KAS DAILY CURRENT AFFAIRS – 12th March 2020

KAS DAILY CURRENT AFFAIRS – 12th March 2020

KAS DAILY CURRENT AFFAIRS – 12th March 2020

 

Mains Topic – GS Paper III – Economy & Planning

Insolvency & Bankruptcy Code of India

In News

Parliament on Thursday passed amendments to the Insolvency & Bankruptcy law that will help ring-fence successful bidders of insolvent companies from risk of criminal proceedings for offences committed by previous promoters.

What is Insolvency & Bankruptcy law?

The 2016 Code applies to companies and individuals.  It provides for a time-bound process to resolve insolvency.  When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency within a 180-day period.

To ensure an uninterrupted resolution process, the Code also provides immunity to debtors from resolution claims of creditors during this period. The Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency.

The Code creates various institutions to facilitate resolution of insolvency.  These are as follows

Insolvency Professionals: A specialised cadre of licensed professionals is proposed to be created. These professionals will administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.

Insolvency Professional Agencies: The insolvency professionals will be registered with insolvency professional agencies. The agencies conduct examinations to certify the insolvency professionals and enforce a code of conduct for their performance.

Information Utilities: Creditors will report financial information of the debt owed to them by the debtor. Such information will include records of debt, liabilities and defaults.

Adjudicating authorities: The proceedings of the resolution process will be adjudicated by the National Companies Law Tribunal (NCLT), for companies; and the Debt Recovery Tribunal (DRT), for individuals. The duties of the authorities will include approval to initiate the resolution process, appoint the insolvency professional, and approve the final decision of creditors.

Adjudicating authorities: The proceedings of the resolution process will be adjudicated by the National Companies Law Tribunal (NCLT), for companies; and the Debt Recovery Tribunal (DRT), for individuals. The duties of the authorities will include approval to initiate the resolution process, appoint the insolvency professional, and approve the final decision of creditors

Issues with IBC

The Bankruptcy Board (regulator) will regulate insolvency professional agencies (IPAs), which will further regulate insolvency professionals (IPs).  The rationale behind multiple IPAs overseeing the functioning of their member IPs, instead of a single regulator is unclear. The presence of multiple IPAs operating simultaneously could enable competition in the sector. However, this may also lead to a conflict of interest between the regulatory and competitive goals of the IPAs.  This structure of regulation varies from the current practice where the regulator directly regulates its registered professionals.  For example, the Institute of Chartered Accountants of India (which regulates chartered accountants) is directly responsible for regulating its registered members.

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.

The smooth functioning of the Code depends on the functioning of new entities such as insolvency professionals, insolvency professional agencies and information utilities.  These entities will have to evolve over time for the proper functioning of the system.  In addition, the NCLT, which will adjudicate corporate insolvency has not been constituted as yet, and the DRTs are overloaded with pending cases.

 

Mains Topic- GS Paper II – Parliament and State Legislatures – structure, function, power and privileges

Anti-defection Law

In News

Recently, Two Congress MLAs in Madhya Pradesh have moved a petition before the Vidhan Sabha Speaker seeking disqualification of six rebel Ministers who are supporters of Jyotiraditya Scindia who recently resigned from congress.

What is Anti-defection law?

The anti-defection law is contained in the 10th Schedule of the Constitution. It was enacted by Parliament in 1985. It came into effect on 1st March 1985.

The purpose of the law is to curb political defection by the legislators.There are two grounds on which a member of a legislature can be disqualified.

If he/she voluntarily gives up the membership of his political party

If he/she Votes, or does not vote in the legislature, contrary to the directions of his political party.  However, if the member has taken prior permission, or is condoned by the party within 15 days from such voting or abstention, the member shall not be disqualified.

If an independent candidate joins a political party after the election.

If a nominated member joins a party six months after he becomes a member of the legislature.

The Chairman or the Speaker of the House takes the decision to disqualify a member.In Kihoto Hollohan vs Zachillhu and Others (1991), an SC Constitution Bench declared that the Speaker’s decision was subject to judicial review.

Significance of Anti-defection law

Positives

Provides greater stability. Check horse-trading in legislature.

Facilitates democratic re-alignment of parties by way of mergers.

Reduces corruption, reduces non-developmental expenditure for elections.

Constitutional recognition to political parties.

Negatives

Doesn’t differentiate b/w dissent & defection.

Irrational differentiation b/w individual & group defection.

No actions on party members outside legislature.

Distinction between independent & nominated members not rational.

Presiding officers impartiality sometimes questioned.

 

Way Forward

Disqualification to be limited to voluntary throwing up of membership & voting in no-confidence motion.

Adjudication must be by president/governor on the advice of EC.

 

Mains Topic – GS Paper III – Parliament and State Legislatures – structure, function, power and privileges

Election Reforms in India

In News

Recently, Election commission published 25 of the main recommendations of the the nine working groups, constituted after the Lok Sabha election for election reforms and invited comments or suggestions from the public till March 31.

Challenges to Elections in India

Criminalisation of Politics – Results in issues such as Candidates with criminal backgrounds,Black money generation for political funding, Fraudulent voting, Booth capturing,Intimidation of voters etc.

Election Funding –

Distorts Level Playing Field – Campaign expenditure extends beyond the legal limits stipulated by EC. This makes poor candidates less competitive.

Increased Corruption – Political parties receiving funding from Corporate will be forced to do favours after being elected.

Huge cost – Elections have become money rolling events in India.This essentially channelize resources to unproductive activities.

Management of Elections – Elections have become a huge exercise due to large number of constituencies & polling booths and proliferation of candidates.The institutional & infrastructural capabilities are strained which leads to other irregularities.

Way Forward

Decriminalisation with ban on candidates with criminal background from contesting.

Transparency in Election expenditure. Bringing political parties under RTI act.

Empowering EC with permanent secretariat, making expenses of it charged on consolidated fund of India, transparent selection process for election commissioners.

 

Mains Topic – Paper GS III – Railways

Privatisation of Railways

In News

The Opposition on Thursday demanded that the government not undertake privatisation of railways and come out with a separate Rail Budget to better analyse the performance.

Privatisation of Indian Railways – Status

After privatisation of the Tejas Express (to be run by the IRCTC), the government is currently in the process of forming a task force to draw a blueprint for handing over operations of as many as 150 trains and a total of 50 railway stations to private operators.Earlier the Bibek Debroy committee recommended that the rail industry needs to be liberalized by allowing the entry of private operators to provide services.

Need of Railways Privatisation

Low Quality of Service, Catering and Punctuality: Indian Railways deserves the credit for serving the largest democracy in the world, but it faces criticism, particularly in case of aspects like service, catering, and punctuality.

Low Internal Revenue: The problem of cross-subsidisation has severely affected the internal revenue generation of the Indian Railways.

Increasing Number of Accidents: Repeated railway accidents have further raised questions on government ownership of railways.

Advantages of Privatization

Improved Infrastructure: Privatisation will lead to better infrastructure which in turn would result in improved amenities for travellers.

Normalization of prices due to the competition: Improvement in quality of services has to be matched up by a rise in charges paid by the travellers.

Improved Security: Private participation can lead to better accountability and monitoring, which can keep a check on rising accidents in railways.

Better Technological Innovation: Private participation can lead to the infusion of modern technology and capacity building of Indian railways.

Disadvantages

Limited Coverage: An advantage of Indian Railways being government-owned is that it provides nation-wide connectivity irrespective of profit.Privatization will make railways a profit-making enterprise and will reduce its inclusivity.

Hikes in fares due to privatization can result in non-affordability of railway travel for the poor.

Issue of Accountability: The privatisation of Indian Railways is not easy, as it covers every part of India and runs for 24×7 hours.The whole railway system cannot be handled by a single party or coordination will be very difficult if area wise given to private parties.

Impact on the Economy: Indian Railways is the backbone of India, it provides low fare transportation to agricultural and industrial trade.

It is difficult to privatise a portion of the railways’ operations as it is strongly vertically integrated, which means ownership and maintenance of the rail and associated infrastructure, all is vested under the Ministry of Railways.

Way Forward

It is important to modernise the railways, so measures must be taken to reimburse the social costs speedily so that resources of the railways is better allocated and facilities are upgraded from time to time.

Core Railways functions can be Corporatizied rather than privatized.

The peripheral function of railways (cleanliness, ticket disposal, traveler’s amenities), must be privatized.