Topics of Law Test 88

The proposal to further simplify the regulatory regime for startups is most welcome. In particular, the promise to create a tax compliance regime that would permit a start-up to not spend more than an hour a month on tax matters sounds most appealing. India has a considerably large startup ecosystem and ensuring that the regulatory regime is conducive to innovation and setting up new businesses is essential for economic growth. The government has already put in place self-certification and other measures to ease compliance. The effort to reduce the time taken to comply with regulatory requirements without diluting the protections that the regulations provide is critical for sustainable economic growth. 
A simpler regime must not become synonymous with a lax regime, nor with dilution of labour protection, security and safety, and environmental norms. It must ensure that businesses have access to space to operate — this requires reasonable rents and stability of tenancy. 
This will mean creating functional markets in land and rental spaces. Access to stable power supply calls for ending the ills of the power sector. Easier starting up calls for systemic reform, for everyone. 

The proposal to further simplify the regulatory regime for startups is most welcome. In particular, the promise to create a tax compliance regime that would permit a start-up to not spend more than an hour a month on tax matters sounds most appealing. India has a considerably large startup ecosystem and ensuring that the regulatory regime is conducive to innovation and setting up new businesses is essential for economic growth. The government has already put in place self-certification and other measures to ease compliance. The effort to reduce the time taken to comply with regulatory requirements without diluting the protections that the regulations provide is critical for sustainable economic growth. 
A simpler regime must not become synonymous with a lax regime, nor with dilution of labour protection, security and safety, and environmental norms. It must ensure that businesses have access to space to operate — this requires reasonable rents and stability of tenancy. 
This will mean creating functional markets in land and rental spaces. Access to stable power supply calls for ending the ills of the power sector. Easier starting up calls for systemic reform, for everyone. 

Various governments have taken steps to tackle the black economy in the last seventy years. Many committees and commissions have been set up to study the problem and they have made thousands of suggestions and hundreds have been implemented.

In 2016, demonetisation was announced with a big bang. It caused untold misery to the poor who never generated any black incomes while those generating black incomes and who had accumulated much black wealth went scot-free; the problem did not get solved. The reason is that the underlying cause of the black economy’s existence is not technical or economic but political and that remains unresolved.

Proponents of GST have been arguing that it would help tackle the black economy since all inputs and outputs in the entire chain of production and distribution would be computerised. As argued, this is not entirely true for the Indian GST since it has various exemptions and certain key commodities are kept out of its purview.

Further, small and cottage sectors are largely outside its scope. More importantly, Indian businesses are adept at keeping two sets of accounts and they can continue to do so.

Finally, it is believed that digitisation would help tackle the black economy. It is argued that the informal sector would get formalised and come under the tax net. This is an incorrect understanding of the nature of the black economy in India. 

Most of the unorganised sector earn incomes way below the taxable limit. To understand this, it is important to know that in India, taxation begins at a multiple of the per capita incomes and income inequality is high. Hence, a vast majority of the people earn incomes way below the taxable limit and do not fall in the tax net. An overwhelming majority of those below the taxable limit belong to the low-paid unorganised and informal sector.

Not only is the perception that black incomes are generated in the informal sector incorrect, but there are also other misperceptions about the black economy.

For instance, demonetisation was premised on the notion that “black means cash.” This led to the unfortunate conclusion that if cash is squeezed out of the system, then the black economy would disappear at one stroke.

It has been argued that the use of technology can help curtail the black economy. It is felt that the human element is incorrigible so it needs to be eliminated from business transactions if the black economy is to be eradicated. The underlying assumption is that the human element can be eliminated in the running of society.

This is a flawed notion since it is human beings who operate technology even if the number of human beings running systems can be reduced. As long as human intervention is needed, illegality can persist.

The idea that more laws are needed to check the growth of the black economy is also flawed. As explained in a book on the Indian economy by this author there can be no perfect law since human ingenuity can find a way of circumventing any law.

Tackling the black economy is a political and societal issue which only movements can address. There is a need to change the consciousness of the public at large so that they demand accountability from their elected representatives. But the public is also compromised.

