Feeds:
Posts
Comments

Archive for the ‘Public Administration / Governance’ Category


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).

Read Full Post »


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.

Read Full Post »


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.

Read Full Post »


What is insolvency?

Insolvency is a situation where individuals or companies are unable to repay their outstanding debt. It may be resolved by changing the repayment plan of the loans, or writing off part of the debt. If insolvency cannot be resolved, assets of the debtor may be sold to raise money, and repay the outstanding debt.

Why do we need a new law?

Insolvency resolution in India took 4.3 years on an average, as of 2015. This is higher when compared to other countries such as United Kingdom (1 year) and United States of America (1.5 years). These delays are caused due to pendency of resolution cases in courts and confusion due to lack of clarity in the current bankruptcy framework.

As the Joint committee on Insolvency and  Bankruptcy Code 2015 has submitted its report. Thus path for its passage in parliament seems clear. Here, I present  some important features of the Bill and some critical analysis on it.

Important Features:

The Bill has a number of helpful provisions for tackling large loan defaults.

First, it enables the early detection of financial distress by allowing any creditor to commence an insolvency proceeding the moment a default occurs. This is in contrast to the current scenario where principal or interest on a loan needs to be unpaid for at least 90 days from its due date to be classified as an NPA.

Second, the Bill contains very strict timelines for each step in the insolvency resolution process. Subject to a few exceptions, a resolution plan needs to be approved within 180 days, failing which the company goes into liquidation.

Third, it enables an investigation into the affairs of the insolvent debtor and the setting aside of fraudulent, undervalued or extortionate credit transactions that occurred in the lead-up to the insolvency. There are also penalties for concealing information, misrepresentations and defrauding creditors during the insolvency resolution process.

Fourth,New law is premised on the establishment of three institutions that currently do not exist – a regulator to be named the Insolvency and Bankruptcy Board of India (the “Board”), a new profession of insolvency professionals who are to be registered and regulated by insolvency professional agencies (“IP Agencies”) and information utilities that are designed to store and release information on debts and defaults. While it is understood that these institutions would take time to mature and develop, the new legislation should, at a minimum, specify certain things about their functioning to provide a starting point for implementation.

critical Analysis:

Let us think about the new regulator. The Bill vests the Board with wide-ranging powers. These powers include regulating insolvency professionals, insolvency professional agencies and information utilities, by laying out the eligibility requirements and standards for their functioning, carrying out investigations, and monitoring their performance. However, despite this vital role, the Bill does not envisage that the regulator will be established at the time the new law comes into effect. Ideally, the Board should be in place well before the new law comes into effect, to allow sufficient time for it to develop a regulatory framework for implementation.

The transition process for moving from the current legal framework to the new law needs to be thought through. The Bill needs to say which institutions will necessarily have to be operational at the time the new legislation comes into effect. To the extent that some institutions need more time to develop, it must specify the timeframe within which these institutions must be functional and the interim measures that would be in place until this point. For example, insolvency resolution professionals don’t exist as a profession today. As it is likely to take time to administer their examination and develop a sufficiently large pool of such professionals, could individuals or firms with other professional qualifications (such as lawyers or chartered accountants) perform the role of insolvency resolution professionals as an interim measure? Until information utilities are established and have robust procedures for gathering, storing and disseminating information on defaults, could any other body perform their function?

The two tribunals that are to hear insolvency and bankruptcy cases – the National Company Law Tribunal (The National Company Law Tribunal (NCLT) will replace the Company Law Board and the Board for Industrial and Financial Reconstruction, and be an overarching body for resolving insolvencies.It will be established under the Companies Act, 2013 ) for corporations and the Debt Recovery Tribunals (“DRTs”) for individuals – have their own set of problems. The NCLT is yet to become operational and the DRTs are, by all accounts, clogged with high case pendency. Both these tribunals would also continue to hear cases under their existing mandates in addition to those under the new law. This might not be an issue that can be fixed through the legislation, but the government must ensure that the NCLT becomes operational and increase the infrastructure and resources of both these tribunals if they are to hear insolvency cases in the efficient and time bound manner that the Bill envisages.

Conclusion:

Countries the world over differ widely in the legal frameworks they have adopted for insolvency and bankruptcy. The US has what is widely acknowledged to be a debtor-friendly regime; the administrator-led system in the UK is more creditor-friendly; while the insolvency regimes in continental Europe fall somewhere in between these two models. However, studies have shown that ultimately the effectiveness of an insolvency regime depends not so much on the specific path the law decided to take, but on whether it is backed by strong institutions for implementation.

Read Full Post »


 In the Westminster system of government, the Speaker of the legislature has considerable power and independence. This is a cherished product of a long process to secure the legislature’s independence and fairness. The considerable discretion they enjoy comes with the assumption that it will be used sparingly or wisely.

However, there are at least two recent instances in which Speakers of the legislature have used this discretion to take debatable decisions. The first instance is from the state of Uttarakhand, which was thrown into crisis when the Speaker of the Legislative Assembly refused to allow a division – the counting of legislators’ votes – on the state budget. The Congress-led government of the state had reportedly lost the confidence of several members of the legislative party; it was possible that the Appropriations Bill would have been defeated had votes been counted, and the government would thus have had to resign since it was a money Bill. By refusing to grant a division, the Uttarakhand Speaker in effect declared the budget passed and insulated the government from a key test of democratic legitimacy. The second instance is at the Centre, where the Speaker of the Lok Sabha has permitted a proposed law, the Aadhaar Bill, to be introduced in the House as a money Bill. Whether regulatory legislation such as Aadhaar meets the definition of a money Bill – traditionally reserved for proposals that alter taxation, borrowing, or affect the Consolidated Fund of India – is doubtful. But, just as it is a Speaker’s traditional right and duty to determine when a division is needed, her decision on whether a bill is a money Bill has also traditionally been considered to be the last word. It is worth noting that the two major national parties are on opposite sides of the fence in terms of the debate at the state and the Centre – in Uttarakhand, the Congress is defending the rights of the Speaker, while in Delhi it is questioning them – indicating that this is possibly a problem of institutional weakness that transcends political parties.

                                                     Unfortunately, India now faces a situation where the decisions of the traditionally independent Speaker of the House are being discussed by another branch of government, namely the judiciary. The Supreme Court has stayed an Uttarakhand High Court judgment that rescinded President’s Rule imposed on the state after the Speaker’s controversial ruling. Meanwhile, it has asked the Union attorney general for his views on a petition filed by a Congress leader questioning the introduction of the Aadhaar Bill as a money Bill. So the judiciary and the executive will now discuss a decision that has traditionally been the sole prerogative of the Speaker of the legislature. The elements of a full-blown constitutional crisis are visible. What is needed is to get ahead of the problem. Perhaps the tradition of the Speaker being notionally completely independent of the other branches needs to be revisited. Rather than letting things deteriorate and forcing the judiciary to get involved, the legislature itself should consider what checks and balances can be imposed on the Speaker’s discretion in order to ensure such situations are not repeated.

Read Full Post »


Accrual Accounting System vs Cash Accounting System:

While cash accounting recognises a transaction only when money changes hands , accrual accounting recognises the transaction at the time it is made, thereby providing more current snapshot. The fourteenth Finance Commission strongly recommended for adoption of accrual based accounting system. It is a means to an end, the end being reforms in public financial management and therefore greater accountability and a greater need for operations of the government to be on commercial lines. The method according to the experts, provide a more accurate picture of the company’s financial position. However it is more complex accounting system than cash accounting which the government uses currently and so is more expensive and time consuming to implement.

Need for Accrual based accounting system:

  1. Accrual accounting is useful in some specific cases such as comparing the cost of public hospitals with private hospitals, for example and in ascertaining why the government is so uncompetitive and why the private players are in a better position.
  2. Budget heads of accounting needs modernisation. The present classification system goes back to around 1974. It has undergone some minor changes, nothing major. What’s happened is that with the greater complexities of the government’s fiscal operations, the need for greater transparency of information and its correct depiction has also become very, very important. A report by the Comptroller and Auditor General of India had found that the archaic classification system had resulted in 11 heads of government spending where more than 50 per cent of the expenditure had no details of how and where the money had been spent. They had simply been classified as ‘other expenditure’. This classification system, called the Chart of Accounts, is like the DNA of the budgetary system.

