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Note4Students

Making paid news an electoral offence has been demanded from long. Paid news plays an important role in influencing the voters. The Election Commission’s order disqualifying Madhya Pradesh Minister Narottam Mishra for three years is an important step in curbing ‘paid news’.

 

Context

1. The Election Commission (EC) has disqualified a Minister for three years for filing wrong accounts of election expenditure.
2. The membership has been revoked under section 10A of the Representation of the People Act, 1951.

 

What is paid news?

1. According to Press Council of India, paid news is “any news or analysis appearing in any media (print & electronic) for a price in cash or kind as consideration”. 
2. It refers to propaganda in favour of a candidate masquerading as news reports or articles for a price in cash or kind as consideration. The news is much like an advertisement, but without the ‘ad tag’.

 

Is paid news an electoral offence?

1. Paid news is not an electoral offence yet in India, but there is a case to make it one.
2. However, the EC has recommended that the Representation of the People Act, 1951, be amended to make the publishing or abetting the publishing, of paid news to further a candidate’s prospects or prejudicially affect another’s an electoral offence.

 

Negatives of paid news:

1. Affects people’s thinking and opinion:

This kind of news has been considered a serious malpractice since it deceives the citizens, not letting them know that the news is, in fact an advertisement and affecting people’ s rational thinking and opinion.

2. Display of money power:

The payment modes usually violate tax laws and election spending laws. It displays the role of money in elections.

3. Hits the bottom of democracy:

Such news play a significant role in influencing voting tendency of voters as the viewer does not get a correct picture of the personality or performance of the candidate in whose favour or against he decides to cast his vote. This destroys the very essence of the democracy.

4. Affects free and fair elections:

Such practices interfere with free and fair elections in the country by violating democratic principle enshrined in our constitution.

5. Curbs the faith of people in media:

Media is described as the fourth pillar of democracy. Such incidents bring down the faith of people in democratic institutions by conveying incorrect and false information to the people.

 

Reasons for rise in paid news: 

1. The Department-Related Parliamentary Standing Committee on Information Technology in its 47th report on the “Issues Related to Paid News” has identified corporatization of media, desegregation of ownership and editorial roles, decline in autonomy of editors/journalists due to emergence of contract system and poor wage levels of journalists as key reasons for the rise in the incidence of paid news. 
2. Besides these, lack of adequate powers available with regulators, lack of effective penal action against those who violate the rules and inaction by the government in cases related to paid news are also important reasons for rise in incidents of paid news.

 

Election Commission Guidelines to Curb Paid News

1. All state Chief Electoral Officers will have to obtain a list of all TV and radio channels and newspapers in the state as well as their standard advertisement rate cards six months before the term of the Lok Sabha or the State Legislative Assembly expires.
2. Setting up of Media Certification and Monitoring Committee (MCMC) at district and state level which will have to monitor all political advertisements in relation to candidates.
3. The committee will intimate the Returning Officer for issue of notices to candidates for inclusion of notional expenditure based on standard rate cards in their election expenses account, “even if they actually do not pay any amount to the channel/newspaper, that is otherwise the case with paid news.”
4. The expenditure will also include publicity for a candidate by a “star campaigner” or others, to impact his electoral prospects.

 

Challenges in dealing with paid news

1. There is circumstantial evidence, but little proof. Establishing transaction of cash or kind is indeed not very easy, as it is usually done without any record and promptly denied by both sides, when enquired. Identifying the cases is a herculean task.
2. Media violations, surrogate advertisement and unreported advertisements are often mistaken as Paid News sometimes in true cases.
3. It is difficult to identify and solve the cases in a set time limit. The cases keep on pending for a long period of time before the courts.
4. The independence of the media and its ability to bring about transparency in society by playing an adversarial role against the establishment get compromised because of corruption within the folds of the media itself and it is usually difficult to fix the accountability in such cases.

 Way forward

To curb such incidents in future, it is necessary to make ‘paid News’ an electoral offence through amendment of Representation of the People Act, 1951. The expenditure ceilings prescribed by Election Commission should be strictly adhered to by political parties and candidates. The people should be sensitized by creating awareness among them and seeking partnership with all stakeholders, including political parties and media.

 

 Conclusion

1. The media acts as a repository of public trust for conveying correct and true information to the people. The “paid news” is therefore, a serious matter as it influences the functioning of a free press. There is an urgent need to protect the right of the public to accurate information before voters exercise their franchise when such incidents are on rise.
2. Hence, a legal framework in which electoral issues are expeditiously adjudicated must be put in place if election laws are to be enforced in both letter and spirit.

Sources 

http://indianexpress.com/article/explained/what-is-the-menace-of-paid-news-election-commission-narottam-mishra-madhya-pradesh-minsiter-2008-assembly-elections-4755328/

http://www.thehindu.com/opinion/editorial/pay-to-publish/article19165976.ece

http://www.thehindu.com/opinion/lead/Paid-news-a-deep-seated-malaise/article16838453.ece

http://www.business-standard.com/article/opinion/the-menace-of-paid-news-116050800630_1.html

Questions

Q.1) The Election Commission’s order disqualifying a minister in the Madhya Pradesh government for three years is an important step in curbing ‘paid news’ in the electoral arena. Do you think ‘paid news’ should be considered as an electoral offence? Substantiate. 

Q.2) With the increase in incidents of paid news across the country and the involvement of political leaders and political parties in such cases, discuss what are the challenges in dealing with paid news? Do you think EC should make paid news an electoral offence? Critically comment. What are the

 

 

Note4Students/Syllabus Mapping: GS2

The recent nine-judge Constitution bench of Supreme Court headed by Chief Justice J. S. Khehar ruled ‘Right to Privacy’ as a Fundamental right protected intrinsically as part of rights guaranteed under Article 21 of the Constitution. As any constitutional interpretation this one is historic and a watershed judgment which has multiplier ramifications over social, political, cultural and economic spheres of citizen-state machinery. UPSC is usually interested in Supreme Court interpretations and this topic forms potential bedrock for analysis. A question on analysis of this topic is expected this year CSE Mains 2017.

Context:

Under the three key Issues involved:

1. Whether Right to Privacy is a fundamental right or not?
2. Need for a stringent data protection act in lieu of fundamental right to privacy.
3. Is sharing personal data to government same as sharing our data with foreign private players?

The recent Supreme Court ruling that Right to Privacy is a Fundamental Right has put to rest the questions rose about definition of privacy and clarified the ambiguities around this matter.

Significance of the Judgment- Multiplier implications!

