Month: September 2013

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Quick summary of Raghuram Rajan’s first speech as RBI governor

RaghuramRajan_RBIgovernor_speechFour days ago, Raghuram Rajan delivered his first speech as the twenty-third Governor of the Reserve Bank of India (“RBI”). Here are some key points from the dramatic speech:

 

Monetary policy

The first monetary policy of Mr. Rajan’s term can be expected on September 20.

The Deputy Governor Urjit Patel will form a panel featuring RBI staff and other experts to come up, within three months, with suggestions on steps to strengthen the monetary policy framework.

Inclusive development

New branches without prior RBI approval for domestic scheduled commercial banks across India – Banks will still be required to fulfil certain inclusion criteria in underserved areas in proportion to their expansion in urban areas. The RBI will also restrain improperly managed banks from expanding until they convince the RBI of their stability.

New bank licenses – A committee, formed outside the RBI and chaired by Dr. Bimal Jalan, will screen license applicants. The RBI will also explore other ways making entry easier and the licensing process more frequent.

Banking-and-Finance-LawForeign banks – The regulatory and supervisory control over the local operations of foreign banks will be increased. The RBI will encourage qualifying foreign banks to move to a wholly owned subsidiary structure, where they will enjoy near national treatment on a reciprocal basis.

Infusing credit – In order to ensure the flow of credit to the productive sectors of the economy, the RBI plans to limit the requirement for banks to invest in government securities to what is strictly needed from a prudential perspective.

Financial markets

The RBI plans to cooperate with the government and SEBI to liberalise the financial markets and remove restrictions on trading in financial instruments.

The RBI will take steps to provide exporters and importers with greater flexibility in their risk management, such as:

(1) enhance the limit available to exporters to re-book cancelled forward exchange contracts to the extent of fifty per cent of the value of cancelled contracts;

(2) allow a similar facility to importers to the extent of twenty-five per cent; and

(3) to develop the money and government securities markets, introduce cash settled, ten-year-interest-rate future contracts and examine the introduction of interest rate futures on overnight interest rates.

Rupee internationalisation and capital inflows

The intent is to push for more settlement in rupees.

The RBI has been receiving requests from banks to consider a special concessional window for swapping Foreign Currency Non-Resident (“FCNR”) deposits. The RBI will offer such a window to the banks.

The current overseas borrowing limit of fifty per cent of the unimpaired Tier I capital will be raised to hundred per cent and the borrowings mobilised under this provision can be swapped with the RBI at the option of the bank at a concessional rate. These schemes will be open up to November 30, 2013.

Financial infrastructure

Retail credit – The RBI will promote the use of “Aadhaar”, the unique ID, in building individual credit histories.

Small and medium enterprises – The RBI will facilitate Electronic Bill Factoring Exchanges, whereby bills from Micro, Small, and Medium Enterprises (“MSMEs”) against large companies can be accepted electronically and auctioned so that MSMEs are paid promptly.

Recovery – The RBI will focus on accelerating the working of Debt Recovery Tribunals and Asset Reconstruction Companies.

Non-performing assets – The RBI proposes to collect credit data and examine large common exposures across banks. This will help the creation of a central repository on large credits, which will be shared with banks.

Households

Together with the government, the RBI will issue Inflation Indexed Savings Certificates linked to the CPI New Index to retail investors by the end of November 2013.

The RBI will implement a national giro-based Indian Bill Payment System, such that households will be able to use bank accounts to pay school fees utilities, medical bills, and make person-to-person transfers electronically.

The RBI will facilitate the setting up of “white” point-of-sale devices and mini-ATMs by non-bank entities to cover the country so as to improve access to financial services in rural and remote areas.

The RBI will set up a Technical Committee to examine the feasibility of using encrypted SMS-based funds transfer using an application that can run on any type of handset. We will also work to get banks and mobile companies to cooperate in rolling out mobile payments.

(Deeksha Singh is part of the faculty on myLaw.net.)

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Human Rights

For the “persons” who are women

NainaKapur_equalitylawIn 1915, having completed all the necessary qualifications in law, Regina Guha applied to be a pleader at the Calcutta Bar. Her application found its way to the High Court of Calcutta where a four-judge bench had to determine whether “persons” admitted as “pleaders” included women. With unhesitating certainty, the bench declared they had “no escape from the position that the Legislature in this country never contemplated the admission of women to the rank of Legal Practitioners.” There was nothing in the legislation which prohibited women as pleaders. Moreover, degrees in law could be conferred on both men and women in Calcutta University. But the bench was adamant.

“There may obviously be weighty reasons why in the University Act words importing the masculine gender may be taken to include females… in the Pleaders Act no such intention can reasonably be attributed to the Legislature.”

In hindsight, the overt gender bias within such reasoning is glaringly obvious. Today however, the heart of such inequality lies in the subtlety of a subtext and its impact on women.

Much has been made of the fact that three out of four lawyers appointed as Senior Advocates by the Supreme Court last week were women. When it comes to equality however, context is relevant. According to a 2013 list of Senior Advocates designated by the Supreme Court of India since 1955, only five out of 309 have been women. As of this week, that number increased to eight. Even that has taken close to fifty years. Of the 200-plus lawyers appointed as Senior Advocates in Delhi and Mumbai over a period of twenty years (up to 2011), only three were women.

Is it a trend? For now, that might be premature. While headlines on such appointments make visible the obvious contribution women are making within the legal profession, the trickle of numbers betrays an underlying subtext of systemic bias within which decision-making about such appointments (be it the Bench or the Bar) continues to take place. That is why the message of leadership matters. To his credit, the transitional ease with which the current Chief Justice of India, through such appointments, has signaled a readiness to abandon the gendered myopia which plagues the profession is certainly welcome. Equality can be a place from which stereotypes and prejudices are challenged or from where they are perpetuated. From that perspective, I would urge more such champions, within law firms, legal academia, social media, civil society law groups, and other law related workplaces to follow the Chief Justices’ cue- assault the system with women and level the playing field.

In that vein, as one amongst a growing population of women who now embody the profession of law, I applaud my professional peers — Vibha Dutta Makhija, Kiran Suri, and dear friend Meenakshi Arora for the recognition they have all earned and justly received.

Regina would be beaming — for the “persons” who are now apparently women — as are all of us.

(Naina Kapur is a preventive law and equality advocate.)

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Democracy over market fundamentalism

NationalFoodSecurityAct_VaibhavRaajThe history of the conception and realisation of the National Food Security Act is the history of deliberations between at least four sides. The central anchor of course, has been the UPA government, which has been pursued by the National Advisory Council led by Sonia Gandhi. Meanwhile, the Supreme Court and its Commissioners kept reminding the government that the right to food has to be seen as an integral component of the fundamental right to life. Removed from this high drama at the national level, the Right to Food Campaign worked from the grassroots up to create a broad-based public opinion on the democratic and constitutional legitimacy of a right to food for the people of India.

The politics of the right to food is revealed to us in a reading of the deliberations between these four actors. In 2001, following the petition filed by the People’s Union for Civil Liberties (“PUCL”), the Government’s reactions to the Supreme Court’s interim orders revealed a primary dissonance between the “welfarist spirit” of the Indian Constitution as interpreted by the Court and the current ideological bent of the Indian state. Some pondered: “The question remains as to whether the right to food as articulated in PUCL can survive India’s liberalization policies, or whether, in contrast, PUCL will have the effect of modifying or reversing these policies.” They argued that the dominant policy disposition of the government is practically antithetical to the intent of the Supreme Court interventions in the right to food case. In the recent years, by reducing international trade barriers, removing food items from the Essential Commodities Act, and removing governmental control over the licensing, distribution, and storage of food grains, the government has been doing exactly the opposite of what the petitioners desired and the Court endorsed in the PUCL Case.

The question of food security has more to do with the affordability of food than with the availability. With the purchasing power of the rupee having plummeted, the problem of providing food to the hungry has to take a central place in the country’s economic policy. The Right to Food Campaign played an indispensable role in mainstreaming the issues of hunger and malnutrition as social problems in the minds of the public by supporting popular action.

Now, as the law awaits Presidential assent, I don’t believe that the struggle for food security will be complete when it is implemented. While the Act itself needs to be perfected with suitable amendments over time, freedom from hunger is more than a function of access to food. Food security needs to be complemented by equitable access to drinking water, sanitation, and health services along with educational and employment opportunities for the vast multitude of the Indian people. Only then can we ensure that starvation is not reproduced in our society.

There have been accusations that the National Food Security Act is merely vote bank politics. If so, why is it that the Congress thinks that people will vote for food and not for the rhetoric of growth? It is because the people of India run the Indian democracy and not television anchors or the moody securities markets, and the grand old party of Indian politics realises this better than most others. The people demand their dues from the governments that they elect and the food security law, even with all its shortcomings, is fundamentally a testimony to the success of India’s democracy.

(Vaibhav Raaj is a PhD candidate at the Centre for Political Studies in Jawaharlal Nehru University, New Delhi.)

Categories
Corporate

Hold your horses, we don’t have a new company law just yet

DeepaMookerjee_CompaniesBillThe Companies Bill, 2013 finally received Presidential assent on August 29, 2013. It has also been published in the Official Gazette, as the Companies Act, 2013 (the “Act”). Even so, this law has not yet come into force totally. All the substantive provisions have not yet been notified. This is clear from Section 1(3).

“This section shall come into force at once and the remaining provisions of this Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision to the commencement of the Act shall be construed as a reference to the coming into force of that provision.”

The substantive provisions of the Act therefore, will be effective only once notified by the Central Government in the Official Gazette. No such notification has been made. Until then, we can assume that the Companies Act, 1956 continues in operation.

Given that the Act proposes sweeping changes in the way business is carried out, it is expected that the Act will be implemented in phases, giving companies enough room to comply with the new provisions.

The Corporate Affairs Ministry is also drafting new rules for implementing the Act. The draft rules will soon be published on the website of the Ministry of Company Affairs and all interested parties, including the general public would have the opportunity to provide comments and suggestions within a prescribed period.

Mergers-and-Acquisitions-LawWhile there is no schedule or timeline for the Act to come into force, companies should consider setting their house in order, to ensure they are in a position to be compliant with the new provisions.

(Deepa Mookerjee is part of the faculty on myLaw.net.)

 

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“Just because you organise a cricket match does not mean you own it” – Conversation with Udit Sood about the Delhi HC judgment on Star’s media rights and the “hot news” doctrine

UditSoodpodcast2Idea Cellular and other mobile providers recently resisted the claim made by Star India Private Limited (“Star”) that they had “misappropriated” Star’s “quasi-property rights” in real-time cricket scores. Star’s claim was that its arrangement with the Board of Control for Cricket in India (“BCCI”) gave them some rights over real-time scores. In a six-year deal, Star had paid the BCCI Rs. 3851 crore for exclusive media rights, including “mobile rights”.

The mobile service providers had captured real-time cricket scores and updated their subscribers through text messages. Star now wanted the Delhi High Court to restrain mobile service providers from sending out real-time cricket scores. A Division Bench of the Delhi High Court recently overturned the opinion of a Single Judge and rejected Star’s claim.

Sports-LawUdit Sood was part of Luthra and Luthra’s team of intellectual property lawyers who acted for the mobile service providers before the Delhi High Court. In a brief conversation with him, he explained the basis of Star’s claim, the history of the “hot news” principle in the United States of America, and the implications of the judgment for the organisers of live events, including sporting organisations.

(Aju John is part of the faculty at myLaw.net.)