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Sonam Chandwani

banks fy2021 recovery

Banks’ FY2021 Recovery to Take a Hit as New IBC Cases Banned for a Year

By Banking No Comments

Banks’ FY2021 Recovery to Take a Hit as New IBC Cases

The suspension of fresh insolvency proceedings and coronavirus-related disruptions will impact recovery for lenders in fiscal 2021 as resolution mechanisms outside the Insolvency and Bankruptcy Code (IBC) are scarce, experts said.

Sonam Chandwani, managing partner, KS Legal and Associates, believes that banks, primarily concerned over deteriorating asset quality due to the lockdown, have been crippled by the announcement of a blanket ban on the IBC for a year. The lack of effective recovery outside the IBC is a worrisome issue for banks looking for resolution under a legal framework, said Chandwani.

“The freezing of IBC for a year closes an effective avenue of debt resolution for lenders leading to lower recoveries. The suspension could be a huge setback for banks relying on IBC as an efficacious means of recovery supported by a legal skeleton and a sanctioned tribunal,” she said.

The rating agency, Icra, expects the resolution of corporate insolvency resolution proceedings (CIRPs) would be impacted during FY21 due to a fall in the number of cases yielding a resolution plan. It also expects an increase in haircuts for lenders.

Icra said financial creditors could realize about Rs. 60,000-70,000 crore in FY21 through successful resolution plans from the IBC, as compared to about Rs. 1 trillion in FY20. The resolution amount would also be lower as the previous year witnessed large non-performing assets (NPAs) successfully being resolved, it said.

Concerned over deteriorating asset quality post-covid-19, banks are now hamstrung with regard to resolution and recovery. While the impact of the lockdown is expected to lead to a pile of bad assets, the lack of effective recovery mechanisms outside the Insolvency and Bankruptcy Code (IBC) is worrisome for lenders.


Tags: ibc cases, recent ibc cases, Banks FY2021 recovery, fy2021 recovery, new ibc cases

force majeure under rera

RERA ACT: A Critical Analysis

By Real Estate No Comments

Analysis of RERA Act

On May 1, 2020, the Real Estate (Regulation and Development) Act, 2016 (RERA) finished a long period since its establishment. This period is a conventional time skyline to consider the working of a Real Estate Regulatory Authority, set up under administrative law, in any event, to address the course, want, and assurance, with which it has accepted the job endorsed for it under the law.

The discussion among home buyers is that RERA, a law authorized to enable purchasers has been cunningly turned around into law for real estate developers – of the manufacturers – by the manufacturers, capably helped by the Regulatory Authorities. A look into the different web-based social networking trades would commute home the distress through which home buyers are getting hooked in the possession of the developer–authority nexus.

Starting with the guidelines under the Act being wrongfully weakened by some significant States (principally forgetting about progressing ventures); delays in the foundation of Authorities/Appellate Tribunals/Adjudicating Officers; deficient facilitating of sites with practically no undertaking data; and others, there is currently an additional weight of managing administrative torpidity.

The most evident of which is the easy-going usage of significant arrangements of the Act, to be specific – informing quarterly task refreshes; ensuring the upkeep of 70 percent venture assets in a different record; guaranteeing offices and enhancements as guaranteed; defending nature of development; knowing about purchaser complaints; and in particular, the execution of requests.

One plausible excuse, being promoted by the Authorities is ‘we need more powers’. This excuse is the oddest contention made by any Regulatory Authority over any part of India. Similar forces are accessible to most administrative specialists, cutting across areas, specifically – to force punishments, and to get orders executed for recuperations as unpaid debts of land income.

Truth be told, this is likewise conjured by the legal executive in instances of recuperation from delinquents. Actually, there is an absolute absence of importance to genuinely and powerfully actualize the Act.

On the other hand, some insignificant things are keeping a few Authorities drawn in, clearly by arrogating powers not given under the Act. One, the Authority of Self-Regulatory Mechanism (SRM) for manufacturers; one wonders, if developers were to self-manage, at that point, why would there be the requirement for RERA.

Moreover, if self-guidelines worked then would the circumstances have come to such a pass. Another, the Authority thought of ‘reviewing’ land ventures, clearly to help offtake deals for manufacturers.

