TOPIC: ENERGY DISPUTES IN INDIA

SUBJECT: NATURAL RESOURCES AND ENERGY LAWS

FACULTY: ASST. PROF SOMA BHATTACHRYA

BY: ANUSHA RAO THOTA

ROLL NUMBER: 2017099
SEMESTER – VI

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 TABLE OF CONTENTS

Chapter I...................................................................................................................................3
Synopsis.................................................................................................................................3
Abstract..................................................................................................................................3
CHAPTER II............................................................................................................................3
INTRODUCTION..................................................................................................................3
Role of government................................................................................................................3
Rules and industry standards..................................................................................................4
Performance mitigation..........................................................................................................6
Nuisance.................................................................................................................................7
Liability and limitations.........................................................................................................7
Enforcement...........................................................................................................................8
Expert evidence......................................................................................................................8
enforcement process for foreign judgments and foreign arbitral awards...............................9
Regulatory agencies...............................................................................................................9
Judicial review.....................................................................................................................10
Fracking................................................................................................................................10
legal or regulatory barriers for foreign companies...............................................................11
Criminal, health, safety and environmental liability of companies.....................................11
Update and trends.................................................................................................................12
protection for indigenous groups.........................................................................................13
CHAPTER III.........................................................................................................................14
Conclusion............................................................................................................................14
Bibliography.........................................................................................................................14

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 CHAPTER I

SYNOPSIS
TOPIC: Energy Disputes in India

OBJECTIVE OF THE STUDY:

To study about the Energy Disputes of India and its difficulties.
SIGNIFICANCE OF THE STUDY:
In this project, the author will discuss about Energy disputes and the due procedure that needs
to be followed by corporations when a dispute arises.

SCOPE: The scope of this study is limited to India.

RESEARCH OBJECTIVE:
This paper’s central focus is on the disputes relating to energy in India

RESEARCH METHODOLOGY:
The researcher has adopted doctrinal method of research and the entire paper is in the form of
analysis of established procedures, following the analytical research style. The primary
sources are articles, reviews and statistics.

REVIEW OF LITERATURE:

Globalisation and Politicals of Natural Resources: Nita Rudraand Nathan M. Jensen

The speaker talks about the relationship between globalization and natural capital is of
immediate importance to political science: The implications for the distribution of power
which be profound. Not only might leaders in resource-rich nations such as Libya,
Venezuela, and Iran be invigorated by their control over these enormously sought resources,
but also resource-dependent nations might make it increasingly difficult to expand their
global economic power and maintain domestic stability. These impacts of influence are part
of why political scientists have studied how countries manage their natural capital. However,
most studies have concentrated on how domestic factors encourage countries (or not) to

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leverage resource resources effectively. It is striking that the international aspects of this issue
have been generally overlooked in more recent literature.

Introduction: Renewable energy by Talus. Kim.

This article focuses om controversies over renewable energy in the EU. It is not limited solely
to disputes concerning over EU lae but also includes various types of disputes relating to
renewable energy that have recently arisen in the EU region. Those problems can include
international public law, EU law and contractual agreements.

Oil, Gas and Energy Disputes: Trends in Tough Times by Dr. Robert Gaitskell

This article talks about how the nations are utilizing the resources around the world. It
focuses on all renewable and non renewable resources and also specially talks about fossil
fuel conservation.

RESEARCH QUESTION:  

Whether due process followed in Energy disputes in India are different and more taxing than
normal commercial disputes.

Lit review

The Global Epicenter of Impact Investing: An Analysis of Social Venture Investments in

India

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Like the name implies, social venture capital funds finance businesses that have a positive
effect on people while still providing investors with a fair return. Since the fund manager is
required to analyse the social benefit generated by companies, they are often referred to as
impact funds. A social venture capital fund must invest at least 75% of its assets in
companies that have a positive impact on society, according to SEBI guidelines. This
distinguishes them from venture capital funds, which are primarily concerned with risk and
reward.
Financial inclusion, accessible healthcare, renewable energy, education, and agriculture are
popular themes for social venture capital funds in India. These funds put money into early-
stage start-ups in this industry. They provide seed funding as well as organisational and
technological assistance to help start-ups establish their businesses and establish governance
and regulatory procedures. They can also have business contacts and assist them in obtaining
additional funds for expansion. Once the company they invested in has established itself,
these funds will decide to leave the firm. The portfolio manager's exit plan, on the other hand,
varies.