• • The final verdict says “Privacy is intrinsic to the right to life and personal liberty under Article 21 of the Constitution and an inherent part of fundamental freedom under part III of the Constitution.”
  • The Supreme Court has reaffirmed the primacy of the individual and served as a check on legislative and executive power.
  • The amorphous definition of Privacy has been done away with by overruling earlier judgments of M.P Sharma vs Satish Chandra (1954) and Kharak Singh vs State of Uttar Pradesh (1962) that had held privacy to not be a fundamental right.
  • An ordinary man not just a citizen, but anyone, whether an Indian national or not, can move the constitutional courts of the land under Articles 32 and 226, respectively, to get justice in case of violation of fundamental right.
  • The court emphasized upon personal, informational and digital privacy. It cleared the air on the amorphous nature the concept of privacy.
  • The judgment of the SC by overruling it earlier verdict shows evolution of our judiciary with changing time.
  • It will directly impact food choices, beef bans and any such restrictions that is intrinsic to choice and privacy
  • The nine-judge Bench’s judgment gains international significance as privacy enjoys a robust legal framework internationally, though India has remained circumspect.
  • The apex court has set the stage for the introduction of a new privacy law by the government.
  • The right to privacy is now applicable against the state as well as against the private companies who possess large amounts of user data without consent or nominal consent of users.

 

1. Acknowledging the pervasion of technology, the apex court identified privacy of information as a subset of the right to privacy. 
2. The judgment cites women’s abortion rights and the execrable Section 377 to note that sexual orientation, gender identity and women’s bodily autonomy are bound with human dignity and the right to privacy. This has profound implications for women and the LGBT (lesbian, gay, bisexual and transgender) community.

The Contours of Privacy:

 

1. It would include bodily integrity, personal autonomy, protection from state surveillance and freedom of dissent, movement, and thought.
2. Privacy in its core includes the “preservation of personal intimacies, the sanctity of family life, marriage, procreation, the home and sexual orientation”.
3. A woman’s freedom of choice to bear a child or abort the pregnancy, freedom to choose to work or not and the right to travel freely fall within this right.
4. It encompasses concepts of personal, informational and digital privacy.
5. Considering the secret ballot an extension of privacy principles into the public space and political system, without which elections would be a farce in a democracy like India.

Right to privacy – why do we need it?

1. The right to privacy has become fundamental in today’s age of technological advancements. For instance through Global Positioning System (GPS), the movement of person could be tracked and misused by the State as well as by non-State actors.
2. Privacy enjoys robust legal framework recognition internationally under Article 12 of the Universal Declaration of Human Rights and Article 17 of the International Covenant on Civil and Political Rights (ICCPR). India has signed and ratified the ICCPR without reservation.
3. It is essential to preserve the balance of power between governments and citizens, especially for a large democracy like India.

Caveats to the judgment:

• • Privacy is at best a “sub-species of liberty and every aspect could not qualify as being fundamental in nature” and that the right could not be extended to “every aspect” of privacy.
  • The litigation against the Aadhaar programme is still pending in a separate case, the striking down of Aadhaar Act (which has now become the bedrock of government welfare programmes, the tax administration network and online financial transactions) on grounds of privacy violations could curtail DBT and welfare scheme benefits.
  • The idea of the “right to be left alone” against the long-standing demand of India’s poor for the “right to be acknowledged” by the state—which was the genesis of Aadhaar in the first place.
  • It will most likely roll back many of the gains made under the ambit of the right to information, which is not a fundamental right, but a statutory right under the Right to Information Act, 2005. Such a ruling could also run afoul of access to information such as voters’ lists, National Rural Employment Guarantee Act muster rolls, etc., which we now take for granted in the name of transparency.
  • Likewise, the state’s actions and processes when it comes to law and order and national security will come under increased scrutiny.
  • Right to life implicitly contains the right to privacy as well. Those protections and rights can be constrained by “procedure established by law”. Without the reasonableness guaranteed by Article 14 to test that procedure, Article 21 is weakened.
  • Right to terminate life under euthanasia as a choice claimed under privacy can have negative fallout along with rise of suicides and abortion if recognized as arbitrary private decisions.
  • Now that Aadhaar has covered 99% of the population, if struck down, could cost exchequer heavily.
  • Right to privacy is not expressly included in the Constitution as the founding fathers rejected or jettisoned the idea of inclusion of privacy as a fundamental right. 

 

1. Some experts raised an argument that there is difference between the right to privacy being considered a common law right and a fundamental right.
2. ‘Informational privacy’ could not be a right to privacy and it could not ever be a fundamental right as Most of our data is anyway outside, and we have no control over its usage. 

Way forward:

1. A data protection regime should carefully balance the trade-off between individual interests and legitimate concerns of the state.
2. The State is obliged to put a robust personal data protection mechanism in place in this digital age. A data protection law as soon as possible is the way to go as highlighted by Nandan Nilekani.
3. Neither private entity nor government should have unrestricted access to information. Both need to come under accountability mechanisms.

Conclusion:

A judgment this comprehensive and far-reaching is bound to raise questions as well. By declaring right to privacy as a new freedom and clear fundamental right it has opened up plethora of hopes and aspirations of Indian citizens as a whole and protects them from arbitrary intrusions of their personal space. While it has negative fallouts, rationally demarcated restrictions on this freedom and a properly regulated robust data protection law to support the judgment is the need of the hour.

 

Due to paucity of time if not reviewing the answers, request you please provide the model answers for test 2. Mains being just a month from now, its not possible to go through every other reviewed answer for checking our mistakes.

Q.1) In February 2016, Ms. Archana Ramasundaram became the first woman Director-General of

a) Central Reserve Police Force

b) Border Security Force

c) Sashastra Seema Bal

d) Central Industrial Security Force

 

Q.2) Consider the following statements about the Pangong Tso Lake which was recently in news:

1. It is a brackish water lake.
2. Spiti river drains into it.

Which of the above statements is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Q.3) For environmental release and use in the fields of the genetically modified seeds, the clearance/approval of which of the following bodies is required?

1. The Genetic Engineering Appraisal Committee
2. The Union Ministry of Environment, Forests and Climate Change

Select the correct answer using the codes given below.

