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BizRegime Legal started as an effort of certain individuals to provide people with the best in class solutions for Corporations including Intellectual Property Rights, Legal Assistance and Digital Marketing Services. Gaining experience from the very best of the individuals in the Legal as well as Marketing Front, the members of our team came together to help those in need, from common people, Businesses, and Startups. We had the ambition to reach out to as many people as possible while providing the best in class solutions in the field of Corporate Law.

Not only this, but we also provide seminars and conferences for people in the field of Corporate Law to spread awareness about the current legal situations in the corporate world and how entrepreneurs and businessmen can deal with them.













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Intellectual Property

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Insolvency & Bankruptcy

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Intellectual Property

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Cyber Laws

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Insolvency Proceedings against LLP and OPC under IBC, 2016

The Insolvency and Bankruptcy Code, 2016 (‘the Code’) has amended and as well as replaced many provisions of other statutes that could have created an overlap of powers and functions with respect to the resolution of insolvency and liquidation of certain entities. Among these statutes, One Person Company [1] (‘OPC’) and Limited Liability Partnership ('LLP') has also been covered in order to give power to National Company Law Tribunal (‘NCLT’) to regulate the insolvency resolution process as well as the liquidation process for the abovementioned entities. [2]

Amendment in Limited Liability Partnership Act, 2008
In the 10th Schedule of the Code, the provisions of winding up of an LLP as mentioned in other statutes [3] were omitted. On the other hand, for OPC, Schedule 8 was enacted for the same purpose. These schedules, when coupled with the overriding power of the Code [4], states, that from the date of enforcement of the Code, all the insolvency and liquidation matters of the entities as mentioned therein [5] will be governed by the Code alone. This is also evident from the provisions which give power to the Code [6] to apply the provisions of the statute on any OPC/LLP. [7] 

Initiation of Insolvency Proceedings
1. Insolvency Proceedings against an OPC and LLP can be initiated by any Financial Creditor [8], Operational Creditor [9], or the entities themselves [10] when there is any debt [11] with respect to any of these creditor(s) [12], and there exists a default of payment [13] with respect to these debts.
2. It must be noted that, in order to initiate a corporate insolvency resolution process (‘CIRP’) against an OPC/LLP, the default of payment must be at least Rs. 1 lakh [14] and falling in the ambit of financial debt [15] or operational debt [16] as mentioned in the Code. 
3. Because of the fact that time is an essential aspect, the whole process of CIRP is to be completed in 180 days [17]. However, if the NCLT is of the opinion that the process will not be able to be completed within such prescribed time-limit, and extension of 90 [18] days can be granted by it. Thus, the total time period for the CIRP to be completed must not exceed a period of 330 days from the date of commencement of insolvency proceedings against the corporate debtor. [19]

Steps after the admission of application for CIRP
1. Once the application for initiation of CIRP is admitted by NCLT, it appoints an Insolvency Resolution Professional (‘IRP’) [20] who takes charge of the management of the firm in order to take necessary steps to help revive the company and pay-off its debts. [21] He can also raise fresh funds [22] to continue the operations of the OPC/LLP and has to make all the endeavors to protect the value of the property of the corporate debtor. [23]
2. During this period, the NCLT also initiates the period of moratorium [24], while the IRP makes a public announcement to call out all the creditors of the firm to claim their debt. [25] 
3. The firm is deemed to be insolvent on the very date when an application for initiating CIRP against the firm is admitted by NCLT. [26]

Committee of Creditors
1. The Creditors give their claims to IRP, and submission of these claims are regulated by the Code. [27]
2. After all the claims are collated by the IRP, he forms a Committee of Creditors (‘CoC’) [28] which contains all the creditors of firm tom whom the debt has not been paid off. The constitution of the CoC also has certain conditions and priorities with respect to the category of creditors. [29]
3. The CoC has the power to appoint IRP as the Resolutions Professional (‘RP’) or appoint any other eligible Insolvency Professional as RP. [30] 
4. The CoC has the power to decide the actions taken by the RP [31] for managing the business of the corporate debtor. 
5. The voting rights of members of the CoC are in proportion to the financial debt owed to them by the corporate debtor. [32]
6. The CoC has to conduct regular meetings to discuss the next steps to be taken for the insolvency resolution of the corporate debtor. These meetings are to be in conformity with the provisions of the Code. [33] 

Preparation of Information Memorandum
When the CoC has appointed an RP, the next step is to create an information memorandum [34] that contains all the relevant information that acts as an aid for the CoC to make better decisions with respect to the situations, which the committee might have made without any analysis. This memorandum is created by the RP. [35] There is a time limit and a manner in which the memorandum has to be submitted by the RP. [36]

Resolution Plan
The Resolution Plan is one of the most important aspects of the whole CIRP. This Resolution Plan is made with the objective of maximizing the value of assets of the corporate debtor. [37] The contents of the Resolution Plan as mentioned by the regulations must adhere to. [38] 
This resolution plan is submitted by a Resolution Applicant [39] and must be in conformity with provisions of the Code [40] in order to be approved by the NCLT for the resolution of the corporate debtor.
After RP has verified the Resolution Plan in accordance with the provisions of the Code [41], he has to present the Plan to CoC to obtain its approval. [42] If the Plan is approved by the CoC [43], the Plan is forwarded to NCLT, which decides whether the Plan is fit to be approved or not. [44]

Approval/Rejection of Resolution Plan
The Resolution Plan has to be approved by the CoC [45] as well as the NCLT [46] in order to continue the business of the corporate debtor as a going concern and prevent its liquidation. Thus, there are two situations that can occur if either CoC or NCLT approves or rejects the Resolution Plan.

(a) When Resolution Plan is Rejected/Disqualified
      (i) If the NCLT does not receive a resolution plan [47]
   (ii) If the Resolution Plan is rejected by RP on account of it being in non-conformity with the provisions of the Code. [48] 
     (iii) If the Plan has not been able to obtain at least 66% of the voting share of the CoC, and if there is no other alternative to resort to within the specified period, the NCLT will have no other option except proceeding with the liquidation of the corporate debtor. [49]

(b) When the Resolution Plan is approved
   (i) If the Resolution Plan is approved by at least 66% of the voting share of the CoC and is submitted to the NCLT by the RP within the prescribed time limit. [50] 

Contingent Situations with respect to the Resolution of Insolvency
(a) When insolvency is resolved
If the Resolution Plan is accepted, the corporate debtor will be prevented from liquidation and maximum efforts will be put in order to revive the business and pay off the debts of the creditor of the corporate debtor. It is to be noted that if the approval of the NCLT is obtained, then the period of moratorium ceases to exist. [51]

(b) When insolvency is not resolved
If the Resolution Plan is rejected [52], or if there is a mutual agreement by the members of the CoC to liquidate the business of the corporate debtor [53], then the NCLT has no other option but to give the order to liquidate the business of the corporate debtor. This decision by the CoC to liquidate the business of the corporate debtor must be taken before submitting the resolution plan to the NCLT.