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 The waterfall mechanism is used to divide returns from social investment funds between
donors and the fund. The capital as well as a certain minimum benefit, known as the hurdle
rate, are spread to investors first. Any excess gains are split between participants and the fund
management team according to the terms specified in the scheme details sheet.

For a long time, social venture capital funds have existed. Lok Capital, Aavishkaar Venture
Management, Elevar Equity, and Menterra Venture Advisors have all been in business in
India for a long time. SEBI listed social enterprise funds as Category 1 AIFs in 2012.
(alternative investment funds). Ankur Capital, Unitus Ventures, and Planner India are among
the companies that have launched a category 1 AIF social venture fund.

These funds are structured similarly to other tier 1 AIFs. They need a minimum investment of
Rs.1 crore and a three-year lock-in period with a two-year extension option. For managing
the fund, fund managers can charge about 2% annual fund management fees.

NGOs and socially aware HNIs and UHNIs are likely to be involved in investing in these
funds. Responsible investments is picking up on a global scale. These funds should be
recommended to the high-net-worth and ultra-high-net-worth clients who choose to invest in
social enterprises. As part of their CSR programmes, you can even refer these funds to
corporate customers.
While they exist in reality, social investment funds were only officially recognised under the
AIF Regulations. A social venture fund is described as a "alternative investment fund that
invests primarily in securities or units of social ventures and that satisfies the fund's social
performance norms and whose investors can consent to earn restricted or muted returns"
under the AIF Regulations.
What are Alternative Investment Funds?
Alternative Investment Funds AIF pool money from sophisticated private investors. Funds
collected are invested according to the investment policy of the AIF. Securities and Exchange
Board of India‘s mutual fund regulations doesn’t govern AIFs. However, AIF in India has its
regulation, Regulation 2 (1) (b) of the Regulation Act, 2012 of SEBI. An AIF in India can be
established as a company, Limited Liability Partnership (LLP), corporate body, or trust.
AIFs invest in investments that are not traditional (for example, equities or fixed income).
Securities and Exchange Board of India classifies AIFs under three broad categories. Namely,
Category I AIF, Category I AIF and Category III AIF. Each of the categories has different
investments as per the broad definition of the category. Some of them are private equity,
venture capital, hedge fund, and angel fund etc.
The minimum investments and fees for AIFs are higher than conventional investments. It is
difficult to value an AIF as the asset classes that they invest in are pretty rare. AIFs are
illiquid as these investments are open only to limited investors. The transaction costs for AIFs
are lower than traditional investments as the turnover is lower. AIFs don’t share any
information relating to the fund publicly. Also, AIFs have less opportunity to advertise to
potential investors.
WHAT ARE THE TYPES OF ALTERNATIVE INVESTMENT FUNDS IN INDIA?
Securities and Exchange Board of India (SEBI) categorises Alternative Investment Funds
into three broad categories. Investors can choose to register in any of the following three
categories and subcategories thereof.

 Category I AIF:

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o Venture Capital Funds
o Angel Funds
o SME Funds
o Social Venture Capital Funds
o Infrastructure funds
 Category II AIF
o Private Equity (PE) Funds
o Real estate Funds
o Funds for distressed assets
o Debt Funds
o Funds of Funds
 Category III AIF
o Hedge Funds
o Private Investment in Public Equity Funds (PIPE)

WHAT ARE CATEGORY I AIFS?

Category I AIFs invest in startups or early-stage ventures or SMEs or social ventures or
infrastructure or other sectors. The government or regulators consider these sectors as
economically and socially desirable. Following are the subcategories under Category I AIF:
Social Venture Capital Funds
As the name suggests, social venture capital funds provide funding for businesses that
positively impact lives. These businesses also offer reasonable returns to their investors.
Moreover, these funds are most commonly known as impact funds. The fund manager of
these funds analyses the social impact the business creates on society.
Following are some of the key features of Social Venture Capital Funds:

 Minimum investment of INR 1 crore.

