Lexster Law

Category: Law

  • From New Delhi to Kigali

    From New Delhi to Kigali

    INTERNATIONAL ARBITRATION · AFRICA
    What an African-Seated Arbitration Taught Us About Practising Without Borders
    By Shantanu Agarwal Managing Partner, Lexster Law LLP

    There is a kind of professional growth no classroom or moot can prepare you for: stepping into an entirely unfamiliar legal ecosystem, a foreign arbitral institution, foreign governing law, foreign co-counsel, and a three-member tribunal drawn from three continents and being expected to deliver for your client.

    That was Lexster Law’s experience in an arbitration seated in Kigali, under the rules of the Kigali International Arbitration Centre (KIAC) and governed by Rwandan law. Our client supplied educational technology to a government body under a procurement contract worth several million dollars. What began as a payment dispute did not stay one. Over the years that followed, it drew in a contested performance guarantee, hard-fought battles over interim relief, a challenge to one of the arbitrators, and litigation running in parallel before the local courts.

    This is a reflection on that journey and on what it means for an Indian firm to operate on the international stage.

    A truly international bench

    One of the defining features of the matter was the tribunal itself: a president practising in Singapore, an arbitrator from the Malaysian arbitration establishment, and an arbitrator from the Nigerian bar. Advocating before European, Southeast Asian, and African legal sensibilities at once demands more than legal competence. It demands cultural fluency — an understanding of divergent arbitral traditions and the ability to craft submissions that land across all of them. Where the institutional rules were silent, the tribunal exercised its procedural discretion to build bespoke frameworks for the dispute, and our submissions had to anticipate that elasticity rather than rely on a fixed playbook.

    Working inside a foreign legal order

    The contract was governed by Rwandan law, a civil-law system with French-influenced traditions, far from the common-law framework Indian practitioners are trained in. Determining liability, damages, and discharge of obligations meant engaging genuinely with that legal order, not citing it superficially.

    Operating inside that system meant building and directing a local capability. We engaged Kigali-based co-counsel for on-the-ground procedural execution and institutional familiarity with the KIAC, while strategy, case theory, and the conduct of the arbitration were led by us. International arbitration of this kind is rarely won by local knowledge alone or by foreign advocacy alone; it is won when a lead firm sets the strategy and orchestrates the right local resources to support it. That integration — not the local relationship in isolation — was the backbone of our approach.

    Interim relief, under fire

    The most intense phase was the fight over interim measures. Early in the proceedings, the counterparty moved to call our client’s performance guarantee and later facilitated the auction of the very equipment at the heart of the dispute by a third-party bank. We fought on several fronts at once: urgent applications under the institutional rules and the Rwandan arbitration statute; a succession of procedural orders restraining those steps; and responses to attempts to terminate those orders and to unseat the tribunal’s president.

    When the equipment was auctioned in breach of the tribunal’s orders, we adapted rather than retreated, quantifying the resulting loss and folding it into the principal claim. The tribunal ultimately found the counterparty in breach of its own procedural orders, drew the appropriate inferences, and compensated our client accordingly.

    A pandemic, parallel litigation, and a challenge to the president

    The arbitration ran through some of the most disrupted years in recent memory. COVID-19 turned planned hearings in Kigali into deferred, rescheduled, and finally virtual proceedings; we managed time zones across Rwanda, Singapore, Malaysia, and Nigeria and kept the case moving through India’s own lockdowns.

    In parallel, the counterparty took the dispute to the local commercial court to challenge the tribunal’s interim orders — and separately filed a formal challenge against the president, alleging bias. We worked through the interaction between the arbitral process and the national courts carefully and upheld the integrity of the tribunal throughout. The challenge was examined and dismissed; the tribunal’s impartiality was upheld without qualification.

    The outcome

    The final award ran decisively in our client’s favour — a multi-million-dollar recovery across principal and contractual interest, further compensation for the loss of the auctioned equipment, and a full award of costs against the counterparty on the costs-follow-the-event principle. The tribunal recorded that our client was, in its words, the clearly prevailing party.

    What this means for Indian firms

    There is a persistent assumption that international arbitration, especially in Africa and other emerging seats, is the preserve of large, Western-headquartered practices. This matter is one data point against it.

    We brought the full weight of Indian advocacy — rigorous analysis, disciplined document management, and composure under pressure to bear across three continents, inside an unfamiliar legal system, and secured a decisive result. The matter was led for our client by Mr. Ciccu Mukhopadhaya and Mr. Saurav Agrawal, whose advocacy across the interim-relief battles, the merits, and the procedural skirmishes was central to the result. A few lessons we carry forward:

    • Local resources matter — but they deliver most when directed within a coherent, lead-counsel-driven strategy.
    • Procedural agility — from interim relief to virtual hearings to arbitrator challenges — matters as much as a perfectly drafted memorial.
    • Institutional knowledge is earned through investment in research, preparation, and people.
    • Governing law is never a formality; a foreign legal order rewards genuine engagement and punishes superficiality.
    • Indian firms are ready. The era of confinement to domestic arbitration is behind us.

