This article surveys significant legal developments in South Asia and Oceania during the calendar year 2022.
This article surveys developments in 2022 related to the Insolvency and Bankruptcy Code (IBC) in India, which was enacted in 2016. Not all the provisions have been brought into force yet. The IBC has been amended eight times since 2016, and the provisions, currently applicable, have been notified in phases. Thus, the law is still evolving, as courts have attempted to streamline various issues that have arisen under the IBC.
The IBC does not provide any time periods within which a creditor must initiate proceedings. This gap has allowed parties to seek insolvency based on stale claims. The courts have drawn a distinction on claims that can result in the initiation of insolvency against a debtor.
In Kotak Mahindra Bank Ltd. v. Kew Precision Parts Private Ltd., the Indian Supreme Court held that proceedings under the IBC have to be initiated within three years from the date of accrual of the right to sue, that is, the date of default of payment of debt. But, in Asset Reconstruction Company (India) Ltd. v. Tulip Star Hotels Ltd., the court held that, if a debt is acknowledged by a corporate debtor before the expiry of three years from the date of declaration that the loan account is in default, the time period gets extended.
Further, the period during which insolvency proceedings take place must be excluded while computing the period of limitation for a suit or proceeding by or against the corporate debtor. Thus, in New Delhi Municipal Council v. Minosha India Ltd., the Supreme Court held that a debtor that undergoes insolvency has the benefit of the extended time period to initiate proceedings against a third party for recovery of its claim.
The courts have also tried to reconcile the conflict between insolvency proceedings and recovery of statutory dues. In Sundaresh Bhatt v. Central Board of Indirect Taxes and Customs, the Supreme Court noted the supremacy of the IBC over other statutes. Once a moratorium is introduced, the Customs authorities have limited powers of assessment or re-assessment of the duties and cannot initiate recovery proceedings. In Indian Overseas Bank v. RCM Infrastructure Ltd., the Supreme Court held that, during moratorium, a financial institution cannot continue with proceedings for recovery of any secured asset under another law.
But, in Rajiv Chakraborty Resolution Pro. of EIEL v. Directorate of Enforcement, the Delhi High Court held that the powers of the Enforcement Directorate under the money laundering law to attach properties are not affected by the moratorium.
In State Tax Officer v. Rainbow Papers Ltd., it was held that the Resolution Plan cannot altogether ignore statutory demands. In the absence of a provision to pay either in a phased manner or with uniform proportional reduction, the company would necessarily have to be liquidated and its assets sold and distributed.
In Vidarbha Industries Power Ltd. v. Axis Bank Ltd., the Supreme Court held that, despite an admission of default towards a financial creditor, insolvency proceedings cannot be initiated automatically if there is a possibility of clearing the financial default.
Likewise, in Invest Asset Securitisation and Reconstruction Private Ltd. v. Girnar Fibres Ltd., it was reiterated that the IBC is intended to bring the corporate debtor back to its feet and that its provisions cannot be misused for recovery of money. In Amit Katyal v. Meera Ahuja, out of a total of 128 home buyers, eighty-two were against the insolvency proceedings of the corporate debtor housing project. Thus, the Supreme Court allowed the withdrawal of proceedings in the larger interest of the home buyers, who had been waiting for possession for more than eight years. It was observed that the object of the IBC is “not to kill the company and stop/stall the project, but to ensure that the business of the company runs as a going concern.”
In Maitreya Doshi v. Anand Rathi Global Finance Ltd., the Supreme Court held that proceedings can be initiated against both the actual borrower and a guarantor at the same time. Further, the culmination of insolvency proceedings with respect to one borrower will not discharge the co-borrower. But, if the amount owing is realized in part from one entity, the balance may be realized from the others.
Likewise, in terms of Mahendra Kumar Jajodia v. State Bank of India, creditors can initiate insolvency proceedings against personal guarantors even before commencing proceedings against the principal borrower. But the constitutionality of IBC provisions relating to personal guarantors has been challenged before the Supreme Court. As an interim measure, the Supreme Court has directed that the personal guarantor “shall not transfer, alienate, encumber or dispose of any of his assets or his legal rights or beneficial interest therein” and that the resolution professional shall not proceed with filing of the report.
