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Archive for May, 2016


India is willing to join the NSG now, today if possible. It has all the elements in place for membership. As the 48-member NSG works by consensus, not majority, India is reaching out to every possible country, much like the push at the UNGA for reforms.

Why NSG?

  • Membership of the NSG creates a climate of predictability with regard to rules for nuclear commerce with India, giving both Indian and foreign companies the confidence to commit the resources that will be needed for the expansion of nuclear power in India. India being a price-sensitive energy market, such an outcome also helps keep the cost of nuclear power within a reasonable band by lowering the risk premium.
  • Access to technology for a range of uses from medicine to building nuclear power plants for India from the NSG which is essentially a traders’ cartel. India has its own indigenously developed technology but to get its hands on state of the art technology that countries within the NSG possess, it has to become part of the group.
  • With access to latest technology, India can commercialize the production of nuclear power equipment. This, in turn will boost innovation and high tech manufacturing in India and can be leveraged for economic and strategic benefits. For example, India has signed a civil nuclear energy co-operation pact with Sri Lanka. Currently,  this entails training people in peaceful uses of nuclear energy, including use of radioisotopes, nuclear safety, radiation safety, nuclear security, radioactive waste management and nuclear and radiological disaster mitigation.
  • Having the ability to offer its own nuclear power plants to the world means spawning of an entire nuclear industry and related technology development. This could give the Make in India programme a big boost.
  • With India committed to reducing dependence on fossil fuels and ensuring that 40% of its energy is sourced from renewable and clean sources, there is a pressing need to scale up nuclear power production. This can only happen if India gains access to the NSG. Even if India today can buy power plants from the global market thanks to the one time NSG waiver in 2008, there are still many types of technologies India can be denied as it is outside the NSG.

 

On the surface, India appears to have fulfilled the commitments it agreed to in exchange for the deal that ended the nuclear trade prohibition.

  • It officially implemented a separation plan, which placed 14 civilian nuclear power reactors under IAEA safeguards, leaving 8 military reactors outside of safeguards,
  • It has sustained its unilateral halt on testing nuclear explosives and,
  • In June 2014, India ratified a protocol that expanded the IAEA’s access to its nuclear sites.

Though U.S. has argued that despite its status outside the NPT, India is sufficiently like-minded regarding non-proliferation to merit membership. Some sceptics, such as Switzerland, might be amenable to this argument if India demonstrated support for non-proliferation through concrete actions. Others, such as Austria, Ireland or New Zealand,may remain opposed on principle unless India joins the NPT, which is extremely unlikely as this would require Delhi to disarm. China has also opposed India’s bid to get NSG membership on the ground that it was yet to sign the NPT.

But India defends its stance by saying that NSG members have to respect safeguards and export controls, nuclear supplies have to be in accordance with the NSG Guidelines. The NSG is an ad hoc export control regime and France, which was not an NPT member for some time, was a member of the NSG since it respected NSG’s objectives. Thus there is no need for NPT as per-requisite for India,s membership in NSG.

 As an important global partner for the United States and a leader in Asia, India’s half-in-half-out nuclear status should not remain permanently unresolved. With the US once again openly endorsing the Indian membership to the NSG in recent, India has begun preparations for the NSG plenary, scheduled to be held in Korea in June.

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India will get the right to tax capital gains on investments channelled through Mauritius under an amended tax treaty it signed with the Mauritius. The amendment to the 1983 India-Mauritius treaty, which will come into force on 1 April 2017, will also apply to the India-Singapore treaty, shutting two lucrative investment routes preferred by foreign investors. The India-Singapore treaty links the capital gains tax regime to that provided in the India-Mauritius treaty. Around 50% of foreign direct investment into India comes through Mauritius and Singapore, according to Indian government data. Some 34% of it is channelled through Mauritius and 16% through Singapore.

In addition, the amended India-Mauritius double taxation avoidance treaty has also provided for a limitation of benefit clause that will ensure that only genuine Mauritius-based companies get the benefit of the bilateral tax treaty. Only those Mauritius-based companies that have a total expenditure of more than Rs.27 lakh in the preceding 12 months will be able to benefit from the tax treaty. Treaty has also provided a two-year transitionary phase wherein the capital gains will be taxed at 50% of the existing tax rate; the full domestic tax rate will be applicable from 2019-20, provided the limitation of benefit clauses have been adhered to.

Under the earlier bilateral agreement between India and Mauritius, capital gains from sale of securities have been taxable only in Mauritius, where the levy is close to zero.

One big positive is that there will be no retroactive impact on any investment made till 1 April 2017.The changes in the treaty should be seen in the light of India’s commitment to base erosion and profit shifting and the impending general anti-avoidance rules that will come into effect on 1 April 2017.

How we got Mauritius to agree?

  • India’s determination to implement GAAR from 1 April,2017,
  • Global pressure built up after panama papers and so many other tax heaven in which the global community is against such arrangements, wherein companies get away with double non taxation, and
  • The urgency the government has put on this matter. Negotiation started back from 1996 and pursued until now.

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Under sections 499 and 500 of the Indian Penal Code, defamation is a criminal offence. Defamatory acts can include “words either spoken or intended to be read”, signs or visible representations, which are published or put up in the public domain. The offence is punishable with up to two years imprisonment, a fine or both.

It is true that ‘defamation’ is one of the reasonable restrictions to free speech envisaged in the Constitution, but this is not enough to justify retaining its criminal component. Article 19(2) of the Constitution permits only “reasonable” restrictions upon the freedom of speech. For a law to be reasonable, it must demonstrate a degree of proportionality between the restriction, and the goal that is sought to be achieved. Criminal defamation fails the proportionality test, in general terms, as well as in the specific legal regime set up by Section 499 of the Indian Penal Code.

In general, criminal defamation is disproportionate because it uses the criminal law to prosecute a wrong that is purely private in nature. A private wrong is one that is purely between the offender and her victim, and has no implications for the society at large. For example, if I fail to control my dog, and it bites you, then you may sue me for compensation in a civil court. Society, the state, and the criminal law have nothing to do with it. However, if I murder a person, then it is not just about one individual taking the life of another, but has ramifications for public peace, order and security. This is why murder is a criminal offence, involves a term in jail, and is prosecuted by the state.

When defamation was first criminalised in medieval England, it had a public purpose. People vindicated insults to their honour by fighting it out in a duel. It was to suppress this kind of self-help regime, and assure people that they did not need to ventilate their grievances with swords and pistols, that defamation was criminalised. But now things have changed.

Many countries, including neighbouring Sri Lanka, have decriminalised defamation, which should be a civil offence alone. The court has unfortunately accepted the self-serving argument by the Centre that criminal defamation does not have a chilling, inhibiting effect on the freedom of expression. In the Indian context, criminal defamation is not generally a dispute between two individuals. It is invariably a shield for public servants, political leaders, corporations and institutions against critical scrutiny as well as questions from the media and citizens.

Subramanian Swamy vs Union of India is a depressing moment for free speech lawyers and activists. It is also (yet another) depressing moment for civil rights lawyers and activists, since it marks a continuing trend – that arguably began with Koushal vs Naz regarding the criminalisation of homosexuality – where two-judge benches decide important civil rights cases. The challenge to the validity of Section 499 and 500 of the IPC was undoubtedly the biggest free speech issue to have arisen in recent times. The two-judge Bench could have referred the matter to a Constitution Bench(a bench of at least five judges).

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Supreme court while striking down the Telecom Regulatory Authority of India’s decision asking service providers to compensate subscribers for dropped calls, called it “arbitrary, ultra vires, unreasonable and not transparent”. But Trai cannot be faulted for its intent: as the regulator, it should indeed worry about the quality of telecom services. But in its eagerness to be seen as strict on service providers, it overlooked some basic factors.

The first factor TRAI overlooked is that the licence conditions allow up to two per cent of calls to be dropped. But TRAI, in its directive, said that service providers would have to pay consumers for all dropped calls: Re 1 per call, subject to a maximum of three rupees a day. This was a violation of the licence conditions and the Supreme Court rightly saw through it.

The second is that there exists no mechanism in the world to tell a dropped call from voluntary disconnection. The TRAI penalty was open to abuse. It would be perfectly possible for a rogue customer to disconnect a call and then claim compensation. What also contributed to the problem of dropped calls was spectrum migration. The first lot of spectrum was issued for 20 years, after which service providers had to buy it afresh. Many bought spectrum in a different frequency subsequently. This led to customers migrating from one band to another, causing unavoidable technical glitches. It takes up to a year to sort this out. TRAI jumped the gun in imposing the penalty.The dropped-call penalty would have raised the cost of doing business for the service providers. Not only would they have to pay compensation, they would also have to set up call centres to handle compensation claims and maintain an army of lawyers and technical experts to sift through the claims.

The lesson to be learnt by regulators as well as the government is that the quality of any service can improve only when the right inputs are available — a penalty cannot always solve the problem. For instance, penalising the airline need not necessarily address the issue of flight delays; instead, the problem of flight delays could be addressed more effectively by improving the airport infrastructure. Similarly, the issue of clogged telecom networks can be addressed through additional spectrum.

One of the justifications for the penalty was that the service providers had under-invested in equipment and the penalty would bring them to book. But with number portability, and the existence of over half a dozen brands, any service provider that cuts corners and offers poor service is bound to lose customers. In case the service providers collude with fellow service providers to maintain similar levels of service, the matter should be addressed by the Competition Commission. The penalty was never the right solution.

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The last two decades have seen a remarkable shift in India’s security dialogue. From almost nowhere, issues in the maritime sector have begun to acquire increasing focus. Terms such as Sagar Mala (development of ports), Mausam (promoting inter-connectivity with littorals in the waters around us) and Blue Economy have entered the discourse even as efforts to build a stronger Navy and Coast Guard to safeguard the nation’s interests at sea and to act as a Net Security Provider have come to the forefront. At every strategic discussion maritime security gets mentioned at the very start of the debate.

Despite its two-coast configuration, dozens of ports on both sides and access to open seas, India has always been a continental country. There were kingdoms which did take our culture to distant lands across the seas but not our power. All invaders, those who came and went and those who stayed to rule, came from across the land borders in the north. The Europeans did come in their ships but had to fight no great battles at sea; they only required a few limited skirmishes on land as kingdoms, big and small, were added one by one to the fold that ultimately became India. In independent India, power at sea was never seriously in the consciousness of our political leadership till as late as the war of 1971 when Prime Minister Indira Gandhi first saw its potential. Rajiv Gandhi gave it further meaning in the mid-1980s. From a paltry 4.7 per cent of the Defence Budget in the mid-1960s, the figure reached 13 per cent two decades later and close to 18 per cent by the turn of the century. This is positive movement but we are far from having become a maritime nation.

America has consistently advocated an Indo-Pacific role for us with joint naval patrols in the South China Sea, most recently during the visit of US Secretary of Defence Ashton Carter where for joint petrol India instantly rejected any possibility. This is largely because for the US, the Indo-Pacific only seems to start from our eastern seaboard extending into waters of the western Pacific; it does not see major roles for our country westwards and it will provoke china too. But, we ourselves have begun to adopt a profile which is veering to ‘Act East’ from ‘Look East’. For example, Indian warships now routinely deploy in the South and East China Seas and visit ports in those regions, exercising with littoral navies.

Moving in to western waters should be cautious step because, even though half of our overseas trade now transits the South China Sea and tranquillity in those waters is important, confrontation with China will not ensure it. We must protest any actions in those waters which could jeopardise safety of commerce and freedom of navigation but actions such as joint patrols with others should not be part of the menu. An Asia-Pacific profile will also not have credibility, at least in the foreseeable future; it can await better days. On the other hand, an Indian Ocean Region (IOR) role is both credible and commensurate with our valid interests that stretch across the Indian Ocean. India in IOR has also proved its worth by successfully leading The Indian Ocean Rim Association (IORA) and fighting piracy in the region. In this space, India’s interests and responsibilities must be those of the major littoral power able to reach places of its choosing and operate credibly for as long as it needs to. We are also better placed than the Chinese to deal with issues in the IOR than in waters farther away and can dominate its entries and exits. This will need maritime forces significantly more than are presently there but not a level that we cannot reach if we plan for it systematically. Interestingly, given clear political direction, these goals are achievable with a less than 20 per cent share of the Defence Budget and predominantly through the ‘Make in India’ route. This approach will also contribute to development of maritime infrastructure in the country, a necessity now recognised at the highest levels.

In short, to develop credible maritime assets and capabilities, India should structure itself essentially as an Indian Ocean Region player, rather than seek a broader Asia-Pacific profile. Without compromising on our long-term interests we must clearly identify our core area and that must be the IOR. This expands our operating space sufficiently without compromising any vital concerns. Such a posture will, in the next two decades or so, result in maritime assets and capabilities which will be credible and commensurate with what we will need.

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It is undeniable that the Supreme Court’s role as the Constitution’s sheet anchor has been weakened in recent times. This dilution, at least partly, owes to the court’s inability to devote itself substantially to the determination of important public questions. As Nick Robinson’s studies have demonstrated, the number of cases decided by constitution benches — benches comprising five or more judges — has steadily declined right from the Supreme Court’s inception. Between 1950 and 1954, almost 15 per cent of the total cases decided by the Supreme Court were decisions of constitution benches. By the time the 1970s came around, this figure had dipped below one per cent. Between 2005 and 2009, benches comprising five judges or more decided only a worryingly paltry 0.12 per cent of the court’s total decisions. This has meant that in spite of the specific precepts of Article 145(3) of the Constitution — which mandates that a minimum of five judges sit for the purpose of deciding any case involving a substantial question of constitutional law — division benches of two judges have increasingly decided important disputes requiring a nuanced interpretation of the Constitution.

