Green Debt Securities & its Disclosure Requirements

June 19, 2017
The Security Exchange Board of India
ISSUE No. 13
June 19, 2017

Green Debt Securities & its Disclosure Requirements

The SEBISecurities and Exchange Board of India (hereinafter referred to as “SEBI”) vide its circular CIR/IMD/DF/51/2017 dated May 30, 2017 released the Disclosure Requirements for Issuance and Listing of Green Debt Securities, in exercise of powers conferred under Section 11(1) of Securities and Exchange Board of India Act, 1992 read with Regulation 31(1) of SEBI ILDS Regulations

Central Board of Direct Taxes notifies new Safe Harbour Regime

Central Board of Direct TaxesCentral Board of Direct Taxes notifies new Safe Harbour Regime. It is to be effective from 1st of April, 2017, i.e. A.Y. 2017-18.

Supreme Court Clears Ambiguity on ‘Turnover’ of Enterprises for CCI to determine penalty

Supreme Court Clears Ambiguity on ‘Turnover’Supreme Court has held that penalty on enterprises involved in anti-competitive practices should be calculated on the basis of ‘relevant turnover’

Supreme Court Provides Clarity on Exclusive Jurisdiction Clause in Arbitration Agreement

Where the parties include an exclusive jurisdiction clause in arbitration agreement, Court in whose jurisdiction the seat of the arbitration falls will to have jurisdiction to entertain petitions.


Green Debt Securities & its Disclosure Requirements

Securities and Exchange Board of India


Securities and Exchange Board of India (hereinafter referred to as “SEBI”) vide its circular CIR/IMD/DF/51/2017 dated May 30, 2017 released the Disclosure Requirements for Issuance and Listing of Green Debt Securities, in exercise of powers conferred under Section 11(1) of Securities and Exchange Board of India Act, 1992 read with Regulation 31(1) of SEBI ILDS Regulations.


Green Debt Securities, also known as Green bonds are debt instruments used to finance green projects that deliver environmental benefits. A green bond is differentiated from a regular bond on the basis of its purpose. The purpose of green bond is to finance or re-finance “green” projects, assets or business activities. Green bonds can be issued either by public or by private actors up front to raise capital for projects or for re-financing purposes, freeing up capital and leading to increased lending.

According to the Circular, a Debt Security shall be considered as “Green” or “Green Debt Securities”, if the funds raised through issuance of the debt securities are to be utilised for project(s) and/or asset(s) falling under any of the following broad categories:

  • Renewable and sustainable energy including wind, solar, bioenergy, other sources of energy which use clean technology etc.
  • Clean transportation including mass/public transportation etc.
  • Sustainable water management including clean and/or drinking water, water recycling etc
  • Climate change adaptation
  • Energy efficiency including efficient and green buildings etc.
  • Sustainable waste management including recycling, waste to energy, efficient disposal of wastage etc.
  • Sustainable land use including sustainable forestry and agriculture, afforestation etc.
  • Biodiversity conservation
  • Any other category as may be specified by Board, from time to time.

Benefits of issuing Green Bonds

A Concept Paper for Issuance of Green Bonds was issued by SEBI[1] on December 03, 2015 which lays down the following key benefits of issuing green bonds:

  • Positive public Relations – Green bonds can help in enhancing an issuer’s reputation, as this is an effective way for an issuer to demonstrate its green credentials. It displays the issuers commitment towards the development and sustainability of the environment. Further, this may also generate some positive publicity for the issuer.
  • Investor Diversification – There are specific global pool of capital, which are earmarked towards investment in Green Ventures. This source of capital focuses primarily on environmental, social and governance (ESG) related aspects of the projects in which they intend to invest. Thus, green bonds provide an issuer the access to such investors which they otherwise may not be able to tap with a regular bond.
  • Potential for pricing advantage – The green bond issuance attracts wider investor base and this may in turn benefit the issuers in terms of better pricing of their bonds vis-a-vis a regular bond. Currently there is very limited evidence available in this regard, however as demand of green bonds increases it is likely to drive increasingly favorable terms and a better price for the issuer. Further, with increasing focus of the global investor community towards green investments, it is expected that new set of investors will enter into this space leading to lowering the cost of funding for green projects.

