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VOLUME 8 ISSUE 2
EDITORIAL NOTE I PEER BOARD I EDITORIAL BOARD I FULL VOLUME
REVAMPED REASSESSMENT PROCEDURE: AN EXAMINATION OF THE EXTENT OF CHANGE AND AREAS OF CONCERN
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PRASHANT MEHARCHANDANI
The author is a practicing advocate before the Supreme Court, High Courts and Income Tax Appellate Tribunals across India and specialises in Direct Tax Litigation.
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The Finance Act, 2021 claims to have introduced a completely new regime for reassessments. A first look at the amended provisions makes it evident that in addition to the changes introduced in the limitation for issuance of notice and the reassessment procedure, changes have also been made in the language of the jurisdictional preconditions. The Memorandum indicated that the objective of the Bill is to result in less litigation and would provide ease of doing business to taxpayers as there is a reduction in time limit by which a notice for assessment or reassessment or recomputation can be issued. The legal framework governing reassessment has always been a highly litigated area of the tax laws. It has been frequently amended in the past, including changes in its jurisdictional pre-conditions. However, despite several amendments, Courts have time and again reaffirmed certain basic principles surrounding the concept of reassessment which are integral to it and any attempt to interpret the legal provision otherwise will amount to misuse of the power to reasseess. This article is an attempt to understand the scope of the new regime, examine how should the assessees expect the department to proceed under the amended provisions and figure out the trigger points that an assessee should keep in mind to immediately litigate and protect themselves against any illegal reassessment proceeding under the new regime.
SIMPLIFYING THE QUANDARY OF CORPORATE GOVERNANCE IN LIGHT OF THE TATA-MISTRY SAGA
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JANAK PANICKER
The author is an Associate at Cyril Amarchand Mangaldas.
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The Hon’ble Supreme Court in the recent case of Tata Consultancy Services Limited v. Cyrus Investments Pvt. Ltd., explored various issues of corporate governance such as the duties of the nominee directors, the role of independent directors in Indian companies and whether they are actually required, the applicability of invoking the remedy of oppression and mismanagement, and the legality of affirmative voting rights. Even though the case largely revolved around the claims of oppression and mismanagement and did not substantially delve into other issues, the Supreme Court’s opinion on issues pertaining to corporate governance has still raised many concerns. This paper seeks to analyse this decision and evaluate the stance of the apex court on the aforementioned issues relating to corporate governance. The authors have revisited the basics of corporate governance, extensively analysed the fiduciary duties of the directors, both in India and the UK, and explored some scenarios in which the fiduciary duties might be subject to change. Further, in light of the judgment, the authors argue for the need of independent directors in the Indian corporate governance regime. Lastly, the authors discuss the remedies available with the shareholders and explain the cases in which these remedies can be invoked.
THE GOODNESS WITHIN THE BAD BANK IN INDIA
KIRTHANA SINGH KHURANA
The author is an Assistant Professor at Jindal Global Law School, Sonipat.
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A bad bank is an entity that purchases distressed assets from a bank at sizeable discounts to book value and then searches for buyers for those assets. A proposal to establish a bad bank was outlined in the Indian Union Budget 2021-22. In this paper, an attempt has been made to explore the advisability of having a bad bank in India. To begin with, the evolution of the existing Indian legal framework for bad debt resolution is examined. This is followed by a discussion on the various features of a bad bank, particularly about how it can prove to be an effective tool to ameliorate a stressed banking sector. An analysis of the mounting bad debts in India is undertaken to appreciate how a bad bank can turn out to be a revolutionary initiative. The author also reviews the growth of bad banks established in various countries and weighs the potential of a similar experiment in India. Based on the experience of existing asset reconstruction companies in India, an evaluation of the potential impediments to the Indian bad bank is also made. The author proposes recommendations for the successful functioning of the bad bank and indicates areas for necessary legal and systemic interventions. It is also emphasised that a bad bank in isolation may not give the desired outcome and an overhaul of the Indian banking sector is the need of the hour. The paper is concluded by making a strong case for establishing a bad bank in India.
GROUP INSOLVENCY: TIME TO STOP RELYING ON THE JUDICIARY TO FILL A LEGISLATIVE LACUNA?
VARADA JAHAGIRDAR & SANJHI AGARWAL
The authors are fourth-year students of Corporate Law Hons. at Institute of Law, Nirma University, Gujarat.
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The Insolvency and the Bankruptcy Code, 2016 (“IBC”), though a comparatively new legislation of the country has developed a massive jurisprudence in merely five years. Considering the intricacies involved in the insolvency process, IBC has been subjected to various amendments and changes, and yet the legislation has failed to accommodate for more complicated transactions like cross-border insolvency and group insolvency matters. Exclusion of such areas have provided for a major lacuna in the scope of IBC and led to academic, judicial and legislative debates and discourses. Groups and conglomerates are becoming exceedingly popular and play an integral role in the national and the global corporate world. However, the lack of provisions addressing group insolvency resolution provision in the IBC, have forced and promoted the need of judicial interpretations and widening of scope of the existing provisions. Judicial interpretations though important in places of legislative lacuna, has led to conflicting interpretations of the statute. The question or the problem that remains with introduction of the provisions regarding group insolvency is whether the corporate veil can be pierced by force of law when there is no public interest or malafide intention on the part of the corporate entity. The paper seeks to understand the application and scope of group insolvency proceedings in various jurisdictions and specifically in India, and attempts to answer the question that whether it is time to introduce the provisions regarding the same in our domestic legislation and dwells on the aspects required to be kept in mind before such addition and inclusion.
TRADE DISTORTIONS DUE TO CROSS-SUBSIDIZATION DURING THE PANDEMIC: A CRITICAL ANALYSIS
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VIJAY ROHAN KRISHNA & SAMBHAVI SANGHAMITRA
The former author is a student of LLM (Corporate and Commercial Laws) at National University of Judicial Sciences, Kolkata and the latter is third-year student of B.A. LL.B. (Hons.) at Chanakya National Law University, Patna.
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The modalities of the WTO Agreement on Agriculture (“AoA”) oversee the liberalization of global agricultural trade through the regulation and reduction of agricultural subsidies, which are categorized under two heads, domestic support and export subsidies. While export subsidies have been successfully phased out, the AoA reduction commitments provide ample policy space for nations to implement trade distorting domestic support programs without contravening said commitments. The concept of cross-subsidization contemplates the use of domestic support measures to subsidize the export of agricultural products. The use of domestic support measures has increased exponentially during the COVID-19 pandemic as WTO members continue to deal with the exigencies of the pandemic, and support their domestic agricultural sectors to maintain stability and prevent critical shortages, and such heavy domestic subsidization has an adverse impact on the global market prices of agricultural products, especially during the pandemic. In the present paper, the authors seeks to critically analyse the provisions of the AoA, and highlight the inability of the statute to effectively curb cross-subsidization. To that end, Part I of the paper provides a brief overview of the regulation of agricultural subsidies. Part II deals with the concept of cross-subsidization, and the ways in which developed nations use their substantial financial resources to engage in trade distorting activities that adversely affect the markets of developing and least developed nations that cannot afford to subsidize their agricultural sector. Furthermore, Part II underscores the exacerbated effect of trade distortions due to the pandemic, and the inadequacy of the current AoA regime to reduce the impact of such distortions. In light of the fact that the AoA does not envisage an explicit scheme for the regulation of crosssubsidization, Part III proposes enlargement of the scope of Articles 9 and 10 of the AoA, and the Agreement on Subsidies and Countervailing Measures to directly prohibit cross-subsidization. An explicit regime is necessary due to the nebulous nature of cross-subsidies as they blur the lines between export subsidies and domestic support. Lastly, Part IV concludes while noting that although the effect of crosssubsidization has been aggravated due to the pandemic, the vast policy space available to developed nations to provide trade distorting domestic support has misused before the pandemic, and will be misused after the pandemic. Therefore, there is a stark need for reform in the AoA regime.
ANTITRUST AND PRIVACY CONCERNS: A DILEMMA ACROSS JURISDICTIONS
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URSHILA PANDIT & SANAH JAVED
The authors are fifth-year students of B.A. LL.B. (Hons.) at School of Law, Christ (Deemed to be) University.
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“Strikingly, the current approach fails even if one believes that consumer interests should remain paramount. Focusing primarily on price and output undermines effective antitrust enforcement by delaying intervention until market power is being actively exercised”. – Lina Khan
This is a glaring issue that confronts antitrust regulators across jurisdictions especially in the context of digital platforms. Consumer harm in digital platform markets manifests in the form of reduced privacy and data protection concerns as opposed to harm in the form of pricing. This Article examines how the price theory fails in digital platform markets. It traces the evolving approach of antitrust authorities in digital markets by examining case laws that have been decided by antitrust regulators in the European Union, the United States and India. The article focuses on two case studies - the Facebook-Reliance Jio deal in India and the case of Amazon’s misuse of thirdparty seller data before the European Commission to highlight the importance of using privacy and data protection principles as a parameter in competition analysis. Lastly, it seeks to provide a theoretical framework as to how such an approach can be applied by competition law regulators across different jurisdictions.