All restrictions of semi-legal etiquette were crossed when Real Estate Regulatory Authorities of all States held hands to frame a skillet India Association. Have we at any point known about any affiliation framed by legal or semi-legal bodies?

As of late, there was a news report that this Association of Authorities, would seek after the Reserve Bank of India (RBI) for credit rebuilding for developers. It is bizarre, if not dubious, to see Authorities attempting to encourage supporting the board for developers.

Unpredictable expansion of undertaking enlistment has become a standard as opposed to an exemption. As of late, under the affection of COVID-19, most Authorities have offered six to nine months’ sweeping augmentation to all undertakings, past one year given under the Force Majeure clause in RERA. This was done to cleanse developers of any obligation towards intrigue, remuneration, and punishment, for delays.

The homebuyers’ locale is losing trust in RERA Authorities, which are encouraging the end of RERA, longingly looked for by manufacturers. In any case, we trust that the Central Government and especially the Prime Minister, will take comprehension of these practices, and find a way to bring the Authorities into the groove again.

One such initial step could be a quick review, either by the Comptroller and Auditor General of India (CAG) or some other able position, of the elements of the Regulatory Authorities’ opposite obligations indicated under the Act. The time, vitality, center, and assets squandered by the Authorities in doing the trivial items aforementioned, could have been all the more productively used for lively usage of RERA.


Tags: real estate regulation and development act, rera, rera act 2016, rera details

indian real estate sector

The Outlook of The Indian Real Estate Sector Post-COVID-19

By Real Estate No Comments

The Indian Real Estate Sector Post-COVID-19

The Indian real estate sector has been zooming through different changes in recent years; however, none of those has undermined the well-being of the sector as intensely as the current emergency is anticipated to have. The lockdown and the resulting apprehension of occupation misfortune have additionally marked the interesting side, and with developmental work at a halt, the graceful side has likewise been upset.

In spite of the fact that the mists look dull at this moment, it is too early to bounce to unflattering ends. The post-lockdown period will have some positive turns of events and some negative ones. Before we know it, we would have entered an increasingly advanced period. Let us gradually stroll through the foreboding shadows towards a clearer viewpoint.

Rental market post-lockdown

The rental market will be extensively unaffected because of the various national and state-specific lockdowns. There is inactive interest in the market, and it will return once the lockdown gets lifted completely. Individuals can slow down purchasing choices amid vulnerabilities and the dread of joblessness, yet once lockdown gets over and normalcy returns, the inactive interest for rental homes will return. No course rectification is required here.

Deal purchase post-lockdown

Most definitely, an impermanent plunge in purchaser requests is normal in the post-lockdown period as individuals will initially concentrate on returning to the typical daily schedule. Be that as it may, when individuals get acclimated to the new ordinary, lower loan fees and other worthwhile arrangements from developers will animate interest in purchasers. It may take several quarters to see a quantifiable change. Be that as it may, it will undoubtedly occur.

Buyers’ confidence in land parcels as an advantage class will likewise return. Among Indians, physical resources are known to render the most noteworthy feeling that all is well with the world particularly in conditions such as these when securities exchanges are falling to phenomenal lows, and other budgetary instruments additionally need steadiness.

Quicker adoption of technology

Most land organizations have begun utilizing video walkthroughs to assist purchasers with shortlisting properties from the solace of their homes and without a physical visit. Shoppers also have been shockingly quick in jumping aboard with the procedure.

It’s straightforward to see property subtleties on the web and recordings give a decent estimation with respect to the real estimations and look of a property. They are more practical and drawing in than pictures and a progressively proficient method of shortlisting properties.

The post-lockdown period will have some positive turns of events and some apparently negative ones. Before we know it, we would have entered an increasingly cutting-edge time with regard to technology utilization for real estate.

The dynamic shift

The sector is doing what’s needed to react to the current circumstances by utilizing technological innovation to keep the ball rolling. The pandemic has made necessary a new way of life, and, as of now, set into movement a few changes that were just considered conceivable in a far-off future.

Faster appropriation of online properties combined with advancements, for example, video walkthroughs, online moment appointments, and online lease installments are ready to be a distinct advantage in real estate in the post-lockdown time. It is sheltered to state that we are in a transformative stage, and once it is finished, Indian reality would have progressed to a more brilliant period.


