Skip to main content

Stronger Contract Law in Pipeline to Lift Ease of Doing Business Ranking

Stronger Contract Law in Pipeline to Lift Ease of Doing Business Ranking
Changes to widen ambit of enforceability beyond compensation; law min to move Cabinet note soon
India is proposing a radical change in the legal framework on contracts to make them enforceable, thus creating a more stable and predictable business environment and boosting investment, especially in the country's infrastructure sector.
A cabinet note will soon be moved by the ministry of law and justice to amend the Specific Relief Act toward this end. The move is expected to lift the country's rating in the World Bank's Doing Business index as it's a measure on which India does poorly, having been ranked at 164 out of 190 on this score.
Prime Minister Narendra Modi wants the country to break into the top 50, boosting India's attractiveness as an investment destination.“Details have been finalised. It will go to cabinet soon,“ a top government official told ET.The changes are aimed at widening the ambit of enforceability beyond just compensation. The law currently provides for damages as a general rule and awarding specific performance -forcing an entity to complete a task-as an exception.
The proposed amendment would make specific performance the rule and damages the exception. The government is also looking at removing the discretionary powers of the courts in granting relief related to specific performance.
A definition for `public works contract' could also be introduced with a provision for specific performance as a general rule with a deadline for the disposal of disputes.
The government is also looking at empowering courts to appoint experts to seek their opinion on individual and a limit of two years for the disposal of suits for the recovery of possession of immovable property .
“These changes are aimed at bringing the law in line with present-day business needs of speedy enforcement of contracts,“ said another government official with knowledge of the development.India's 164th position on enforcing contracts was better than 172 in the 2017 World Bank ranking.
Contract enforcement, particularly in the infrastructure sector, has been in focus as the country looks to improve its roads, ports, railways and airports. Breaches of contract have scared away domestic and foreign investors from the sector.
“This is an area in the works,“ said another official. The government hopes that these changes would not just help India climb the doing business ladder, but also improve the overall investment climate. Reviving investment is critical to boosting India's economic growth rate, generating jobs and lifting people out of poverty.
In Mumbai, it takes 1,445 days on average to resolve a dispute, accor ding to the World Bank's Doing Business report, against 578 days in high-income OECD countries and 164 in best-performing Singapore.A high 31% of the claim value goes in meeting costs in India against 9% for Singapore, it said.The proposed changes will help accelerate India's development, said Vishal Gandhi, founder of law firm Gandhi & Associates
Time to Set Up Commercial Courts
The move makes ample sense.We do need to proactively improve the enforcement of contracts. As per the latest World Bank's Doing Business global survey, India's rank for the parameter `enforcing contracts' is a lowly 164. But we also need to set commercial courts in Delhi and Mumbai, to begin with, to seedily resolve commercial disputes. For transparency and efficiency such courts need to have electronic case management systems.
The Economics Times, New Delhi, 09th November 2017

Comments

Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …