Daily Current Affairs for 4th August 2021

GS PAPER II

Essential Defence Services Bill, 2021

Why in News

The Lok Sabha recently passed the ‘Essential Defence Services Bill, 2021’.

Essential Defence Services Bill, 2021

• The Essential Defence Services Bill, 2021 seeks to replace the ordinance promulgated in June 2021 and allows the Central government to prohibit strikes, lock-outs, and lay-offs in units engaged in essential defence services.
• The new Bill allows the Central Government to prohibit strikes, lock-outs, and lay-offs in units engaged in essential defence services. The government may issue such order, if necessary, in the interest of: Sovereignty and integrity of India, Security of any state, Public, Public order, Decency and Morality.
• The prohibition order will remain in force for six months and may be extended by another six months.
• Strikes and lock-outs that are declared after the issue of the prohibition order or those that had commenced before the prohibition order was issued will be illegal.
• The prohibition will not apply to lay-offs made due to power shortage or natural calamity, or lay-offs of temporary or casual workmen.
• Under the new Bill, a strike is defined as cessation of work by a body of persons acting together. It includes the following under its purview:
• Mass casual leave,
• Coordinated refusal of any number of persons to continue to work or accept employment,
• Refusal to work overtime, where such work is necessary for the maintenance of essential defence services,
• Any other conduct which results in, or is likely to result in, disruption of work in essential defence services.
• The new Bill also amends the Industrial Disputes Act, 1947 to include essential defence services under public utility services. Under the Act, in the case of public utility services, a six-week notice must be given before:
• Persons employed in such services go on strike in breach of contract,
• Employers carrying on such services do lock-outs.

Essential Defence Services

• Essential Defence Services deals with the any establishment or undertaking dealing with the production of goods or equipment required for defence-related purposes, or establishment of the armed forces or connected with them or defence.
• These include services that, if ceased, would affect the safety of the establishment engaged in such services or its employees.
• The government may declare any service as an essential defence service if its cessation would affect the:
• Production of defence equipment or goods,
• Operation or maintenance of industrial establishments or units engaged in such production, or
• Repair or maintenance of products connected with defence.

Punishment for illegal strikes

• Persons initiating in illegal strikes will be punished with up to one-year imprisonment or Rs 10,000 fine or both.
• Persons instigating, inciting, or taking actions to continue illegal strikes, or knowingly supplying money for such purposes, will be punished with up to two years imprisonment or Rs 15,000 fine, or both.
• Such an employee will be liable to disciplinary action including dismissal as per the terms and conditions of his service. In such cases, the concerned authority is allowed to dismiss or remove the employee without any inquiry, if it is not reasonably practicable to hold such inquiry.
• All offences punishable under the Bill will be cognisable and non-bailable.

Impact of Essential Defence Services Bill, 2021

• The Essential Defence Services Bill, 2021 has a direct bearing on around 70,000 employees of the 41 ordnance factories around the country, who are unhappy with the corporatisation of OFB, fearing that it will impact their service and retirement conditions.
• In June, the government announced the corporatisation of the Ordnance Factory Board which was otherwise directly under the Department of Defence Production and worked as an arm of the government.
• As per the new plan, 41 ordnance factories that make ammunition and other equipment for the armed forces will become part of seven government-owned corporate entities.
• The government has claimed that the move is aimed at improving the efficiency and accountability of these factories.

GS PAPER II

Insolvency and Bankruptcy Code (Amendment) Bill, 2021

Why in News

Parliament has passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2021 with Rajya Sabha approving it recently.

Key Points

• This bill is introduced to amend the Insolvency and Bankruptcy Code, 2016.

Insolvency and Bankruptcy Code (Amendment) Bill, 2021

• A pre-packaged insolvency resolution mechanism is an alternative method of providing a corporate rescue plan for MSMEs.
• The Code provides a time-bound process for resolving the insolvency of corporate debtors within 330 days, called the Corporate Insolvency Resolution Process (CIRP).
• Under CIRP, a committee of creditors is constituted to decide regarding the insolvency resolution.
• The committee may consider a resolution plan which typically provides for the payoff of debt by merger, acquisition, or restructuring of the company.
• If a resolution plan is not approved by the committee of creditors within the specified time, the company is liquidated.
• During CIRP, the affairs of the company are managed by the resolution professional (RP), who is appointed to conduct CIRP.
• Pre-packaged insolvency resolution:
• The Ordinance introduces an alternate insolvency resolution process for micro, small, and medium enterprises (MSMEs), called the pre-packaged insolvency resolution process (PIRP).
• Unlike CIRP, PIRP may be initiated only by debtors. The debtor should have a base resolution plan in place. During PIRP, the management of the company will remain with the debtor.
• Minimum default amount:
• Application for initiating PIRP may be filed in the event of a default of at least one lakh rupees.
• The central government may increase the threshold of minimum default up to one crore rupees through a notification.
• Debtors eligible for PIRP:
• PIRP may be initiated in the event of a default by a corporate debtor classified as an MSME under the MSME Development Act, 2006.
• Currently, under the 2006 Act, an enterprise with an annual turnover of up to Rs 250 crore, and investment in plant and machinery or equipment up to Rs 50 crore, is classified as an MSME.
• For initiating PIRP, the corporate debtor himself is required to apply to the adjudicating authority (National Company Law Tribunal).
• The authority must approve or reject the application for PIRP within 14 days of its receipt.
• Approval of financial creditors:
• For applying for PIRP, the debtor needs to obtain approval of at least 66% of its financial creditors who are not related parties of the debtor.
• Before seeking approval, the debtor must provide creditors with a base resolution plan.
• Proceedings under PIRP:
• The debtor will submit the base resolution plan to the RP within two days of the commencement of the PIRP.
• A committee of creditors will be constituted within seven days of the PIRP commencement date, which will consider the base resolution plan.
• The RP may also invite resolution plans from other persons. Alternative resolution plans may be invited if the base plan:
• Not approved by the committee, or
• Unable to pay the debt of operational creditors (claims related to the provision of goods and services).
• Moratorium:
• During PIRP, the debtor will be provided with a moratorium under which certain actions against the debtor will be prohibited.
• These include filing or continuation of suits, execution of court orders, or recovery of property.
• Initiation of CIRP:
• At any time from the PIRP commencement date but before the approval of the resolution plan, the committee of creditors may decide to terminate PIRP and instead initiate CIRP in respect of the debtor (by a vote of at least 66% of the voting shares).

Insolvency

• Insolvency is a situation where individuals or companies are unable to repay their outstanding debt.

Insolvency and Bankruptcy Board of India (IBBI)

• The Insolvency and Bankruptcy Board of India was established on 1^st October, 2016 under the Insolvency and Bankruptcy Code, 2016 (Code).
• It is a key pillar of the ecosystem responsible for implementation of the Code that consolidates and amends the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders.
• It is a unique regulator: regulates a profession as well as processes. It has regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities and Information Utilities.
• It writes and enforces rules for processes, namely, corporate insolvency resolution, corporate liquidation, individual insolvency resolution and individual bankruptcy under the Code.
• It has recently been tasked to promote the development of, and regulate, the working and practices of, insolvency professionals, insolvency professional agencies and information utilities and other institutions, in furtherance of the purposes of the Code.
• It has also been designated as the ‘Authority’ under the Companies (Registered Valuers and Valuation Rules), 2017 for regulation and development of the profession of valuers in the country.

