Vinay Kumar
There is no doubt that India faces multiplicity of Laws (at the Centre) passed over many years to take care of eventualities and events as they arise during the nation development. The intent of the laws is genuine but at many times there is conflict between their provisions and Courts in India spend time and effort in deciding what prevails. This blog does not address state laws.
- Simplification of definitions (common definitions)
The things that can be done to simplify commercial and financial life of an Indian individual could be to have standard definitions of terms across all Acts / Laws where the term is used. An example would be the term ‘Nominee’, ‘legal heir’, ‘beneficiary’. The Rights / powers / obligations of these persons have to be clearly defined and should be applicable across all statutes where these terms are in use and defined (sometimes not defined). It is necessary that across all commercial and financial transactions and dealings the same meanings must apply. There are sometimes minor variations in these terms for property matters, investments in shares, insurance policies, PF & PPF dues payable on death etc. There needs to be an overarching definition applicable across. This would be helpful in implementation and practice.
- Having a sunset clause for commercial / financial impact business laws
We often hear that the current NDA Government at the Centre has scrapped over 1600 laws, over 2000 Rules & Regulations and supposedly 35000 compliances. Just reading this sentence tells us how difficult it is to do business in India. One way of possibly reducing the numbers of operative laws on statute and technically applicable for implementation is to have a ‘sunset clause’ in statutes.
All new commercial laws for industry / business must have a sunset clause, after which the Law is no more applicable. Similarly, on important existing laws – Parliament and it’s committees, Ministries, senior bureaucracy must look at the possibility of introducing the ‘sunset’ clause for various Central Acts. The sunset clause means that after that date the requirements, compliances, bureaucracy positions no longer apply. This is a very important part of making Industry operative Laws more efficient. The sunset clause also serves as a timer / alarm for anybody wanting to enter the specific Industry that any benefits / subsidies / handouts given will stop after that date.
There are provisions of law under various Acts which are passed where values are mentioned for applicability of certain sections, value of penalty for default, values under Income Tax Act, Company Law etc. Indexation would be very helpful for Income Tax Act. Under Income Tax Law one can index the tax free level of income and the tax rates bands income values that are applicable. Just as we have indexation under Long Term Capital Gains, similar index should apply to the values under various sections of the Income Tax Act.
There is then no need for annual revisions in tax rates and income levels. Indexation will take care of inflation and Rupee value. Similarly, for benefits which are specified in value terms – proper indexation formulas would ensure that the values are current and contemporary and speak of the Present and not of the Past when the Act was passed. A proper indexation process would be very helpful for Business conduct, since values are current. Similar for individual income tax, where values are current and not dated.
We have a recent Supreme Court judgement on the telecom sector stating that airwaves eligibility cannot be sold by a Lender when the telecom company is under liquidation. This has happened because in my view and understanding there are multiple Acts which Rule the Telecom sector and the SC judgement was guided by the view that the airwaves are deemed to be Government owned. The fallout of this judgement (though legally sound) could be that the telecom sector will find borrowing from Banks and Financial Institutions difficult since an important and appreciating part of business (air waves) cannot be be sold for recovery purposes. Lenders could take a significant loss which will make them very careful in funding this sector which is a growth sector and will require higher funding levels.
One way of handling issues emerging from multiplicity of laws and sometimes contradictions which emerge from them is for a clear waterfall of liquidation benefits under Industry specific Acts and the precise mention of Assets liable for liquidation. This would be helpful to all stakeholders of the industry – shareholders, lenders, employees, secured and unsecured creditors, revenue authorities, etc. Clarity on liquidation of assets and distribution thereof facilitates Risks being built into products / services / finance supply costs and pricing thereof.
By it’s Constitutional structure of Centre and States, India Laws have great complications in impact on citizens and business. At the Centre at least we can make a start by addressing the issues raised above. It is definitely hard work but the benefits will be a multiplier of gains to individual and business life.
Disclaimer
Views expressed above are the author’s own.
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