    Looking ahead

    This matter reaffirmed something we hold deeply: geography is no longer a limitation in international dispute resolution. Whether the seat is Mumbai, Delhi, Geneva, Singapore, London, Maputo or Kigali, the standard of advocacy should not change. The experience has since proved its worth well beyond Rwanda. The instincts sharpened in Kigali — reading an unfamiliar procedural order, integrating local counsel under a single strategy, holding a line through interlocutory turbulence — have carried directly into our work on cross-border disputes seated in Maputo, Laos, Nairobi, Doha, and elsewhere. As African and other emerging states grow in prominence and institutions like the KIAC continue to mature, we expect to see far more cross-border workflow through them, and we intend to be part of it.

    Lexster Law is a New Delhi disputes and advisory practice focused on international arbitration and cross-border litigation, backed by a global co-counsel network. Asian Legal Business (Thomson Reuters) named Lexster Law an ALB India Firm to Watch 2026 and Dispute Resolution Boutique Law Firm of the Year 2026.

    #InternationalArbitration  #CrossBorderDisputes  #Arbitration  #KIAC  #Rwanda  #DisputeResolution  #IndianLaw  #AfricaArbitration

  • A Guess in the Dark, or an Estimate in the Light? The Arbitrator’s Guesstimate

    A Guess in the Dark, or an Estimate in the Light? The Arbitrator’s Guesstimate

    The Viewpoint · External Publication
    Originally published on Bar & Bench ↗
    19 August 2026  ·  Shantanu Agarwal, Ananya Garg & Tazeen Ahmed
    Read original article ↗

    Every arbitrator who has sat through final arguments faces a familiar difficulty: the breach is proved, the loss is real, but the arithmetic is nowhere to be found. Section 73 of the Contract Act, 1872 requires proof of actual loss, while commercial reality rarely permits precise calculation. In the gap between the two lies one of arbitration’s most consequential exercises: the honest estimate.

    Where precise proof of loss is genuinely impossible, a tribunal may arrive at an honest estimate. In Trishala Jain v. State of Uttaranchal, the Supreme Court distinguished a ‘guess’—an estimate without specific evidence—from a ‘calculation’ based on specific evidence and a ‘guesstimate’, which combines elements of both and carries greater certainty than a bare guess. The line is narrow: too little estimation may unfairly reward the breaching party; too much may become speculation and expose the award to challenge. This article examines how common law and civil law jurisdictions navigate this boundary and what their approaches reveal about the extent of arbitral discretion in assessing damages.

    Common Law: An Exception That Must Be Earned

    India’s position has deep roots in the common law tradition. In Gemini Bay Transcription Private Limited v. Integrated Sales Service Limited, the Court traced the principle to the Calcutta High Court’s decision in Frederick Thomas Kingsley v. Secretary of State for India, which held that damages are not uncertain merely because loss cannot be proved with mathematical certainty. What is required is reasonable certainty that the loss probably followed from the wrong.

    The Supreme Court has therefore permitted practical estimates of lost profit where exact proof is unavailable. In Mohd Salamatullah v. Government of Andhra Pradesh and A.T. Brij Paul Singh v. State of Gujarat, the Court awarded lost profit at fifteen per cent of contract value rather than insisting on exact proof. Construction and Design Services v. Delhi Development Authority similarly held that where the fact of loss is established but its precise amount cannot be quantified, honest guesswork may be used.

    The Delhi High Court has applied the same approach in arbitration. In Cobra Instalaciones judgment, it restored an award that apportioned loss from concurrent delays through honest estimation. In National Highways Authority of India v. ITD Cementation India Ltd, it held that practical guesswork based on reasonable material should not be disturbed merely because another figure could have been adopted. In Simplex Concrete Piles v. Union of India, it upheld an award representing roughly one-thirteenth of the sum claimed as a reasonable estimate drawn from the record.

    But discretion has firm limits. In Unibros v. All India Radio, the Supreme Court set aside an award for loss of profit, holding that formulae such as Hudson’s may assist estimation but cannot, by themselves, establish loss. Evidence of lost opportunity remains necessary; the court cannot “make a guess in the dark”. Batliboi Environmental Engineers Ltd. v. Hindustan Petroleum Corpn. Ltd. similarly stressed that damages must correspond to actual loss and must not create a windfall. In Radiance Infracon v. GLS Infratech, the Delhi High Court held that the law does not permit guesswork in vacuo: an estimate must have a reasoned basis and a nexus with the material on record.

    The same tension appears across the common-law world. In Chaplin v. Hicks, England’s Court of Appeal awarded damages for loss of a chance despite the practical difficulty of exact calculation. Singapore’s courts have also adopted a practical approach. In CEF v. CEH, the court recognised that some losses are inherently difficult to quantify precisely, while MFM Restaurants v. Fish & Co held that difficulty in proving the exact cause or amount of loss does not justify nominal damages where substantial loss is clear. In Story Parchment Co. v. Paterson Parchment Paper Co., the US Supreme Court similarly accepted that where the wrong itself makes certainty impossible, a just and reasonable inference may suffice.