India’s recent legal discourse has revolved around remedying an overburdened and slow dispute resolution system. For many domestic and multinational entities that transact in India, issues often stem from improper enforcement mechanisms leading to delays and uncertain results. Inevitably, companies start to prefer seating their disputes elsewhere, leading to a negative impact on the growth of India’s financial market. Different approaches have been resorted to over the years to stem the tide. The establishment of commercial courts and specialized tribunals designated exclusively to deal with commercial disputes has been one such laudable effort. Furthermore, the recent COVID-19 pandemic forced the judiciary to adopt technology in its daily practice, resorting to virtual hearings and electronic filing mechanisms to make the process more accessible and coherent. A top-down approach proved beneficial, and many courts continue the practice, even beyond the lockdown.
Over the past year, the approach has turned towards reinforcing alternative dispute resolution as a more popular option. The effort here again is not only to provide an alternative method of adjudication but also to showcase India’s growing commitment to delivering an effective and efficient dispute resolution that benefits robust business. This pro-ADR approach can be identified in three crucial spaces: (1) commercial suits; (2) insolvency disputes; and (3) arbitration.
In a case delivered this year, the Supreme Court reinforced the need for all parties to undergo a pre-litigation mediation before instituting a suit under the Commercial Courts Act of 2015. Relying on the statutory amendment of section 12A of the Act, the Supreme Court highlighted the importance of undergoing mediation before approaching the rigors of court. The Supreme Court’s decision underscores the need for parties to first attempt to resolve disputes amicably and within a short duration before it is brought to court. The mandatory nature can further be understood to ensure equal access to justice and a workable solution in commercial matters.
In two separate cases dealing with insolvency and bankruptcy law, the Supreme Court again found mediation and out-of-court settlements to be an effective method of quick and easy resolutions, even at later stages of litigation. In one of the cases, the Supreme Court observed that the law ensures all creditors have the capability and willingness to restructure their liabilities as part of the dispute resolution process. In essence, the Supreme Court preferred the wisdom of the parties over court intervention. In another case, the Supreme Court held that the parties should not be forced to continue litigating their disputes merely because of a statutory limitation. It was vital to allow parties to settle their disputes through other methods of dispute resolution, even when the dispute was tightly regulated by statutory guidelines.
Courts have limited their jurisdiction when it comes to parties agreeing to arbitrate their contractual disputes. In earlier decisions, courts upheld the procedure adopted by parties in their tribunals, even if it did not entirely prescribe to the due process followed in the courts. In one such case, the Supreme Court held that even statutory contraventions are not sufficient grounds for setting aside an award. The Supreme Court observed that the construction of a tribunal under the terms of the agreement must not be replaced by curial intervention, unless there is an egregious violation of law. Again, in another case, the Supreme Court expanded the enforcement of interim awards to include foreign emergency orders to allow parties the freedom to choose the method in which they attain and enforce urgent relief. Similarly, over this past year, the role of courts to sit over arbitral proceedings was limited only to either relegate parties back to the tribunal or consider the challenge on a very high threshold of questions of law, emphasising the need to limit curial intervention.
Analyzing each of the cases above demonstrates the courts’ efforts to make ADR and out-of-court settlement an easier and more legitimate platform to conduct dispute resolution. The underlying theme is to provide more freedom for parties to choose the method they wish to employ for settling their disputes while alleviating the caseload burden on the courts.
A trend being seen in intellectual property litigation in India is the prevalence of mandatory pre-suit mediation. Section 12A(1) of the Commercial Courts Act states that “[a] suit, which does not contemplate any urgent interim relief under [the] Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.”
A timeline for the pre-suit mediation is prescribed in section 12A(3). It states that the process of mediation shall be completed within a period of three months from the date of application made by the plaintiff under section 12A(1). This “period of mediation may be extended for a further period of two months with the consent of the parties.” “If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator.” The Central Government also enacted the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, laying down the procedure to be followed under section 12A before the institution of the lawsuit.
The aim is to resolve commercial disputes in the swiftest and most efficient manner possible. Since there is a direct correlation between the effectual resolution of commercial disputes and ease of doing business, this push towards increased pre-suit mediation has been crucial in establishing India’s reputation as a place for effective intellectual property protection.
In 2022, there were several interesting cases concerning whether intellectual property disputes need to be referred to pre-suit mediation or not. In Patil Automation Private Ltd. v. Rakheja Engineers Private Ltd., the Supreme Court held that, when there is no urgent interim relief contemplated in the suit, it is mandatory and necessary to go through pre-suit mediation, as stated in section 12A of the Commercial Courts Act.
In Bolt Technology OU v. Ujoy Technology Private Ltd., the Delhi High Court observed that, in intellectual property cases, the relief of an interim injunction, including at the ex-parte stage and ad-interim stage, is extremely important. Such matters do not merely involve the interests of the plaintiff and the defendants but also involve the interest of the customers or consumers of the products and services in question.
Bolt Technology had filed an application seeking exemption from instituting pre-litigation mediation. Bolt Technology filed suit seeking permanent injunction against the defendants. The defendants, however, made a preliminary objection to reject the complaint for non-compliance with section 12A of the Commercial Courts Act. The defendants relied on the Patil Automation case to argue that pre-litigation mediation under section 12A of Commercial Courts Act is a mandatory process and that no suit can be entertained unless parties comply with pre-suit mediation under section 12A of the Commercial Courts Act.
In response to this preliminary objection by the defendants, Bolt Technology argued that “Paragraph 81 of the judgment of the Supreme Court in [the Patil Automation case] clarifie[d] that when an urgent interim relief is being sought, the suit can be filed without resorting to pre-litigation mediation.”
An ex parte interim injunction was granted by the Delhi High Court, since the defendant had shown that it was not interested in any mediation, as it did not respond in a proper fashion to the legal notice sent by Bolt Technology. The Delhi High Court stated that the requirement of section 12A of the Commercial Courts Act was satisfied, since Bolt Technology attempted an amicable resolution that was clearly rejected by the defendants, prayed for urgent interim relief before the Delhi High Court, and was entitled to maintain the present suit.
In another recent case, Micro Labs Ltd. v. Santhosh, the Madras High Court interpreted the word “contemplate” in section 12A(1). The Madras High Court held that:
This Commercial Division should be convinced that interim relief is “urgent” and a product of contemplation in every sense of the terms. In the case on hand, i.e., in the facts and circumstances of the instant case, as there has been a complete lull or in other words, as plaintiff has gone into slumber after issuing cease and desist notice dated 28.04.2022 (served on notice / defendant on 30.04.2022) and thereafter suddenly woke up four months later and presented this plaint on 22.08.2022 (plaint presented on 22.08.2022, suit filed on 29.08.2022). In this view of the matter, this Commercial Division is convinced that though interim order has been sought for vide O.A.Nos.554 to 556 of 2022, it is neither urgent nor a product of contemplation. To be noted, the expression used in sub section (1) of section 12A is not merely “interim relief”, it is “urgent interim relief”. This takes this Commercial Division to the term “contemplate” deployed in sub section (1) of section 12A. This term has not been defined in said Act . . . . Therefore, a thought process which is not only detailed but profound too is an imperative ingredient of the term “contemplate” deployed by Parliament in sub section (1) of section 12A and in the light of the lull / slumber of four months, this Commercial Division is convinced that applications with interim prayers have been filed absent contemplation and therefore, mere filing of applications for interim prayers do not save the plaintiff from the death knell consequence qua infraction of section 12A. To put it in very simple and short terms, deciding whether the interim relief sought for is urgent and a product of “contemplation” is the prerogative of this Commercial Division when a plaint is tested for rejection qua infraction of section 12A of said Act and in the case on hand, the answer is in the negative.
In intellectual property cases in which an ex parte interim relief would be preferred against an infringer whose malafide intention is evident, the insistence on pre-suit mediation would snatch away the element of surprise available to the plaintiff against the defendant. Further, when a prayer for urgent relief has been filed by the plaintiff and there is a time-lapse of certain months between the issuance of legal notice and the institution of the suit, directing the plaintiff to resort to pre-suit mediation due to such lapse of time is the latest interpretation of the law.
The cybersecurity framework in India is primarily regulated by the Information Technology Act, 2000, and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which govern areas such as collection, transfer, and processing of data while also regulating the social media intermediaries. As the world becomes increasingly data- and digital-reliant, cybersecurity has emerged as a major concern. India has also been subject to numerous cyberattacks, with insurance and finance organizations being the most affected ones.
It is important to comprehend the advancements that have occurred in India’s cybersecurity sector in 2022. The Ministry of Electronics and Information Technology (MEiTY) proposed the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2022, which proposes establishing a Grievance Appellate Committee. This committee was tasked with dealing with the issues pertaining to censorship of information being disseminated on social media and was also empowered to hear appeals to ascertain the removal of certain content from social media. Under the appellate system, any aggrieved person could appeal to the relevant committee having jurisdiction within thirty days from the receipt of the decision. Such appeals would need to be disposed of within thirty days from the date of receipt of the appeal. Further, the Amendment Rules required due diligence to be exercised by the intermediaries and mandated the publishing of the rules, regulations, privacy policy, and user agreements in the public domain. The Amendment Rules provided that any complaint that pertained to suspending or removing any user account and those complaints in the nature of request for removal of information that was, inter alia, defamatory, obscene, or in violation of someone else’s IP shall be acknowledged by the intermediary within twenty-four hours and disposed of within fifteen days from the date of receiving the same.
In addition to this amendment, several new cybersecurity directives were released by the Indian Computer Emergency Response Team in April 2022 (CERT-In). These directives were issued to protect the above-mentioned bodies against threats and breaches while addressing the lacuna in the existing cybersecurity legislation and regime of the country.
The directives provide for the following remedies and rules: All entities shall be required to report any cybersecurity incident within a period of six hours, and the previous ambiguous rule of reporting such incident “as soon as possible” has been removed. Entities that fall under the ambit of the 2022 directives must cater to the Indian Government’s clocks, established by the Network Time Protocol and the National Physical Laboratory, by connecting their servers to ensure synchronization of information and enhanced communication. Further, it mandated all the entities to maintain logs of their ICT systems for a period of 180 days, which can be called for by the CERT-In for investigation in case of an incident. In addition, the entities shall make provisions for the appointment of a Point of Contact exclusively for communication between the entity and CERT-In.
Furthermore, these directives empower CERT-In to issue orders to entities mandating them to act or provide information that assists CERT-In to prevent, pre-empt, or address cyber incidents and provide the format in which the information is required, the timeframe which could include up to and including near real-time, and the timeframe within which such information must be provided to CERT-In. Failure in adhering to the same would result in imprisonment for a term of up to one year or a fine of up to 100,000 rupees, or both.
These directives, thus, provide for an updated cybersecurity framework for entities such as service providers (including telecom service providers, network service providers, internet service providers, web-hosting service providers, cloud service providers, and cryptocurrency exchanges and wallets), intermediaries (social media platforms, search engines, and e-commerce platforms), body corporates (any company, firm, or proprietorship), data centers (which store and process large quantities of private and public data), and eventually governmental bodies.
Cybersecurity has become a necessity, and the legislative framework is constantly undergoing changes to adapt per the requirements of the society. However, the implementation of the newly formed data security and cybersecurity regime shall be the key to safeguard the interests of the associated stakeholders.
The automotive industry in India is undergoing a paradigm shift in trying to switch towards energy efficient alternatives. Mobility and electric vehicles (EV) are seen as a possible replacement for fueled automobiles, which would address, among other things, rising pollution, global warming, and depleting natural resources. India extended its support to the COP26 declaration, which focused on a global-level effort towards zero-emission vehicles. To materialize it, the Ministry of Power promulgated the revised consolidated guidelines and standards for charging infrastructure of electric vehicles on January 14, 2022. The Guidelines provide that any individual or entity is free to set up public charging stations without a license, provided that such stations meet the technical, safety, and performance standards, along with the protocols, laid down under the Guidelines. A model revenue-sharing agreement is included under the Guidelines, which would initially be entered into by parties for a period of ten years. The tariff for supply of electricity to public EV charging stations would not exceed the average cost of supply until March 31, 2025. Any public charging station “may obtain electricity from any generation company through open access.” The Guidelines were further amended on November 7, 2022, to provide public charging stations with “the feature of prepaid collection of service charges with the time of the day rates and discount for solar hours.”
As another crucial development, the Faster and Adoption and Manufacture of Hybrid and Electric Vehicles (FAME- II) scheme, a government incentive scheme for the promotion of electric and hybrid vehicles in India, has been extended for a period of two years after March 31, 2022. The main objective of this program is to encourage faster adoption of electric and hybrid motor vehicles by way of offering an upfront incentive on the purchase of electric vehicles and by establishing the necessary charging infrastructure for electric vehicles.
NITI Aayog released a draft battery swapping policy on April 22, 2022, with the intention of offering incentives to EVs with swappable batteries, subsidies to companies manufacturing swappable batteries, and standards for interoperable batteries, among other measures. The policy will be implemented in two phases—the first phase will cover the metropolitan cities with a population greater than four million, and the second phase will cover all UTs and major cities with a population greater than 500,000.
In light of the incentives and notifications by the respective Ministries and the Central Government, as many as five more States/UTs have adopted their EV policy to bring the number to nineteen, and others are in various stages of creation or implementation of policy. Under the production-linked incentive schemes for EV, the incentives under the scheme are applicable for products manufactured in India from April 2022.
