GOVERNMENT PROPOSES KEY AMENDMENTS TO INSOLVENCY AND BANKRUPTCY CODE 2016

Recently, the Government of India had proposed certain changes in the Insolvency and Bankruptcy Code 2016 as amended thereof (the Code) which have been passed by the Union Cabinet on 17-07-2019.

The said proposed amendments to the Code are as follows:

  1. That a time limit of 330 days has been fixed for bankruptcy resolution of a debtor company. Once the time limit expires, the corporate debtor would be liquidated.
  2. That the bankruptcy resolution or the liquidation of a corporate debtor, as the case may be, would have a binding effect on authorities including the central, state and local governments, to whom the bankrupt firm may owe dues.
  3. That there may be a clarity with regard to the position of financial and operational creditors in the order of priority for the purpose of distribution of sale proceeds after liquidation of debtor’s assets. Although the proposed amendments indicate primacy of secured financial creditors over operational creditors and unsecured financial creditors.
  4. That in cases where there are a large number of creditors such as homebuyers and bondholders, etc, if more than half of these creditors, present and voting in the CoC meeting, approve a resolution plan, it would be considered that the entire class of creditors has approved it. The said voting threshold of 50% has been brought down from the earlier 66% voting threshold.

In this way, these proposed amendments are aimed at facilitating decision-making in the case of bankrupt entities such as property developers, which have a large number of creditors, including homebuyers, and also, in ensuring a speedy resolution of insolvency and bankruptcy process.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

THIRD PARTY FUNDED ARBITRATION IN INDIA – A WAY AHEAD

With a rapid enhancement in cross-border transactions, international commercial and investment arbitrations have gained its relevance. Though, arbitration is the more efficient and time saving procedure especially in Indian jurisdiction, where legal disputes are most time consuming, here arbitration exists with limited beneficiaries. The prime reason for limited use of arbitration in Indian jurisdiction is the exorbitant costs attached to it which makes it expansive process. Parties with disputes involving small amounts don’t prefer arbitration due to high handed fees of arbitrators and other incidental costs.

The concept of third-party funding agreements has helped financially weaker claimants to successfully pursue their legitimate interests without putting their businesses at economical risk. Under third party funding arrangement someone who is not involved in an arbitration provides funds to a party to that arbitration in exchange for an agreed return. Typically, the funding will cover the funded party’s legal fees and expenses incurred in the arbitration. The funder may also agree to pay the other side’s costs if the funded party is so ordered, and provide security for the opponent’s costs.

The concept of third-party funding is statutorily recognized in civil suits under the Civil Code of Procedure in states such as Maharashtra, Gujarat, Madhya Pradesh and Uttar Pradesh. This consent to third-party funding can be adduced from the Civil Procedure Code 1908, which governs civil court procedure in India. Order XXV Rule 1 of the code (as amended by Maharashtra, Gujarat, Madhya Pradesh and Uttar Pradesh) provides that the courts have the power to secure costs for litigation by asking the financier to become a party and depositing the costs in court. The Arbitration and Conciliation Act, 1996 does not mention about third-party funding and therefore its validity need to be checked under Indian Contract Act, 1872.  There are other issues with respect to the enforceability of the award which may be challenged on the grounds of illegal funding arrangement.

Thus, the concept of third-party funding is still new to Indian jurisdiction but it may have positive implications. Especially in India where the amounts involved in the disputes are less, there it becomes pertinent to provide financial assistance to parties with lack of funds. Further this would promote specialized agencies who would finance arbitration and ensure timely enforcements of the awards. Third party funding would make India a pro-arbitration jurisdiction and also bring it in line with international practices.

Saksham Mishra

5th Year, UPES, Dehradun

Intern, The Indian Lawyer

THE NATIONAL CONSUMER DISPUTE REDRESSAL COMMISSION HAS HELD DOCTOR AND HOSPITAL LIABLE FOR POST-SURGERY NEGLIGENCE

The National Consumer Dispute Redressal Commission (NCDRC) has recently in a matter of Pankaj R. Toprani and 3 others vs. Bombay Hospital and Research and Medical and 2 others passed a Judgment dated 04-07-2019, whereby the NCDRC held the doctor and hospital liable for post-surgery negligence and further held that the duty of care of doctors and hospitals towards their patients does not end with surgery.

