Section 6 in The Bilateral Netting of Qualified Financial Contracts Act, 2020

Title: Invocation of close-out netting.

Description: (1) Close-out netting may be commenced by a notice given by one party to the other party of a qualified financial contract upon the occurrence of an event of default with respect to the other party or a termination event that may, in certain circumstances, occur automatically as specified in the netting agreement: Provided that where any one of the parties to a netting agreement is subject to administration, then no prior notice to or consent of the party in insolvency, winding up, liquidation, administration or resolution proceeding, or to the administration practitioner of such proceeding, shall be required. Explanation.--For the purposes of this sub-section,-- (i) "event of default" means failure to pay or deliver or honour the obligations of a qualified financial contract, or bankruptcy, or any other event as may be agreed upon by the parties in the agreement; and (ii) "termination event" means the occurrence of any event mentioned in the netting agreement which gives one or both parties the right to terminate relevant transactions under that agreement. (2) The parties to a qualified financial contract shall ensure that all obligations owed by one party to another party under a qualified financial contract are reduced to or replaced with single net amount which has the following effect, namely:-- (a) the termination, liquidation or acceleration of any present or future payment or delivery rights or obligations arising under or in connection with any one or more qualified financial contracts to which a netting agreement applies; (b) the calculation or estimation of a close-out value, market value, liquidation value or replacement value in respect of each right and obligation or group of rights and obligations terminated, liquidated or accelerated under clause (a) and the conversion of each such value into a single currency; and (c) the determination of the net balance of the values calculated under clause (b), whether by operation of set-off or otherwise, giving rise to the obligation of one party to pay an amount equal to the net balance to the other party. (3) Without prejudice to the provisions of any law for the time being in force requiring the realisation, appropriation or liquidation of collateral, and unless otherwise agreed by the parties, the realisation, appropriation or liquidation of collateral under a collateral arrangement shall take effect without any requirement of prior notice to, or consent from, any party, person or entity. (4) Close-out netting shall be applicable to all qualified financial market participants who are parties to a qualified financial contract notwithstanding anything to the contrary contained in any law specified in the Second Schedule or any other law pursuant to which any qualified financial market participant has been incorporated, constituted or is regulated.

Title: Net amount.

Description: (1) Where parties to the qualified financial contract enter into a netting agreement, the net amount payable under the close-out netting shall be determined in accordance with the terms of the netting agreement entered into by the parties. (2) In the absence of the netting agreement, where the parties to a qualified financial contract fail to agree on the sum with regard to the net amount payable under the close-out netting, such sum shall be determined through arbitration.

Title: Limitations on powers of administration practitioner.

Description: The administration practitioner shall not render or seek to render ineffective,-- (a) any transfer, substitution or exchange of cash, collateral or any other interests under or in connection with a netting agreement between the insolvent party and the non-insolvent party to a qualified financial contract; or (b) any payment or delivery obligation incurred by the insolvent party and owing to the non-insolvent party under or in connection with a netting agreement on the grounds of it constituting a preference including a fraudulent preference or a transfer for undervalue, including during a suspect period by the insolvent party to the non-insolvent party. Explanation.--For the purposes of this clause, "suspect period" means the relevant period referred to in sub-section (4) of section 43 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) in respect of "preferential transaction" and in sub-section (1) of section 46 of the said Code in respect of "undervalued transaction".

Title: Power to amend Schedules.

Description: (1) If the Central Government is satisfied that it is necessary or expedient so to do, it may, by notification, add to or otherwise amend the First Schedule or the Second Schedule and thereupon, the First Schedule or the Second Schedule, as the case may be, shall be deemed to have been amended accordingly. (2) Every notification issued under sub-section (1) shall be laid, as soon as may be after it is issued, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or both Houses agree that the notification should not be issued, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification.

Title: Provisions of this Act to override other laws.

Description: The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.