India's Economic Landscape: A Positive Outlook Weekly round for second week of December 2024

India's Economic Landscape: A Positive Outlook

Investor Confidence on the Rise

The Securities and Exchange Board of India (SEBI) has taken significant steps to bolster investor protection and trust. The updated Investor Charter ensures confidentiality of investor information and provides a clear exit mechanism for investments. Additionally, the launch of SCORES 2.0 and SMART ODR Portal streamlines grievance redressal and dispute resolution processes.

India: A Global Investment Hub

India continues to attract foreign investment. Foreign Portfolio Investors (FPIs) have recently pumped billions of rupees into Indian equities, reflecting a renewed confidence in the country's economic growth prospects. The government's pro-business policies and focus on ease of doing business have made India an attractive destination for global businesses.

Data-Driven Decision Making

The National Statistics Office (NSO) is committed to providing accurate and reliable data. The E-Sankhyiki portal facilitates the efficient sharing and dissemination of official statistics across the country. This data-driven approach empowers policymakers and businesses to make informed decisions.

ESG and Sustainable Finance

Environmental, Social, and Governance (ESG) factors are gaining increasing importance. Companies like Shell PLC are actively disclosing their Scope 3 emissions and taking steps to reduce their environmental impact. In India, several companies are following suit, demonstrating a growing commitment to sustainability.

Empowering Women Entrepreneurs

The government is actively promoting women's participation in entrepreneurship. A significant number of startups now have at least one woman director, reflecting the increasing role of women in driving innovation and economic growth. Various initiatives, such as the Startup India Seed Fund Scheme and Credit Guarantee Scheme, are aimed at supporting women-led businesses.

Corporate Governance and Legal Landscape

The Supreme Court's recent ruling on the liability of holding companies clarifies the distinction between the assets of a holding company and its subsidiaries. This decision has implications for corporate governance and insolvency proceedings.

SEBI's Focus on ESG Debt Securities

SEBI has introduced new regulations for ESG Debt Securities, aligning India with global standards for sustainable finance. This move is expected to attract green investments and promote sustainable development.

India's Bright Economic Future

With strong economic fundamentals, supportive government policies, and a growing focus on sustainability and innovation, India is well-positioned to achieve its ambitious growth goals.

Case Law

BRS Ventures Investments Ltd. (Appellant)

Versus SREI Infrastructure Finance Ltd. & Anr. (Respondents) - SC

Holding Company is not the owner of the assets of its Subsidiary. Therefore, the assets of the Subsidiaries cannot be included in the Resolution Plan of the Holding Company

Brief Facts

Gujarat Hydrocarbon and Power SEZ Limited, is a corporate debtor. The corporate debtor approached the 1st respondent–SREI Infrastructure Finance Limited (the financial creditor), for a grant of a loan. Under the

agreement dated 5th January 2011, the financial creditor granted the corporate debtor a loan of Rs.100 crores for setting up a SEZ project. The corporate debtor is a subsidiary of M/s. Assam Company India Limited (ACIL).

The loan granted by the financial creditor to the corporate debtor was secured by a mortgage made by the corporate debtor of its leasehold land and a pledge of shares of the corporate debtor and ACIL. The loan was also secured by the corporate guarantee dated 5thJanuary 2011 furnished by ACIL. The financial creditor filed an Original Application before the Debt Recovery Tribunal-I, Kolkata (for short, ‘the DRT’) to recover the outstanding loan amount. On 24th March 2015, a “debt repayment and settlement agreement” was executed to which the financial creditor, the corporate debtor and ACIL (the guarantor) were parties. On account of the default committed by the corporate debtor, the financial creditor invoked the corporate guarantee of ACIL.

Thereafter, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, ‘the IBC’)was filed concerning ACIL as the guarantee  was not honored.

Judgement

Hon’ble Supreme Court summarized some of its conclusions as under:

a. Payment of the sum of Rs.38.87 crores to the 1st respondent-financial creditor under the resolution plan of the corporate guarantor-ACIL will not extinguish the liability of the 2nd respondent principal borrower/corporate debtor to pay the entire amount payable under the loan transaction after deducting the amount paid on behalf of the corporate guarantor in terms of its resolution plan;

b. A holding company is not the owner of the assets of its subsidiary. Therefore, the assets of the subsidiaries cannot be included in the resolution plan of the holding company, and

c. The financial creditor can always file separate applications under Section 7 of the IBC against the corporate debtor and the corporate guarantor. The applications can be filed simultaneously as well.