In this case, the doctors of the Bombay Hospital and Medical Research Centre of the Bombay Hospital Trust had performed a surgery on a 73-year old patient (Patient) for Carcinoma of the Sigmoid Colon, after having gone through his medical history of urticaria, glaucoma tension in the eyes, chronic depression, etc (Operation). After the Operation was performed, the family members of the Patient were informed that the Operation was successful and that they would transfer him to the ward. But instead of doing so, they transferred the Patient to post-operative ICU on third floor for keeping him under observation. The following day the Patient had complained of lack of sleep and pain in the abdomen, throat pain, breathlessness, chocking sensation and suddenly had convulsions. The family members of the Patient were then informed that he had suffered a Bradycardia Attack, which is said to be a condition wherein an individual’s heart rate goes low as much as under 60 beats per minute, as a result of which the heart cannot pump enough oxygen-rich blood to the body. After a few hours the Patient was transferred to the ICU on twelfth floor of another building stating that it had better equipments. Thereafter, when the Complainants did not give permission for a CT Scan to be performed on the Patient on the grounds that he was in a state of convulsions, he was transferred back to the ward in an unconscious state and later on taken back home in the same vegetative state, where eventually he passed away.

The NCDRC has held the doctors and the Hospital liable on the following grounds:

  1. That there was an unexplained delay of 2 ½ hours in shifting the Patient, who was not in a stable condition, from post-operative ICU on third floor of one building to another ICU on twelfth floor of another building. That the doctors and the Hospital should have taken due care and caution in shifting the Patient who had already suffered Bradycardia Attack. As a result of this negligence, the Patient slipped into coma and remained in a vegetative state for a period of almost three years and eventually, passed away.
  • Having regard to a number of Supreme Court Cases, the NCDRC herein has held that the duty of care of a medical professional, who possesses a certain degree of skill and knowledge, starts from the time the patient gives an implied consent for his treatment and the medical professional accepts him as a patient for treatment with a reasonable degree of skill, care, and knowledge, and extends beyond surgery.

Thus, the NCDRC held the concerned doctors and the Hospital liable for negligence in the treatment rendered to the Patient after the Operation was performed, on the ground that the duty of care of a doctor and a hospital extends to taking proper care of a patient, post-surgery. The NCDRC herein directed the Hospital to pay Rs. 30,00,000/- and the Doctors to jointly and severally pay Rs. 1,00,000/- as compensation to the family members of the deceased Patient.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

KEY POLICY CHANGES IN THE EDUCATION SECTOR IN THE UNION BUDGET 2019

The Union Finance Minister while presenting the Union Budget 2019 gave importance to the education sector by introducing major education policies. The Union Government has allocated Rs 94,854 crore for the education sector in this Budget for 2019-20. This is an increase from the revised Budget 2018-19, which was at Rs 83,625.86 crore. Of the total Rs 94,854 crore education Budget, Rs 56, 536.63 crore has been allocated to the school sector and the rest Rs. 38,317.01 crore has been pegged for the Department of Higher Education. In the school sector, a total amount of Rs. 36447.4 crore has been allocated to National Education Mission also called as Samagra Siksha Abhiyan, which amalgamates other schemes namely Sarva Shiksha Abhiyan (elementary education) and Rashtriya Madhyamik Shikha Abhiyan (secondary education). Along with this a mid-day meal programme has been allocated an amount of Rs 11,000 crore. 

 Major announcements:

  1. New Education Policy to transform India’s Higher Education System to one of the best global education systems.
  2. Creation of National Research Foundation to fund, co-ordinate and promote research. A total amount of Rs 608.87 crore has been allocated under the head ‘Research and Innovation’.
  3. ‘Study in India Program’ to help India attract foreign students to make India a global Higher Education Hub.
  4. Setting up ‘Higher Education Commission of India’ to promote autonomy and focus on academic outcomes. HECI will replace the University Grants Commission.
  5. Setting up of National Sports Education Board for development of sportsperson under Khelo India Scheme.
  6. Rs. 400 crore provided for “World Class Institutions”, for FY 2019-20.
  7. To prepare youth for overseas jobs, focus to be increased on globally valued skill-sets including language training, Artificial Intelligence (AI), Internet of Things (IoT), Big Data, 3D Printing, Virtual Reality and Robotics.

India is now poised for entry of foreign business in various sectors. The fact that the Budget has made an allotment for foreign students goes a long way to show India’s global approach not only in business but also in education. The Indian Intelligence is recognized worldwide as being superior. This is proved by the fact that most CEOs of large multi-nationals are from India.

