Chandhiok & Mahajan, Advocates and Solicitors

I. WHAT ACTUALLY HAPPENED: THE FLIPKART EXIT On 15 January 2026, the Supreme Court of India (“SC”) delivered a judgment that materially alters how offshore investment structures into India are evaluated for tax purposes (“Tiger Global Judgement”)[1]. The SC recalibrated the very foundation of treaty entitlement by holding that the possession of a Tax Residency Certificate (“TRC”), by itself, does not secure treaty protection if the structure lacks commercial and economic substance. The ruling arose from Walmart Inc’s approximately USD 16 billion acquisition of Flipkart in 2018, but its implications extend far beyond that transaction. Hitherto, it was sufficient for a non-resident investor to furnish a Tax Residency Certificate as an acceptable proof of residency in the treaty jurisdiction.  The SC held that Tiger Global, a New York based investment fund that invested in Flipkart Singapore through its Mauritius subsidiary, is liable to capital gains tax in India on its 2018 exit from Flipkart Singapore. The tax exposure potentially exceeds USD 1 billion, making this one of the most consequential international tax rulings in India’s history since Vodafone[2]. But its real significance lies not in its numbers, but in the doctrinal shift it introduces. At the centre of the dispute were three Mauritius-based investment vehicles, namely Tiger Global International II, III & IV Holdings. These entities were part of the Tiger Global group’s offshore investment platform. Between 2011 and 2015, they invested in a Singapore intermediate holding company, namely Flipkart Singapore Private Limited (“Flipkart Singapore”) that held shares in Flipkart India Private Limited (“Flipkart India”). Although shares transferred in the Walmart transaction were those of Flipkart Singapore, however, the value of the shares of Flipkart Singapore was derived substantially from assets located in India i.e. shares of Flipkart India, making the transaction an “indirect transfer” of assets held in India under Indian tax law. Despite holding a valid TRC and a Category 1 Global Business Licence from Mauritius, Tiger Global’s entities were denied nil withholding tax certificates under the provisions of the Income-tax Act, 1961[3] (“IT Act”) by the tax department. Tiger Global claimed exemption under the India – Mauritius Double Taxation Avoidance Agreement (“DTAA”)[4] on the basis of the “grandfathering” protection, arguing that the shares had been acquired before 1 April 2017 and should therefore remain outside India’s capital gains tax net. The dispute moved through all three adjudicatory levels, and at each stage reflected a fundamentally different view of treaty protection. i. Authority for Advance Ruling (“AAR”) (2020): The AAR rejected the application, holding that the Mauritius entities were mere conduits and the structure was prima facie tax avoidance. ii. Delhi High Court (“DHC”) (2024): The DHC reversed the AAR ruling, emphasising the primacy and sufficiency of the TRC and allowing grandfathering protection. iii. Supreme Court (2026): The SC overturned the High Court decision, holding that the treaty is meant for direct investments in India, fundamentally recalibrating the importance of TRCs, General Anti-Avoidance Regulations (“GAAR”) and denying treaty protection to indirect transfers. II. THE FIVE PILLARS OF THE SUPREME COURT'S REASONING The Tiger Global Judgment establishes five clear rules that will now govern how offshore investment structures into India will be assessed. Together, they move treaty eligibility away from documentation and towards economic reality, control, and governance. A. India Can Tax What Is Economically “Indian”, Even If It Is Legally Offshore The SC reaffirmed that India can tax transactions where the economic value is rooted in India, even if the legal form of the transaction is offshore. If the underlying value sits in India, shifting ownership through a foreign company i.e. indirect transfers, does not take the transaction outside India’s tax net. This converts indirect transfers from a technical tax issue into a direct structuring risk. B. If Avoidance Is Prima Facie, AAR Will Shut the Door at the Threshold The SC made it clear that if a transaction appears, at first glance, to be designed for tax avoidance, the AAR after providing the applicant an opportunity of being heard,  is bound to refuse a ruling and not examine the application on its merits in accordance with the threshold bar to maintainability of such application.[5] This weakens the traditional reliance on advance rulings as a source of front-loaded certainty. C. A TRC Is No Longer a Shield – It Is Only the Starting Point The SC held that a TRC only establishes formal residence and is merely an eligibility condition for treaty benefit[6], not sufficient evidence of residency. It does not prove that the entity is commercially autonomous, independently managed, or substantively operating from that jurisdiction. If control, decision-making and financial authority sit elsewhere, treaty benefits can be denied even in the presence of a valid TRC. For decades, the market treated a TRC as sufficient evidence of treaty entitlement. This judgment decisively reverses that understanding. On facts, the SC focused on who truly controlled the investment. It noted that above certain internal thresholds, any key decisions, financial authority and exit approvals were exercised outside Mauritius, predominantly from the United States, and the Mauritian entities lacked genuine autonomy making them operationally passive. D. Grandfathering Is No Longer Absolute: GAAR Can Still Bite The SC has dismantled the belief that pre-2017 investments are automatically immune from GAAR. By harmoniously interpreting the provisions of the IT Act[7], the SC held that if a tax benefit arises after 1 April 2017, GAAR can apply even if the investment was made earlier, provided the aggregate tax benefit exceeds the prescribed threshold. Grandfathering now protects timing, not structure. If the structure is a conduit, the acquisition date becomes irrelevant. E. Indirect Transfers Get No Treaty Comfort at All The SC drew a sharp line between direct and indirect transfers. It held that grandfathering and limitation-of-benefits (“LoB”) protection[8] apply only to direct transfers of Indian shares. Indirect transfers fall outside treaty protection altogether. This is critical for PE and VC exits, which more often than not, operate through multi-layered offshore holding structures. III. WHAT BREAKS IMMEDIATELY: WHY EXISTING STRUCTURES ARE NOW EXPOSED The judgment converts treaty protection from a structural assumption into a factual test. Existing offshore holding structures may now be exposed unless they can demonstrate real substance, real control, and real commercial purpose. A. Treaty Shopping Is No Longer Structural – It Is Evidentiary Incorporation in Mauritius or Singapore and possession of a TRC is no longer sufficient. Treaty entitlement now mostly depends on whether the entity can demonstrate genuine substance, independent control, and a commercial purpose beyond tax efficiency. Offshore holding entities that exist primarily as routing vehicles now carry significant risk as structures without autonomous governance, operational capability, and financial authority will struggle to survive scrutiny. Funds may need to reassess exit models, withholding assumptions, indemnity structures and tax gross-up mechanisms. Treaty uncertainty may now be priced into transaction documents rather than treated as a remote contingency. Late-stage exits and secondary transactions will have to take into account higher tax risk through valuation discounts or contractual risk allocation. B. Legacy PE/VC and Intermediate Holding Structures Could Carry Real Exit Tax Risk For funds exiting legacy pre-2017 investments, the risk profile has materially changed. The assumption that such investments are insulated from Indian capital gains tax is no longer reliable. Capital gains exposure will now have to be modelled into exit economics, alongside litigation risk and potential delays in capital repatriation. The Tiger Global Judgment does not block investment. It changes how risk is priced. Structures that lack substance will face slower exits, heavier documentation burdens, and reduced net outcomes. Escrow arrangements, tax holdbacks, and expanded indemnities are likely to become standard features of exit documentation. Term sheets will also reflect this shift. Tax risk allocation will move earlier into negotiations and becoming a valuation variable rather than a closing-stage compliance issue. IV. HOW THIS CHANGES THE MARKET: VALUATIONS, EXITS AND CAPITAL FLOW Tiger Global Judgement converts tax uncertainty into a pricing variable. Capital could become more expensive, exits may become slower, and valuations could become more conservative wherever treaty protection is not structurally defensible. A. Capital Becomes More Expensive When Tax Certainty Disappears When tax outcomes become uncertain, capital tends to become more expensive. Investors either demand higher returns to compensate for risk or reduce exposure