 Lock-in period of three years, with an option to extend for two years.
 The fund has to invest a minimum of 75% of the assets in businesses that have a
positive social impact.

Mostly, SVCFs do theme-based investing in India. For example, education, affordable

healthcare, agriculture, and clean energy.
In addition to seed investment, social venture funds also provide technical and operational
support to businesses. They also help in setting up the business, laying down compliance and
governance procedures. Also, if necessary, they offer business connections and help in
getting further funding.
Investors and the fund share the returns from the social venture fund. They follow the
waterfall mechanism. As per this mechanism, firstly, the capital and hurdle rate is distributed
among the investors. The hurdle rate is the minimum profit that is given. The excess returns
are then distributed as per the terms in the scheme information document.

I. Laws Relating to Social Venture Funds in India

Offshore social venture funds tend to pool capital (and grants) outside India and make
investments in India like a typical venture capital fund. Such offshore funds may not directly
make grants to otherwise eligible Indian opportunities, since this may require regulatory
approval.

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Onshore social venture funds are required to be registered as Category I AIFs under the
specific subcategory of social venture funds. In addition to the requirement to fulfill the
conditions set out in the definition (set out above), social venture funds under the AIF
Regulations are subject to the following restrictions and conditions:

Requirement to have at least 75% of their investible funds invested in unlisted securities or
partnership interest of ‘social ventures’10

“10. Regulation 2(1)(u) of the AIF Regulations states – “social venture fund” means a trust,
society or company or venture capital undertaking or limited liability partnership formed with
the purpose of promoting social welfare or solving social problems or providing social
benefits and includes -

i. public charitable trusts registered with Charity Commissioner;

ii. societies registered for charitable purposes or for promotion

of science, literature, or fine arts;

iii. company registered under Section 25 of the Companies Act,”

Allowed to receive grants (in so far as they conform to the above investment restriction) and
provide grants. Relevant disclosure in the placement memorandum of the fund will have to be
provided if the social venture fund is considering providing grants as well

Allowed to receive muted returns

II. Characteristics of Social Venture Funds

Social venture funds tend to be different from venture capital funds or private equity funds
not just in the investments that they make, but also in the nature of commitments that they
receive from their limited partners / investors. The following is a list of some of the
characteristics that a social venture fund may expect to have:

Investors making grants (without expectation of returns) instead of investments;

The Fund itself provides grants and capital support considering social impact of such
participation as opposed to returns on investment alone;

  Fund targeting par returns or below par returns instead of a fixed double digit IRR;
  Management team of the Fund participating in mentoring, “incubating” and growing
their portfolio companies, resulting in limited token investments (similar to a seed
funding amount) with additional capital infused as and when the portfolio grows;
  Moderate to long term fund lives in order to adequately support portfolio companies.

Social venture funds also tend to be aligned towards environmental, infrastructure and
socially relevant sectors which would have an immediate impact in the geographies
where the portfolio companies operate.

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 1956/Section 8 of the Companies Act, 2013; iv. microfinanceinstitutions.

III. Alternate Investment Fund Regulations

An alternative investment fund (“AIF”) is a privately pooled investment vehicle which

collects funds from investors, whether Indian or foreign, for investing it in accordance with a
defined investment policy for the benefit of its investors. Social venture funds (“SVFs”) are
privately pooled investment vehicles set up for the purpose of promoting social welfare or
solving social problems or providing social benefits. 21

AIFs, including SVFs, are regulated by Security Exchange Board of India (SEBI) under the SEBI (Alternative
Investment Funds) Regulations, 2012 (“AIF Regulations”). Being private investment vehicles set up for a social
cause, the AIF Regulations allow SVFs to provide muted or nil returns to investors, and also permit them to
receive and deploy grants for downstream investments in social ventures. 22

AIFs have mobilized large amounts of money for investment into India. Category II AIFs have raised
commitments to the tune of INR 1.3 lakh crore as of June 30, 2018. Category I AIFs have raised commitments
of INR 28,717 crore as of the same date, with SVFs raising INR 1,133 crore of such total. Various AIFs,
including non-SVFs, are engaged in promoting social welfare projects in India. While the investment program
of AIFs is the prerogative of the investment manager, in practice, it is often seen that such program is heavily
influenced by contributors through the agreements entered into with respect to contribution to the AIF.

AIFs therefore, could therefore present a suitable avenue for companies undertaking CSR activities to channel
investments into socially beneficial projects and ensure compliance through arrangements which are ultimately
under the purview of a statutory regulator i.e. SEBI. Therefore, the existing CSR framework should be amended

to allow CSR funding to AIFs primarily investing in social ventures (as understood under the AIF Regulations).
In this respect, it would be preferable

to provide such allowance in respect of all Category I and II AIFs with an investment programme primarily
focused on social ventures, This can ensure a greater flow of funding to social welfare projects since, as
discussed above, Category I AIFs other than SVFs and Category II AIFs have historically (and as may be
expected going forward too) raised much greater commitments than SVFs.

For all such AIFs, the Fund and the investment managers may be bound, through appropriate fund documents,
to adhere to the relevant policy if they accept funding from companies from their CSR budgets. A parallel is
seen in the insurance industry, wherein the Insurance Regulatory and Development Authority of India (“IRDA”)
has stipulated that Category II AIFs which accept investments from insurers (regulated by the IRDA) should
invest a minimum of 51% of their funds in infrastructure entities, small and medium enterprises, venture capital
undertakings or social venture entities.23 Typically, this requirement is incorporated in fund documentation by
insurers while entering contribution agreements or related fund documents, thereby binding the investment
manager and the AIF.

However, specifically with respect to receipt of grants by SVFs, greater regulatory clarity would be welcome on
few salient aspects (discussed here). While permission in this regard has been granted, the regulations are not
very clear on the interplay between a grant and an investment with a muted return and what each should
constitute. Further, there is a legislative blind-spot between the AIF Regulations, the Foreign Contribution
Regulation Act, 2010 (FCRA) and the Income Tax

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Act, 1961 (“ITA”). While the AIF Regulations allow SVFstoreceivegrants,bothfromdomesticaswell as foreign
sources, the provisions of the FCRA clearly state that no foreign contributions can be received by any
organization in India without taking specific approval from the Ministry of Home

Affairs (“MHA”).24 Thus, despite SVFs being purely regulated under the AIF Regulations for the purposes of
receiving grants and making investments using such grants, the provisions of FCRA only envisage non-profit
entities to receive foreign grants. Even under the provisions of ITA, typically only non- profit entities are
considered as compatible vehicles to receive grants, while AIFs typically are for-profit Special Purpose Vehicle
(SPVs). Thus, there are certain non-convergences between the provisions of the AIF Regulations, the ITA and
the FCRA in respect of receipt of foreign and/or domestic grants, and its application thereof.

Social Venture Fund-I (Outcome Funding Model)

Description: In this model, a Social Venture Fund is set up and managed by a fund manager.
Risk investors in India and abroad invest in units of the SVF. The SVF uses this capital to
invest in social enterprises

or through captive investments provides funding to service providers (in consultation with
risk investors) who will help achieve the outcome with respect
to specific projects. Once outcome is verified the outcome funders in India can make the
outcome funding to the SVF and the outcome funding by offshore funders can be received by
the captive entities which will upstream the returns to investors.

Advantages: The main advantages are that this structure enables pooling in of funding from
several sources of both risk and outcome funding capital. As a consequence, the scale of
impact that can be achieved through such a platform increases significantly when compared

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with a simple SIB model which is more suited to a project specific arrangement between
limited parties.

Disadvantages: The main disadvantage is that the capital involved should be of a significant
size to justify the costs of setting up this structure. Secondly, there are several novel elements
in this innovative financing structure, which commercially speaking, impact investors or the
social enterprises may need comfort that it will not be challenged by any of the tax or
regulatory authorities. Since it is the first of its kind structure, no precedents exist to confirm
that such a model has been shown to successfully work.

Social Venture Funds – II (Socially Responsible Investing)

Description: In this model, a Social Venture Fund is set up and managed by a fund manager.
Risk investors in India and abroad invest in units of the SVF. The SVF uses this capital to
invest into a section 8 company which will run a hospital or an education institution. The
SVF would also have a captive service LLP which would provide management services to the
Section 8 company. Typically, this is the model currently in the market, without the SVF.