    Civil Law: Estimation as Ordinary Judgment

    Civil law systems reach a similar result through a different route. Under French law, estimation is treated as part of the fact-finder’s ordinary function rather than an exceptional departure from proof. German law is similarly flexible, allowing estimation where the claimant has pleaded sufficient facts to support a minimum figure, without requiring exceptional circumstances or special justification.

    The Gulf approach goes further by treating estimation as a normal judicial function. Under the UAE Civil Code, where compensation is not fixed by law or contract, the judge may assess it based on the harm suffered. Article 390(2) also allowed courts to revise agreed damages to reflect actual loss, even where the parties had fixed a specific amount. This differed from Dunlop Pneumatic Tyre v. New Garage, Cavendish Square Holding v. Talal El Makdessi, and Kailash Nath Associates v. Delhi Development Authority, where agreed sums are generally respected subject to applicable legal limits.

    The UAE’s broad discretion has been narrowed by the new Civil Code, effective June 1, 2026. Article 340 replaces Article 390 and retains the power to adjust agreed compensation where it is excessive, the contract has been partly performed, or the creditor contributed to the loss. An award above the agreed amount now requires proof of fraud or gross fault. The reform therefore introduces greater structure while preserving the court’s ability to prevent unfair outcomes. Article 340 continues to preserve this power against contrary contractual arrangements.

    Saudi Arabia has taken a different path. Its Civil Transactions Law 2023 recognises loss of profit as compensable, reflecting a more flexible approach to uncertain future loss. The DIFC and ADGM, by contrast, continue to follow common law principles. For tribunals seated onshore in the Gulf, estimation remains an important judicial function, although the UAE now subjects it to clearer safeguards.

    UNIDROIT Principles

    Article 7.4.3(3) of the UNIDROIT Principles of International Commercial Contracts similarly leaves the assessment of damages to the tribunal where the amount cannot be established with certainty. The provision reflects the broader principle that lack of mathematical precision does not necessarily defeat a damages claim, provided the tribunal has a reasonable basis for its assessment.

    Convergence in investment arbitration

    Investment tribunals follow the Factory at Chorzów principle that compensation should, as far as possible, restore the position that would have existed without the wrongful act. Where future loss is uncertain, tribunals may estimate it but must avoid speculation. In Bear Creek Mining v. Peru, the tribunal rejected a discounted cash flow valuation for an early-stage project because of its uncertainty and awarded sunk costs instead. By contrast, Tethyan Copper v. Pakistan awarded nearly USD 6 billion for a mine that was never built. The lesson is that methodology alone does not create certainty; what matters is whether the reasoning connects the evidence to the amount awarded.

    Conclusion: The statutory fence

    The guesstimate doctrine cannot be understood apart from the statutory limits on an arbitral tribunal’s authority. Section 28(1)(a) of the Arbitration and Conciliation Act, 1996 requires a tribunal seated in India, other than in an international commercial arbitration, to decide according to Indian substantive law. The power to guesstimate is therefore derivative: it exists because Section 73 of the Contract Act, as judicially interpreted, permits estimation where loss is proved but its precise amount cannot be established.

    That power is fenced on two sides. First, Section 28(3) requires the tribunal to take the contract and applicable trade usages into account. In Associate Builders v. Delhi Development Authority, the Supreme Court held that an arbitrator who goes beyond the contract acts without jurisdiction, a principle reflected in Ssangyong Engineering v. NHAI as a form of patent illegality under Section 34(2A). An arbitrator who estimates loss contrary to an agreed measure of damages, or awards what the contract excludes, therefore exceeds the parties’ mandate. Garg Builders and Union of India v. Manraj Enterprises reinforce this contractual limit.

    The second fence is Section 31(3), which requires the award to be reasoned. Ssangyong held that mere contravention of Indian substantive law is not, by itself, enough to set aside an award. However, an unreasoned award, or one whose reasons show no connection with the material on record, remains vulnerable to challenge. The reviewing court’s inquiry is therefore narrow as it asks whether the arbitrator gave reasons and remained within the contract, rather than whether the figure was correct. This distinction matters because an appellate court is not entitled to substitute its own assessment merely because it would have preferred a different methodology or figure. The focus remains on legality, contractual boundaries and the adequacy of the reasoning. That is what keeps estimation from becoming speculation while preserving the tribunal’s limited role in quantifying proven loss.

    That is the quiet consequence of the doctrine. An arbitrator has no free-ranging judicial discretion, but a bounded power to estimate within statutory and contractual limits. Where the breach is proved, the loss is real, and precise arithmetic is absent, the estimate may stand—not necessarily because it was right, but because it was reasoned.

    About the authors: Shantanu Agarwal is the Managing Partner of Lexster Law LLP. Ananya Garg is a Senior Associate and Tazeen Ahmed is an Associate.

    Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

  • Lexster Law LLP Honoured at the ALB India Law Awards 2026

    Lexster Law LLP Honoured at the ALB India Law Awards 2026

    Lexster Law LLP is honoured to have been recognised at the ALB India Law Awards 2026, receiving the prestigious Dispute Resolution Boutique Law Firm of the Year 2026 award. The Firm was also recognised as an ALB India Firm to Watch 2026, reflecting its growing presence and contribution to India’s evolving legal landscape.

    The ALB India Law Awards celebrate excellence, innovation, and outstanding achievements within the legal profession. These recognitions reaffirm Lexster’s unwavering commitment to delivering strategic, client-centric dispute resolution services while upholding the highest standards of professionalism, integrity, and legal excellence.

    This milestone would not have been possible without the continued trust and confidence of our clients, the encouragement of our colleagues and peers, and the invaluable support of our dedicated team and Of Counsels. Their commitment, expertise, and collaborative spirit have been instrumental in this achievement.

    As we celebrate this recognition, we remain steadfast in our commitment to delivering exceptional legal solutions, fostering meaningful client relationships, and continuing to contribute to the advancement of dispute resolution in India.

    ALB India Law Awards 2026
  • Dubai Arbitration Week 2025: Lexster Law hosts Panel discussion on Navigating Multiparty and Cross-Border Disputes in Mega Project Arbitration.

    Dubai Arbitration Week 2025: Lexster Law hosts Panel discussion on Navigating Multiparty and Cross-Border Disputes in Mega Project Arbitration.

    Lexster Law had the honour of being a Gold Sponsor at the Dubai Arbitration Week 2025 organised by Dubai International Arbitration Centre (DIAC), one of the most prestigious global convening in the world of arbitration.

    One of the proudest moments came when we co-hosted a panel discussion on Navigating Multiparty and Cross-Border Disputes in Mega Project Arbitration. We had a stellar panel of speakers, including: Justice Sanjeev Khanna (Former Chief Justice, Supreme Court of India), Mr. Essam Al Tamimi (Chairman at Al Tamimi & Company), Mr. Mukul Rohatgi (Former Attorney General of India), Ms. Anne K. Hoffmann (International Arbitrator), Ms. Soraya Corm-Bakhos, (FCIArb,International Arbitrator), Mr. Mahesh Agarwal.

    DAW 2025
  • India ADR Week 2025: Exploring the Group of Companies Doctrine and Non-Signatories in Arbitration

    India ADR Week 2025: Exploring the Group of Companies Doctrine and Non-Signatories in Arbitration

    We hosted a panel discussion during India ADR Week 2025 on 18 September 2025 on “Non-Signatories in Contracts and the Group of Companies Doctrine”, featuring Hon’ble Ms. Justice Indu Malhotra (Former Judge, Supreme Court of India), Dr. Sanjeev Gemawat (Managing Director & Group General Counsel, Essar Group), Mr. Ooi Huey Miin (Partner, Rajah Darryl & Loh, Malaysia), and Mr. Saurav Agrawal (Counsel, New Delhi). The session was moderated by Mr Saurabh Seth, Counsel, New Delhi.

    ADR Week 2025
  • The Intersection of Copyright Law and Artistic Creativity: Lessons  from Andy Warhol Foundation v. Goldsmith and a Comparison with  Indian Copyright Law

    The Intersection of Copyright Law and Artistic Creativity: Lessons  from Andy Warhol Foundation v. Goldsmith and a Comparison with  Indian Copyright Law

    Introduction

    The Andy Warhol Foundation for the Visual Arts v. Goldsmith case has sparked extensive  discussions on the relationship between copyright law and artistic expression. This memo briefly  explores the case and compares the fair use provisions in U.S. copyright law with those in Indian  copyright law. By examining these frameworks, we can gain valuable insights into the challenges  of balancing copyright protection and artistic innovation.

    Andy Warhol Foundation for the Visual Arts v. Goldsmith

    In this recent landmark case, the Supreme Court of the United States (SCOTUS) ruled in favour  of celebrity photographer Lynn Goldsmith, affirming her claim that the Andy Warhol estate  infringed her copyright. In 1981, Goldsmith photographed the renowned musician, Prince, for  Rolling Stone magazine. In 1984, Andy Warhol created a series of silkscreen prints based on  Goldsmith’s photograph. The Andy Warhol Foundation later licensed one of Warhol’s prints to  Condé Nast for use in a magazine article about Prince.  

    Goldsmith sued the Andy Warhol Foundation for copyright infringement. The district court  granted summary judgment to the foundation, finding that its use of Goldsmith’s photograph  was fair use. However, the Second Circuit reversed the ruling, holding that the foundation’s use  was not transformative and, therefore, not fair use.  

    The SCOTUS affirmed the Second Circuit’s decision. It held that the foundation’s use of  Goldsmith’s photograph was not transformative because it did not add a new expression or  meaning to the original work. The court also found that the foundation’s use was commercial in  nature, which weighed against a finding of fair use.  

    The SCOTUS’s verdict sheds light on the complex considerations involved in determining fair use,  with Justice Sonia Sotomayor authoring the majority opinion. 

    The Fair Use Factors: A Comparative Analysis  

    In the United States, fair use is determined by four key factors: the purpose and character of  the use, the nature of the copyrighted work, the amount used, and the effect on the market for  

    1 Read the full opinion of the SCOTUS at 21-869 Andy Warhol Foundation for Visual Arts, Inc. v. …  Supreme Court of the United States (.gov) https://www.supremecourt.gov › opinions (google.com)

    www.lexsterlaw.com 1  

    the original work. Similarly, Indian copyright law includes a fair use defense, considering factors  such as the purpose and character of the use, the nature of the copyrighted work, the proportion  used, and the impact on the potential market for the copyrighted work.  

    In Andy Warhol Foundation for the Visual Arts v. Goldsmith, factors such as the commercial nature  of the use, the absence of transformative elements, and the potential negative impact on the  market for Goldsmith’s photograph were decisive in the SCOTUS’s decision. Applying a similar  analytical framework, Indian courts would likely reach a similar conclusion, considering the  broad application of fair use principles within Indian copyright law. However, it is important to  note that the Indian courts have not yet ruled on a case directly analogous to Andy Warhol  Foundation v. Goldsmith. As such, it is impossible to say with certainty how the Indian courts would  rule in a similar case.  

    While Indian and U.S. laws on fair use are similar, some key differences exist. Indian law does  not explicitly mention the transformative nature of a work or the commercial nature of use as  factors in determining fair use, but Indian courts have held that these factors are relevant. It is  vital to be aware of the specific provisions of Indian copyright law when creating and using  copyrighted material in India.  

    Conclusion  

    The Andy Warhol Foundation v. Goldsmith case offers valuable insights into fair use in U.S.  copyright law and prompts a consideration of the potential application of similar principles  within Indian copyright law. Still, balancing copyright protection and artistic innovation remains  a complex challenge in both legal frameworks.

    www.lexsterlaw.com 2 

  • CERT‐In Rules and Directions 

    CERT‐In Rules and Directions 

    With an increasing number of Indians using the Internet and cyberspace and  the goal of a $1 trillion digital economy by 2026, the Government of India is taking  steps to strengthen cybersecurity in India. It has established an evolving framework  comprising statutes, rules, directions and supervisory agencies intended to keep  cyberspace safe for individuals and businesses.  

    CERT‐In

    The Indian Computer Emergency Response Team (“CERT‐In”) is a national  organisation appointed1 by the Government of India to ensure cyber safety in India.  

    Functions of CERT‐In. The functions of the CERT-In are2:  

    • a) collection, analysis, and dissemination of information on cyber incidents; 
      b) forecast and alerts of cyber security incidents;
    • c) determining emergency measures for handling cyber security incidents;
    • d) coordination of cyber incidents response activities;  
    • e) issuing guidelines, advisories, vulnerability notes and white papers  relating to information security practices, procedures, prevention,  response, and reporting of cyber incidents; and  
    • f) such other functions relating to cyber security as may be prescribed.  

    1 The appointment was made vide notification dated 27 October 2009 in terms of section 70B of the  Information Technology Act, 2000 (“IT Act”). 

    2 Section 70B(4) of the Information Technology Act, 2000 

    The CERT-In Rules3 prescribe how CERT-In performs its functions and  provide for the level of support provided by CERT-In concerning different types of  ‘cyber security incidents.’4 

    Powers of CERT‐In. CERT-In is the referral agency for cyber users in India for  responding to cyber security incidents.5 CERT-In is empowered to seek information  from and issue directions to service providers, intermediaries, data centres, body  corporate, and other persons to carry out its functions.6 Information regarding logs  may be requisitioned by an officer of CERT-In, not below the rank of Deputy Secretary  to the Government of India. The CERT-In Rules also set out the procedure to be  followed if such information is not provided. Persons that fail to provide the  information called for or follow directions issued by the CERT-In may be punished  with imprisonment, a fine or both7.  

    Cyber Security Directions 8

    The Cyber Security Directions provide a framework for ensuring cyber security in India. They were issued pursuant to consultations with industry and government organisations and other stakeholders.  

    3 Information Technology (The Indian Computer Emergency Response Team and Manner Performing  Functions and Duties) Rules, 2013 published vide notification dated 16 January 2014 pursuant to  section 70B(5) of the IT Act read with section 87(zf) of the IT Act 

    4 Rule 11 of the CERT-In Rules  

    5 Rule 8 of the CERT-In Rules  

    6 Rule 14 of the CERT-In Rules  

    7 Section 70B(7) of the IT Act  

    8 Directions dated 28 April 2022 issued by the Ministry of Electronics and Information Technology,  CERT-In under section 70B(6) of the Information Technology Act, 2000 relating to information  security practices, procedure, prevention, response and reporting of cyber incidents for Safe & Trusted  Internet, No. 20 (3)/2022-CERT-In 

    Person Covered by Cyber Security Directions. Service providers,  ‘intermediaries’9, data centres, body corporate, Virtual Private Server (VPS)  providers, cloud service providers, Virtual Private Network (VPN) Service providers,  virtual asset service providers, virtual asset exchange providers, custodian wallet providers and government organisations (“Parties Covered by CERT‐In Directions”) are required to comply with the Cyber Security Directions.  

    Duty to Report. Parties Covered by CERT-In Directions are required to immediately report10 cyber security incidents to the CERT-In. The methods and formats of reporting cyber security incidents are published on CERT-In’s website.  

    Duty to Synchronise. Parties Covered by CERT-In Directions are required to connect to the Network Time Protocol (NTP) Server of the National Informatics  Centre (NIC) or National Physical Laboratory (NPL) or with NTP servers traceable to these NTP servers, for synchronisation of all their ICT systems clocks. This means that the clocks in the network of the service providers, intermediaries, data centres, body corporate and governmental organizations must be in sync with the NTP server and will provide the exact same time as NTP. This, in turn, will help in determining the  exact time when a cyber security incident took place.  

    Duty to Maintain Logs. Cyber Securities Directions also mandate that Parties  Covered by CERT-In Directions maintain logs of all their ICT systems and maintain  them securely for a rolling period of 180 days. The said logs are to be maintained  within the jurisdiction of India and must be provided to the CERT-In while reporting  an cyber security incident or when so directed or sought by the CERT-In.  

    9 Defined in section 2(w) of the IT Act.  

    10 Rule 12 of the CERT-In Rules 

    Duty to Know Customer. Data centres, VPS providers, Cloud Service providers and VPN service providers are required to maintain accurate information about subscribers/customers and the hiring services availed by subscribers etc. for a period  of five years or such longer duration according to law after cancellation or withdrawal of the registration.  

    Overall, the Cyber Security Directions are intended to improve India’s overall cyber security framework so that the Internet is safe for its citizens.  

    Things to Think About

    Issues related to the CERT-In Rules or the Cuber Security Directions that  require deeper thinking include:  

    • How do the CERT-In Rules or the Cuber Security Directions affect the  individual right to privacy?  
    • Are confidentiality agreements affected by CERT-In Rules or the Cuber  Security Directions?  
    • Do the CERT-In Rules or the Cuber Security Directions cover non Indian entities?  
    • How is the confidentiality of customer data that may be reported to  CERT-In ensured? How should data that is required to be disclosed to CERT In that belongs to data subjects covered by data protection regimes such as  GDPR be handled?  ∙ Where should the logs that may be requisitioned by the CERT-In be  stored?
  • EU Shows the Way to Responsible Regulation of AI  

    EU Shows the Way to Responsible Regulation of AI  

    European Union’s AI Act – The Dawn of a New Regulatory Regime

    The European Union’s Artificial Intelligence Act (AI Act) stands as a pivotal milestone in the European  Union’s pursuit of effective artificial intelligence (AI) governance. This groundbreaking proposal strives  to establish a comprehensive regulatory framework that harmonizes the development, market  deployment, and responsible usage of AI systems throughout the EU. It is the first comprehensive  regulatory framework for AI systems in the world. The AI Act is expected to significantly affect the  governance of AI systems in the EU. It is also expected to have a broader impact as other jurisdictions  worldwide consider the AI Act a model for their own AI regulations.  

    AI Regulation In India – A Good Start Is Half The Battle

    The Indian government has not yet announced plans to introduce a specific law to regulate AI. However,  the government has taken a few steps to promote the responsible development and use of AI. For  example, in 2020, the government published a national strategy for AI that sets out principles for the  responsible development and use of AI. The government has also established several working groups to  study AI’s potential risks and benefits and develop recommendations for mitigating the risks.  

    The Indian government might introduce a specific law to regulate AI. However, the government also might  continue to take a more informal approach to regulating AI by issuing guidelines and best practices. 

    Overview of the AI Act

    The primary objective of the AI Act is to safeguard the development and utilization of AI systems in a  manner that prioritizes safety, reliability, and responsibility while simultaneously upholding fundamental  rights and freedoms.  

    The AI Act classifies AI systems into three distinct risk categories. AI systems categorized as presenting  an unacceptable level of risk, such as those employed for social scoring, mass surveillance, or biometric  identification without consent, are prohibited. High-risk AI systems, which encompass those utilized in  automated decision-making, critical infrastructure, or law enforcement, are subject to specific  requirements, including mandatory conformity assessment and market surveillance. Conversely, low or  negligible risk AI systems are not subjected to any particular requirements.  

    In addition to the risk-based classification, the AI Act sets forth general requirements that are applicable  to all AI systems, regardless of their risk category. These requirements encompass transparency,  accountability, robustness, and privacy. AI systems must be designed to ensure transparency and  comprehensibility, providing users with information concerning their functionality, training, and decision 

    making processes. Furthermore, provisions must be in place to ensure accountability, allowing for human  intervention when deemed necessary. It is imperative that AI systems are designed in a manner that  guarantees robustness, resilience against manipulation, bias, and errors. Additionally, AI systems must  uphold privacy standards and comply with the General Data Protection Regulation (GDPR) when  handling personal data.  

    The AI Act is still under negotiation, but it is expected to be adopted by the European Parliament and  the Council of the European Union in 2023. Once adopted, the AI Act will directly apply to all EU Member  States. 

    Key Takeaways

    1. The AI Act demonstrates the EU’s commitment to responsible regulation of AI, setting a pioneering example for the global community. The AI Act has garnered acclaim from experts who commend its ambitious and comprehensive nature.  
    2. Clear regulations and guidelines are necessary to ensure the safe, responsible, and ethical development and utilization of AI. The AI Act serves as a foundation in this regard, facilitating the promotion of responsible AI practices. Nevertheless, some experts have expressed that the  AI Act could be more extensive. Specifically, they propose the inclusion of more explicit mandates pertaining to AI systems implemented in sensitive domains like law enforcement and healthcare.  
    3. The AI Act could serve as a compelling model that can be emulated by other countries seeking to advance their own frameworks for AI regulation and governance. 
  • Supreme Court Rules That Intent Is Relevant In Insider Trading Cases   

    Supreme Court Rules That Intent Is Relevant In Insider Trading Cases   

    In Securities and Exchange Board of India v. Abhijit Rajan1, the Supreme Court held  that the insider’s intent must be considered before determining whether the insider is  guilty of insider trading. If the insider did not intend to take advantage of the unpublished  price sensitive information (“UPSI”), the person could not be guilty of insider trading.  

    The Supreme Court summarised the applicable tests for determining whether a  person is guilty of insider trading as follows:  

    • (i) Is the person an ‘insider’ under Regulation 2(e) of the Securities And  Exchange Board of India (Prohibition Of Insider Trading) Regulations,  1992 (“Regulations”)? 
    • (ii) Is the information “price sensitive information”2?  
    • (iii) Is the information ‘unpublished’3? 
    • (iv) Has the person indulged in trading of securities of the company4?  

    The court held that each of the tests was passed in the present case, viz., the respondent  was an insider of a company who possessed UPSI and indulged in trading of the securities  of the said company before the publication of the UPSI. However, for reasons set out  below, it held that this was insufficient to hold the respondent guilty of insider trading.  

    SEBI argued inter alia that the Regulations set out a strict prohibition of insider  trading5, which cannot be avoided on any grounds, including the materiality of impact or  intent of the insider. On the other hand, the respondent argued that whether the  information is price sensitive depends on the materiality of impact on price. The  respondent also argued that the purpose of trading and intent for the trading, along with  other relevant circumstances, must be considered before determining whether the  insider is guilty of insider trading. 

    1 Judgment dated September 19, 2022, by Hon’ble Justices Indira Banerjee and V Ramasubramanian in Civil  Appeal No. 563 of 2020  

    2 Regulation 2(ha) of the Regulations 

    3 Regulation 2(k) of the Regulations 

    4 Regulations 3 and 4 of the Regulations 

    5 Regulations 3 and 4 of the Regulations 

    The court appears to have found the respondent’s arguments more persuasive. It  held that it is necessary to see whether the information will affect the security’s price materially. It also held that the activities of the insider must be examined and reasoned  that if the trading is not driven by a motive for profit, the person cannot be guilty of  insider trading. Specifically, it stated: 

    If a person enters into a transaction which is surely likely to result in loss, he cannot be accused of insider trading. In other words, the actual gain or loss is immaterial, but the motive for making a gain is essential.

    The court determined on the facts of the case that the respondent’s actions were  not motivated by the pursuit of underserving gains. It found in this case that because the  UPSI was likely to increase the market price of the company’s securities on disclosure,  the respondent’s sale of securities before disclosure did not amount to insider trading. 

    Sharad Kumar

    Surabhi Katyal

  • Supreme Court’s Stamping Decision: Blow to the Validity of Arbitration Agreements?  

    Supreme Court’s Stamping Decision: Blow to the Validity of Arbitration Agreements?  

    The Supreme Court’s recent landmark judgment by a 3-2 majority1 in N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd.2, held that an arbitration agreement in an unstamped contract is not enforceable under Indian law if such contract is not duly stamped. The court thus overruled its previous decision by a  bench of three judges3. 

    Background Facts 

    The case involves a sub-contract between the first respondent and the appellant, which included an arbitration agreement in a Work Order. The appellant had provided a bank guarantee, and after its invocation, the appellant filed a suit against the encashment of the bank guarantee. The first respondent sought reference under Section 8 of the Arbitration and Conciliation Act, 1996, and filed a Writ Petition after the commercial court rejected their application. One contention raised was that the arbitration agreement was unenforceable due to the unstamped Work Order.  However, the High Court allowed the Writ Petition. The issue before the Supreme  Court was whether the arbitration agreement was enforceable despite the Work Order being unstamped and therefore unenforceable under the Stamp Act, 1899.  

    The bench of three judges, in N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd.4 unanimously agreed with the appellant and held that the arbitration agreement in the Work Order was valid and enforceable, even though the Work Order was unstamped, as per the doctrine of separability of the arbitration agreement from the main contract. Accordingly, it overruled its previous judgments in SMS Tea Estates5 and Garware Wall Ropes6, wherein it was held that an unstamped contract’s arbitration agreement is non-existent in law and cannot be acted on. The Supreme  Court also agreed with the appellant and held that the arbitrator could decide the stamp duty payable on the Work Order. It also observed that the court’s role under  Section 11 of the Arbitration Act, 1996 was limited to examining the existence of an arbitration agreement and not its validity or enforceability.  

    However, since a coordinate bench in Vidya Drolia v. Durga Trading Corporation7 affirmed the judgment in Garware Wall Ropes, the bench of three judges  considered it necessary that the issue of the validity of an arbitration agreement in an  

    1 K. M. Joseph, Aniruddha Bose and C. T Ravikumar, JJ., comprising the majority. 

    2 (2021) 4 SCC 379  

    3 Dr. D. Y. Chandrachud, Indu Malhotra and Indira Banerjee, JJ.  

    4 (2021) 4 SCC 379  

    5 (2011) 14 SCC 66  

    6 (2019) 9 SCC 209  

    7 (2021) 2 SCC 1 

    unstamped contract be authoritatively settled by a constitution bench of the Supreme  Court. Hence, N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. was referred to a five-judge constitution bench.  

    Contentions Before the Bench of Five Judges

    The appellant, N.N. Global Mercantile Pvt. Ltd., contended that the arbitration  agreement in the Work Order was valid and enforceable, as per the doctrine of  separability of the arbitration agreement from the main contract, even though the  work order was unstamped. It also argued that the stamp duty payable on the Work  Order could be decided by the arbitrator, who had the power to impound the  document and direct the parties to pay the stamp duty and penalty. It further argued  that fraud or fraudulent invocation of a bank guarantee was arbitrable unless it  affected the public interest or public policy of India.  

    The respondents, Indo Unique Flame Ltd. and others, contended that the  arbitration agreement in the Work Order was invalid and unenforceable, as the Work  Order was unstamped and not a valid contract under Section 2(h) of the Contract Act,  1872. They also argued that stamp duty payable on the Work Order had to be decided by a court, acting under Section 11 of the Arbitration and Conciliation Act, 1996, as per the judgments in SMS Tea Estates and Garware Wall Ropes. They further argued that fraud or fraudulent invocation of a bank guarantee was not arbitrable, as it involved severe allegations of criminality and malpractice. 

    Decision and Key Takeaways Regarding Stamping of Arbitration Agreements

    1. An unstamped instrument containing an arbitration clause cannot be  considered a contract enforceable under Section 2(h) or Section 2(g) of the  Contract Act, 1872. An arbitration agreement that is part of an unstamped  contract cannot be acted on or enforced by a court unless the parties cure the  defect of non-payment or insufficient payment of stamp duty.  
    2. Sections 33 and 35 of the Stamp Act, 1899, applicable to instruments  chargeable to stamp duty, would render the arbitration agreement in such  instruments non-existent in law unless the instrument is validated under the  Stamp Act, 1899.  
    3. A stand-alone arbitration agreement that does not form part of any contract  requires no stamping and can be valid and enforceable.  
    4. Under Section 11 of the Act, a court must impound an unstamped contract  containing an arbitration agreement under Section 33 of the Stamp Act, 1899  and direct the parties to pay the stamp duty and penalty as per the relevant  stamp laws before appointing an arbitrator.  
    5. Once appointed, the arbitrator can also impound an unstamped contract  containing an arbitration agreement and direct the parties to pay the stamp  duty and penalty as per the relevant stamp laws before moving forward with  the arbitration. 

    Final Thoughts

    The requirement of stamping arbitration agreements may create a procedural difficulty in the speedy constitution of arbitral tribunals and delay the already time-consuming process of appointment of arbitrators. It may also give an opportunity to recalcitrant parties to avoid or frustrate their duty to arbitrate. Most common law jurisdictions, including the U.K., Singapore, Hong Kong, Australia, and the USA, do not require stamping of arbitration agreements. In such jurisdictions, the authenticity of agreements is ensured through other means such as notarization, witnesses, and electronic signatures.  

    India, too, should exempt the stamping of arbitration agreements. Doing so will strengthen India’s arbitration regime. This will require amending India’s stamp laws to exclude arbitration agreements from stamp duty. Alternatively, India could enact separate legislation to provide for the validity and enforceability of arbitration agreements despite the stamping of the main contract. However, such a change would require the consent of the states, as stamp duty is a state subject under the Indian constitution. It may also affect the revenue collection of the states from stamp duty.  This will make exempting stamping of arbitration agreements a formidable task.

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