altogether. India has already been experiencing a tightening of growth-stage capital as compared to past years. In such an environment, any additional uncertainty around exit taxation may directly affect the access to additional capital. Investors tend to discount future returns more aggressively when exit economics are unclear, particularly in late-stage and secondary transactions. Reduced certainty around offshore exits discourages long-duration capital. Growth-stage funding, which depends most heavily on predictable exit outcomes, is therefore the first to be impacted. B. Valuations Could Fall Where Exit Tax Risk Cannot Be Priced Out The judgment re-introduces the treaty risk into valuation models. Until now, the “India premium” reflected regulatory complexity and currency volatility. It will now also include uncertainty around treaty eligibility and exit taxation. Tax insurance and indemnity pricing could harden. Structures that cannot demonstrate substance may face higher premiums or reduced coverage. In M&A transactions involving Mauritius or Singapore holding structures, counterparties will tend to demand deeper due diligence on governance, control architecture, and evaluate GAAR exposure. C. FPIs and Derivatives Desks Face a Silent Risk Reset Although the case arose from a private equity exit, its reasoning extends to Foreign Portfolio Investors (“FPI”) using offshore treaty structures. The SC’s focus on control and commercial purpose applies equally to FPIs trading Indian Futures & Options (“F&O”) entities. If strategic decisions and risk management occur outside the treaty jurisdiction, treaty benefits could become vulnerable. That exposure may also have to be factored into risk and return calculations. V. THE NEW PLAYBOOK: HOW FUNDS AND INVESTORS MUST NOW BUILD, HOLD AND EXIT INDIA INVESTMENTS After the Tiger Global Judgement, structuring is no longer only a tax exercise. It is a governance, control and credibility exercise. Funds that treat substance as design, not compliance, will preserve certainty. Those that treat it as form will not. A. Governance Documentation and Board Oversight Governance will now become a tax variable. How decisions are taken, who takes them, and where authority truly sits will now determine whether treaty benefits survive as opposed to merely where routine execution is carried out. Boards and investment committees must now treat control architecture as part of tax risk management, not merely corporate hygiene. Governance structure will now be as important as tax structuring. Decision approval rights, banking mandates, veto thresholds and delegation frameworks will have to be examined to determine whether an offshore entity genuinely governs or merely records decisions taken elsewhere. B. Control Must Sit Where You Claim Residence To satisfy the "head and brain test", control must reside where residence is claimed. Funds must demonstrate that strategic, financial, and exit decisions are actually made within the treaty jurisdiction. Board composition, approval authority, financial control mechanisms, functional office premises, dedicated local staff, and IT infrastructure all evidence actual control. C. Spending, People and Infrastructure Will Decide Treaty Survival Treaty survival will now be determined by operational reality and the presence of commercial substance i.e. people, spending, infrastructure and authority. Funds will have to demonstrate real operational presence, decision-capable directors, functioning office infrastructure, locally managed bank accounts, and employees with financial and investment competence. Documentation will now have to evidence deliberation, not ratification. Board minutes will have to show real debate, not formal approval of externally decided outcomes. The burden now squarely lies on the investor to prove that the offshore entity is commercially autonomous. D. Every Exit Needs a GAAR Readiness Review GAAR readiness is one of the key factors in determining exit success. Documentation could make or break treaty entitlement. Legacy structures, even pre-2017, should not assume safety. Groups with legacy offshore structures and future liquidity events will need pre-exit GAAR and treaty reviews. Each financing round should be treated as a structural audit point. Grandfathering reduces exposure only where structure integrity exists, for it does not protect defective architecture. E. GIFT City: From Alternative to Strategic Default GIFT City offers a structural solution, not a workaround. Being a domestic onshore alternative, it replaces treaty dependence with statutory certainty by eliminating treaty risk, reducing GAAR exposure, and anchoring tax benefits in domestic law. For funds willing to locate substance within India, GIFT City is the clearest path to stability. Mauritius and GIFT City serve the same objective i.e. attracting global capital through certainty, the key difference being that GIFT City embeds certainty in statute, not treaty interpretation. VI. CONCLUSION: INDIA IS RAISING THE STANDARD, NOT CLOSING THE DOOR This judgment is not a rejection of foreign capital. It is a recalibration of how India expects capital to be structured. The SC has drawn a clear line between legitimate planning and artificial tax engineering.  What it demands is credibility, real governance, real control and real economic presence. Structures built on documentation alone will not survive. Structures built on substance will. Legally, the ruling is jurisdictional, not determinative. Revenue must still satisfy statutory thresholds, establish impermissible avoidance, and justify attribution and penalties. Defensive space remains but only for investors whose structures reflect commercial reality. For dealmakers, treaty eligibility is no longer a technical assumption verified at closing. It is a factual condition to be designed from inception and maintained throughout the investment lifecycle. Governance architecture, decision-making authority, and documentation discipline are now core components of tax risk management. The choice is no longer between aggressive and conservative structuring. It is between credible and vulnerable structuring. Those who adapt will find India still offers scale, depth, and opportunity. Those who rely on form without substance will find the old playbook obsolete. The Tiger Global Judgement does not signal retreat. It signals maturity and a market confident enough to welcome global capital but no longer willing to subsidise it through legal fiction. [1] The Authority for Advance Rulings (Income Tax) & Ors. v. Tiger Global International II Holdings, 2026 INSC 60 available at < https://api.sci.gov.in/supremecourt/2025/1251/1251_2025_7_1501_67552_Judgement_15-Jan-2026.pdf > [2] Vodafone International Holdings BV v. Union of India, 2012 (6) SCC 757 [3] Section 197, Income-tax Act, 1961 [4] Agreement For Avoidable Of Double Taxation And Prevention Of Fiscal Evasion With Mauritius, (as amended from time to time). [5] Proviso (iii) to Section 245R(2), Income-tax Act, 1961 [6] Section 90(4), Income-tax Act, 1961 [7] Rule 10U(2) r.w Chapter X-A, Income-tax Act, 1961 [8] Article 13(3A), Agreement For Avoidable Of Double Taxation And Prevention Of Fiscal Evasion With Mauritius, 1983 (as amended from time to time). Authored by: Sujoy Bhatia and Vedangshri Vijay 

Chandhiok & Mahajan’s competition team acted for JSW Steel Limited (JSW Steel), JSW Kalinga Steel Limited and its subsidiary JSW Sambalpur Steel Limited, and Bhushan Power and Steel Limited (BPSL). The transaction involves the proposed transfer of the steel business of Bhushan Power and Steel Limited to the JV entity for a cash consideration of INR 24,483 crores, with JFE Steel infusing INR 15,750 crores into the JV entity in two tranches. The transaction was previously disclosed by JSW Steel Limited to the stock exchanges on 3 December 2025 and is expected to drive efficiencies and accelerate capacity expansion through best-in-class technology and production of high value-added steel products. C&M’s team comprised Karan S. Chandhiok (Head of Practice and Partner), Modhulika Bose (Partner), Tarun Donadi (Senior Associate), Riddhika Dumane (Associate) and Jai Hindocha (Associate). JFE Steel was represented by AZB.

Chandhiok & Mahajan acted as legal advisors for InsuranceDekho and RenewBuy and secured an approval from the Competition Commission of India in relation to their proposed merger. C&M advised on all competition law aspects of the transaction, including the preparation of the merger notification and related submissions before the CCI. C&M’s competition team, comprising Avinash Amarnath (Partner), Aakash Kumbhat (Managing Associate), Aileen Aditi Sundardas (Associate), Saumya Sunidhi (Associate), and Jai Hindocha (Associate), represented InsuranceDekho and RenewBuy before the CCI. InsuranceDekho is involved in the distribution of various insurance products in India through its platform, and RenewBuy provides insurance brokerage services through online and offline channels and operates a platform that simplifies insurance and financial products and makes them accessible for customers through its digitally enabled advisors.

New Delhi: Chandhiok & Mahajan is pleased to announce the promotion of seven exceptional attorneys across various levels within the firm. We are proud to share the following promotions: Shreya Gupta has been promoted to Counsel, Lead – Data Privacy Arveena Sharma has been promoted to Counsel, Restructuring & Insolvency Aakash Kumbhat has been elevated to Managing Associate Suchitra Dey (Corporate), Harshita Malik, Shivangi Bajpai (Disputes), and Karan Vir Khosla (Restructuring & Insolvency) have been promoted to Senior Associate These promotions reflect the dedication, excellence, and consistent contributions of our team members. Each of them embodies the firm’s values and continues to play a key role in driving our growth and delivering outstanding client service. Shreya Gupta advises organizations on global data privacy compliance. She navigates complex regulatory frameworks and helps clients implement commercially viable solutions aligned with international legal obligations. Her business-oriented approach has shaped the firm’s data privacy practice. Arveena Sharma regularly advises resolution applicants, creditors, and corporate debtors in high-value insolvency and liquidation proceedings before the NCLT, NCLAT, High Courts, and the Supreme Court of India. She also handles corporate restructuring, schemes of arrangement, and disputes related to oppression and mismanagement. She delivers strategic, client-focused advice tailored to commercial realities. Aakash Kumbhat advises clients on behavioural and merger control matters in competition law. He regularly appears before the Competition Commission of India, NCLAT, High Courts, and the Supreme Court, and supports clients through complex regulatory processes. Suchitra Dey advises on fundraising and M&A transactions across sectors including insurance, retail, fintech, manufacturing, and cryptocurrency. She supports clients on commercial contracts, cross-border investments, SEBI regulations, and day-to-day legal matters. Shivangi Bajpai manages civil, commercial, and regulatory disputes, including arbitrations in sectors such as infrastructure, energy, telecom, real estate, and financial services. She advises on dispute strategy and third-party funding and regularly appears before courts and tribunals. Harshita Malik focuses on commercial litigation and arbitration, particularly in construction arbitration, insolvency, shareholder disputes, and regulatory matters. She represents clients across sectors including telecom, infrastructure, renewable energy, FMCG, and banking, and brings a strategic, detail-oriented approach to every matter. Karan Vir Khosla represents clients before the NCLT, NCLAT, and the Supreme Court of India. He works extensively on matters under the Insolvency and Bankruptcy Code, including CIRP and liquidation proceedings. Pooja Mahajan, Managing Partner at Chandhiok & Mahajan, stated: “We are excited to celebrate the achievements of our colleagues through these well-earned promotions. I extend my warmest congratulations to each of them. Their dedication, expertise, and passion for excellence continue to inspire us. We are proud to have them as part of our team and look forward to supporting their continued growth and success.” These promotions underscore the strength of our team and reinforce our commitment to nurturing talent and delivering excellence to our clients.

In the realm of commercial transactions, a term sheet often functions as a crucial stepping stone – establishing the foundation of a proposed deal. As a roadmap for future definitive agreements, a term sheet captures the parties' preliminary intentions and commercial understanding. That said, when a term sheet has a blend of binding and non-binding clauses, it treads a legally ambiguous path. The enforceability of such documents has long been a contentious issue, raising questions about when a term sheet crosses the line from being a mere expression of intent to becoming a legally binding contract. This uncertainty came to a head in the recent high-profile dispute between OYO (Oravel Stays Private Limited) and Zostel (Zostel Hospitality Private Limited). Here, while an arbitral tribunal initially ruled in the favour of Zostel enforcing the rights and obligations outlined in a term sheet signed in 2015, the Delhi High Court (DHC) set aside the arbitration award, underscoring the non-binding nature of the document. The Supreme Court of India (SCI) very recently refused to entertain Zostel’s appeal against the DHC’s judgement on the ground that Zostel should have filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, as opposed to moving the SCI with a special leave petition under Article 136 of the Constitution of India. Pursuant to SCI’s observation, reportedly, Zostel has withdrawn its petition. This Article delves into the dispute, the key findings of the arbitral tribunal and the DHC and examines the legal weight that term sheets can (or cannot) carry. OYO – ZOSTEL DISPUTE Background Back in 2015, OYO and Zostel, signed a non‑binding term sheet outlining a potential acquisition where Zostel was to transfer tech assets, IP, employees, and hotels to OYO, in exchange for a 7% stake in OYO. However, it explicitly required execution of ‘final and definitive agreements’ for binding effect - only provisions related to confidentiality, exclusivity, governing law etc. were enforceable. Although some progress was made towards the proposed transaction (such as conducting due diligence and as per Zostel’s claim, transfer of business and personnel to OYO), the definitive agreements contemplated in the term sheet were never signed. This led to Zostel initiating arbitration, claiming specific performance of the term sheet and compensation for OYO’s failure to close the deal. Arbitration Award The arbitral tribunal found that: The term sheet, although styled as ‘non-binding’, created enforceable obligations based on the conduct of the parties.   