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Q.4) Consider the following pairs:

           <u>Physicist</u>                               <u>Major Contribution / Discovery</u>

1. Christiaan Huygens             Law of electromagnetic Induction
2. James Clerk Maxwell          Wave Theory of Light
3. Victor Francis Hess             Cosmic Radiation
4. Paul Dirac                           Theory of nuclear forces

Which of the above pairs is/are correctly matched?

a) 1, 2 and 4 only

b) 2 and 3 only

c) 1 and 4 only

d) 3 only

 

Q.5) Which of the following countries severed its relations with Taiwan and established diplomatic ties with China in June?

a) Sao Tome

b) Panama

c) Nicaragua

d) Fiji

 

Q.6) Which of the following pairs with reference to the member and portfolio held in the interim government (1946) is not correctly matched?

a) Jawahar Lal Nehru : External Affairs

b) Rajendra Prasad : Defence

c) C Rajagopalachari : Education and Arts

d) John Mathai : Industries and Supply

 

Q.7) Which among the following fundamental forces of nature operates over the shortest range

a) Gravitational force

b) Strong nuclear force

c) Weak nuclear force

d) Electromagnetic force

 

Q.8) Which of the following was not a feature introduced by the Government of India Act, 1919?

a) Dual scheme of governance

b) Communal representation

c) Bicameralism

d) Separate provincial and central budgets

 

Q.9) Which of the following is not a part of the procedure to remove a High Court judge from its office?

a) A motion signed by at least 50 Rajya Sabha members or 100 Lok Sabha members is presented to the Presiding officer of the House

b) A three member committee is constituted to investigate the charges

c) The President makes the report of this committee be laid down on the floor of the Houses

d) The motion is passed by a special majority of both the Houses and an address is made to the President for the removal of the judge

 

Q.10) One unified atomic mass unit is defined as

a) (1/12) of the mass of an atom of Carbon-12 isotope excluding the mass of electrons

b) (1/12) of the mass of an atom of Carbon-14 isotope including the mass of electrons

c) (1/12) of the mass of an atom of Carbon-12 isotope including the mass of electrons

d) (1/12) of the mass of an atom of Carbon-14 isotope excluding the mass of electrons

 

Q.11) ‘Dfc’ type of climate is found in

a) Tamil Nadu Coast

b) Arunachal Pradesh

c) Kerala and Karnataka coast

d) Uttar Pradesh and Bihar

 

Q.12) Which of the following states has become the first state in the country to have a cyber-police station in each district simultaneously?

a) Tamil Nadu

b) Gujarat

c) Kerala

d) Maharashtra

 

Q.13) Strait of Bosporus separates the continents of

a) Asia and Europe

b) Europe and North America

c) Asia and Africa

d) Africa and Europe

 

Q.14) The ruins of Vijayanagara at Hampi were brought to light in 1800 by

a) Colonel Colin Mackenzie

b) Sir John Shore

c) Andrew Fraser

d) John Marshall

 

Q.15) At which one of the following places the largest mammal found has adapted to take up its fresh water supply from the morning dew on the leaves?

a) Karang Island in Loktak Lake

b) Pirotan Island in Gulf of Kutch

c) Nalaban Island in Chilka Lake

d) Rutland Island in Andaman & Nicobar

 

Q.16) Relation between Plants, Mangroves and Halophytes is best represented by

a) two distinct concentric circles and a third non-overlapping circle

b) three distinct concentric circles

c) three distinct circles with some portion of each overlapping with some portion of other two

d) three distinct non-overlapping circles

 

Q.17) Which of the following paramilitary forces was raised as ‘Cacher Levy’ ?

a) Sashastra Seema Bal

b) Border Security Force

c) Assam Rifles

d) Central Industrial Security Force

 

Q.18) Let n be a natural number. Consider the following statements about the number (1+ square of n + fourth power of n) :

1. It is always odd.
2. It can be represented as product of two odd natural numbers.

Which of the above statements is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Q.19) Consider the following statements:

1. Solar storms result from an accumulation of magnetic energy.
2. They can disrupt high-frequency radio communications on earth.

Which of the above statements is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Q.20) Which of the following is/are used in making imitation jewellery?

1. Lead
2. Chromium
3. Heptachlor

Select the correct answer using the codes given below.

a) 2 and 3 only

b) 1 only

c) 1 and 2 only

d) 1, 2 and 3

 

Q.21) Examine the Statement I and Statement II given below carefully and select the correct answer using the codes given below.

Statement I : Recent discovery of boron on Mars has bolstered the theory that the Red Planet  may have once been habitable.

Statement II : Boron gives stability to ribose which is a key ingredient of RNA.

a) Both the statements are individually true and Statement II is the correct explanation of Statement I.

b) Both the statements are individually true but Statement II is NOT the correct explanation of Statement I.

c) Statement I is true but Statement II is false

d) Statement I is false but Statement II is true

 

Q.22) Examine the Statement I and Statement II given below carefully and select the correct answer using the codes given below.

Statement I : The Palaeocene-Eocene Thermal Maximum, PETM, was the most rapid and extreme natural global warming event of last 66 million years.

Statement II : PETM lasted for about 150 thousand years.

a) Both the statements are individually true and Statement II is the correct explanation of Statement I.

b) Both the statements are individually true but Statement II is NOT the correct explanation of Statement I.

c) Statement I is true but Statement II is false

d) Statement I is false but Statement II is true

 

Q.23) Who are ‘Agariyas’?

a) metal workers of Murshidabad

b) weavers of Pochampalli

c) salt farmers of Rann of Kutch

d) tribal dancers of Niyamgiri hills

 

Q.24)  Which of the following cities has become the first city in India to be recognized as a ‘World Heritage City’?

a) Mumbai

b) Ahmedabad

c) Gwalior

d) Patan

 

Q.25) Which of the following is not a member country of the European Free Trade Association?

a) Norway

b) Switzerland

c) Iceland

d) Sweden

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Note4Student:

Government is likely to scrap public distribution scheme (PDS) system and transfer money directly to the accounts of poor beneficiaries after getting encouraging results from Haryana and Puducherry. This move has been supported as well as criticized by many economists.

 

What is PDS?

Under the PDS, central public sector undertaking Food Corporation of India (FCI) sells food grains, including wheat, rice and sugar, and kerosene through fair price shops in states and union territories. 

 

Arguments in Favour of substituting PDS grain transfers with cash?

1.PDS Prone to corruption and leakage: Proponents of substituting PDS grain transfers with cash argue that PDS is an inefficient mode of transfer of subsidies, prone to enormous leakages into the black market, and high waste in costs of transferring subsidies in the form of food transfers. They argue that replacing food with direct cash transfers would greatly reduce corruption and leakages.

2.Better targeting: It would enable the poor to access goods currently denied them by a PDS beset by corruption.

3.More Choice for consumers: It would enable people to buy better quality food of their choice from the open market and not be restricted to items sold in the PDS, which are often inferior in quality and limited in range.

4.Will Reduce wastage: Providing subsidies directly to the poor, it is further argued, would both bypass brokers as well as reduce the waste and holding costs of storing grains in government silos. The amount of grain actually required for India’s buffer stock needs could be held in better-quality warehouses, eliminating waste and rotting.

