The debate in Rajya Sabha on the Bill to increase the Judges' salaries is, like the Lok Sabha debate earlier, equally noteworthy. Arun Jaitly, a former Law Minister, used the occasion to reflect on the process of Judges' appointments, and the procedure to investigate minor allegations against the Judges. Other members too shared their concern about related issues.
Among other speakers, Ram Jethmalani's speech was provocative: he deplored the fact that we are yet to build a monument for Justice H.R.Khanna, who had the courage to dissent in the A.D.M.Jabalpur case. D.Raja made a forceful plea for declaration of assets by Judges. The Law Minister reiterated the points which he made in the Lok Sabha. Overall, the debate in the Upper House reveals some Members' defence of judicial review or activism - which is interesting when we know that political class in general is opposed to judicial activism.
Showing posts with label Indian Parliament. Show all posts
Showing posts with label Indian Parliament. Show all posts
Wednesday, February 25, 2009
Thursday, February 19, 2009
Parliament's debate on judiciary
I was lucky to watch the debate in Lok Sabha yesterday on the Bill (on the Lok Sabha channel) to increase the Judges' salaries. Though the attendance in the House was thin, the House did witness a lively debate before the passage of the Bill. (You can use the link here to read the full debate, by directly going to the time of the debate, that is, 14.06, when it started). The synopsis of the debate can be read here from p.8 to 24.
It is worth reading the debate because the media has completely ignored it. Ironically, when Bills are passed without debate, the media takes notice, but when debate does take place, the media has no space for it. However, there are other reasons why the debate is worth reading. A Judge in the Bombay High Court has refused to accept this month's salary because the increment was first sanctioned through an Ordinance. Interestingly, the Members as well as the Speaker were agitated about the urgency displayed by the Government in hiking the salaries. The Law Minister has replied that Ordinance was necessary because some of the Judges telephoned him to correct the disparity in pay immediately, and it was not fair to let the judiciary nurture a grievance. But was it too urgent to justify the ordinance route? The Bill passed yesterday could have given the raise in salaries of the Judges with retrospective effect.
The debate is hilarious for other reasons as well. The Law Minister said he was senior in age and experience to the present Chief Justice of India; therefore, Government was not bound to follow the CJI's letter to the Prime Minister seeking the removal of Justice Soumitra Sen of Calcutta High Court. The Minister was clearly indicating that he did not see any merit in the allegations against Sen, besides pointing out that securing requisite number of signatures of MPs to initiate the impeachment process would be impractical.
The Law Minister was at his provocative best on other issues: that he did not agree with the 1993 Advocates-on-Record judgment of the Supreme Court giving primacy to the Collegium, or even the SC's judgment in the Kesavananda Bharati case putting fetters on the Parliament's power to amend the Constitution. "Parliament is supreme, and the Supreme Court is accountable to the Constitution", he said, leaving one to wonder whether Parliament is not accountable to the Constitution. The issue of ordinance increasing the Judges' salaries, and the failure to enact the Bill to create the National Judicial Commission, despite all-party consensus on it, are two instances of this Government's extraordinary deference to the Judiciary.
Also read:
PRS Legislative Research's summary of the bill to raise the salaries of Judges.
The Bill as introduced in the Lok Sabha.
V.R.Krishna Iyer's article in The Hindu admonishing the Judiciary for seeking a salary-hike.
It is worth reading the debate because the media has completely ignored it. Ironically, when Bills are passed without debate, the media takes notice, but when debate does take place, the media has no space for it. However, there are other reasons why the debate is worth reading. A Judge in the Bombay High Court has refused to accept this month's salary because the increment was first sanctioned through an Ordinance. Interestingly, the Members as well as the Speaker were agitated about the urgency displayed by the Government in hiking the salaries. The Law Minister has replied that Ordinance was necessary because some of the Judges telephoned him to correct the disparity in pay immediately, and it was not fair to let the judiciary nurture a grievance. But was it too urgent to justify the ordinance route? The Bill passed yesterday could have given the raise in salaries of the Judges with retrospective effect.
The debate is hilarious for other reasons as well. The Law Minister said he was senior in age and experience to the present Chief Justice of India; therefore, Government was not bound to follow the CJI's letter to the Prime Minister seeking the removal of Justice Soumitra Sen of Calcutta High Court. The Minister was clearly indicating that he did not see any merit in the allegations against Sen, besides pointing out that securing requisite number of signatures of MPs to initiate the impeachment process would be impractical.
The Law Minister was at his provocative best on other issues: that he did not agree with the 1993 Advocates-on-Record judgment of the Supreme Court giving primacy to the Collegium, or even the SC's judgment in the Kesavananda Bharati case putting fetters on the Parliament's power to amend the Constitution. "Parliament is supreme, and the Supreme Court is accountable to the Constitution", he said, leaving one to wonder whether Parliament is not accountable to the Constitution. The issue of ordinance increasing the Judges' salaries, and the failure to enact the Bill to create the National Judicial Commission, despite all-party consensus on it, are two instances of this Government's extraordinary deference to the Judiciary.
Also read:
PRS Legislative Research's summary of the bill to raise the salaries of Judges.
The Bill as introduced in the Lok Sabha.
V.R.Krishna Iyer's article in The Hindu admonishing the Judiciary for seeking a salary-hike.
Friday, February 13, 2009
Mysteries of law making
There is an interesting article in The Hindu by the CPI National Secretary, and MP, D.Raja (A design to block opportunities)revealing not just how hastily the Scheduled Castes and Scheduled Tribes (Reservation in Posts and Services) Bill, 2008 was passed by the Rajya Sabha in December 2008, but how key changes were introduced in the Bill stealthily. The Bill, everyone avers, was required because till now reservations for SCs, and STs (and for OBCs)have been provided through executive orders. Raja's main objection is against S.4(1) of the Bill which removes 47 government institutions from the purview of quota. (The list can be enlarged by the government).
The Bill has a long trajectory. The Bill had originally included the OBCs in its ambit, and was introduced in the Lok Sabha in 2004. The Parliamentary Standing committee report on the bill was submitted in June 2005. Raja says the Govt. rejected the report and inserted S.4(1) which was not there in the Bill, and which the committee did not recommend. More important, the Govt. did not consult the relevant Ministries. Sure enough, there will be lot of heat in the Lok Sabha and amendments will be suggested to this Bill, which then may have to get the clearance afresh in Rajya Sabha. The summary of the Bill, provided by the PRS Legislative Research,is here.
My interest in this post is on the procedural issue: Just who had managed to insert S.4(1) in the Bill, when it is likely to ignite a huge political controversy? It will remain a mystery, unless one goes into the various stages of the evolution of this Bill and the various hands it passed through till it was passed by the Rajya Sabha.
The original Bill referred to the Standing Committee is here.
The Standing Committee report can also be read here, courtesy PRS. The summary of the 2004 Bill is also available here.
The Bill has a long trajectory. The Bill had originally included the OBCs in its ambit, and was introduced in the Lok Sabha in 2004. The Parliamentary Standing committee report on the bill was submitted in June 2005. Raja says the Govt. rejected the report and inserted S.4(1) which was not there in the Bill, and which the committee did not recommend. More important, the Govt. did not consult the relevant Ministries. Sure enough, there will be lot of heat in the Lok Sabha and amendments will be suggested to this Bill, which then may have to get the clearance afresh in Rajya Sabha. The summary of the Bill, provided by the PRS Legislative Research,is here.
My interest in this post is on the procedural issue: Just who had managed to insert S.4(1) in the Bill, when it is likely to ignite a huge political controversy? It will remain a mystery, unless one goes into the various stages of the evolution of this Bill and the various hands it passed through till it was passed by the Rajya Sabha.
The original Bill referred to the Standing Committee is here.
The Standing Committee report can also be read here, courtesy PRS. The summary of the 2004 Bill is also available here.
Wednesday, January 28, 2009
PRS Conference on Effective Legislatures
In previous posts on this blog available here and here, I summarised the panel discussions at the PRS Conference on Effective Legislatures held at New Delhi, on December 5th, 2008. The discussion papers circulated at the conference, official transcripts of the panel discussions as well as summaries of the panel proceedings are all now available at this link.
Wednesday, December 17, 2008
MR Madhavan on the new Right to Education Bill
The UPA government recently introduced the Right to Free and Compulsory Education Bill, 2008. The issue of the right to primary education in India, and the way it should be implemented through parliamentary law has been simmering for long, and has attracted commentary on this blog from its inception. Previous posts tracking debates over this issue can be found here, here and here. For a good resource on issues relating to education in general, see this section of the regularly updated website of India Together.
Today’s Indian Express carries an op-ed by MR Madhavan of PRS Legislative Research which seeks to highlight problematic aspects of the Bill. He begins his analysis by noting - as mentioned in the posts referenced above - that the Bill has been delayed since 2005 on the sticky issue of the sharing of costs between the centre and the states, which appears to have now been resolved. Madhavan provides a good summary of the main provisions and aims of the Bill:
The Bill states that all children between the age of six and fourteen years have the right to free and compulsory education. It mandates the government to set up neighbourhood schools within three years. It has provisions to provide out-of-school children to be given special training and then be admitted to the class appropriate for their age. It bans capitation fees and screening tests at the time of admission, failing or expelling any child till the completion of elementary education, and private tuitions by teachers. The Bill has specific provisions for private schools: a certificate of recognition and admitting at least 25 per cent of students belonging to the “weaker section and disadvantaged group in the neighbourhood and provide free and compulsory education till its completion”. For such children, the government will provide reimbursement to the school to the extent of per-child expenditure for government schools.
He goes on to highlight five main points:
First, there appears to be lack of clarity on the delivery mechanism to provide elementary education for all children. … … … [The Bill] permits private schools, [but] places several conditions — on admissions (including the 25 per cent quota for weaker sections), minimum standards and policies on promoting students among others. ... ... ... Second, the focus appears to be on infrastructure and enrolment and not to see that the children who go to school actually learn. ... ... ... Third, the Bill provides for a uniform curriculum and evaluation procedure for elementary education within each state. This would limit the freedom of schools to determining the pedagogical content and methodology. Fourth, this Bill states that “it shall be the duty of every parent to admit his child to a neighbourhood school”. It, however, does not state the consequences of not following this duty. Also, it does not address the issues due to which parents do not admit their children. Fifth, the Bill requires each government and aided school to form a school management committee comprising local elected representatives, parents and teachers. This committee shall monitor the working of the school and the utilisation of grants given to the school. Evidence from Karnataka and several countries in Latin America and Africa on similar committees do not present any conclusive evidence of improvement in quality of schools.
His conclusion:
While the Bill attempts to lay down some guideposts, it remains an open question whether its provisions are sufficient to achieve this goal.
There is near unanimous agreement among policy makers on the crucial importance of primary education in India. To echo the point made by Tarunabh in the previous post, it is imperative that Parliament play its role of a genuine deliberative forum, at least on issues that go to the core of our constitutional democracy.
Update: The discussion in the comments section makes a reference to the text of the Bill necessary. Here is the full text of the Bill, from the PRS Legislative Research website.
Saturday, August 30, 2008
Unenforced legislations - reconsidering AK Roy
In a recent post on a related matter, I mentioned the judgment in AK Roy:
'In AK Roy v Union of India the duly enacted 44th Constitution Amendment Act 1978 provided that it shall come into force when notified. The government notified all but Section 3 of the Amending Act which sought to amend Article 22 of the Constitution dealing with preventive detention. The Supreme Court held that it could not issue a mandamus asking the government to notify it and bring it into force. If this is true of a constitutional amendment, it is definitely true of a mere legislation.Many other duly enacted laws which had similar provisions granting discretion of notification to the Executive have not been brought into force, including the Hire Purchase Act, 1972 (which I think continues to be on the statute books as valid but unenforceable law) and the Freedom of Information Act 2002 (which was repealed by the Right to Information Act 2005). This article documents several others suffering a similar fate.'
It is very interesting to compare AK Roy and several subsequent cases which have taken the same route with a British case decided by the far less 'activist' House of Lords:
In Secretary of State for the Home Department, ex parte Fire Brigades Union (1995) 2 AC 513 (HL) the House of Lords held that it was unlawful for the Home Secretary to introduce changes to a scheme which were incompatible with an Act of Parliament. Parliament enacted a provision for compensating victims of crimes, with a clause empowering the Secretary of State to bring it into force. The Secretary not only did not bring it into force, but also issued an order instituting a less generous scheme. The majority held that although it was within the Secretary's discretion to decide when it was appropriate to bring the law into force, he was under an obligation to keep the matter under continuing review. The institution of the less generous scheme was a failure of this duty since it was clear that the Secretary did not intend to bring the law into force at all, and thereby frustrated Parliament's will.
The doctrine of reasonable expectations also played a role. To quote Lord Brone-Wilkinson:
"Although the victim of a crime committed immediately before theWhite Paper was published had no legal right to receive compensation inaccordance with the old scheme, he certainly had a legitimate expectation thathe would do so. Moreover, he had a legitimate expectation that, unless therewere proper reasons for further delay in bringing sections 108 to 117 of theAct into force, his expectations would be converted into a statutory right. Ifthose legitimate expectations were defeated by the composite decision of theSecretary of State to discontinue the old scheme and not to bring the statutoryscheme into force and those decisions were unlawfully taken, he has locusstandi in proceedings for judicial review to complain of such illegality."
Interestingly, both the majority and the minority employed separation of power arguments. The majority held that it was for the Parliament to repeal a law, not the Executive. The minority reminded the Court of its own limitations.
The majority opionion makes sense. There are several instances where it is quite clear that the Executive has decided never to implement a law, like the constitutional amendment in AK Roy. It has thereby frustrated Parliamentary mandate - surely the discretion to bring into force does not include the choice of never bringing it into force. It is easy to say that those aggreived should go back to the Parliament - but Parliamentary time is a valuable resource. In any case, the Parliament has expressed an intention and has not said anything to the contrary - shouldn't it generate some obligations on the Executive? In fact, if it is unhappy with a law, shouldn't it be the government's responsibility to go back to Parliament to get it repealed (like it did in the case of the Freedom of Information Act 2002) rather than it frustrating the legitimate expectations of the citizen as well as the will of the Parliament?
Even international law (I think) has comparable rules, where a country which has signed a treaty but not ratified it is nonetheless has the obligation to refrain from any action contrary to the spirit of the treaty.
Perhaps the courts cannot issue mandamus to bring the law into force. But surely there is a middle way, like in Fire Brigades Union? The challenge of coming up with appropriate remedies should not result in the denial of the right itself. In some cases, even a mere judicial declaration of the continuing obligation on the Executive to consider the date of implementation and seeking evidence to demonstrate the fulfilment of this duty might suffice.
Update:
This article discusses a related issue of bringing different provisions into force at different times, creating confusion:
'The Supreme Court was confronted with this predicament in a recent case, J Mitra & Co Pvt Ltd vs Assistant Controller of Patents & Designs.
The judgment described the case as a “classic illustration of the confusion which has emerged on account of the postponement of in-part commencement of the Patents (Amendment) Act 2005”. There were amendments in 1999 and 2002, making significant changes in the patent law. But some sections were not notified, and others telescoped into the later amendments, creating a bewildering situation. This is what happens when different dates are appointed for the coming into force of different parts of the same Act, and the government does not enforce some portions.'