Green Bonds in India

According to an Input Paper prepared by Organisation for Economic Co-operation and Development (OECD)[2] titled Green Bonds: Country Experiences, Barriers and Options, India entered the green bond market in the year 2015, with a total of USD 1.1 billion of green bonds issued from a handful of pioneer issuers. The first green bond issue in India was by Yes Bank Limited in 2015 for INR 1000 crores which was oversubscribed. This was closely followed by the green bond issue by CLP India for INR 600 crores for its wind portfolio, India’s first certified climate bond issue by Hero Future Energies for INR 300 crores and the first internationally certified green bond issue by Axis Bank Limited for raising USD 500 million which was listed on the London Stock Exchange. The Asian Development Bank (ADB) in 2016 has issued green bonds to support climate change mitigation and renewable energy in India. It has already raised three billion Indian Rupees (£35.7m) from issuing the bonds, which will be channeled into the ReNew Clean Energy Project, a wind and solar power project across six Indian states.

India is one of popular markets when it comes to issuance of Green Bonds. It featured in the 7th position in terms of issuances in 2016 with issuance of USD 2.7 billion, behind United States, France, China, Germany, Netherlands and Sweden.

Disclosure Requirements under the Circular

It is clarified that SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (hereinafter referred to as “SEBI ILDS Regulations”), govern public issue of debt securities and listing of debt securities issued through public issue or on private placement basis, on a recognized stock exchange. Therefore, the requirements placed under the Circular for public issue and listing of Green Debt Securities and listing of privately placed Green Debt Securities are in addition to the requirements as prescribed under SEBI ILDS Regulations.

The additional requirements include disclosures such as – Disclosures in Offer Document/ Disclosure Document and other requirements; Continuous disclosure requirements; Responsibilities of the issuer; and an issuer of Green Debt Securities or any agent appointed by the issuer, if follows any globally accepted standard(s) for the issuance of Green Debt Securities including measurement of the environmental impact, identification of the project(s) and/or asset(s), utilisation of proceeds, etc., shall disclose the same in the offer document/disclosure document and/or in continuous disclosures.

The complete details of the additional requirements are provided under the Circular which may be accessed


India’s green bond market is still small. The Council on Energy, Environment and Water (CEEW) estimates that around USD 1.62 billion of green bonds were issued in India in 2016. Compared to the total issue of USD 81 billion that was issued globally, it’s a very small fraction.

India aims to generate 40% of electricity through renewable energy sources like wind and solar by the year 2030, which would require substantial investment. Green bonds could support deployment of renewable energy projects by providing broader access to domestic and foreign capital as well as better financing terms, including lower interest rates with longer lending terms. SEBI’s statement in the Concept Paper included an explicit mention that SEBI sees the green bond market as a key tool to help raise the finance needed to meet the ambitious targets of India’s Intended Nationally Determined Contribution (INDC) as established for COP21 – essentially India’s climate change action plan. Such a viewpoint from SEBI demonstrates the potential for other countries to utilize the green bond market in order to meet INDCs.




Central Board of Direct Taxes notifies new Safe Harbour Regime

Central Board of the Direct Taxes


The safe harbor regime which was initiated by the Central Board of Direct Taxes (“CBDT”) in the year 2013 has now taken another leap to the relief of the Indian taxpayers. On 7th June, the CBDT published a notification making significant changes to the safe harbor rules by amending the Income Tax Rules, 1962. These changes have simplified and enhanced the safe harbor regime in India and are being construed in a positive light by tax payers as of now. At this juncture, we bring to you a simplified note on the working of the safe harbor mechanism along with its related concepts.

To provide certainty to taxpayers, to align safe harbor margins with industry standards and to enlarge the scope of safe harbor transactions, the CBDT has notified a new safe harbor regime.[1] Before proceeding with the salient features of this notification, we take a moment to explain in brief as to what constitutes the safe harbor regime.

Transfer Pricing:

“Transfer price is, thus, a price which represents the value of good; or services between independently operating units of an organisation. But, the expression “transfer pricing” generally refers to prices of transactions between associated enterprises which may take place under conditions differing from those taking place between independent enterprises.”[2]

Many multinational enterprises, having establishments in different countries, adopt different business methods to escape or evade taxes by selling their products/ services, at very low prices, to their entity in a foreign country, having lesser tax duties than the home countries where such products/ services are manufactured. These countries then sell these products/ services where lesser tax duties are applicable. This way the foreign entity makes a huge profit and the home country of the products shows a loss dominant balance sheet, thereby paying lesser and lesser taxes. This is the crux of transfer pricing.

The Income Tax authorities regulate transfer pricing setting a threshold limit below which the entity cannot sell its products/ services via intra group transactions.

Safe Harbour:

Safe harbour is basically a method of regulating transfer pricing by setting up a minimum revenue/ margin which if satisfied by the eligible assesse, the Assessing Officer will accept whatever price is declared by the assesse for providing products/ services to his foreign counter part.

