Legalaxy – Monthly Newsletter Series – Vol XXXVI – May, 2026

In the May edition of our monthly newsletter “Legalaxy”, our team analyses some of the key developments in securities market, banking and finance, labour and startup funds.

Below are the key highlights of the newsletter:

SEBI UPDATES

  • SEBI operationalises mechanism for lock-in of pledged shares under ICDR Regulations
  • SEBI grants one-time relaxation from penal provisions for non-compliance with minimum public shareholding requirements
  • SEBI relaxes social stock exchange norms for not-for-profit organisations
  • SEBI amends the ‘fit and proper person’ criteria for intermediaries
  • SEBI amends the AIF Regulations 2012

RBI & IFSC UPDATES

  • RBI exempts NBFCs without public funds or customer interface from registration
  • RBI issues standardised approach directions for credit risk capital charge
  • IFSCA mandates certification courses for KMPs and employees of capital market intermediaries and fund management entities in IFSC
  • IFSCA amends KMP circular for FMEs in IFSC
  • IFSCA revises reporting norms for CMIs in IFSC
  • IFSCA mandates segregation of fiduciaries roles from fund administration roles in IFSC

LABOUR UPDATES

  • Karnataka exempts certain classes of enrolled persons from filing profession tax returns
  • No profession tax in Odisha from April 2026

 OTHER UPDATES

  •  Central Government establishes Startup India Fund of Funds 2.0 with INR 10,000 crores corpus

We hope you like our publication. We look forward to your suggestions.

Please feel free to contact us at [email protected]

Corporate Laws (Amendment) Bill, 2026: Transforming India’s M&A and Capital Structuring Framework

On March 23, 2026, Finance and Corporate Affairs Minister Nirmala Sitharaman introduced the Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026) (“Bill”) in the Lok Sabha. The Bill was subsequently referred to a Joint Parliamentary Committee for detailed examination.

The Bill proposes amendments to the Limited Liability Partnership Act, 2008 and the Companies Act, 2013 across 107 clauses, with a stated objective of facilitating greater ease of doing business, decriminalising procedural defaults, and modernising the corporate governance framework.

Read the article “Corporate Laws (Amendment) Bill, 2026: Transforming India’s M&A and Capital Structuring Framework” authored by Mr. Saheb Singh Chadha, Associate Partner, Mr. Akshay Chugh and Ms. Ria Agrawal, Associates, published on Lexology : https://lnkd.in/guaMvFUk

For any clarification, please write to [email protected]

Customs and GST Alert – May 2026

We are pleased to share with you our latest Customs and GST Alert, covering recent judgments and regulatory updates.

We trust that you will find the same useful.

Looking forward to receiving your valuable feedback.

For any clarification, please write to:

Mr. Shammi Kapoor
Senior Partner
[email protected]

Mr. Arnab Roy
Partner
[email protected]

ITAT: STCG on Index-Based Derivatives Not Taxable in India under India–Mauritius DTAA

The ITAT, in EM Delta One, has held that short-term capital gains earned by a Mauritius-based FPI from trading in index-based derivatives are not taxable in India under Article 13(4) of the India–Mauritius DTAA.

Rejecting the tax department’s attempt to tax such gains as share-related income under Article 13(3A), the Tribunal clarified that derivatives and shares are distinct asset classes under the Securities Contracts (Regulation) Act, 1956 and the Income-tax Act, 1961. The mere fact that derivatives derive value from underlying shares or indices does not alter their legal character.

Relying on its earlier ruling in Estee India Fund, the ITAT reiterated that gains from derivative transactions are taxable only in the country of residence of the investor and cannot be recharacterised as gains from shares for treaty purposes.

The ruling offers important clarity for foreign investors resident in jurisdictions with similar DTAA provisions, including Singapore, UAE, Saudi Arabia, and others, while noting that treaties such as those with the UK, USA, and Canada follow a different approach to capital gains taxation.

For any clarification, please write to [email protected]

Delhi High Court Upholds Registration of TRANSFORMOTION, Rejects Volkswagen’s Opposition to 4MOTION

In Volkswagen AG v. The Registrar of Trade Marks & Anr. (2026:DHC:2029), the Delhi High Court upheld registration of Maruti Suzuki’s “TRANSFORMOTION”, rejecting Volkswagen’s opposition based on alleged similarity with its “4MOTION” mark.

