Highlights:

Corporate Brief 

  • Circular dated 07.11.2024 issued by the Reserve Bank of India regarding Investment by Non-Residents in Sovereign Green Bonds under the Fully Accessible Route.
  • Circular dated 11.11.2024 issued by the Reserve Bank of India regarding the Operational framework for reclassification of Foreign Portfolio Investment to Foreign Direct Investment (FDI).

RERA Brief

  • Office Order dated 26.11.2024 issued by Uttar Pradesh RERA (“UP RERA”) with respect to directions under Section 15 read with Section 37 for transferring/ assigning majority rights and liabilities of a RERA registered project to a third party.

IPR Brief

  • ANI Media Private Limited versus OPEN AI Incorporation & ANR.
  • India ranks in top 10 under the IP domains as per World Intellectual Property Indicators (WIPI) Report.
  • The Office of CGPDTM has introduced four (4) new miscellaneous forms under Trade Marks.

NCLT Brief

  • State Bank of India & Ors. Vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

Litigation Brief

  • Consent Decree does not create a new right – it only asserts pre-existing rights; Payment of stamp duty not required. 

Corporate Brief:

Circular dated 07.11.2024 issued by the Reserve Bank of India regarding Investment by Non-Residents in Sovereign Green Bonds under the Fully Accessible Route. 

  • As per the said Circular, the RBI has decided to also designate Sovereign Green Bonds of 10-year tenor issued by the Government in the second half of the fiscal year 2024-25 as ‘specified securities’ under FAR eligible for investment by non-resident investors without any restrictions. 

Circular dated 11.11.2024 issued by the Reserve Bank of India regarding the Operational framework for reclassification of Foreign Portfolio Investment to Foreign Direct Investment (FDI). 

  • The Reserve Bank of India issued a circular dated 11.11.2024 regarding the Operational framework for reclassification of Foreign Portfolio Investment to Foreign Direct Investment (FDI).
  • Under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, (hereinafter referred to as ‘Rules’) it is prescribed that the investment made by foreign portfolio investor along with its investor group (hereinafter referred to as ‘FPI’) should be less than 10 percent of the total paid-up equity capital on a fully diluted basis.
  • FPI investing in breach of the prescribed limit have the option of divesting their holdings or reclassifying such holdings as FDI.
  • The said Circular sets forth the operational framework to be followed in case an FPI intends to reclassify its foreign portfolio investment into FDI including inter alia the following:
    • reclassification shall not be permitted in any sector prohibited for FDI;
    • The FPI concerned is required to obtain the requisite approvals/concurrence before intending to acquire equity instruments beyond the prescribed limit.
    • The FPI should clearly articulate its intent to reclassify existing foreign portfolio investment held in a company into FDI and shall provide the copy of the necessary approvals and concurrence to its Custodian pursuant to which the Custodian shall freeze the purchase transactions by such FPI in equity instruments of such Indian company, till completion of the
    • Provided that where the necessary prior approvals/concurrence have not been obtained by the FPI, the investment beyond the prescribed limit shall be compulsorily divested within the prescribed time.
  • The reporting requirements for the reclassification and timelines for the same have also been set forth in the circular.
  • Post completion of reporting as above, the FPI shall approach its Custodian with a request for transferring the equity instruments of the Indian company from its demat account maintained for holding foreign portfolio investments to its demat account maintained for holding FDI. After ensuring that the reporting for reclassification is complete in all aspects, the custodian shall unfreeze the equity instruments and process the request. The date of investment causing breach in such cases shall be considered as the date of reclassification. Thereafter, the entire investment of the FPI in the Indian company shall be considered as FDI and shall continue to be treated as FDI even if the investment falls to a level below ten percent subsequently. The Foreign Portfolio investor along with its investor group shall be treated as a single person for the purpose of reclassification of foreign portfolio investment.
  • Post reclassification of foreign portfolio investment to FDI, the said investment shall be governed by Schedule I to the Rules.

RERA Brief:

Office Order dated 26.11.2024 issued by Uttar Pradesh Real Estate Regulatory Authority (“UP RERA”) with respect to directions under Section 15 read with Section 37 for transferring/ assigning majority rights and liabilities of a RERA registered project to a third party (“Directions”).