5.Will reduce fiscal deficit: Cash transfers would help reduce fiscal deficit by curbing expenditures earmarked for the PDS that are siphoned off through corruption, as well as avoiding substantially higher costs of transferring food rather than cash.

 

Arguments against Arguments in Favour of substituting PDS grain transfers with cash?

Not leakage proof: it is problematic to assume that cash transfers would in themselves bring about drastic reductions in corruption and leakages in welfare programmes, as there is nothing intrinsic to cash transfers which renders them less vulnerable to leakages. Irregularities are empirically found to be high in existing cash transfer programmes. Cash transfers of old-age pensions are at least as notorious for corruption and leakages as the PDS.

PDS performing better: Studies confirm that many states have been able to reform PDS and significantly reduce leakages, as much as some states have reformed pension transfers. Clearly, the difference between the corruption or probity of delivery of welfare programmes is not dependent on whether cash or food is delivered, but on political and administrative will and capacities, and public vigilance and organization.

Misuse of Cash: It is also possible for people to spend cash transfers not on more nutritious food, as proponents suggest, but instead on non-food items, which would decrease the amount of household money left for buying food. There are significant gendered differences of choice here. Research confirms that culturally decisions relating to cash in households tend to be made by men, who may or may not spend the money on food. Decisions relating to food are made by women in almost all cultures, and therefore food rather than cash in a household is more likely to end up as food in a child’s stomach.

Weak Banking Infrastructure: There are also worries about how genuinely inclusive of people in remote rural regions is India’s banking system. Fair price shops exist in three of every four villages, and are therefore generally accessible. According to one survey, average distance to the nearest bank branch is between 6.5km to 10km. Distances would be much longer in remote regions, entailing high additional costs of transport and time.

PDS a shield against Inflation: Another advantage of PDS over cash transfers from the perspective of the poor is that PDS supplies rations at a constant price, irrespective of the fluctuations in market prices. This therefore provides a shield against inflation, a benefit that cash transfers cannot match.

PDS ensures stable income for Farmer’s:  it is a mistake to view PDS only as a means to transfer subsidies to poor households. PDS costs need to be measured against its other goals as well. PDS requires the government to procure food from farmers. The government builds up stocks of grains which are also useful for price stabilization. Indeed, the guarantee of minimum support price purchase by the government for wheat and rice is the most important instrument for the protection of farmers’ income in India, and this would become unfeasible if the government could not offload a lot of this grain back through the PDS.

Cash Transfer leading to exclusion: In areas where pilot programme has been launched There were issues in transfers, as results show as high as 50 per cent of those entitled did not receive the full or part cash transfer, especially due to issues in linking of bank accounts with Aadhaar and ration cards. 

 

Way Forward:

1. Certainly, DBT is a novel idea and it could certainly reduce leakages and corruption of PDS system has proven its record in LPG case where Government saved rs 14000 crore due to better targeting and elimination of ghost beneficiaries
2. However, DBT in food subsidy is an idea which has many flaws as mentioned above. PDS system itself is flawed and it needs to be eliminated.
3. Therefore, instead of cash transfer Government should give food coupons as this will solve the problem of misuse of cash for buying non-food things and it will also give poor people choice to buy food from the retailer of their choice. Food coupon amount should be periodically revised so that it takes into account the current inflation. Thus what we require is a system which is somewhere in between the present inefficient PDS system and the proposed DBT system.

 

Questions:

(Q) Should PDS scheme be replaced by Direct benefit transfer in Food Subsidy. Give Pros and cons.

(Q.) Replacing PDS with cash transfers would, in effect, gradually erode and eventually dismantle this obligation of the government, with an adverse impact on an already precarious agriculture and farmer protection. Critically comment

 

Note4Students

Any bilateral relationship between neighbouring countries should be considered in the larger matrix of regional development. India Myanmar relationship should be seen as the part of Act east policy, which would bolster the development of north eastern states. Recent Rohingya crisis poses grave threat to the regional security. So India Myanmar relationship is important for this year examination

Context

PM has recently Visited Myanmar. This will be the Second visit of PM modi To Myanmar.

Introduction

1. India shares a long land border of over 1600 Km with Myanmar as well as a maritime boundary in the Bay of Bengal. Four north-eastern states viz. Arunachal Pradesh, Nagaland, Manipur and Mizoram share boundary with Myanmar.
2. These geo-strategic realities encompass our broader interests in the Indian Ocean region. Both countries share a heritage of religious, linguistic and ethnic ties.
3. Further, Myanmar is the only ASEAN country adjoining India and, therefore, our gateway to South East Asia with which we are seeking greater economic integration through India’s ‘Look East’ and now ‘Act East’ Policy. Business opportunities that emerge from a surging economy in Myanmar also provide new vistas for engagement.

Analysis

Recent Developements

1. The landslide victory by Aung San Suu Kyi-led National League for Democracy (NLD) in November 2015 general elections and the formation of NLD government has provided opportunities to strengthen the engagement building on our previous efforts.
2. India expressed its “deep concern” about the situation in Rakhine State where security forces have been engaged in a bloody battle against Rohingya insurgents, forcing thousands of people to flee neighbouring Bangladesh and India.
3. New Delhi asked Myanmar to focus on the welfare of the civilian population as well security forces and underlined that it is imperative that violence is ended and normalcy in the State restored expeditiously.
4. India also refused to be a part of a declaration adopted at an international conference recently in Indonesia as it carried “inappropriate” reference to violence in Rakhine state from where Rohingyas have fled to Bangladesh.

Why is Myanmar important for India? 

1) Geo-strategic Location

This is one of the most important factors in determining diplomatic ties with other countries.
Burma is located south of the states of Mizoram, Manipur, Nagaland and Arunachal Pradesh in Northeast India. The Indo-Burmese border stretches over 1,600 kilometers.

With the expansionist policy of China and growing insurgency in North East states of India , it is very important for India that neighbors like Bangladesh and Myanmar co-operate India on issues regarding border-infiltration , money laundering , human trafficking and penetrating drug and fake currency through porous land borders shared with them.

2) India’s Look East Policy

India’s Look East policy represents its efforts to cultivate extensive economic and strategic relations with the nations of Southeast Asia in order to bolster its standing as a regional power and a counterweight to the strategic influence of the People’s Republic of China.

Two highways involving Myanmar play a vital role in improving connectivity in the South East Asian region.

3) India-Myanmar-Thailand Friendship Highway

India and Myanmar have agreed to a 4-lane, 3200 km triangular highway connecting India, Myanmar and Thailand. The route, which is expected to be completed by sometime during 2016, will run from India’s northeastern states into Myanmar, where over 1,600 km of roads will be built or improved.

4) Access to North-east

The Kaladan Multi-modal Transit Transport Project will connect the eastern Indian seaport of Kolkata with Sittwe seaport in Myanmar by sea; it will then link Sittwe seaport toLashio in Myanmar via Kaladan river boat route and then from Lashio on to Mizoram in India by road transport

Various Aspects of India –Myanmar Relationship

Defence& Security Cooperation

1. has strengthened over the years. Exchange of high-level visits,
2. signing of MoU on Border Cooperation, training, Army, Air Force and Naval Staff Talks are important indicators in this direction.
3. .In July 2017, Sr Gen Min Aung Hliang, C-in-C 3 Myanmar Defence Services visited India, in what was his second visit in as many years, giving an opportunity to further cement defence ties.
4. Myanmar side has provided assurances at the highest levels that it will cooperate with India in taking necessary action in preventing the use of Myanmar territory for anti-India activity.

Rohingya crisis (refer the article of Rohingya crisis)

 Myanmar’s more dependence on China

1. Given that the visit will be taking place after the Doklam crisis, there will be a temptation in India to see the visit of the prime minister as an attempt to build a robust relationship in the neighbourhood to counter the growing Chinese presence in the region.
2. It should be noted that the Myanmar government today is more dependent on Chinese support than it was two or three years ago.
3. Its dependence on China characterised by a largely extractive relationship focused on natural resources and access to the Bay of Bengal where it already has an oil and gas terminal, concession to build a Special Economic Zone and seeks a possibly controlling stake in a natural deep sea harbour at Kyaukpyu that could form part of its ambitious BRI.
4. China has been a major player in the peace negotiations between the armed ethnic groups and the Myanmar government.
5. Further, because of the on-going conflict in the Rakhine state, the Myanmar government will be dependent on the support from China on various human right platforms including the Security Council.
6. Successive Indian prime ministers have refrained from assessing the relationship with Myanmar through the prism of China and instead focused on developing a comprehensive bilateral relationship.

Commercial Cooperation:

1. A bilateral Trade Agreement was signed in 1970. Bilateral trade has been growing steadily to reach US$2178.44 million (2016-17),
2. of which Indian exports amounted to US$1111.19 million and Indian’s imports to US$1067.25 million.
3. India is the fifth largest trading partner of Myanmar but trade remains below potential.
4. Agriculture sector dominates trade, particularly supply of beans & pulses to India ($ 809million, 2016-17) and timber ($ 156 million).
5. India’s exports to Myanmar include sugar ($ 424 million), pharmaceuticals ($ 184 million), etc. Border trade via Moreh and Zawkhatar reached to $ 87.89 million;
6. India is presently the tenth largest investor with an approved investment of US$ 740.64 million by 25 Indian companies (as of 30Jun 2017).
7. Most India’s investments have been in oil & gas sector. 100% FDI is allowed in select sectors. Indian companies have evinced interest in investing in Myanmar and major contracts have been won by Indian companies.
8. Besides normal trade, both sides have also taken steps to bolster trade across the land border. Cooperation in the banking sector is crucial for investment and trade. United Bank of India signed banking agreements with banks of Myanmar (MFTB, MICB, MEB, and 9 private banks) to facilitate bilateral trade
9. Myanmar is an important partner in our energy relations with other countries.MOS for Petroleum & Natural Gas,.

Development Cooperation:

1. We have extended development assistance on generous terms.
2. We are committed to provide grant-in-aid assistance amounting to almost Rs 4000 crore (of total commitment of approx. US$ 1726 million).
3. These include

• support for the Kaladan Multimodal Transit Transport Project;
• the Trilateral Highway Project, which is an East-West corridor connecting our Northeast with Myanmar and Thailand;
• the Rhi-Tiddim road;
• supply of Bailey bridges;
• assistance for border area development in the Naga Self Administered Zone by financing bridges, roads, schools and small health centres;

1. assistance in setting up institutions for higher learning and research,

• namely Myanmar Institute of Information Technology,
• Advance Centre for Agricultural Research and Education,
• Myanmar-India Entrepreneurship Development Centre, Myanmar-India Centre for English Language Training,
• Myanmar-India Entrepreneurship Development Centre, Myanmar-India Centre for English Language Training,
• India-Myanmar Industrial Training Centres,, Sittwe General Hospital etc.

Culture:

1. India and Myanmar share close cultural ties and a sense of deep kinship given India’s Buddhist heritage.
2. Building on this shared heritage India is undertaking some key initiatives:
3. Restoration of the Ananda Temple in Bagan and
4. GOI donation of a 16 foot replica of the Sarnath Buddha Statue which has been installed at the premises of Shwedagon pagoda in Yangon.
5. The ‘Samvad-II’ Interfaith dialogue was held on 6-7 August 2017, Yangon.
6. ICCR and Sitagu International Buddhist Academy organised an International Conference on Buddhist Cultural Heritage
7. We have responded to Myanmar’s interest in restoring and renovating two historic temples in Bodh Gaya built by Myanmar rulers King Mindon and King Baygyidaw. These temples and inscriptions will now be restored with the assistance of the Archaeological Survey of India as a bilateral friendship project.

Indian diaspora:

1. The origin of the Indian community in Myanmar is traced to the mid-19thcentury with the advent of the British rule in Lower Burma in 1852.
2. The two cities Yangon and Mandalay had a dominating presence of Indians in civil services, education, trade and commerce during the British rule.
3. There are varying estt. of 1.5-2.5 million people of Indian origin living and working in various parts of Myanmar.

Bilateral Cooperation in Regional/ Sub-regional context:

ASEAN: As the only ASEAN country which shares a land border with India, Myanmar is a bridge between India and ASEAN.

BIMSTEC: Myanmar is a signatory to the BIMSTEC Free Trade Agreement. Myanmar is the lead country for the energy sector. Myanmar trades mostly with Thailand and India in the BIMSTEC region. Myanmar’s major exports to India are agricultural products like beans, pulses and maize and forest products such as teak and hardwoods. Its imports from India include chemical products, pharmaceuticals, electrical appliances and transport equipment.

Mekong Ganga Cooperation: Myanmar is a member of the Mekong Ganga Cooperation (MGC) since its inception in November 2000. MGC is an initiative by six countries – India and five ASEAN countries namely, Cambodia, Laos, Myanmar, Thailand and Vietnam – for cooperation in the fields of tourism, education, culture, transport and communication. The chairmanship of MGC is assumed by member countries in alphabetical order.