Volkswagen argued deceptive similarity, but the Court held that the marks are visually, phonetically, and conceptually distinct, noting the clear structural difference between “4MOTION” and “TRANSFORMOTION”. The Court further observed that “MOTION” is commonly used in the automobile industry and cannot be monopolised. It also accepted that “TRANSFORMOTION” is a coined expression derived from “transformation”, giving it a distinct identity. Emphasising that automobiles are high-value goods purchased with care, the Court found a low likelihood of consumer confusion and recognised the independent goodwill of both parties.

The ruling highlights that trademark protection does not extend to common or descriptive industry elements, and that similarity must be assessed holistically, particularly in markets involving informed consumers where minor overlaps are unlikely to mislead.

For any clarification, please write to [email protected]

Discharged Accused Stands on a Higher Footing Than Acquitted Accused: Supreme Court

In Ex. Sqn. Ldr. R. Sood v. Union of India & Ors., 2026 INSC 366, the Supreme Court of India has clarified that an accused who is discharged stands on a higher footing than one who is acquitted after a full-fledged criminal trial, reaffirming the legal consequences and protections flowing from an order of discharge.

The case arose from criminal proceedings initiated against a former Indian Air Force officer in connection with an incident dating back to 1987. Although criminal proceedings were instituted, the Sessions Court discharged the accused at the threshold, finding that no prima facie case was made out and that mandatory legal requirements were not satisfied. Despite such discharge, departmental proceedings were subsequently initiated, culminating in his dismissal from service. The legality of such action fell for consideration before the Supreme Court.

At the outset, the Court undertook a detailed examination of the distinction between discharge and acquittal. It reiterated that discharge is a pre-trial termination of proceedings on the ground that the material on record is insufficient to even frame charges, whereas acquittal is a post-trial determination rendered after evaluation of evidence.

Emphasising the legal effect of discharge, the Court observed:

“Discharge is a pre-trial termination of proceedings for lack of evidence. As and when ordered, discharge signifies and reinforces the position that there is no material against the accused for him to stand trial. Whereas, acquittal is a posttrial outcome declaring the accused either innocent due to lack of credible material or on account of grant of the benefit of doubt. Insufficient evidence to even frame charges for standing trial would lead to a discharge while evidence presented not proving guilt leads to acquittal”

Drawing a clear doctrinal distinction, the Court further held:

“In that sense, an accused discharged of a criminal offence stands on a better footing than an accused who is finally acquitted after a full-fledged trial.”

In arriving at this conclusion, the Court relied on its earlier decision in Yuvraj Laxmilal Kanther v. State of Maharashtra, 2025 SCC OnLine SC 520, reiterating that, by its very nature, discharge stands on a higher pedestal than acquittal.

The Court explained that while an acquittal follows a complete trial where evidence is led but ultimately fails to establish guilt on the other hand a discharge reflects a stronger judicial determination that the case itself lacked sufficient foundation to proceed. In other words, a discharged person ought never to have been subjected to the rigours of a criminal trial in the first place.

Rejecting the contention that discharge places an individual in a weaker position than an acquitted person, the Court termed such understanding as “fallacious”. It held that once an accused is discharged, he cannot be treated as occupying a lesser position merely because there was no formal acquittal after trial.

Significantly, the Court held that a discharged person is entitled to all consequential benefits and cannot be subjected to adverse civil or administrative consequences on the basis of the same allegations. It emphasised that once discharge is recorded, the individual ceases to be an accused altogether, and the foundation for further punitive action on identical facts stands substantially eroded.

In this backdrop, the Supreme Court held that the continuation of disciplinary action, despite a clear discharge in criminal proceedings, was unsustainable in law.

The judgment thus crystallises the legal position that discharge is not a lesser relief than acquittal, but in fact represents a stronger exoneration at the threshold stage, reinforcing that individuals should not be subjected to the consequences of prosecution where even a prima facie case is absent.

Authored By
Rajat Jain, Advocate
Email: [email protected]
Mobile No. 9953887311