The Ministry of Finance vide its notification dated 1st October 2020 has appointed 1st day of October, 2020 as the date on which all the provisions of the Bilateral Netting of Qualified Financial Contracts Act, 2020 shall come into force.
The Act shall apply to a qualified financial contract entered into on a bilateral basis between qualified financial market participants, either under a netting agreement or otherwise, where at least one of such participants shall be an entity regulated by an authority.
Netting of the qualified financial contract shall be enforceable—
- where such a contract is entered into with a netting agreement, in accordance with the terms of the netting agreement.
Provided that the inclusion of any non-qualified financial contract in a netting agreement shall not invalidate the enforceability of netting of qualified financial contract under such agreement
- where such contract is entered into without a netting agreement, in accordance with the provisions of section 6.
A qualified financial contract shall not be void and shall be deemed never to have been void or unenforceable by reason of any law for the time being in force.
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.
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