The future of the car industry is thought to lie with India’s electric vehicles. EVs are expected to overtake gasoline-powered vehicles as the industry’s mainstay in the coming years due to the current climate change and concerns about such climate change. Given that the EV industry in India seems to have a promising future, by 2030, India may be able to cut its carbon dioxide emissions by one giga ton thanks to its concerted efforts to encourage shared, electrified, and connected mobility. Although the EV transition presents itself as a massive opportunity, several barriers exist to domestic EV adoption, which should be addressed systematically and expediently, resulting in improved investments in the electric mobility sector in India.
No report on this topic can begin without mentioning the momentous events shown live to the world from Sri Lanka in the early part of this year. Large civilian crowds on the streets of Colombo protesting and occupying government buildings resulted in the resignation of an executive president elected by the entire country at a presidential election held just three years ago. This political upheaval led to the election of a new president and the passage of a new constitutional amendment that established checks and balances on the executive powers of the president.
The executive presidency originally came into operation in Sri Lanka with a new constitution in 1978. Before that time, Sri Lanka and the dominion of Ceylon had a Westminster-style constitution. Sri Lanka’s 1978 constitution had a clear separation of powers, as laid out in Article 4, which states, among other things, that the executive power of the people, including the defense of Sri Lanka, shall be exercised by the president of the republic elected by the people. After 1978, four subsequent amendments were made to Article 4 by different political parties that sought to alter the separation of powers for their own perceived advantage.
Following the popular revolt of 2021, the twenty-first amendment to the Constitution was proposed and passed. The most important aspect of the passing of the twenty-first amendment to the Constitution was that there was a broad consensus reached not only by the political parties in Parliament, but also by professionals, intellectuals, and the broader public, to create a system of checks and balances on the executive powers granted to the president by the Constitution.
The twenty-first amendment to the Constitution created a constitutional council, which will approve the names of the persons nominated to hold high positions of power, such as the Chief Justice, the judges of the apex courts, the Attorney General, and the Auditor General, among others. It has also created independent commissions to oversee elections, public service, the police, human rights, and finance, among others.
For example, the establishment of the Audit Service Commission has created a certain amount of transparency to the state system in public finance. The legal framework in combating corruption and mismanagement has also been strengthened by the re-introduction of the constitutional council, the members of which include three persons who are not members of Parliament. According to the twenty-first amendment, these persons are to be appointed to “ensure that the Council reflects the pluralistic character of Sri Lankan society, including professional and social diversity.”
Notably, the twenty-first amendment was passed with only one member of Parliament voting against it, and even that opposition was on very technical grounds, demonstrating the strength of consensual democratic politics and rule of law in Sri Lanka.
The Sri Lankan Parliament passed the Personal Data Protection Act No. 9 in March 2022. The Act states that the government is to provide a legal framework and mechanism for the protection of personal data, ensuring consumer trust and safeguarding privacy.
C. Other Significant Legal Developments
The Prohibition of Anti-Personnel Mines Act No. 3 of 2022 gives effect to the Ottawa Convention. The Act applies to Sri Lankan citizens and those aboard aircrafts and ships registered in Sri Lanka. The Act prohibits the use of anti-personnel mines by those who come under the Act, other than on a few instances, such as training, which are specified in the Act. The Act also describes the process if such a device is located. Offences are also prescribed.
The Intellectual Property Amendment Act No. 8 of 2022 introduced the registration of geographical indications to the Intellectual Property Law of Sri Lanka. The amendment provided for the registration of foreign geographical indications as well. In 2022, the European Union accepted Ceylon Cinnamon as a geographical indication.
The committee editors were Kavita Mohan, Of Counsel, GDLSK LLP (Washington D.C.); Amy Tolbert Harris, Senior Paralegal, GDLSK LLP (Washington D.C.); and Jonathan Blank. Section I was authored by Amit Gupta and Hari Sankar Mahapatra, Advocates, Supreme Court of India (New Delhi, India). Section II was authored by Vishnu Tallapragada, international arbitration lawyer (London, United Kingdom and New Delhi, India). Section III was authored by Lakshmidevi Somanath, Partner, Intellectual Property Practice, Surana & Surana International Attorneys (Chennai, India). Sections IV and V were authored by Neeraj Dubey, Partner, Juris Corp Advocates & Solicitors (Bengaluru, India). Section VI was authored by Champaka Ladduwahetty, Attorney-at-Law, Supreme Court of Sri Lanka (Colombo, Sri Lanka).