For example, in December 2013, it was a bench of two judges, in Suresh Kumar Koushal v. Naz Foundation, which reversed the Delhi High Court’s momentous judgment declaring Section 377 of the Indian Penal Code, insofar as it criminalised homosexuality, as unconstitutional. Similarly, when last year in Shreya Singhal v. Union of India the Supreme Court struck down the pernicious Section 66A of the Information Technology Act, in the process paving the way for a refined thinking on the right to free speech, it was once again a bench of two judges that rendered the verdict.

What we have, therefore, is a quite unusual scheme of constitutionalism where any given pair of two individuals is vested with the enormous power of ruling conclusively on significant matters of public importance. This phenomenon — still relatively recent — of rulings by two-judge benches in noteworthy cases has coincided with the court’s mounting docket. What’s clearly evident is that this manner of functioning is far from what the Constitution’s framers envisaged of the Supreme Court.

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The Real Estate (Regulation and Development) Act, 2016, is an effort to improve customers’ confidence in the real estate sector. It is an initiative to protect customers’ interests, promote fair play in real estate transactions, and ensure timely execution of projects. Real estate transactions are often complex and involve legal formalities that buyers may not understand until too late. Most of the buyers do not know what a transparent agreement should contain and how to safeguard their interests as buyers.

But,The real estate Act will lead to transparency in the sector, because :

  1. Developers as well as real estate brokers will have to register themselves (The real estate Act states that projects of above 500 sq. meter be compulsorily registered with the real estate regulator once it is set up. This will bring a large proportion of projects under the purview of the regulation. But each state will have the flexibility to reduce the threshold as per regional requirements. So, a state can also bring in even smaller projects or those that have less than eight units, under the Act.),
  2. To register a project, a builder will have to disclose names of promoters, project layouts, plans of development works, land status, statutory approvals’ status, draft of builder buyer agreements, and names and addresses of real estate agents, contractors, architects and structural engineers, to the authority. Once a project gets registered, all this information will be readily available on the authority’s website, which should help buyers take more informed decisions. Plus, the information has to be regularly updated by the developer. A clear picture of number of units sold and construction status has to be available on the website. ,
  3. Will not be able to launch projects without proper approvals,
  4. Moreover, they will not be able to change plans without the consent of at least two-thirds of buyers,
  5. Builders will also have to deposit at least 70% of the sale proceeds in a separate account to meet construction cost of the particular project, compared with the earlier proposal for 50% or less.

The agreement with customers will also have to be more transparent than what it has been. It will have to include clauses such as:

  1. Advance money of not over 10% before entering into a sale agreement.
  2. Possession date, specifications of the property, construction schedule will be there in the agreement and compensation to be paid to buyers for default or delay, which should be the same as that charged to buyers for delayed payment from their side.
  3. Liability of builders for structural defects for five years (instead of the earlier two years) and clearly defined carpet area, which means customers must know precisely how much space they are going to get for the price paid.

The real estate sector is facing issues related to liquidity, huge debts, and delays in project completion. But ultimately, it is the customers that bear the brunt due to increased pricing.

It is hoped that the situation will change once the Act is implemented, and more investors are attracted to the sector, which will, in turn, improve customer confidence, and give the sector a much-needed growth impetus. It will also bring in more confidence among global investors, providing better access to structured capital, which is in short supply now.

The Act will have positive consequences for the sector in terms of transparency, accountability, and avenues for grievance redressal, which will mean lower litigation cost for buyers. It will also ensure that only serious players will remain in the sector leading to greater transparency in the sector.

There are multiple reasons for such delaysfunds being diverted by developers, lack of funding options, and slow sales. Implementation of the Act will bring project delays under control as funds will not be diverted, more funding avenues will be available for builders at a lesser cost, customer confidence will improve in the sector and home buying process will be easier to follow.

Challanges: 

  1. Many departments and processes have to be streamlined to make this part of the Act successful. Land records need to be updated. Parity between circle rate and market rate needs to be established. In some localities, there is a gap between these rates. Some consumer activists share the view.
  2. We cannot overlook the fact that a completion certificate that is issued by a government agency should necessarily be issued in a time-bound manner. So, a time frame should be fixed for government agencies to provide services. Otherwise, this can be used by the promoter as a plea for unnecessary delay.
  3. The Act has provisions for penalising developers in case of delays. But many developers say that the main cause of delay is slow approvals from government agencies. A single-window clearance is needed now, without which there may be cases where bona fide delays by developers may still result in an unfavourable penalty.
  4. Under the Act, if the registration is revoked by the regulatory authority, who will complete the construction? How will that be managed looking at such a vast number of projects?

Ultimately, it will be a win-win situation for developers as well as customers in the long term, which will restore much-needed trust, transparency, and growth. This will have a positive effect on the country’s economy as well.

The Act has been formulated. Now it has to be seen how soon states start implementing it.

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