Venkatesan, thanks for pointing this out.
Update 2:
Apparently Aeltemesh Rein v. Union of India decided by the Supreme Court has already upheld a 'duty to consider' similar to that in Fire Brigades Union. I haven't read the case myself yet, but picked this up from a note Vikram sent (thanks) - am I correct in this? Has anyone else seen this case?
'In AK Roy v Union of India the duly enacted 44th Constitution Amendment Act 1978 provided that it shall come into force when notified. The government notified all but Section 3 of the Amending Act which sought to amend Article 22 of the Constitution dealing with preventive detention. The Supreme Court held that it could not issue a mandamus asking the government to notify it and bring it into force. If this is true of a constitutional amendment, it is definitely true of a mere legislation.Many other duly enacted laws which had similar provisions granting discretion of notification to the Executive have not been brought into force, including the Hire Purchase Act, 1972 (which I think continues to be on the statute books as valid but unenforceable law) and the Freedom of Information Act 2002 (which was repealed by the Right to Information Act 2005). This article documents several others suffering a similar fate.'
It is very interesting to compare AK Roy and several subsequent cases which have taken the same route with a British case decided by the far less 'activist' House of Lords:
In Secretary of State for the Home Department, ex parte Fire Brigades Union (1995) 2 AC 513 (HL) the House of Lords held that it was unlawful for the Home Secretary to introduce changes to a scheme which were incompatible with an Act of Parliament. Parliament enacted a provision for compensating victims of crimes, with a clause empowering the Secretary of State to bring it into force. The Secretary not only did not bring it into force, but also issued an order instituting a less generous scheme. The majority held that although it was within the Secretary's discretion to decide when it was appropriate to bring the law into force, he was under an obligation to keep the matter under continuing review. The institution of the less generous scheme was a failure of this duty since it was clear that the Secretary did not intend to bring the law into force at all, and thereby frustrated Parliament's will.
The doctrine of reasonable expectations also played a role. To quote Lord Brone-Wilkinson:
"Although the victim of a crime committed immediately before theWhite Paper was published had no legal right to receive compensation inaccordance with the old scheme, he certainly had a legitimate expectation thathe would do so. Moreover, he had a legitimate expectation that, unless therewere proper reasons for further delay in bringing sections 108 to 117 of theAct into force, his expectations would be converted into a statutory right. Ifthose legitimate expectations were defeated by the composite decision of theSecretary of State to discontinue the old scheme and not to bring the statutoryscheme into force and those decisions were unlawfully taken, he has locusstandi in proceedings for judicial review to complain of such illegality."
Interestingly, both the majority and the minority employed separation of power arguments. The majority held that it was for the Parliament to repeal a law, not the Executive. The minority reminded the Court of its own limitations.
The majority opionion makes sense. There are several instances where it is quite clear that the Executive has decided never to implement a law, like the constitutional amendment in AK Roy. It has thereby frustrated Parliamentary mandate - surely the discretion to bring into force does not include the choice of never bringing it into force. It is easy to say that those aggreived should go back to the Parliament - but Parliamentary time is a valuable resource. In any case, the Parliament has expressed an intention and has not said anything to the contrary - shouldn't it generate some obligations on the Executive? In fact, if it is unhappy with a law, shouldn't it be the government's responsibility to go back to Parliament to get it repealed (like it did in the case of the Freedom of Information Act 2002) rather than it frustrating the legitimate expectations of the citizen as well as the will of the Parliament?
Even international law (I think) has comparable rules, where a country which has signed a treaty but not ratified it is nonetheless has the obligation to refrain from any action contrary to the spirit of the treaty.
Perhaps the courts cannot issue mandamus to bring the law into force. But surely there is a middle way, like in Fire Brigades Union? The challenge of coming up with appropriate remedies should not result in the denial of the right itself. In some cases, even a mere judicial declaration of the continuing obligation on the Executive to consider the date of implementation and seeking evidence to demonstrate the fulfilment of this duty might suffice.
Update:
This article discusses a related issue of bringing different provisions into force at different times, creating confusion:
'The Supreme Court was confronted with this predicament in a recent case, J Mitra & Co Pvt Ltd vs Assistant Controller of Patents & Designs.
The judgment described the case as a “classic illustration of the confusion which has emerged on account of the postponement of in-part commencement of the Patents (Amendment) Act 2005”. There were amendments in 1999 and 2002, making significant changes in the patent law. But some sections were not notified, and others telescoped into the later amendments, creating a bewildering situation. This is what happens when different dates are appointed for the coming into force of different parts of the same Act, and the government does not enforce some portions.'
Venkatesan, thanks for pointing this out.
Update 2:
Apparently Aeltemesh Rein v. Union of India decided by the Supreme Court has already upheld a 'duty to consider' similar to that in Fire Brigades Union. I haven't read the case myself yet, but picked this up from a note Vikram sent (thanks) - am I correct in this? Has anyone else seen this case?
Wednesday, August 27, 2008
Dhavan's response to Venkatesan
Dr. Dhavan has sent the following in response to Venkatesan's critique. I have his permission to post it on the blog:
"Wrong But Delightful: A Response to V. Venkatesan
- By Rajeev Dhavan
1. What a wonderfully provocative review!
2. The main debate is on whether the Parliamentary debates were fulfilling (see Book pp. 34-5). Clearly they were not.
3. It is the OBC bench that was utterly confused about whether the creamy layer applied to SCs and STs (see Book pp. 227-233) where the contradiction is shown.
4. The important aspect of Nagraj and Coelho is the caveat that, 50% reservations, creamy layer and compelling necessity are essential in respect of future actions even validity of the constitutional amendments is upheld (see Book pp. 238).
5. Alas, you have reviewed only the epilogue (see Book pp.199 ff) and my supposed reversal of roles, but not the book.
6. I love your writing – right or wrong!!"
"Wrong But Delightful: A Response to V. Venkatesan
- By Rajeev Dhavan
1. What a wonderfully provocative review!
2. The main debate is on whether the Parliamentary debates were fulfilling (see Book pp. 34-5). Clearly they were not.
3. It is the OBC bench that was utterly confused about whether the creamy layer applied to SCs and STs (see Book pp. 227-233) where the contradiction is shown.
4. The important aspect of Nagraj and Coelho is the caveat that, 50% reservations, creamy layer and compelling necessity are essential in respect of future actions even validity of the constitutional amendments is upheld (see Book pp. 238).
5. Alas, you have reviewed only the epilogue (see Book pp.199 ff) and my supposed reversal of roles, but not the book.
6. I love your writing – right or wrong!!"
Wednesday, April 2, 2008
Derivatives in Commodities: Some Issues
The issue over commodities exchanges and trading of futures and options in respect commodities has been brought to the fore with the Left parties deciding not to support the Forward Contracts (Regulation) Amendment Bill.
By way of background, commodities trading can occur in two ways. One is spot trading, where a buyer and seller of commodities enter into a contract, and settle the same by delivery of the commodities and the corresponding payment within a predefined time period (usually up to 11 days). The second is forward trading, where the delivery and/or payment occurs beyond such pre-defined period. Under the Constitution, spot trading is left to States to legislate, while forward trading is within the domain of the Parliament. It is under the latter powers that the Parliament enacted the Forward Contracts (Regulation) Act, 1952 (FCRA) that governs forward trading in commodities. Under the FCRA, while forward trading was permitted in some commodities and restricted in others, options were prohibited. To explain an option, it is a contract under which one party has the option or right (but not the obligation) to buy or to sell a commodity at a predetermined price. The administrative authority under the FCRA was the Forward Markets Commission (FMC), which was a government body.
With the development of the commodities futures markets over the last few years, the Government proposed an overhaul of the FCRA to take these recent developments into account. The principal changes relate to the allowance of options in commodities (that were earlier prohibited), the reestablishment of the FMC as an independent regulator (on similar lines as SEBI) rather than as an arm of the Government itself, and the organisation of commodities exchanges (to enable commodities futures trading) on corporate lines similar to stock exchanges. While these issues were part of the Forward Contracts (Regulation) Bill, 2006 that was pending in Parliament, the Government accelerated the reform process by ensuring the promulgation of the Forward Contracts (Regulation) Ordinance, 2008. The key features of the Ordinance are set out in a press release issued by the Government.
While there could be some questions as to the way in which the Government secured the changes through an Ordinance just two weeks before the Parliament commenced its session, there is little doubt that these changes were long overdue. Like the stock markets in India, the commodities markets too have been developing in a structured fashion over the last few years. Two large electronic exchanges in the form of the Multi Commodity Exchange of India Limited (MCX) and the National Commodities and Derivatives Exchange Limited (NCDEX) have been established and they now handle a significant portion of futures trading that occurs in commodities in India.
Economically, futures trading provides several benefits; it creates liquidity in the markets, enables price discovery by signaling the best price to the rest of the market participants, and most importantly, it provides traders with an avenue to hedge their risks. But, we must bear in mind that derivatives (such as futures and options) are complex instruments and hence are inherently risky. They are largely based on movements in commodity prices, and wrong bets on market movement can prove to be very costly, sometimes even to sophisticated players.
The Left has largely attacked the Ordinance by attributing the recent surge in commodity prices to extensive futures trading. However, that seems somewhat misdirected, as there is no correlation established between futures trading and increase in prices. Price increases could possibly arise due to myriad other factors.
I find that an important aspect that the Ordinance has failed to tackle is the issue of complexity of derivatives. It is not sufficient if the law merely provides a platform for derivatives trading in commodities. There needs to be a proper mechanism for disclosure, which requires persons that are selling futures and options in commodities to disclose all details (the risks in particular) relating to these products in a manner that the buyers of such products are able to appreciate the risks involved before they decide whether to participate in that market or not. In relation to derivatives in the stock market, the detailed rules issued by SEBI largely serve that purpose. It is also to be noted that the commodities futures market is likely to be patronised primarily by traders (some of them who may be of medium to small-scale) who may not possess sufficient sophistication to comprehend the risks involved in such complex instruments. The experience with derivatives in the financial markets (where the level of sophistication is somewhat higher) has not been good either, what with several companies now filing suits against banks (with whom they entered into derivative transactions) to renege on their commitments, including on the grounds that they did not fully understand what they were entering into. For details, see here and here on the Indian Corporate Law Blog). Therefore, a proper disclosure regime is called for in commodities trading so as to ensure informed trading in commodities derivatives, and thereby a transparent market.
The Left has also opposed foreign direct investment (FDI) in commodities exchanges. Although the press reports (referring to the Left objections) indicate that the FDI has been permitted under the Ordinance, it is not the accurate position. FDI is governed by various policies issued by the Department of Industrial Policy and Promotion (and not the Ordinance). The Press Note 2 of 2008 allows foreign investment of 49% in commodities exchanges (with 26% FDI and 23% FII investment) with the prior approval of the Government. Further, no foreign investor/entity, including persons acting in concert, will hold more than 5% equity in such companies. This appears to me to be a balanced approach towards foreign investment. While it allows major world players in this industry to participate in the Indian market and thereby introduce their expertise and business practices, it guards domestic interests as well. It is fairly restrictive as (i) investment is possible only with prior Government approval, (ii) majority shareholding still remains with domestic owners; and (iii) there is no risk of dominance by a single foreign player (or group) on an exchange as individual investments are capped at 5%.
It is likely that these issues will be the subject of heated debate in the near future, especially as the Bill comes up for discussion in Parliament.
By way of background, commodities trading can occur in two ways. One is spot trading, where a buyer and seller of commodities enter into a contract, and settle the same by delivery of the commodities and the corresponding payment within a predefined time period (usually up to 11 days). The second is forward trading, where the delivery and/or payment occurs beyond such pre-defined period. Under the Constitution, spot trading is left to States to legislate, while forward trading is within the domain of the Parliament. It is under the latter powers that the Parliament enacted the Forward Contracts (Regulation) Act, 1952 (FCRA) that governs forward trading in commodities. Under the FCRA, while forward trading was permitted in some commodities and restricted in others, options were prohibited. To explain an option, it is a contract under which one party has the option or right (but not the obligation) to buy or to sell a commodity at a predetermined price. The administrative authority under the FCRA was the Forward Markets Commission (FMC), which was a government body.
With the development of the commodities futures markets over the last few years, the Government proposed an overhaul of the FCRA to take these recent developments into account. The principal changes relate to the allowance of options in commodities (that were earlier prohibited), the reestablishment of the FMC as an independent regulator (on similar lines as SEBI) rather than as an arm of the Government itself, and the organisation of commodities exchanges (to enable commodities futures trading) on corporate lines similar to stock exchanges. While these issues were part of the Forward Contracts (Regulation) Bill, 2006 that was pending in Parliament, the Government accelerated the reform process by ensuring the promulgation of the Forward Contracts (Regulation) Ordinance, 2008. The key features of the Ordinance are set out in a press release issued by the Government.
While there could be some questions as to the way in which the Government secured the changes through an Ordinance just two weeks before the Parliament commenced its session, there is little doubt that these changes were long overdue. Like the stock markets in India, the commodities markets too have been developing in a structured fashion over the last few years. Two large electronic exchanges in the form of the Multi Commodity Exchange of India Limited (MCX) and the National Commodities and Derivatives Exchange Limited (NCDEX) have been established and they now handle a significant portion of futures trading that occurs in commodities in India.
Economically, futures trading provides several benefits; it creates liquidity in the markets, enables price discovery by signaling the best price to the rest of the market participants, and most importantly, it provides traders with an avenue to hedge their risks. But, we must bear in mind that derivatives (such as futures and options) are complex instruments and hence are inherently risky. They are largely based on movements in commodity prices, and wrong bets on market movement can prove to be very costly, sometimes even to sophisticated players.
The Left has largely attacked the Ordinance by attributing the recent surge in commodity prices to extensive futures trading. However, that seems somewhat misdirected, as there is no correlation established between futures trading and increase in prices. Price increases could possibly arise due to myriad other factors.
I find that an important aspect that the Ordinance has failed to tackle is the issue of complexity of derivatives. It is not sufficient if the law merely provides a platform for derivatives trading in commodities. There needs to be a proper mechanism for disclosure, which requires persons that are selling futures and options in commodities to disclose all details (the risks in particular) relating to these products in a manner that the buyers of such products are able to appreciate the risks involved before they decide whether to participate in that market or not. In relation to derivatives in the stock market, the detailed rules issued by SEBI largely serve that purpose. It is also to be noted that the commodities futures market is likely to be patronised primarily by traders (some of them who may be of medium to small-scale) who may not possess sufficient sophistication to comprehend the risks involved in such complex instruments. The experience with derivatives in the financial markets (where the level of sophistication is somewhat higher) has not been good either, what with several companies now filing suits against banks (with whom they entered into derivative transactions) to renege on their commitments, including on the grounds that they did not fully understand what they were entering into. For details, see here and here on the Indian Corporate Law Blog). Therefore, a proper disclosure regime is called for in commodities trading so as to ensure informed trading in commodities derivatives, and thereby a transparent market.
