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E-pharmacy and its regulation in India

E-commerce is rapidly transforming the way business is carried out in India. The increasing use of internet and smartphones is further making people dependant on such options as they offer convenience, promptness and cost effectiveness in the services provided by them. Improvements in technology and growth in digital payments have increased people engaging in online shopping.

As per the Economic Survey, the e-commerce industry has been growing at a  rate of 17 percent in the year 2018-2019. It is pertinent to highlight that E-pharmacy is the next big thing for e-commerce entities. There mode of operation is as follows: There is one where a technology corporation brings together neighbourhood licensed pharmacies to the consumers, and the other where the e-pharmacy is an online service of an offline pharmacy.

These pharmacies offer huge discounts to customers, providing value added services and free home delivery that are just a click away. A number of such factors have led to the springing up of a number of e-pharmacies lately that are close to about 250, and have cornered around Rs.1000 crores of the Indian market, where the retail market of overall drugs and medicines is worth Rs.1.2 lakh crores.

It is relevant to say that the mechanism of regulation of e-pharmacies is very shaky and cloudy, and the same has been manifest in the recent judgements against such online pharmacies by the Delhi High Court and Madras High Court (wherein the latter lifted the imposed ban until further guidelines on the functioning of these pharmacies are issued). On 12.12.2018, the Delhi High Court had ordered a complete ban on online pharmacies across the country with directions to the Central Government to implement the order. This decision came in the wake of a large number of protests from owners of traditional medical shops and All India Organization of Chemists and Druggists, against the proliferation of online pharmacies. The Petition stated that the sale of medicines online was without the mandate of law and illegal, and could also prove to be a major health risk as ‘drugs are highly potent and its misuse or abuse can have serious consequence on human health, a large number of people who are minors/uneducated use the internet and they can be victims of wrong medication while ordering medicines online.’

The Government and the Traditional Pharmacists’ contention has been that if such online pharmacies are not regulated; expired, unapproved, fake and contaminated drugs may be consumed by patients who obtain them through e-pharmacies.

The ban came at a time when the government has issued draft guidelines which recommend regulating the online pharmacy industry and licensing the e-pharmacies. The said draft rules were issued by the Ministry of Health and Family Welfare through notification dated 28.08.2018. It is noted that despite this order that was passed by the Delhi High Court, many pharmacy portals remained operational and their take on this issue was that if the Government has considered and issued guidelines for the regulation of online pharmacies, it is an indication that it does not want to kill the industry, as the same is at a very nascent stage. It is imperative to note that a Division Bench of Madras High Court on 02.01.2019 stayed the order passed by a single judge on 17.12.2018 banning the sale of medicines online. The Bench has observed that the Centre is actively putting systems in place for regulating the sector and is not opposed to online pharmacies.

Before substantiating upon the draft rules issued by the Ministry, it is pertinent to appraise the current regulatory state of the pharmaceutical and e-pharmacy industry. Regulatory framework in the pharma industry is aimed at the protection of human health. Governments spend on this industry because of its role in restoring health, saving lives, stopping epidemics and preventing diseases. Since the very purpose of drugs is to diagnose, prevent or treat ailments, they are products closely linked with advances in regulation and research. At present drugs in India are regulated under the Drugs and Cosmetics Act, 1940, that regulates the import, export, manufacture, distribution and sale of drugs and cosmetics. The Central Drugs Standard Organization(CDSCO) is the apex regulatory body that lays down the standard of drugs, diagnostics, cosmetics and devices, and also issues licenses to drug importers and manufacturers. It also lays down amendments to Acts, Rules, regulatory measures, and regulates market authorization of new drugs and clinical research in India. At present as per law, the fixed retail shops must obtain license under Section 18 of the DCA and Rule 61 of the DCR to carry sale of prescribed medicines. A brick and mortar pharmacy is required to have a drug license issued by the Licensing Authority, for dispensation of drugs with the mandatory requirement of a Registered Pharmacist who is a person registered under the Pharmacy Act, 1948, or a matriculate or equivalent with four years’ experience of selling drugs, or a degree holder form a recognized University who has one year’s experience of dealing in drugs. The Draft Rules impose similar conditions on the online pharmacies.

It is highlighted that the Drugs and Cosmetics Act was formulated in 1940 and the Drugs and Cosmetics Rules in 1945, since they were enacted prior to the advent of internet, they did not consider the sale of drugs online or over the internet.  Through a circular dated 30.12.2015, the Drugs Controller General (India) clarified that the Act and Rules do not differentiate between the sale of drugs through conventional means or online. Companies selling drugs through online pharmacies were required to comply with the Act and the Rules. Due to the lack of a monitoring mechanism and operational efficiency, the need to introduce separate rules to govern online sale of drugs was realized. It is noted that parties opposing these e-pharmacies have averred that the former openly flout these rules and play with the health of millions. However, with the notification of the Draft rules being issued, it is highlighted that the Indian Internet Pharmacy Association (IIPA), a self-regulatory body of e-pharmacies believes that online pharmacies will encourage a transparent mechanism for drug dispensing and will also have higher accountability as the entire procedure will be tracked.

The Draft Rules on ‘Sale of drugs through e-pharmacy’ provide that:

  1. a) No person will distribute or sell, stock, exhibit or offer for sale of drugs through e-pharmacy portal unless registered (with the Central Drugs Standard Control Organization (CDSCO).
  2. b) Any person who intends to conduct business of e-pharmacy shall apply for the grant of registration to the Central Licensing Authority in Form 18AA through the online portal of the Central Government.
  3. c) The registration issued to any person for e-pharmacy will remain valid for a period of three years from the date of issuance, and a renewal of registration will have to be done if it wants to continue.
  4. d) The application of registration of e-pharmacy will have to be accompanied by a sum of Rs.50,000 and also that the registration holder of the e-pharmacy will have to comply with the provisions of the Information Technology Act, 2000.
  5. e) The supply of any drug shall be made against a cash or credit memo generated through the e-pharmacy portal and such memos shall be maintained by the e-pharmacy registration holder as record.
  6. f) The details of the patient shall be kept confidential and shall not be disclosed to any person other than the central government or the state government concerned, as the case may be.
  7. g) The e-pharmacies will not be allowed to sell narcotic drugs, tranquilisers, and Schedule X drugs.
  8. h) No e-pharmacy shall advertise any drug on radio or television or internet or print or any other media for any purpose.
  9. i) A team of officers authorized by the Central Licensing Authority, with/without experts in the relevant field or officers authorized by the concerned State Licensing Authority, will inspect the premises from where the e-pharmacy business is conducted, every two years.
  10. j) It would also be binding upon the online pharmacies to deliver the ordered drugs in the specific time that will be communicated to the patients during the time of purchase.
  11. k) The e-pharmacy portals will be required to have 24/7 call centres to assist and guide customers.
  12. l) The registration of the e-portal may be cancelled or suspended if any of the provisions of the Drugs and Cosmetics Act, 1940 are contravened.

 

An analysis of the draft rules brings to light certain inconsistencies such as the fact that where a pharmacy is already registered under the Drugs and Cosmetics Act, 1940 and it also operates an online pharmacy, would also be required to apply for an e pharmacy license. This would unnecessarily lead to double abidance to similar rules.

The current draft rules on e-pharmacies only talk about entities that directly undertake sale of drugs or retail sale and do not contemplate a ‘marketplace model’ under which online pharmacies are currently operating in India, basically providing a technological platform to connect sellers and customers for the sale of drugs. Such intermediaries do not hold the inventory of drugs and nor do they deal in sale, contrary to how a pharmacy operates in case of retail sale. It is unclear as to whether certain obligations provided by the rules would be relevant to the marketplace model if they were to obtain a registration, which actually apply to a retail sale model, some of them are as follows- procuring drugs for customers from a licensed premises, maintaining records of e-prescription uploaded on portal, having a registered pharmacist, etc.

 

Conclusion

India shall widen the ambit of the industry by incorporating the best practices from across the world such as establishing a National Portal which shall act as a nodal platform for transacting and monitoring online sale of drugs. The concept of online pharmacies can help contain problems such as over and unscrupulous use of drugs if sale is done through an Electronic Prescription Exchange(EPE). EPE is a computer based electronic generation, transmission and filling of a medical prescription by replacing the papers and faxed prescriptions.

These portals provide medicines at affordable prices, at huge discounts, and free delivery thus proving to be a more convenient option for patients, especially senior citizens. They allow people to order medicines discreetly and also to choose the best service out of a number of options without having to visit a store physically. These portals can also prove to be a possible solution for the problems of malpractices that offline pharmacies engage in, wherein they have tie ups with hospitals and doctors, while selling medicines of higher range for the benefit of commission for themselves or the doctors.

For any of these benefits of online pharmacies to practically accrue, there needs to be a solid framework for the regulation of these players, from registration to functioning, etc. Specific rules should be designed for prescribing, dispensing, selling, and delivering prescription drugs through these pharmacies. The e-pharmacies should be compulsorily registered and be licensed from the regulatory body and hence the legal mechanism shall be put in place.

Companies (Amendment) Ordinance, 2019

The Companies (Amendment) Ordinance, 2019 was promulgated to replace the Companies (Amendment) Ordinance, 2018 which brought about amendments to 31 provisions of the Act. The need for repromulgation of an ordinance arose due to the fact that the Companies Amendment Bill, 2019 which was to replace the 2018 Ordinance was passed by the Loksabha on 4.01.2019 and was pending before the Loksabha for its approval. The Bill had not yet been taken up for consideration despite the fact that the 2018 Ordinance was to cease to operate on 21.01.2019. Hence, the 2019 Ordinance was promulgated by the President for giving continuing effect to the 2018 Ordinance.
The 2018 Ordinance was a result of the recommendations of the Committee formed by the Ministry of Corporate Affairs under the chairmanship of Mr. Injeti Srinivas to review the offences from under the Act.
The ordinance has been promulgated with two main objectives. i.e, promote ease of doing business in India as well as to ensure better compliance of laws by the corporate giants. The Ordinance seeks to achieve these goals through the following amendments to the Companies Amendment Act, 2013:
·      Declaration by the Director  under Section 10A
The Ordinance seeks to introduce Section 10A which mandates the director of any company incorporated after the commencement of the Ordinance to make a declaration that every subscriber to the memorandum has paid the value of shares agreed to be taken by hi. The declaration is to be made  within 180 days, before commencing any business and  shall be verified by the registrar.  In case of default, the Company will be penalised with a fine of INR 50000.
·      Removal of Company’s name from the register
The Ordinance empowers the Registrar to remove a company’s name from the register of companies if he has sufficient reason to believe that a company is not carrying on business, after a physical verification of the registered office under Section 12 of the Act. Failure to comply with provision will result in striking off the name of the company from the Register.   This has been done with the objective to tackle the increasing menace of ‘shell’ companies.
·      Penalty for issuing shares at a discount
The Ordinance imposes penalty for issuing shares at a discount under Section 53 of the Act. The Company will have to pay a penalty equivalent to the amount raised by the issue of such shares or five lakh rupees, whichever is less. The Company will also have to refund the amount with 12% shares.
·      Duty to register charges
The Ordinance seeks to reduce the time period provided for registration of charges under Section 77. Section 77 of the Act has been amended to the effect that charges created before the commencement of the Ordinance are to be registered within 300 days.  In case the charge is not registered within the time, the Ordinance provides an additional time of six months from the date of commencement within which the charge ought to be registered after payemtn of additional fees. In case the charges are created after the commencement of the Ordinance, the Charges are to be registered within 60 days of their creating. If the charge is not registered within the given time period, the Registrar can allow the registration of the charge within a period of further 60 das on payment of ad valorem fees.
Furthermore, Section 86 has been amended to the effect that any wilful furnishing of false information or supressing any material information pertaining to registration of charges will attract Section 447 of the Act, dealing with fraud.
·      Filing of resolutions and agreement
In order to improve transparency, the Ordinance  amended S. 117 (2) to impose a penalty of INR 1,00,000 as penalty on companies that fail to file resolutions and agreements before the specified time. In case of continuing failures, the penalty will be INR 500 per day subject to a maximum amount of 25 Lakhs.
·      Enhancement of penalties
The Ordinance seeks to enhance the penalties levied under several sections. This has been done with a view to impose stringency in terms of companies complying with the Act.
·      Shifting of jurisdiction of certain Corporate Offences
The Ordinance seeks to institute an in-house system for adjudication of certain offences.  The Ordinance seeks to shift jurisdiction of 16 corporate offences from Special Courts to Inhouse. For this purpose, the offences which were earlier considered to be compoundable offences have been recategorized as technical defaults, carrying civil liability. This has been done with an objective to reduce the case load of special courts, so as to enable them to deal with serious offences.
·      Reduction in penalty imposed on small companies and OPCs
In order to encourage the business activities of small companies, the Ordinance has also reduced the penalty imposed on small companies and OPCs to half of what is applicable to normal companies.
·      Efforts to reduce the load on NCLT
The Ordinance seeks to reduce the increasing load on NCLT in the following manner:
(i)            The pecuniary jurisdiction of Regional Director for compounding of offences unde Section 441 has been enhanced to INR 25 Lakh as opposed to the earlier limit of INR 5 Lak so asto reduce the load on the Tribunal.
(ii)          The Ordinance amended Section 12 of the Act to mandate the approval of the Central Government vide an Order as a pre-requisite for conversion of a Public Company to a Private Company. Prior to the promulgation of the Order, the power to issue such Orders was with the Tribunal.
(iii)        The Ordinance vests power on the Central Government to change the financial year of a company incorporated outside India, if it requires to follow a different financial year for consolidation of its accounts outside India (Section 2(41) of the Act). Prior to the Ordinance, the same rested with the Tribunal and continues to do so in cases pending before the Tribunal
·      Substitution of the term, ‘Punishment’ with ‘Penalty’
The Ordinance has substituted the term, ‘Punishment’ with ‘Penalty’ in Ss. 105, 117 121 137, 140 so as to convert the criminal offences to civil penalties.
·      Disqualification of directors
The Ordinance also added an additional ground for disqualification of director under S. 164. After the promulgation of the Ordinance, directors who contravene the maximum number of directorship mandated under the law (20 for private companies and 1 for public companies) shall be liable for disqualification.
·      Penalty for repeated defaults
The Ordinance inserted a new Section 454A, wherein a company, its officer or any person already having subjected to penalty for default commits such default again, within a period of 3 years of date of order of imposing the penalty shall be liable to pay a penalty that is twice the amount of penalty provided under the Act.
Conclusion
The Ordinance is the need of the hour as it  seeks to streamline the procedures so as to ensure  the enhancement of ease of doing business in India. It also introduces stringent penalties so as to take strict action against companies that do not take compliances seriously. If implemented rigorously, the Ordinance has the potential to strengthen corporate governance and enforcement framework by increasing transparency in compliance and disclosures.

Angel Tax fiasco: Government To Soften The Blow On Startup Businesses

New Delhi, February 12: In terms of the number of businesses, India is the second biggest ecosystem for the start-up. Even though the incumbent government has time and again promoted the entrepreneurship in the country, from the past two weeks it is receiving constant flak from the startup ecosystem, as it is facing a new hurdle, that is, Angel Tax. This was prompted by the Income Tax Department seizing the accounts of two Indian start-ups- TravelKhana and Babygogo. Start-ups alleged that the government’s most-vaunted Startup initiative is affecting their financial health.

A large number of startups have received notices to pay angel tax. According to a survey conducted by LocalCircles and Indian Venture Capital Association, around 73% of startups said they have received at least one angel tax notice, while 30% have received three or more such notices most recently.

What is Angel Tax and why is it problematic? 

Angel investors are HNI or High-net-worth individuals who invest their personal money into the startup in the early stages when such entrepreneurial ventures find it difficult to access traditional sources of funds. They provide mentorship to startups. Here is how SEBI defines an angel investors, under the Alternative Investment Fund Regulations.  Any person who proposes to invest in an angel fund and satisfies one of the following conditions, namely,
(a) an individual investor who has net tangible assets of at least two crore rupees excluding the value of his principal residence, and who:

(i) has early stage investment experience; or
(ii) has experience as a serial entrepreneur; or
(iii) is a senior management professional with at least ten years of
experience

(b) a body corporate with a net worth of at least ten crore rupees; or
(c) an AIF registered under these regulations or a VCF registered under the SEBI (Venture Capital Funds) regulations, 1996.

Introduced by the UPA government in 2012, angel tax refers to a section of Income Tax Act that deals with taxing any capital raised by a closely-held company or startup which is above or excess of its Fair Market Value. This amount is deemed as income from other sources and is taxed at 30.9%. There, however, is no clear objective way to determine the Fair Market Value of the startup. Angel investors at the funding stage pay for the potential of an idea and the valuation is tied to the assessment of that potential. As per the Section, Fair Market Value is defined as the value-

a) as may be determined in accordance with such method as may be prescribed; or
b) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature;
whichever is higher;

According to a report by iSpirit, a think-tank of the Indian software industry, ideally a taxman or the Assessing Officer should not have the discretionary power to disregard a valuation acceptable to the startup and a group of sophisticated investors and arrived at by a professional in the form of a qualified Charted Accountant or a Category 1 Merchant Banker. Many startups have faced a challenge, whereby, the assessing officer takes the lower value as the Fair Market Value and taxes the entire premium as income in the hands of the companies. Additionally, the law states that the companies need to satisfy the assessing officer based on the value of the company, as on the date of the fundraising, whereas the valuation methodologies allow for you to discount future cash flows as of today. These contradict each other as the value as of today will always be less than the value in the future. This leads to taxation on the basis of the present Net Asset Value instead of the probable future value.

A big relief:

To soften the blow, according to a news report by the Economic Times, DIPP is believed to have accepted some of the demands by the startups, which it will notify by the end of this week. It is also planning to hike the investment limited for availing the income tax concessions by the startups. Adding to it, the government might increase investment limited for tax exemption from ten crores to twenty-five and forty crores. It is also likely to recognize all companies that are operational for up to ten years as startups.

Companies (Amendment) Ordinance, 2019: An Overview

The Companies (Amendment) Ordinance, 2019 was promulgated to replace the Companies (Amendment) Ordinance, 2018 which brought about amendments to 31 provisions of the Act. The need for re-promulgation of an ordinance arose due to the fact that the Companies Amendment Bill, 2019 which was to replace the 2018 Ordinance was passed by the Lok Sabha on 4.01.2019 and was pending before the Lok Ssabha for its approval. The Bill had not yet been taken up for consideration despite the fact that the 2018 Ordinance was to cease to operate on 21.01.2019. Hence, the 2019 Ordinance was promulgated by the President for giving continuing effect to the 2018 Ordinance.