Advantages: The primary advantage of this model, compared with the current structure in the
market,
is that while primarily the investors would be paid returns from the profits made from the
operations of the Section 8 company and the Service LLP together, subject to payment of
applicable taxes, they also have access to additional outcome funding provided they are able
to meet such outcome funding targets. This is likely to significantly improve returns and
outcomes for the stakeholders involved.

Disadvantages: The main disadvantage is that the capital involved should be of a significant
size to justify the costs of setting up this structure. Secondly, there are several novel elements
in this innovative financing structure, which commercially speaking, impact investors or the

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social enterprises may need comfort that it will not be challenged by any of the tax or
regulatory authorities. Since it is the first of its kind structure, no precedents exist to confirm
that such a model has been shown to successfully work. Further, while it might be easier to
set this up from scratch, moving existing structures into this model might prove a challenge.

conclusion
One financial innovation that can be a gamechanger for the social sector is a social venture
fund (SVF). A type of alternative investments fund (AIF) permitted by India’s securities
regulator, the Securities and Exchange Board of India (Sebi), an SVF is an intermediated
structure that can receive funds from donors and investors, who are issued units in exchange.
Much like a mutual fund, it is managed by a professional fund manager, who then ‘invests’
the funds. The difference being that an SVF can invest in securities issued by social sector
organisations, including non-profit organisations (NPOs). Unlike other AIFs, the structure of
an SVF allows it to receive grants alongside commercial capital and disburse them.
Interestingly, while SVFs have been allowed since 2012, no non-profit focused SVF launched
in India so far.
So why is an SVF a promising financial innovation for the cause of social impact?
First, it unlocks the benefits of a collective grant-making entity that is managed by a
professional ‘fund manager’.
For donors, it offers an opportunity to discover better or lesser-known NPOs through an
expert funder manager. This is comparable to what a general partner does for limited partners
in the venture capital/private equity world. It is cost-effective, as it limits the need for donors
to have their own in-house teams and domain expertise to diligence grantees. It enables
access to a large NPO pool without the need for on-ground presence, which is especially
useful for foreign philanthropic funders.
For NPOs, it broadens the pools of capital by crowding in new funders and lowers overheads
and reporting requirements. This is because they have to deal only with the manager of the
collective entity, and not with individual donors. This liberates NPOs from the burden of
reporting to different donors in different formats and reporting cycles and frees up more of
their organisational mind space to focus on their mission.

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For the non-profit sector as a whole, it enables the creation of new far-reaching opportunities
for impact at a scale, which may otherwise not happen, such as large collective efforts around
specific causes like adolescent girls, migration, etc.
But, the benefits of setting up a regulated SVF go beyond that of any generic collective grant-
making entity.
The ‘trust-mark’ that comes with being a regulated entity provides greater confidence to new
non-traditional funders. The regulatory umbrella of Sebi brings in greater credibility and
accountability and also minimises the perception of idiosyncratic risks associated with a non-
regulated, traditional grant-manager.
The Sebi working group (WG) on the social stock exchange (SSE) takes the SVF concept a
step further. It recommends that the units issued by SVFs should be listed on the envisaged
SSE, provided that the recipients of these funds commit to reporting their social impact
performance on the SSE in standardised disclosure formats proposed by the WG. Listing on
the SSE will, therefore, enable greater clarity on the “what” and the “how” of the impact
created, using standardised frameworks. Over time, the availability of information on the
impact performance of various NGOs can help well-performing NPOs raise more capital and
scale up their work, and incentivise the attainment of impact goals.
Setting up the first regulated, non-profit focused ‘SSE-listed’ SVF can be a major milestone
for India’s non-profit sector. It could become a template of sorts that can be replicated to
create an additional fundraising route for non-profits.
We believe that the SVF innovation could be as important to the non-profit sector, as mutual
funds have been to investors, who can now participate in financial markets without having to
set up in-house teams to do stock-picking. The onus is now on the government, Sebi and the
first set of bold funders to seize the moment and make this a reality.

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