Process of Liquidation
1. After NCLT has passed the order for liquidation, a liquidator is appointed [54] who consolidates [55] and verifies the claims of all the creditors. [56] He has the power to accept or reject the claims [57] provided he give sufficient reason for doing so. Further, he has to determine the value of claims. [58]
2. The assets that can be liquidated in order to satisfy the claims of the debtors are called ‘Liquidation Estate’. Provisions of the Code contain a list of assets of the corporate debtor that can be liquidated.[59]
3. After all the assets are liquidated, they are to be distributed in accordance with the priority of claims as mentioned in the Code. [60] When the proceeds obtained from the liquidation of such assets are distributed, the liquidator has the responsibility to make an application to the NCLT for the dissolution of the Corporate Debtor. [61] 
4. When the application for the dissolution of the corporate debtor is approved by the NCLT, the corporate debtor is dissolved and ceases to exist. [62]

[1] Section 2(62), Companies Act, 2013.
[2] Section 2(62), Companies Act, 2013; Section 2(n), Limited Liability Partnership Act, 2008 r/w Section 2(a), Insolvency and Bankruptcy Code, 2016.
[3] Section 64(C), Limited Liability Partnership Act, 2008.
[4] Section 238, Insolvency and Bankruptcy Code, 2016.
[5] Section 2, Insolvency and Bankruptcy Code, 2016.
[6] Section 2(a) r/w Section 255, Insolvency and Bankruptcy Code, 2016.
[7] Section 3(7) r/w Section 3(8) and Section 3(23), Insolvency and Bankruptcy Code, 2016.
[8] Section 5(7) r/w Section 7, Insolvency and Bankruptcy Code, 2016.
[9] Section 5(20) r/w Section 8 and Section 9, Insolvency and Bankruptcy Code, 2016.
[10] Section 5(5)(a) r/w Section 10, Insolvency and Bankruptcy Code, 2016.
[11Section 3(11), Insolvency and Bankruptcy Code, 2016.
[12Section 3(10), Insolvency and Bankruptcy Code, 2016.
[13Section 3(12), Insolvency and Bankruptcy Code, 2016.
[14Section 4, Insolvency and Bankruptcy Code, 2016.
[15Section 5(8), Insolvency and Bankruptcy Code, 2016.
[16Section 5(21), Insolvency and Bankruptcy Code, 2016.
[17Section 5(14) r/w Section 12(1), Insolvency and Bankruptcy Code, 2016.
[18Section 12(3), Insolvency and Bankruptcy Code, 2016.
[19First Proviso of Section 12(3), Insolvency and Bankruptcy Code, 2016.
[20Section 13(c) r/w Section 16, Insolvency and Bankruptcy Code, 2016.
[21] Section 17 and Section 18,  Insolvency and Bankruptcy Code, 2016.
[22] Section 5(15) r/w Section 20(2)(c), Insolvency and Bankruptcy Code, 2016.
[23] Section 20, Insolvency and Bankruptcy Code, 2016
[24] Section 13(a) r/w Section 14, Insolvency and Bankruptcy Code, 2016.
[25] Section 13(b) r/w Section 15, Insolvency and Bankruptcy Code, 2016.
[26] Section 5(12), Insolvency and Bankruptcy Code, 2016.
[27] Section 18(b), Insolvency and Bankruptcy Code, 2016. r/w Regulation 12(1), IBBI (CIRP) Regulations, 2016.
[28] Regulations 12(3), 16, and 17(1), IBBI (CIRP) Regulations, 2016.
[29] Section 21(2) and Section 21(3), Insolvency and Bankruptcy Code, 2016.
[30] Section 22, Insolvency and Bankruptcy Code, 2016.
[31] Section 28, Insolvency and Bankruptcy Code, 2016.
[32] Section 24(6), Insolvency and Bankruptcy Code, 2016.
[33] Section 24, Insolvency and Bankruptcy Code, 2016.
[34] Section 5(10), Insolvency and Bankruptcy Code, 2016.
[35] Section 29(1), Insolvency and Bankruptcy Code, 2016.
[36] Regulation 36, IBBI (CIRP) Regulations, 2016.
[37] Regulation 37, IBBI (CIRP) Regulations, 2016.
[38] Regulation 38, IBBI (CIRP) Regulations, 2016.
[39] Section 5(25), Insolvency and Bankruptcy Code, 2016.
[40] Section 30, Insolvency and Bankruptcy Code, 2016.
[41] Section 30(2), Insolvency and Bankruptcy Code, 2016.
[42] Section 30(3), Insolvency and Bankruptcy Code, 2016. r/w CIRP Regulation 39(2) & 39(3).
[43] Section 30(4), Insolvency and Bankruptcy Code, 2016 r/w Regulation 39(3), IBBI (CIRP) Regulations, 2016.
[44] Section 30(6), Insolvency and Bankruptcy Code, 2016. r/w Regulation 39(4) & 39(5), IBBI (CIRP) Regulations, 2016.
[45] Section 30(4), Insolvency and Bankruptcy Code, 2016. r/w Regulation 39(3), IBBI (CIRP) Regulations, 2016.
[46] Section 31, Insolvency and Bankruptcy Code, 2016.
[47] Section 30(6), Insolvency and Bankruptcy Code, 2016.
[48] Section 30(2), Insolvency and Bankruptcy Code, 2016.
[49] Section 33(1), Insolvency and Bankruptcy Code, 2016.
[50] Section 30(6), Insolvency and Bankruptcy Code, 2016.
[51] Section 31(2), Insolvency and Bankruptcy Code, 2016.
[52] Section 33(1), Insolvency and Bankruptcy Code, 2016.
[53] Section 33(2), Insolvency and Bankruptcy Code, 2016.
[54] Section 34, Insolvency and Bankruptcy Code, 2016.
[55] Section 38, Insolvency and Bankruptcy Code, 2016.
[56] Section 39, Insolvency and Bankruptcy Code, 2016.
[57] Section 40, Insolvency and Bankruptcy Code, 2016.
[58] Section 41, Insolvency and Bankruptcy Code, 2016.
[59] Section 36, Insolvency and Bankruptcy Code, 2016.
[60] Section 53, Insolvency and Bankruptcy Code, 2016.
[61] Section 54, Insolvency and Bankruptcy Code, 2016.
[62] Section 302, Companies Act, 2013.

Trade Mark Law: Indian Perspective

Trademark is the name, symbol, logo, sound, etc. which identifies the basis and the origin of the goods and the services basically it shows the value and goodwill of the good. Trademark is the distinguishing factor that actually differentiates one firm from another by the means of their name, symbol, etc. without a trademark, it would be very difficult for the consumer to identify products. In the economic term, the trademark gives the power of “monopoly” that can be used only by himself. No one can use either the same trademark or branding attached to his products for raising margins if someone tries to use the trademark of others that would be called trademark infringement i.e violation of exclusive rights attaching to a trademark without the authorization of the trademark owner or any license. Trademark gives a boon to the company in the sense that it works as an incentive, by the means of it helps a company to expand its business to other commodities. umbrella branding (brand extension) which means that a company uses its trademark which is famous by selling one product enters into another type of market. An example of such a market is RELIANCE which works in retail marketing, entertainment industry, telecommunication, restaurants, etc. by the means of such brand extension, it gives a legitimate competition with other companies present in the market. Indian trademark law provides protection to trademark statutorily under trademark act 1999 and also under the common law remedy of passing off. 
Passing Off is a common law tort that can be used to enforce unregistered rights. The tort of passing off protects the goodwill of a trader from a misrepresentation. Statutory protection of a trademark is administered by the controller general of patents, designs, and trademark, a government agency which reports to the department of industrial policy and promotion (DIPP), under the ministry of commerce and industry.  

According to section 2(zb) of the trademark act 1999 “trademark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include the shape of goods, their packaging, and combination of colors.” a mark can include a device, brand heading, label, ticket name, signature, word, letter, numeral, shape of goods, packaging or combination of colors or any such combination.   In India, the term of registration of a trademark is 10 years from the date of Registration, which can be renewed for a further 10  years before the expiration date by paying the prescribed fees. There are various types of benefits if someone registered their brand name as a trademark, firstly it gives the uniqueness to the product, the faith of the public is also raised as compared to the other competitors present in the market, protects the name of the product from its duplicity, trademark gives long term security to the business.   

Various Types Of Trademarks Can Be Identified as Follows:
(a) Trademark as Property: Trademarks are generally not considered as a property as normal people understand the property to be of two types i.e. movable and immovable but as we know that there is another type of property which is IP and it is a special kind of property which can intangible or tangible as per the preference of the owner. 
(b) Trademark and Patent: Although the trademark and patent look very similar, there are some key differences that disguise both. Trademarks are a protection to a mark with which the company differentiates the product from other products in the market whereas the patent is a protection to the idea which has turned into reality.
(c) Trademark and Copyright: Both the trademark, as well as copyright, provide a right to ownership whereas copyright gives protection to the author’s publication, in other words, copyright helps to protect original content.
(d) Trademark and Geographical Indications: Trademark is actually a mark which shows that the authenticity of the product is on the top-notch and the product is made only by the concerning authority who actually has the right but on the other hand if we talk about Geographical Indication it is the right which is given to the manufacturer of some type of goods which can only be made at a particular region or state if somebody else indulges in such type of activity outside that region he is committing an offense.
(e) Trademark and Brands: Trademark is a mark that legally represents something and a brand name is a name that a  business uses for its product. A brand specifies and identifies a particular type of product.
(f) The Shape of Goods as a Trademark: Any shape of goods or its packaging or any three-dimensional object which can be represented graphically can be used as a trademark.
(g) Smell Trademark: Smell as a trademark can be registered as long as it can represent graphically and can be distinctive as a good. The link which connects smell trademark to the customer is olfactory. The smell is a very powerful & distinctive feature in which any consumer can actually judge and differentiate a good from one merchant to others.  Ex: Chanel was the first company which registered its fragrance. In India, it is not been registered under intellectual property rights. 
(h) Touch Trademark: Under the observation of German supreme court touch trademarks are the non-conventional trademark. Signs which are suitable to distinguish .the goods or services of a specific enterprise from others are eligible for trademark protection the principal function of the mark is to ensure that the customer identifies the original product with the label or mark. A sign which is perceptible via the sense of touch can also be a trademark. In India, a touch trademark is also recognized and can be registered as a trademark. Examples of such trademarks are raw silk, raw cotton, raw or treated wool. 
(i) Slogan Trademark: Slogans can also be registered as a trademark, slogans show the motto as well as the brand name of the product. The public reacts to slogans more quickly than normal branding does. For the registration of a slogan, it should be creative and distinctive. Mere, not every slogan can be registered as a trademark, there should not be a slogan with different meaning like as help me! For NGOs and other volunteer groups.
(j) Sound Trademark: A sound mark is a non-conventional trademark where the sound is used to perform the trademark function of uniquely identifying the commercial origin of the products or services. In today’s market, ‘sounds’ are being increasingly used as a popular means of identification of products in the marketplace.
(k) Collective Trademark: A collective trademark, collective trademark, or collective mark is a trademark owned by an organization, used by its members to identify themselves with a level of quality or accuracy, geographical origin, or other characteristics set by the organization.
(l) Service Trademark: A service mark is a trademark used in the United States and several other countries to identify a service rather than a product. 

Trademark Classification in India
Trademark in India is classified in about 45 different classes, which includes chemical substances used in industry, paints, lubricants machine, machine tools, medical and surgical, instruments, stationery, lather, household, furniture, textiles, games, beverages preparatory material, sanitary material, and hand tools, other scientific and educational products. Goods were classified in 1-34 classes, and services were classified in 35-45. These are again further subdivided, the main objective of trademark classification is to group together the similar nature of goods and services. 

Registration of a Trademark in India
STEP 1: Selecting a different and unique brand name 
STEP 2: Making the trademark application  
STEP 3: filling the brand name application  
STEP 4: examining the brand name registration application   
STEP 5: Issuance of the trademark registration certificate. Registration of a trademark confers the owner has the exclusive right by showing a symbol of ® or (™) in the goods and services.  

Remedies Available To The Owner of a Trademark in Case of Infringement
There are two types of remedies available in case of infringement by the third party.
(a) Action for infringement in case of a registered trademark
(b) Action for passing off in case of an unregistered trademark 
In both, the usage of the case of someone trademark is an illegal act for which the owner can file a suit against a third party who does such a thing. The first remedy which is an action for infringement is a statutory remedy which is basically codified in nature and the second remedy is a common-law action. In both cases court grant relief of injunction, monetary compensation for the damages incurred to the business of the owner, and government confiscate/destroy the infringing labels and tags, etc. In India, the punishment for selling and providing services by using fake tags or trademark is a minimum of six-month imprisonment which may extend to three years, with a  minimum fine of rupees fifty thousand which may extend to rupees two lakhs. 

Some Recent Case Judgments
(a) Feast over Choco Feast; Unilever’s Sweet Win
Unilever PLC, a well-known FMCG, filed a suit seeking a permanent injunction against Hyderabad based Masqati Dairy Products for infringing Unilever’s registered trademark FEAST by using the deceptively similar mark CHOCO FEAST for ice-creams. The High Court of Bombay instructed Masqati to pay INR 5 lakh as damages to Unilever. However, Unilever requested the amount be donated to the ‘AWARE Foundation’, an organization that takes care of animals found in a sick and injured condition on the streets. The Court passed a permanent injunction in favor of Unilever. Interestingly, the Court also ordered the infringing goods seized by the Court Receiver, to be distributed amongst the poor children and the seized wrappers to be destroyed by the Parties.  