It votes for a person from its own caste, region, community, etc., even if they are corrupt and/or have a criminal background. The public chooses one who will do their work, regardless of legality, given that policies fail. There is also a growing belief that one community can only gain at the expense of others.

People have come to believe that it is a zero-sum game and not a positive-sum game. GST does not dismantle the triad and hence cannot tackle the black economy. As argued above, ways to circumvent the GST laws will emerge to enable the black economy to continue, even if its form changes.

Various governments have taken steps to tackle the black economy in the last seventy years. Many committees and commissions have been set up to study the problem and they have made thousands of suggestions and hundreds have been implemented.

In 2016, demonetisation was announced with a big bang. It caused untold misery to the poor who never generated any black incomes while those generating black incomes and who had accumulated much black wealth went scot-free; the problem did not get solved. The reason is that the underlying cause of the black economy’s existence is not technical or economic but political and that remains unresolved.

Proponents of GST have been arguing that it would help tackle the black economy since all inputs and outputs in the entire chain of production and distribution would be computerised. As argued, this is not entirely true for the Indian GST since it has various exemptions and certain key commodities are kept out of its purview.

Further, small and cottage sectors are largely outside its scope. More importantly, Indian businesses are adept at keeping two sets of accounts and they can continue to do so.

Finally, it is believed that digitisation would help tackle the black economy. It is argued that the informal sector would get formalised and come under the tax net. This is an incorrect understanding of the nature of the black economy in India. 

Most of the unorganised sector earn incomes way below the taxable limit. To understand this, it is important to know that in India, taxation begins at a multiple of the per capita incomes and income inequality is high. Hence, a vast majority of the people earn incomes way below the taxable limit and do not fall in the tax net. An overwhelming majority of those below the taxable limit belong to the low-paid unorganised and informal sector.

Not only is the perception that black incomes are generated in the informal sector incorrect, but there are also other misperceptions about the black economy.

For instance, demonetisation was premised on the notion that “black means cash.” This led to the unfortunate conclusion that if cash is squeezed out of the system, then the black economy would disappear at one stroke.

It has been argued that the use of technology can help curtail the black economy. It is felt that the human element is incorrigible so it needs to be eliminated from business transactions if the black economy is to be eradicated. The underlying assumption is that the human element can be eliminated in the running of society.

This is a flawed notion since it is human beings who operate technology even if the number of human beings running systems can be reduced. As long as human intervention is needed, illegality can persist.

The idea that more laws are needed to check the growth of the black economy is also flawed. As explained in a book on the Indian economy by this author there can be no perfect law since human ingenuity can find a way of circumventing any law.

Tackling the black economy is a political and societal issue which only movements can address. There is a need to change the consciousness of the public at large so that they demand accountability from their elected representatives. But the public is also compromised.

It votes for a person from its own caste, region, community, etc., even if they are corrupt and/or have a criminal background. The public chooses one who will do their work, regardless of legality, given that policies fail. There is also a growing belief that one community can only gain at the expense of others.

People have come to believe that it is a zero-sum game and not a positive-sum game. GST does not dismantle the triad and hence cannot tackle the black economy. As argued above, ways to circumvent the GST laws will emerge to enable the black economy to continue, even if its form changes.

Various governments have taken steps to tackle the black economy in the last seventy years. Many committees and commissions have been set up to study the problem and they have made thousands of suggestions and hundreds have been implemented.

In 2016, demonetisation was announced with a big bang. It caused untold misery to the poor who never generated any black incomes while those generating black incomes and who had accumulated much black wealth went scot-free; the problem did not get solved. The reason is that the underlying cause of the black economy’s existence is not technical or economic but political and that remains unresolved.

Proponents of GST have been arguing that it would help tackle the black economy since all inputs and outputs in the entire chain of production and distribution would be computerised. As argued, this is not entirely true for the Indian GST since it has various exemptions and certain key commodities are kept out of its purview.

Further, small and cottage sectors are largely outside its scope. More importantly, Indian businesses are adept at keeping two sets of accounts and they can continue to do so.

Finally, it is believed that digitisation would help tackle the black economy. It is argued that the informal sector would get formalised and come under the tax net. This is an incorrect understanding of the nature of the black economy in India. 

Most of the unorganised sector earn incomes way below the taxable limit. To understand this, it is important to know that in India, taxation begins at a multiple of the per capita incomes and income inequality is high. Hence, a vast majority of the people earn incomes way below the taxable limit and do not fall in the tax net. An overwhelming majority of those below the taxable limit belong to the low-paid unorganised and informal sector.

Not only is the perception that black incomes are generated in the informal sector incorrect, but there are also other misperceptions about the black economy.

For instance, demonetisation was premised on the notion that “black means cash.” This led to the unfortunate conclusion that if cash is squeezed out of the system, then the black economy would disappear at one stroke.

It has been argued that the use of technology can help curtail the black economy. It is felt that the human element is incorrigible so it needs to be eliminated from business transactions if the black economy is to be eradicated. The underlying assumption is that the human element can be eliminated in the running of society.

This is a flawed notion since it is human beings who operate technology even if the number of human beings running systems can be reduced. As long as human intervention is needed, illegality can persist.

The idea that more laws are needed to check the growth of the black economy is also flawed. As explained in a book on the Indian economy by this author there can be no perfect law since human ingenuity can find a way of circumventing any law.

Tackling the black economy is a political and societal issue which only movements can address. There is a need to change the consciousness of the public at large so that they demand accountability from their elected representatives. But the public is also compromised.

It votes for a person from its own caste, region, community, etc., even if they are corrupt and/or have a criminal background. The public chooses one who will do their work, regardless of legality, given that policies fail. There is also a growing belief that one community can only gain at the expense of others.

People have come to believe that it is a zero-sum game and not a positive-sum game. GST does not dismantle the triad and hence cannot tackle the black economy. As argued above, ways to circumvent the GST laws will emerge to enable the black economy to continue, even if its form changes.

Hours after India went into lockdown, the Finance Minister announced a slew of measures to alleviate the economic crisis. This included proposed changes to the Insolvency and Bankruptcy Code (IBC), 2016, a law enacted to bring about smooth and quick resolutions for companies facing insolvency and bankruptcy with a view to primarily avoiding liquidation. The government, the Minister said, was considering suspension of certain provisions of the IBC which enabled creditors to file insolvency petitions against Indian companies for a years’ time beyond April 30. April 30 came and went without any announcement in this regard. 

In mid-May, the Finance Minister announced that the government was planning to bring in an ordinance to suspend provisions enabling filing of fresh insolvency cases for a period of one year. This was followed by absolute silence on the modalities or mechanism of suspension of the provisions. Banks, financial institutions (FIs), and insolvency law practitioners had no idea where they stood with these announcements. Finally, on June 5, the government promulgated an ordinance which inserted Section 10A in the IBC. The government said the ordinance was promulgated because the lockdown has caused business disruptions which may lead to default on debts pushing such companies into insolvency. Therefore, if felt that suspending Sections 7, 9 and 10 of the IBC would be the right course of action. 

Towards that end ,Section 10 A provides that “no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March,2020 for a period of six months or such further period, not exceeding one year from this period, as may be notified in this behalf”. This means that these provisions shall remain suspended from March 25 till September 25, unless extended for another six months, which would extend the suspension up till March 25,2021. 

However, the provision to the section states that no application for insolvency resolution shall ever be filed against a corporate debtor for any default occurring during the suspension period. While the main Section 10A suspends such applications for a limited period, the proviso enlarges the scope to provide complete amnesty under the IBC for any default occurring during such period. The role of a proviso in a statute is to restrict the application of the main provision under exceptional circumstances. However, the proviso expands the substantive provision in the main section. Further, if the main provision is unclear, a proviso may be given to explain its true meaning. In this case the main provision appears clear, only to be obfuscated by the proviso. The proviso therefore does not appear to be legally tenable .As creditors can still approach courts, and as banks/Fis can still approach Debt Recovery Tribunals, the protection given by this proviso seems illusory.