India

TLH Advocates & Solicitors acted as counsel to Patanjali Foods Limited (“PFL”)in a Special Leave Petition filed before the Supreme Court of India challenging the cancellation of its factory zone in the Suryapet district of Telangana, which had been allotted under the National Mission of Edible Oils – Oil Palm (“NMEO-OP”) scheme. The allotment, originally made by the Government of Telangana for oil palm cultivation and processing, was cancelled and re-allotted to a government-owned entity through Government Orders (“G.Os.”) issued in March 2025. Recently, the Division Bench of the Telangana High Court declined interim relief in the Writ Appeal filed against the Single Judge’s order disallowing the Writ Petition filed by Patanjali Foods Limited challenging the GOs. The Supreme Court, in SLP (Civil) No. 5434 of 2026, Patanjali Foods Limited v. Department of Horticulture (“SLP”), issued notice in the SLP and directed the parties to maintain status quo in relation to the cancellation and re-allotment of the Suryapet factory zone. TLH Advocates & Solicitors represented PFL in the SLP and advised on all aspects, including strategy in relation to challenging the G.Os. The firm also represented PFL in the Writ Petition and the Writ Appeal and earlier obtained interim relief for PFL in the Writ Petition. This dispute relates to the government’s power to cancel the allotment of the factory zone under an MOA, raising questions of contract law, fairness in government contracts, applicability of the provisions of the Telangana Oil Palm (Regulation of Production and Processing) Act, 1993 and tests the arbitrariness in issuing the GOs, including on the ground of discrimination under Article 14 of the Constitution of India. TLH disputes team was led by Prahastha Madapathi (Principal Associate) and included Priyanka Deshmukh (Senior Associate) and Saikat Mukherjee (Associate). Mr. Neeraj Kishan Kaul and Mr. Navin Pahwa, Senior Advocates, appeared for PFL in the SLP along with Mr Divyanshu Kumar Srivastava, counsel, and were instructed by TLH Advocates and Solicitors. M/s Agarwal Law Associates acted as the Advocate-on-Record in the SLP. This matter highlights TLH’s expertise in high-stakes commercial litigation with significant public law elements involving the interplay of government contracts and regulatory statutes.

Supreme Court In a recent Judicial pronouncement the Supreme Court came up with the decision supporting the implementation of an existing framework for early detection of financial stress of enterprises, particularly in relation to Macro, Small and Micro Enterprises (MSME) sector, before the Bankers/Lenders could to take up steps for classifying their debt as Non-Performing Asset (NPA) in order to assume coercive measures under SARFAESI Act, for recovery of dues. In fact, non-adherence to such framework was held as violative on the part of Lender/Banker, with the result that any steps taken for NPA declaration or resorting to SARFAESI Act measures, to be running the risk of being declared as null and void. The Supreme Court was called upon to decide the challenge to Bombay High Court judgment passed in exercise of its Writ Jurisdiction, wherein the action of Banker/Lender in declaring the Account of an MSME as NPA and subsequent actions of invoking the measures under SARFAESI Act, was impugned for not adhering to the framework of restructuring process contemplated in the Notification dated 29.05.2015 called, “Framework for Revival and Rehabilitation of MSMEs” (Notification), issued by Ministry of MSME, Govt. of India under MSMED Act. The Hon’ble High Court rejected the Writ holding that Bankers/Lenders are not obliged to adopt the restructuring process contemplated in the Notification on their own, when the MSME had not submitted any application for the same. The Supreme Court however setting aside the decision of the Hon’ble High Court of Bombay, noted that Section 9 of the MSMED Act, empowers Central Government to issue Notification prescribing measures for facilitating promotion, development and enhancing competitiveness of MSMEs and in that regard specify programmes, guidelines or instructions. It was further noted that Section 10 of the MSMED Act, requires implementation Policies/Practices ensuring timely and smooth flow of credit facilities to MSMEs in consonance with Guidelines/instructions of RBI, and minimize the incidence of their sickness and enhance their competitiveness. It was further noted that in support of the Notification of 29.05.2015, the RBI, in exercise of its powers under Section 21 read with Section 35A of Banking Regulation Act, issued Master Direction, called, the “Reserve Bank of India [Lending to Micro, Small and Medium Enterprises (MSME) Sector] Directions, 2016,” (Master Directions) vide the Notification dated 21st July, 2016, thereby advising all scheduled commercial banks to follow the guidelines/instructions pertaining to MSMEs. It was further noted from the scheme/arrangement in the Notification, that it required Bankers/Lenders to identify incipient stress in the account of the concerned enterprise registered as MSME by creating three sub categories as set out in the Notification, in order to explore various options to resolve the stress in the account, in terms of the said Notification. It was further noted, that the Bankers/Lenders stood obliged to implement the measures identified in the Notification, before proceeding to classify the account of the concerned MSME as NPA. It was also noted from the Scheme of the Notification that apart from the Bankers/Lenders adhering to