India’s regulatory environment pragmatic, no excuse for non-compliance: Percival Billimoria, Sr Advocate

Percival Billimoria - Sr Advocate on Paytm Payments Bank and Byju's

Speaking to Moneycontrol in light of two of India’s prized start-ups — Paytm and Byju’s — running into trouble with the regulators, Senior Advocate and chartered accountant Percival Billimoria said that over the last 10 years, India’s regulatory environment has become pragmatic, nevertheless there’s really no excuse for non-compliance.

The senior advocate has argued multiple cases in Indian courts concerning Indian and international companies and investors. Some of the companies he has represented include German automotive manufacturer Rheinmetall, and American conglomerate Johnson Controls.

“India was an overregulated economy; that has now changed. Maybe a little more needs to change. But I think we are at the juncture where we should not really resent regulation. Regardless of what the regulatory environment is, I don’t think there is an excuse for non-compliance,” he said.

According to Billimoria, India’s regulatory environment has evolved over the last decade and has become more streamlined with the introduction of e-governance. ``Just last month I went to register a document. What would normally take three to four hours, took just 15 minutes. But I think a lot more can be done,” he said.

While the Reserve Bank of India (RBI) clamped down on Paytm Payments Bank in late January, the Enforcement Directorate (ED) issued a notice to ed-tech giant Byju’s over alleged violations of the Foreign Exchange Management Act (FEMA), 1999.

In January 2024, the RBI imposed business restrictions on Paytm Payments Bank after it found major irregularities in its KYC, which exposed the customers, depositors, and wallet holders to serious risks. The RBI barred Paytm Payments Bank from accepting fresh deposits and doing credit transactions after March 15.
“From what I have read, it seems that Paytm Payments Bank was not following certain very basic norms,” said Billimoria. He noted that while the RBI has clamped down on the payments bank and the wallet arm of Paytm, they have not really passed any adverse directions against Paytm’s mobile application, which enables users to access the United Payments Interface (UPI). “RBI only said that the payments bank should stop collecting further deposits. The app doesn't really change. The app remains. But Paytm’s ability to make money from lending gets affected,” he explained

Billimoria noted there are a lot of facets to regulations in the financial sector, such as data privacy, considering the sensitivity involved. “I think our regulators are very justified in keeping a close eye on what's going on,” he emphasised.

The Senior Advocate, however, highlighted that while the regulatory environment has largely improved over the last decade, the government must address concerns over the antiquated investigation and trial process to back up the regulations.

“Our investigation and trial process is a little antiquated, that needs to measure up to the regulations,” he added.

Indian entrepreneurs need to be more ethical

“Previously, foreign investors used to complain that India is very bureaucratic. However, a lot of foreign investors now say that Indian entrepreneurs must be more ethical,” said Billimoria.

The Senior Advocate cited the example of royalty disputes between Indian and foreign companies that often reach the court. Billimoria noted that when an Indian enterprise uses the technology of a foreign company for their products, they assume that they can continue using it even after the royalty agreement has come to an end, because they have trained their staff to operate the technology. But from the perspective of a foreign investor, the Indian enterprise must continue to pay royalty till there is a transfer of technology.

However, he noted that such instances are more of a cultural issue, a difference of perspective between the Indian entrepreneur and the foreign investor.

According to Billimoria, handling such ethical conflicts is important at this point of time. “If the government is coming down heavily on people who violate the law, I don’t think it is a bad thing,” he said.