Op EdsOP. ED.

To make India a global destination for business and investment and accordingly, to improve its ease of doing business rankings, the Government of India took note of the observations made by the Law Commission of India[1] and established the Commercial Courts and the Commercial Division and the Commercial Appellate Division in the High Courts for speedy disposal of commercial disputes above a specified value[2]. To take this a step further, in 2018, the Government introduced a provision[3] in the law to make it mandatory for disputing parties in commercial disputes to attempt mediation before filing a claim in court. In furtherance of this provision, the Government introduced rules[4] for pre-institution mediation and settlement but authorised only the District and State Legal Services Authorities[5] to conduct these mediations.

Mediation, in its simplest avatar, is a method to resolve disputes amicably with the help of an expert mediator and without the intervention of courts. This move by the Government was welcomed by stakeholders across the board as it was believed that this would ensure timely resolutions of disputes while retaining business relationships between the parties, a win-win for all – the Government, the overburdened judiciary and the business community.

However, a recent judgment of the Bombay High Court[6] has raised the brows of many from the business and legal fraternity. In the judgment delivered on 16-2-2021, the Court observes that the provision that “compulsorily” requires disputing parties to attempt an amicable settlement via mediation is procedural and there is no absolute prohibition to file a suit before attempting mediation. The reasoning behind such an observation is three-fold:

  • The very purpose of putting in place such a mechanism was for speedy disposal of commercial disputes for their early resolution which would in turn create a positive image for the investor world about the independent and responsive Indian legal system. Routinely referring parties to compulsory mediation would run counter to the very purpose for which the law was brought into force. It would have the effect of delaying the proceedings rather than having a quick resolution of the dispute.
  • The provision itself contemplates that where any urgent interim relief is applied for, the party seeking relief is not required to exhaust the remedy of mediation before approaching the court. According to the Court, the purpose of the law appears to be that parties should try and resolve their disputes before coming to court. This is for the simple reason that if parties resolve their disputes, they need not approach the court at all. However, when parties have tried to resolve their disputes unsuccessfully, it would be futile to still drive the parties to pre-institution mediation.
  • The counterparty must object to non-compliance regarding pre-institution mediation at the earliest opportunity. If not, it would be presumed that he does not want to resolve his dispute through mediation.

One can hardly disagree with the rationale by which the Court has justified the interpretation of mandatory pre-institution mediation as procedural keeping speedy disposal of commercial cases at the helm of its observations. On the contrary, such a mindset can be seen as forward-looking as disputing parties need not routinely approach the already burdened District and State Legal Services Authorities for the purpose of pre-institution mediation, and can rather undergo mediation privately. In fact, world over online mediation through online dispute resolution (ODR) platforms has become the go-to mechanism for parties that want to settle their disputes amicably.

However, there is one observation that is concerning and will face flak by those well-acquainted with the concept of mediation, and this is the Court’s reliance on doctrine of substantial compliance in an attempt to drive its point home. The Court says:

  1. … Take a case, where through correspondence, the parties have tried to resolve their disputes before approaching the court without any success. Can it then be contended that parties are still to be referred to mediation to resolve their disputes when an attempt has already been made and failed? I think not. To my mind, one has to interpret this provision to see that there is substantial compliance, namely, that an attempt has been made to resolve the disputes amicably which has failed, and therefore, the plaintiff is constrained to approach the court for redressal of his grievances.

On a plain reading, one may wonder what is wrong with this particular observation of the Court, but on a careful reading, one will realise that this greatly undermines the process of mediation and the skills of a mediator. A standard or private attempt at an amicable resolution of a dispute by the parties or their representatives substantially differs from routing a dispute through the process of mediation and seeking an early and amicable resolution with the support of a competent and well-trained mediator.

Virtually every dispute goes through one (if not more) round of informal negotiations before it is escalated to a more serious forum. However, driving a dispute through the tunnel of mediation is wholly different from such informal negotiations and the chances of a successful settlement increases due the involvement of an independent and skilled mediator. This finds support in the fact that less than 5% of cases raised in courts across the US result in a full trial taking place. A substantial factor in that statistic is the successful use of mediation, which is estimated to result in a positive resolution of roughly 80% of cases[7]. A similar success story of mediation in India may not see the light of day if courts come to a conclusion that equates any form of correspondence between parties for amicable settlement with the process of mediation.

A well-balanced view could be such where so long as mediation is conducted through the State machinery or privately, online or in-person with the involvement of an accredited mediator or institution be looked at through the lens of the doctrine of substantial compliance. Perhaps, this could be the ground for challenge of the Bombay High Court judgment before the Supreme Court of India, unless of course, the matter is settled amicably.

*Author is the co-founder of Presolv360 – a legal-tech company that specialises in online dispute resolution. With an academic background in law and finance, he has a decade of experience in understanding law, commerce and conflict resolution.

[1] Report No. 253 on Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015 (January 2015)

[2] Commercial Courts Act, 2015

[3] Section 12-A, Commercial Courts Act, 2015

[4] Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018

[5] Ministry of Law and Justice, Noti No. S.O. 3232(E), dated July 3, 2018

[6] Ganga Taro Vazirani v. Deepak Raheja, 2021 SCC OnLine Bom 195.

[7] <https://www.skuld.com/topics/legal/pi-and-defence/us-vs-uk—a-comparison-of-mediation-processes/#:~:text=Currently%2C%20less%20than%205%25%20of,of%20roughly%2080%25%20of%20cases>.

Legislation UpdatesNotifications

The Labour Department, Haryana has taken up a series of measures to improve ‘Ease of Doing Business’.

The emphasis has been on simplification and rationalization of the existing rules and introduction of information technology to make governance more efficient and effective. In furtherance of Section 4 read with Section 81 of Information Technology Act, 2000 and in compliance of Business Action Plans (BRAP) 2020 of the Department of Promotion of Industries & Internal Trade [DPIIT], Ministry of Commerce & Industry, Government of India, the State Government of Haryana has approved maintaining records in electronic form under following Labour Laws and Rules framed thereunder:-

  • Bonded Labour System (Abolition) Act, 1976
  • Child Labour (Abolition & Regulation) Act, 1986
  • Contract Labour (Regulation and Abolition) Act, 1970
  • Equal Remuneration Act, 1976
  • Factories Act, 1948
  • Industrial Disputes Act, 1947
  • Industrial Employment (Standing Orders) Act, 1946
  • Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
  • Maternity Benefit Act, 1961
  • Minimum Wages Act, 1948
  • Motor Transport Workers Act, 1961
  • Payment of Bonus Act, 1965
  • Payment of Gratuity Act, 1972
  • Payment of Wages Act, 1936
  • Punjab Industrial Establishments (National and Festival Holidays and Casual and Sick Leave) Act, 1965
  • Punjab Labour Welfare Fund Act, 1965
  • Punjab Shops and Commercial Establishments Act, 1958
  • Sales Promotion Employees (Conditions of Service) Act,1976
  • The Building and Other Construction Workers Welfare Cess Act, 1996
  • The Building and Other Construction Workers (RE & CSJ )Act, 1996
  • The Employees’ State Insurance Act, 1948
  • Trade Unions Act,1926
  • Employee’s Compensation Act, 1923
  • Working Journalists and other Newspaper Employees and Miscellaneous Provisions (Condition of Service) Act, 1955
  • Haryana Major Accident Hazard Control Rules, 2009
  • Unorganized Workers Social Security Act, 2008

Haryana Government, Labour Department

[Order dt. 23-10-2020]

Hot Off The PressNews

Decriminalisation of minor offences is one of the thrust areas of the Government. The risk of imprisonment for actions or omissions that aren’t necessarily fraudulent or the outcome of malafide intent is a big hurdle in attracting investments. The ensuing uncertainty in legal processes and the time taken for resolution in the courts hurts ease of doing business.

Criminal penalties including imprisonment for minor offences act as deterrents, and this is perceived as one of the major reasons impacting business sentiment and hindering investments both from domestic and foreign investors. This becomes even more pertinent in the post COVID19 response strategy to help revive the economic growth and improve the justice system.

Given the nature of pendency in all tiers of the courts and the time taken for disputes to be resolved, legislative measures have been considered to help restore trust in doing business. In this pursuit, it is also important that a balance be found so that malafide intent is punished while other less serious offences are compounded.

Accordingly, a framework is required such that a penalty levied is sufficient to act as a deterrent. Actions taken for decriminalisation of minor offences are expected to go a long way in improving ease of doing business and helping unclog the court system and prisons. It would also be a significant step in the Government of India’s objective of achieving ‘Sabka Saath, Sabka Vikas and Sabka Vishwas‘.

Criminalizing procedural lapses and minor non-compliances increases burden on businesses and it is essential that one should re-look at provisions which are merely procedural in nature and do not impact national security or public interest at large. The following principles should be kept in mind when deciding on reclassification of criminal offences to compoundable offences: (i) Decrease the burden on businesses and inspire confidence amongst investors; (ii) Focus on economic growth, public interest and national security should remain paramount; (iii) Mens rea (malafide/ criminal intent) plays an important role in imposition of criminal liability, therefore, it is critical to evaluate nature of non-compliance, i.e. fraud as compared to negligence or inadvertent omission; and (iv) The habitual nature of non-compliance.

Stakeholders may kindly propose and submit their comments/ suggestions regarding decriminalisation of a particular Act or particular Sections of an Act, along with the rationale for the same. Comments/ suggestions may kindly be submitted to the Department at the email address bo2@nic.in within 15 days, i.e., by 23rd June, 2020.

Statement of Reason

Ministry of Finance

[Dt. 08-06-2020]

Legislation UpdatesStatutes/Bills/Ordinances

Parliament passed The Mineral Laws (Amendment) Bill, 2020 for amendments in Mines & Mineral (Development and Regulation) Act 1957 and The Coal Mines (Special Provisions) Act, 2015. Rajya Sabha passed the bill today while Lok Sabha already passed this bill on 6th March, 2020.

The Mineral Laws (Amendment) Bill, 2020, will open a new era in Indian coal & mining sector specially to promote Ease of Doing Business. Union Coal & Mines Minister Sh. Pralhad Joshi said that this Bill will transform the mining sector in the country boosting coal production and reducing dependence on imports.

The amended provisions clearly provide that companies which do not possess any prior coal mining experience in India and/or have mining experience in other minerals or in other countries can participate in auction of coal/lignite blocks. This will not only increase participation in coal/lignite block auctions, but also facilitate the implementation of FDI policy in the coal sector.

Now, the companies which are not ‘engaged in specified end-use’ can also participate in auctions of Schedule II and III coal mines. The removal of the end use restriction would allow wider participation in auction of coal mines for a variety of purposes such as own consumption, sale or for any other purpose, as may be specified by the Central Government.

The Bill also allows prospecting licence-cum-mining lease (PL-cum-ML) for coal/lignite which increases the availability of coal & lignite blocks, and coal blocks of varying grades in a wide geographical distribution will be available for allocation.

The successful bidders/allottees have now been entitled to utilize mined coal in any of its plants or plants of its subsidiary or holding company. Amendments also provide for allocation of the coal mine to the next successful bidder or allottee, subsequent to termination of its allocation along with the matters incidental to it. A provision has also been made for appointment of designated custodian for management of the mines, apart from Schedule II mines, which have come under production and whose vesting/ allotment order has been cancelled.

With the amendments, environment and forest clearances along with other approvals and clearances shall automatically get transferred to the new owners of mineral blocks for a period of two years from the date of grant of new lease. This will allow new owners to continue with hassle free mining operations. During the period, they may apply for the fresh licence beyond the period of two years.

The auction of lease of mines can now be started before expiry of lease period. It will enable the state government to take advance action for auction of mineral blocks so that the new lease holder could be decided before the existing lease gets expired. This will help in seamless production of minerals in the country.

The new provisions will also augment the exploration of the deep seated minerals and minerals of national interest by allowing Non Exclusive Reconnaissance Permit (NERP) holders to apply for composite licence or Mining Lease (PL-cum-ML). Various repetitive and redundant provisions of MMDR Act and CMSP Act have also been omitted for Ease of Doing Business.

The Bill replaces the ordinance for amendment of the MMDR Act 1957 and CMSP Act which was promulgated on 11th January 2020.

Also read:

Lok Sabha passes — Mineral Laws (Amendment) Bill, 2020

Ministry of Coal

[Source: PIB]

[Press Release dt. 12-03-2020]

Business NewsNews

Boost to Digital India Campaign Championing the cause of Digitisation and Modernisation

In line with the vision of Prime Minister, Narendra Modi’s Digital India and Ease of Doing Business, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, has launched paperless licensing process through Petroleum and Explosives Safety Organisation (PESO) for road tankers for transportation of petroleum under the Petroleum Rules, 2002.

This is a significant move towards paperless and green India that will provide a simpler mechanism, ease of living and business to the petroleum road tanker owners. Moving towards digitisation, the process will include filing the applications online. This will also include online payment of fees which will go directly to the concerned officer’s ID without any manual interface. Applicants, at each stage of processing of the application, will be intimated via SMS and email, whether discrepancy or grant of licence or approval. This will be in addition to the same being reflected in the applicant’s profile.

The new process will update the applicant at each stage triggering an e-mail and SMS immediately when the licence is granted by the officer concerned and is dispatched electronically. All this process will be without any need for printing and physical dispatch.

This extraordinary and forward-looking initiative is directly going to benefit more than one lakh petroleum road tanker owners who together hold more than half of total licences issued under the Petroleum Rules, 2002. An added advantage of this move is that the authenticity of the licence can be verified through public domain available on PESO’s website. This automation is going to revolutionise the petroleum & gas industry benefitting it immensely.

Ministry of Commerce & Industry

[Press Release dt. 10-01-2020]

[Source: PIB]

Hot Off The PressNews

In sync with the Government’s commitment to ‘Ease of doing business’, the Ministry of Coal has decided to simplify the process of clearance for Coal Mining Projects. This will not only expedite operationalisation of already allotted coal blocks but also encourage prospective investors/bidders in future auctions.

The Ministry of Coal has re-engineered the Mining Plan preparation and approval process. This is likely to slash the approval period substantially from the existing 90 days to about 30 days. The re-engineering process includes simplification of guidelines & format for preparation of Mining Plan, amendments in relevant provisions of Mineral Concession Rules, 1960 and approval process.

The proposed simplified guidelines and format not only reduce the mining plan formulation time but also make the document lighter and easier to comprehend. This will further facilitate hosting the soft copy in an accessible data base.

The proposed system of mining plan preparation and approval allows the leasee to get the mining plan prepared by the Mining Plan Preparing Agency (MPPA) and get it certified by Mining Plan Certifying Agency (MPCA) and submit the mining plan to Ministry of Coal for approval. This will improve the quality &reduce time for detailed scrutiny.

To ensure the quality of preparation of Mining Plan, Government approved accrediting body will accredit agency(s) consisting a team of multi-disciplinary background, which will be recognised for preparation of mining plan and for certification (i.e. scrutiny from geo-mining & techno-administrative angles), Government will accredit agency(s) consisting of multi-disciplinary domain experts, who will certify that the mining plan prepared by MPPA, is in line with the prevailing guidelines and is complete in all respects. On certification by the MPCA, a committee in government will consider the Mining Plan for approval and the Government will dispose application of within the stipulated period.

In the next phase to further ease the system, the entire Mining Plan approval process is proposed to be made online for application, processing and approval. This system will ultimately interact with the PARIVESH portal of MoEF&CC and similar portals of other related ministries and organisations of the Central and State Governments.

Ministry of Coal

[Press Release dt. 16-12-2019]

[Source: PIB]

Hot Off The PressNews

Company Law Committee, constituted by the Ministry of Corporate Affairs (MCA) vide order dated 18-09-2019, has submitted the first phase report to the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman on 18-11-2019, proposing amendments in the Companies Act, 2013 for further decriminalising the offences under the said Act and to facilitate ease of doing business and ease of living.

Anurag Singh Thakur, Minister of State for Finance & Corporate Affairs, in a written reply to a question in Rajya Sabha submitted his response today.

Company Law Committee was constituted for examining and making recommendations to the Government on various provisions and issues pertaining to the implementation of the Companies Act, 2013 and the Limited Liability Partnership Act, 2008 and other related matters.

The main recommendations of the Committee with regard to decriminalization of compoundable offences are as under:-

  1. Re-categorising 23 offences out of the 66 remaining compoundable offences under the Act, to be dealt with in the in-house adjudication framework wherein these defaults would be subject to a penalty levied by an adjudicating officer.
  2. Omitting, altogether, 7 compoundable offences; limiting punishment for 11 compoundable offences to only fine by removing provision for imprisonment and recommending that 5 offences be dealt under alternative frameworks;
  3. Reducing the quantum of penalties in respect of certain provisions, which were shifted to the in-house adjudication framework through the recently passed Companies (Amendment) Act, 2019;
  4. Retention of status-quo in case of the non-compoundable offences.

Ministry of Corporate Affairs

[Press Release dt: 03-12-2019]

[Source: PIB]

Business NewsNews

The World Bank released its latest Doing Business Report (DBR, 2020) today on 24th October 2019. India has recorded a jump of 14 positions against its rank of 77 in 2019 to be placed now at 63rd rank among 190 countries assessed by the World Bank. India’sleap of 14 ranks in the Ease of Doing Business ranking is significant considering that there has been continuous improvement since 2015 and for the third consecutive year India is amongst the top 10 improvers.As a result of continued efforts by the Government, India has improved its rank by 79 positions in last five years [2014-19].

The Doing Business assessment provides objective measures of business regulations and their enforcement across 190 economies on ten parameters affecting a business through its life cycle. The DBR ranks countries on the basis of Distance to Frontier (DTF), a score that shows the gap of aneconomy to the global best practice. This year, India’s DTF score improved to 71.0 from 67.23 in the previous year.

India has improved its rank in 7 out of 10 indicators and has moved closer to international best practices (Distance to Frontier score).

The important features of India’s performance this year are:

  • The World Bank has recognized India as one of the top 10 improvers for the third consecutive year.
  • Recovery rate under resolving insolvency has improved significantly from 26.5% to 71.6%.
  • The time taken for resolving insolvency has also come down significantly from 4.3 years to 1.6 years.
  • India continues to maintain its first position among South Asian countries. It was 6th in 2014.

Ministry of Commerce & Industry

[Press Release dt. 24-10-2019]

[Source: PIB]

Business NewsNews

The concept of fixed term employment defines the tenure of employment as well as other associated conditions of service and remunerations, which are provided to regular employees under various labour laws. The government has extended the facility of hiring workers on fixed term employment to all sectors for improving the ease of doing business for players intending to hire people for completing specified projects, tasks or orders. The facility of fixed term employment was introduced in apparel manufacturing sector in Industrial Employment (Standing Order ) Act in October, 2016.

[Key highlights] As per a notification issued by the labour ministry to amend the Order :-

  • The words “fixed term employment in apparel manufacturing sector” will be replaced by “fixed term employment” meaning that facility would be available/extended to all sectors.
  • The worker employed for short period will get better working and service conditions as compared to a contract worker.
  • No notice of termination of employment shall be necessary in case of temporary and badli workmen.
  • The fixed term employment is defined as a workman employed on a contract basis for a fixed period. Thus the services of the workman will be automatically terminated as a result of non-renewal of contract between the employer and the workman concerned.
  • A fixed term worker would not be entitled to any notice or pay in lieu of that, if his services are terminated or in case of non-renewal of contract or expiry of term of employment.
  • Also a temporary workmen who has completed 3 months of continuous service, shall be given 2 weeks notice of the intention to terminate his employment if such termination is not in accordance with the terms of the contract. In case he has not completed 3 months of continuous service, he shall be informed for the reasons for termination in writing.
  • Any services of temporary nature shall not be terminated as punishment unless the employee has been given an opportunity of explaining the charges of misconduct alleged against him.
  • A separation of service of the workman as a result of non-renewal of the contract of employment between the employer and workman concerned shall not be construed as termination of employment. This facility will aid the industry to employ worker in sectors which are of seasonal nature and witness fluctuation of demand and hence requires flexibility in employing workers.
  • Under the fixed term employment the working conditions in terms of working hours, wages, allowances and other statutory dues would be at par with a permanent workmen and no less than that.
  • A fixed term worker will also be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him even though his period of employment does not extend to the qualifying period of employment required in the statute.
  • The employer can directly hire a worker for a fixed term without mediation of any contractor.

[Source: The Economic Times]

Photo Courtesy: Financial Tribune, https://financialtribune.com/sites/default/files/field/image/