Insolvency and Bankruptcy Code, 2016 (Code)

• Definition of Bankruptcy:
• The legal status of an entity or a person where the debt owed to the creditors cannot be repaid is known as Bankruptcy.
• A court order imposes bankruptcy in most of the jurisdictions. It is mostly initiated by the debtor.
• It is important to note that bankruptcy is not synonymous with insolvency. It is not the only legal status that could be applicable to an insolvent individual or an entity.
• In countries like the UK, bankruptcy is exclusive to individuals. Liquidation, administration and other such insolvency proceedings are applicable to entities and companies.
• The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
• Objectives of IBC:
• To consolidate and amend all existing insolvency laws in India;
• To simplify and expedite the Insolvency and Bankruptcy Proceedings in India;
• To protect the interest of creditors including stakeholders in a company;
• To revive the company in a time-bound manner;
• To promote entrepreneurship;
• To get the necessary relief to the creditors and consequently increase the credit supply in the economy;
• To work out a new and timely recovery procedure to be adopted by the banks, financial institutions or individuals;
• To set up an Insolvency and Bankruptcy Board of India; and
• Maximization of the value of assets of corporate persons.

GS PAPER II

Tribunals Reforms Bill, 2021

Why in news

The Tribunals Reforms Bill, 2021 was introduced in Lok Sabha by the Finance Ministry on 2^nd August, 2021.

Key Points

• The Bill seeks to amend certain existing appellate bodies and transfer their functions to other existing judicial bodies.
• The Bill replaces a similar Ordinance promulgated in April 2021.

Highlights of the bill

• Abolition of Appellate Tribunals:
• There are few tribunals which are sought to be abolished by the Bill and their functions are to be transferred to the existing judicial bodies:
• The Cinematograph Act, 1952,
• The Trade Marks Act, 1999,
• The Copyright Act, 1957,
• The Customs Act, 1962,
• The Patents Act, 1970,
• The Airports Authority of India Act, 1994,
• The Control of National Highways (Land and Traffic) Act, 2002,
• The Geographical Indications of Goods (Registration and Protection) Act, 1999.
• Many tribunals add to another additional layer of litigation. In 2017, seven tribunals were abolished or merged based on functional similarity.
• Amendments to the Finance Act, 2017:
• The Finance Act, 2017 merged tribunals based on domain.
• It also empowered the central government to notify rules on:
• Composition of search-cum-selection committees,
• Qualifications of tribunal members, and
• Their terms and conditions of service such as their removal and salaries.
• The Bill removes these provisions from the Finance Act, 2017. Provisions on the composition of selection committees, and term of office have been included in the Bill.
• Qualification of members, and other terms and conditions of service will be notified by the central government.
• Search-cum-selection committees:
• The Chairperson and Members of the Tribunals will be appointed by the central government on the recommendation of a Search-cum-Selection Committee.
• The Committee will consist of:
• Chief Justice of India, or a Supreme Court Judge nominated by him, as the Chairperson with casting vote,
• Two Secretaries nominated by the central government,
• The sitting or outgoing Chairperson, or a retired Supreme Court Judge, or a retired Chief Justice of a High Court, and
• The Secretary of the Ministry under which the Tribunal is constituted with no voting right.
• State administrative tribunals:
• It will have separate search-cum-selection committees.
• These Committees will consist of:
• Chief Justice of the High Court of the concerned state, as the Chairman with a casting vote,
• Chief Secretary of the state government and the Chairman of the Public Service Commission of the concerned state,
• The sitting or outgoing Chairperson, or a retired High Court Judge, and
• The Secretary or Principal Secretary of the state’s general administrative department with no voting right.
• Eligibility and term of office:
• The Bill provides for a four-year term of office subject to the upper age limit of 70 years for the Chairperson, and 67 years for members.
• Further, it specifies a minimum age requirement of 50 years for appointment of a chairperson or a member.

Tribunals

• The 42nd Amendment of the Indian Constitution in 1976 introduced Part XIV-A which included Article 323A and 323B providing for constitution of tribunals dealing with administrative matters and other issues.
• According to the provisions, tribunals are to be organized and established in such a manner that they do not violate the integrity of the judicial system given in the Constitution which forms the basic structure of the Constitution.
• The primary objective behind introducing Article 323A and 323B was to exclude the jurisdiction of the High Courts under Article 226 and 227, except the jurisdiction of the Supreme Court under Article 136 and for originating an efficacious alternative institutional mechanism or authority for specific judicial cases.
• The purpose of establishing tribunals to reduce the pendency and lower the burden of cases from High court.
• Therefore, tribunals are organised as a part of civil and criminal court system under the supremacy of the Supreme Court of India.
• An administrative tribunal is neither an exclusively judicial body nor an absolute administrative body but is somewhere between the two. That’s why an administrative tribunal is also called ‘quasi-judicial’ body.

GS PAPER III

Power Distribution Sector of India

Why in news

NITI Aayog released a report on the country’s power distribution sector recently.

Key Points

• The report, titled ‘Turning Around the Power Distribution Sector’, is co-authored by NITI Aayog, RMI and RMI India.

Highlights of the report

• Most power distribution companies in India incur losses every year, total losses are estimated to be as high as Rs 90,000 crore in FY 2021.
• Due to these accumulated losses, discoms are unable to pay generators on time, make investments required to ensure high-quality power, or prepare for greater use of variable renewable energy.
• The report presents a review of reform efforts in the Indian and global power distribution sector. It extracts the learnings and best practices from the wealth of policy experience that exists in the country.
• The report examines many important reforms, such as the role of the private sector in distribution, power procurement, regulatory oversight, integration of renewable energy, and upgradation of infrastructure,’.
• A healthy and efficient distribution sector is essential, whether for improving the ease of doing business, or for improving the ease of life.
• The report is divided into chapters focusing on structural reforms, regulatory reforms, operational reforms, managerial reforms, and renewable energy integration.
• This report presents policymakers with a menu of reform options to put the distribution sector on the track of efficiency and profitability.

Conclusion

• Highlighting the need for addressing current challenges, a robust and long-lasting solution to the woes of the discoms requires changes in policy as well as organisational, managerial, and technological reforms.
• Different states have travelled along different pathways of reforms, giving a rich set of policy experiments to learn from.

GS PAPER II

Code of Criminal Procedure: Section 433A

Why in News

The Supreme Court recently held that the Governor of a State can pardon prisoners, including those on death row, even before they have served a minimum 14 years of prison sentence.

Key Points

• The Governor’s power to pardon overrides a provision in the Code of Criminal Procedure — Section 433A, which mandates that a prisoner’s sentence can be remitted only after 14 years of jail.
• Section 433A of the Code cannot and does not in any way affect the constitutional power conferred on the President/Governor to grant pardon under Articles 72 or 161 of the Constitution.
• If the prisoner has not undergone 14 years or more of actual imprisonment, the Governor has a power to grant pardon, de hors the restrictions imposed under Section 433A.
• Such power is in exercise of the power of the sovereign, though the Governor is bound to act on the aid and advice of the State Government.
• In fact, the court noted that the sovereign power of a Governor to pardon a prisoner under Article 161 is actually exercised by the State government and not the Governor on his own.

Pardoning power of President

• Power of pardon under Article 73 and 161 by the Constitution is different from judicial power as the governor or the President can grant pardon or reduce the sentence of the court even if a minimum is prescribed.
• Pardoning power of President:
• The President shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence –
• In all cases where the punishment or sentence is by a Court Martial;
• In all cases where the punishment or sentence is for an offence against any law relating to a matter to which the executive power of the Union extends;
• In all cases where the sentence is a sentence of death.
• Article 72 empowers the President to grant pardons etc. and to suspend, remit or commute sentences in certain cases.

Pardoning power of Governor

• Power of Governor to grant pardons, etc, and to suspend, remit or commute sentences in certain cases
• The Governor of a State shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence against any law relating to a matter to which the executive power of the State extends.
• The Article deals with the power of the Governor to grant pardons, etc, and to suspend, remit or commute sentences in certain cases.
• The Governor of a State shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence against any law relating to a matter to which the executive power of the State extends.