Challenges in Implementing Accrual based accounting System :

  1. Its relevance to certain departments becomes crucial but most government departments and ministries are policy-oriented ministries. So what if you knew about their assets and liabilities? Accounting information must have relevance.
  2. Another issue with adopting accrual accounting is the cost and time involved. “There are heavy costs involved. Also, experience shows the timeframe for implementation is around 10-15 years for a government of our size. And then there is the issue of the states. If the Centre moves to the accrual system, what happens to the states? Do you have a dual set of statements? Or will you get all the states on board?
  3. In India, our focus isn’t so much to run fiscal surpluses, which may be the focus, say, in Australia but because of our other social sector priorities and heavy subsidy element; our focus is on balancing the budget somehow or the other and remaining within fiscally prudent levels of deficit

Conclusion:

The Controller General of Accounts has asked the government to be careful in adopting the accrual method of accounting considering the costs involved as only a few of its departments can benefit. We should tread this subject in a careful manner. There is no such thing as a big-bang approach. And even if you’ve heard of some advanced countries that have made this transition, like Australia, New Zealand, South Africa, UK, you must understand that the background to the introduction of accrual accounting was not that it was an end by itself.

Read Full Post »


Security of land and property title through a guaranteed system of title certification has been one of India’s long-pending reforms, the absence of which has impeded economic growth, development, social justice and judicial efficiency.

What we have in India today is a system of “presumed ownership”. The notion that a “sale deed” is proof of ownership is misplaced. The registration of property at the stamps and registration department merely acknowledges that a transaction has taken place between two parties. It does not verify or guarantee that the seller is indeed the indisputable owner, nor that the buyer is now indisputably the new owner. It does not guarantee the existing nature of rights to the property, or that the property has no existing restrictions on rights, or that it has no existing mortgage or lien on it, no disputes or litigations in court. All that the current process of deed registration does is acknowledge that a transaction has taken place between two parties, and collect a fee for such acknowledgement. In similar fashion, khatha and “tax paid” documents are not indisputable verification of ownership.

Around the world, governments have developed different approaches to provide systems of guaranteed title to land and immovable property, many enshrining right to property with constitutional protection. Guaranteed title forms the bedrock upon which are built all land-related policies—acquisition, pooling, taxation, sub-division, inheritance, contracts, etc. Without guaranteed title, it is akin to constructing buildings with no foundation.

A central aspect of growth in any market-based economy is land economics, with three pillars of an efficient land management system:

  1. The formal recognition and record of ownership rights and extent of property;
  2. An efficient facilitation of guaranteed transactions on property; and
  3. A transparent, reliable land market valuation.

In India while all three pillars exist, they are individually weak and collectively dysfunctional.

Fallouts of Presumed ownership:

                                                            The negative consequences of India’s system of “presumed ownership” versus a system of “guaranteed title” are far-reaching, not only for owners of property but also for the country’s economic growth and development. In presumed ownership risk of fraud is entirely the buyer’s and there are no guarantees provided by the state. The rampant spiraling of unresolved disputes clogging the courts is a direct result of the lack of guaranteed title to property.The urban poor, with no access to expensive lawyers and no formal recognition of rights provided by the state, are in a state of constant vulnerability of eviction, with no ability to use their property to access capital, or civic services.

Development of any public infrastructure in the country is invariably delayed due to disputed ownership and boundaries, resulting in high project costs and failure in delivery of project objectives. Most municipal governments, whose primary source of revenue for the city is property taxes, are unable to undertake more than 50% collection on property taxes or development charges, predominantly due to poor records of property ownership.

Efforts towards title certification:

                                                            The ministry of urban development (MoUD) included title certification as a mandatory reform under the Congress-led Jawaharlal Nehru National Urban Renewal Mission, and undertook serious efforts to develop guidelines to help states with the reform. PLATINUM Guidelines (Partnership for Land Title Implementation in Urban Management), were released by MoUD in 2012—a comprehensive “how-to” manual to help states transition from a system of presumptive ownership, to a system of guaranteed title.

Three states embarked upon title in various forms: Maharashtra, Andhra Pradesh and Rajasthan. Of these, Rajasthan is the only one with a specific focus on title to urban land, recognizing the urgency of rapid urbanization. The government successfully passed an ordinance for guaranteed title in 2008. However, after Vasundhara Raje lost elections in 2008, Ashok Gehlot’s government allowed the ordinance to lapse.

Post her victory in the 2013 elections, Raje has stayed the course in pursuing guaranteed land title reform. 4 April marks one major milestone in the long journey of this complex reform.

With the successful passage of the Rajasthan Urban Land Certification of Titles, the state will identify select cities to pilot and streamline the system of ULCT before rolling it out across the state.

Read Full Post »

Older Posts »

%d bloggers like this: