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Legal Chronicle

September 2024

UJA | Key Legislative and Regulatory Updates-

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Index

Introduction

Dear Reader,

The Legal Department at UJA is delighted to impart certain legal knowledge as construed under the Legal Chronicle to keep the readers aware of the recent updates and developments that revolve around various aspects of the law. Our ultimate goal is to enable our readers to develop a sense of familiarity with the complexities of Indian as well as international law.

With our proven expertise and knowledge, the Chronicle shall uncover the intricacies of various branches of law like international law, labor law, intellectual property, alternative dispute resolution,  and business and corporate laws.

In this edition of Legal Chronicle, we delve into significant legislative and regulatory updates. We also analyze case law related to arbitration, highlighting its implications for the dispute resolution landscape.

We hope that this edition creates a sense of enthusiasm for our readers and successfully delivers the plethora of legal knowledge as intended. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at legal@uja.in

 

Notification of Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2024

The Ministry of Corporate Affairs, vide a notification dated September 9, 2024, has notified an amendment, and these rules may be called the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2024. These rules amend the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016.

Amendment Rules, 2024

The rules shall come into force on the 17th of September 2024. The amendment provides that where the transferor foreign company incorporated outside India being a holding company and the transferee Indian company being a wholly owned subsidiary company incorporated in India, enter into merger or amalgamation, both the companies shall obtain the prior approval of the Reserve Bank of India; and the application shall be made by the transferee Indian company to the Central Government under Section 233 of the Act and provisions of Rule 25 along with a declaration.

Homebuyers Get Support: IBBI Unveils Amendments to Insolvency Process.

Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations).

The Insolvency and Bankruptcy Board of India (IBBI/Board) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2024 (Amendment Regulations) on 24th September 2024.

The Amendment Regulations provide for the appointment of an interim representative who will act as a representative for a class of creditors during the period when the application for appointment of the authorized representative is under consideration by the adjudicating authority for approval. The interim representative will possess the same rights and responsibilities as an authorized representative during the committee of creditors meetings. These amendments are designed to ensure effective representation for specific groups of creditors, particularly those with large numbers, such as homebuyers, throughout the corporate insolvency resolution process. 

Government Encourages Platform Aggregators to register Platform Workers on e-Shram Portal

The Ministry of Labour & Employment released an advisory on 16th September 2024, urging aggregators to register on the e-Shram portal and on-board their gig and platform workers. This is a major step in extending social security benefits to platform workers.

The guidelines define key terms such as “Aggregator,” “Platform work,” and “Platform worker.” To guide the process, the advisory also specifies Standard Operating Procedures outlining the responsibilities of aggregators, which include registering their platform workers on the e-Shram Portal and regularly updating their data. Upon registration, platform workers will receive a Universal Account Number (UAN), which will allow them access to key social security benefits. In case, any platform worker has exited the platform work of the aggregator, the aggregator may notify the exit for that UAN on the eShram Portal.

The advisory shall apply to platform-based gig workers engaged in or undertaking platform work and aggregators, who provide services to a business or an end customer through a digital app or platform. The classification of aggregator includes but is not limited to ride-sharing services, food and grocery delivery services, logistics services, e-marketplace, etc.

Government Encourages Platform Aggregators to register Platform Workers on e-Shram Portal

A toll-free helpline (14434) has been set up to disseminate information to platform workers, and to facilitate on boarding of aggregators and registration of platform workers.

Case Analysis

Binding Agreements: Supreme Court Clarifies How Non-Signatories Can Be Held to Arbitration Terms under the Agreement

The parties filed a petition under Sections 11(6) and 11(9) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to settle their differences as set forth in the Family Arrangement Agreement between the petitioner, AMP Group, and the respondent, JRS Group. The Court was handling a dispute in an International Commercial Arbitration case. The two groups had participated in different economic endeavors and jointly owned multiple firms; they were represented by co-brothers who were married in the same family. The SRG Group eventually formed alliances with the AMP and JRS Groups to form two businesses, Millenium and Degree, of which SRG owns 40% of the equity.

Between 2013 and 2019, various disputes emerged among the groups, resulting in multiple proceedings across different forums, including the National Company Law Tribunal.

To resolve these issues, the parties entered into a Family Arrangement Agreement, agreeing that the AMP Group would take full control of certain entities, while the JRS and SRG Groups would jointly own others. However, there were further disputes that emerged between the AMP Group on one side and the JRS and SRG Groups on the other.

When seeking the appointment of a sole arbitrator, it was argued before the Supreme Court that the SRG Group, as a non-signatory to the Family Arrangement Agreement, could not be compelled to participate in arbitration. Notably, the JRS Group did not object to resolving disputes with the AMP Group through arbitration; their primary concern was the inclusion of the SRG Group in the arbitration proceedings.

Analysis

The Court observed that both signature and non-signatory parties are included in the definition of “parties” under Section 2(1)(h) in conjunction with Section 7 of the Arbitration and Conciliation Act, 1996. It is decided that parties may nonetheless intend to be bound by the terms of the arbitration agreement even if they haven’t actually signed the related contract or the arbitration agreement. Furthermore, even though Section 7 stipulates that the agreement must be in writing, non-signature parties may still be obligated if they have a distinct legal connection to the signatory parties.

Consent is the main factor that determines who is considered a “party” to an arbitration agreement. A party’s willingness to be obligated by the agreement may be shown by their actions or conduct. The Court recognized that the absence of a signature from a non-signatory could imply that they do not want to accept any rights or responsibilities under the arbitration agreement. However, courts and tribunals should not take a restrictive approach that excludes individuals or corporations who demonstrate, through their conduct and contacts with signature parties, a clear intention to be bound by the agreement.

The Court went on to say that participation in the underlying contract’s negotiation, execution, and conclusion by the non-signatory frequently implies a desire to be bound. A reasonable impression that the non-signatory is essentially a party to the contract that contains the arbitration agreement may arise when the non-signatory’s behavior is consistent with that of the other parties. However, rather than being purely incidental, the non-signatory’s participation needs to be positive, direct, and meaningful to create consent.

The Court observed that these points indicate a potential link between the SRG Group and the FAA, suggesting their involvement in the anticipated settlement. Consequently, a comprehensive review of the disputed factual matters is required to establish whether the SRG Group participated in negotiating and finalizing the underlying contract and whether they are bound by the arbitration agreement.

Decision of the Court

Reaffirming its restricted jurisdiction as outlined in Section 11(6) of the Act, the Court underscored that it should refrain from conducting a mini-trial or engaging in disputed factual inquiries, as such issues are better suited for comprehensive examination by the Arbitral Tribunal. Given the intricacies involved in assessing whether the SRG Group is a legitimate party to the arbitration agreement, the Court concluded that it would be more appropriate for the arbitral tribunal to make this determination after reviewing the evidence submitted by both parties. As a result, the Court appointed Justice Akil Kureshi, the former Chief Justice of the High Court of Rajasthan, to act as the sole arbitrator in this matter. 

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