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VOLUME XII ISSUE II
TREATING AI OUTPUTS AS “COMMERCIAL SPEECH”
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Varun Pathak and Vishwajeet Deshmukh
The authors are Partner and associate at Shardul Amarchand Mangaldas & Co. Respectively
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The Delhi High Court, in San Nutrition Private Limited v. Arpit Mangal and Others, recently examined the elements required to establish disparagement through ‘commercial speech’. However, Indian jurisprudence continues to lack a cleardefinition of what constitutes “commercial speech”. By leveraging this gap, the authors argue that AI-generated outputs should also fall within the ambit of commercial speech and be entitled to protection under Article 19(1)(a) of the Constitution. The paper begins with a general introduction to the concept of commercial speech and how it is protectedunder Article 19(1)(a) of the Constitution. It then explores the restrictions under Article 19(2) that may apply when classifying AI-generated outputs as commercial speech, which serve as safeguards to the freedom of speech and expression granted under Article 19(1)(a). Thereafter, the authors highlight that neither Indian nor American jurisprudence provides a definitive test for what qualifies as commercial speech. This ambiguity creates room to argue that AI-generated outputs may be classified as commercial speech, provided they satisfy a framework developed by the authors based on current trends in the AI commercial space. The paper presents an in-depth analysis of the practical applicability of this framework and pre-emptively addresses potential challenges or concerns regarding its workability.Finally, it underscores the regulatory significance of classifying AI outputs as commercial speech: doing so may shield developers from liability for user- generated outputs used for commercial purposes, as long as they meet the established framework. This classification could help resolve the ongoing dilemma of accountability within the AI ecosystem while preserving constitutional safeguards.
AN EXAMINATION OF PENAL INTEREST:FOUNDATIONAL PRINCIPLES AND CONTEMPORARY CHALLENGES
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The authors areare students at National Law University, Odisha
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In response to the exorbitant rates of penal interest being charged, the Reserve Bank of India has prohibited Regulated Entities from levying penal interest in loan agreements. However, penal interest, not being exclusive to loan agreements, has not been addressed comprehensively. The only significant effort so far in other avenues has been the National Consumer Disputes Redressal Commission’s ruling, which capped the maximum rate of penal interest on credit card defaults. However, this too was recently overturned by the Supreme Court, citing a lack of jurisdiction. This highlightshow fragmented the framework governing penal interest is, being marked by overregulation through prohibition on one hand and hesitation to introduce meaningful regulation on the other. This is despite the existence of general principles on the concept. Albeit, developments in the past decade did take place through a route under competition law but the chapter closed even before starting properly. Examining these challenges, this article aims to evaluate the impact of the guidelines on the parties involved, particularly in terms of available remedies and potential relief. It further provides a critical analysis of the recent Supreme Court verdict in Hongkong and Shanghai Banking Corp. Ltd. v. Awaz and Ors., exploring avenues to introduce regulation through purposive interpretation and competition law. Additionally, the article addresses the unrefined nature of the framework governing penal interest for other entities while drawing on jurisprudence from the United Kingdom and the United States to propose a comprehensive test for determining the reasonableness and justifiability of penal interest rates.
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The author is a third-year student at Maharashtra National Law University, Nagpur.
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The process of Initial Public Offering (“IPO”) begins with the preparation of certain essential documents. The Prospectus is one such document that plays a significant role in the IPO process. It provides crucial details about the company to thepotential investors, helping them in making informed investment decisions. Prior to the issuance of the Prospectus, thecompany issues the Red Herring Prospectus (“RHP”), which provides all crucial details of the company and the IPO, whileexcluding the details of exact price and the quantum of the securities being offered. While company puts rigorous efforts into preparing the RHP so as to safeguard the interest of the stakeholders, but at times it confronts various obstacles thatrenders the ultimate object of RHP unaccomplished. This paper critically analyses the idea of RHP and highlights the prevailing challenges related to it that are frustrating its objective, in light of relevant judicial pronouncements. Further, this paper also evaluates the prevailing challenges related to the RHP through the lens of corporate governance, thereby assesses the impact of these challenges over the principles of corporate governance. Lastly, the paper examines the existing regulatory framework and disclosure requirements related to the RHP and also put forward few suggestivemeasures to further strengthen the existing regulatory framework that can ultimately help in navigating through the highlighted challenges, can further uphold the investor’s confidence and ensure adherence to corporate governance standards.
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INTENT, DECEPTION, AND LIABILITY: A CRITICAL APPRAISAL OF SEBI'S PFUTP REGULATIONS, 2003​
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The author is an Assistant Professor of Law at NMIMS Mumbai
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Robust enforcement mechanism against market manipulations is integral to securities regulations. Fraud being one of the most stigmatized and morally corrupt forms of market manipulation is always on constant scrutiny by SEBI. However, Indian legislature has erred while delineating fraud under securities regulations. The omission of the elements of intention or deception in scrutinizing fraud within the securities market represents a departure from the approach adopted by the United States, wherein scienter is a pre-requisite for establishing securities fraud, which served as a foundational reference point in the formulation of our domestic securities law policy. Such a departure has led to intolerable vagueness in defining the contours of fraud under PFUTP Regulations. Conception of fraud devoid of any intention requirement or absence of elementary analysis into mental state raises concerns for it being not justified on either legal or philosophical fronts.This paper takes a critical stand against legislative action which eliminates the requirement of intention or deceptionin establishing fraud under PFUTP regulations. This paper argues that elimination of intention or deception requirement renders conception of fraud directionless. Conclusively attempting to establish the definition of fraud under PFUTP regulations for being specious.
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Oshin Beniwal and Devesh Pratap Mall
The authors are are students at National Law University, Jodhpur
Auditors have held a fundamental position in the corporate realm since the old-age Companies Act, 1956 which proves that their role has been crucial since the start. With the advent of improving financial literacy in India and a plethora of new-age investors on a lookout for ventures to invest in, auditors are increasingly acquiring an even more intricate position inthe corporate arena as their reports provide credibility to the financial statements of a business. Owing to their extremelyintegral role, the threshold of liability on them shall be decided with utmost care and diligence. However, we observe that this threshold is dwindling with courts attaching extremely high level of liability in some cases meanwhile beingsignificantly lenient in other instances. This paper explores these ambiguities in the legal arena and the challenges arisingout of the differing interpretations by NFRA and ICAI under the Companies Act, 2013. Secondly, it aims to present the trajectory of the precedents in an aligned manner while manoeuvring through the complex standards and the arisingimpact out of the same. Thirdly, this paper compares the global position by analysing the liability standards in UK, USA and Australia and sheds light on the challenges that India faces in balancing the stringent measures. Lastly, this paper attempts to bring forward a suggestive framework to create a robust financial ecosystem by addressing the gaps in auditing standards and bridging it with least possible disruption in the corporate landscape.
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Soumya Jain and Hemendra Vaishnav
The authors are are students at HNLU, Raipur
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This paper delves into the challenges and opportunities presented by Settlement Agreements (“SAs”) within the Insolvency and Bankruptcy Code (“IBC”) 2016 framework. The paper addresses two critical gaps in the Indian IBC regime: the absence of Operational Creditors’ (“OCs”) participation in decision-making processes and the absence of arobust mechanism for handling a breach of the SA. These gaps are proving to be roadblocks in building investor trust, equitable treatment, and overall efficiency in India’s Insolvency framework. The paper criticizes OCs absence from theCommittee of Creditors (“CoC”) for an SA, which grants decision-making power exclusively to Financial Creditors (“FCs”). To address this, the paper advocates reforms to empower the OCs by allowing them to form a separate committee for the protection of their interest. Subsequently, allowing them to proportionately vote regarding the terms and conditions of the SA. The authors argue that this inclusion is essential to foster a more equitable and inclusive SA process in IBC. Another significant aspect of the paper is its focus on the legal treatment of breaches of SAs. In the current jurisprudence, unless the parties ask for specific permission from the court or themselves agree upon the reinstatement of Corporate Insolvency Resolution Process (“CIRP”), such breaches are treated as civil disputes. Thepaper offers a novel argument for the reinstatement of the CIRP upon a breach of an SA, thereby preventing forum shopping and ensuring adherence to the IBC’s objectives of time-bound resolutions. The submission is novel for its emphasis on creditor inclusion and procedural efficiency. In contrast to the current literature, which emphasizesexclusively the role of FCs, this research emphasizes the need for a balanced strategy that fosters the trust of all stakeholders. By addressing these shortcomings and offering practical solutions, the paper contributes towards building a robust SA mechanism during insolvency proceedings in India.
CURBING THE BAD INFLUENCE: A LOOK INTO SEBI’S RECENT AMENDMENTS TO REGULATE FINFLUENCERS​
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The author is a student at National Law Institute University, Bhopal.
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There is arguably no area of human life that has remained untouched by social media, either directly or indirectly. Influencers ranging from those providing content on daily life hacks to those explaining the most complicated andtechnical concepts exist on these media platforms. The subject of finance has been no exception. Influencers providing content explaining complex financial concepts to their audience, commonly known as “finfluencers”, have also been on the rise. Concerned about these entities providing securities market related advice without requisite qualifications and registration, the Securities and Exchange Board of India has been attempting to regulate these entities through amendments to the SEBI (Intermediaries) Regulation, 2008, Securities Contracts (Stock Exchanges and Clearing Corporations) Regulations, 2018 and SEBI (Depositories and Participants) Regulations, 2018. In this article, the author has analyzed the framework that SEBI is laying down to regulate these entities while exploring regulatory overlaps andconcerns surrounding these regulations.
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Kajal Jamdare
The author is a student at National Law School of India University, Bengaluru
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India's competition policy has witnessed significant advancements in recent years, marked by the introduction of mechanisms like the Deal Value Threshold (“DVT”) and the Leniency Plus regime. Anchored by the Competition Act, 2002, which serves as the cornerstone of the nation's competition framework, these developments aim to address a diverseset of challenges in the evolving market landscape. However, these legislative innovations also bring us back to the perennial debate surrounding the goal(s) of India’s competition regime. This paper seeks to add a fresh dimension to this discourse by exploring the potential of gender wage parity as a critical and complementary goal of the competition framework, examining its relevance and alignment with the overarching principles of fair competition. The paper uses two data sets on gender wage gap and market concentration in selected industries in India to test the hypothesis of a positive correlation between the two. Analyzing this hypothesis to be correct, the author argues that there exists a positivecorrelation between gender wage gap and level of market concentration in the Indian economy. The author further highlights the need for an active and express adoption of gendered lens in the competition regime in India on a case-to-case basis instead of mere passive mentioning of gender.