Safe harbour is a boon to these assesssees. By safe harbor, the authorities trust the assesse declared price and accept it. However, this trust is conditional. The assesse has to pass through three filtering stages to become eligible to the benefits of safe harbor.

Firstly, the assessee has to opt for this route. The provisions for application of safe harbor are optional. Secondly, only certain types of entities are eligible. These majorly include entities providing software development services, services related to IT, internet development, contract R & D related software development or general pharmaceutical development or intragroup loans or corporate guarantees etc. These are prescribed in detail in Rule 10TB. Lastly, the transactions should be those prescribed in Rule 10TC. Another important point for qualification is that minimum limit for safe harbor in case of various sectors has to be adhered to.

The new regime initiated by the recently released notifications, has many positive features. It is to be effective from 1st of April, 2017, i.e. A.Y. 2017-18 and shall continue to remain in force for two immediately succeeding years thereafter, i.e. up to A.Y. 2019-2020.

A new category of transactions being “Receipt of Low Value-Adding Intra-Group Services” has been introduced.

The CBDT has introduced a gradation in rates for knowledge process outsourcing services, a structure of 3 different rates of 24%, 21% and 18% has been provided, based on employee cost to operating cost ratio, replacing the single rate of 25% in the previous regime.[3]

In respect of transactions involving provision of contract research and development services wholly or partly relating to software development and provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs, safe harbour margins have been reduced to 24% from 30% and 29% respectively in the previous regime.[4]

In case of risks in intra-group loans denominated in foreign currency, they will be benchmarked to the 6-month London Inter-Bank Offer Rate (LIBOR) as on 30th September of the relevant year and on loans denominated in Indian Rupees to the 1-year SBI MCLR as on 1st April of the relevant year.

We look forward to the positive effect of this new regime in the coming assessment years.

[1]Press Release, Press Information Bureau Government of India Ministry of Finance


[3]Press Release, Press Information Bureau Government of India Ministry of Finance

Supreme Court Clears Ambiguity on ‘Turnover’ of Enterprises for CCI to determine penalty


The Supreme Court, in the case of Excel Crop Care Limited Versus Competition Commission of India and Another dated May 8, 2017 held that the penalty to be imposed on enterprises involved in anti-competitive practices should be calculated on the basis of ‘relevant turnover’ of the enterprise and not the ‘total turnover’.

Facts of the case:

  • Food Corporation of India submitted a letter to the Competition Commission of India (hereinafter referred to as “CCI”) dated February 4, 2011 alleging execution of anti-competitive agreements between four companies-M/s. Excel Crop Care Limited, M/s. United Phosphorous Limited, M/s. Sandhya Organics Chemicals (P) Ltd. and M/s Agrosynth Chemicals Limited.
  • These companies were involved in the manufacturing of Aluminium Phosphide Tablets (hereinafter referred to as “APT”) and were alleged to have formed a cartel by entering into an anti-competitive agreement amongst themselves.
  • On receipt of such compliant by CCI, an investigation was conducted by the Director General of CCI who found that since 2002 to 2009, these companies had been submitting their bids by quoting identical rates in the tenders invited by the FCI for the purchase of APT. The report of the Director General of CCI found these companies to be in violation of section 3(3) of the Competition Act, 2002 (hereinafter referred to as the “Act”) which prohibits anti-competitive agreement.
  • On the basis of the report of the Director General, CCI, and objections filed by the four companies, the CCI concluded vide order dated April 23, 2012 that M/s. Excel Crop Care Limited, M/s. United Phosphorous Limited, M/s. Sandhya Organics Chemicals (P) Ltd (hereinafter referred to as “appellants”) had violated section 3 of the Act and therefore, imposed penalty on them at the rate of 9% on the average total turnover of these establishments for the last three years, under section 27 (b) of the Act.
  • The appellants filed appeals against the order of CCI at COMPAT (Competition Appellate Tribunal). COMPAT found the appellants to be violative of section 3 of the Act. However, the COMPAT held that while assessing imposition of penalty under section 27(b) on multiproduct companies, only ‘relevant turnover’ should be considered and not ‘total turnover’. Relevant turnover refers to the turnover in relation to the product in question in respect of which provisions of the Act were contravened whereas total turnover refers to the entire turnover of the offending person/enterprise covering all the products.
  • Thereafter, the appellants approached the Supreme Court requesting it to declare the findings of COMPAT as untenable and to set aside the penalty imposed on them. The CCI also filed appeal to the Supreme Court to set aside that part of the order of COMPAT wherein it held that penalty upon suppliers should be restricted to relevant turnover and not total turnover.


  • Section 27(b) of the Act empowers the CCI to impose penalty on persons or enterprises in contravention of section 3 or 4 of the Act to the extent as it deems fit but not exceeding 10% of the average of the turnover for the last three preceding financial years. The issue before the court was whether ‘turnover’ as occurring under Section 27 of the Act meant ‘relevant turnover’ or ‘total turnover’.
  • Another issue before the Court was that whether CCI had jurisdiction to conduct inquiry in respect of a tender that was submitted by the parties before commencement of Section 3 of the Act Section 3 of the Act had come into operation on May 20, 2009.


  • Issue of determination of turnover

The concept of ‘turnover’ for multiproduct enterprises:

When a multiproduct enterprise has entered into an anti-competitive agreement such anti-competitive agreement may be in respect of a single product. Therefore, imposing penalty on the total turnover of such enterprise would bring out inequitable results. Such inequitable or absurd results are to be eschewed. When an agreement which is in violation of Section 3 involves one product, there seems to be no justification for including other products of an enterprise for the purpose of imposing penalty. Hence, the turnover should be of the infringing product.

The doctrine of proportionality:

The Supreme Court applied the doctrine of proportionality to strike a balance between the object of the Act to discourage anti-competitive practices and the right of the infringer in not suffering the punishment which may be disproportionate to the seriousness of the Act. The Act seeks to penalize offenders of the Act. However, the Court held that the penalty should not be disproportionate and offenders should be suitably punished.

The doctrine of purposive interpretation:

The Supreme Court applied the doctrine of ‘purposive interpretation’ to state that there was a legislative link between the damage caused and the profits which accrue from the cartel activity. Further, the Court stated that there had to be a relationship between the nature of offence and the benefit derived from such offence. Therefore, keeping in mind such co-relation, the affected turnover, i.e., ‘relevant turnover’ becomes the yardstick for imposing a penalty.

Calculation of Penalty:

The Supreme Court relied on various principles to determine the necessity of using ‘relevant turnover’ to assess the penalty of offending enterprises. In furtherance of this, the Court also laid down a two-step test to calculate the penalty under section 27 of the Act.

  • Step 1: Determination of relevant turnover:

Relevant turnover has been held to be the entity’s turnover pertaining to products and services that have been affected by such contravention. The Court held that while assessing the penalty to be imposed on an offender, the assessing authority should have regard to the entity’s audited financial statements, and in the absence of such audited financial statements, relevant records reflecting the entity’s relevant turnover or estimate relevant turnover may be considered.

  • Step2: Determination of appropriate percentage of penalty based on aggravating and mitigating circumstances

Factors that are to be taken while imposing appropriate percentage of penalty include nature, gravity, extent of the contravention, role played by the infringer, the duration and intensity of participation, loss or damage suffered as a result of such contravention, market circumstances in which the contravention took place, nature of the product etc. However, such penalty should not be more than the overall cap of 10% of the entity’s relevant turnover.

In view of the above principles, the Supreme Court upheld the penalty imposed on the appellants as calculated by COMPAT on the basis of relevant turnover of the enterprises.

  • Issue of CCI to conduct inquiry for tender prior to commencement of the Section 3

The Supreme Court held that the inquiry conducted by CCI into the tender of March 2009 was covered by Section 3 of the Act as the tender process, though initiated prior to the date when Section 3 became operation, continued much beyond May 20, 2009, the date on which the provisions of Section 3 of the Act were enforced.


The decision from the apex court of the country to determine penalty on the basis of relevant turnover of enterprises has set a landmark precedent for the CCI and COMPAT to calculate penalty of offenders henceforth. Not only the ambiguity of the term ‘turnover’ has been cleared to mean relevant turnover, the Supreme Court has also provided an illustrative list of factors to be considered while determining percentage of penalty. Companies have been spared from being imposed exorbitantly high amounts of penalty which would have been disproportionate to their offence.

However, it is to be noted that companies which have gained high amounts of profits by entering into cartels may still stand the chance of being imposed higher penalties because proviso of section 27(b) of the Act empowers CCI to impose a penalty of up to three times the profit of the company if it is higher than 10% of the turnover of the company.

Supreme Court Provides Clarity on Exclusive Jurisdiction Clause in Arbitration Agreement

Arbitration Agreement

On April 19, 2017, a two-judge bench of the Supreme Court bench passed their judgment in
Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and Ors.[1] holding that in cases where the parties include an exclusive jurisdiction clause in an arbitration agreement designating a particular place as the seat of the arbitration, the Court in whose jurisdiction the seat of the arbitration falls would have sole jurisdiction to entertain petitions in respective of non-arbitrable issues arising out of the agreement, to the exclusion of any other Courts.