The Left has also opposed foreign direct investment (FDI) in commodities exchanges. Although the press reports (referring to the Left objections) indicate that the FDI has been permitted under the Ordinance, it is not the accurate position. FDI is governed by various policies issued by the Department of Industrial Policy and Promotion (and not the Ordinance). The Press Note 2 of 2008 allows foreign investment of 49% in commodities exchanges (with 26% FDI and 23% FII investment) with the prior approval of the Government. Further, no foreign investor/entity, including persons acting in concert, will hold more than 5% equity in such companies. This appears to me to be a balanced approach towards foreign investment. While it allows major world players in this industry to participate in the Indian market and thereby introduce their expertise and business practices, it guards domestic interests as well. It is fairly restrictive as (i) investment is possible only with prior Government approval, (ii) majority shareholding still remains with domestic owners; and (iii) there is no risk of dominance by a single foreign player (or group) on an exchange as individual investments are capped at 5%.
It is likely that these issues will be the subject of heated debate in the near future, especially as the Bill comes up for discussion in Parliament.
Friday, March 28, 2008
Redrawing Constituencies: The Basics, and the Implications of recent legislation
M.R. Madhavan, the Head of Research at PRS Legislative Research, has an insightful column in today’s Indian Express where he explains the history of the practice of delimitation of constituencies in India, while also providing basic facts and explanations about the policy dilemmas involved. His piece is written against the backdrop of recent legislative efforts in this respect, and Madhavan also explains details of the process that is now afoot.
He describes a significant implication of the current process as follows:
The number of seats in each state remains unchanged. An important implication is that the Hindi heartland would be under-represented in Parliament to the benefit of the southern states. That is, the 11 Hindi speaking states and Union territories would have 18 seats less than their population share, while the 6 southern states/UTs will have 12 more than theirs. The next delimitation will not be carried out before 2026. Given the continued divergence in population growth, the under-representation of Hindi states would increase to 37 seats and over-representation of the south to 26 seats by 2026. In the next election, Uttar Pradesh alone would have a deficit of 8 seats, which would widen to 16 seats by 2026.
In the remaining part of the article, he analyses the issues that arise as a result of this decision. The implications seem staggering even to those (like me) who are probably getting exposed to this area of the law for the first time. For some inexplicable reason, despite the importance of elections in India, analysis of electoral laws has not received the prominence in constitutional law that it deserves. In other constitutional democracies, this area of the law garners prominent attention among constitutional scholars. Perhaps the legal community in India would do well to go beyond focusing on the more dramatic aspects of election law (issues arising out of Article 356, the provisions of the Representation of People’s Act that gained prominence in the Hindutva cases, etc).
Sunday, March 16, 2008
Farmer Debt Waivers: The Ongoing Debate
This year’s Budget, which was presented by the Financial Minister Mr. P. Chidambaram in Parliament a couple of weeks ago, has been termed a populist and an election-year budget. One aspect of the Budget that has been subject to intense scrutiny and debate pertains to the waivers and one-time settlements offered to certain farmers who have obtained agricultural loans from scheduled commercial banks, regional rural banks and cooperative credit institutions.
Budget Terms
In his Budget speech, the Finance Minister stated (in paragraph 73):
Budget Terms
In his Budget speech, the Finance Minister stated (in paragraph 73):
“Debt Waiver and Debt Relief
73. Sir, while I am confident that the schemes and measures that I have listed above will give a boost to the agriculture sector, the question that still looms large is what we should do about the indebtedness of farmers. Honourable members will recall that Government had appointed a Committee under Dr. R. Radhakrishna to examine all aspects of agricultural indebtedness. The Committee has since submitted its report and it is in the public domain. The Committee had made a number of recommendations but stopped short of recommending waiver of agricultural loans. However, Government is conscious of the dimensions of the problem and is sensitive to the difficulties of the farming community, especially the small and marginal farmers. Having carefully weighed the pros and cons of debt waiver and having taken into account the resource position, I place before this House a scheme of debt waiver and debt relief for farmers:(i) All agricultural loans disbursed by scheduled commercial banks, regional rural banks and cooperative credit institutions up to March 31, 2007 and overdue as on December 31, 2007 will be covered under the scheme.…”
(ii) For marginal farmers (i.e., holding upto 1 hectare) and small farmers (1-2 hectare), there will be a complete waiver of all loans that were overdue on December 31, 2007 and which remained unpaid until February 29, 2008. In respect of other farmers, there will be a one time settlement (OTS) scheme for all loans that were overdue on December 31, 2007 and which remained unpaid until February 29, 2008. Under the OTS, a rebate of 25 per cent will be given against payment of the balance of 75 per cent.
The Budget estimates the total figure of the debt waiver to be in the region of Rs. 60,000 crore (Rs. 600 billion).
Some of the key features of the debt waiver are as follows: (i) they are applicable to agricultural loans disbursed by scheduled commercial banks, regional rural banks and cooperative credit institutions; (ii) marginal and small farmers get a complete waiver of the loans; (iii) other farmers are entitled to a one-time settlement under which they get a rebate of 25% of the loan outstanding, while they are required to pay the balance 75%.
Public Interest Litigation
This farmer debt waiver was challenged in the Supreme Court in a public interest litigation (PIL) within days of the Budget announcement. The petitioner, ML Sharma, alleged that the amount of debt held by small and marginal farmers was way below the Rs. 60,000-crore figure suggested by the Government. Further, the PIL sought that the waiver not be limited to farmers who have taken loans from nationalised banks, but also be extended to farmers who have obtained finances from private banks and private money lenders.
The Supreme Court, however, refused urgent hearing on the petition on the ground that the waiver was still a proposal pending before Parliament, and that the Court would not interfere on an issue that is still being discussed in Parliament. The Supreme Court’s approach seems appropriate at this stage because the petition is premature – the proposal is still being discussed in Parliament, and there is not certainty that the debt waiver will assume the nature of a binding law in the same form that it has been proposed, if at all.
However, since the matter has assumed importance, not only due to several legal and economic issues that it raises, but also because of the significant political overtones surrounding it, there is strong reason to suspect that the issue will not die down so easily that that the matter will spring up in further litigation at a later stage.
It would therefore not be out of place to discuss some of the key issues that emerge from the debt waivers proposed. The purpose of this post is only to raise the issues and highlight the arguments from different points of view, but no attempt is being made to proffer any final solutions (as that may not only be premature yet, but will necessarily involve a far more detailed exercise).
Implications
1. Size of the Problem
A key challenge to the proposal has been the alleged incongruity in the numbers disclosed by the Government. It is believed that the amount of loans borrowed by farmers from public sectors banks is far less than the numbers (i.e. Rs. 60,000 crores) arrived at by the Government. For example, the Economic Times reports today that the non-performing assets/ loans (NPAs) of all scheduled commercial banks stood at Rs. 20,100 crore, the NPAs of the cooperative sector at Rs. 32,500 crores and the NPAs of the regional rural banks at Rs. 1,000 crores. Therefore, all the NPAs of the affected set of banks totals only to Rs. 53,600 crores. Now, these figures include all loans that are non-performing in the books of the banks that arise from all types of activities, including agricultural and non-agricultural activities. Then, it seems curious at a first glance as to how the agricultural non-performing loans as proposed in the Budget stand at Rs. 60,000 crores, when the entire non-performing loans (from all sectors) of the scheduled commercial banks, cooperative banks and regional rural banks stand only at a lesser figure of Rs. 53,600 crores. This defies logic, and the anomaly in the figures requires further explanation, failing which the proposal could be susceptible to serious challenge on the ground that the proposal seeks to address an illusory problem that does not exist at all.
2. Issues of Classification
Any challenge to the proposal is likely to involve issues of classification that constitutional lawyers are entirely familiar with. Has there been any arbitrariness in determining the class of farmers that are eligible to the waiver benefit? For instance, why are only loans borrowed from scheduled commercial banks, regional rural banks and cooperative credit institutions eligible for the waiver? Why not the loans borrowed from private commercial banks or private money lenders? In fact, commentators have stated that the agriculture sector is quite substantially funded by private money lenders whose terms of lending (such as exorbitant interest rates) and harsh recovery methods cause unbearable harassment to poor farmers, sometimes even resulting in farmer suicides. Certainly, the public sector banks are likely to be softer on borrowers than private money lenders. Now, if the Budget proposal is to address the issue of farmer harassment, one issue that may arise is why the private money lenders have been left out of the waivers. The legal approach to dealing with private money lenders may be somewhat different because that would involve cancellation of the loan contracts they have entered into with borrowers, unlike in the case of public sector banks where the Government has direct authority over the activities of these banks themselves which can forego their rights under the loan contracts without involving a cancellation of the contracts. But, that may not necessarily explain the reasons for leaving the private money lenders out of the scheme.
There may potentially be challenges to the types of farmers who are eligible to benefit from the waiver. For example, there have already been calls from members of parliament such as Rahul Gandhi to increase the threshold limits of landholding that determine which farmers are entitled to the benefits.
3. Moral Hazard
This is a problem that arises in economics where one of the parties to a contract has entered into the contract without good faith or has the incentive to take unusual risks without any attendant consequences. In the context of loan transactions, this involves cases where borrowers have taken loans, made risky investments and defaulted on the loans, but have been rescued either by government intervention or other circumstances thereby excusing them from fully performing the contract, as they would have been required to had the intervention not occurred. The problem with moral hazard is that it induces risky behaviour in other borrowers who, having witnessed their peers being bailed out, generate expectations in themselves of being similarly bailed out and hence indulge in risky investments.
Applying this (implicitly) in the context of farmer debt waivers, Gurcharan Das, a well-known commentator on the Indian economy, notes that such waivers are likely to result in large scale defaults by farmers that will impose an unbearable burden on the Indian public banking system. However, others have countered this point by arguing that bail-outs and the moral hazard problem are not unique to the farming sector. It ubiquitous in the industrial sector. That is indeed a fact hardly capable of being disputed. We witness bail-outs all the time of different industrial groups or banks that have gone into the red, and usually such bail-outs have been the result of governmental intervention either directly or through the involvement of central banks. For instance, we are seeing such bail-outs unfold before us in the sub-prime crisis where several banks and economies themselves (the United States for one) have seen interventions by the central banks (such as the Federal Reserve in the case of the United States). Such industrial bail-outs are common in India too. It is probably too hard to disagree with the proponents of the farmer debt waiver measures that the moral hazard problem is universal and should not be held up as a red-flag to scuttle the waiver of farmers’ debts.
Despite all the legalities and economic aspects involved in this ongoing issue, one thing seems clear. The debt waiver is perhaps only a short term measure to extricate some farmers out of their financial misery. It does not, however, address long-term issues on how agriculture can grow through proper methods of financing the farmers. There are several other long-term measures that need to taken to improve the situation of farmers. However, as far as financing is concerned, there is a need to find ways of more sustained lending measures that properly support the farmers in their activities so as to enable them to repay their loans without imposing too high a burden and thereby keeping the non-performing loans at a low rate. It may even be necessary to replicate the success of the micro-credit financing schemes in the agricultural sector in the longer term.
Wednesday, March 5, 2008
Reforming the Parliament
Two interesting developments, both initiated by the Chairs of the two Houses of Parliament, are worth noting.
First concerns the an issue referred to the Committee of Privileges by the Vice-President and Rajya Sabha Chairperson Hamid Ansari. The question referred is whether members of the House who obstruct its proceedings violate the privilege of those who were entitled to ask questions but could not because of the obstruction to the proceedings. Whether the legal determination of the issue will have any practical ramifications remains to be seen.
The second issue has been raised by the Speaker of the Lok Sabha, Somnath Chatterjee. He has favoured making transparent the debates that take place in the Standing Committees of the House, a stand opposed by both the Congress and the BJP. The issue is an important one, and not entirely unrelated to the first one. Given how little legislative work actually takes place in the Houses of Parliament due to regular obstructions (the PRS website has useful tables tabulating hours spent in legislative activity), much of actual legislation (at least for the more important legislations) is delegated to various Committees. Although these committees do sometimes invite comments from the public on matters under consideration through links on the Parliament's website, their debates and proceedings are largely opaque. The argument against openness, aptly articulated in the link above by Sushma Swaraj, is that opaqueness in the Committees allows MPs to argue on principle and not toe the party line. Ideally, this should happen in the Houses of Parliament as well, but they have largely become fora for playing to the gallery. Thus, legislators end up wearing two hats, one for public consumption and other other as policy-makers. The system encourages dishonesty and hypocrisy. In general, given that legislative business has mostly shifted to Parliamentary Committees, they deserve much more academic and media attention than they get at the moment.
Given widespread political consensus on both questions raised by the Chairs of the two Houses in favour of inertia, nothing is likely to change.
First concerns the an issue referred to the Committee of Privileges by the Vice-President and Rajya Sabha Chairperson Hamid Ansari. The question referred is whether members of the House who obstruct its proceedings violate the privilege of those who were entitled to ask questions but could not because of the obstruction to the proceedings. Whether the legal determination of the issue will have any practical ramifications remains to be seen.
The second issue has been raised by the Speaker of the Lok Sabha, Somnath Chatterjee. He has favoured making transparent the debates that take place in the Standing Committees of the House, a stand opposed by both the Congress and the BJP. The issue is an important one, and not entirely unrelated to the first one. Given how little legislative work actually takes place in the Houses of Parliament due to regular obstructions (the PRS website has useful tables tabulating hours spent in legislative activity), much of actual legislation (at least for the more important legislations) is delegated to various Committees. Although these committees do sometimes invite comments from the public on matters under consideration through links on the Parliament's website, their debates and proceedings are largely opaque. The argument against openness, aptly articulated in the link above by Sushma Swaraj, is that opaqueness in the Committees allows MPs to argue on principle and not toe the party line. Ideally, this should happen in the Houses of Parliament as well, but they have largely become fora for playing to the gallery. Thus, legislators end up wearing two hats, one for public consumption and other other as policy-makers. The system encourages dishonesty and hypocrisy. In general, given that legislative business has mostly shifted to Parliamentary Committees, they deserve much more academic and media attention than they get at the moment.
Given widespread political consensus on both questions raised by the Chairs of the two Houses in favour of inertia, nothing is likely to change.
Wednesday, August 15, 2007
A critique of recent changes in Criminal Procedure
An article by Colin Gonsalves published recently in India Together argues strongly against a number of changes brought about by the Criminal Procedure (Amendment) Act, 2005, which was passed in May 2005. The full text of the Amendment Act , references to which may be necessary to appreciate Gonsalves' argument, is available at the website of PRS Legislative Research, and can be accessed here.
In his article Gonsalves argues as follows:
"The Code of Criminal Procedure (Amendment) Act, 2005 has been welcomed in the national media as heralding the release of 50,000 undertrials many of whom have been languishing in jails for years without their trials even beginning. Nothing could be farther from the truth. The amendment is, in fact, a reversal of the Supreme Court decisions from 1996 onwards in the Common Cause and the Raj Deo Sharma cases."
After explaining the facts and ruling in the applicable Supreme Court cases, Gonsalves explains his central argument:
"The present criminal amendment is a reversal of the guidelines laid down in the Common Cause and the Raj Deo Sharma cases, first of all because they do not lay down any time limit for a criminal trial to end. Secondly, whereas in the earlier decision an accused was entitled to be released on bail or personal bond after being in jail for six months to a year depending upon the seriousness of the crime alleged, now that has been enhanced to half the period of possible incarceration i.e. one-and-a-half to three-and-a-half years. If under the earlier decisions of the Supreme Court undertrials were not released there is no reason for us to believe that under a more stringent regime, justice will be done.
There are over 250,000 undertrials languishing in jails even though the law presumes them innocent unless convicted. In many cases despite years going by the trials have not begun. Seven out of every ten persons in jail are in this situation. Overcrowding in jails is routine, in some jails as high as 300 percent. Inmates sleep in shifts. Possibly no country in the democratic world keeps its people behind bars in the manner India does. The overwhelming majority of those incarcerated are poor, Dalits, Adivasis and Muslims. That the system operates harshly against these sections is an understatement. It operates only against these people.
In his article Gonsalves argues as follows:
"The Code of Criminal Procedure (Amendment) Act, 2005 has been welcomed in the national media as heralding the release of 50,000 undertrials many of whom have been languishing in jails for years without their trials even beginning. Nothing could be farther from the truth. The amendment is, in fact, a reversal of the Supreme Court decisions from 1996 onwards in the Common Cause and the Raj Deo Sharma cases."
After explaining the facts and ruling in the applicable Supreme Court cases, Gonsalves explains his central argument:
"The present criminal amendment is a reversal of the guidelines laid down in the Common Cause and the Raj Deo Sharma cases, first of all because they do not lay down any time limit for a criminal trial to end. Secondly, whereas in the earlier decision an accused was entitled to be released on bail or personal bond after being in jail for six months to a year depending upon the seriousness of the crime alleged, now that has been enhanced to half the period of possible incarceration i.e. one-and-a-half to three-and-a-half years. If under the earlier decisions of the Supreme Court undertrials were not released there is no reason for us to believe that under a more stringent regime, justice will be done.
There are over 250,000 undertrials languishing in jails even though the law presumes them innocent unless convicted. In many cases despite years going by the trials have not begun. Seven out of every ten persons in jail are in this situation. Overcrowding in jails is routine, in some jails as high as 300 percent. Inmates sleep in shifts. Possibly no country in the democratic world keeps its people behind bars in the manner India does. The overwhelming majority of those incarcerated are poor, Dalits, Adivasis and Muslims. That the system operates harshly against these sections is an understatement. It operates only against these people.
The reluctance of the State to clear the jails of the poor is more by design rather than accident. The arbitrary powers to keep a person confined without a guilty verdict is necessary for a State and its police that rules by terror. The Criminal justice system is not really interested in the determination of truth ensconced in the final verdict, rather it is a massive arbitrary system of preventive detention where the ultimate verdict is of no concern as long as the accused picked up by the police languish many years in jail prior to acquittal. Those who criticise the State for the low rate of conviction miss this point; that conviction was never the intention of the police in the first place. This accounts for the sloppy state of forensic investigation and the reliance placed on the lathi over the law."
In the rest of the piece, Gonsalves points to other provisions of the same Amendment Act which are also problematic for other reasons.
I cannot claim any expertise on the issues that Gonsalves addresses, and I hope someone more familiar with this area of law will comment upon Gonsalves' critique. Focusing on the critique is important because of the implications that Gonsalves draws attention towards. This is also important because another wide-ranging round of amendments is under consideration by Parliament, in the form of this draft Bill.
Thursday, August 2, 2007
Important Achievements of the RTI and the NREGA Acts for rural Indians
Today's Indian Express features an op-ed by Sandeep Pandey who explains the significant practical achievements of the Right to Information Act and the National Rural Employment Generation Act for rural India in particular:
"Take the RTI Act. Meant to create more transparency and accountability in governance, it has for the first time provided an opportunity to ordinary people to intervene in political and administrative decision-making. Politicians and bureaucrats have, thus far, considered it their prerogative to keep information secret. What is not widely recognised is that this mindset characterises not just secretaries and under-secretaries but those who man the lowest tier of government. For instance, in January 2003, the gram pradhans of Ambedkar villages and two MLAs (including a minister in the then Mayawati government) unanimously passed a resolution calling for the jailing of anyone demanding income-expenditure details from the Gram Panchayat Bharawan of Hardoi district, Uttar Pradesh, or for holding dharna to push for their claims. As people’s representatives, they argued, they enjoyed a privileged position and were above providing a statement of accounts for public funds.
Before the RTI Act came into force, officials would humiliate citizens who asked for information and sometimes even threatened them. In their arrogance they did not even bother to do basic book-keeping. The first statement of accounts for the Bharawan Gram Panchayat, which was given to the people by the block development officer (BDO), did not carry any entries under expenditure. When asked about it, the officer explained that that was how accounts have been kept all those years. This was confirmed by the District Rural Development Agency, where employees confessed that once funds left their office, they did not bother to follow up on any details of how they were spent — the assumption was that the funds disbursed were spent for the intended purpose. In a detail of accounts the Bharawan Block Panchayat obtained using the RTI Act, it was discovered that the desilting of a canal was shown to have been performed for more than Rs 3 lakh when no work was done at all.
The RTI Act has made a difference to this situation of complete unaccountability. Today, if an ordinary villager goes to an office with an application seeking information under the RTI Act, she would be treated with respect, offered tea and asked about her problem. Officials would promise to address her problem in a bid to convince her to withdraw her application. Although officials try their best to evade accountability, there is a realisation that they cannot continue to function like they used to. This is good news for democracy. The BDO of Behender block in Hardoi recently confessed that it is only since people have started asking for information that the office has been compelled to keep books.
The NREGA goes a step further and secures the legal right of the people of a gram sabha to conduct social audits of work being performed under the NREGA. This is the first acknowledgement by the government that it requires people’s help in tackling an imperfect system. Earlier, one could only complain if one suspected a misappropriation of funds and then it was up to the authorities to institute an inquiry. Now ordinary citizens have the right to all data pertaining to the workings of the NREGA and must receive it within 15 days of their application. They can then place the records before the villagers for physical verification. The social audits conducted at various places in the country under the NREGA have uncovered numerous discrepancies, ranging from fake names in muster rolls to the fact that facilities for workers are not provided for. Labourers are at last getting their dues in most places where the NREGA is in force."
"Take the RTI Act. Meant to create more transparency and accountability in governance, it has for the first time provided an opportunity to ordinary people to intervene in political and administrative decision-making. Politicians and bureaucrats have, thus far, considered it their prerogative to keep information secret. What is not widely recognised is that this mindset characterises not just secretaries and under-secretaries but those who man the lowest tier of government. For instance, in January 2003, the gram pradhans of Ambedkar villages and two MLAs (including a minister in the then Mayawati government) unanimously passed a resolution calling for the jailing of anyone demanding income-expenditure details from the Gram Panchayat Bharawan of Hardoi district, Uttar Pradesh, or for holding dharna to push for their claims. As people’s representatives, they argued, they enjoyed a privileged position and were above providing a statement of accounts for public funds.
Before the RTI Act came into force, officials would humiliate citizens who asked for information and sometimes even threatened them. In their arrogance they did not even bother to do basic book-keeping. The first statement of accounts for the Bharawan Gram Panchayat, which was given to the people by the block development officer (BDO), did not carry any entries under expenditure. When asked about it, the officer explained that that was how accounts have been kept all those years. This was confirmed by the District Rural Development Agency, where employees confessed that once funds left their office, they did not bother to follow up on any details of how they were spent — the assumption was that the funds disbursed were spent for the intended purpose. In a detail of accounts the Bharawan Block Panchayat obtained using the RTI Act, it was discovered that the desilting of a canal was shown to have been performed for more than Rs 3 lakh when no work was done at all.
The RTI Act has made a difference to this situation of complete unaccountability. Today, if an ordinary villager goes to an office with an application seeking information under the RTI Act, she would be treated with respect, offered tea and asked about her problem. Officials would promise to address her problem in a bid to convince her to withdraw her application. Although officials try their best to evade accountability, there is a realisation that they cannot continue to function like they used to. This is good news for democracy. The BDO of Behender block in Hardoi recently confessed that it is only since people have started asking for information that the office has been compelled to keep books.
The NREGA goes a step further and secures the legal right of the people of a gram sabha to conduct social audits of work being performed under the NREGA. This is the first acknowledgement by the government that it requires people’s help in tackling an imperfect system. Earlier, one could only complain if one suspected a misappropriation of funds and then it was up to the authorities to institute an inquiry. Now ordinary citizens have the right to all data pertaining to the workings of the NREGA and must receive it within 15 days of their application. They can then place the records before the villagers for physical verification. The social audits conducted at various places in the country under the NREGA have uncovered numerous discrepancies, ranging from fake names in muster rolls to the fact that facilities for workers are not provided for. Labourers are at last getting their dues in most places where the NREGA is in force."
Sunday, July 22, 2007
PRS Legislative Research : An excellent resource on the Indian Parliament's legislative output and functioning
While hunting for a specific post in the archives of this blog, I began to classify the types of blog posts that I found there, and realised that very few posts have actually focused on legislation, or on the functioning of Parliament. Tarunabh's recent post about the Broadcast Regulation Bill is quite an exception. The bulk of posts on our blog have focused upon judicial decisions, while the posts which generated the greatest debates involved those focusing on particular Supreme Court decisions. In this, the posts on this blog reflect larger trends in Indian legal scholarship, as well as in Indian legal education, where the focus invariably is on courts.
Looking back at my own legal education in India, I have to accept that a focus on judicial decisions, particularly those of the Indian Supreme Court, was the predominant feature of much of the curriculum. There were no courses on Legislative Drafting (though my batch was fortunate enough to have one offered as an optional course, even as, reflecting the perceived practical utility of such a course, there were few takers for the course). Most of us were briefly exposed to the stages of enactment of a Bill when we dealt with the constitutional provisions in this respect, but this was done very cursorily, and I suspect that most law students do not have a good understanding of exactly what happens in the process by which a Bill becomes a duly enacted statute. The mandatory course on Statutory Interpretation that I studied focused more on the perspective of practicing lawyers and judges who have to interpret enacted statutes. A cursory glance at the present curriculum adopted at NLS, Bangalore and NALSAR, Hyderabad indicates that not much has changed since the mid-1990s in this respect.
This is indeed unfortunate, because, as all of us are aware, legislative activity accounts for some of the most important developments in our legal system. Academics who focus on India's legal system have long pointed to the large number of obsolete laws on our statutory rolls. Attention has also been drawn towards the fact that even recent statutes have problems embedded in the language in which they are drafted, as well as their inherent structure. Yet, this has not been accompanied by rigorous thinking (and teaching) about the kind of changes we should be incorporating in our drafting methods. The one Indian legal academic that I am aware of who focused on these questions extensively in his writings is P.M. Bakshi (at least some of his scholarship is available in the pages of the Journal of the Indian Law Institute).
In some respects, this is a malaise which affects many countries which adopted the common law system. Fellow graduate students from civil law jurisdictions would often point out to me that their legal education focused extensively upon legislative activity, and that several of them underwent extensive training in legislative drafting. Academics from civil law jurisdictions also tend to focus upon legislative reform, and legislative developments quite extensively and naturally. In some other common law systems, however, the situation is not as bad as in India, and law schools in particular have made efforts to focus on the issues highlighted here.
Reverting to the situation in India, research and teaching focusing on legislation is hampered by the fact that we do not have the tools to conduct proper research or develop teaching modules around the issue. For those interested in this isssue, some hope is now at hand. I recently came across the excellent website of the PRS Legislative Research team. Here, from their website, is some information about the team and their mission:
"PRS Legislative Research is an independent research initiative that aims to strengthen the legislative debate by making it better informed, more transparent and participatory. PRS is the first initiative of its kind in India India
What we do:
Looking back at my own legal education in India, I have to accept that a focus on judicial decisions, particularly those of the Indian Supreme Court, was the predominant feature of much of the curriculum. There were no courses on Legislative Drafting (though my batch was fortunate enough to have one offered as an optional course, even as, reflecting the perceived practical utility of such a course, there were few takers for the course). Most of us were briefly exposed to the stages of enactment of a Bill when we dealt with the constitutional provisions in this respect, but this was done very cursorily, and I suspect that most law students do not have a good understanding of exactly what happens in the process by which a Bill becomes a duly enacted statute. The mandatory course on Statutory Interpretation that I studied focused more on the perspective of practicing lawyers and judges who have to interpret enacted statutes. A cursory glance at the present curriculum adopted at NLS, Bangalore and NALSAR, Hyderabad indicates that not much has changed since the mid-1990s in this respect.
This is indeed unfortunate, because, as all of us are aware, legislative activity accounts for some of the most important developments in our legal system. Academics who focus on India's legal system have long pointed to the large number of obsolete laws on our statutory rolls. Attention has also been drawn towards the fact that even recent statutes have problems embedded in the language in which they are drafted, as well as their inherent structure. Yet, this has not been accompanied by rigorous thinking (and teaching) about the kind of changes we should be incorporating in our drafting methods. The one Indian legal academic that I am aware of who focused on these questions extensively in his writings is P.M. Bakshi (at least some of his scholarship is available in the pages of the Journal of the Indian Law Institute).
In some respects, this is a malaise which affects many countries which adopted the common law system. Fellow graduate students from civil law jurisdictions would often point out to me that their legal education focused extensively upon legislative activity, and that several of them underwent extensive training in legislative drafting. Academics from civil law jurisdictions also tend to focus upon legislative reform, and legislative developments quite extensively and naturally. In some other common law systems, however, the situation is not as bad as in India, and law schools in particular have made efforts to focus on the issues highlighted here.
Reverting to the situation in India, research and teaching focusing on legislation is hampered by the fact that we do not have the tools to conduct proper research or develop teaching modules around the issue. For those interested in this isssue, some hope is now at hand. I recently came across the excellent website of the PRS Legislative Research team. Here, from their website, is some information about the team and their mission:
What we do:
The Post Session Summary is a synopsis of all the legislative business that has been transacted in a Parliament session. The Pre-Session Alert is a summary of the legislative business that is likely to be transacted in the forthcoming session of Parliament. One page Bill Summary is a unique offering from
The website of PRS has different sections which provide links to the full text of the following:
| Bills Pending in Parliament |
| Recent Acts |
| Draft Bills |
| Bills Passed |
For many of the specific entries, PRS provides short and helpful 'Legislative Briefs' which allow readers to get a quick sense of the proposed law. The archives date back to 2004, allowing researchers and students to study some of the most significant laws passed in recent years. In a section called "Vital Stats", the website provides interesting analysis of statistical data, which enables readers to monitor the activity of Parliament and get a sense of, for instance, the attendance record of MPs. The main page of the website also has a useful section which tracks news stories related to laws and disputes about laws, broadly defined. As of today, the website features legislative briefs about important bills such as the Competition Amendment Bill and the Microfinance Bill.
Some members of the Core team of PRS have been reaching out to mainstream publications to air their research findings. Indeed, reports by MR Madhavan and Priya Parker (on the Maintenance of Parents Bill, 2007) that appeared in newspapers and online magazines have been featured on our blog as well. Clearly, the members of PRS are seeking to highlight these issues and cause national opinion to focus upon the often pressing issues that they work upon.
I for one will be revisiting this website often to get a sense of important policy changes that are being proposed in Parliament. I suspect the site will be very useful to law students, scholars and practitioners in general.
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