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Posts Tagged ‘Governance’


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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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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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.

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 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.

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The President makes a special address to a joint sitting of both Houses, at the beginning of the first session after an election, and at the first session each year (usually the budget session) as per Art 87 of the constitution. The address is a statement of government policy, which has to be approved by the Cabinet. The President highlights the legislative and policy activities and achievements during the preceding year and gives a broad indication of the agenda for the year ahead.

The address is followed by a motion of thanks moved in each House by ruling party MPs, followed by discussions that last up to three or four days and conclude with the Prime Minister replying to the points raised during the discussion.After the PM’s reply, MPs vote on the motion of thanks and some may move amendments to the address. The amendments may emphasise or add issues addressed by the President or highlight those that did not find mention. Changes proposed by MPs are not passed in Parliament. Should an amendment to the Address be carried through in the Lok Sabha, the government would have to resign. There is, of course, no such obligation in the Rajya Sabha, but it is still seen to undermine the government’s ability at consensus-building. For the members of the Rajya Sabha, it is a way to give notice that they cannot be taken for granted.

This hints at the ruling party’s failure to reach out to the Opposition and forge a working consensus on the legislative agenda. With its clear majority in the Lok Sabha, the BJP may feel unencumbered by the need for floor management of the sort that ruling coalitions have had to work at over the past couple or decades — this year’s vote shows that its lack of numbers in the Rajya Sabha does in fact demand an inventive outreach to the Opposition if it wants support on important Bills in the Upper House.

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