Use of Exclusive Jurisdiction Clauses in Agreements

Exclusive Jurisdiction Clauses are widely used by parties to an agreement as often it may not be convenient for the parties to sue at the place at which the cause of action for the dispute may have arisen. In such cases the exclusive jurisdiction clause offers a party the opportunity to establish a convenient pre-determined place where disputes arising in regard to the contract would be referred to, if and when they arise.

Factual Background

  • Datawind Innovations Private Limited (hereinafter referred to as Respondent No.1) having its registered office at Amritsar in Punjab was engaged in the manufacture, marketing and distribution of mobile phones, tablets and other accessories.
  • Indus Mobile Distribution Private Limited (hereinafter referred to as the Appellant) wished to conduct business with Respondent No.1, acting as their Retail Chain Partner.
  • In furtherance of the above, an agreement dated October 25, 2014 was entered into between the Parties with Respondent No.1 supplying goods to the Appellant at Chennai from New Delhi.
  • The Dispute Resolution Mechanism was provided under Clauses 18 and 19 of the agreement dated October 25, 2014. Clause 18 provided that in case of disputes between the parties, if the dispute could not be resolved by discussion between senior officials of the parties, then the matter would finally be settled through arbitration, presided by a sole arbitrator, conducted under the provisions of the Arbitration and Conciliation Act, 1996 with the seat of the Arbitration being Mumbai.
  • Further, Clause 19 provided that all disputes arising out of, or in connection with the Agreement would be subject to the exclusive jurisdiction of the Courts of Mumbai alone.
  • Disputes arose between the parties and Respondent No.1 sent a notice dated September 25, 2015 to the Appellant. Further, the arbitration clause provided under Clause 18 of the Agreement was invoked. The Appellant denied the contents of the notice and asked Respondent No.1 to withdraw the same.
  • In the meantime, Respondent No. 1 filed a petition before the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) seeking various interim reliefs.
  • In October 2015 Respondent No.1 filed a second petition before the Delhi High Court under Section 11 of the Act to appoint the sole Arbitrator.

The Impugned Decision of the Delhi High Court

  • The Delhi High Court while disposing off the two petitions held that as no part of the cause of action arose in Mumbai, the Courts of Mumbai would have no jurisdiction over the matter with only the Courts of Amritsar, Chennai and Delhi having jurisdiction.
  • Since, the Delhi High Court had been approached first, it would continue to have jurisdiction in the matter. Further, the Court restrained the Appellant from transferring, alienating or creating any third-party interests in the Appellant’s property in Chennai and also appointed the sole Arbitrator.

Issue before the Supreme Court

In case no cause of action arises at the place where the seat of arbitration is situated, whether the Court within whose jurisdiction the seat of arbitration is located would have exclusive jurisdiction in all proceedings.

Decision of the Supreme Court

  • The Supreme Court referring to its earlier judgments in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc[2] ,
    Enercon (India) Ltd. v. Enercon Gmbh>[3] , and Reliance Industries Ltd. v. Union of India[4] , the Court observed that in its previous judgments, it has time and again been reiterated that once the seat of arbitration has been fixed, it would be in the nature of an exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration.
  • Further, in Union of India v. Reliance Industries Limited and Others[5] , the Court referred had held that the supervisory jurisdiction of courts over the arbitration goes along with seat.
  • Under the law of Arbitration, a reference to seat is a concept that has been developed to facilitate parties to choose a neutral venue for Arbitration. It is not necessary for any cause of action to have arisen at the neutral venue as the provisions of Section 16 to 21 of the Code of Civil Procedure, 1908 would not be attracted.
  • Therefore, while setting aside the impugned order of the Delhi High Court with regard to its jurisdictional power, the Supreme Court held that since the parties had established the seat of the arbitration at Mumbai, exclusive jurisdiction would vest in Mumbai, the Courts of Mumbai would have exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.


This decision of the Supreme Court is a welcome clarity on the issue that often arises with the parties to a contract approaching Courts whose jurisdiction has been ousted by the terms of the exclusive jurisdiction clause in the agreement. Parties should ensure that the seat of arbitration is selected by them after due consideration as this judgment prevents forum shopping, once the seat of arbitration is agreed to by the parties.

[1]Civil Appeal Nos. 5370-5371 Of 2017

[2](2012) 9 SCC 552

[3](2014) 5 SCC 1

[4](2014) 7 SCC 603

[5](2015) 10 SCC 213

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