Suchitra Upadhyay

4th Year

IIMT And School of Law, GGSIP University Delhi

Intern

The Indian Lawyer

HIGHLIGHTS OF THE UNION BUDGET 2019-20: FOCUS OF THE GOVERNMENT ON DEVELOPMENT OF INFRASTRUCTURE SECTOR IN INDIA

The 89th Union Budget 2019-20 has been recently presented by Finance Minister, Smt. Nirmala Sitharaman (the Minister) on 05-07-2019. The Government has planned to invest Rs 100 Lakh Crore in infrastructure over next 5 years.

Focusing on the infrastructure sector, the Minister has proposed several measures with a vision for the next 5 years for the development of infrastructure sector. The highlights of such measures are as follows:

  • Under the Pradhan Mantri Gram Sadak Yojana:

The Bharatmala Programme: It would help develop national road corridors and highways

The Sagarmala Programme: It would enhance port connectivity, modernization and port-linked industrialization.

The Jal Marg Vikas Project: It aims at smoothening internal trade carried out through inland water transport and at reducing the cost of transportation through waterways.

The Ude Desh Ka Aam Nagrik (UDAN) Scheme: It would make way for cheaper air travel and also, connect remote parts of the country.

  • The Metro Rail Projects: Out of a total route length of 300 kilometers approved during 2018-19, about 210 kms metro lines have been operationalized in 2019.
  • Incentives for advanced battery and registered e-vehicles:

GST rate on electric vehicles is proposed to be lowered from 12% to 5%

Proposed additional income tax deduction of INR 1.5 Lakh on the interest paid on loans taken to purchase electric vehicles. Provided the loan has to be taken on or before 31-03-2023

Customs duty would be exempted on certain parts of electric vehicles such as e-drive assembly, on board charger, e-compressor, charging gun

  • Roadways: Comprehensive restructuring of National Highways and development of State road networks. Further, the Government has proposed to increase Special Additional Excise duty and Road and Infrastructure Cess each on petrol and diesel from Rs 8 per litre to Rs 9 per litre.
  • Waterways: Movement of cargo on River Ganga to increase four times with the construction of two more terminals at Sahibganj and Haldia
  • Water supply: Jal Shakti Mantralaya to focus on creation of local infrastructure including rainwater harvesting, groundwater recharge and management of household wastewater for reuse in agriculture
  • Railways: Proposal to use Public-Private Partnership to hasten the process of development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services.
  • Power connectivity: Proposal to implement One Nation, One Grid that would ensure power availability to states at affordable rates

Thus, the Government has aimed at increasing investments for the development of the aforesaid infrastructure sector and also other sectors including digital economy, job creation in small and medium enterprises, and water management in India.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

THE PROMISING ANNOUNCEMENT FOR CIVIL AVIATION – UNION BUDGET 2019-20

Indian Civil Aviation sector is facing plethora of issues in the aftermath of the collapse of Jet airways and debt ridden Air India. The domestic airlines are facing operational issues and most of them are debt ridden due to thin profit margins, lack of level playing field in the market.  Keeping these issues at their priorities the government has made some promising announcements in the union budget 2019.  These reforms can have curative implications on the civil aviation sector.

Highlights of the announcements –

  • Policy interventions to be made for the development of Maintenance, Repair and Overhaul (MRO), to achieve self- reliance in aviation segment.
  • FDI in sectors to be promoted in Aviation segment.
  • Regulatory roadmap for making India a hub for aircraft financing and leasing activities from Indian shores, to be laid by the Government.

The Government has proposed to hike the Foreign Direct Investment (FDI) limit in domestic air carriers from existing 49 per cent, though no fix percentage has been quoted it has been said that the Government will examine suggestions of further opening up FDI in aviation. Earlier Union Cabinet allowed 100 per cent foreign direct investment in Indian aviation for automatic route. Even on previous occasions the government tried to divest its stake in Air India. An earlier attempt by the government to divest 76% stake in the national carrier did not find any taker.  The government now intends to sell 100% in the national carrier and the move to relax FDI may interest buyers of Air India. However, there is no clarity on the Substantial Ownership and Effective Control (SOEC) clause yet. The SOEC clause bars any foreign investor from taking complete control of the operations of the airline and be run by a board that has two third members as Indian.

The government has also proposed to implement measures to make the country a hub of aircraft leasing and aviation finance.

As the world’s third-largest domestic aviation market, the time is ripe for India to enter into aircraft financing and leasing activities from Indian shores. This is critical to the development of a self-reliant aviation industry, creating aspirational jobs in aviation finance, besides leveraging the business opportunities available in India’s financial special economic zones (SEZs), namely, International Financial Services Centre (IFSC),” Ms.Sitharaman said in her budget speech.

The emphasis of the Finance Minister on development of Maintenance, Repair and Overhaul  (MRO) industry was welcomed by MRO Association of India.  It is estimated that this move will help to turn India from an importer of MRO to net exporter and will create over 100,000 direct jobs and revenues exceeding Rs. 35,000 crore in next five years.

Few long pending demands, which is, quotes as key demands by aviation industry such as to reduce taxation on aviation turbine fuel (ATF) or Jet fuel was not addressed by the Government. At present, jet fuel accounts for 35% to 50% of airline costs.

Analysis –

These announcements are welcomed by stakeholders and it reflects the government intentions to revitalize the civil aviation segment. Primarily the government is aiming to make the segment more investment friendly so that sufficient amount capital can be injected. The civil aviation segment is facing profitability issues due to cutthroat competition amongst the domestic airlines. After the collapse of Air India, Jet airways which was one of the prominent domestic airlines got defunct and there are many more who are facing fiscal issues. In such an alarming environment FDI promotion and relaxing the norms could be a curative measures to get back the segment its good fiscal health.  One prominent reason to focus aviation sector is to secure the revenue generation from the sector.

 The Maintenance Repair and Overhaul (MRO) sector would require tax rebate from the government to ensure that the cost of servicing planes in the country are at par with countries like Sri Lanka and Singapore. This will make the segment competitive and make it more profit generating.

Other announcement of making India a hub for aircraft leasing is also a work in progress and the civil aviation ministry has a committee with various stakeholders, including airlines, to make Ahmedabad’s GIFT city – a tax free zone – as the hub for aircraft leasing.

Implications over the civil aviation sector –

The impact of these announcements over the civil aviation sector can be summarized as follows

  • The promotion of FDI can help in easy disinvestment of Air India, earlier government was selling the majority of its stakes in Air India but unable to found the investors. This time by relaxing the investments norms government may plan for 100% disinvestments in Air India.
  • It will create a level playing field in the domestic aviation, which will make the sector profitable and attractive for the investment.
  • India a hub for aircraft leasing is also a work in progress and the civil aviation ministry has a committee with various stakeholders, including airlines, to make Ahmadabad’s GIFT city – a tax free zone – as the hub for aircraft leasing.
  • This will indirectly create employments in the segment.

Things that needs clarifications –

  • There is no clarity on the Substantial Ownership and Effective Control (SOEC) clause yet. The SOEC clause bars any foreign investor from taking complete control of the operations of the airline and is run by a board that has two third members as Indian. Further rebates and exemptions need to be given for making environment investment friendly.
  • Government needs to clarify on the role played by the DGCA in the segment and need to ensure that the market remains profit yielding.

Sourabh Kumar Mishra

Senior Associate

The Indian Lawyer

LAUNCH OF FIRST COMPREHENSIVE DATABASE ON INFRASTRUCTURE PROJECTS IN INDIA

The Indian Institute of Technology (IIT) Madras has recently launched an Integrated Database on Infrastructure Projects in India (IDIP) at the 15th World Conference on Transport Research Conference held at IIT Bombay on 29-05-2019. 

The IDIP is a service from GeoNomics Research and Technologies Private Limited, an Infrastructure Analytics and Consulting Firm, partnered with Akara Research and Technologies, a Startup Company in India.

For developing the database on the Platform, various researchers are said to have collaborated with state governments and private sector infrastructure developers. The said database provides comprehensive data about the entire life cycle of a particular infrastructure project including the various stages of development, construction, operation, etc (Platform).

The IDIP has primarily stressed on the road sector, as the public-private partnership in the road sector in India is the highest in the world. But eventually, this Platform would cover other areas of infrastructure sector as well such as railways, ports, airports, power, transmission, water supply, sanitation, solid waste management, etc.

As soon as the users, such as project managers, financiers, researchers, etc, log into the Website http://www.idip.co.in/, they can search for projects based on specifics such as projects developed by a specific developer or developed in a specific location, or road projects exceeding a certain length, etc.

This would enable various stakeholders to make informed decisions, monitor the investment trends and also make way for overall development of the infrastructure sector.

Furthermore, it is believed that the roll out of IDIP would also help in achieving transparency and accountability among the stakeholders of this sector.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer