Volume V Issue II, 2018
THEME: EASE OF DOING BUSINESS
RESOLVING COMMERCIAL DISPUTES IN INDIA: FOCUS ON ‘MEDIATION’ AS AN EFFECTIVE ALTERNATIVE ‘TOWARDS
EASE OF DOING BUSINESS’
Dr. Vijay Kumar Singh
Disputes are inevitable in commercial transactions and this gets further complicated when it comes to cross-boundary commercial transactions. It has frequently been experienced that the parties to a commercial dispute, including international commercial transaction disputes, take a recourse to arbitration. Institutions like I.C.C., L.C.I.A. and I.C.S.I.D. have evolved and are handling the matters relating to international commercial disputes. While one may say that, the international dispute settlement mechanism in commercial matters is invariably ‘arbitration’, as parties do not prefer to choose litigation due to its inherent lacunae of delay and costs, the new methods or alternate methods of dispute settlement are still evolving. Mediation is one such method and has proven itself to be unique and quite successful settlement process when conducted by a skilled mediator. As regards its utility, mediation is more useful as compared to arbitration because of its principle of parties themselves coming to a settlement and ‘without prejudice’ process. However, the parties to a commercial dispute or an international commercial transaction dispute have not accepted mediation that readily. This paper explores the reasons behind that by examining the existing literature and the efforts put in by the countries in promoting mediation as a method of settlement of commercial disputes. It explores if ‘mediation’ can emerge as an important alternative to the dispute settlement mechanism for settling commercial disputes.
EASE OF DOING E-COMMERCE BUSINESS IN INDIA: THE FDI POLICY RELATING TO E-COMMERCE AND ITS IMPACT ON THE INDIAN ECONOMY
In recent years, the Indian economy has witnessed significant changes due to an increase in e-commerce. The implications of the surge of e-commerce include various economic, legislative, and social issues. The Department of Industrial Policy and Promotion (DIPP) issued a Press Note in March 2016 to regulate the foreign direct investment (FDI) in the sector. The policy, among other conditions, had put several restrictions on global online retailers in order to maintain a level playing field. The research work seeks to analyse as to whether such restrictions are really necessary in light of the competition issues in e-commerce in the present economic scenario or if they pose as an obstacle in the ease of doing business. Recently, a think tank headed by the Union Minister for Commerce and Industry, Mr. Suresh Prabhu, was set up for the drafting of a national e-commerce policy. The think tank has come up with the first draft of the e-commerce policy which has been shared among the stakeholders for consultations. The draft policy mainly reiterates the provisions relating to competition and FDI issues from the Press Note, along with some more restrictions placed on e-commerce companies. The research work examines the draft policy with respect to the relevance of the restrictions imposed under the policy and opines on whether the draft policy is the right way forward.
CADY, ROBERTS & CO., 40 SAEC 907 (1961) — CASE ANALYSIS
This case analysis is based on the first case that has shaped today’s insider-trading law. Through this, the SEC had become the torch-bearer for the world that, insider trading meant much beyond manipulation of markets. Beyond this case, jurisprudence evolved that has had a great impact on the insider trading law as we see it today. This article deals with the Cady, Roberts & Co. Case in detail and thereafter deals with how the insider trading jurisprudence evolved in the United States of America along the ‘possession’ v. ‘use’ debate. Lastly, it deals with how, if this case was to happen today, Indian law would deal with the same set of facts.
WITHDRAWAL OF THE FRDI BILL: BAIL-IN AND OTHER PUBLIC CONCERNS
The Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill) was tabled in the Parliament in August 2017, however, it has recently been withdrawn by the Central Government due to enormous pressure from public and other institutions. This article aims to discuss the important aspects of the FRDI Bill and points out to the concerns that were emerging out of this Bill, inter alia, the “bail-in” clause, protection of bank deposits, and the proposed resolution mechanism, conflicts with the existing regulatory body, overlooking disclosures, and inaptness of ownership neutrality model in India. These concerns eventually led to the doom of this Bill.
CORPORATE LOBBYING: THE MEANS AND ENDS OF CORPORATE BRIBERY
Mallows Priscilla P.
Bribing and lobbying are two distinct and separate concepts of influencing the Government or officials of the Government. But in India, lobbying has been equated to bribing and is considered as an illegal act. Lobbying in India is in a nascent stage and there are no laws governing it. It is neither legal nor illegal but is considered to be unlawful in India. Corporations are the best vehicles to do business and their interests matter a lot to the economy. The corporations lobby the Government but it ends up as a crime of corporate bribery as there are no checks on the activity of lobbying. This article will explain how corporate lobbying, when not regulated, paves the way to the crime of corporate bribery which is an impediment to do business in India. The author has attempted to establish the proposition better with a recent example of lobbying activity of the 5/20 rule in the airline industry.
INSOLVENCY AND BANKRUPTCY CODE, 2016: EMERGING JURISPRUDENCE, AMBIGUITIES AND PREDICAMENTS
With India’s bad loan amount culminating to USD 154 billion and, the moratorium period of 12 major defaulting firms facing resolution proceedings coming to an end, the year 2018 is proving to be a testing one for effectiveness of the Insolvency and Bankruptcy Code, 2016 (Code). The Code was introduced to reorganize and restructure the corporate insolvency process in a time bound manner in India. The fundamental aim of the Code is to revive financial institutions, restructure their debts, and ensure maximisation of the value of their assets. With interpretation of several provisions in question and new amendments introduced, it will be interesting to note how the Adjudicating Authorities have dealt with them. In the past year, various benches of National Company Law Tribunal (NCLT) in the country gave contradicting judgements, and the National Company Law Appellate Tribunal (NCLAT) faced several challenges. This paper, apart from looking into the evolving jurisprudence under the Code, also throws light upon the amendments, highlights the loopholes of the Code, and suggests changes.
EFFICACY OF I.B.C. IN LIGHT OF ABSENCE OF THE CROSS- BORDER INSOLVENCY REGIME: A CRITICAL COMPARISON OF THE UNITED STATES, THE UNITED KINGDOM AND SINGAPORE APPROACH TO THE MODEL LAW
Varendyam Jahnawi Tiwari
The Insolvency and Bankruptcy Code, 2016 (hereinafter “IBC” or the “Code”) is the extant law dealing with insolvency in India. While it may seem that by not addressing the issue of cross-border insolvency the Code’s efficacy may be questioned because it may not provide an immediate solution in cases of cross-border insolvency which involve the claims of the Indian corporations against the defaulting firms situated globally or the claims of financial persons situated globally having claims against the Indian firms. But, the stance that first, the domestic insolvency regime must prove effective to meet the challenges of time is also the other side which should not be ignored.
The present paper aims to delineate the important provisions of the UNCITRAL Model Law on Cross-Border Insolvency along with a study of a comparative approach of the United States, the United Kingdom, and Singapore which have adopted the Model Law in the year 2005, 2006, and 2017 respectively. The paper also critically analyses the Sections 234 and Section 235 of the IBC. Whether the adoption of the Model Law or ratifying an International Convention (yet to develop) is the road ahead for India or, altogether there can be the third approach is the cardinal focal point of the paper.
The central question of the paper is the solution that India may adhere to while addressing the need of incorporating provisions that deal with cross-border insolvency given the need of doing so in the near future due to increased foreign trade and investment and for the ease of doing business in India. The research paper does not focus on questioning the efficacy of the Code in the absence of the Cross-border insolvency, it rather suggests the recommendations that India can be mindful of while incorporating provisions dealing with the cross-border insolvency.
THE INSOLVENCY AND BANKRUPTCY CODE, 2016: IMPACT OF MORATORIUM ON PRE-EXISTING CONTRACTUAL ARRANGEMENTS AND EXCEPTIONS TO STATUTORY MORATORIUM
The aim of this research paper is to evaluate the implication of statutory moratorium upon pre-existing contractual arrangements. The evaluation of the moratorium’s impact involves appreciating the fundamentally distinct rationales which form the basis of insolvency law and contract law. Multifarious views have emerged to resolve this conflict. The Indian insolvency regime, in light of introduction of the Insolvency and Bankruptcy code, 2016, prima facie adheres to the view that bankruptcy law has an overriding effect over the prevailing laws. This helps in achieving the insolvency law’s objective of collectivity among creditors in the administration and distribution of assets. However, it blatantly ignores the importance of certainty in mutually beneficial exchanges, which forms the basis of contract law and is essential for expediting commerce. Accordingly, by extinguishing pre-insolvency obligations the moratorium can prejudice the interests of contract vendee. The author, while analysing such alteration in pre-existing contractual relations, tends to focus on the bankruptcy law’s objective of maintaining the corporate debtor as a going concern. The present code has a single- minded focus upon value maximization of assets, without being cognizant of the highly specialized operations of some corporate debtor. This undermines the new code’s objective of effectively reviving stressed assets. The author also puts forth the suggestion of granting exemption from the moratorium to certain category of debts. Mature insolvency law jurisdictions have acknowledged the special nature of certain debts and have accordingly exempted them from the moratorium. The author undertakes a comparative analysis of such exceptions and studies their feasibility in the Indian Context.
SELECTIVE LITIGATION: THE TRUE PURPOSE OF I.B.C. MORATORIUM
Since its entry in the field of insolvency resolution, moratorium has been a hot topic for discussion. The essential requirement is to know and be able to ascertain the right time within which the fiscal health of the concern could be decided and the optimal outcome for all could be achieved.
The paper briefly discusses the considerations that have been there since 1909, when the first Insolvency Act in India came into force. An understanding of how things stood and how they are today is indispensable for scrutiny of all the constructs. This discussion has been further augmented by the English practice of moratorium stays.
This paper at its core enquires into the nature of Section 14 of the Insolvency and Bankruptcy Code, 2016 in the light of recent decisions of the Supreme Court, various High Courts, and the National Company Law Tribunal, owing to the recent decisions of the N.C.L.T., High Courts and Supreme Court. This papers attempts to find the balance between the overriding interpretation of I.B.C. moratorium and a more moderated consideration of other references, such as the Sick Industrial Companies (Special Provisions) Act, 1985 and Banking Regulation Act, 1949. This question is more about dispute resolution than about the litigation.
STARTING A STARTUP:
LEGAL ANALYSIS OF A LIMITED LIABILITY PARTNERSHIP AS THE IDEAL BUSINESS STRUCTURE AND AVAILABLE INVESTMENT CHANNELS
Considering the fact that startups are gaining massive popularity these days, it seemed important to understand the legal environment and the legal compliances relating to a startup business. Even the Government of India has a huge focus on the ease of doing business reforms and startup action plans. The reason being that, the Government wishes to simplify the business-related legal environment, in order to give a boost to startups. In this light, this article aims to discuss the structural and financial ease of doing business. Firstly, the article analyses the legal benefits of a Limited Liability Partnership over all other business structures, i.e., a public and a private company by pointing out its less complex and less compliance- seeking nature. Thereafter, the article acknowledges the importance of financial decisions for a business which are the cornerstone for its initial years. It is further understood that most people drift away from the idea of opening a startup because of their concerns over financial hurdles. In this light, the latter half of the article points out multiple funding options available with a Limited Liability Partnership, such as Equity and Debt Investment options, Foreign Direct Investment and other unique financing methods, and analyses each method in detail by discussing various legal regulations attached therewith.
ACCOMODATING PRE-PACKS IN THE INDIAN INSOLVENCY REGIME
Priyadarsini T.P. & Vishnu Suresh
The Insolvency and Bankruptcy Code, 2016 was enacted to establish a uniform, comprehensive legal framework to govern the matters of Bankruptcy in India. Since its inception, it has been hailed as being creditor-friendly. One of the reasons for the same is that the Code leans in favour of extensive monitoring of the Insolvency Resolution Process by the Courts. Though good in its intentions, this leaves no scope for informal arrangements which may be desirable in certain circumstances. Such an approach is based on the assumption that Indian market is not mature enough for informal Bankruptcy resolution.
It is against this backdrop that this paper seeks to study Pre-Packs, a popular mode of informal/quasi-formal bankruptcy resolution prevalent in many jurisdictions over the world. Such arrangements existing in the US and UK are chosen as the primary subject matter of scrutiny. The paper evaluates the viability of Pre-Packs as an alternative Insolvency Resolution mechanism in terms of both corporate rescue and satisfaction of creditors’ claims as against the formal bankruptcy procedure. The criticisms against such arrangements are also discussed. The paper then analyses the present Indian Insolvency Regime to determine the feasibility of Pre-Packaging in India. A comparison is made between the legislative intention and judicial trend to show that such pre-packs ought to be given legal recognition. Finally, it illustrates how the Insolvency Code can be amended so as to accommodate such pre-packed arrangements in India.