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ATHUL ROSHAL KUMAR & KANIKA JAIN
The authors are fourth-year students of B.B.A. LL.B. (Hons.) at Symbiosis Law School, Pune. Views stated in this paper are personal
Legal stability forms a cornerstone of the common law system, yet discord among High Courts causes confusion among the public at large regarding certain parts of the law. The problem compounds itself when one narrows their scope to the field of tax law – as predictability of tax becomes paramount. The present study seeks to understand the current position of Section 40(a)(ia) of the Income Tax Act, 1961 which pertains to the non-deduction of certain expenditures while calculating the income of a business and expands into a more holistic analysis of the interpretation of tax statutes. In particular, the present paper focuses on the retrospective application of the second proviso of Section 40(a)(ia) and the possible consequences of such a decision – while exploring the arguments for and against the retrospective application of the provision. Additionally, the present paper scrutinises the six High Court decisions in this regard, and other allied judgements, to gauge the best possible reasoned interpretation of the provision. This dispute has gained contemporary relevance after the Apex Court, in the Shree Choudhary Transport Company case, enunciated that a substantial provision does not warrant retrospective operation merely because it is beneficial in nature. This strikes at the very core of the judgments delivered by various High Courts holding that the second proviso of Section 40(a)(ia) is retrospective in nature. While the appeals against these decisions of the High Courts are pending before the Supreme Court, the authors opine that the Apex Court is likely to hold that the proviso does not have retrospective operation, in light of the recent aforementioned case. The paper concludes with the opinion of the authors regarding the retrospective application of the said section, and tax statutes in general, while also putting forth recommendations that would bring uniformity in the interpretations of tax statutes across the judicial discipline – providing the greater good to the public in the form of enhanced stability of laws.
BID-RIGGING IN INSOLVENCY RESOLUTION APPLICATIONS: HARMONIZING COMPETITION LAW WITH INSOLVENCY LAW
AMEYA GARUD
The author is a second-year student of B.A. LL.B. (Hons.) at National Law University, Nagpur.
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The Corporate Insolvency Resolution Process (“CIRP”) determines the fate of the Corporate Debtor wherein third-party entities can acquire the debtor in order to revive it. Some opportunistic notorious entities may indulge in bid-rigging in insolvency resolution applications. Now as the economy is revitalizing again after insolvency initiations being barred for a year, India may witness such bid-rigging. The insolvency jurisprudence of the USA has seen a few such cases of which India can take cognizance. This misconduct can be in form of bid-suppression, collusive jointbidding, multiple bidding & collective boycotts. To tackle this issue, there is a need to make the CIRP process fairer & more transparent for all the stakeholders. The Committee of Creditors (“CoC”) must be made accountable for their powers & decision-making. The acts of bid-withdrawals, bid-revisions & bid-suppressions can spark suspicion of bid-rigging. This paper attempts to explain how bid-rigging can happen in Insolvency Resolution Applications, how it can be suspected & how a harmonious construction between the Insolvency and Bankruptcy Code, 2016 and Competition Law can be made to penalize & regulate this misconduct.
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RASHMI BIRMOLE
The author is a fourth-year student of B.A. LL.B. at ILS Law College, Pune.
Given the dynamic nature of financial markets, the need to introduce inter-exchange competition assumes paramount importance for an investor to exercise choice, and for the market to adapt to evolving challenges at large. At present, the competitive landscape in the Indian trading space pales in comparison to global developments. Market infrastructure in India has been in a state of duopoly for the last two decades, raising concerns about excessive concentration of market share and its unintended stagnating consequences on innovation. To address these concerns, the Securities and Exchange Board of India recently released a Discussion Paper on Review of Ownership and Governance Norms for facilitating new entrants to set up Stock Exchange/Depository for public consultation. The framework proposed in the paper aims to introduce competition in the trading space and facilitate the setting up of new stock exchanges by lowering a crucial entry barrier, i.e., the default precondition of dispersed shareholding, as is imposed by the extant ownership framework. Through this paper, the author attempts to analyse the possible repercussions of the proposed framework on inter-exchange competition and puts forward recommendations and issues that ought to be considered prior to implementation. In the course of doing so, the author also discusses factors that have contributed to the emergence of duopoly in stock exchanges, while briefly commenting on the shortcomings of the dominance and the dispersed ownership model.
INFORMATION TECHNOLOGY RULES 2021: ARE WE HEADING TOWARDS A DRACONIAN RULE?
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SHIPRA TIWARI & KERTI SHARMA
The authors are fourth-year B.A. LL.B. students at National University of Study and Research in Law, Ranchi.
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“If liberty means anything at all it means the right to tell people what they do not want to hear.” -George Orwell Ever since the Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules, 2021, were passed by the government of India, they have been a topic of discussion and have faced serious criticism for being violative of fundamental rights. While, with the increase in the overall internet accessibility and increase in cybercrimes, it is without a doubt true that the digital space does need to be regulated, the regulations need to be drafted in a manner that strikes a balance between the duty of the State to protect the citizens by way of drafting laws for the purpose, and the fundamental rights of the citizens. This paper provides an overview of the provisions of the IT Rules and analyses them on the touchstone of the constitutional provisions to test their validity. The authors aim to provide an alternate perspective, by comparing the Rules with international instruments and legislations regarding the control of media and user privacy, like the Cyber Security Law of People’s Republic of China, and the General Data Protection Regulation of the European Union, in order to highlight the shortcomings of the Indian framework, and suggest how the authorities could oversee digital communications and content and protect the morality and security of the nation and its people, without overstepping the constitutional boundaries or violating the rights of the citizens.