(b) Reliance Jio Dials Down Trademark Infringement
Reliance Industries, the Indian conglomerate, filed a suit before the Mumbai High Court seeking a permanent injunction against Dhananjay Dinkarrao Khairnar for using the trademarks JIOFIT, JOIFER, JIO-4G and JIO-4EVER.  Reliance claims these marks are deceptively similar to its registered trademark JIO. The Court issued a permanent injunction and instructed Dhananjay to return all goods bearing impugned trademarks to Reliance. A court receiver has also been appointed to take charge of the disputed goods and remove contents in the packing material and hand it over to Reliance for destruction.  

(c) Swarovski’s Shining Trademark Win
Swarovski Aktiengesellschaft, a well-known crystal jewelry maker filed a suit seeking a permanent injunction against Durgesh Kumar Patwa, proprietor of M/s. Bajrang Beads for infringing their registered trademark “SWAROVSKI” and logo. Durgesh was engaged in selling, manufacturing, soliciting and trading jewelry, gemstones, artificial stones, or allied products using the mark/label SWARAWSKI, SWAROVSKI, and its logo and its variants having artistic features, getup, layout and lettering style similar to that of Swarovski. On the basis of the documents filed and the evidence, the Delhi High Court noted that Swarovski is the registered owner of the trademark SWAROVSKI and its logo and the trademark have acquired distinct features due to the long and continuous use. The Court further, awarded damages of INR 25,000 to be paid to Swarovski.

Report on Laws Regulating Banking Sector in India

Reserve Bank of India Act, 1934
The functions and establishment of RBI are laid down in the RBI Act which provides the RBI to manage its own constitution, incorporation, capital management, business, and functions. The RBI is also conferred with the power to regulate the monetary policy of India.

Companies Act, 2013
CA, 2013 mainly regulates the Related Party Transactions (transactions with affiliates). Compliance with the SEBI (LODR) is also necessary for banks which are listed companies. Related parties include:
(i) Directors (or their relatives);
(ii) Key managerial personnel (or their relatives);
(iii) Subsidiaries;
(iv) Holding companies; and
(v) Associate companies.
There are separate thresholds and approval requirements (by the Board of Directors and/or shareholders) for entering into an RTP. Further, disclosure of these RTPS in the annual accounts is a must and must be abiding the Indian generally accepted accounting principles. All transactions between a bank and a subsidiary or mutual fund sponsored by it should be on an arms-length basis.

Consumer Protection Act, 2019 (CPA. 2019)
The relationship between a bank and its customer is considered to be of a consumer and service provider, and thus CPA becomes applicable. This is an alternative and speedy remedy to approaching courts. A three-tier mechanism has been established to deal with complaints:
(i) District Forum: Operating at the district level with complaint value up to Rs. 2 million.
(ii) State Commission: Operating at the state level with complaint value between Rs. 2 million and 10 million. It is also an appellate authority for orders passed by the District Forum.
(iii) National Commission: Operating at the national level with complaint value more than Rs. 10 million. It is also an appellate authority for orders passed by State Commission. An appeal from the order of the national commission can be directed to the Supreme Court of India.

Banking Regulation Act, 1949 (BRA, 1949)
The framework for supervision and regulation of all banks is provided by the Banking Regulation Act, 1949. This legislation further confers the power to RBI to regulate the business operations of banks and also grant them licenses.
In addition, banks are prohibited from entering into certain RPTs under the BR Act. For example, a bank cannot give loans or advances to, or on behalf of, or remit any amounts due to it by:
(i) Any of its directors (or spouse or minor children of such a director);
(ii) Any partnership firm in which any of its directors is interested as a partner, manager, employee or guarantor;
(iii) Any company or subsidiary or holding company of a company in which any of its directors is interested as a director, managing agent, manager, employee or guarantor, or in which a director (together with its spouse and minor children) holds the interest of more than 500,000 rupees or 10 percent of the paid-up capital of the company, whichever is lower; and
(iv) Any individual with respect to whom a director is a partner or a guarantor.
(v) An approval from the board of the bank will be required for any loans given to relatives of any directors of that bank or directors or relatives of directors of any other bank.
Foreign Exchange Management Act, 1999  (FEMA, 1999)
FEMA and its rules were made with the purpose of regulating and monitoring cross-border activities of banks that are administered by RBI. The primary legislation for the control of exchange is FEMA.

Bankers Books Evidence Act, 1891 (BBE, 1891)
The Act is applicable in the event where the judge orders a party to inspect and take copies of the books of the bank. 

Negotiable Instruments Act 1881 (NI Act, 1881)
Banks deal with various negotiable instruments in order to provide banking services to their customers. These can include Cheques, Demand Drafts, Bill of Exchange, etc. The duties and responsibilities of a paying bank, as well as collecting such Negotiable Instruments, are governed by the NI Act.  Legal protection under NI Act can only be availed if the banks have adhered to the provisions laid down by the Act.

Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI, 1993)
The banks (and other financial institutions) which are registered with RBI have the duty to provide loans to legal entities and other borrowers (individuals). They also have the power to recover these loans or any unpaid amount, including interest and part of any loan or if the debts become Non-Performing Assets (NPA). This recovery can be made by approaching the appropriate Judicial forum.

Payment and Settlement Systems Act, 2007  (PSS Act, 2007)
All the modes of payment systems used in India are governed and regulated by the PSS Act, 2007.  The RBI has been conferred with the power to direct and regulate the payment systems as well as its participants in India. The Act also governs and regulates activities which involve payment and settlement of the transaction in substitute of paying or settling a transaction by cash or other means of physical movement of payment instruments to settle a transaction. 

Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI, 2002)
Documentation enables a bank to determine the borrower, capacity, security, and type of charge created. This documentation also serves as a piece of evidence in recovery proceedings before a court of law. This documentation also helps in determining the limitation period as well as enables the banks to enforce their rights under the SARFAESI Act, 2002, and also initiate recovery proceedings in Debt recovery Tribunals.

Banking Ombudsman Scheme 2006 (BOS, 2006)
If there is any dispute existing between as bank and its customers, then they are adjudicated under the BOS, 2006. The Banking Ombudsman is an authority appointed by RBI and is quasi-judicial in nature. It deals with customer complaints against banks with relation to lack of services rendered by them and facilitates resolution through mediation or passing an award.

Insolvency and Bankruptcy Code, 2016 (IBC, 2016)
RBI has the power to issue directions to any banks in the matter to commence the insolvency resolution process under IBC, 2016 with relations to any default in loan. However, this can only be done when the RBI is authorized by the Central Government to issue such directions.
If banks have provided a person with any loan, they fall within the ambit of Financial Creditor and constitute the Committee of Creditors for taking a decision on the Resolution Plan and resolution Process in order to revive the entity or take further actions of liquidation or bankruptcy.

Complexities between RDDBFI, SARFAESI, and IBC
IBC, 2016 is a more streamlined procedure of dealing with stressed assets as it unifies all the laws related to dealing with bankruptcy. The Code focuses on ‘Creditor-in-control’ rather than ‘Debtor-in-possession’. It has been designed in such a way that it unites the provisions of the SARFAESI, The RDDBFI, the Code of the Civil Procedure, etc.

S. No. Basis of Difference RDDBFI SARFAESI IBC
Trigger Amount
The default of 
Rs. 10 Lakh 
or more
Amount of default as
owed to a
secured creditor
Minimum default of 
amount of Rs. 1 Lakh 
to file an application
More than 2 Years
1-2 Years
180-330 Days
Types of
Creditors Covered
Secured & Unsecured
Operational and Financial Creditor 
which include secured and unsecured creditor

Minimum Wages Act, 1948

In developing countries like India where the problem of unemployment is great, there is a chance of exploitation of labourers being poor and having no bargaining capacity. In such circumstances, the employer may offer the labourer wages even below the subsistence level resulting thereby into starvation of labour, Therefore, the legislature thought fit to control the unfair practices of the employer of paying wages below the subsistence level to the employees. As per the Minimum Wages Act, 1948 every employer is bound to pay the minimum wages to his employees. These wages are said to be statutory wages. Even public works ostensibly initiated by the government for the sole purpose of providing employment are subject to this Act.

The Validity of the Act
In the case of Shamrao v. State of Bombay, the constitutionality of the Act was challenged by the employers to be violative of fundamental freedom under Article 19(1)(g) of the Constitution of India. But the Supreme Court held that the Act is constitutional as per the provisions of Directive Principle of State Policy embodied under Article 43 of the Constitution of India. The same was held in the V. Unichonoy v. State of Kerala, and Golmohammad Tatyasaheb v. State of Bombay
It was argued that this Act is violative of Article 14 as the provision in question, that is, section 3(3)(iv) of this Act was not in contravention to the equal protection clause of the constitution. This was decided in the case of Bhikusa Yamasa Kshatriya v. Sangamner Akola Bidi Kamgar Union.
In the case of N.M. Wadia Charitable Hospital v. State of Maharashtra, it was held that fixing different minimum wages for different localities is permitted under the constitution and under the labour laws. 

Object and Scope
To provide for fixing minimum rates of wages in certain employments. The employments are those which are included in the schedule and are referred to as ‘Scheduled Employments’. The Act extends to the whole of India.
Purports to achieve is to prevent exploitation of labour and for that purpose empowers the appropriate Government to take steps to prescribe minimum rates of wages in the scheduled industries.  In an underdeveloped country which faces the problem of unemployment on a very large scale, it is not unlikely that labour may offer to work even on starvation wages. 
The policy of the Act is to prevent the employment of such sweated labour in the interest of the general public and so in prescribing the minimum rates, the capacity of the employer need not be considered. 
What is being prescribed is minimum wage rates which a welfare State assumes every employer must pay before he employs labour. This Act aims to ensure not only bare physical subsistence but also maintenance of health and decency.
It ensures and secures adequate living wages to the labourer in the interest of the general public. To keep the family of the labourer living and to add to his efficiency and ensure a decent standard of life and full of employment of leisure and social and cultural opportunities.

What are Wages?
The meaning of the term ‘wages’ is defined under Section 2(h) of the Act. It means all remunerations capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes house rent allowance.
There are some exceptions to this definition. The term wages under this Act does not include:
  • The value of any house accommodation, a supply of light, water medical; 
  • The value of any other amenity or any service excluded by the general or social order of the appropriate Government; 
  • Contribution by the employer to any Pension Fund or Provides Fund or under any scheme of social insurance; 
  • Any traveling allowance or the value of any traveling concession; 
  • Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; 
  • Any gratuity which is payable on discharge.
In the year 1948, the Tripartite Committee on Fair Wages was appointed by the Central Advisory Council. The said committee had laid down a certain criterion for minimum wages. Such criterion provides 5 elements that have to be considered while fixing the minimum wages. These are as follows:
  • 3 consumption units per earners
  • Minimum food requirement of 2700 calories per average adult;
  • Cloth requirement of 72 yards per annum per family;
  • House rent corresponding to the minimum area provided under the Government’s Industrial Housing Scheme;
  • Fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total minimum wage.
Adding to it, the Appropriate Government has the power to fix the minimum rates of wages. It can fix the minimum rates of wages either:
  • by the hour; or
  • by the day; or
  • by the month or
  • by such a large wage period as may be prescribed.
What is Employment?
The act recognizes Scheduled Employment. The meaning of the term ‘scheduled employment’ is defined under Section 2(g) of the Act. It means employment specified in the Schedule or any process or branch of work forming part of such employment. The schedule is divided into two parts namely, Part I and Part II. When originally enacted Part I of Schedule had 12 entries. Part II relates to employment in agriculture. It was realized that it would be necessary to fix minimum wages in many more employments to be identified in the course of time. Accordingly, powers were given to the appropriate Government to add employments to the Schedule by following the procedure laid down in Section 21 of the Act. The State Government and Central Government have made several additions to the Schedule and it differs from State to State.

Who is an Employee?
The meaning of the term ‘employee’ is defined under Section 2(i) of the Act. It means any person who is employed for hire or rewards to do any work, skilled or unskilled, manual or clerical in scheduled employment in respect of which minimum rates of wages have been fixed; and includes an outworker to whom any articles or materials are given out by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale purpose of the trade or business of that other person where the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of that person; and also includes an employee declared to be an employee by the appropriate Government. 
The definition does not include any member of the Armed Forces of the Union.

Who is an Employer?
The meaning of the term ‘employer’ is defined under Section 2(e) of the Act. It means any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees in any scheduled employment in respect of which minimum rates of wages have been fixed under this Act and includes:
  • In a factory where there is carried on any scheduled employment in respect of which minimum rates of wages have been fixed under this Act, any person named under clause (f) of sub-section (1) of Section 7 of the Factories Act, 1948, as manager of the factory; 
  • In any scheduled employment under the control of any Government in India in respect of which minimum rates of wages have been fixed under this Act, the person or authority appointed by such Government for the supervision and control of employees or where no person of authority is so appointed, the Head of the Department; 
  • In any scheduled employment under any local authority in respect of which minimum rates of wages have been fixed under this Act the person appointed by such authority for the supervision and control of employees or where no person is so appointed, the Chief Executive Officer of the local authority; 
  • In any other case where there is carried on any scheduled employment in respect of which minimum rates of wages have been fixed under this Act, any person responsible to the owner of the supervision and control of the employees or for the payment of wages. A person who engages workers through another, like a contractor would also be an employer.
This act does not include Wages payable by an employer to a member of his family who is living with him and is dependent on him under Section 26(3).

Offences and Penalties
The offences and penalties recognized by this Act have been dealt with under Section 22. They are listed as below:
  • Any employer who pays to any employee less than the minimum rates of wages fixed for that employee’s class of work or less than the amount due to him under the provisions of this Act or contravenes any rule or order made under Section 13, shall be punishable with imprisonment for a term which may extend to 6 months or with fine which may extend to 500 rupees or with both. 
  • While imposing any fine for an offence under this section the court shall take into consideration the amount of any compensation already awarded against the accused in any proceedings taken under section 20. 
  • It is further stipulated under Section 22A of the Act that any employer who contravenes any provision of this Act or of any rule or order made thereunder shall if no other penalty is provided for such contravention by this Act be punishable with fine which may extend to five hundred rupees.
Fixation and Revision of Rates of Wages
The government under the Minimum Wages Act, 1948 has made it mandatory to provide the workers working in a factory with minimum wages. Therefore, Section 3(1)(a) of this act states the Fixation of Minimum Rates of Wages. This will help the employees to get their hard-work paid appropriately.
  • The appropriate Government may fix the minimum rates of wages payable to employees employed in an employment specified in Part - I or Part - II of the Schedule and in employment added to the Schedule.  The Government may review the minimum rates of wages and revise the minimum rates at intervals not exceeding five years.
  • The appropriate Government may fix a minimum rate of wages for time and for piece rate.  However different wage rates may be fixed for different scheduled employments, different classes of work in the same scheduled employment, for adults, adolescents, children and apprentices and for different localities and for any one or more of the wage periods, viz., by the hour or by the day or by the month or by such larger period.
Minimum Rate of Wages
Any minimum rate of wages fixed or revised may consist of:
  • A basic rate of wages and a special allowance.
  • A basic wage rate with or without the cost of living allowances and the cash value of concessions in respect of supplies of essential commodities at concessional rates.
  • An all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of concessions.
Procedure for Fixing and Revising Minimum Wages
  • The appropriate Government may appoint an advisory Board for advising it, generally in the matter of fixing and revising minimum rates of wages.
  • The Central Government may appoint a Central Advisory Board for the purpose of advising the Central and State Governments in the matters of the fixation and revision of minimum rates of wages.
Dearness Allowance
The Dearness Allowance (DA) is a cost of living adjustment allowance paid to Government employees, Public sector employees (PSE) and pensioners. It is payable to monthly, daily and piece-rate earners. The respective State Governments issue the Cost of Living Index number every six months for each and every scheduled employment.
For calculation, DA is divided into two separate categories: Industrial Dearness Allowance and Variable Dearness Allowance.
Industrial Dearness Allowance (IDA) applies to the Public sector employees of the Central Government. The Industrial Dearness Allowance for public sector employees undergoes quarterly revision depending on the Consumer Price Index to help offset the impact of rising levels of inflation.
Variable Dearness Allowance (VDA) applies to the employees of the Central Government. It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation. VDA in itself is dependent on three different components as given below.
  • Base Index – remains fixed for a particular period.
  • Consumer Price Index – impacts VDA as it changes every month.
  • Variable DA amount that has been fixed by the Government remains fixed unless the government revises the basic minimum wages.
The following formula is being used by the Central Government to calculate the dearness allowance for the Central Government Employees, after implementing the recommendations of the 7th Pay Commission, from July 1st, 2016 onwards. The formula is: 

Dearness Allowance% = (Average of AICPIN for the past 12 months – 261.4) * 100 / 261.4
Dearness Allowance% = (Average of AICPIN for the past 3 months – 126.33) * 100 / 126.33

AICPIN stands for the All India Consumer Price Index. Dearness allowance is calculated from the AICPIN value, once the AICPI(IW) for a particular month is published by the Government. AICPIN is issued by the Ministry of Labour and Employment, which are revised periodically.
The dearness allowances are revised by the government twice a year. It was increased by the Central Government from 15% to 17% when was revised in July 2019.
The minimum rates of wages include the basic rates and Variable Dearness Allowance. The revised rates of Variable Dearness Allowance on the basis of the average Consumer Price Index for Industrial Workers.

Independence and Impartiality in Adjudication of Arbitral Proceedings

The most significant element of domestic as well as international arbitration is the constitution of an impartial, independent, and neutral tribunal. The perception of justice and the administration of justice itself depends upon these elements. An independent arbitrator has no stake or apparent conflict with the parties or the sum involved in the proceedings, an impartial arbitrator means that the arbitrator allows the equal chance of hearing to both the parties to plead. An arbitrator is considered neutral if the nationality of such arbitrator is different from that of the parties, which is of utmost relevance in the international commercial arbitration.

The Arbitration and Conciliation Act of 1996- Pre Amendment Situation
Section 11 of the Act provided for the appointment of the arbitrators by the parties. Further Section 12 [1] of the Act specified the grounds for challenging an arbitrator. It simply laid down that an arbitrator shall disclose any circumstances to the parties which shall give rise to doubts as to his independence and impartiality before and after the appointment. Further, it specified that any appointment may be challenged only if doubtful circumstances exist as to his independence or impartiality; or if he does not possess the qualifications as agreed between the parties after the appointment has been made.

(a) Vague and uncertain language as to indefinite provisions to ensure that an arbitrator appointed to adjudicate the disputes between parties is indeed unbiased. 
(b) Silent as to what constitutes Justifiable Guidance.
(c) Silent as to what renders an arbitrator ineligible to act.
The above uncertainties rendered the Act toothless with reference to the virtues of independence, impartiality, and neutrality of an arbitrator.

Law Commission's 246th Report
The Law Commission of India examined various shortcomings in the working of the Act and in its first report, i.e. 176th Report the said Commission made various suggestions for amending certain provisions of the Act. This exercise was again done by the Law Commission of India in its 246th in August 2004, which led to the enactment of the Arbitration and Conciliation (Amendment Act), 2015 (“Amendment Act”). The amendment brought a major change in Section 12 of the 1996 Act.

The Arbitration and Conciliation Act - Post 2015 Amendment
The Amendment Act of 2015 led to the significant changes in the "grounds for the challenge" of an arbitrator :
Amendment of Section 12(1) of the Act, now mandates an arbitrator to disclose in writing the existence of any direct/indirect, past or present relationship with any of the parties to such dispute, which may raise justifiable doubts as to his impartiality. It also introduced Schedule V to the Act [2], provides guidance on what constitutes such "justifiable doubts";
Introduction of Section 12(5) to the Act with the simultaneous introduction of Schedule VII, which specifies certain categories that render an arbitrator ineligible to act
Grounds that may render an arbitrator ineligible for appointment
(a) Arbitrator's relationship with the parties or counsel (14 grounds);
(b) Relationship of the arbitrator to the dispute (2 grounds);
(c) Arbitrator's direct or indirect interest in the dispute (3 grounds).
Section 12(5) is reproduced as under:
"(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing"
Section 14 of the Act has been amended to include the provision of substitution of another arbitrator, upon the termination of the mandate of an arbitrator [3].

Ensuring Independence and Impartiality
Section 12 of the Amended Act provided that the person who has been approached in relation to his possible appointment as an arbitrator must give disclosure regarding any direct, indirect of past or present relationship with any of the parties or in relation to any interest in the subject matter in dispute, etc. which may raise legitimate doubts on his independence and impartiality. Further, such a person is also required to disclose regarding any situation or circumstance which may impact his ability to devote sufficient time to arbitration. The said disclosure must be provided in such form as prescribed in the sixth schedule of the Amendment Act.
The fifth schedule enlisted the guiding factors in determining whether such circumstances exist which may give rise to justifiable doubts as to the independence and impartiality of the arbitrator.
Further, if the relationship of the person, who has been approached to be appointed as the arbitrator, and the parties or the counsel, or the subject matter falls within the forbidden categories, as enumerated in the seventh schedule of the Amendment Act, then such person shall be considered ineligible to be appointed as an arbitrator.

Judicial Precedents which clarified the amended Provisions
Before the Amendment Act, it was a generally accepted norm that arbitration agreements in government, statutory and public-sector contracts would contain a named arbitrator, which would generally be a departmental head.

Issue No. 1: What could be called 'apparent bias'?
Courts did not recognize the concept of 'apparent bias' in situations like these. Hon'ble Supreme Court of India, in Indian Oil Corporation v. Raja Transport (P) Ltd [4], has held:
"...senior officer/s (usually, heads of department or equivalent) of a government/statutory corporation/public sector undertaking, not associated with the contract, are considered to be independent and impartial and are not barred from functioning as Arbitrators merely because their employer is a party to the contract." 
However, in the Union of India v. Singh Builders Syndicate [5], the Hon'ble Supreme Court had suggested that the government, statutory authorities, and government companies should consider phasing out arbitration clauses providing for the appointment of serving officers and encourage professionalism in arbitration.

Post Amendment Situation and One Landmark Judgement
Post Amendment, a landmark judgment was pronounced by the Supreme Court in order to highlight the importance of the independence of an arbitrator.
The Apex Court in Voestalpine Schienen GmBH v. Delhi Metro Rail Corporation Limited [6] held that independence and impartiality of the arbitrator are the hallmarks IF any arbitration proceeding. The moot issue was whether the arbitration clause providing for the appointment of arbitrators from a panel of arbitrators was contrary to the parameters of impartiality and eligibility as per amended section 12 of the Act.

Factual Matrix
The petitioner, VSG, is a Company registered under the laws of Austria and has its branch office in India. The respondent, DMRC, awarded the contract dated 12th August 2013 to the petitioner for the supply of rails.
Certain disputes arose between the parties and the petitioner being aggrieved by actions of Respondent desired for resolution of the dispute by means of arbitration, as provided in Clause 9.2 of General Conditions of Contract read with Clause 9.2 of Special Conditions of Contract executed between the parties. Clause 9.2(A) of the SCC prescribed a particular procedure for constitution of the arbitral tribunal which, inter alia, stipulated that the respondent shall forward names of five persons from the panel of arbitrators maintained by the respondent and the petitioner will have to choose his nominee arbitrator from the said panel.
As per this provision, the respondent had, in fact, furnished the names of five such persons to the petitioner with a request to nominate its arbitrator from the said panel. However, this was unacceptable to the petitioner on the grounds that the panel consisted of serving or retired engineers either of the respondent or of Government department or public sector undertakings.
The petitioner claimed that the panel did not consist of independent arbitrators. Thus, according to the petitioner, due to the amendment of Section 12 of the Act, such a panel had lost its validity being contrary to the law of the land.

Findings of the Court
The Supreme Court held that the arrangement may result in adverse consequences. Firstly, the choice given to the petitioner was very limited, the availability of free choice to nominate a person out the entire panel list, which was prepared by DMRC, was completely absent.
Secondly, with the discretion given to DMRC to choose five persons, a room for suspicion was eventually created in the mind of the petitioner that DMRC may have picked up its own favorites. This may lead to the impartiality of the arbitrator towards DMRC.
Thus, the Supreme Court held that the sub-clauses (b) & (c) of clause 9.2 of SCC warrants deletion and appropriate choice must be provided to the parties to nominate any person from the entire panel of arbitrators. Likewise, the two arbitrators nominated by the parties should be given full freedom to choose the third arbitrator from the panel.
Further, it was also held that it is imperative to have a much broad-based panel so that there is no misapprehension between the parties that there is any possibility of the principle of impartiality and independence being compromised at any stage of the arbitration proceedings, especially at the stage of the constitution of the arbitral tribunal. Accordingly, the parties were directed to prepare a broad-based panel on the aforesaid lines within a period of two months.

Issue No. 2: Whether a former employee of an organization is disqualified to act as an arbitrator in a dispute involving the organization?
Many rulings allowed a former employee outside the purview of the Entry 1 Seventh Schedule. In the aforesaid cases, the Courts applied the literal rule of construction, thereby holding that former employees are not disqualified to act as arbitrators in a dispute involving their employers.

Jurisprudence, as developed by the Courts
1. Patna High Court
Hindustan Steel Works Construction Limited v. Union of India & Ors. [7]
Considering whether a panel of retired Railway Officers who were associated with the Railway Administration would be impartial arbitrators, ruled that the purpose behind the amendment of Section 12 of the Act was to ensure that the arbitrator appointed is independent and discharges his duties without hindrance. The Court relied heavily on the decision in M/s. Voestalpine Schienen GMHB V. Delhi Metro Rail Corporation Ltd., and did not approve of the panel. The Court observed Law laid down by the Hon'ble Supreme Court in the case of Delhi Metro Rail Corporation Ltd. (supra) is correct. The court was of the considered view that as all these officers were in some way or the other connected with the Railway Administration either through the Railway Board or other zonal Railways the dispute in question pertains to an agreement executed as per the guidelines of the Railway Board, it is not appropriate to approve the aforesaid panel.

2. High Court of Delhi
Afcons Infrastructure Limited v. Ircon International Limited [8]
The Court appointed a broad-based arbitration panel instead of the existing panel of retired Railway Officers empanelled to work as Railway Arbitrator. Further, the Court clarified that though the appointment of an ex-employee as an arbitrator did not fall within the rigor of Section 12(5) of the Act read with the Seventh The issue whether a person disqualified under Section 12(5) of the Act read with the Seventh Schedule to act as an arbitrator can nominate an arbitrator was resolved and Court held that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would be tantamount to the ineligible arbitrator carrying on the proceeding of arbitration by proxy.
In order to bar the same, it was held that once an arbitrator has become ineligible by operation of law, he cannot nominate another person as an arbitrator. The Court observed that:
Schedule to the Act, but undeniably it did give rise to apprehensions (whether justifiable or not) in the minds of the other party, and it was essential that all parties have full confidence in the arbitral process.

3. Supreme Court of India
TRF Ltd. v. Energo Engineering Projects Ltd. [9] 

(i) The court relied upon the maxim "Qui facit per alium facit per se" (What one does through another is done by oneself). To put it in another form, that which cannot be done directly may not be done indirectly by engaging another outside the prohibited area to do the illegal activities within the prohibited area.
(ii) It is immaterial whether, for the doing of such an illegal act, the agent employed is given the wider powers or authority of the "pucca adatia", or, as the High Court had held, he is clothed with the powers of an ordinary commission agent only."
(iii) Court did not concern itself with the concept of apprehension of bias or suitability or respectability of the arbitrator while coming to its decision but strictly limited itself to the question of authority and power of the ineligible named arbitrator.