Tags: nifty realty, indian real estate, indian real estate news, realty sector, indian real estate sector, real estate sector, real estate market in india, real estate growth in india, real estate market in india 2021

intellectual property litigation

Intellectual Property Litigation During And Before Covid-19

By Real Estate No Comments

Intellectual Property Litigation During Covid

The Covid-19 has smacked nearly all aspects of our lives subsequently halting certain key operations including inter alia legal enforcement. The pandemic accompanied by the nationwide lockdown accompanied dawned upon us without any caution. The emergence of a new world saw the closing of multiple segments of the economy.

However, despite such telling circumstances, the courts could not afford a complete month-long shutdown. The Supreme Court, eventually followed by the high court and the district courts has extended the limitation period and all interim orders.

Courts have been operating in a staggered manner hearing urgent cases over video conference post a short duration of the closure. In such circumstances, the Controller General of Patents, Designs, Trademarks, and GI suspended their operations pursuant to a notification released on March 23 and thereby, led to essential questions being raised regarding the reliefs available for people in disputes involving intellectual property (“IP”).

Keeping in mind the current circumstances apprised by the pandemic, IP litigation has been moving largely towards patent and trademark infringement cases. The primary focus recently has been largely on the pharmaceutical sector and the IP issues that arise therein.

Recently, the Delhi High Court in a case of trademark infringement case filed by Dettol Inc. fined a company named Devtol to the tune of INR 1 Lakh and ordered an injunction, thereby, restricting them to use their brand name and confuse the consumers during such a critical time.

The issues pertaining to compulsory licensing of pharmaceutical products such as critical life-saving drugs, in consonance with the provisions under the law can be well predicted to rise during Covid-19. There has been a steady surge in licensing cases of life-saving drugs due to the continuously rising number of Covid cases witnessed worldwide.  

Notwithstanding the predicted paradigm shift to the increased patent and trademark litigation as a result of the pandemic, the filing of such cases would be limited as courts would only be inclined to hear urgent matters only till the crisis subsides, which is unlikely in near future.

IP litigation conforming to the current circumstances is bound to experience a slight shift as the focus has now been majorly directed toward the pharmaceutical sector.

Trademark cases and licensing cases have largely increased, and those have largely been in the pharmaceutical sector, which shows a shift in the patterns of IP litigation when compared to the pre-Covid time. Additionally, the Courts have recognized the nature of time-bound IP filings which have been absurdly stopped with the onset of the pandemic.

Nevertheless, the courts have recognized the various adversities and the limitation in respect of such cases has been extended as well as a much-needed respite for stakeholders in India and abroad.

In light of the ongoing circumstances, even WIPO has released remedies to deal with the hurdles faced by dealing with intellectual property rights categorically advising for an automatic extension of time limits and subsequent shift towards electronic communication to mitigate all possible undesirable outcomes arising out of the current state of affairs. Evidently, the measures undertaken by India are on similar lines.

One has to wait for normalcy to return, post which the real consequences of the shutdown on IP litigation can be well realized.


Tags: ip litigation, intellectual property litigation, trade secret litigation, best ip law firms, intellectual property disputes, ip litigation firms, trade secret lawsuits, ipr litigation

agr dues

Repayment Of AGR Dues: A Ticking Bomb

By Others No Comments

Repayment Of AGR Dues

The COVID-19 pandemic has demonstrated the importance that telecommunications infrastructure plays in keeping businesses, societies, and governments, connected and functional. However, telecom companies have been laden in debt in recent years, and their network resiliency has been tested despite challenges posed by the current pandemic, propelling them further into the dark hole of debt.

Amongst the slew of challenges, the telecommunications sector was already grappling with the issue of payment of Adjusted Gross Revenue (AGR) when the pandemic hit the world. Recently, the Supreme Court reserved its order for deciding the deadline for the payment of Adjusted Gross Revenue (“AGR”) related dues of the telecom companies like Idea, Vodafone, and Bharti Airtel payable to the government.  

In particular, Vodafone Idea owes a mammoth Rs 58,254 crore out of which it has only been able to pay Rs 6854 crore, while Bharti Airtel is relatively in a better position than the former.

With respect to the issue of the appropriate timeline for the repayment of the AGR dues, the court refuted the suggestions by telecom companies of 15 to 20 years for repayment of their dues, on the grounds that 15-20 years was an unreasonably excessive amount of time considering the fact that telecom players have still been financially stable even during these tumultuous times.

In fact, it is believed that the telecom sector to a large extent has not been adversely affected and has been witnessing profits even during these times due to increased data usage resulting from work from home trends. This is particularly pertinent in the backdrop of the catastrophic financial impact emanating from the COVID-19 pandemic.

However, in consideration of the larger picture, huge repayment amounts and intense competition within the telecom sector can be detrimental to the survival of Vodafone Idea. If telecom companies are required to pay the AGR in full or without any deferment, it is bound to take a severe toll on the telecom’s financial wellbeing.

In the event of inadequate revenues and cash for payment of license fees, telecom companies may be forced to consider increasing debt to meet demand. However, given the current situation, lenders willing to extend financial assistance will be limited and the cost of borrowing may be higher as opposed to the pre-COVID era, creating a vicious cycle.

During these critical financial times, no bank would be ready to grant guarantees or loans for such a magnanimous amount, which essentially increases the plight of Vodafone Idea because of the fact that even to borrow loans from the banks, they would have to pay a significant amount of money upfront which could possibly push them to the brink of exiting the market.

The court’s concern was majorly attributable to the uncertainty associated with granting such an extended period and the possibility that Vodafone Idea might become insolvent in any case.

The rationale of the Supreme Court in relation to profits may be deemed accurate in part; however, there is no denying the fact that ghosts from the past still haunt the telecommunication sector in India, such as massive AGR repayment dues. Therefore, the changing customer preferences of higher data usage may fill up the Vodafone’s bags sooner than otherwise, and enable it to pay back to the government in light of the judgment delivered last year.

However, the overhang of AGR dues is likely to hurt Vodafone’s Idea, pushing it to the brink of insolvency, which may impact the competitiveness of the telecom market and ultimately leave monopolistic prowess in the hands of Reliance-Jio.

Therefore, while the Supreme Court makes a decision on the adequate timeline for the repayment of AGR dues, spectators can only hope that the repercussions of a potential exit by the major market players can be extraordinary, like the present times.

So it is imperative that the competition watchdog and government collectively provide regulatory relaxations to the telecom players within a reasonable time frame to mitigate deleterious consequences on the competitive dynamics of the industry!


Tags: adjusted gross revenue, network telecom, telecom companies, agr dues, national telecom, network resiliency, telecom operators


Digitization: The Natural Progression of Indian Judiciary

By Others No Comments

Digitization in Indian Judiciary

The spread of the influenza-like infection plummeted without an alert carrying the world to an extraordinary halt. One fine day, the boundaries overseeing our regular activities were redesigned exemplarily. The world wound up in a smooth situation, with an obscure infection that radiated in China’s Wuhan city arriving at most nations over the globe.

The administrations struggled to cope with the rising number of cases and deaths. As a measure, regions began enforcing lockdowns. India has been no special case for the continuous undertakings. By mid of March, the nation found itself in the clutches of the pandemic, and four months later, it finds itself at the no.3 spot for most cases as the figures inch closer to the 1.2 million mark.

Under the progressing improvements, with the announcement of the COVID-19 as a pandemic, the Indian legal executive ended up in a fix. At first, with the expanding fear of the spread of the infection in the nation, the activity of the courts in the country adopted the necessary preventive measures. There was a breaking point put on the section of lawyers alone in the court excepting disputants, except if called for by the court.

The premises were being disinfected, the temperature of all ingoing staff was being checked, and social removing was being rehearsed overwhelmingly. In any case, the declaration of the lockdown fundamentally implied that the courts must be closed in the wake of the rising contaminations. In the given situation, could equity be let to endure while the world was destined with the spread of an obstruct infection? Maybe not.

If the courts were to be shut uncertainly, sitting tight for standardization of the circumstance, the result presumably would have caused unrecoverable harm.

The courts would have been troubled over-limit prompting further overabundances and postponement during the time spent administering equity. The effect of such a shutdown would be grave on fundamentally two fronts, the criminal equity framework and matters identifying with life and individual freedom of people.

It is the obligation of the court to secure the privileges of the residents, in all the unstable circumstances may be. Remembering such cardinal contemplations, the conceivable way out to adjust the wellbeing worries just as proceed with the way toward apportioning equity was shown up by the shrewd salvage looked for from the ‘E-Courts Project’.

This denotes the beginning of another time throughout the entire existence of the Indian Judiciary. There was a significant update in the whole court structure with the procedures currently being done by video conferencing and the coming of the e-documenting system.

At a fundamental crossroads, the possibility of virtual courts should be commended as a hearty system concocted to moderate the obstructions got by the pandemic.

There are a few advantages of hearing by means of video conferencing including no prerequisite of physical nearness wherein parties do go miles to be available face to face under the steady gaze of courts and simultaneously, it will be cost and time viable for the gatherings’ point of view just as the legal executive.

Above all, this will decrease the carbon impression. Video conferencing ought to be made discretionary in all courts across the nation for a wide range of issues. Digitalization will lessen the humongous number of pendency of cases under the steady gaze of courts and will be a successful solution for deferred equity.

Openness is the center capacity of the conveyance of equity. The nature of settling in the court will not be of utility if equity can’t be gotten to by individuals in any case. Thus, the current emergency would be an extraordinary open door for the digitalization of Indian courts.

It can likewise help diminish a gigantic excess of cases under the steady gaze of the courts. In the present-day situation, there can be numerous troubles looked at in the down-to-earth ramifications of virtual courts.

Numerous individuals and disputants may confront trouble in exploring a digitalized equity framework that could be controlled by some pragmatic preparation.

Besides, it is a desperate need that the National Informatics Centre make a stage that incorporates highlights of video conferencing and e-recording to supplant the utilization of any outsider exclusive programming for the release of basic open capacities like mediation.

As it were, making a cutting-edge equity stage will be brimming with difficulties yet note that this is the initial move towards digitalization of the court framework in a progression of many.


Tags: indian judicial system, digitization and digitalization, digitization process, digitization, indian judiciary, the indian judiciary, india judicial system, modern judicial system in india

business resumes

Business Resumes, Unemployment Drops: Unlock 1.0

By Others No Comments

Business Resumes and Unemployment Drops

The transmission pace slowed down but did not really aid in the flattening of the curve as compared to other nations. Instead, a full-year economic contravention was observed as a direct decade leaving millions of people jobless. The unemployment rate peaked during this lockdown period, being the highest in the urban areas.

With the brunt of the lockdown becoming unaffordable, the government ordered the first phase of reopening the country while people strive to learn to live with the virus until the vaccine arrives. 

With the lifting of the lockdown, a new ray of hope was offered to witness a surprising strength in India’s labor market as the economic activities started reviving. Most of the offices, shops, and self-employment avenues reopened after much struggle. And, as a result, a lot of jobs were restored that were earlier lost. A sharp fall in the unemployment rate was also witnessed with a drastic improvement in the unemployment crisis.

A massive gain in employment in rural areas also caught attention recently.  Due to the lockdown and the chain of events, the vulnerable section of the society, especially the migrant laborers were deprived of their daily wages and were compelled to face economic deprivation.

As a result, a flock of migrant laborers moved from megacities to their villages. To provide some relief from the adversities, the government increased the allocation of MNEREGA funds for the rural workers. The sudden boost in MNREGA activities resulted in alleviating the unemployment stress.

However, this unemployment drop is mostly because of casual work and self-employment activities growth. Demand for work under the national rural employment schemes has gone up after the unlock. The formal sector is still facing unemployment and recovering completely from the COVID-19 pain will take a much longer time.

There is a rise in non-wage work. Workers who were earlier employed in wage employment have returned to their villages after facing hardships due to the lockdown.

In villages, these workers are now either in casual work or agricultural work. Recently, the Joint Action Committee (JAC) of the unemployed youth associations made a demand to the state government to fill around 2.5 lakh vacancies in the government sector.

The committee has also demanded that until these vacancies are filled up, the government should provide unemployment allowance to the youths who have registered with Telangana State Public Service Commission for jobs.

India is amongst the worst-hit countries facing two challenges right now, slowing down the transmission along with handling the worst economic crisis. A massive spike of cases is expected in July and it’s going to be hard over a couple of months. It is yet to see whether the unlock 1.0 and the resuming of business will prove to be a relief to the economy or a disaster to human life.


Tags: unemployment rate 2021, natural unemployment, natural rate of unemployment, employment rate, Business Resumes, unemployment rate 2020, national unemployment rate, unemployment drops, unemployment rate

personalized banking

The Power of Personalized Banking

By Banking No Comments

The Personalized Banking

The banking sector, a bulwark against the breakdown of other industries, is left to nibble away at the remnants in the wake of the virus-induced global economic slowdown. Banks wrote off over Rs 80,000 crore of loans in the first half of the financial year 2020. But major Indian banks have demonstrated resilience through uninterrupted services, offering EMI moratoriums or fee waivers to borrowers.

Unfortunately, historic trends allude to a grim scenario where financial institutions (FIs) were resigned to overlooking defaults, thereby leading to grave profitability concerns and credit risks associated with them in the wake of the pandemic. As the sector is left scrambling for money, more financial institutions are embracing technology to achieve their objective of survival, growth, expansion, or otherwise.

Personalized banking: Tech giants like Amazon, Facebook and Google have spurred a desire for more customized interactions and fostered a willingness to trade data for a better experience. As a result, the concept of “personalized banking” becomes more important now. Targeting customer micro-segments and tailoring offers for them will enable banks to differentiate themselves, build customer engagement, and gain a competitive advantage.

The first step would be to identify what personalization is. Thereafter, banks and FIs can leverage the large repository of customer data, customer touch-points, and digital platforms to deliver meaningful and powerful personalized experiences. To be sure, personalized banking is not primarily about selling.

It’s about providing service, information, and advice, often on a daily basis or even several times a day. Such interactions, as opposed to infrequent sales communications, form the crux of the customer’s banking experience. Yet many banks still tend to focus their personalization efforts on the sales arena.

Today, machine learning and data analytics can be harnessed to deliver an omnichannel digital experience to customers. For banks and FIs with a wealth of data available, hyper-personalization represents a window of opportunity to stay ahead of the curve with a value proposition that makes customers feel understood.

It also promises significant gains, with Boston Consulting Group estimating that successful personalization at scale could represent an increase of 10 percent in a bank’s annual revenue.

The biggest takeaway for a bank is staying ahead of the curve as you get to know your customer better and leverage those insights and trends to create tailored digital experiences that boost revenues.

On the other hand, as customers expect a basic level of customization, hyper-personalized experiences in personal finance can lead to amplified satisfaction and engagement, fraud prevention, and better decision-making coupled with a sense of humanized understanding from their bank. This humanized understanding by banks can be demonstrated in many ways.

Behavioral personalization: This attempts to determine the visitors’ interest based on their actions, which include visit count, search phrase, content viewed, functions performed and referrers’ websites.

IP-based personalization: This can gain information about the anonymous visitor from the IP address and DNS record. This type of personalization makes use of geolocation tracking and company attributes to customize the experience.

Online banking, CRM, and loan or deposit applications: These use data from other banking platforms to drive personalization. While it may seem complex, implementation is often easier than perceived. However, customization leads us to a larger question of whether technological advancement and privacy can be allies?  

At present, the Information Technology Act, of 2000 and Information Technology Rules, of 2011 govern India’s data protection regime. However, they fail to protect individual interests. Geo-location tracking, biometric data, and facial recognition apps could invariably violate the right to privacy, but there is no legal framework that regulates or enables the use of such technologies without violating the Fundamental Right to Privacy.

Even the Personal Data Protection Bill, 2019, likely to be approved soon, fails to take into account all stakeholders involved in data breaches. For instance, the Bill imposes heavy fines for violations but exempts the “consent” requirement in certain circumstances, where data is required by the State, for legal proceedings, or to respond to a medical emergency.

These regulatory changes are necessary considering India’s growing digital footprint in the world. Personalization is without a doubt a promising area that might be able to answer some of the questions that internet banking must deal with today and in the future.

The possibilities of personalization are not yet fully utilized, nor is there sufficient hands-on experience or research-based knowledge about the most advanced ideas of how to personalize internet banking services. The importance of hitting the right target in both selecting the things to be personalized and the way of presenting them visually are delicate matters.

If not done right, they might compromise the most important customer values: Speed, efficiency, and trust. Thus as the impact of the contagion relies upon the gravity, degree, and dissemination of the cataclysm, which remains uncertain even today, the banks must leverage personalized online banking to boost revenues in a cash-strapped economy and possibly help the banking sector rise from the ashes.