SAARC: Myanmar was given the status of observer in SAARC in August 2008.

Conclusion

1. In India, we often say Myanmar is our “gateway” to the East. Against the rhetoric, the existing connectivity between the two neighbours remains much to be desired. With long land and maritime boundaries, surely, the neighbours are yet to take full advantage of geography.
2. Historically, India has been a major player in Myanmar’s socio-economic landscape till the 1960s. The advent of military dictatorship and its economic policies reduced India’s interactions with Myanmar.
3. As the political transition in Myanmar picks up momentum, it provides an excellent opportunity for Prime Minister to explore new avenues of cooperation.

Question:

“Bolstering relationship with Myanmar is important for sustainable neighbourhood”. Comment

Rohingya refugee crisis should be seen as security threat to the region. Analyse

Source:

Ministry of External affairs

Note4Students

1. Section 124A was challenged in the Supreme Court as unconstitutional. In its celebrated judgment in the case of Kedarnath vs State of Bihar, the Supreme Court explained the scope of sedition law. It ruled that “vigorous words in writing and very strong criticism of measures of government or acts of public officials, would be outside the scope of Section 124A”.It has been in news very frequently due to its frequent misuse.A large number of op-eds have been written on this issue in recent years.UPSC also asked a similar kind of question (Hate speech) in UPSC mains 2014. Therefore it’s necessary to prepare both arguments in favour and against Sedition law.

Introduction

1. The section 124A of Indian Penal Code is a pre-independence provision which covers sedition charges against government. 
2. Section 124A of the IPC defines sedition and says:
   • whoever by words either spoken or written or by signs or by visible representation or otherwise brings or attempts to bring into hatred or contempt, the government established by law; or
   • Whoever by the above means excites or attempts to excite disaffection towards the government established by law, has committed the offence of sedition.

 

1. Figures of the National Crime Records Bureau reveal that in the two years preceding the Jawaharlal Nehru University case, there were a total of 77 sedition cases, of which only one resulted in conviction.
2. Human rights activists and supporters of free speech argued that this section is draconian and should be got rid of.

 

Arguments in favour of Sedition Law

 

1. In 1962, the Supreme Court in Kedar Nath Singh vs State of Bihar upheld Section 124A and held that it struck a “correct balance” between fundamental rights and the need for public order.
2. The court has reduced the scope of Sedition law to only those cases where there is incitement to imminent violence towards overthrow of the state. 
3. The Court held that it is not mere against government of the day but the institutions as symbol of state. 

 

Argument against section 124A

1. It stifles the democratic right of people to criticize the government.
2. In the Menaka Gandhi case, the Supreme Court had held that  freedom of speech and expression is not confined to geographical limitations and it carries with it the right of a citizen to gather information and to exchange thought with others not only in India but abroad too.
3. Thus, criticism against the government policies and decisions within a reasonable limit that does not incite people to rebel is consistent with freedom of speech and expression.
4. In the Kedarnath Singh case, the Supreme Court has warned against the arbitrary use of sedition law because such arbitrary use would violate the freedom of speech and expression guaranteed by the Constitution.
5. The police might not have the “requisite” training to understand the consequences of imposing such a “stringent” provision.
6. It has been used arbitrarily to curb dissent. In many cases the main targets have been writers, journalists, activists who question government policy and projects, and political dissenters.
7. The draconian nature of this law—non-bailable, non-cognisable and punishment that can extend for life, has a strong deterrent effect on dissent even if it is not used.
8. The press should be protected so that it could bare the secrets of government and inform the people. Only a free and unrestrained press can effectively expose deception in government
9. Legislation exists to deal with unlawful activities and armed movements. There is no need to criminalize words spoken or written.

 

Way Forward

1. India of the 21st century does not require a law used by the colonial government to suppress India’s voice.
2. The guidelines of the SC must be incorporated in Section 124A as well by amendment to IPC so that any ambiguity is removed.
3. This will ensure that section 124 A of IPC strikes a balance between security and smooth functioning of state with the fundamental right of freedom of speech and expression.

 

Questions

1. What do understand by sedition? Should it be deleted? Critically comment
2. “The arbitrariness of the sedition charges imposed on various situations makes for a test case on the validity of Section 124A” Critically examine

Note4Students:

India has been facing a bad loan Problem from last few Years. According to latest report of RBI, Stressed assets, which include non-performing assets (NPAs) and restructured loans, form some 12% of the total loans in Indian banking now. A question on NPA is expected from last 2 years. Probably this is the year where UPSC will ask question on NPA in Mains.

Context

According to RBI’s recent data The pile of bad loans, or stressed assets, is close to Rs10 lakh crore($154 billion) now, which is more than the GDP of at least 137 countries. And what’s more, it is only growing.

Stressed assets, which include non-performing assets (NPAs) and restructured loans, form some 12% of the total loans in Indian banking now.

 

What is NPA?

1. The assets of the banks which don’t perform (that is – don’t bring any return) are called Non Performing Assets (NPA) or bad loans. Bank’s assets are the loans and advances given to customers. If customers don’t pay either interest or part of principal or both, the loan turns into bad loan.
2. According to RBI, terms loans on which interest or instalment of principal remain overdue for a period of more than 90 days from the end of a particular quarter is called a Non-performing Asset.
3. However, in terms of Agriculture / Farm Loans; the NPA is defined as under: For short duration crop agriculture loans such as paddy, Jowar, Bajra etc. if the loan (installment / interest) is not paid for 2 crop seasons, it would be termed as a NPA. For Long Duration Crops, the above would be 1 Crop season from the due date.

source

 

Impact of NPA on Economy

The problem of NPAs in the Indian banking system is one of the foremost and the most formidable problems that had impact the entire banking system. Higher NPA leads to following adverse impact on Economy:

1. Depositors do not get rightful returns and many times may lose uninsured deposits. Banks may begin charging higher interest rates on some products to compensate Non-performing loan losses
2. Bank shareholders are adversely affected
3. Bad loans imply redirecting of funds from good projects to bad ones. Hence, the economy suffers due to loss of good projects and failure of bad investments
4. When bank do not get loan repayment or interest payments, liquidity problems may ensue.

Reasons for the rise in NPA in recent years

1. GDP slowdown: Between early 2000’s and 2008 Indian economy were in the boom phase. During this period Banks especially Public sector banks lent extensively to corporates. However, the profits of most of the corporate dwindled due to slowdown in the global and domestic economy, bans in mining projects, delays in environmental related permits ,Land acquisition hurdles and volatility in prices of raw material. This has adversely affected their ability to pay back loans and is the most important reason behind increase in NPA of public sector banks.
2. Relaxed lending Norms: One of the main reasons of rising NPA was the relaxed lending norms especially for corporate honchos when their financial status and credit rating was not analyzed properly. Also, to face competition banks were hugely selling unsecured loans .
3. Priority Sector Lending: There is a myth that main reason for rise in NPA in Public sector banks was Priority sector lending as according to the findings of Standing Committee on Finance , NPAs in the corporate sector are far higher than those in the priority or agriculture sector. However, even if PSL is not the main cause but it is still a cause for rising NPA which can be seen from the fact that As per the latest estimates by the SBI, education loans constitute 20% of its NPAs.
4. The Lack of Bankruptcy code in India and sluggish legal system makes it difficult for banks to recover these loans from both corporate and noncorporate.

 

Other factors

1. Banks did not conducted adequate contingency planning, especially for mitigating project risk. They did not factor eventualities like failure of gas projects to ensure supply of gas or failure of land acquisition process for highways.
2. Restructuring of loan facility was extended to companies that were facing larger problems of over-leverage & inadequate profitability. This problem was more in the Public sector banks.
3. Companies with dwindling debt repayment capacity were raising more & more debt from the system.

Why most NPA in Public sector?

1. Five sectors Textile, aviation, mining, Infrastructure contributes to most of the NPA, since most of the loan given in these sector are by PSB, they account for most of the NPA.
2. Public Sector banks provide around 80% of the credit to industries and it is this part of the credit distribution that forms a great chunk of NPA. Last year, when kingfisher was marred in financial crisis, SBI provided it huge amount of loan which it is not able to recover from it.
3. Less Professional management
4. Political Pressure and interference forces PSB to lend to not so commercially sounds project.

Steps taken by RBI and Government in last few years to curb NPA

• 1. Government has launched Mission Indradhanush to make the working of public sector bank more transparent and professional in order to curb the menace of NPA in future.
  2. Government has also proposed to introduce Bankruptcy code which will make it easier for banks to Recover the loans from the debtors.
  3. RBI introduced number of measures in last few years which include:
  4. Tightening the Corporate Debt Restructuring (CDR) mechanism,
  5. Setting up a Joint Lenders’ Forum, prodding banks to disclose the real picture of bad loans, asking them to increase provisioning for stressed assets,
  6. Introducing a 5:25 scheme where loans are to be amortized over 25 years with refinancing option after every five years, and

 

• Empowering them to take majority control in defaulting companies under the Strategic Debt Restructuring (SDR) scheme.
• Amendment in banking law to give RBI more powers: The Banking Regulation Act may be amended to give RBI more powers to monitor bank accounts of big defaulters. The amendment in the banking law will enable setting up of a committee to oversee companies that have been the biggest defaulters of loans.
• Stringent NPA recovery rules: The government has over the years enacted and tweaked stringent rules to recover assets of defaulters. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act or Sarfaesi Act of 2002 was amended in 2016 as it took banks years to recover the assets.

How to curb the menace of NPA?

#1. Short Term measures

1. Review of NPA’S/Restructured advances- We need to assess the viability case by case. Viable accounts need to be given more finance for turnaround and unviable accounts should either be given to Asset Reconstruction Company or Management/ownership restructuring or permitting banks to take over the units.
2. Bankruptcy code should be passed as soon as possible. Bankruptcy code will make it easier for banks to recover loans from unviable enterprises.
3. Government should establish ARC with equity contribution from the government and the Reserve Bank of India (RBI). The established ARC should take the tumor (of non-performing assets or NPAs) out” of the banking system. An ARC acquires bad loans from banks and financial institutions, usually at a discount, and works to recover them through a variety of measures, including sale of assets or a turnaround steered by professional management. Relieved of their NPA burden, the banks can focus on their core activity of lending.

#2. Long term Measures

1. Improving credit risk management– This includes credit appraisal, credit monitoring, and efficient system of fixing accountability and analyzing trends in group leverage to which the borrowing firm belongs to
2. Sources/structure of equity capital– Banks need to see that promoter’s contribution is funded through equity and not debt.
3. Banks should conduct necessary sensitivity analysis and contingency planning while appraising the projects and it should built adequate safeguards against such external factors.
4. Strengthen credit monitoring– Develop an early warning mechanism and comprehensive MIS(Management information system) can play an important role in it.MIS must enable timely detection of problem accounts, flag early signs of delinquencies and facilitate timely information to management on these aspects.
5. Enforce accountability- Till now lower ring officials considered accountable even though loaning decisions are taken at higher level. Thus sanction official should also share the burden of responsibility.
6. Restructured accounts should treated as non performing and technical write offs where Banks remove NPA’S from their balance sheets Permanently should be dispensed with.
7. Address corporate governance issues in PSB- This includes explicit fit and proper criteria for appointment of top executives and instituting system of an open market wide search for Chairman.

Questions:

 

Q.1) Non-performing assets, restructured loans and written-off assets — collectively called ‘stressed assets’ — have become a major challenge to the country’s banking system. To combat these, what has government done? Will these measures be effective? Examine.

Q.2) The problem of non-performing assets (NPAs) in the Indian banking system is said to be big and might affect economic growth of the country. What are the approaches that RBI and government are adopting to clean the banking system of NPAs? Examine.

 

 

Note4Students

Bankruptcy code addresses the larger issue of ease of doing business. Economic survey 2016 talked about chakravyuha problem of Indian business ecosystem. In this context bankruptcy code is important topic to examine.

Introduction

1. Hitherto India was lacking the legal and institutional machinery for dealing with debt defaults as per the global standards.
2. The recovery proceedings by creditors, either through the Contract Act or through special laws such as the Recovery of Debts due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, has not had desired outcomes.
3. Similarly, action through the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the winding up provisions of the Companies Act, 1956 have neither been able to aid recovery for lenders nor restructuring of firms.
4. Laws dealing with individual insolvency, the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, were almost a century old. This has hampered the confidence of the lender and development of the credit markets in India. Resultantly, credit by banks is the largest component of the credit market in India and corporate bond market has not yet developed to the desired level.

Analysis

Highlights of the Code

1. The Code creates time-bound processes for insolvency resolution of companies and individuals.  These processes will be completed within 180 days.  If insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors.
2. The resolution processes will be conducted by licensed insolvency professionals (IPs).  These IPs will be members of insolvency professional agencies (IPAs).  IPAs will also furnish performance bonds equal to the assets of a company under insolvency resolution.
3. Information utilities (IUs) will be established to collect, collate and disseminate financial information to facilitate insolvency resolution.
4. The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies.  The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.
5. The Insolvency and Bankruptcy Board of India will be set up to regulate functioning of IPs, IPAs and IUs.

Positive Aspects

1. The new law aims to consolidate the laws relating to insolvency of companies and limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals, Presently contained in a number of legislations, into a single legislation and provide for their reorganization and resolution in a time bound manner for maximization of value of their assets.
2. Such consolidation will provide for a greater clarity in law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt.
3. This law will thus promote entrepreneurship, availability of credit and balance the interest of all stakeholders.
4. It is true that some business ventures will always fail, but such failures will be handled rapidly and swiftly. Entrepreneurs and lenders will be able to move on, instead of being bogged down with decisions taken in the past.
5. The Code empowers the operational creditors (workmen, suppliers etc.) also to initiate the insolvency resolution process upon non-payment of dues. In order to develop the credit market in India, in case of liquidation, financial debts owed to unsecured creditors have been kept above the Government’s dues in the list of priorities (waterfall).
6. Facilitating early resolution and exit is as important as facilitating investment.
7. The essential idea of the new law is that when a corporate entity defaults on its debt, control shifts from the shareholders/promoters to a committee of creditors, who have 180 days (extendable by 90 days in deserving cases) to evaluate proposals from various players about resuscitating the company or taking it into liquidation.
8. When decisions are taken in a time-bound manner, there is a greater chance that the corporate entity can be saved as a going concern, and the productive resources of the economy (labour and capital) can be put to the best use. This is in complete departure from SICA regime where there were delays leading to destruction of the value of the firm.
9. The Code separates commercial aspects of the insolvency proceedings from judicial aspects.
10. While Insolvency Professionals (IPs) will deal with commercial aspects such as management of the affairs of the corporate debtor, facilitating formation of committee of creditors, organising their meetings, examination of the resolution plan, etc.,
11. judicial issues will be handled by proposed Adjudicating Authorities (National Company Law Tribunal / Debt Recovery Tribunal). One more important institution created under the Code is the ‘Information Utility’ which would store financial information and data and terms of lending in electronic databases. This would eliminate delays and disputes about facts when default does take place.
12. The Code also provides a fast track insolvency resolution process for corporates and LLPs. This will be an enabler for start-ups and small and medium enterprises (SMEs) to complete the resolution process in 90 days (extendable to 45 days in deserving cases).
13. The Code also addresses the important issue relating to cross border insolvency by providing the enabling mechanism on the subject. The Government, at an appropriate time, will come out with a detailed framework for cross border insolvency.

Key Issues

1. In relation to corporate persons, the Code looks to wrap up the game in 180 days.
2. It warrants a notice of dispute to be issued followed by a response period of 10 days for the corporate debtor, failing which the creditor is entitled to file an insolvency application before the National Company Law Tribunal (NCLT).
3. Within 14 days from filing, the application must be admitted. Upon admission, the moratorium period (freezing of bank accounts, prohibition on foreclosures in relation to financial debts, etc.) commences.
4. At this stage, the existing management of the company loses complete control and all powers vest with an interim resolution professional, who has merely 30 days to put together all the relevant information and call for a meeting of the financial creditors.
5. Once the financial creditors meet, they must appoint a resolution professional who will put together an information memorandum of the company that forms the basis for a resolution applicant to propose a resolution plan for the company.
6. The Code fails to define a resolution applicant. All such resolution plans are placed before the financial creditors. When at least 75% of the financial creditors approve, the plan is implemented by way of an order by the NCLT. If the financial creditors fail to arrive at a consensus, the default plan is to liquidate the company.
7. The Code rides substantially on the unquestionable word of the creditors. Neither does the corporate debtor have an opportunity to put forth his/her case nor is there any scope of discretion provided to the adjudicating authority itself.
8. At various stages — of admission of the insolvency proceedings, of appointing the insolvency professional, of finalising the resolution plan — the Code fails to provide any opportunity to the corporate debtor to make a representation, at the very least.
9. In this manner, the Code ignores rights enshrined in the Constitution. (In Maneka Gandhi v. Union of India, 1978, the Supreme Court observed that it is the duty of the authority to give reasonable opportunity to be heard, even where there is no specific provision for showing cause when a proposed action affects the rights of the individual.)
10. The Code is also deficient in providing a yardstick for the qualification of the interim and of the final insolvency resolution professionals.It allows for any person to access the information memorandum put together by the insolvency professional without restricting competitors or imposing any confidentiality obligations.
11. This allows for any person to access proprietary information of the corporate debtor and misuse the same, given that there is no law protecting confidentiality and vitiates the fundamental right to business under Article 19(1)(g).
12. The Code prohibits withdrawal of the application once the same has been admitted.
13. This means that there is no scope whatsoever for settlement.
14. This is despite the recent ruling of the Supreme Court in Lokhandwala Kataria Construction (P) Ltd. V. Nisus Finance and Investment Managers LLP (2017), wherein a settlement proposal was taken on record and the appeal was disposed of. However, this cannot be held as a precedent.
15. Further, the unrestricted access of any person without mandatory contractual obligations in relation to confidentiality vitiates the fundamental right to business under Article 19(1)(g).
16. Time-bound insolvency resolution will require establishment of several new entities.  Also, given the pendency and disposal rate of DRTs, their current capacity may be inadequate to take up the additional role.
17. IPAs, regulated by the Board, will be created for regulating the functioning of IPs.  This approach of having regulated entities further regulate professionals may be contrary to the current practice of regulating licensed professionals.  Further, requiring a high value of performance bond may deter the formation of IPAs. 
18. The Code provides an order of priority to distribute assets during liquidation.  It is unclear why: (i) secured creditors will receive their entire outstanding amount, rather than up to their collateral value, (ii) unsecured creditors have priority over trade creditors, and (iii) government dues will be repaid after unsecured creditors.
19. The Code provides for the creation of multiple IUs. However, it does not specify that full information about a company will be accessible through a single query from any IU.  This may lead to financial information being scattered across these IUs.
20. The Code creates an Insolvency and Bankruptcy Fund.  However, it does not specify the manner in which the Fund will be used.

Conclusion

The Insolvency and Bankruptcy Code is

a comprehensive and systemic reform, which will give a quantum leap to the functioning of the credit market. It would take India from among relatively weak insolvency regimes to becoming one of the world’s best insolvency regimes. It lays the foundations for the development of the corporate bond market, which would finance the infrastructure projects of the future. The passing of this Code and implementation of the same will give a big boost to ease of doing business in India.

Question

Q.) “Bankruptcy code is a greater step towards the business friendly India.” Comment

Q.) What are the features of the bankruptcy code. Do think certain provisions undermine the fundamental right to carry out any profession

Source

The Hindu

PRS