Insolvency in a Wartime Economy: What Lies Ahead for India

Ritu Shaktawat and Vinita Krishnan discuss the Supreme Court’s ruling in the Tiger Global case and its implications for the interpretation of the General Anti-Avoidance Rules (GAAR), particularly the grandfathering benefit for investments made prior to 1 April 2017. GAAR, introduced as an anti-abuse framework, enables tax authorities to disregard arrangements primarily designed to obtain tax benefits and assess them based on substance over form. The Court’s interpretation of the “without prejudice” language in the rules led to uncertainty by indicating that even pre-1 April 2017 investments could be examined under GAAR.

In response, the Government amended the GAAR rules on 31 March 2026 to provide greater clarity by removing the ambiguity and stating that income from the transfer of such investments is excluded from GAAR. While capital gains from these investments are now clearly carved out, other income streams, such as dividends and interest, may still be subject to GAAR and treaty claims continue to be evaluated under judicial anti-avoidance principles.

The discussion also highlights the continued relevance of maintaining appropriate substance, governance and documentation, as well as the need to review investment structures and exit strategies in light of these developments.

Siddharth Shah and Bijal Ajinkya discuss the origins, structure and regulatory changes around carried interest, a topic making waves in the world of private equity and venture capital. Carried interest is the share of profits of an investment fund that is paid to the fund manager as compensation linked to the performance of the fund. In the context of alternative investment funds (AIFs), carried interest is generally distributed to the fund sponsors and managers in the form of additional profits from the trust on the units that they hold, which are often represented to a different class. The additional distribution to the carry unit is typically distributed after the investors have received back their initial capital contribution plus a specified minimum return, also known as the hurdle rate.

They further discuss tax and regulatory developments that are impacting the current environment, including the Karnataka High Court’s pass-through ruling involving ICICI Ventures and SEBI’s December 2024 circular that introduced guidelines to ensure pari passu rights for all participants in the AIF. Globally, there are two distinct approaches being taken - some jurisdictions are moving to increase the tax burden on carried interest, while others are trying to be more competitive. For instance in the UK, cashed interest will be taxed as trading profits from April 2026, while Luxembourg will see carried interest being taxed at a much lower rate, making it an attractive hub for AIF managers. 

Anshul Prakash and Vinay Joy discuss India’s four new Labour Codes on wages, social security, industrial relations and workplace safety, replacing 29 central labour laws. The substantive provisions of all four codes are in effect - definitions, basis for computation of social security contributions and gratuity, timeline for payment of wages, and prohibition on engagement of contract labour in core business activities. However, the procedural framework still evolving, and State rules, schemes and notifications are pending. Until those are finalised, existing laws and rules continue to apply for procedural compliance. 

The episode breaks down what is effective now, what is pending, and answer some questions from an employer’s perspective. It examines the misconception around the definition of employee under the codes and what employers should focus on immediately.

Anshul and Vinay highlight the uniform definition of ‘wages’ under the Wages Code and employers need to check if their remuneration structure aligns with the 50% threshold rule for wage components. They emphasise that the government aims to ease compliance with digital interfaces and compounding of offences and not to immediately commence prosecution against employers. 

Anisha Chand and Anshuman Sakle discuss the National Company Law Appellate Tribunal’s (NCLAT) landmark judgment in the Meta - WhatsApp 2021 Privacy Policy case, a decision that reshapes how data privacy and competition law intersect in India’s digital markets. 

While the Tribunal upheld Competition Commission of India’s (CCI) INR 213 crores (~USD 25 million) penalty for abuse of dominance on Meta, it set aside the five-year ban on data sharing between WhatsApp and Meta for advertising, offering critical clarity on the boundaries of lawful data use by dominant digital platforms.

In this episode, the conversation examines NCLAT’s recognition of data as a form of non-monetary price in zero-cost digital services, and how coercive consent, particularly when users lack real alternatives can distort competitive conditions. They analyse why data privacy and competition/ antitrust laws are complementary frameworks, the relevance of informed choice, and how dominant enterprises must design proportionate and transparent data-sharing policies. 

Anisha and Anshuman examine the ruling in light of global enforcement trends, where regulators are increasingly treating data practices central to competition law assessments. As digital markets become more data-driven, consent architecture, privacy design and competition/antitrust compliance must evolve together. The discussion highlights why this judgment is a turning point for digital platforms operating in India on responsible data governance and fair market conduct.

Prasenjit Chakravarti and Harsh Walia discuss how strong legal and digital hygiene is increasingly shaping deal value in today’s M&A landscape. While often overlooked in comparison to commercial metrics, compliance has become a direct value driver, influencing valuations, deal timelines, closing conditions and investor confidence. Companies demonstrating clean documentation, clear IP ownership, structured governance and robust data management are now commanding higher valuations and smoother negotiations. 

The conversation underscores two critical dimensions that investors should scrutinise. Legal hygiene spans well-documented ESOPs, properly papered inter-company loans, aligned shareholder and board documents and maintained corporate records - factors that can prevent escrows, delayed closings or reduced payouts. Digital hygiene, on the other hand, involves data hosting clarity, lawful consents, cloud/vendor contract robustness, cyber insurance adequacy and compliance with emerging data protection norms. Weaknesses in these areas have triggered valuation cuts, restructuring of deal terms or near-failures of cross-border transactions.

Prasenjit and Harsh emphasise that compliance readiness must precede a transaction, not follow diligence. Treating legal and digital compliance as a core enterprise value issue, rather than a box-ticking exercise, builds resilience and buyer trust. With investors increasingly pricing in compliance maturity, being “investor-ready” and not merely “pitch-deck ready” is what enables companies to protect value, accelerate deals, and secure a premium in competitive markets.

Smita Jha and Supratim Chakraborty discuss how RBI’s FREE-AI Framework is shaping the future of finance in India. As AI increasingly drives underwriting, credit scoring, fraud detection, process automation, customer support, risk management, and compliance, clear regulatory guidance has become essential. The framework lays out guiding principles, called Sutras, along with practical recommendations to ensure innovation proceeds with accountability and trust.

The conversation highlights the framework’s twin pillars, Innovation Enablement and Risk Mitigation, and their significance for financial institutions navigating an AI-driven landscape. Innovation Enablement focuses on building high-quality, interoperable financial-sector data infrastructure and AI sandboxes for safe testing, while Risk Mitigation emphasizes governance, board-approved AI policies, data lifecycle management, consumer protection, and transparent reporting.

Smita and Supratim also explore the convergence of finance and privacy. While AI enables efficiency and broader credit access, privacy safeguards are critical to prevent misuse of sensitive data. Embedding AI literacy, fostering a culture of governance, and proactively managing risks are essential to responsible adoption. The discussion demonstrates how innovation and accountability can coexist to strengthen India’s financial ecosystem.