Tags: personal banking, sbi personal banking, personal online banking, personal net banking, personalized banking, personal internet banking

fair practices code

Fair Practices Norms May Prompt ARCs to Cherry-Pick Deals, Improve Transparency

By Banking No Comments

Fair Practices Code May Prompt ARCs to Cherry-Pick Deals

While the Indian stressed asset market is often seen as dismal, globalization has tightened the screws on the government and regulators to take decisive action. 

Earlier, India’s bad debt headache was alleviated somewhat with the introduction of the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest), allowing banks to recover monies without judicial intervention

But the problem of mounting non-performing assets (NPAs) kept growing, thereby bringing asset reconstruction companies (ARCs) into prominence.

Need for Fair Practices Code

In the wake of the mounting NPAs, the banking sector is under immense pressure to get its house in order. Realizing this, banks resorted to offloading bad debts from their loan books to ARCs thereby leading to a massive reduction in their distressed assets. 

However, during this exercise, banks made no provisions for these bad loans on their books and bore no losses in case of defaults. This issue led to intervention by the Reserve Bank of India (RBI) in the form of the Fair Practices Code to ensure transparency in cash transactions.

Maintaining transparency

Another reason for the need for the Code was that the sale of assets conducted by ARCs turned out to be no different from the sale of assets by state finance corporations or others vested with similar special powers of recovery. 

There have been many instances wherein ARCs sold assets through private auctions and simply served a notice to the borrower. In this procedure, there was no account of the sale proceeds, description of the buyer or competing bidders, information on how the asset was sold, etc. 

This is where the RBI’s notification ensures transparent and non-discriminatory practices in terms of the acquisition of assets.  To curb the issues and unclear process of assets being sold to bidders where there is no trace of information of who these individuals are, the notification states that the invitation to participate in the auction should be made public. 

This will provide transparency on how many assets are being sold. The Insolvency and Bankruptcy Board of India’s (IBBI) involvement to make sure these rules are being held up is of utmost importance. When dealing with buyers, Section 29A of the Insolvency and Bankruptcy Code (IBC) must guide the process. 

Simply put, a wilful defaulter or a person who was a promoter or was in the management of the corporate debtor, among other conditions, would not be allowed to bid for the concerned insolvent company. 

Thus, the notification aims to address issues of transparency and borrowers being kept in the dark during such sale of assets while keeping a check on the aggressive sale of assets by the banks and easy purchase by ARCs.

Also, the sale of assets was not transparent and was far too commonly done at prices that do not represent fair values.  Thus, these malpractices by ARCs forced the RBI to come up with Fair Practices Code to ensure transparency in transactions and keep a check on their practices. 

Under the notification, ARCs are entitled to release all securities on the repayment of dues. 

If the right of set-off is exercised, then a notice to the buyer must be sent with information regarding the full particulars of the remaining claim and the conditions under which ARCs are entitled to retain the securities till the relevant claim is settled or paid.

Ethical recovery processes

Hereafter, ARCs must ensure adequate training to staff to deal with customer matters appropriately. This will prevent or mitigate unlawful and uncivilized harassment inflicted upon debtors in the name of debt recovery processes. 

In the spirit of this Code, ARCs must establish a code of conduct for recovery agents and hold the company accountable in case of breaches by their agents. A proper grievance redressal mechanism within the company should be constituted by ARC. The officer’s name designated for that redressal must be mentioned during the process. 

Such machinery will prove to be a step towards settlement of issues subsisting between the ARCs and the borrowers or the banks. In addition to this, initiatives to address the absence of a poor secondary market have been taken up. 

To outsource an activity, a suitable policy needs to be established for the delegation of authority to monitor and review the operations.


Overall, the RBI’s guidelines reward assertive steps yet ethical recovery practices are strides in the right direction. This move will rationalize recent trends in the industry and prove advantageous to various stakeholders in the stressed asset sector, including defaulting borrowers. In the light of the new guidelines, ARCs are likely to change their bidding strategy and cherry-pick deals backed by hard assets, reducing the number of transactions.

At the heart of the Fair Practices Code is the protection of the debtor by humanizing the recovery process while striking an optimum balance between lender-borrower interests in the recovery framework. 

