, regulatory, and restructuring. Vikram has also played a key role in shaping the collaborative culture that defines our firm. His return reinforces our commitment to delivering integrated, industry-focused solutions to our clients.” added Karan S. Chandhiok, Partner and Head of Competition & Regulatory Practice. Commenting on his return, Vikram Sobti said: “It’s a privilege to rejoin C&M at a time when the real estate sector is undergoing rapid transformation. Having led legal strategy for one of India’s largest real estate companies, I’ve had the opportunity to work closely on complex transactions, regulatory frameworks, and large-scale dispute resolution. I look forward to leveraging this experience to build a solutions-driven practice that is deeply aligned with client goals and commercial realities.” Vikram’s rejoining significantly enhances C&M’s Real Estate offering and supports the firm’s broader strategy of deepening sectoral expertise and delivering value-led, integrated legal services. About Chandhiok & Mahajan Chandhiok & Mahajan is a leading Indian law firm offering full-service capabilities across dispute resolution, competition, restructuring, regulatory, and corporate practices. With a reputation for high-quality legal advice and a collaborative approach, the firm advises a diverse client base across sectors and jurisdictions.

New Delhi, April 2025 — Chandhiok & Mahajan (C&M) has further strengthened its Corporate practice with the appointment of Natasha Tuli as Counsel in its New Delhi office, effective April 2025. Natasha brings over 17 years of diverse experience advising corporates, investors, and financial institutions on complex transactions, regulatory strategy, corporate restructuring, and governance. Her practice spans both Indian and international markets, including in-house roles with Porsche Cars and Pfizer in the UK, and senior positions at leading Indian firms such as Tatva Legal, Dua Associates, and Sakura Advisory. A commercially focused and solutions-driven practitioner, Natasha is known for her ability to navigate high-value, cross-border transactions and deliver advice that aligns legal precision with business imperatives. Sujoy Bhatia, Head of Corporate/M&A at C&M, said: “Natasha brings a distinctive blend of international insight and domestic experience. Her ability to advise across M&A, private equity, and regulatory matters makes her a valuable addition as we continue to support clients in an increasingly complex and fast-moving business environment.” Pooja Mahajan, Managing Partner, commented: “We are delighted to welcome Natasha to the firm. Her appointment reflects our continued investment in building a future-ready Corporate practice—one that combines deep sectoral knowledge with sharp legal and commercial thinking.” On joining C&M, Natasha Tuli said: “I’m excited to be part of a firm that’s respected for both its collaborative ethos and its sophisticated client work. I look forward to working with the team to help clients navigate evolving regulatory landscapes and realise their strategic goals.”  

Managing Partner and Head of Restructuring & Insolvency Practice, assisted by Nishant Sogani,Counsel, Savar Mahajan, Managing Associate, Saurabh Bachhawat, Managing Associate, Shrishti Agnihotri, Associate, Shreya Mahalwar, Associate and Priyanka Pandey, Associate, advised Sarda Energy & Minerals Limited (‘Sarda’) in acquisition of SKS Power Generation Chhattisgarh Limited (having 600 MW thermal power plant in Chhattisgarh) in its corporate insolvency resolution process of under the Insolvency & Bankruptcy Code, 2016 for a deal value of more than INR 1900 crores. The resolution plan submitted by Sarda was approved by the Hon’ble NCLT on 13 August 2024. C&M also successfully defended Sarda in various applications and appeals which were filed by the unsuccessful resolution applicants before the NCLT and NCLAT respectively, challenging the approval of the resolution plan of Sarda Energy. The NCLAT by its judgement dated 1 October 2024 has upheld the plan approval order of NCLT and dismissed the objections raised by unsuccessful resolution applicants. C&M is proud to have contributed to the successful acquisition of a thermal power plant by Sarda Energy & Minerals Limited.  

Chandhiok & Mahajan is delighted to announce the promotions of four outstanding attorneys within our firm, honoring their exceptional contributions and steadfast dedication. We are proud to share that Nishant Sogani has been promoted to Counsel, Ashwani Malhotra and Saurabh Bachhawat have been elevated to Managing Associates, and Tarun Donadi has been promoted to Senior Associate. These promotions are testament to our outstanding legal expertise, unwavering commitment to clients, and a significant impact on our firm’s practice. Nishant Sogani, based in Mumbai, brings over 10 years of experience in Restructuring & Insolvency and General Corporate practice. As a pivotal member of the team, Nishant handles some of our most complex cases and is well-positioned to tackle new challenges while continuing to drive excellence. Nishant advises insolvency professionals, banks & financial institutions, asset reconstruction companies (ARCs) and corporate groups in the stressed asset space including on aspects of insolvency resolution and loan transfers (including portfolio sales). He also advises clients on M&A transactions (distress and non-distress) and general corporate issues relating to company law, debt financing, debt restructuring and commercial contracts. He has advised clients in various insolvency and restructuring matters in the power, real estate and steel sector. Ashwani Malhotra and Saurabh Bachhawat have both been promoted to Managing Associates. Ashwani manages a diverse practice portfolio, specializing in domestic and international commercial arbitration, shareholder disputes, company law-related disputes, and white-collar crime defense matters. He regularly appears before arbitral tribunals, investigating agencies such as the Enforcement Directorate, the Appellate Tribunal (PMLA), the National Company Law Tribunal, the National Company Law Appellate Tribunal, various High Courts, and the Supreme Court of India. Saurabh, with over 9 years of experience in commercial and regulatory litigation, regularly appears before various forums including Securities Appellate Tribunal, SEBI, NCLT, NCLAT, and other regulatory bodies. Ashwani and Saurabh are based in our New Delhi and Mumbai offices, respectively. Tarun Donadi has been promoted to Senior Associate. He has extensive experience in representing clients in merger control, cartel investigations and abuse of dominance cases before the Competition Commission of India and the National Company Law Appellate Tribunal. Pooja Mahajan, Managing Partner at Chandhiok & Mahajan, stated, “We are excited to celebrate the achievements of our colleagues through these well-earned promotions. Each of these professionals exemplifies our firm’s core values and has consistently excelled in their roles. Their advancement not only strengthens our firm’s capabilities but also underscores our commitment to delivering top-tier legal services. We are confident that they will continue to excel and strengthen our resolve of delivering exceptional results for our clients.” These promotions highlight the outstanding talent and dedication at Chandhiok & Mahajan. We look forward to their continued contributions and success in their new roles.