LEGAL UPDATES FOR THE MONTH OF DECEMBER, 2023

Special Event

Indianisation of the Indian Legal Landscape: Decolonizing Academia & Legal System, 22 nd
December, 2023

The team at Ivy Law participated in an event on Indianisation of the Indian Legal Landscape:
Decolonizing Academia & Legal System organized by the Gujarat National Law University. The
discussion was exhaustive, covering various aspects including the concept of "Indianisation" in
the legal sphere and how it has gained significant traction in recent years. The webinar raised
crucial arguments about the post-colonial identity of India's legal system and academia and also
delved into the complex task of reconciling inherited colonial frameworks with the unique
values, ethos, and realities of India's diverse society. Further, how to do away with foreign and
old laws and come up with new frameworks that could help tackle Indian problems in a more
‘Indian manner’ as well as the process of decolonizing the legal system were also deliberated
upon.

Legal Updates

1. The Reserve Bank of India (“RBI”) Announces Relaxations, Measures for Financial
Technology (“Fintech”) Sector
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=56888

RBI’s Monetary Policy Committee, on 8th December, 2023, has announced a slew of measures,
major relaxations and new initiatives for the fintech industry which is at present under a lot of
regulatory scrutiny. RBI has raised the payment limits for Unified Payments Interface
transactions for the hospitals and educational institutions from INR 1 lakh to INR 5 lakhs. It has
also created a fintech repository which would be run by RBI’s Innovation Hub to better
understand the developments in the fintech ecosystem. Further, RBI has decided to lay down a
regulatory framework for web aggregation of loan products to enhance customer centricity and
transparency in digital lending.

2. RBI Tightens Investing Norms for Banks and Non-Banking Finance Companies
(“NBFCs”) Investing in Alternate Investment Funds (“AIFs”)
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12572&Mode=0

RBI, on 19th December, 2023, has tightened norms for banks and NBFCs regarding the
evergreening of loans by lenders through AIFs by advising them to refrain from investing in
 AIFs having investment in companies that have taken loan from the lenders concerned in the past
12 months due to the possibility of high risk and the likelihood of dubious credit, both of which
could have an impact on the flow of institutional capital. Further, RBI has also directed lenders
that such investments would be required to be liquidated within 30 days and if they are not able
to liquidate their investments within the prescribed time limit, they should make 100 per cent
provision on such investments.

3. RBI Releases Draft Licensing Framework for Authorized Persons (“APs”) under Foreign
Exchange Management Act, 1999 (“FEMA”)
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=56993

RBI, on 26th December, 2023, has notified a draft licensing framework for APs under FEMA
with the aim to improve the ease of foreign exchange (“forex”) transactions and strengthen the
regulatory mechanisms. The draft emphasizes on rationalizing the authorization framework for
money changers in view of the widespread availability of banks and banking services to the
public, overseeing alternative models for the facilitation of forex related services along with the
reviewing of the regulatory framework for the APs. Further, the primary objective of the
notification is to achieve operational efficiency in the delivery of forex facilities to common
persons, tourists and businesses, while also maintaining appropriate safeguards.

4. License Withdrawal by RBI Compel Online Payment Aggregators to Seek Alternative

Business Options
https://economictimes.indiatimes.com/tech/technology/under-rbi-embargo-payment-apps-try-
out-new-business-lines/articleshow/105705617.cms

RBI had put forward a regulatory ban on various payment aggregators to onboard new merchants
and businesses, which has forced these venture capital-backed firms to scout for alternative
sources of revenue. As such embargoes lead to slower growth, stagnating revenue and, in turn,
stressing on valuations, therefore, these companies are now on the lookout for other ways to
generate money by focusing on international markets, offline payments, and remittances. They
are further adding new features, services, and products for their existing customers. However, on
the other hand, the ban has opened numerous opportunities for other payment companies to enter
the Indian market.

5. Banks Seek More Time from RBI to Declare Wilful Defaulters

https://economictimes.indiatimes.com/industry/banking/finance/banking/lenders-again-move-rbi-
on-wilful-defaulter-tag-for-non-performing-accounts/articleshow/105735838.cms
 RBI had earlier granted six months’ time period to banks across the nation on the treatment of
wilful and large defaulters, in its draft rules, to which, the banks have reached out to RBI again,
seeking an extension of another six months for the declaration of a non-performing asset as a
wilful defaulter. Further, banks’ contention also includes the fact that the period allotted to them
by RBI is considerably less as borrowers are required to give an ‘in-person’ meeting before
declaring themselves as a non-performing asset, which is subjected to delays.

6. RBI and Ministry of Electronics and Information Technology (“MeitY”) Team Up to

Tackle Illegal Forex Trading

https://economictimes.indiatimes.com/industry/banking/finance/rbi-cracks-down-on-illegal-
forex-trading/articleshow/106260061.cms

RBI, in collaboration with banks and MeitY, has suggested greater public awareness and
stringent measures to ensure that banking channels are not used for illegal forex trading. RBI has
so far named 75 entities in its alert list, which includes platforms and websites that are not
authorized to deal in foreign currency or execute any forex transactions. Permitted forex
transactions can be executed electronically, however, they should be on RBI authorized platforms
or recognized stock exchanges as per the terms and conditions specified by the RBI.

7. Failure to Curb Deepfakes May Lead to Action Under Indian Penal Code, 1860 (“IPC”)

https://economictimes.indiatimes.com/tech/technology/failure-to-curb-deepfakes-may-lead-to-
action-under-ipc-too-official/articleshow/105763100.cms?
utm_source=newsletter&utm_medium=email&utm_campaign=update&ncode=63410566368b44
f706211fbaf278731825011289d6bcd4da86e688261f92f2768a9377b9bc3c366479944517a05421
6fde34319d58d42ee8eedef9819a46b00c384008872f1fe80e0f12b0beecf25386

MeitY has warned social media and internet intermediaries that failure to act on deepfake,
synthetically altered content and other similar harm mentioned in the Information Technology
Rules, 2021 (“IT Rules”) could attract action under relevant sections of IPC apart from the IT
Rules. This new amendment is actively under consideration with the aim to ensure social media
and other platforms’ compliance on deepfake in order to gain the trust and safety of citizens of
India. Earlier, in November, 2023, MeitY had cited various sections and rules of the Information
Technology Act, 2000 and IT Rules, specifically stating that social media intermediaries must
ensure that the users of their platforms do not host any content which impersonates another
person.

8. Central Government (“CG”) May Soon Permit Angel Funds to Invest More in Startups
Boosting System
 https://economictimes.indiatimes.com/epaper/delhicapital/2023/dec/12/et-mkts/angel-funds-may-
soon-get-to-invest-more-in-startups-boosting-system/articleshow/105913512.cms?
utm_source=newsletter&utm_medium=email&utm_campaign=ETepaper_paid&utm_content=s
mart-
investing&ncode=63410566368b44f706211fbaf278731825011289d6bcd4da15bab469c5d64bd3
1d5332817e387f87712b7278353ad5df38d411b0375f8c66047010f865e842018b021170cca66351
1212e8019557ad90
Angel Funds, a sub-category of venture capital funds under AIFs which are regulated by
Securities and Exchange Board of India (“SEBI”), who generally invest smaller amounts of
money than venture capitalists, but can be a valuable source of funding for early-stage
businesses, are likely to get a bigger role in future as these pooled vehicles could be given the
opportunity to take larger bets on startups whose early stage plans they bankroll. CG and SEBI
are on the verge to take a relook at the maximum investment that an angel fund can make in a
single company and could double the investment limit which, at present, is capped at INR 10
crore, with the aim to provide more flexible funding than traditional investors so that they can
impart valuable mentorship.
9. CG Reconstitutes National Startup Advisory Council (“NSAC”)
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1987898#:~:text=Department%20for
%20Promotion%20of%20Industry,a%20strong%20ecosystem%20for%20nurturing
CG, on 18th December, 2023, has reconstituted NSAC with the nomination of 31 non-official
members representing various stakeholders such as founders of startups, veterans who have
grown and scaled companies in India, and persons capable of representing the interest of
investors into startups, among others. The term of the said members would be two years. The
Department for Promotion of Industry and Internal Trade had constituted the NSAC in January,
2020, to advise CG with measures required to build a strong ecosystem for nurturing innovation
and startups in the country. NSAC meets on a regular basis to suggest measures to foster and
promote a culture of innovation among citizens, and support creative and innovative ideas
through incubation and research.
10. 10 States/ Union Territories Hold Up Labour Codes Rollout
https://economictimes.indiatimes.com/epaper/delhicapital/2023/dec/21/et-comp/10-states/uts-
hold-up-labour-codes-rollout/articleshow/106166403.cms?
utm_source=newsletter&utm_medium=email&utm_campaign=ETepaper_paid&utm_content=ec
onomy-macro-micro-
more&ncode=63410566368b44f706211fbaf278731825011289d6bcd4da15bab469c5d64bd31d53
32817e387f87712b7278353ad5df022eb770ffdb70526f2854520b9bc0f5cf3bbd7c4e77fab396fdc3
00cb22964f
 The fate of the four labour codes, namely the Code on Wages, 2019, the Industrial Relations
Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and
Working Conditions Code, 2020, hangs in the balance as at least 10 states and union territories
are yet to frame rules for two or more codes. Labour, being a concurrent subject, the Ministry of
Labour and Employment is of the view of converging towards a simultaneous implementation of
the codes in order to avoid any legal issues after implementation.

