Legalaxy – Monthly Newsletter Series – Vol XXXV – April, 2026

In the April edition of our monthly newsletter “Legalaxy”, our team analyses some of the key developments in securities market, banking and finance, information technology, foreign investments and power.

Below are the key highlights of the newsletter:

SEBI UPDATES

  • Key highlights of the 213th SEBI board meeting
  • SEBI strengthens IPO disclosure norms mandating abridged prospectus and qr code requirements
  • SEBI specifies regulatory reporting norms for AIFs

RBI & IFSC UPDATES

  • RBI amends computation of owned funds for core investment companies
  • IFSCA prescribes the fee structure for entities undertaking or intending to undertake permissible activities in IFSC
  • IFSCA extends exemptions under the Cyber Security Guidelines for IFSC REs
  • RBI revises reporting requirements for ECB
  • RBI revises acquisition financing framework

OTHER UPDATES

  • MEITY’s amendment to the compulsory registration order: compliance relief for highly specialized enterprise electronics
  • Press Note 3 of 2020 revisited
  • Electricity (Amendment) Rules, 2026: key amendments to captive generating power plant requirements

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

Please feel free to contact us at [email protected]

Section 35(3) BNSS Notice Is the Rule, Arrest an Exception for Offences up to 7 Years: Supreme Court

In Satender Kumar Antil v. Central Bureau of Investigation, 2026 INSC 115, the Supreme Court of India has reiterated and strengthened the safeguards governing arrest under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), holding that issuance of notice under Section 35(3) of the BNSS is the rule in cases involving offences punishable with imprisonment of up to seven years.

The Court examined whether police officers are mandatorily required to issue a notice of appearance under Section 35(3) of the BNSS before proceeding to arrest an accused in such cases.

Answering the issue, the Court held in clear terms that for offences punishable with imprisonment of up to seven years, issuance of notice under Section 35(3) is not discretionary but constitutes the default rule, while arrest is an exception. The provision mandates that the police officer issue a notice directing the accused to appear and cooperate with the investigation where arrest is not immediately necessary. The Court emphasised that this requirement is a vital safeguard against arbitrary deprivation of personal liberty.

Interpreting the scheme of Section 35, the Court noted that the use of the expression “may” in Section 35(1) of the BNSS makes it clear that the power to arrest is discretionary and not mandatory. However, such discretion is not unfettered and must be exercised strictly in accordance with the statutory conditions. In particular, the mandate of Section 35(1)(b)(i) of the BNSS, read with any one of the conditions under Section 35(1)(b)(ii) of the BNSS, must be satisfied  namely, the existence of a “reason to believe” that the person has committed the offence, coupled with the necessity of arrest for purposes such as proper investigation or preventing tampering with evidence. Once such satisfaction is reached, the police officer is duty bound to record reasons for arrest in writing.

The Court underscored that these conditions are not mere formalities, observing that:

“To attract the power of arrest… the conditions mentioned thereunder ought to be complied with scrupulously.”

It further clarified that even where such conditions are met, arrest does not follow as a matter of course. The police officer must independently assess whether custody is absolutely necessary for the investigation. The power of arrest, the Court cautioned, must be exercised only as a matter of strict objective necessity, and not as a tool of convenience.

Significantly, the Court held that:

“A notice under Section 35(3)… is the rule,”

and that even where circumstances for arrest may exist,

“the arrest shall not be undertaken, unless it is absolutely warranted.”

The Court also emphasised that arrest cannot be resorted to merely for the purpose of questioning.

Further, the Court clarified that even after issuance of notice under Section 35(3) of the BNSS, the power to arrest under Section 35(6) of the BNSS is not automatic. Even in cases of non-compliance with the notice or failure to identify oneself, arrest is not to be treated as a matter of course. Such power must be exercised sparingly, with due application of mind. Importantly, the Court observed that any arrest under Section 35(6) of the BNSS must be founded on fresh material or circumstances which were not available at the time of issuance of notice under Section 35(3) of the BNSS.

The judgment thus harmonises the statutory framework with constitutional principles of personal liberty, making it clear that procedural safeguards under the BNSS are substantive in nature and require strict compliance. It reinforces that notice, not arrest, is the starting point of investigation in offences punishable up to seven years, and any departure from this principle must be supported by clear, recorded, and legally sustainable reasons. The power to arrest remains an exception, and the police officer is expected to be circumspect and slow in exercising it.

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

Customs and GST Alert – March 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]

SEBI Approves Amendments to AIF Regulations – Retention of Liquidation Proceeds Beyond Fund Tenure

The Securities and Exchange Board of India, in its board meeting dated March 23, 2026, has approved amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 to permit AIFs to retain liquidation proceeds beyond the expiry of their tenure under specified conditions.

Under the revised framework, AIFs may retain funds where there are pending or anticipated litigation or tax liabilities, subject to investor consent or demonstrable regulatory or operational requirements. The amendments also introduce the concept of ‘inoperative funds’, allowing AIFs to surrender registration while retaining funds, with proportionately reduced compliance obligations compared to active funds.

The changes aim to address practical challenges faced by AIFs in achieving complete liquidation within prescribed timelines, while balancing regulatory oversight with ease of doing business.

Click here to read the press release: https://lnkd.in/gXHWkAbV

For any clarification, please write to [email protected]

RBI Notifies Foreign Exchange Management (Guarantee) Regulations, 2026 – Revised Framework for Cross-Border Guarantees

The Reserve Bank of India has notified the Foreign Exchange Management (Guarantee) Regulations, 2026, superseding the earlier 2000 framework and introducing a comprehensive regime governing guarantees involving persons resident in India and outside India.

The Regulations define key concepts such as guarantee, principal debtor, surety, and creditor, and impose a general restriction on cross-border guarantee arrangements unless specifically permitted under FEMA or by RBI approval. They also outline permitted scenarios for Indian residents to act as surety or principal debtor, along with conditions for obtaining guarantees as a creditor.

Further, the framework prescribes exemptions for certain transactions, including guarantees under overseas investment regulations and specific banking arrangements, while introducing structured reporting requirements through quarterly filings in Form GRN. Delays in reporting attract a prescribed late submission fee.

Click here to view the regulations: https://lnkd.in/da2yBKfq

For any clarification, please write to [email protected]

Press Note 2 (2026 Series) Clarifies LBC Investment Rules – Focus on Beneficial Ownership

The Government of India has revised the FDI framework for investments from countries sharing a land border with India (LBCs) through Press Note 2 (2026 Series), providing clarity on the determination of “beneficial ownership” and when prior government approval is required.

The amendments align the definition of beneficial ownership with the Prevention of Money-laundering framework, introducing a threshold and control-based test. Investments not meeting these conditions will not require prior approval but will remain subject to reporting requirements.

The Union Cabinet has also approved a 60-day timeline for expedited approvals in select manufacturing sectors, indicating a shift towards balancing regulatory oversight with ease of doing business.

For any clarification, please write to [email protected]