The 2018 Ordinance was a result of the recommendations of the Committee formed by the Ministry of Corporate Affairs under the chairmanship of Mr. Injeti Srinivas to review the offences from under the Act.

The ordinance has been promulgated with two main objectives. i.e, promote ease of doing business in India as well as to ensure better compliance of laws by the corporate giants. The Ordinance seeks to achieve these goals through the following amendments to the Companies Amendment Act, 2013:

  • Declaration by the Director  under Section 10A

The Ordinance seeks to introduce Section 10-A which mandates the director of any company incorporated after the commencement of the Ordinance to make a declaration that every subscriber to the memorandum has paid the value of shares agreed to be taken by hi. The declaration is to be made  within 180 days, before commencing any business and shall be verified by the registrar. In case of default, the Company will be penalized with a fine of INR 50000.

  • Removal of Company’s name from the register

The Ordinance empowers the Registrar to remove a company’s name from the register of companies if he has sufficient reason to believe that a company is not carrying on business, after a physical verification of the registered office under Section 12 of the Act. Failure to comply with provision will result in striking off the name of the company from the Register.   This has been done with the objective to tackle the increasing menace of ‘shell’ companies.

  • Penalty for issuing shares at a discount

The Ordinance imposes penalty for issuing shares at a discount under Section 53 of the Act. The Company will have to pay a penalty equivalent to the amount raised by the issue of such shares or five lakh rupees, whichever is less. The Company will also have to refund the amount with 12% shares.

  • Duty to register charges

The Ordinance seeks to reduce the time period provided for registration of charges under Section 77. Section 77 of the Act has been amended to the effect that charges created before the commencement of the Ordinance are to be registered within 300 days.  In case the charge is not registered within the time, the Ordinance provides an additional time of six months from the date of commencement within which the charge ought to be registered after payment of additional fees. In case the charges are created after the commencement of the Ordinance, the Charges are to be registered within 60 days of their creating. If the charge is not registered within the given time period, the Registrar can allow the registration of the charge within a period of further 60 days on payment of ad valorem fees.

Furthermore, Section 86 has been amended to the effect that any willful furnishing of false information or suppressing any material information pertaining to registration of charges will attract Section 447 of the Act, dealing with fraud.

  • Filing of resolutions and agreement

In order to improve transparency, the Ordinance  amended S. 117 (2) to impose a penalty of INR 1,00,000 as penalty on companies that fail to file resolutions and agreements before the specified time. In case of continuing failures, the penalty will be INR 500 per day subject to a maximum amount of 25 Lakh.

  • Enhancement of penalties

The Ordinance seeks to enhance the penalties levied under several sections. This has been done with a view to impose stringency in terms of companies complying with the Act.

  • Shifting of jurisdiction of certain Corporate Offences

The Ordinance seeks to institute an in-house system for adjudication of certain offences.  The Ordinance seeks to shift jurisdiction of 16 corporate offences from Special Courts to In-house. For this purpose, the offences which were earlier considered to be compoundable offences have been re-categorized as technical defaults, carrying civil liability. This has been done with an objective to reduce the case load of special courts, so as to enable them to deal with serious offences.

  • Reduction in penalty imposed on small companies and OPCs

In order to encourage the business activities of small companies, the Ordinance has also reduced the penalty imposed on small companies and OPCs to half of what is applicable to normal companies.

  • Efforts to reduce the load on NCLT

The Ordinance seeks to reduce the increasing load on NCLT in the following manner:

  1. The pecuniary jurisdiction of Regional Director for compounding of offences under Section 441 has been enhanced to INR 25 Lakh as opposed to the earlier limit of INR 5 Lakh so as to reduce the load on the Tribunal.
  2. The Ordinance amended Section 12 of the Act to mandate the approval of the Central Government vide an Order as a pre-requisite for conversion of a Public Company to a Private Company. Prior to the promulgation of the Order, the power to issue such Orders was with the Tribunal.
  3. The Ordinance vests power on the Central Government to change the financial year of a company incorporated outside India, if it requires to follow a different financial year for consolidation of its accounts outside India (Section 2(41) of the Act). Prior to the Ordinance, the same rested with the Tribunal and continues to do so in cases pending before the Tribunal

  • Substitution of the term, ‘Punishment’ with ‘Penalty’

The Ordinance has substituted the term, ‘Punishment’ with ‘Penalty’ in Ss. 105, 117 121 137, 140 so as to convert the criminal offences to civil penalties.

  • Disqualification of directors

The Ordinance also added an additional ground for disqualification of director under S. 164. After the promulgation of the Ordinance, directors who contravene the maximum number of directorship mandated under the law (20 for private companies and 1 for public companies) shall be liable for disqualification.

  • Penalty for repeated defaults

The Ordinance inserted a new Section 454A, wherein a company, its officer or any person already having subjected to penalty for default commits such default again, within a period of 3 years of date of order of imposing the penalty shall be liable to pay a penalty that is twice the amount of penalty provided under the Act.

Conclusion

The Ordinance is the need of the hour as it  seeks to streamline the procedures so as to ensure  the enhancement of ease of doing business in India. It also introduces stringent penalties so as to take strict action against companies that do not take compliance seriously. If implemented rigorously, the Ordinance has the potential to strengthen corporate governance and enforcement framework by increasing transparency in compliance and disclosures.

Financing Of International Trade: Need, Method & Practical Implications

International Trade in today’s world has become extremely intrinsic, and has led to rise in the living standards, generating more employment and has also brought in a market wherein the consumers have the option to choose from a vast variety of goods.

The fact of International Trade taking place is not something exclusive to this era,  since, the practice has been in place since the earliest civilization where trade used to happen, the key difference being that now the nature of International Trade has become more complex and import and export have also become a key contributor in the GDP of the countries.

Often, questions are posed as to why we need international Trade, why does any sovereign nation want to import or export goods from another sovereign nation. It would be worthwhile to mention here, that, not all nations are blessed with naturally available abundant raw materials, for instance Oil in Qatar, Congo has diamonds, Butter in New Zealand etc. Therefore, what has become a general practice is that, the nations tend to export more goods which are produced by the abundant use of local factor endowments; and import the goods where resources within the nation are scarce.

Nowadays, International Trade is no more restricted to Government to Government end trade, but has expanded with even the Multi National Corporations and other private entities disrupting into the trade process now.

Trade cannot take place without money, and most of the entities indulging into trade place heavy reliance on external capital for the purposes of financing costs for numerous business activities like advertising, intermediate input purchases, inventories, payment to the workers and other such costs.

Export activities require incurring of additional upfront expenditures which more or less constrain the companies to look for external finance due to the various stages involved in the export process that require incurring of expenses on duties, freight cost, insurance, trade costs. Moreover, International Trade involves  cross border delivery which not only would take longer time but would also lead to an increase in the requirements of the working capital.

Thus, trade finance is an important aspect when it comes to international Trade and considering the role played by capital in it the governments and various financial institutions have come up with different kinds of instruments to provide trade finance.

For instance, if we look at HSBC Bank, it provides with export finance facilities. These facilities primarily aid the exporter in informing him and also protecting him against the emerging market risks, the assessment thereof. The Bank since has global presence all around the globe, and have trade specialists who help in improving the cash-flow, managing risks associated with international trade even more effectively. These kind of instruments thus, are tailor-made for the needs and in a manner best suited to the exporters.

Trade Finance primarily has two purposes to serve; firstly, it acts as a source for providing working capital which is of utmost need for traders and other companies involved therein that require liquid assets; secondly, it also provides protection in the form of credit insurance against various prevalent risks like political risks, currency fluctuations and other trade risks.

When it comes to trade finance, the financial managers involved therein responsible for providing measures of financing trade have to make sure to use such instruments/methods, the deployment of which would in effect maximize the value of an MNC.

Mostly, banks of the nations or the destinations where trade is taking place are involved in the trade financing activities. Generally, as the practice is, the banks towards both the sides of the trade transaction, i.e., the exporter and the importer’s side play a major role in the financing of trade taking place therein. There are various methods through which the trade specialists help in financing trade. The most popular ones being;

Accounts Receivable Financing; this is a kind of an asset financing arrangement wherein the company (or exporter in the present case) uses it’s outstanding money or invoices owed by the customer to them for the purpose of securing loan from the bank.

Thus, there may be times, when the customer of the exporter pay the invoices in 30 to 60 days, however, in order to continue with their export and to incur expenses therein the exporter requires capital, thus, it is in these kinds of situations that the exporter can seek loan from the bank by the assignment of the amounts receivables. In this situation, the bank makes a loan to the exporter based on the exporter’s creditworthiness in the eyes of the bank. However, this method although fosters the exporter in carrying out his trade activities uninterruptedly, but at the same time since there is absence of any assurance regarding the payment from the customer’s end, the exporter is always at risk of not receiving any payment from the exporter. The exporter, even though is not assured of payments, is still bound to repay the loan to the bank.

There is presence of further additional risks like the government imposing restrictions and exchange restraints which may further hinder completion of payment from the customer’s side to the exporter. As a consequence thereof, the rate at which the bank provides the loan is often higher than the domestic rates prevalent in the account receivable financing. Further, since there are risks pertaining to currency fluctuations, government restrictions, which are generally beyond the control of the parties, there is an additional requirement to obtain credit insurance as a safety measure prior to financing foreign receivables.

Another method is that of Factoring, under this method the exporter (or business as used in this context in common parlance) sells its receivables, invoices to a third party, who is called a “factor”. This selling/assignment to the factor enables him to collect the payments on behalf of the exporter from the business’s customers. Factoring is beneficial to the exporter in several ways. As first, this act of selling/assignment relieves the exporter of the administrative duties involved therein for maintaining and monitoring the account receivables for the purposes of accounting ledger. Secondly, by such assignment the entire credit exposure is given to the factor and the exporter therefore, is relieved from taking efforts to assess the creditworthiness of the foreign buyer as the task is assigned to the factor. Thirdly, this sale to the factor, enables and improves the cash flow of the exporter as he obtained immediate payment from the factor upon such selling/assignment.

The factor here, since pays money to the exporter, is therefore dependent on the import buyer for repayment to the factor which places the responsibility of assessment of credit risk on the factor. Thus, in order for the factor to ensure that the importer is creditworthy, cross border factoring is often put to use. The factor of the exporter contacts a corresponding factor in the buyer/importer’s country to assess the creditworthiness of the importer and also the consequent handling of receivables.

These factoring services are generally provided by commercial banks or commercial finance companies set up for these purposes having factoring subsidiaries. Export credit insurance is usually obtained by these factors in order to mitigate the risks arising due to foreign receivables.

The next method used is that of Letters of Credit. These Letter of Credit (L/C) is generally found to be beneficial and affords protection to both the buyer as well as the exporter, which is primary for international trade transactions. The Letter of Credit basically is an undertaking from a bank, wherein the bank undertakes to make payments on behalf of one party (involved in the trade transaction)  to another party being the beneficiary, under the specified conditions, generally upon fulfillment of specified conditions. The process of making payment by way of a Letter of Credit , generally works in a manner that the beneficiary therein (exporter) gets paid after presenting the specified documents in accordance with and as required in the terms of the Letter of Credit. The payment method by way of Letter of Credit involves two banks generally, one bank each in each party’s country, i.e., the exporter’s bank and the bank of the importer. The issuing bank substitutes its credit for the importer. The reason for wide usage of the Letter of Credit lies in the fact that it more or less provides a guarantee of payment to the exporter, provided there is proper compliance  with the terms and conditions of the Letter of Credit.

One problem that generally arises in this process is the lack of ability to trust. Now, there might be a case that the exporter is skeptical in trusting the importer’s bank, and this is very genuine also, since, the importer’s bank is situated in a foreign country and the exporter getting apprehensive in trusting this bank located in a foreign country is very normal. Even in cases, where the issuing bank is a well known bank all over the world, there still remain chances that by virtue of being in different country, that particular government may impose certain restrictions which may hamper the payment process in favor of the exporter, thereby causing loss to the exporter. Thus, the exporter due to these apprehensions may even request a local bank to confirm the Letter of Credit, thereby assuring the exporter that all the responsibilities/obligations of the issuing bank would be duly met. In such a situation, the confirming bank gets obligated to honor the drawings therein made by the beneficiary in accordance/ compliance with the terms of the Letter of Credit irrespective of the ability of the issuing bank to be able to make the payment or not.

Generally, the Trade related Letters of credit are also termed as Commercial letter of credit or export/import letters of credit. Basically, there are two types of letters of credit, one being revocable and the other one being irrevocable. The revocable letter of credit may be cancelled or be revoked at anytime without any prior notice to the beneficiary. On the other hand, an irrevocable letter of credit cannot be so amended or cancelled without the consent of the beneficiary. The bank which issues the Letter of Credit is known as the issuing bank. The corresponding bank located in the country of the beneficiary to which this issuing bank send the letter of credit so issued is referred to as the advising bank. An irrevocable letter of credit creates an obligation on the issuing bank to honor all the drawings drawn thereto in accordance with the terms of the letter of credit. The International Chamber of Commerce issues the “Uniform Customs and Practice for Documentary Credits” which contain provisions governing the issuance of the letter of credit, and the letters of credit are usually issued in compliance with these provisions also.

The bank that issues the letter of credit makes the payment after the requisite documentation is presented to it with full compliance with the terms and conditions of the letter of credit. The importer is required to make payment to the issuing bank of the amount mentioned in the letter of credit with the addition of the fee so accrued in obtaining the letter of credit. The general practice followed is that the importer usually has an account opened with the issuing bank which is to be drawn upon for payment, in order to prevent the issuing bank from tieing its own funds. Surprisingly, even if the importer does not have enough/sufficient funds in the account, still, the issuing bank is under an obligation to honor the drawings so made against the letter of credit. This, is the reason that the importer’s creditworthiness is ascertained and analysed before the bank issues a letter of credit in order to protect itself from such situations. The importer in such circumstances is obligated to repay to the bank both the principal amount and also the amount of interest at the time of maturity. All these measures have been devised and put to use for the purposes of providing an extended payment term to the buyer when their is an insistence from the exporter’s side to make the payment at sight.

The bank which issued the letter of credit has to make payment to the beneficiary once, all the documents as required by the terms of the Letter of credit have been presented before the bank. There is an option for payment by way of letters of credit. It can either be made at sight or on a specified future date. The documents that comprise a Letter of Credit  generally are a collation of a draft, a bill of lading and a commercial invoice. Rest, depending on the terms of the agreement, country or the product or other documents (like the inspection certificate, packing list, certificate of origin or even the insurance certificate) may also be required.

How The Resignation Of NSC Member Exposed The Incumbent Government’s Unwillingness To Put Forth Data

New Delhi: Few months into the most-awaited Lok Sabha elections, a report by The Business Standard has sparked a major controversy. Even though the data on unemployment has not been officially released, the business standard claimed to have procured the copy of the National Sample Survey Office’s (NSSO) periodic labour force survey (PLFS).

If figures from National Sample Survey Office’s (NSSO) Periodic Labour Force Survey (PLFS) are to be believed, in 2017-18, unemployment was at an unprecedented high of 6.1%. PLFS is based on the field-work done between July 2017 and June 2018.

Even before the scheduled release of Annual Employment Survey 2017-18, two of the National statistic commission (NSC) members, including the acting chairman, resigned, agitated over the fact that they had already approved the report, but the government withheld it for unknown reasons. This move by the members of NSC sparked a major controversy.

According to the report, from 2011-12 to 2017-18, the rates of joblessness among rural men between the age of 15-29 years increased by three times, from 5% to 17.4%. In rural areas, the unemployment rate for women rose from 4.8% in 2011-12 to 13.5% in 2017-18. The picture is not rosy in the urban areas as well. Unemployment for men in cities has risen from 8.1% in 2011-12 to 18.7% in 2017-18. For women, the rise in unemployment is nearly double, with 13.1% in 2011-12 to 27.2% in 2017-18. The Labour Force Participation Rate (LFPR) has declined from 39.5% in 2011-12 to 36.9% in 2017-18.

The figures show that the unemployment crisis in the country right now are alarming and brings forth the failure of the incumbent government to formulate policies, as it is the first survey brought out post demonetisation.

The major issue that arose out of this is not the shocking figures but the fact that the government chose to withheld it like other reports that have either gone missing from the website or have not been ever released in the public domain.

Scrapping down the allegations of withholding the data, the government came out with a statement on January 30th, 2019, stating,

“NSSO is processing the quarterly data for the period of July 2017 to December 2018and the report will be released thereafter.”

 In an interview to the quint, NITI Aayog Vice Chairperson Rajiv said that the data in the reported NSSO survey was not verified, and that it was not correct to use this data to talk about joblessness.

According to a research conducted by Indiaspend.com, a whole gamut of other government statistics have not been updated or even made public. This includes data on crime, employment, farmer suicide, caste and agricultural wages.

Apart from the job front, data on crime which is annually released by the National Crime Records Bureau (NCRB), has not been released from the past two years.

Similarly, the data on accidents and suicides has not been put forth from the past four years.

Shockingly, even after constant reminders by the Reserve Bank of India, data on foreign Direct Investment, which is released by Department of Industrial Policy and Production (DIPP) quarterly, has not been released since June 2018.

These relavations are shocking as the lack of data creates economic opacity which prevents businesses and investors from making a right decision. Moreover, lack or absense of data further prevents the Central and State government from making informed decisions regarding policies and governance.

Academic Pursuit V/S The Issue Of Political Correctness

“If a country is to be corruption free and become a nation of beautiful minds, I strongly feel there are three key societal members who can make a difference. They are the father, the mother and the teacher.” – Dr. A.P.J. Abdul Kalam

In the life of a student, living in the practical realm is of utmost necessity. A student will only be able to develop when he or she can skim through the theoretical studies and have pragmatic inter linkage thereto. In fields like medicine and law especially this pragmatic approach towards the subjects is indefeasible.

Thus, when an M.B.B.S student is given to tackle practical situations during the course as  a part of the curriculum, the same facilitates and develops the cognitive faculties to an extent that aids the receptivity of the student towards the real life situations as and when they arise. Likewise, goes for an LLB student, you cannot keep law out of society. Law and society are integrally interlinked. The course of legal studies in India or all over the world for that matter is more or less case study based. It is an accepted practice, to give law students situational based questions and leave to them to give the answers by applying the relevant provisions of law to those situations and frame an appropriate answer.

The Bar Council of India has time and again revised directions to the law institutions holding that legal education cannot be imparted through channels where there is no interaction inter se the teachers and students, no classrooms, no requirement for attendance and no practical exposure. Law is one of such courses where academic education is considered incomplete without practical exposure be it through internships or moot courts or otherwise. The students who eventually are going to deal with the rights, duties and lives of the people when they become lawyers have to be trained with the practical exigencies and hand-holdings by their seniors, and, this is why not just the students are required to undertake internships but even practicing lawyers and sitting judges are often called upon by the Universities for judging moot courts which forms part of the basic tenets of the modus of imparting legal education.

Recently, a lot of controversy arose when such a situational based question was given in the December, 2018 End term Examination of the University School of Law and Legal Studies, IP University College, Law of Crimes Paper; the question read as,

“Ahmed, a Muslim kills a cow in a market in the presence of Rohit, Tushar, Manav and Rahul, who are Hindus. Has Ahmed committed any offence?”.

This question is ordinarily seen by any law student would make his or her mind skim through the relevant provisions of the criminal legal regime, like section 153-A, 295-A IPC or even section 298 of the IPC, or other provisions of the Prevention of the Cow Slaughter Act (of the respective states). Pursuant to this paper, the esteemed University who by virtue of teaching law is expected to act in a rationale manner actually ended up issuing an Office Order dated December 20, 2018 against the teachers who had framed the said question thereby debarring them from getting involved in the task of setting up and moderation of question papers for a period of six semesters from thereon. In addition to this, making optimum use of this situation for bringing politics into the picture the Deputy CM on January 1, 2019 issued an order stating :

This is a serious matter where the basic spirit of the Constitution of India is being violated. This cannot be allowed. Merely issuing press release or barring the responsible person from making the question papers for few semesters would not be sufficient. Responsibility should be fixed and responsible persons to be terminated immediately. Cover up exercise cannot be tolerated after such a huge lapse.”

Subsequent to this order, the University called for a Board of Management Meeting citing the agenda to be to discuss the  termination of the Assistant Professors. The professors therefore had approached the Honorable High Court of Delhi, wherein the learned counsels representing the Assistant Professors put-forth arguments before the Honorable Court, thereby refuting the allegations of inciting communal violence and stated that the sole purpose of asking this question was to check the understanding of the students with respect to the criminal legal regime in light of the application of the relevant provisions of law. The question was framed in a fashion that it had to be answered on basis of the case laws and provisions of law, no personal opinion of the students or any person in any manner was ever sought. And, when there is no independence granted to the student to express their opinion on the situation and when the students were well constrained within the frame of the legal provisions and the case laws, how can the same be said to be inciting communal violence. The Honorable Delhi High Court thereafter, accepting the contentions of the counsels representing the professors granted an interim stay in their favor thereby putting at halt any kind of termination or adverse action against the professors sought to be taken by the University. Thus, the Delhi High Court in the true sense upheld the echelons of justice and ensuring that justice was not denied.

An article published in “The Indian Express” on December 12, 2019 cited a statement made by the Education Minister that, “How could such a reprehensible question with a communal overtone be framed for an LLB exam?” Such a reaction is seriously questionable and condemned especially, when a similar question formed part of the GGSIPU End Term Examination paper on the Law of Crimes during November-December 2016 also. The question then read as,

“ ‘X’ a Mohammedan kills a cow in an open place in the presence of 4-5 Hindus. What offence did he commit?”

Thus, the rage raised in pursuance to the 2018 paper was certainly unneeded and uncalled for and is a sheer demonstration of exploitation of academic institutions of our country for political ends at the hands of the ruling government.

This is not the first time that political manifestations have been made keeping the gun on the shoulders of academic institutions, the difference just being that earlier such attacks were made on the administrative domain of the institutions like the case of JNU, and this time a targeted attempt was made to disrupt the academic affairs of an Institution.

This leaves the public with a question as to whether at all is there any academic freedom in our country, or is the country to be governed as per the whims and fancies of the government thereby being a mere facilitator for the political gains of the few. The scholars, teachers should be vested with the freedom to not only teach but also frame the most suited questions relevant to the subjects freely. These time and again attempts from the government’s side to interfere with the affairs of the Academic Institutions whether be in the ordinary executive and administrative sphere or the academic sphere (like in the present GGSIPU case) should be condoned. The Government should not be given the liberty to exploit these Institutions for their political gains. May be, the routinely interference of the government with the affairs of JNU has  provided them with a leeway to now even hamper the academic sphere, but this certainly shall be condoned in strict sense.

The teachers form the building blocks of the nation due to the responsibility vested in them to train and educate the children of the country who are the future of the nation. Setting up and moderation of the question papers infact, should be considered to be as a part of the right to dignity of the teaching profession, and actions debarring teachers from being part of the paper setting team should be strongly discouraged, especially, in light of situations like the present one wherein there is a clear attack intended solely for the purpose of deriving political mileage.

Eugene Vinaver, Professor of French Language and Literature at the University of Manchester, in an address to the faculty of the University stressed on the uniqueness of the University as public institution and observed:

“That the condition under which academic work can prosper can never be equated with the political structure of a state or the administrative structure of an army or, for that matter, the rational structure of a large concern. Efficiency in all such enterprises requires within certain limits the abandonment of equality. In an academic body, on the contrary, efficiency is strictly proportionate to the degree of individual freedom, for such is the nature of human intellect that when its freedom is violated, destruction ensues.”

Academic freedom here is required to be distinguished from University autonomy, the former relates to the professional freedom of the teaching fraternity in the matters of prescribing the syllabus and curriculum, conduct of examinations, teaching, valuation etc., whereas the latter majorly relates to the university being a self governing institution making decisions  for its affairs.

Furthermore, it is extremely imperative for us to ponder over that every human has two key roles to be played in a society, the first one being discharging the obligations as a citizen, and, the second one being, discharging responsibility as a functionality, when functioning in the professional domain does not mean that the person is not sensitive as a citizen, there certainly is that sense of sensitiveness, however, due to the demand of the functionality which is required to be discharged requires the person to undertake decision making or conduct certain activities which may be peculiar to the discharging of obligations qua the profession and the same cannot be adjudged as insensitive by the society. A judge as a human being in the shoes of a citizen might not even want to kill a mosquito, however, the profession demands him to even levy death penalty on the offenders, thus, while discharging this professional responsibility one can’t target judge on grounds of being insensitive. Likewise, it is unfair to target the professors by raising such controversies when all that they are doing is discharging their professional obligations. If posed with constant   fear of criticism in this manner, how can a law professor be expected to teach, when they know they would be targeted with political criticism. This act in fact compromises the principles of academic freedom to a large extent. Under such circumstances, how can the teachers even be expected to discuss case laws and teach sections like 153A, 124A, 295A of the IPC, 1860. Thus, in order to impart the ideology behind these sections it is imperative for the teachers to hold discussions in this respect and for better clarity on the ingredients thereof, to even deliberate using the existing case laws. And, the need to preserve this right to them is necessary. There has to be certain threshold of academic freedom required to be maintained.

It is of utmost necessity that now, we as a nation initiate taking a stand for protecting the academic institutions of our nation and prevent them from being exploited at the hands of the few and ensure that their sanctity is well preserved, maintained and protected. It is further important for us to ensure that the profession of teaching remains as noble as it has ever been and at the same time it is for us to ensure that utmost independence is given to the teachers to not only, frame whatever kind of questions they deem fit for imparting the best of knowledge to their students, but also, for using the best of the ways for imparting education and  for independence to use the best of their capabilities to develop the scientific temper, humanism and the spirit of inquiry and reform among the individuals as well enshrined under our Indian Constitution as well.

Critical Analysis of the Motor Vehicle Amendment Bill, 2017

Critical Analysis of the Motor Vehicle Amendment Bill, 2017

The Motor Vehicle Amendment Bill, 2017 which was passed by the Loksabha on April 10, 2017, has been stalled in the Rajyasabha for over a year despite road safety activists pushing for urgent passage of the same. The Bill is likely to be passed in the monsoon session of Parliament and its approval is of national importance for the following reasons:

(i) The Global Status Report on Road Safety, 2018 released by WHO provides that the road crash fatalities in India is at 3 Lakh, the highest in the world. Furthermore, the MoRTH’s Report, ‘Road Accidents in India, 2016 records the number of accidents in India to be.  1.46 lakh annually. This is extremely disconcerting especially considering that India only accounts for 2% of the global vehicle population. In light of the same, it is extremely pertinent to amend the existing law so as to curb the growing number of accidents and consequent fatalities.

(ii) The MV Act is three decades old and is not contemporaneous to the existing technology. Consequently, the outdated provisions of the Motor Vehicles Act, 1988 are failing to deter the increasing fatalities due to traffic violations.  Hence there is a dire need to bring in radical changes to the Law.

(iii) The new Bill is a great step towards strengthening transportation and road safety in India since roads are vital for transportation in India and carry 655 of goods and 90% of passengers.