In supersession of the earlier Standard Operating Procedure (SOP) dated 15.05.2018 notified by UP RERA vide UP RERA Ciruclar No. 894/UPRERA/Website/2018-19 for the purpose of transfer or assigning of the Promoter’s rights, the UP RERA has issued Directions under Section 15 read with Section 37 for transferring/ assigning the majority rights and liabilities of RERA Registered Projects to third party.

The said Directions are applicable with immediate effect.

As per the said Directions:

  • The provision of Section 15 of the Real Estate (Regulation and Development) Act, 2016 (‘Act’) shall be applicable whether the transfer of majority rights and liabilities of a real estate project is through a sale or amalgamation or merger of the incumbent promoter of the project with third party.
  • The transfer or assignment shall be permissible only if the registration granted to such project, including extensions granted for such project, is valid.
  • The steps for transfer or assignment include (i) application for transfer by incumbent promoter of the project, (ii) examination of application, (iii) provisional approval and (iv) final approval.

Once the final approval has been received, the order under Section 15 of the Act will be communicated to the incumbent and intending promoters. The intending promoter is required to submit an online application for permission to update the project registration details along with requisite fee.

The non-compliance of the directions by the incumbent and intending promoters is punishable under Section 61 and 63 of the Act with penalty upto 5% of the cost of the project. The UP RERA Authority may also initiate the proceedings under Section 7 of the Act for revocation of the registration.

Full text of said Directions is available at: https://www.up-rera.in/pdf/SOP-Sec15.pdf

IPR Brief:

ANI Media Private Limited versus OPEN AI Incorporation & ANR.

CS(COMM) 1028/2024; The High Court of Delhi

For the first time in India, a suit for copyright infringement has been filed against an entity for its Artificial Intelligence tool. The suit has been filed by Asian News International (ANI) in the High Court of Delhi against OpenAI, alleging that its AI tool, ChatGPT, is exploiting ANI’s content for commercial gain.

The Court passed an order dated 19.11.2024 and raised some key issues:

  • Whether the storage by the Defendants of Plaintiff’s data (which is in the nature of news and is claimed to be protected under the Copyright Act, 1957) for training its software (ChatGPT), would amount to infringement of Plaintiff’s copyright.
  • Whether the use by the Defendants of Plaintiff’s copyrighted data in order to generate responses for its users, would amount to infringement of the Plaintiff’s copyright.
  • Whether the Defendants’ use of Plaintiff’s copyrighted data qualifies as ‘fair use’ in terms of Section 52 of the Copyright Act, 1957.
  • Whether the Courts in India have jurisdiction to entertain the present lawsuit considering that the servers of the Open AI are located in the United States of America.

The Court has appointed two Amici Curiae to assist the court in this case, namely, Mr. Adarsh Ramanujan, Advocate, a lawyer practicing in the field of intellectual property; and Dr. Arun George Scaria, Professor of Law, National Law School of India University.

The next date of hearing is on 28.01.2025.

India ranks in top 10 under the IP domains as per World Intellectual Property Indicators (WIPI) Report.

World Intellectual Property Indicators Report: India in the top 10 across the three main Intellectual Property Rights

On November 07, 2024, the World Intellectual Property Organization (WIPO) published its annual World Intellectual Property Indicators (WIPI) Report. India for the first time is in the top 10 across the three main intellectual property (IP) domains with both patent and industrial design applications more than doubling between 2018 and 2023 and trademark applications increasing by 60%.

Patent: India (+15.7%) recorded the fastest growth in patent applications in 2023, marking the fifth consecutive year of double-digit growth.

Trade Mark: India (+6.1%) experienced growth in filings in 2023 and the growth appears to have driven by increases in both resident and abroad filing.

Industrial Designs: The filing activity of 13 of the top 20 origins increased in 2023, with 7 experiencing double-digit growth. The sharpest increases came from applicants from 3 countries including India (+36.4%).

The report can be accessed at:

https://www.wipo.int/pressroom/en/articles/2024/article_0015.html

The Office of CGPDTM has introduced four (4) new miscellaneous forms under Trade Marks

In a recent development, the Office of the Controller General of Patents, Designs and Trade Marks (CGPDTM) has introduced four (4) new forms under the miscellaneous segment:

  1. Letter of withdrawal for Opposition

An Opponent has the opportunity file a specific request to withdraw the Opposition.

  1. Letter of withdrawal for Rectification

An Applicant can now file a specific request to withdraw the Rectification application.

  1. Reply to notice under Section 19 of the Trade Marks Act, 1999

This gives the Applicant a chance to file a reply against the decision to withdraw the acceptance of a trademark by the Trade Marks Registrar. 

  1. Reply to notice under Section 57(4) of the Trade Marks Act, 1999

This gives the Applicant an opportunity to file a reply against an order passed by the Trade Marks Registrar in a rectification matter.

A snapshot of ipindiaonline.gov.in is as below:

NCLT Brief:

Case Study: – State Bank of India & Ors. Vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

BRIEF FACTS: –

This Article is a study of the judgement dated 07.11.2024 by the Hon’ble Supreme Court of India in the matter of “State Bank of India & Ors. vs The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.” C.A. No. 5023-5024 of 2024. Jet Airways (India) Limited (“Company”) was admitted into the Corporate Insolvency Resolution Process (“CIRP”) on the basis of an application filed under Section 7 of Insolvency and Bankruptcy Code (“IBC”). The Resolution Plan (“Plan”) submitted by the Successful Resolution Applicant (“SRA”) was approved by the Committee of Creditors (“CoC”) with 99.22% voting. As per the Plan, it was a duty of the SRA to infuse as a first tranche payment of Rs. 350 crores, where Rs. 150 crores had to be paid by SRA in favour of State Bank of India (“SBI”) as an unconditional and irrevocable Performance Bank Guarantee (“PBG”) within 7 days of being declared as the SRA. The SRA failed to infuse the first tranche payment. Since 2019, there have been as many as 4 extensions granted by the NCLT, NCLAT and the Apex Court in hopes that the SRA would honour the objective of the code which is of revival and the company could be saved from liquidation.

ISSUES INVOLVED: –

  1. Whether the impugned order of the NCLAT allowing the adjustment of the PBG in lieu of payment of the first tranche could be said to be perverse?
  2. Whether non-implementation of the Resolution Plan by the SRA necessarily leads to the consequence of liquidation under section 33(3) of IBC?
  3. Whether the timely implementation of the resolution plan is also one of the objectives of the IBC?

FINDINGS OF THE SUPREME COURT: –

  1. The Supreme Court held that a misconstruction of a document or wrong application of a principle of law in construing such document and ignorance of material and relevant facts gave rise to a question of law which is directly determinative of the rights of parties to the suit/ case. Here, the Request For Resolution Plan (“RFRP”) and the Plan were misconstrued in terms of their binding nature or whether any adjustment of Rs. 150 crores against the first tranche payment can be allowed, violating established law and the terms laid down in the Plan.
  2. FIRST ISSUE: – The court while deciding the first issue referred to the clauses of RFRP and Plan to determine whether the adjustment is allowed. The court held that a conjoined reading of RFRP and Plan is indicative of the fact that there is a binding force since a non-implementation of the same by SRA would result in forfeiture of the PBG. The court referred to its Judgement in the matter of “Ebix Singapore Private Limited v. CoC of Educomp Solutions Limited and Anr.” wherein it was held that the Adjudicating Authority lacks the authority to direct modification or allow the withdrawal of the Plan. There can only be a rejection of the Plan under Section 33 of the Code after which a mandatory liquidation is directed.
  3. SECOND ISSUE: – To determine the second issue, the court looked into the failures on part of the SRA. The non-deposit of Rs. 150 crores even after repeated extensions are indicative of non-implementation of the Plan. The court referred to its own earlier decisions in Kridhan Infrastructure Private Limited v. Venkatesan Sankaranarayan and Others (2021) and Innoventive Industries Ltd. v. ICICI Bank (2018) wherein given the default the by SRA, the corporate debtor was sent into liquidation.
  4. THIRD ISSUE: – To determine the fate of third issue, the court has highlighted the Report of the Bankruptcy Law Reforms Committee formed in 2015 which emphasizes that speed is the essence of the Code and that to protect the value of assets from going down, a good realization can be made if the firm is sold as a going concern. Particularly, the objective of section 12 of the Code is to ensure that the assets do not get frittered away. The court thus agrees that a timely implementation of the Resolution Plan is one of the objectives of the Code.