the measures set out in the Notification, the borrower was also entitled to voluntarily initiate the process set out in the Notification by making an application to that effect. Keeping in view the scheme of the Notification read with Master Directions, the Supreme Court noticed that no doubt by virtue of Section 35 the SARFAESI Act shall prevail notwithstanding anything inconsistent in any other law in force; however, the provisions of SARFAESI Act gets triggered consequent to classification of the concerned account as NPA upon default in repayment of secured debt. It was observed that the Banks/Lenders are required to take up steps under the Notification, towards identification of incipient stress in the loan account and according categorization, on the basis of authenticated and verifiable material as furnished by the concerned MSME to establish that the loan account is of a MSME. It was accordingly, held that the implementation of the scheme prescribed in the Notification becomes very crucial, before any loan account of MSME can be classified as NPA. Therefore, until the exhaustion of measures under the Notificfation, the accounts of MSME cannot be classified as NPA, without which the measures under SARFAESI Act cannot be triggered. Taking note of the above position, the Supreme Court negated the findings of High Court that Bankers/Lenders of MSMEs were not obligated to follow the measures prescribed under Notification on its own, until MSME applies for initiation of said measures. While observing that it was mandatory for the Bankers/Lenders to follow the scheme prescribed in the Notification on its own, the Supreme Cour found it equally incumbent upon the concerned MSME to remain vigilant and follow the process set out in the framework of Notification. On that count, the Supreme Court cautioned that in case the MSME remains negligent and allows the process of enforcement of security under SARFAESI Act to get completed, such MSME could not be permitted to misuse process of Notification by taking a plea at belated stage. It is significant to highlight from the aforesaid that the Judgment of Supreme Court clearly weighs in favour of revival of an enterprise, before taking up of any coercive measures against it. In this backdrop, it is relevant to highlight that exactly the same objective can be traced with the scheme of the Insolvency and Bankruptcy Code, 2016 (IBC) as well. So far, eight years down the line from enforcement of IBC, the economic thought leaders and think tanks find tremendous reason to rejoice the successful implementation of IBC, while alluding such reasons to encouraging arithmetic figures of ‘debt resolution’ running into several lakhs of crores. However, the legislative objective of IBC towards ‘resolution of enterprises’ is yet to see a positive prospect, much less an encouraging number. In fact, the infrastructure for enterprise resolution is still struggling to settle and stabilize, and is dependent largely on ad-hoc measures, including interim finance support, for pulling on the sick enterprise as a going concern. The present Judgment of Supreme Court is a manifestation of legislative mandate towards ‘enterprise resolution’ (and not merely ‘debt resolution’), which need be implemented with support from an institutionalized infrastructure. It is high time that Policy framers and stakeholders join hands to implement an institutionalized infrastructure, to support the resolution measures of financially ailing enterprises, rather than leaving them on support of ad-hoc measures. Author: Mr. Jyoti K. Chaudhary

Introduction In the 1990s, India’s banking sector witnessed a notable rise in Non-Performing Assets (NPAs) due to factors like economic slowdown, liberalization, and new lending practices.To address the increasing NPAs, the Indian government, following the Narasimham Committee II's recommendations, introduced the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (“SARFAESI”) Act, 2002. The said act facilitated the creation of Asset Reconstruction Companies (ARCs) in India. ARCs are specialized financial institutions set up to acquire and manage the non-performing assets of banks and financial institutions, and they were established in India in 2003 under the SARFAESI Act, 2002. With the intention of better value realization and to improve the efficiency of ARCs, the Reserve Bank of India (RBI) in terms of the recommendation given by Sudarshan Sen committee, issued the regulatory framework titled “Review of Regulatory Framework for Asset Reconstruction Companies (ARCs)” RBI/2022-23-128 on October 11, 2022. Through the said framework, RBI allowed the ARCs to be resolution applicant entities under the Insolvency and Bankruptcy Code, 2016 (“IBC”). The said framework marked as the revolutionary step in terms of the asset valuation of the Corporate debtor as it focused on enabling the ARC to function in a “more transparent and efficient manner”. While the primary focus of Asset Reconstruction Companies (ARCs) has traditionally been on recovering bad debts, industry experts now anticipate a more proactive role for them. As the sector grows, ARCs are expected to take on a crucial role in reviving struggling companies at an early stage, which could significantly benefit India’s economy. This shift towards timely intervention will require regulatory support. The present article discusses the interplay between the new RBI Guidelines of 2024 and the evolving role of ARCs Significance of ARCs in the resolution process As forecasted, ARCs played vital role in the resolution process than acting merely as the recovery agent. ARCs brought specialized expertise in asset management and recovery. Unlike traditional banks, ARCs employed professionals with experience in turnaround strategies, legal frameworks, and sector-specific knowledge. This expertise enabled them to devise innovative resolution strategies, negotiate with stakeholders, and maximize recovery values. The role of ARCs proved to be indispensable in ensuring that the distressed assets are efficiently managed and productive resources are optimally utilized, ultimately contributed to overall economic growth. Following are the key advantages of including the ARCs as resolution applicants under IBC: ARCs possess in-depth expertise in managing and resolving distressed assets, thus making it the best source for assets realization. Due to high number of NOF, ARCs have the ability to customize resolution plans specific to the needs of each case, enhancing the likelihood of achieving coherent and mutually beneficial outcomes. The ARCs, being are large firms are well equipped with the management which covers every aspect of the resolution process, thus their involvement ensures higher degree of governance in the resolution process. New role of ARCs ARC have primarily played a reactive role, focusing on recovering assets from non-performing assets (NPAs). With nearly 30 licensed ARCs currently operating in the country, this sector has seen significant growth since the Reserve Bank of India first introduced this licensing category. Now with the change in sector, it is expected that the ARCs play more proactive role in early detection of the distressed assets. At present, IBC only applies when businesses are struggling severely. However, with the evolving role of ARCs, the expectation is that they will intervene much earlier to prevent companies from reaching this critical stage. Consequently, in general parlance, ARCs comes into play when the assets of the company are termed as NPAs. While the model was satisfactory when it was first proposed, today ARCs can offer much more than simply reviving bad loans. With the proper setup, ARCs can gain much more by early identification of the assets from turning bad and subsequent repair them for maximum value. To prevent Companies from slipping into the vicious cycle of bad debts and loans, ARCs can use indicators and flags data to show lack of innovation, customer satisfactions, continue demands, future sustainability of the products etc as the early warning signs. By analyzing these warning signs and coordinating effectively with the bank, ARCs can play a more proactive role within the IBC framework. Regulatory Framework and Future Directions As the way to protect the interest stakeholders of the insolvency proceedings and to further strengthen and streamline the role of ARCs, RBI later in 2024 issued the Mater Direction on Asset Reconstruction Companies, 2024 (“Directions 2024”) RBI/DOR/2024-25/116. It is pertinent to mention that while the previous the RBI framework focused on the internal governance of the ARCs, this time the directions were elaborative and covered several aspects of the ARCs workings. Following are the Checks and Balances provision mentioned in the Directions, 2024 to prevent Collusion. Regulatory Oversight and Registration Requirements  Stringent Registration Norms: The RBI requires ARCs to obtain a certificate of registration before commencing operations. This involves a thorough vetting process, including an assessment of the promoters’ background, the company’s financial strength, and its proposed business plan. Continuous Monitoring: ARCs are subject to continuous monitoring and periodic inspections by the RBI to ensure compliance with regulatory norms and to detect any signs of malpractices, including collusion. Governance and Management Controls Fit and Proper Criteria: The RBI mandates that the directors and key management personnel of ARCs must meet the ‘fit and proper’ criteria, which includes assessments of their integrity, experience, competence, and financial soundness. Independent Directors: ARCs are required to have a certain number of independent directors on their boards to ensure impartiality and to provide an external perspective on the company's operations and decision-making processes. Valuation and Acquisition Practices Fair Valuation of Assets: The RBI has set guidelines for the fair valuation of NPAs to ensure that ARCs do not overpay or underpay for these assets, which could be a sign of collusion. As per the Directions, the valuation process should be uniform and is done in a scientific and objective manner. Independent Valuation: The Directions provides provision for engaging independent valuers to assess the value of NPAs before acquisition. This prevents any manipulation of asset prices that could facilitate collusion. Conflict of Interest Policies Code of Conduct: ARCs must adhere to a strict code of conduct that prohibits any activities that could lead to conflicts of interest, including collusion with corporate debtors. Whistleblower Mechanism: A robust whistleblower mechanism should be in place to allow employees and stakeholders to report any suspicious activities or potential collusion without fear of retaliation. Regulatory Penalties and Sanctions Penalties for Non-compliance: The RBI has the authority to impose penalties on ARCs for non-compliance with regulatory norms, including instances of collusion with corporate debtors. Revocation of Registration: In severe cases of malpractice, including proven collusion, the RBI can revoke the registration of an ARC, effectively ceasing its operations. Disclosure Requirements and Transparency Transparency in operations is critical for ARCs to maintain trust with stakeholders and regulators. Key disclosure requirements include: Annual Reports: ARCs must publish detailed annual reports that include financial statements, details of asset acquisitions, recoveries, and resolution strategies. Periodic Filings: Regular filings with the RBI, including quarterly and half-yearly reports on operational metrics and financial performance  Conclusion The inclusion of ARCs as part of the resolution process has undoubtedly contributed to quicker and more effective company resolutions. By acting as resolution applicants, ARCs bring their specialized expertise in asset management, which helps in maximizing the recovery of distressed assets and improving governance during the resolution process. This shift from a reactive to a more proactive role is expected to significantly enhance the overall effectiveness of the insolvency framework in India. As ARCs begin to intervene earlier, their ability to identify potential distress signs before assets turn non-performing can help prevent companies from entering the vicious cycle of bad debts and insolvency proceedings. This proactive approach can not only improve asset recovery but also reduce the economic burden of distressed businesses on the broader economy. However, the success of this initiative will largely depend on the pecific policies and operational frameworks that each ARC establishes, particularly with regard to sectoral exposure limits and their ability to manage early-stage distressed assets. The regulatory changes outlined in the RBI's Directions 2024 are a crucial factor in determining how effectively ARCs can perform their new role. These guidelines, which include stringent registration norms, transparency in operations, and conflict-of-interest policies, will ensure that ARCs operate in a sound and ethical manner, safeguarding the interests of all stakeholders involved in the resolution process. Looking forward, it is essential for ARCs to effectively implement these regulatory directions, focusing not only on financial outcomes but also on ensuring fair, transparent, and efficient resolution procedures. If these guidelines are adhered to, ARCs can play a transformative role in India's insolvency landscape, promoting faster economic recovery and enabling a healthier business environment for the future. References The Securitisation and Reconstruction of Financial Assets And Enforcement Of Security Interest Act, 2002 Insolvency and Bankruptcy Code, 2016 RBI/2022-23/128 DoR.SIG.FIN.REC.75/26.03.001/2022-23. RBI/DOR/2024-25/116 DoR.FIN.REC.16/26.03.001/2024-25. Yash Gupta, Asset Reconstruction Company- A way ahead as a Resolution Applicant under IBC, IBC Laws. Report of the Committee to Review the Working of Asset Reconstruction Companies. Abhizer Diwanji and Srinath Sridharan, Asset reconstruction companies should change their orientation.

A tragic incident recently occurred where an Air India Flight 171, a Boeing 787 Dreamliner, after just taking off from Ahmedabad got crashed within a few minutes. In accordance with the Data from the Airport Authority, the last recorded altitude of the plane was at 625 feet off the ground, just immediately after takeoff. It flew just 2 km more. The flight was carrying 230 passengers and 12 crew members. However, except for one passenger, all the passengers and the crew members died on the spot.  Moreover, the flight crashed into the B.J. Medical College Hostel's mess and, as per the report, killed around 19 people and injured at least 60 more on the ground. The flight was a scheduled international passenger flight operated by Air India from Ahmedabad Airport in India to London Gatwick Airport in the United Kingdom. After the 2010 air crash incident wherein the 2-year-old aircraft had crashed outside Mangalore airport in Karnataka on May 22, killing 158 people when it burst into flames after overshooting a tabletop runway and plunging into a nearby forest. This is the tragic incident wherein the Air India Flight 171 crashed and killed around 300 people. The Air India Flight 171 crashed in the B.J. Medical College Hostel's mess, causing damage to the properties nearby, approximately 2 square kilometres. This event has reportedly triggered what could be India's largest aviation liability, exceeding 1,000 crores. In this article, we will discuss and try to understand what kinds of liability arise because of this plane crash on the airlines and the country, and under which law. LAWS OF INDIA GOVERNING THE AIRPLANE INCIDENT The Aircraft (Investigation of Accidents and Incidents) Rules, 2012, were notified by the Central Government of India through a Gazette Notification. This notification was published as G.S.R. 536(E) on July 5, 2012. These rules were formulated based on the ICAO (International Civil Aviation Organisation) SARPs (Standards and Recommended Practices) and the Indian Civil Aviation scenario. The purpose of these rules was to establish a framework for investigating aircraft accidents and incidents, which led to the establishment of the Aircraft Accident Investigation Bureau (AAIB). As per the Definition of the Accident in the Act, it refers to an event related to the operation of a manned or unmanned aircraft occurring between boarding and disembarkation (for manned) or from readiness to engine shutdown (for unmanned), resulting in either: fatal or serious injury caused by being in or coming into contact with the aircraft or jet blast (excluding natural