With an emphasis on compliance, transparent and non-discriminatory practices in the acquisition of assets, and required release of securities upon repayment of dues, the guidelines may collectively help insulate debtors from the clutches of the sale process. 

Adherence to these guidelines will place these bad bank sponges on a game-changing pathway leading to reduced NPAs thereby reviving stressed assets in the banking sector and the Indian economy one step at a time.

Tags: fair practice, cherry pick, asset reconstruction companies, arc, fair practices code, asset reconstruction, the arc

suspension of rent

The Doctrine of Suspension of Rent: A Silver Lining for Tenants

By Real Estate No Comments

The Doctrine of Suspension of Rent

The transmission of a virus with flu-like symptoms has pushed world economies to an unprecedented standstill. To combat an impending economic depression and prevent a spate of homelessness, the government announced several rent relief measures looking out for tenants’ interests.

However, the virus-induced nationwide lockdown has not only led to large-scale ramifications for businesses across the globe but has also adversely affected contractual relationships.

An important question that has arisen during these unprecedented times is whether this lockdown would entitle tenants to claim the waiver, postponement, part payment, or suspension of rent.

This article is concentrated on assessing the applicability of the latter i.e. the doctrine of suspension of rent and how Indian Courts have dealt with the subject, as this is the relief that most renters seek in the current circumstances.

Force Majeure

In the absence of any clarity by the Government on rental obligations under commercial lease agreements, businesses are left struggling with zero sales coupled with salary and rental obligations. Amid the pandemic, the much forgotten ‘Force Majeure’ provision in contracts and leases has gained traction and attention.

The commercial tenants could invoke the ‘force majeure’ to absolve them from rental payments during “an event beyond the parties’ control”.

However, force majeure events are not exhaustively laid out under the law, and the applicability of this provision depends on the language of the rental agreement and the interpretation of the courts. Therefore, the parties must review and, as mutually agreeable, revise the terms of the agreement in order to meet a consensus and provide breathing room to both parties.

Suspension of Rent

Recently, the High Court of Delhi in Ramanand & Ors. v. Dr. Girish Soni & Anr. set out the parameters to be considered while dealing with requests for waiver or suspension of rent, however, clarified that the question of waiver, suspension, or any remission in rental payments would differ from case to case.

In doing so, the courts will be required to solve a convoluted interplay between the provisions of the rental agreement with applicable tenancy and property laws.

This recent judgment shall go a long way in providing relief to the tenants as long as they fit in the ambit of the conditions laid down by the court. This decision of the High Court makes it clear that it is not an inherent right of a tenant to seek a waiver or suspension of rent from the landlord.

Although this decision is first in a line with the many judgments that will possibly be rendered by courts in this regard, it certainly does set the benchmark for consideration of requests for waiver or suspension of rent.

Various countries like Singapore and UK have requested the landlords to not evict their tenants in the event of non-payment of rent for a short period of time.

Moreover, the Indian States like Delhi, Maharashtra, and Uttar Pradesh have requested landlords to give extensions to the tenants for the payment of rent and to amicably settle their disputes. The rationale behind these notifications was to provide some breather to tenants unable to pay rent during a crisis.

The recent judgment lays emphasis on the need to review and renegotiate rental contracts and lease agreements to be entitled to the protection as well as show other grounds such as their financial and social status etc. Thus, the mere possibility of suspension of rent through a judicial decree is true to be considered a silver lining for the tenants.

While some postponement or relaxation in the schedule of payment can be granted owing to the lockdown, most tenancy agreements don’t have the provision of ‘force mature and cannot invoke the doctrine of suspension and so unless announcements are backed by ordinances, the uncertainty of its enforceability remains.


The customary strained landlord-tenant relationships are further distressed with the lack of clarity in central and state government announcements bringing fore questions of eligibility and applicability of relief measures. Until the air clears, Indians will continue to rely on legislation that hugely favors tenants in rental disputes, leaving landlords grappling to survive the crisis without any respite.

In the interim, as parties await clarification from the government, it is advisable to facilitate a shared objective of contractual performance through collaboration and provide a win-win solution to all until normalcy returns.


Tags: tenancy agreement, rental contract, rental lease agreement, suspension of rent, lease contract, rental lease, rental obligations, rental agreement, lease agreement