11. The Competition Commission of India (“CCI”) Proposes Draft Rules on Penalty Under the
Provisions of the Competition Law

https://www.cci.gov.in/images/whatsnew/en/background-note-turnover-or-income-
regulations1703241036.pdf

CCI has put forth a proposal in its draft penalty regulations to exclude indirect taxes, trade
discounts, and intra-group sales when calculating the turnover of an entity for imposing penalties
related to violations of competition law. Seeking input from the public on the same, CCI, on 22 nd
December, 2023, has opened a window for comments on a set of regulations namely the CCI
(Determination of Turnover or Income) Regulations, 2023. The objective of the proposed
regulation is to establish a thorough and transparent framework for assessing turnover or income
for both enterprises and individuals as it would have a bearing on how much penalties would be
levied on enterprises for their anti-competitive conduct.

12. Rajya Sabha (“RS”) Passes the Telecommunications Bill, 2023 (“Telecom Bill”)

https://sansad.in/rs/legislation/bills

RS, on 21st December, 2023, has passed the new Telecom Bill, with the aim to replace the age-
old Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 and to establish a
new framework emphasizing on inclusive growth and safe and secure telecommunication
(“telecom”). The Telecom Bill further intends to include internet-based calling and messaging
services as well as over-the-top platforms within the purview of telecoms. CG will now have the
authority to take complete control of telecom services in the event of a public emergency.
Moreover, the companies would require authorization to start providing telecom services instead
of licenses that are issued at present.

13. The Supreme Court of India (“SC”): Group of Companies Doctrine (“GOCD”) Applicable
to Arbitration Agreements

https://www.scobserver.in/reports/group-of-companies-doctrine-in-arbitration-proceedings-
judgement-pronouncement/#:~:text=Chandrachud%20unanimously%20upheld%20the
%20validity,signatories%20to%20the%20arbitration%20agreement.
 SC, on 6th December, 2023, upheld the validity of GOCD in Indian arbitration jurisprudence
wherein an arbitration agreement entered into by a company which is part of a group of
companies may bind non-signatories to the arbitration agreement as well since the definition of
parties under section 7 (Arbitration agreement) of the Arbitration and Conciliation Act, 1996
includes both signatories as well as non-signatories. However, in case of non-signatories, courts
must identify whether the non-signatory entities consented to be bound by the arbitration
agreement through their acts or conduct, and once the validity of an arbitration agreement is
established, the court or tribunal can determine which parties are bound by such agreement.
Therefore, SC finally held that merely being a part of a group of companies is not sufficient to
invoke a non-signatory to be a part of an arbitration agreement.

14. The Jammu and Kashmir and Ladakh High Court (“J&K HC”): Maternity Leave Doesn't
Result in a Break in Service or Reduction in Total Service Rendered

https://www.livelaw.in/high-court/jammu-kashmir/jammu-kashmir-ladakh-high-court-maternity-
leave-break-service-reduction-total-service-promotion-244681#:~:text=The%20Jammu%20and
%20Kashmir%20and,as%20being%20in%20active%20service

The J&K HC, in its recent judgment, while upholding six female bankers’ promotion rights,
made it clear that no kind of leave approved by the organisation, including that of maternity
leaves, is to be considered a break of the service or reduction in the work that the organisation
has prescribed to its employees. This judgement came into light after six banking employees
were denied being considered for promotion by the Jammu & Kashmir Bank since the bank
deducted their maternal leave period from the total tenure.

15. The New Drugs, Medical Devices and Cosmetics Bill, 2023 (“NMC Bill”) Seeking to
Regulate Drugs, Medical Gear to be Tabled in the Parliament

https://www.fortuneindia.com/enterprise/new-drug-law-to-be-introduced-in-parliament/114988

The NMC Bill, which seeks to repeal the age-old Drugs and Cosmetics Act, 1940, may soon be
introduced in the ongoing session of the Indian Parliament. The NMC Bill is designed to regulate
the import, manufacture, distribution, and sale of drugs, medical devices, and cosmetics. It
further aims to ensure the quality, safety, efficacy, and performance of these products, including
clinical trials for new drugs and investigations for medical devices. Regulation of electronic
pharmacies is another important feature that is included in the bill. The NMC Bill, along with
policies to encourage startups and promote research and development, would play a significant
role in expanding the country’s innovation ecosystem.