LEGAL UPDATES FOR THE MONTH OF APRIL 2023

Special Events

Judicial Responses to Anti-Conversion Laws in India, 25th April, 2023

The team at Ivy Law participated in a webinar on “Judicial Responses to Anti-Conversion

Laws in India” organized by the Law Library of the Library of Congress. The key highlights of
the webinar were to provide an overview of India’s state-level anti-conversion laws that have
been enacted in 8 Indian states to regulate religious conversions, and the judicial responses to
them. The webinar emphasized on enforcement of these anti-conversion laws in these states
namely Arunachal Pradesh, Odisha, Madhya Pradesh, Chhattisgarh, Gujarat, Himachal Pradesh,
Jharkhand, and Uttarakhand and how the varied state laws are in fact similar in their content and
structure. Further, the webinar also deliberated upon how the Supreme Court and high courts are
considering both the misuse and constitutionality of these recently issued laws and ordinances.

Legal Updates

1. India, Malaysia Can Now Trade in Indian Rupee (“INR”)

https://hcikl.gov.in/pdf/press/press_1988853280.pdf

The Ministry of External Affairs, on 1st April, 2023, has notified that India and Malaysia can
now use INR to settle trade, in addition to the other currencies. This move follows the decision
by the Reserve Bank of India (“RBI”) in July 2022 to allow the settlement of international trade
in INR with the aim to facilitate the growth of global trade and support the interests of the global
trading community in INR. Further, it would also help in reducing transaction costs and currency
risk for businesses, encourage greater economic integration between the two countries, and
reduce reliance on the US dollar for international trade and finance.

2. Rajya Sabha Passes Competition (Amendment) Bill, 2022 (“Competition Bill”)

https://prsindia.org/files/bills_acts/bills_parliament/2022/Competition%20(Amendment)%20Bill,
%202022.pdf

Rajya Sabha, on 3rd April, 2023, has passed the Competition Bill with the aim to modernize the
anti-trust and competition laws in India in order to align it with the changes in the economy. The
key features of the Competition Bill are:
  Mergers and acquisitions exceeding INR 2,000 crores in value must be notified to the
Competition Commission of India (“CCI”), provided that the party being acquired has
substantial business operations in India.
 CCI would be liable to impose penalties on entities based on their global turnover instead of the
current practice of considering only relevant market turnover.
 Reduction of the overall time limit for the assessment of combinations to 150 days from the
current 210 days.
 Broadened scope of anti-competitive agreements to cover hub-and-spoke cartels, sellers, and
sales of goods and services, and modified factors used by CCI to determine whether an
agreement has an appreciable adverse effect on competition.
 Introduction of a new settlements framework, which would allow entities to propose
settlements for alleged contraventions.

3. The Information Technology (Intermediary Guidelines and Digital Media Ethics Code)
Amendment Rules, 2023 (“IT Rules, 2023”)

https://www.meity.gov.in/gazette-notification

The Ministry of Electronics and Information Technology (“MeitY”), on 6th April 2023, has
notified IT Rules, 2023 with the aim to introduce a fact-checking unit to curb fake or false
information concerning the Central Government (“CG”) wherein online platforms and other
internet intermediaries would be required to ensure that such fake news items be removed from
their platforms lest they would be liable for legal action against them. MeitY has recognized the
Press Information Bureau as the designated fact-checking unit which would contact the
appropriate departments in order to determine whether the news is fake or not. Further, IT Rules,
2023 has also incorporated regulatory provisions relating to online gaming and online real
money games within India.

4. The Bombay High Court Seeks CG’s Affidavit on Plea Challenging Amendment to the
Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules,
2021 (“IT Rules, 2021”) to Identify Fake News on Social Media

https://theprint.in/india/bombay-hc-seeks-centres-affidavit-on-plea-challenging-it-rules-
amendment-to-identify-fake-news-on-social-media/1511123/

The Bombay High Court, on 11th April, 2023, directed CG to file an affidavit in response to a
petition filed by a renowned Indian stand-up comedian (“Petitioner”) challenging an amendment
to the IT Rules, 2021 which empowers CG to identify fake news on social media against them.
The Petitioner claimed that section 79 (Exemption from liability of intermediary in certain cases)
of the Information Technology Act, 2000, which allows intermediaries to avoid liabilities for
 what third parties post on their websites was being challenged as violative of fundamental rights
of citizens hampering freedom of speech and expression and could potentially lead to his content
being arbitrarily blocked or his social media accounts being suspended or deactivated, thus
harming him professionally.

5. The Securities and Exchange Board of India (“SEBI”) Solicits Alternate Investment Funds
(“AIF”) to Provide Direct Plan Option to Investors

https://www.sebi.gov.in/legal/circulars/apr-2023/direct-plan-for-schemes-of-alternative-
investment-funds-aifs-and-trail-model-for-distribution-commission-in-aifs_69996.html

SEBI, on 10th April, 2023, has directed AIFs to provide the option of direct plans to investors
wherein such investors could participate in an AIF without having to pay any distribution or
placement fees. Further, SEBI has also asked AIFs to ensure that investors who approach such
AIF through SEBI registered intermediary which is separately charging the investor a fees, are
on boarded via direct plans only. The new rules are aimed at providing flexibility to investors for
investing in AIFs, thereby bringing transparency in expenses and curbing mis-selling.

6. Foreign Trade Policy, 2023 (“FTP, 2023”)

https://invest.up.gov.in/wp-content/uploads/2023/04/FOREIGN_010423.pdf

The Ministry of Commerce and Industry, on 14 th April, 2023, unveiled FTP, 2023 with the
objective to shift from incentives to a more remission and entitlement-based regime. The key
takeaways from FTP, 2023 are:
 The FTP benefits have been extended to e-commerce exports, which are estimated to grow to
USD 200-300 billion by 2030.
 The value limit for exports through courier service has been increased from INR 5 lakh to
INR 10 lakh per consignment.
 It seeks to make the INR a global currency and allow international trade settlement in the
domestic currency.
 Digitisation of applications (“apps”) pertaining to FTP and automatic system-based approval
of FTP apps with the aim to automate some trade approvals and cut charges for medium-
sized and small businesses to secure some government-backed benefits.

7. Companies (Removal of Names of Companies from the Register of Companies)

Amendment Rules, 2023 (“Companies Rules, 2023”)

https://www.mca.gov.in/bin/dms/getdocument
 The Ministry of Corporate Affairs, on 17th April, 2023, has notified the Companies Rules, 2023
to amend Companies (Removal of Names of Companies from the Register of Companies) Rules,
2016. Subsequent to the amendment:
 Under rule 4(1) (Application for removal of name of company), an application for removal of
name of a company shall be made to the Registrar, Centre for Processing Accelerated
Corporate Exit in Form No. STK-2 (Application by company to ROC for removing its name
from register of companies) along with a fee of INR 10,000.
 A new rule 3A (Removal of name of company from the Register on suo-motu basis) has been
inserted wherein the Registrar, Centre for Processing Accelerated Corporate Exit shall be the
Registrar of Companies for the purposes of exercising functional jurisdiction of processing
and disposal of applications made in Form No. STK-2 and all matters related thereto.

8. Global Trade Research Initiative (“GTRI”) Suggests Launching 'PLI Plus' Scheme to
Focus on New Product Development

https://economictimes.indiatimes.com/news/economy/policy/launch-pli-plus-initiative-focus-on-
new-product-development-to-boost-mfg-gtri-to-govt/articleshow/99712439.cms?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

GTRI, on 23rd April, 2023, has suggested that CG should consider launching a 'PLI Plus’ scheme
with the focus on development of new products, industrial designs and enhancing productivity
with a view to boost domestic manufacturing and therefore a production-linked incentives
scheme is under implementation by CG with a budgetary outlay of around INR 2 lakh crore for
14 sectors such as white goods, mobile, telecommunication and auto components. It was held
that creating sustainable and competitive manufacturing is imperative to increase the share of
manufacturing in Gross Domestic Product to 25 per cent by 2030 up from 15 per cent at present.

9. Supreme Court (“SC”): For a Company to be a "Resident" in India, Domicile or

Registration Irrelevant; Test is Where De Facto Control Lies

https://www.livelaw.in/pdf_upload/291-mansarovar-commercial-pvt-ltd-v-commissioner-of-
income-tax-delhi-10-apr-2023-468323.pdf

SC, on 10th April, 2023, has ruled that under the Income Tax Act, 1961, the domicile or the
registration of the company is not relevant, and the determinate test is the place where the sole
right to manage the company and the control of the company lies. Further, SC asserted that the
place where the “head and seat”, the “directing power” of the affairs of the company and the
control and management is shown, must not merely be theoretical control and power, i.e., not de
jure control and power. Rather, in order to hold that a non-Indian company is a resident in India
 during any previous year, it must be established that such company de facto controls and
manages its affairs in India.

10. SC: Changes via Circulars to Qualify as “Change of Law” Eligible for Relief

https://main.sci.gov.in/supremecourt/2022/6650/6650_2022_8_1506_43821_Judgement_20-
Apr-2023.pdf

SC, on 20th April 2023, held that all the changes effected through notifications, orders or
circulars by state-run entities would qualify as a “change of law” and would be eligible for
compensatory relief or tariff. Therefore, all such additional charges which are payable on
account of orders, directions, notifications, regulations, etc., issued by the instrumentalities of the
state, after the cut-off date, will have to be considered to be 'change in law' events. Furthermore,
SC also defined the scope of law to include all rules, regulations, order notifications by such
government instrumentalities.

11. SC: No Service Tax on Corporate Guarantees by Parent Companies to its Subsidiaries

https://economictimes.indiatimes.com/news/india/no-service-tax-on-corporate-guarantees-by-
parent-to-arms-supreme-court/articleshow/99223120.cms

SC has ruled that no service tax would be assessed on the corporate guarantees offered by a
parent company to its subsidiaries as there is no consideration involved. Though service tax
authorities argued that providing a corporate guarantee constitutes a service provided by the
holding company to its subsidiary, and accordingly service tax is applicable, however, SC held
that for determining the liability for service tax on a transaction, it is necessary to establish that
the service provider has received consideration, monetary or non-monetary, for that transaction.

12. Reserve Bank of India (“RBI”) Proposes Expansion of Unified Payments Interface (“UPI”)
Transactions to Allow Credit Card Payments

https://economictimes.indiatimes.com/news/economy/policy/now-avail-pre-approved-credit-on-
your-upi-account-mandates-rbi/articleshow/99296800.cms?from=mdr

RBI has proposed to expand the scope of UPI by enabling transfer to and from pre sanctioned
credit lines in banks, in addition to deposit accounts with the aim to reduce costs of digital
offerings and assist in improvement of distinctive merchandise for Indian markets. This
measure would allow linking of UPI to credit score strains which are permitted by banks for fee
transactions of each secured and unsecured lending merchandise like private mortgage and
 working capital mortgage, and thereby enable UPI services to mimic credit cards and provide
low value credit of upto INR 30 crores.
13. RBI to Recast Rules on Classification of Fraudulent Accounts

https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-to-recast-rules-on-
classification-of-fraudulent-accounts/articleshow/99622312.cms

RBI is on the verge of developing a new set of rules that will govern the declaration of bank
accounts as fraudulent in the wake of SC observation wherein SC had asked the banks to hear
out the views of delinquent borrowers before declaring their accounts as fraudulent. As per the
new rules, the borrower would be given a personal hearing before they are declared a wilful
defaulter thereby standardising the process of declaring a fraudulent account and aligning with
the wilful defaulter norms.

14. RBI Cracks the Whip on Banks, Companies Over Past Reporting Lapses

https://economictimes.indiatimes.com/news/economy/policy/rbi-cracks-the-whip-on-banks-
companies-over-past-reporting-lapses/articleshow/99649263.cms?from=mdr

RBI has become stricter regarding the disclosure of foreign funds of Indian banks and companies
due to which the difficulties of banks and companies have increased as RBI has started taking a
harder look at past defaults on loans to foreign subsidiaries and joint ventures by corporates. RBI
has further asserted that companies would be allowed to make fresh financial commitments only
after defaults are identified in past reports and fines are paid. Moreover, RBI has directed the
banks to look at old records of cross-border transfers to detect all reporting lapses, after which
RBI would review the data and prepare a code to fix late deposit fees and only then will a
company be allowed to send money abroad.

15. Service Providers Urge CG to Allow Foreign Currency Transactions in the Country via
RBI

https://economictimes.indiatimes.com/news/economy/policy/

Consultants and service providers in India have appealed to CG to stop routing domestic foreign
currency deals via the United States of America (“US”) banking system in order to avoid paying
high transaction fees and save foreign currency as by routing the transactions through the US
banking system, the country is losing substantial money, which is going to the Americans
towards transaction costs. At present, all domestic deals that involve foreign currency such as the
US Dollar are being routed through the US banking system where they charge transaction fees
 on every deal. The stakeholders have thereby suggested that such domestic deals should rather be
routed through RBI.

16. The Department for Promotion of Industry and Internal Trade (“DPIIT”) Raises
Startups’ Concerns Regarding ‘Fair Market Value’ with the Ministry of Finance (“MoF”)
https://economictimes.indiatimes.com/news/economy/policy/dpiit-takes-up-startups-concerns-
with-finance-ministry/articleshow/99444615.cms?from=mdr>

DPIIT has escalated issues related to the startups’ concerns over discrepancy pertaining to the
calculation of ‘fair market value’ under the angel tax provisions and also the Budget, 2023
proposal to include foreign investors under the ambit of the angel tax that till now applied only to
Indian residents following which, the startups have expressed apprehension about securing
funding as the angel tax may deter the foreign investors from investing which could eventually
affect the Indian startup ecosystem. Further, the Finance Bill, 2023 which was passed in March,
2023 also failed to address any of the startups’ concerns related to the provisions of the angel
tax introduced in the Budget, 2023.

17. Startups Demand More Exemption from Angel Tax

https://economictimes.indiatimes.com/tech/startups/

The startup industry raised concerns regarding the angel tax threshold wherein it is lobbying with
MoF to scrap or at least increase the INR 25 crores threshold limit which exempts them from
angel tax as, according to them, only a small number of startups would be able to meet this limit.
Further, they have also sought flexibility to invest surplus funds in the money market and liquid
instruments.

18. Ministry of Law and Justice in Talks to Curb Big Technology Companies’ Digital
Dominance

https://economictimes.indiatimes.com/tech/technology

The recent ruling by CCI against Google has prompted CG to formulate laws in order to restrain
big technology companies from achieving or misusing their market dominance. To this effect,
either new legislation would be brought up independently or the issues may be resolved by
amending the upcoming Digital India Act, 2023.

19. Financial Technology (“FinTech”) Firms in Search of Legal Experts Amid CG’s Tighter
Regulations
 https://www.business-standard.com/technology/tech-news

With CG’s increased attention on digital payments and RBI’s newly introduced guidelines on
digital lending, Fintech firms are actively looking for legal and compliance experts to handle the
increased regulatory burden. Therefore, there is a growing demand for tech-savvy legal experts
having experience of working in law firms who are adept at handling legal and compliance-
related issues to support their operations.

20. FinTech Companies Considering Establishing a Self-Regulatory Organization (“SRO”)

https://www.business-standard.com/finance/news/
https://www.ibanet.org/New-IBA-report

FinTech companies are actively contemplating the creation of an SRO with the aim to smoothen
the digital payments business and develop uniform rules and standards of operation. The
Payments Council of India was intended to take on the role of an SRO, however, due to its
association with multiple unregulated entities such as Google, RBI expressed its concern over the
proposal. Though RBI wishes that all regulated payment companies come together and form a
single SRO, however, given the payments industry's diverse players, such as UPI apps, mobile
wallet businesses, ATM service providers, and others, forming a self-regulatory body would be a
difficult undertaking.

21. Sri Lanka Seeks Indian Foreign Direct Investment for State Corporate Sector
Restructuring

https://economictimes.indiatimes.com/news/india/sri-lanka-seeks-indian-fdi-as-it-restructures-
state-corporate-sector/articleshow/99696763.cms?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Sri Lanka is implementing measures to restructure its state-owned enterprises and divesting
from sectors such as airlines, hotels, and hospitals which is thereby expected to create
investment opportunities for Indian investors. In March, 2023, the International Monetary Fund
approved a $3 billion loan program for Sri Lanka marking a crucial step for the bankrupt nation
to stabilize its economy and begin restructuring its debt. Further, it is also being speculated that
Tata Enterprises, a major industrial conglomerate in India, is being considered as a possible
investor in Sri Lankan Airways.

22. United States Trade Representative (“USTR”) Raises Intellectual Property Rights (“IPR”)
Issues over Draft Digital Personal Data Protection Bill (“DPDP Bill”)

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/april/ustr-releases-
2023-special-301-report-intellectual-property-protection-and-enforcement
 USTR, on 26th April, 2023, has released its 2023 Special 301 Report on intellectual property
(“IP”) protection and enforcement wherein it has placed India on its priority watchlist alongside
China, Russia, and others in response to concerns over India’s draft DPDP Bill. They are
concerned with the concise language on IP protection in the DPDP Bill noting that problematic
issues could be faced at the rule making stage after DPDP Bill is enacted which could
potentially threaten innovation and personal growth, if not amended. Further, USTR alleged that
India’s overall IP enforcement remains inadequate and trademark counterfeiting continues to be
a problematic area.

23. Introduction of the Digital India Bill (“DI Bill”) Raises Concerns of Over Compliance and
Regulatory Overreach

https://www.business-standard.com/technology/tech-news/experts-caution-overlap-in-dib-
legislation-fear-regulatory-overreach-123041100330_1.html

The DI Bill, which, if passed, intends to replace the Information Technology Act, 2000, the
Competition Act, 2002 and the Consumer Protection Act, 2019, has raised concerns amongst
numerous renowned experts who have pointed out that there would be several overlaps between
current and proposed laws which might result in over compliance and regulatory overreach.
Further, the Digital Competition Law, which is underway could also have potential overlaps
with DI Bill and therefore, the experts have requested CG to create a sync between various
legislations by determining the most optimal structure and method to implement the planned
regulatory schemes.

24. The Director General of GST Intelligence (“DGGI”) Issues Show Cause Notices to
Multiple Insurance Giants for Wrongful Input Tax Credit (“ITC”) Claims

https://m.economictimes.com/tech/newsletters

DGGI has served show cause notices to various insurance companies for issuing fraudulent
invoices in order to claim ITC which has further resulted in tax evasion of INR 2,250 crores.
These companies have allegedly issued fake invoices in arrangement with other insurance
intermediaries under the guise of marketing services without actually providing any services
which is an offence punishable under rule 16 of the Goods and Service Tax (“GST”) Act, 2017
which mandates that for ITC to be claimed, the buyer must possess the invoice on which the
GST was paid and must have received the goods or services he paid for.

25. Telecom Regulatory Authority of India’s (“TRAI”) Proposal for a Unified Legal
Framework for Telecommunication and Broadcasting Services Opposed by Major Media
Bodies
 https://www.trai.gov.in/sites/default/files/Times_Network_05042023.pdf

TRAI, in January, 2023, floated a consultation paper inviting comments from stakeholders on
the need for a comprehensive legal framework for telecommunication and broadcasting services
which is now being opposed by several media bodies including the Indian Broadcasting and
Digital Foundation and the Internet and Mobile Association of India who are of the view that
both the services are distinct as they lack common regulatory and licensing framework and
therefore, should have separate laws. Further, they opined that there is a technological barrier to
converging two services as broadcasting is a one-way service while telecommunication is a two-
way interactive service.

26. MoF Working with MeitY, RBI to Clamp Down on Ponzi Apps

https://ciso.economictimes.indiatimes.com/news/grc/finmin-working-with-meity-rbi-to-clamp-
down-on-ponzi-apps-nirmala-sitharaman/99719970

MoF has stated that discussions were on with MeitY and RBI to clamp down on ponzi apps with
the objective to prevent them from taking away hard earned money of gullible investors. MoF
maintains that investors should do their due diligence and should not be lured by claims of
lucrative returns made by such apps as social influencers and financial influencers are all out
there but a strong sense of caution is required by the investors to make sure to perform double
check and thereby protect their hard earned money. With this regard, in 2019, CG enacted a law
called the Banning of Unregulated Deposit Schemes Act, 2019, which looked to prevent
unregulated entities from collecting deposits and duping the poor and gullible of their hard
earned savings.