CONCLUSION: –

The Supreme Court pressed on urgent reforms to ensure effective resolution. The court thus allowed the appeal and held that the impugned order passed by NCLAT allowing the PBG adjustment is perverse and unsustainable in law and therefore, the NCLAT Order was set aside. The court has exercised its powers under Article 142 and thus directed liquidation of the Company given that 5 years have elapsed and multiple extensions have been granted and still there is no possibility of an effective resolution. The stake of creditors was clearly affected and in order to save from further value depreciation of assets, a liquidation is the best resort.

Litigation Brief:

Consent Decree does not create a new right – it only asserts pre-existing rights; Payment of stamp duty not required.

Mukesh v. The State of Madhya Pradesh & Anr., reported in 2024 INSC 1026.

A Civil Suit (No. 47-A/2013) was filed before the Court of First Civil Judge, Class-2, Badnawar, Madhya Pradesh, in which a consent decree was obtained by the Appellant. In the suit, a declaration and permanent injunction was sought against Abhay Kumar (Respondent No. 2) and the State of Madhya Pradesh (Respondent No. 1) regarding land situated in Survey Nos. 2087, 2088/9/1/1 (measuring 0.076 Ares) at Village Kheda, Tehsil Badnawar, District Dhar (“Subject Land”), where ownership and continuous possession was claimed.

The suit was filed when an attempt was made by Respondent No. 2 to sell the Subject Land to third parties. Through a compromise, the matter was resolved, and a Decree was passed in the Appellant’s favor on 30.11.2013. For mutation of the Subject Land, an Application was made by the Appellant before the Tehsildar, by whom the matter was referred to the Collector of Stamps, District Dhar, Madhya Pradesh.

Under Section 33 of the Indian Stamp Act, 1899, proceedings were initiated by the Collector of Stamps, and stamp duty of ₹6,67,500/- was determined to be payable by the Appellant through an Order dated 23.08.2016. A Revision was filed by the Appellant before the Board of Revenue, Gwalior, which was dismissed on 12.02.2019. Before the High Court of Madhya Pradesh, Indore Bench, Miscellaneous Petition No. 3317 of 2019 was filed by the Appellant to quash the orders of the Collector of Stamps and the Board of Revenue.

The Miscellaneous Petition was dismissed by the High Court on 06.12.2019, where reliance was placed on prior precedents, including Bhoop Singh v. Ram Singh Major, and it was held that registration and payment of stamp duty were necessitated as a new right over the property was created by the compromise decree.

Key Issues:

  1. Whether the compromise decree required registration under Section 17 of Registration Act, 1908?
  1. Whether stamp duty was payable on the compromise decree for mutation of land?

Ratio: The Supreme Court examined that in a civil suit, the Appellant claimed ownership and continuous possession through cultivation of the subject land. The Court relied on the judgment in Ravinder Kaur Grewal v. Manjit Kaur (2019), which established that continuous and uninterrupted adverse possession confers right, title and interest that can be used as a sword.

The Court noted that through the compromise decree, the Appellant did not obtain any new right but merely asserted his pre-existing right/title/interest over the subject land. While allegations of collusion were made, no concrete evidence was presented to substantiate this claim.

The Court analyzed Section 3 of the Indian Stamp Act, 1899, and found that stamp duty is not chargeable on court orders/decrees as they do not fall within documents mentioned in Schedule I or I-A of the Act.

Held:

  1. On Registration: The Supreme Court held that the compromise decree did not require registration under Section 17(2)(vi) of the Registration Act, 1908, as it merely recognized the appellant’s pre-existing rights rather than creating any new rights.
  2. On Stamp Duty: The Court held that since the compromise decree only asserted pre-existing rights and did not operate as a conveyance transferring any new rights, it was not liable for stamp duty payment for mutation of the subject land. The Court rejected the Collector’s determination of stamp duty under Article 22 of Schedule IA of the Indian Stamp Act, 1899, as the compromise decree did not fall under instruments mentioned in the Schedule.

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