(iv) The Proposed Bill is also the need of the hour so as to attain the UN mandate under the Brasilia Declaration to reduce road accidents up to 50 percent by 2020.

Main proposals in the Bill:

  • Introduction of a Road Safety Board

The New Bill provides for a National Road Safety Board under Section 215D. The Board has been set up with an objective to render advice to the Union as well as the State Government on aspects of road safety and traffic management including standards of road design, vehicle maintenance, road maintenance, motor vehicle standards etc.

  • Centralized Digital Licensing System

The new Bill takes into account the digital growth of the country and provides for a centralized digital licensing System which envisages the following:

  1. Section 25A provides for setting up of a  digital National Register of Driving Licenses, the identification of which would be on the basis of UID System. The Register would subsume all the State Registers and hence, would enable the maintenance of a comprehensive register of all the licenses issued in the country. To ensure the success of the register, Section 25H specifically provides that no driving licenses shall be valid unless it has been issued a unique driving license number under the National Register of Driving Licenses.
  2. The Bill also envisages the introduction of Learner’s license online and automated driving tests.

Outcome:

An online licensing system will reduce the increasing number of touts involved in obtaining a driving license.  It will also curb the practice of obtaining multiple licenses from different States which was earlier possible due to the lack of a centralized database.  Furthermore, it will help to bring in uniformity with respect to driving licenses throughout India.

  • Provisions Regarding Offences Committed by Juveniles

The Bill seeks to introduce Section 199A wherein Guardians of the Juvenile / Owner of the vehicle will be held responsible for traffic violations by the juvenile. The onus will be on the guardian/ juveniles to prove that the offense was committed without their knowledge or they tried to prevent it.  Additionally, the guardian or owner of the vehicle shall be held guilty with a fine of Rs.25000 and or imprisonment of up to 3 years. Juveniles committing traffic violations will be tried under the Juvenile Justice Act. The registration of the vehicle shall also be canceled.

Currently, there are no provisions pertaining to offenses committed by Juveniles. Allowing unauthorized person the driven vehicle imputes a penalty of Rs.1000 and or imprisonment of up to three months. Provisions of IPC are also invoked in certain instances.

The stringent provision is a result of 18738 accidents in India involving underage drivers.  (as per 2016 MORTH Report). It is pertinent to note that 5383 of the said accidents were fatal. The amendment will ensure that the vehicle owners/guardians will not allow their vehicle to be used by minors, resulting in a reduction of the number of offenses committed by juveniles.

  • Protection of Good Samaritans

The Bill seeks introductions of Section 134A to protect people who aid accident victims from criminal and civil liability, also known as good Samaritans. The section gives them an option not to disclose their identity to policy or medical personnel. This is in tune to the directions of the Honourable Supreme Court in Save Life Foundation v Union of India wherein the Honourable Court had held that civil/criminal liability cannot be imputed on any person who brings the injured person the hospital in accident cases. Similar guidelines have already been issued by MORTH, binding on all States and UTs.

The amendment will ensure that the people who witness the road accidents will wilfully help the accident victims without any fear of civil or criminal liability. On the flip side, the lack of provision for examination of good Samaritans may lead to people with bad intention of taking advantage of the provision.

  • Motor Vehicle Accident Fund

The Bill also envisages the setting up of a Motor Vehicle Accident Fund which provides compulsory insurance cover to all road users in India for certain types of accidents by the Government.

The need for such a fund was widely debated in the Parliament. The Government is yet to come up with a rational answer.

  • Accountability for Poor Roads

The Bill also envisages the insertion of Section 198A to impute accountability on contractors, consultants, and civic agencies for faulty design, construction or poor maintenance of roads leading to accidents.  This will result in a penalty of up to Rs. One lakh in such cases.

The new provision is a laudatory step towards improving the quality of roads in India. The provision was introduced to curb the increasing number of accidents and deaths caused due to engineering/designing fault. As per the MORTH’s Report (Road Accidents in India, 2016), 1289 accident were caused in India due to engineering faults, killing 589.

  • Provision for Recalling Vehicles with Substandard Components

Under Ss. 110A and 110B, the Bill empowers the Central Government to recall vehicles with substandard components/engines, posing a threat to the environment, the driver, occupants of the vehicle or other road users. Additionally, testing agencies or owners (comprising of a minimum specified percentage) can report defects to the central Government so that the Government can then make a recall order.  Vehicle Users who are affected by such orders are also entitled to reimburse the buyers for the full cost of the vehicle or replacement of the defective vehicle with a similar or better vehicle. Manufacturers can also be fined upto Rs. 500 crore for sub-standard products.

The insertion of S. 110Aand 110B will result in a paradigm shift in the transport industry in terms of recall of vehicles.

  • Enhancement of Fine for Several Offences:

The Bill also enhances the fine for the following offences:

  1. Minimum fine for drunk driving (From Rs. 2000 to Rs. 10000)
  2. Fine for rash driving (From Rs. 1000 to Rs. 5000)
  • Driving without a license (From Rs. 500 to Rs. 5000)
  1. Fine for over speeding ( From Rs. 500 to Rs.5000)
  2. Fine for not wearing seatbelt (From Rs. 100 to Rs. 1000)
  3. Fine for talking on a mobile phone while driving (From Rs. 1000 to Rs. 5000)
  • Fine for travelling without ticket on public transport (From Rs. 200 to Rs 500)
  • Fine for disobeying the orders of authorities (From Rs. 500 to Rs. 2000)
  1. Fine for unauthorized use of vehicles without license (From Rs 1000 to Rs. 5000)
  2. Fine for driving without license (From Rs. 500 to Rs. 5000)
  3. Fine for driving despite disqualification (From Rs. 500 to Rs. 10000)
  • Fine for not wearing helmet – (From Rs. 100 to Rs. 1000 (along with disqualification of license for three months)

The stringent penalty will result in curbing traffic violations as they will think twice before committing any offense. However, the stringent penalties will only enable in obtaining the objectives if the enforcement agencies act strictly. It is pertinent to ensure that corruption is kept at check as the increase in penalty gives opportunities to enforcement agencies to collect bribes lower amounts.

  • Introduction of New Penalties

The Bill also introduces new penalties to ensure stringent punishment which will act as a deterrent and prevent road users from driving recklessly:

  1. Fine for driving oversize vehicles would be Rs. 5000 and Rs. 1000 for LMV.
  2. Fine for aggregators (violating licensing conditions – Rs. 1,00,000
  • Fine for not giving way to emergency vehicles – Rs 10000
  1. Fine imposed on guardians of juveniles for offences committed by Juveniles ( Rs. 25,000 with 3 years’ imprisonment)
  • Categorisation of Validity Period for Vehicles

The new Bill introduces new categories for validity period of driving licence. If the driving license is issued to a person under the age of 30, it would be valid till he turns 40. If driving license is issued to a person between the ages of 30 and 50, the license would be valid for a period of 10 years. If the license is issued to a person between 50 and 55 years, it will be valid until the person turns 60. If the Dl is issued to person above 55 years, it will be valid for five years. (This can be contrasted with the current provision wherein a DL is valid for 20 years until a person turns 50, and for 5 years after the age of 50)

The new categorisation reasonably classifies validity period of driving licenses on the basis of age of individuals, thereby ensuring that people who are not physically capable of driving vehicles obtain licenses for driving.

  • Introduction of Aggregators

Currently, app based taxi services were to register themselves as taxi operator under obsolete laws requiring them to obtain permits of different kinds to operate.The new Bill seeks to introduce a concept of aggregators who have been defined as “a digital intermediary or market place for a passenger to connect with a driver for the purpose of transportation”, thereby giving statutory recognition to transport aggregators. E.g. cab service providers like Ola, Uber.

This is a laudable state as most app based taxi services were receiving flak from different State Government for not registering themselves in their respective states as taxi operators. This will not only enable these aggregators to move our of the web of legal confusion that they have been tangled in but also enable them to become a business entity by themselves.

  • Introduction of Safety Provisions
  1. The new Bill proposes amendment to S. 138 of the MV Act which confers power to the State Government to make rules for a number of specified matters. The bill envisages the insertion of sub-section (1A) which will confer power on the State Government to “regulate activities of pedestrians and non-motorised road user sin a public place.” This will empower the State Government to create cycle tracks, footpaths, NMT lanes etc to ensure safety of pedestrians.
  2. The new Bill makes it mandatory for every child to be secured by a safety belt or a child restraint system (Section 194B). If the child is not seated in a safe manner, a penalty of Rs. 1000 shall be imposed on the adult.
  • Section 129 of the Act has been amended to mandate that every child above the age of four years being carried on a motorcycle wears a helmet. The design and specification of the helmet shall be prescribed by the Central government.

The introduction of the above mentioned safety provisions would enable in improving the safety conditions for pedestrians as well as motor vehicle users in India.

  • Provisions Pertaining to Transport Vehicles:
  1. The Bill seeks to introduce Section 12(5) which enables an applicant to obtain a transport vehicle in which he has received training through an accredit school. This is as opposed to the earlier provision which mandated at least one year experience of driving a light motor vehicle before applying for a LL for transport vehicle. The said amendment has been widely criticized, as it seems to be a step backward from road safety.
  2. Section 14(2)(a) has been amended so as to increase the renewal period of transport licenses. The renewal period has been increased from 3 years to 5 years. In case of transport licenses for driving vehicles with hazardous good, the renewal period has been increased from 1 year to 3 years in addition to compliance with the conditions prescribed by the Central Government.
  • Additionally, the Bill also envisages introduction of automated fitness testing for transport vehicles with effect from 1st October, 2019.

It is pertinent to note that the Bill has not dealt with provisions pertaining to fatigue tests, training of heavy vehicle transport drivers etc. which are extremely important factors to improve road safety.

  • Disqualification of Driver’s License

Section 19 has been amended so as to enable the disqualification of the driver’s license of any person after a certain number of offences. The name of the disqualified person shall be placed in public domain until completion of a driver refresher training course from an established school.

  • Registration of New Vehicles by Vehicle Dealers

Section 41 has been amended so as to enable vehicle dealers to register new vehicles. Such vehicles shall bear distinguishable registration marks. Dealers who fail to duly register a vehicle are liable to be fined up to an amount of Rs. 15000.

  • Annual Increase in Fines

Section 199B envisages an increase in the fines under the Act at the rate of ten percent on an annual basis on the first day of April every year. This has been done so as to ensure that the fines are contemporaneous with the changing times.

  • Introduction of Electronic Monitoring and Enforcement System

The Bill envisages the introduction of an electronic monitoring and enforcement of road safety under Section 136A. The Central Government shall make rules for the same and the respective State Governments shall be responsible for its implementation, as opposed to the current system wherein the monitoring and enforcement of road safety is a State subject.

The Section envisages the establishment of a robust electronic enforcement system including speed cameras, closed-circuit television cameras, speed guns and such other technology necessary for ensuring safer roads in India.

The introduction of Section 136A is a laudable step towards a better and improved road safety and infrastructure in India as it will reduce the amount of human intervention and consequently, the corruption involved.  The provision will also help in bringing in uniformity in terms of electronic monitoring and enforcement of road safety in India

  • Wider Scope of ‘Dangerous Driving’

Section 184 which deals with dangerous driving has been amended to widen the scope of dangerous driving. At present, the definition is very narrow and does not include traffic offences that lead to the most number of traffic accidents like using mobile phones, jumping traffic lights.    It now includes include the acts that are considered driving in manner dangerous to the public such as jumping a red light, violating a stop sign, use of hand-held communication devices while driving, driving against the flow of traffic, and passing or overtaking any motor-vehicle in a manner contrary to law.

The amendment will make the public more careful about traffic violations, thereby reducing the number of road accidents. The provision will also enable law enforcement agencies to penalise violators effectively.

  • National Transportation Policy

The amendment introduces Ss. 66A and 66B which empowers the Central Government to introduce A National Transportation Policy. The said Policy would be formulated after consulting with the State Governments

  • Introduction of Multiplies for Penalty

The Bill seeks to introduce the concept of multipliers for penalty (under S. 210A).  The said section will enable the State governments to increase fine in their respective States. .The multiplier cannot be less than 1 nor greater than 10.  Under S. 210B, the enforcing authority will have to pay twice the penalty corresponding to any offence.

This provision will aid the State Government to increase penalties in places where they are of the opinion that higher penalties may be required to curb to violations.

  • Enhancement of Compensation in Hit and Run Cases

The Bill proposes to amend S 161 to the effect that compensation in hit and run cases in case of grievous injury would be hiked to Rs. 50,000 and in case of death, Rs. 2 lakhs.   Currently, compensation for hit and run cases is Rs. 12,500in case of grievous hurt and Rs. 25,000 in case of death.

 India suffered from 55,942 hit and run cases in 2016 alone. The amendment would enable in decreasing the number.

  • Removal of Cap for Liability for Third Party Insurance

The 2016 Bill capped the maximum liability for third party insurance at Rs. 10 lakh in case of death and Rs. 5 lakh in case of grievous injury.  The current Bill seeks to remove the cap on liability.  This may encourage owners to start insuring their vehicles, enabling progress in the field of financial protection in toad safety.

Conclusion

The Government, through the Amendment Bill seeks to promote safe and sustainable mobility in India. The Amendment Bill is a very promising Bill considered to be the biggest reform in the Transportation Sector. The Bill proposes humungous improvement in the realm of road transportation and connectivity in India through mediums of digitalization and automation. Consequently, the Bill leaves no scope for abuse of power by intermediaries/tauts.  Additionally, the Bill recognizes that stakeholders play a significant role in its implementation and imposes liability on them at several stages, so as to achieve the process. However, the success of the Bill would largely depend on the efforts of the Central And State Governments to strictly implement the same.

High Court’s Order On Law Exam Paper Row

Last month, an examination question  regarding a Muslim slaughtering a cow in front of three Hindus caused a furor across the nation.

The aforementioned question formed a part of the Law of Crime-1 paper conducted by Guru Gobind Singh Indraprastha University (GGSIPU) on December 7. This question sparked a row of controversies when the supreme court lawyer Bilal Anwar tweeted an image of the question paper stating that the question asked in the paper dehumanized the entire community. The tweet was retweeted several times before it came under the scrutiny of politicians, lawyers, and journalists from across the country.

According to a report by The Indian Express, the university, when contacted, said that they regretted the question and decided to delete it later. They further stated that they will not evaluate the students on their answer.

Succumbing to the political pressure and without conducting a full and fair inquiry into the matter, the University passed the impugned adverse order on 20.12.2018 barring professors, Dr. Upma Gautam, and Dr. Rakesh Kumar, who had made the question paper, from setting or moderating any question paper for the next six semesters.

Thereafter, the Deputy Cheif Minister of Delhi ordered an inquiry into the matter. He passed as impugned order dated 31.12.2018 ordering the immediate termination of professors in charge of setting the question paper. In an interview to the Indian Expresses, he was quoted saying,

“It is very bizarre and seems to be an attempt to disturb the harmony of society. We won’t tolerate such misconduct. I am ordering an inquiry, and if found true, strongest action will be taken.”

In pursuance to this order, a meeting of Board of Management of the University was called to discuss the illegal termination of the professor.

Stating that the decision to terminate was in violation of Article 311 and Article 14 of the constitution, the professors approached the High Court seeking appropriate remedies.

During the hearing, the counsel for the petitioners vehemently argued that the allegations of inciting communal violence were false, as the question was asked only to check the student’s understanding of the offenses under the Section 153 and 153A of the Indian Penal Code, 1860 falling under the Unit “Offenses Against Public Tranquility” of their syllabus. They also argued that the orders dated 20.12.2018 and 31.12.2018 had a chilling effect on the scholarly independence and the right of the petitioner to carry out their professional obligations without fear.

 

The High Court, after listening to the arguments led by both the parties, finally granted interim relief in favor of the professors, setting aside the order of the university and the directions of the deputy CM, and thereby upholding the rules governing principles of natural justice.

An Introduction To Trade Remedies: Their Need & Working

The World Trade Organisation Members aspire for free trade, however, free trade does not always imply fair trade. Although, as a result of liberalization, there has been the advent of many players in the International market which has increased scope for freer competition, yet, as they say, all that glitters is not gold, the same also brings along with it the phenomena of unfair pricing by the exporters/business players. There has been a parallel increase in the instances of unfair trade practices opted by these market players thereby elevating the risk of injuries that might be caused to the domestic industries/businesses of various nations. Thus, such practices necessitate the need for establishing fair trade order and devising means for the protection of such domestic industries thereby curbing the risk of injuries caused to them due to the deployment of such unfair practices.

Trade remedies can be said to be tools of trade policy which permit the governments to take remedial actions against the imports that seek to cause or have the potential of causing material/substantial injury to the domestic industry of that nation. Generally, employment of these trade remedies as a general rule are discouraged, however in situations where there is a targetted risk to the domestic industry or when there is an invocation of such unfair trade practices, the states can take resort of these remedies as a protection measure as an exception. Thus, these trade remedies are to be invoked as an exceptional measure and not a general rule of law.

Trade remedies under the International law are broadly divided into; anti-dumping action; countervailing duty measures and safeguard actions and are majorly provided for in three separate agreements of the WTO, being, the Anti-dumping Agreement (Implementation of Article VI of the General Agreement on Tariffs and Trade 1994); the Agreement on Subsidies and Countervailing Measures; and the Agreement on Safeguards.

These remedies basically qualify the importing nation to exercise power with respect to regulating the rate, extent, and cost of imports entering into their territory. The importing nation can use these trade restraint mechanisms and impose restrictions and regulations on the exporting nation. Thus, like it is said, power corrupts and absolute power corrupts absolutely, similarly, when the importing nations are vested with such powers, there is the likelihood of them abusing these powers to the disadvantage of the exporting nations as well. Thus, the WTO also contains a system to stop such governments from abusing these measures/actions, since in all circumstances the consequences and impact of the exercise of such powers are more prejudicial to the interest of the exporting nation.

The first among the above-mentioned trade remedies relates to anti-dumping. Dumping means pricing the products in a way injurious to the market. Thus, when manufacturers exporting a product, charge low prices for their products as compared to the prices of similar products in the foreign market, it is referred to as an act of dumping. Thus, generally if viewed, dumping, in fact, should be considered for the consumers, as the products would be available to them at lower prices, however, since it has direct consequences on the domestic industries, thus governments are often found taking anti-dumping actions. Under the WTO, dumping as a general rule is not prohibited, however, it is prohibited if it either causes or threatens to cause material injury to the domestic industry of the importing country or if it becomes the cause for material retardation in the establishment of some industry in the domestic market of the importing country.

Dumping thus connotes, the act of exporting products at a price lower than what they are sold in the home country’s domestic market, or selling products at a cost even lower than their cost of production. It often reflects glimpses of unfair competition as it has the effect of injuring the domestic industries.

Thus, the WTO agreement allows the governments to respond to such practices by resorting to anti-dumping actions when there is a genuine case made out for material injury to the competing domestic industry. For sustaining such actions, the governments have to showcase that dumping is in effect taking place. The governments further are required to calculate the extent to which dumping is taking place, this well can be done by comparing the price at which the exporter is exporting and the price being charged by the exporter in his home country. Lastly, the governments have to establish that such actions on part of the manufacturer/exporter/exporting country are actually causing or threatening to cause injury to that government’s domestic industry.

Anti-dumping action typically means, imposing extra/additional import duty on the product thereby being exported by the exporting country for the purposes of bringing parity between the price charged by the exporting country and the normal value of the products in the importing nation’s home market so that the element of injury or threat of injury to the home market/ domestic industry is eliminated.

The second remedy being, countervailing duties, basically mean imposing tariffs on imported goods to counteract the subsidies made to those goods by their exporting country. Countervailing duties are often also termed as anti-subsidy duties. These duties typically mean import tax which is imposed on the goods for the purposes of either preventing dumping or to is used as a countervailing measure to tackle the export subsidies been granted by the exporting nation on their goods. Thus, where manufacturers by providing subsidies to the exporting products attempt to lower down the price of such products in the foreign market, the importing nation can adopt this remedy and impose tariffs on the products being imported so as to lower down the price of these products in the market of importing nation thereby preventing the domestic industries from the threats which such low prices might cause.

Countervailing Duties (CVD)  are measures of regulation often employed for neutralizing the negative impact that arises due to subsidies being provided by the government of the exporting nation on such products. The cost of the exporting goods is naturally bound to decrease when the government provides subsidies as compared to the prices of the same products in the importing nation wherein no such subsidies are provided. Thus, as a result of importing such subsidized imports, there might be dire consequences for the domestic industries, thereby leading to factory closure and extending to causing huge job losses as well.

Talking about unfair trade practice in the International Trade Law realm, such export subsidies to are considered to be one of such practices since they have serious and damaging repercussions on the domestic industries of the importing nation. The effect that such subsidies cause on the domestic industries can well be showcased by way of the following example; Now, say country X provides an export subsidy to manufacturers in the nation who export pens at $8 per pen in mass to Country Y. And, say Country Y has home manufacturers (being the domestic industry/home market of Country Y) who make the same pens available at $10 in the Country Y. Then, by virtue of the export subsidy being offered by Country X to its manufacturers, the cost of the same pen goes down to $8 per pen when imported from Country X and rises to $10 when manufactured in Country Y. It is obvious, that there would be a tendency in the consumers of Country Y to opt for a pen priced at $8 per pen rather than buying the same pen priced at $10. Therefore, this export subsidy provided by the Country X, though would have the effect of fostering exports of Country X would at the same time have a negative impact on the domestic industries of Country Y. If Country Y, in such circumstances determines that its domestic industry is being hurt on account of the unrestrained flow/import of such subsidized pens then it can resort to the imposition of such countervailing duties on the pens so as to neutralize the impact thereof. The WTO, therefore, provides for a solution to such situations, as it provides Country Y with the option to impose import tax or countervailing duty to be precise, on the subsidized pens to bring the cost of such importing pens to $10 equal to the price of the in-house pens, thereby eliminating the unfair price advantage that the manufacturers of Country X could have over Country Y owing to the export subsidy provided by the Country X.

To ensure, that such countervailing measures are not abused by the importing nations, the WTO has provided for global rules governing trade inter se the nations and also the detailed procedures stating the circumstances giving rise for the imposition of such countervailing duties by the importing nations. These rules are well contained in the WTO’s “Agreement on Subsidies and Countervailing Measures”, which contained in the General Agreement on Tariffs and Trade (GATT) 1994, thereby defining how and when can the export subsidies be used and also regulates the measures that nations can opt for counteracting such subsidies. Generally, the common form of measures opted by the affected nation includes seeking withdrawal of the subsidy through the WTO’s dispute settlement procedure; or as pointed out above, the imposition of countervailing duties on the subsidized imports which have the effect of hurting the domestic producers/ industry of the affected nation.

The definition of the term “subsidy” for the purposes of the agreement has been kept quite broad. It is defined to include any financial contribution made by a government or government agency, including a direct transfer of funds (such as grants,loans and infusion of equity), potential direct transfer of funds (for example, loan guarantees), fiscal incentives such as tax credits, and any form of income or price support.

In order to ensure that there is no abuse of such measures by the affected nation, there are limitations placed on the occasions when such measures may be resorted to by the nations. Thus, an importing nation can charge such countervailing duties only after conducting an in-depth investigation into such subsidized exports. The agreement thereby, provides in great detail the rules for determining if a product is subsidized and also calculating the amount of such subsidy, there is a further mention of the criteria for establishing/ascertaining if such subsidized imports affect the domestic country and further also extends to rules for implementation as well as the duration of the countervailing duties which generally is five years.

The third remedy being, the Safeguard Actions. These actions are more like emergency actions. Thus, in times when there is a surge of imports causing or threatening to cause serious substantial injury to the domestic industry. A member of the WTO may cause temporary restriction on the imports of particular products if it so feels that such imports have the effect of causing serious injury to the domestic industry. These measures are generally adapted to buy time for the domestic industries to adjust to the foreign competition created by virtue of increased quantities of imports causing serious injury to the domestic industries of the importing nations who produce “like or directly competitive” products.

This Agreement on Safeguards under article 19 of the GATT, 1994 and is also referred to as the third leg of the trade measures. This agreement finds its roots in the events that took place in the 1980s when there was a rapid growth in the exports from the manufacturers of Japan and also of the Newly Industrialised Countries (NICs) of East Asia which constrained various countries and majorly the US, ultimately had to accede to the pressure built by the domestic lobbies in these nations for restricting the imports.

These grey measures also included within themselves Voluntary Export Restraints (VERs), wherein most of the exporters in Japan had agreed on limiting the exports to certain fixed quantities. VERs are kind of non-tariff barriers on the number of goods/products that can be exported out of the exporting country during a specified period of time. They are viewed as being self-imposing limits by the exporting country when actually they are imposed at the instance of importing country. These restraints are generally imposed by the importing countries for the purposes of providing protection to the ongoing domestic businesses of that country. Oftenly, the goods that are imported into the country pose to be a competitive threat to the domestic businesses producing the same goods in the importing country and for protecting the domestic businesses against the surge of such imports there restraint barriers imposed by the importing country. In order to protect its’s trade interest VERs are then offered by the exporting country for propitiating the importing country and deterring it from imposing such explicit and stringent trade barriers.

Voluntary Export Restraint, the name itself provides, is a measure adopted in international trade law for protecting business/trade interests. The term voluntary is prefixed since it is self-imposed by the exporting country for protecting itself against the deterring barriers intended to be imposed by the importing country. The imposition of this restraint widely covers many products ranging from products relating to textiles, footwear, steel, machine tools, and even automobiles. Recently, India dragged the USA into WTO on the steel and aluminum tariffs imposed by the latter. The reason cited by India was USA’s inconsistency with global trade norms. Multiple violations of the WTO norms especially relating to norms like the introduction of restrictions in the form of sanctions/ quotas, discrimination against its imports and the major one being the use of tariffs for getting other countries to agree to adopt such VERs.

These so-called “grey measures” were mostly non-transparent, arbitrary and trade-distorting, and, instead of regulating the trade in an efficient manner, the very purpose for which they were adopted stood defeated since these measures, on the contrary, led to increasing the market prices of those goods which were restricted which perversely had the effect of increasing profits of the exporters. Thus, this was a clear case where the so-called regulatory measures turned into abusive measures.

For resorting to the safeguards agreement, it is imperative that the importing country conducts a thorough, in-depth investigation with due compliance with the procedural requirements to determine whether a serious injury has occurred to the domestic industries. After the inquiry is conducted, then the authorities can accordingly choose to impose quantitative restrictions or special import duties as they consider most appropriate in view of the prevailing situation.

No doubt, these trade remedies are available to all the 164 member countries of the WTO, yet, their use is still more specific to developed nations in comparison to developing nations because of the complexity of the WTO procedural requirement or even due to the fact that huge costs are incurred in the process of dispute settlement.

Recently, in India, the Ministry of Commerce came up with Manual of Operating Practices for Trade Remedy Investigations and Handbook of Operating Procedures of Trade Defence Wing. The country has also come up with brochure pertaining to Trade Remedial Measures for the purposes of familiarising the industry about measures like anti-dumping, countervailing and safeguard measures. These publications have been brought in by the DGTR (Director General for Trade Remedies) Officials and the Trade Policy Divison, Department of Commerce, Centre for WTO studies, Centre for Trade and Investment Law and the Centre for Regional Trade.

India has actively been resorting to these trade remedies. For instance, in March 2018 India imposed anti-dumping duty on the import of Ofloxacin which was used for treatment for infections in China.