INDIA Law and Practice Contributed by: Alina Arora, Samarth Gupta and Parth Singh, Shardul Amarchand Mangaldas & Co
early remedial action are generally treated as mitigat - ing factors. 4.8 Recent Enforcement Actions and Developments No domestic enforcement action against a defence- sector participant for a sanctions contravention has been publicly reported during the past 12 months. Three developments in the past 12 months are rel - evant. • First, there have been significant foreign designa - tions, whereby: (a) the US designated 21 Indian entities in October 2024 in connection with Russian energy and military industrial trade – of which, four were delisted in 2026; (b) EU sanctions packages listed Indian compa - nies in 2025 and June 2026; and (c) the UK designated Indian refiners and port operators in October 2025, bringing Indian defence-adjacent businesses within the scope of foreign sanctions. • Second, the National Company Law Tribunal (NCLT) Ahmedabad bench held that placement on the OFAC Specially Designated Nationals and Blocked Persons list does not have automatic legal force in India. However, in April 2026, the NCLAT granted interim relief – keeping the NCLT order in abeyance and clarifying that it should not be treat - ed as a precedent until the appeal is decided. The parties settled, with the appellate court explicitly keeping open the substantive question of whether foreign sanctions can constitute a valid excuse for non-performance under Indian law. • Third, the trade prohibition against Pakistan con - tinued, and changes to UN lists were implemented through domestic orders. 5. National Security Regulation 5.1 National Security Legislation Applicable to the Defence Sector The statutes relevant to national security in India are as follows:
• the OSA – covering espionage, prohibited places, and unauthorised disclosure of secret official infor - mation; • the UAPA and the WMD Act – covering terrorism, terrorist designations and counter-proliferation; • Bharatiya Nyaya Sanhita 2023 (BNS) – covering offences against the State such as acts endanger - ing sovereignty, unity, and integrity; and • the Information Technology Act 2000 (the “IT Act”) and the Telecommunications Act 2023 – covering cyberterrorism; interception, monitoring or blocking in the interest of national security; and temporary control of telecommunication services during a public emergency or war. Administration and enforcement of the above-men - tioned statutes may not rest with a single agency. For instance, the OSA is administered by the MHA (includ - ing prosecution sanction) but investigation rests with the Central Bureau of Investigation (CBI) and state police forces. Similarly, the UAPA is administered by the MHA, but investigation rests with the National India does not have a unified security clearance sys - tem. Security vetting operates at two levels, as fol - lows. • At the company level, the MHA grants security clearance for applicant companies, their directors and key shareholders (including all foreign share - holders) in connection with defence industrial/man - ufacturing licences and, for FDI, on the basis of antecedents, foreign linkages and criminal record. • At the personnel level, the Security Manual for Licensed Defence Industries issued by the DDP (the “Security Manual”) requires character and police verification of employees, positive vetting by the DDP’s nodal office before access to top secret work, re-verification every three years for the chief company security officer (CCSO) and the cyber-information security officer (CISO) and every two years for personnel on top secret work, and quarterly reporting of cleared personnel. Investigation Agency (NIA) or state police. 5.2 Security Vetting and Clearance Requirements
94 D EFENCE CON TRACTS 2 026
CHAMBERS.COM
Powered by FlippingBook