causes, self-inflicted harm, assaults, or injuries to hidden stowaways); aircraft damage or structural failure affecting performance or safety, requiring major repair or replacement (excluding minor or localized damage to components like engines, propellers, tires, or panels); or the aircraft being missing or completely inaccessible. In these types of cases of aircraft accidents, the airline is primarily liable for compensating victims, and the amount can vary. For international flights, the Montreal Convention sets a minimum compensation of around 1.4 crore per passenger, while domestic flights are also subject to this convention's standards. However, if negligence on the airline's part is proven, the compensation can exceed this capped amount. The Aircraft (Investigation of Accidents and Incidents) Rules, 2012, and subsequent amendments primarily focus on the investigation process and don't directly dictate compensation amounts, but they do establish the framework for investigation and reporting. The Air India Flight 171 took off from Ahmedabad Airport in India and was going to London Gatwick Airport in the United Kingdom, which means it was an International flight. Therefore, the liability would be covered under an International Convention. In this case, the damage caused to the passengers will be governed under the Montreal Convention, 1999, also known as the 'Convention for the Unification of Certain Rules for International Carriage by Air'. Montreal Convention, 1999 India was the 91st country to ratify the Montreal Convention 1999. The Convention was effective for India on 30th June 2009, wherein the death of a passenger, there is a strict liability of 100,000 SDRs. As per Article 17, the liability of an air carrier is limited under specific conditions. The carrier is liable for a passenger’s death or bodily injury only if the accident occurred on board the aircraft or during embarking or disembarking operations. As per Article 21, the air carrier cannot exclude or limit its liability for passenger death or injury damages up to 100,000 Special Drawing Rights (SDRs) per passenger. For damages exceeding this amount, the carrier is not liable if it proves that the harm was not due to its own negligence or that of its employees or agents, or that the damage was entirely caused by a third party’s negligence or wrongful act. The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries. As per Article 24, the SDR amounts are reviewed and adjusted every 5 years for inflation. Thereafter, the current SDR amount is updated by the International Civil Aviation Organisation in the month of October,2024. As per the reports, one SDR is equal to 122 INR. The Kerala High Court division bench in the case of National Aviation Company Of India Ltd vs S.Abdul Salam dated 25.10.2011 has held that while an air carrier’s liability for passenger death or injury in an air accident is unlimited, only actual damages proven by the victim or claimants are payable, either through settlement or by a competent civil court. The law does not mandate any minimum compensation under Rule 21(1) or any other provision, although carriers are encouraged to offer reasonable ex gratia payments to avoid prolonged litigation. In the absence of a settlement, claimants must establish the extent of damages in court. The carrier may defend itself by proving contributory negligence on the part of the passenger. For claims exceeding the threshold, the carrier can escape additional liability only by proving that the accident was not due to its own or its agents' negligence, or was solely caused by a third party, failing. Judgement Link Who is to claim compensation The legal heirs or dependents of the deceased can file a claim for compensation. In case of injury, the passenger themselves can do so. The amount depends on the proof of damage or loss (for claims beyond the strict liability limit). As per Article 33, an action for damages may be initiated, at the plaintiff’s choice, in the territory of a State Party either where the carrier is domiciled, has its principal place of business, where the contract was made through a business location, or at the place of destination. In cases involving death or injury of a passenger, the plaintiff may also sue in the State where the passenger had their principal and permanent residence at the time of the accident, provided the carrier operates services to or from that State under its own or a partner carrier’s aircraft, and conducts its business from premises it owns or leases. CONCLUSION The tragic crash of Air India Flight 171, resulting in nearly 300 fatalities and massive property damage, marks one of the most catastrophic aviation disasters in India’s history, raising critical questions about airline accountability and systemic safety failures. Governed by the Montreal Convention, 1999, and India’s Aircraft (Investigation of Accidents and Incidents) Rules, 2012, the legal framework mandates strict liability up to 100,000 SDRs per passenger, with scope for higher compensation if negligence is proven. Legal heirs of the deceased can seek damages through various jurisdictions, though claims beyond the fixed threshold require evidence and may involve prolonged litigation. The crash not only exposes the country to liabilities exceeding ₹1,000 crore but also highlights the urgent need for stronger aviation safety standards, accountability mechanisms, and crisis response systems to prevent such devastating incidents in the future. Author: Mr Akhand Pratap Singh Chauhan, Partner Co-Author: Mr. Sachin Sharma, Assessment Intern