[1] 12. Grounds for the challenge:
    (i) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.
     (ii) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in subsection (1) unless they have already been informed of them by him.
     (iii) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or he does not possess the qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reason, of which he becomes aware after the appointment has been made.
[2] Grounds that give rise to justifiable doubts as to the independence or impartiality of arbitrators:
      (i) Arbitrator's relationship with the parties or counsel (14 grounds)
      (ii) Relationship of the arbitrator to the dispute (2 grounds);
      (iii) Arbitrator's direct or indirect interest in the dispute (3 grounds);
      (iv) Previous services for one of the parties or other involvement in the case (5 grounds);
      (v) Relationship between an arbitrator and another arbitrator or counsel (5 grounds);
      (vi) Relationship between arbitrator and party and others involved in the arbitration (2 grounds);
      (vii) Other circumstances (3 grounds).
[3] Section 14 as amended states the following:
     (i) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if - (a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; (b) he withdraws from his office or the parties agree to the termination of his mandate.
     (ii) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
     (iii) If under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12."
[4] Indian Oil Corporation v. Raja Transport (P) Ltd, (2009) 8 SCC 520.
[5] Union of India v. Singh Builders Syndicate, (2009) 4 SCC 523.
[6] Voestalpine Schienen GmBH v. Delhi Metro Rail Corporation Limited, AIR 2017 SC 939.
[7] Hindustan Steelworks Works Construction Limited v. The Union Of India & Ors on 2 August 2017.
[8] Afcons Infrastructure Limited v. Ircon International Limited [ARB.P. 21/2017, decided on May 29, 2017 (High Court of Delhi)].
[10] TRF Ltd. v. Energo Engineering Projects Ltd. [Civil Appeal No. 5306 of 2017, decided on July 3, 2017. (Delhi High Court)].

Differences between Financial and Operational Creditors under Insolvency and Bankruptcy Code, 2016

Financial Creditor
A financial creditor is defined under Section 5(7) of the IBC to mean "a person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred". In order to ascertain whether a person is a financial creditor, the debt owed to such a person must fall within the ambit a 'Financial Debt' as under Section 5(8) of the IBC. Financial debt is defined under Section 5(8) of the IBC to mean: "a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes:
  • Money borrowed against payment of interest;
  • Any amount raised by acceptance under any acceptance credit facility or its de-materialized equivalent;
  • Any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
  • The amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;
  • Receivable sold or discounted other than any receivables sold on non-recourse basis;
  • Any amount raised under any other transaction, including, any forward sale or purchase agreement, having the commercial effect of a borrowing;
  • Any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;
  • The amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause"
Homebuyers are also considered to be the financial creditors [1] provided only if 10% or 100 homebuyers (whichever is less) or moe debenture holders agree to move the application for insolvency. [2] Furthermore, it has also been held that dissenting financial creditors cannot be allowed to scramble CIRP. [3] Also, the commercial freedom of individual financial creditors is non-justiciable, [4] while the dissenting financial creditors should not be discriminated against. [5] The dispute with the financial creditor is not relevant for deciding the admission of insolvency resolutions process.[6] A notice is required to be given to the corporate debtor for the initiation of CIRP. [7]

Operational Creditor
An operational creditor is defined under Section 5(20) of the IBC to mean "any person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred".
In order to ascertain whether a person would fall within the definition of an operational creditor, the debt owed to such a person must fall within the definition of an operational debt as defined under Section 5(21) of the IBC.
An operational debt is defined under section 5(21) of the IBC to mean: "a claim in respect of the provisions of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority". 
Furthermore, statutory dues (income tax, sales tax, VAT) are also treated as operational debt.[8] Passing an arbitral award and steps taken to challenge the arbitral award constitutes a valid dispute with regard to operational debt as well as a pending appeal under Arbitration and Conciliation Act. [9] The demand notice of unpaid operational debt can be issued by a lawyer on behalf of the operational creditor. [10]

The distinction between Financial and Operational Creditor
The distinction between a financial creditor and an operational creditor has been drawn by the Bankruptcy Law Reforms Committee in para 5.2.1 of its final report [11]. It states: "Here, the Code differentiates between financial creditors and operational creditors. Financial creditors are those whose relationship with the entity is a pure financial contract, such as a loan or debt security. Operational creditors are those whose liabilities from the entity come from a transaction on operations...The Code also provides for cases where a creditor has both a solely financial transaction as well as an operational transaction with the entity. In such a case, the creditor can be considered a financial creditor to the extent of the financial debt and an operational creditor to the extent of the operational debt."
The Hon'ble Tribunal while deciding the question of whether a flat purchaser could be considered an operation creditor [12] considered the observations of the Bankruptcy Law Reforms Committee in paragraph no. 5.2.1 of the Final Report [13]:
"Operational Creditors are those whose liability from the entity comes from a transaction on operations. Thus, the wholesale vendor of spare parts whose spark plugs are kept in inventory by car mechanics and who gets paid only after the spark plugs are sold is an operational creditor. Similarly, the lessor that the entity rents out space from is an operational creditor to whom the entity owes monthly rent on a three-year lease."
From the case law discussed above, it is evident that the Tribunals are stringent in construing the definition of 'Operational Creditor' under the IBC and are refraining from entertaining applications wherein the applicants are not strictly falling within the scope of the IBC and have alternate effective remedies available. The Hon'ble Tribunal has also in subsequent cases before it passed similar orders [14].
[1] Pioneer Urban Land Infrastructure & Ors. v. Union of India & Ors. 2019 SCC Online SC 1005; Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.
[2] Insolvency and Bankruptcy (Amendment) Act, 2019.
[3] Edelweiss Asset Reconstruction Company Ltd. v. Sai Regency Power Corp. (P) Ltd., 2019 SCC Online NCLAT 921.
[4] K Shashidhar v. Indian Overseas Bank, 2019 SCC Online SC 257.
[5] Hero Fincorp Ltd. v. Rave Scans Pvt. Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 745/2018.
[6] Vinayaka Exports and Anr. v. M/s Colohome Developers Pvt. Ltd, Company Appeal (AT) (Insolvency) No. 06/2019.
[7] Innoventive Industries Ltd. v. ICICI Bank & Anr. Civil Appeal No. 8337-8338/2019. 
[8] Pr. Director-General of Income Tax (Admn. & TPS) vs M/s. Synergies Dooray Automotive Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 205/2017.
[9] Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., Civil Appeal No. 9405/2017.
[10] Macquarie Bank Limited v. Shilpi Cable Technologies Ltd., Civil Appeal No. 15135/2017.
[11] Banking Law Reform Committee Report Click Here
[12] Co. Vinod Awasthy v. AMR Infrastructure Ltd., C.P. No. (IB)-10 (PB)/2017.
[13] Banking Law Reform Committee Report Click Here 
[14] Mukesh Kumar v. AMR Infrastructure Ltd., C.P. No. (IB)-30 (PB)/2017; Pawan Dubey v. JBK Developers Private Limited, C.P. No. (IB)-19 (PB)/2017.

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