Zostel had fulfilled its obligations, including the transfer of assets and employees and OYO’s failure to consummate the transaction amounted to a breach. The arbitral tribunal held that OYO was liable to issue 7% equity to Zostel shareholders and pay USD 1 million to the founders as per the term sheet. The tribunal rejected OYO’s argument that the absence of executed definitive agreements rendered the term sheet unenforceable. DHC’s Intervention OYO challenged the above-mentioned arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. The DHC in Oravel Stays Pvt. Ltd. v. Zostel Hospitality Pvt. Ltd.[1] (OYO Zostel Judgement) set aside the award making crucial observations on the legal enforceability of term sheets and observed that: “… A document that clearly states it is not binding and requires execution of further definitive agreements for its terms to become enforceable, cannot, by conduct alone, be elevated to a legally binding contract …” A few key findings from the OYO Zostel Judgement are set out below: The term sheet expressly stated that it was non-binding except for certain specified clauses. Clause 7 particularly made the closing of the transaction contingent upon the execution of definitive agreements.   There was no evidence that the parties had reached a final and concluded agreement on the essential terms of the deal and therefore, there was no consensus ad idem, a necessary element for the formation of a binding contract. Specific performance can only be granted for enforceable contracts, and not for preliminary documents like term sheets unless there is clear intention and consensus on essential terms. Granting specific performance in the absence of a complete agreement between the parties is contrary to the basic tenets of Indian law of contract and specific performance.   While Zostel had transferred employees and assets, the DHC ruled that these acts, at best, reflected the parties’ preliminary intentions and could not override the explicit non-binding nature of the document – the DHC observed that: “… Even if some steps were taken by the respondent towards performance, these were in furtherance of negotiations and cannot be construed as evidence of a concluded contract …”   Citing Supreme Court of India’s judgement in Bank of India v. K. Mohandas[2], the DHC emphasized that the true construction of a contract depends on the words used, not subsequent conduct. Therefore, this comes as a vital lesson in transactional practice: intention matters, but so does the underlying documents. If the document explicitly states it is non-binding, courts may not interpret it otherwise, regardless of subsequent actions. KEY TAKEAWAYS Drafting precision and clarity is paramount: As is the case with any legal document, it is always advisable to use precise and unambiguous language and clearly demarcate which parts of a term sheet are binding and which are not. Parties should avoid ambiguity, especially when large financial obligations are involved. While the conduct of parties matters, it cannot easily override express and unambiguous terms. The OYO Zostel Judgment reinforces the idea that if parties want an agreement to be non-binding, they must state it clearly and act consistently with that intention.   Execute your definitive agreements before performing: As is evident from DHC’s findings in the OYO Zostel Judgement, even if parties begin to act upon a term sheet, failure to execute definitive agreements can nullify enforceability of such term sheet. The remedy of specific performance may be available only when there is a valid and enforceable contract with a clear meeting of minds on all essential terms. CONCLUSION The law does not look kindly on casual commitments in high stakes deals. The OYO-Zostel episode reaffirms a crucial lesson for dealmakers: a term sheet is more than a memo - it can be the linchpin of enforceable legal commitments. It serves as a cautionary tale on the limits of relying on term sheets. While they are essential tools in deal-making, term sheets are not substitutes for final contracts. While we await SCI’s views on this, the DHC’s judgment reaffirms that in commercial transactions, intent must be reflected in binding documentation, and that conduct alone may not suffice. In the world of high-stakes transactions, what is agreed in written truly matters. 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.   Shivani (Senior Associate, General Corporate and Transactions) Natasha Tuli (Counsel, General Corporate and Transactions)   [1] 2025 SCC OnLine Del 3377 [2] (2009) 5 SCC 313

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.