Deliberate laws before passing them

July 28, 2021 5:30 AM

A robust mechanism for doing this is to put all Bills through a detailed scrutiny process by parliamentary committees

Of course, the amounts collected under retrospective tax claims — about `8,100 crore — will now be refunded sans interest.Of course, the amounts collected under retrospective tax claims — about `8,100 crore — will now be refunded sans interest.

By Chakshu Roy

Parliament did not pass any laws in the first week of the ongoing monsoon session. Continuous slogan-shouting in the two houses on farm laws and the Pegasus hacking controversy washed out the first four days of the 19-day monsoon session of Parliament. The expectation was that in the second week, political parties would resolve their differences, and the two houses will be able to resume their normal functioning. But the impasse continues in Parliament. In the two weeks left in the session, the government wants parliamentary approval on 26 Bills. Several of these are industry-focused and fall into two categories: Bills pending in Parliament from previous sessions and fresh ideas that the government plans to bring in this session.

In the first category are three legislative proposals, the Factoring Regulation (Amendment) Bill, the Insolvency and Bankruptcy Code Amendment and the Tribunal Reforms Ordinance. The Factoring Bill is the first change to the 2011 law regulating factoring business (a transaction in which a company can sell its debts to an entity). The purpose of the 2011 law was to address liquidity issues faced by MSMEs. It was part of the last batch of proposals brought during then finance minister Pranab Mukherjee’s term before becoming president.

In her 2019 budget speech, finance minister Nirmala Sitharam announced the government’s intention to widen the net of entities engaging in the factoring business. The original law only allowed those NBFCs whose 50% of income and assets came from the factoring business—the 2020 Bill removed this threshold. The parliamentary committee of finance headed by Jayant Sinha has recommended the mandatory listing of government dues on the Trade Receivables Discounting System and linking it to the Goods and Services Tax Network. Earlier this week, Lok Sabha passed the Bill in a din. It now awaits debate in Rajya Sabha.

The Insolvency and Bankruptcy Amendment Ordinance is another law that has an impact on MSMEs. This ordinance allows an MSME debtor to initiate the resolution process after obtaining the approval of 66% of its creditors. The advantage of this process is that the debtor (instead of the creditor) continues to retain the company’s management and gets protection from legal proceedings. During the passing of the Insolvency and Bankruptcy Code of 2016, Parliament discussed that the law might require some changes. Since then, there have been six amendments to the bankruptcy code, five of which have been by way of the government promulgating an ordinance when Parliament has not been in session.

The Tribunal Reforms Ordinance is another enactment that the government brought after this years budget session. Tribunals were set up under different laws to provide specialised adjudication and faster disposal of cases. Since 2017, the government has been reorganising the tribunal system. First, it merged tribunals with functional similarity. Under this 2021 ordinance, it abolishes appellate tribunals created under statutes like the Cinematograph Act, the Trade Marks Act, etc. The ordinance specifies that the High Courts will now handle the work done by these tribunals.

The government’s view is that tribunals have not always led to efficient justice delivery. The parliamentary committee on commerce chaired by Rajya Sabha member Vijay Sai Reddy recently examined the IPR regime in the country. After listening to the viewpoints of different stakeholders, the committee recommended that the government reconsider abolishing the Intellectual Property Appellate Board set up under the Trade Marks Act which has been efficiently dealing with complex IPR issues. The committee also observed that the government should undertake judicial impact assessments and hold wider consultations before abolishing an established system.

The government also intends to bring some new legislative proposals in this session for Parliament’s consideration. One of them is the Electricity Amendment Bill that will delicence power distribution to bring in more competition. The last legislative attempt at electricity reform was made in the last Lok Sabha in 2014. In that Bill, the government intended to introduce multiple supply licences and continuing with carriage (distribution network) as a regulated activity. That Bill has lapsed in 2019 at the end of the 16th Lok Sabha. The government is also proposing to decriminalise 12 offences under the Limited Liability Partnership Act. This Bill will be in continuation of similar laws already enacted by Parliament where criminal penalties were removed for procedural/minor lapses under the Companies Act. A Bill to increase the insurance on bank deposits from `1 lakh to `5 lakh is also on the cards in the monsoon session. Detailed information about all of these proposals will be available when the government brings them to Parliament.

But there are a few Bills that are missing from the government’s agenda. For example, there was a budgetary announcement regarding the privatisation of two or more public sector banks. Another one was about the consolidation of four different market laws into a single Securities Market Code. Both these proposals are not part of the government’s legislative agenda. Another item that is missing is a Bill for the regulation of cryptocurrencies, which was first talked about in the budget session.

It is Parliament’s responsibility to carefully deliberate laws before passing them. A robust mechanism for doing that is by putting all Bills through a detailed scrutiny process by parliamentary committees. If the committee process is bypassed, and the legislature continues to be disrupted, then Bills passed in a hurry may fail to achieve their intended outcomes.

Head of outreach, PRS Legislative Research
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