Continuing our regular coverage of India’s parliamentary sessions, Mandira Kala and Roopal Suhag assess key commercial bills that were debated and passed during the recent session

The monsoon session of parliament in 2018 marked the end of four years of the National Democratic Alliance government in power. Parliament will convene for two more sessions before next year’s national elections. For the first time in four years, a no-confidence motion was moved against the government. The motion was defeated after a detailed discussion. It also marked the first anniversary of the roll-out of the goods and services tax (GST) in India’s biggest tax reform in recent years, changing the indirect taxation system.

The monsoon session had 18 scheduled sittings from 18 July to 10 August. Of these, parliament sat for 16 days. The legislative agenda was tight with 43 bills listed for passage.

The focus of the session was on passing legislation covering individuals who had absconded after committing economic offences; reducing the pecuniary jurisdiction of commercial courts and commercial divisions of high courts from ₹10 million (US$139,000) to ₹300,000; treating allottees of real estate projects as financial creditors; amending legislation related to GST; reducing the discretion given to courts in enforcing contracts; and making giving a bribe an offence.

Among the key bills introduced in this session and pending were those relating to the establishing of the Arbitration Council of India for the promotion of arbitration, mediation, conciliation and other alternative dispute redressal mechanisms; creating a mechanism to ban unregulated deposit schemes; and amending the definition of micro, small and medium enterprises based on annual turnover.

THE COMMERCIAL COURTS (AMENDMENT) BILL, 2018

Status: Passed by parliament

The Commercial Courts (Amendment) Bill, 2018, amends the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. The act will establish commercial courts at the district level, commercial divisions and commercial appellate divisions in high courts intending to fast track the disposal of high-value commercial disputes (above ₹10 million). The 2018 amendment bill reduces the pecuniary jurisdiction of commercial courts and commercial divisions in high courts from the existing limit of ₹10 million to ₹300,000.

Lowering this value of pecuniary jurisdiction raises a question on its appropriateness. Reducing the minimum value to above `300,000 will increase the number of cases admitted in commercial courts and, therefore, lower the priority given to relatively higher-value cases. While examining the 2015 act, the Standing Committee on Law and Justice recommended increasing the minimum value of commercial disputes from ₹10 million to ₹20 million. It argued that setting a lower value might lead to the transfer of a large number of cases, which could overburden the commercial courts. As such, the purpose of establishing might be defeated. However, instead of increasing the value, as the standing committee suggested, the bill is lowering it.

THE ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2018

Status: Introduced and passed in Lok Sabha; pending in Rajya Sabha

The Arbitration and Conciliation (Amendment) Bill, 2018, amends the Arbitration and Conciliation Act, 1996. The act contains provisions to deal with domestic and international arbitration, and defines the law for conducting conciliation proceedings. The bill seeks to establish an independent body, called the Arbitration Council of India, for the promotion of arbitration, mediation, conciliation and other alternative dispute-redressal mechanisms. Its functions will include: (1) framing policies for grading arbitral institutions and accrediting arbitrators, (2) making policies for the establishment, operation and maintenance of uniform professional standards for all alternative dispute-redressal matters, and (3) maintaining a depository of arbitral awards (judgments) made in India and abroad.

THE FUGITIVE ECONOMIC OFFENDERS BILL, 2018

Status: Passed by parliament

The Fugitive Economic Offenders Bill, 2018, allows for a person to be declared a fugitive economic offender (FEO) if: (1) an arrest warrant has been issued against a suspect for any specified offences where the value involved is over ₹1 billion, and (2) the person has left the country and refuses to return to face prosecution. To declare a person an FEO, an application must be filed in a special court (designated under the Prevention of Money-Laundering Act, 2002) with details of the properties to be confiscated, and information about the person’s location.

The special court will require the person to appear at a specified place at least six weeks from the issue of notice. Proceedings will be terminated if the person appears. The bill allows authorities provisionally to attach properties of an accused, while the application is pending. On being declared an FEO, the person’s properties may be confiscated and vested in the central government, free of encumbrances (rights and claims in the property). The FEO or any company associated with them may be barred from filing or defending civil claims.

Although the bill has been passed, some of its provisions could be challenged in court. For example, it could be questioned if barring an FEO or an associated company from filing or defending civil claims before any court or tribunal could violate article 21, i.e. the right to life of India’s Constitution. Article 21 has been interpreted to include the right to access to justice.

The law does not require the authorities to obtain a search warrant or ensure the presence of witnesses before a search. This differs from other laws, such as the Code of Criminal Procedure, 1973, which carries such safeguards. These safeguards are important as they protect against harassment and planting of evidence.

THE INSOLVENCY AND BANKRUPTCY CODE (SECOND AMENDMENT) BILL, 2018

Status: Passed by parliament

The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, amends the Insolvency and Bankruptcy Code, 2016. The code provides a time-bound process for resolving insolvency in companies and among individuals.

An expert insolvency law committee reviewed the 2016 code earlier this year. The committee made several recommendations, such as exempting micro, small and medium enterprises from certain provisions of the code, treating allottees under a real estate project as financial creditors and reducing voting thresholds of the committee of creditors. The bill incorporates most of these recommendations. It clarifies that allottees under a real estate project should be treated as financial creditors.

The bill reduces from 75% to 51% the voting threshold for routine decisions taken by the committee of creditors. For certain key decisions, this threshold has been reduced to 66%. In addition, the bill allows the withdrawal of a resolution application submitted to the National Company Law Tribunal under the code. This decision can be taken with the approval of 90% of the committee of creditors.

THE SPECIFIC RELIEF (AMENDMENT) BILL, 2017

Status: Passed by parliament

The Specific Relief (Amendment) Bill, 2017, amends the Specific Relief Act, 1963. The act outlines the remedies available to parties whose contractual or civil rights have been violated. It sets out two main remedies available to a party with a contract that has not been performed. The remedies are: (1) the party may ask the court to compel performance of the contract (specific performance); or (2) the party may seek monetary compensation instead of performance.

Under the act, specific performance is a limited right, which may be given by the court at its discretion, in the following circumstances: (1) when monetary compensation is inadequate; or (2) when monetary compensation cannot be easily ascertained. The bill seeks to remove these conditions and permit specific performance to be granted by courts as a general rule.

The bill gives an affected party (i.e. one with a contract not acted on by the other party) the option to arrange for the performance of that contract by a third party or by the affected party’s own agency (substituted performance). The affected party must give a written notice of at least 30 days before obtaining such substituted performance. The costs in connection with such performance may be recovered from the other party. After obtaining substituted performance, specific performance cannot be claimed.

FOUR GST AMENDMENT BILLS

Status: Passed by parliament

The Central GST (Amendment) Bill, 2018, the Integrated GST (Amendment) Bill, 2018, the Union Territory GST (Amendment) Bill, 2018, and the GST (Compensation to States) Amendment Bill, 2018, amend the existing laws related to GST. The Central Goods and Services Tax (Amendment) Bill, 2018, amends the provisions of the 2017 act related to (1) reverse charge mechanism, (2) registration, (3) input tax credit, and (4) pre-deposit amount for appeals.

The Integrated Goods and Services Tax (Amendment) Bill, 2018, amends provisions of the 2017 act related to: (1) reverse charge mechanism, (2) place of supply of services, (3) distribution of integrated goods and services tax revenue between the centre and states, and (4) pre-deposit amount for appeals.

The Union Territory Goods and Services Tax (Amendment) Bill, 2018, amends the provisions of the act with respect to reverse charge mechanism and the utilization of input tax credit on Union Territory GST. The GST (Compensation to States) Amendment Bill, 2018, amends the manner in which unutilized amount in the Compensation Fund will be distributed between the centre and states.

THE PREVENTION OF CORRUPTION (AMENDMENT) BILL, 2013

Status: Passed by parliament

The Prevention of Corruption (Amendment) Bill, 2013, was pending in parliament for about five years before being passed in this session. The bill amends the Prevention of Corruption Act, 1988. The act covers the offence of giving a bribe to a public servant under abetment. The bill makes specific provisions related to giving a bribe to a public servant and giving a bribe by a commercial organization. It makes giving a bribe an offence and modifies the definition of taking a bribe. The act requires prior sanction to prosecute serving public officials. The bill extends this protection to former officials.

BANNING OF UNREGULATED DEPOSIT SCHEMES BILL, 2018

Status: Introduced in Lok Sabha; referred to the Standing Committee on Finance for detailed examination

The Banning of Unregulated Deposit Schemes Bill, 2018, provides a mechanism to ban unregulated deposit schemes and protect the interests of depositors. It also seeks to amend three laws, including the Reserve Bank of India Act, 1934, and the Securities and Exchange Board of India Act, 1992. The bill defines a deposit as an amount of money received through an advance, a loan, or in any other form, with a promise to be returned with or without interest. Such deposit may be returned either in cash or as a service, and the time of return may or may not be specified.

The bill defines a deposit-taking scheme as unregulated if it is not registered with the nine regulators listed in the bill, including the Reserve Bank of India, the Securities and Exchange Board of India and the Ministry of Corporate Affairs. The bill outlines penalties for offences like: (1) running (advertising, promoting, operating or accepting money for) unregulated deposit schemes; (2) fraudulently defaulting on regulated deposit schemes; and (3) wrongfully inducing depositors to invest in unregulated deposit schemes by wilfully falsifying facts.

MANDIRA KALA is the head of research and ROOPAL SUHAG is an analyst at PRS Legislative Research, a think-tank that tracks the functioning of the Indian parliament and works with members of parliament from the Lok Sabha and Rajya Sabha, across political parties, and members of the legislative assemblies of various states.