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Update on New Laws and Legislation
by Suresh Chandra, ILS

Cite as : ( 2002) PL WebJour 8

Department of Company Affairs

The Corporate Law Reforms For Effective Corporate Governance

The Companies (Amendment) Act, 1999

OBJECTIVES

— To give further fillip to the ongoing reform process;

— To boost the morale of national business houses;

— To encourage foreign institutional investors as well as foreign direct investment in the country.

SALIENT FEATURES

— Buy-back of shares allowed

— Issue of sweat equity allowed

— Restrictions by way of Government approval on inter-corporate loans and investments were lifted and companies were allowed to self regulate themselves

— Enabling provisions for setting up an Investor Education and Protection Fund brought in

— Provisions for Constitution of National Advisory Committee on Accounting Standards brought in

— Nomination facility allowed for shares, debentures and deposits

— Infrastructure Development Finance Company Limited brought within the list of Public Financial Institutions.

Company Law Settlement Scheme, 2000

OBJECTIVES

— To create an environment of trust, confidence and partnership;

— To permit defaulting companies to avail one-time declaration and settlement;

— To avoid cumbersome prosecution.1

The Department of Company Affairs had launched a scheme, namely the Company Law Settlement Scheme, 20002 to create an environment of trust, confidence and partnership wherein companies which have defaulted in filing documents with the Registrar of Companies in the past may come forward and avail one time declaration and settlement. The total collections made under CLSS, 2000 amounted to Rs 136.83 crore.

Fast Track Section 560 Scheme

OBJECTIVES

— To provide a simple "exit route" to both — companies which had no business and who had availed of Company Law Settlement Scheme 2000 and to other companies;

— To save from the protracted process of voluntarily winding up of companies.

The Department had launched a "Fast Track Section 560 Scheme"3 with effect from 28th September, 2000. The Scheme was valid till 31.1. 2001. For the Earthquake attacked Gujarat, the scheme was extended till 31.3. 2001. The Scheme provided a simple "exit route" to both — companies which had no business and who had availed of Company Law Settlement Scheme, 2000 and to other companies. They were saved from the protracted process of voluntarily winding up of companies. Through the Fast Track Section 560 Scheme3, the Department had collected Rs 5.27 crore.

The Companies (Amendment) Act, 2000

OBJECTIVES

— To ensure good corporate governance and investor protection;

— To ensure investors' protection.

SALIENT FEATURES

— To provide a minimum paid up capital of Rs l lakh for private limited companies and Rs 5 lakh for public limited companies;

— To delete provisions relating to deemed public companies; to reduce the period for disbursing dividend/interim dividend to shareholders from 42 days to 30 days;

— To mandate the companies to inform the Company Law Board within 60 days if the company fails to make repayment of deposits on maturity to small deposit holders4

— To provide that the Securities and Exchange Board of India be entrusted with powers with regard to all matters relating to public issues and transfers including power to prosecute defaulting companies and their directors;

— To include the Directors Responsibility Statement in the Board's report5

— To provide for public listed companies with paid up capital of Rs 5 crores or more to set up an Audit Committee of the Board of Directors;

— To require companies with paid up capital of Rs 10 lakh or more and which do not have a whole time Secretary in their employment to submit a Secretarial Compliance Certificate from Company Secretary in whole time practice;

— To delete the provisions for appointment of public trustee by Central Government;

— To provide that any offer of shares or debentures to more than 50 persons shall be treated as public issue with suitable modification in the case of public financial institutions and non-banking financial companies;

— To prescribe voting through postal ballot in case of only important items;

— To empower Regional Director to allow change of registered office of company from jurisdiction of the one Registrar of Companies to another within the same state;

— To empower the Comptroller and Auditor-General of India to appoint the auditors in respect of government companies and also to provide that the shareholders of such companies will fix their remuneration in annual general meeting;

— To provide that in case of a public company which does not file annual accounts and annual returns continuously for three years, the directors of such company will be debarred from becoming the director of other public companies for five years.6

— To provide that for the purpose of managerial remuneration, the amount of depreciation will be the same as provided in Profit and Loss Account of the Company;

— To provide that no person can hold office of director in more than fifteen companies at a time;

— To provide penal provisions for increased fine for offences under the Act;

— To provide that a shareholder of the company be disqualified for appointment as auditor of the company;

— To delete the provisions relating to managing agents, secretaries and treasurers7;

— To provide that private limited companies shall be excluded in reckoning the number of companies which an auditor can audit.

The Companies (Amendment) Act, 2001

OBJECTIVES

— To improve market sentiments.

— To further liberalise the buy-back of shares by the companies to the extent of less than 10% of the total paid up capital and free reserves of the company and such buy-back has been authorized by means of a resolution passed in its Board Meeting;

— To provide that no offer of buy-back referred to above shall be made with a period 365 days recalled from the date of the preceding offer of buy-back;

— To reduce the time limit from 24 months specified under sub-section (8) of Section 77-A of the 1956 Act, for issue of same kind of shares of buy-back to 6 months;

— The aforementioned Act replaced the aforementioned Ordinance, 2001.

During the last few years the securities market was passing through depression, which became worst following the terrorist attack on September 11 in the United States of America and consequential developments in other places. With a view to improve market sentiment, it was decided to liberalise certain provisions of Section 77-A of the Companies Act, 1956 relating to buy-back and the Companies (Amendment) Ordinance, 2001 was promulgated which has been replaced by the aforesaid Act.

Proposed Legislations

The Government has introduced the Competition Bill, 2001, the Companies (Amendment) Bill, 2001 and the Companies (Second Amendment) Bill, 2001. These are before Parliament. With their passage, the profile of corporate laws will undergo further changes to bring them in tune with the best practices in corporate governance as are available globally. These will also catalyze second generation economic reforms in the country.

The Competition Bill, 2001

OBJECTIVES

— To constitute a regulatory body to be known as the Competition Commission of India;

— To regulate competition, quality of products and services of industry;

— To prevent abuse of dominance in tune with the global standards;

— To replace the existing Monopolies and Restrictive Trade Practices Commission (MRTPC).

The Monopolies and Restrictive Trade Practices Act, 1969 has become obsolete in certain respects in the light of international economic developments relating more particularly to competition laws and there is a need to shift our focus from curbing monopolies to promoting competition. The Central Government constituted a high level Committee which submitted its report to the Government and after considering the report and consulting the trade and industry the Government enacted the Competition Bill, 2001. The Bill seeks to ensure fair competition by privatizing trade practices which cause adverse effect on market and create a quasi-judicial body called Competition Commission of India (CCI). The Commission shall also undertake Competition Advocacy for creating awareness and imparting training on competition issues.

The Companies (First Amendment) Bill, 2001

OBJECTIVES

— To provide for a new insolvency law designed to wind up and liquidate companies within a timeframe;

— To provide for constitution of a National Company Law Tribunal and an insolvency fund;

— To replace BIFR by repealing the Sick Industries (Special Provision) Act, 1985, for accelerating the pace of winding up of sick companies or their revival.

SALIENT FEATURES

— Creation of National Company Law Tribunal;

— Dissolution of the existing Company Law Board;

— Transfer of all pending proceedings from the Company Law Board to the proposed Tribunal;

— Repealing of the Sick Industrial Companies (Special Provisions) Act, 1985 and dissolution of the Board of Industrial and Financial Reconstruction and the Appellate Authority for Industrial and Financial Reconstruction shall stand abated on dissolution of Board for Industrial and Financial Reconstruction and Appellate Authority for Industrial and Financial Reconstruction;

— A mandatory reference to the Tribunal by Board of Directors of the Company other than a government company; where the company's accumulated losses in any financial year equal to 50% or more of its average net worth during four years immediately preceding such financial year; or the company failed to repay its debts within any three consecutive quarters on demand for its repayment by a creditor or creditors of such company.

— It is also proposed to create a Revival and Rehabilitation Fund for making interim payment and revival/rehabilitation of companies;

— The President of the National Company Law Tribunal will be the Chairperson who is, or has been, a Judge of the Supreme Court or Chief Justice of High Court. The orders of the Tribunal will be appealable to the National Company Law Appellate Tribunal. The orders of the Appellate Tribunal shall be appealable only to the Supreme Court of India on points of law;

— Private Liquidators will be enrolled in a panel to be maintained by the Central Government for providing services in addition to the existing set of Official Liquidators to cope up with enormous volume of pending work.

— The Tribunal will have jurisdiction and power relating to winding up, merger and amalgamation of companies presently vested in High Court. All winding up cases pending before High Courts will be transferred to the proposed National Company Law Tribunal for further proceedings.

The Companies (Second Amendment) Bill, 2001

OBJECTIVES

— To provide for conversion of cooperative business into companies, especially the producing cooperative businesses.

SALIENT FEATURES

— To offer a statutory and regulatory framework that creates the potential for produce owned enterprises to compete with other enterprises.

— To provide for the formation and registration of producer companies, which include the mutual assistance and cooperative principles within the more liberal regulatory framework, afforded by the Company Law, with suitable adaptations.

— To provide an opportunity to cooperative institutions to voluntarily transform themselves into new form of producer companies.

— Under the Bill conversion of cooperatives to producer companies is purely voluntary.

— Members' equity may not be publicly traded, but may only be transferred, with the approval of the Producer Company's Board of Directors. Producer companies would not be vulnerable to the takeover by multinationals or other companies.

— The conversion option by cooperative society to Producer Company can be exercised only if two-thirds of the Members of the concerned society vote in favour of a resolution to that effect.

— The new form of company is designated as "producer company" to indicate that only certain categories of persons can participate in the ownership of such companies. The members of a producer company have necessarily to be primary producers, that is, persons engaged in on activity connected with, or related to, primary produce.

— The objects of a producer company have been defined to include, among other things, production, processing, manufacturing and sale of primary producer as well as allied matters.

Investor Education and Protection Fund

In exercise of the powers conferred by Section 205-C of the Companies Act, 1956, the Central Government (this Department) has, on 1.10. 2001, established an Investor Education and Protection Fund. The Fund will get contributions from companies having unpaid dividend, matured deposits & debentures and share application moneys lying with them.

This Fund shall be utilised for promotion of investors' awareness and protection of their interests. A Committee to administer this Fund has already been constituted by this Department.

Easing the working of Nidhi Companies

Streamlining the functioning of Nidhi Companies — these Nidhi Companies are homegrown, gross-roots financial companies in the southern states occupying a special niche in meeting the financial needs of the ordinary men. Through changes in the regulations, DCA has sought to put their activities within a prudential regulatory framework, but has given them enough adjustment time to comply with the new regulations. A ham-handed approach in this respect could have completely shifted the growth of the Nidhi Companies.

Centre for Corporate Excellence

In order to effectively operationalise the concept of excellence in corporate governance on a sustained basis, to sharpen India's global competitive edge and to further foster and develop corporate culture in the country, the Department of Company Affairs had set up on 15.5. 2000 a Study Group, which has recommended several far reaching steps including setting up of an independent, autonomous Centre for Corporate Excellence mainly to accord accreditation and promote policy research and studies, training and education and institute awards, etc. in the field of corporate excellence.

Concessions to Companies in Special Economic Zones

Concessions with adequate safeguards are proposed to be given to companies having their unit(s)/works(s)/registered office in Special Economic Zones (as notified by Department of Commerce from time to time) in respect of Schedule XIII of the Companies Act, 1956 (Managerial Remuneration).

LEGISLATIVE DEPARTMENT

Civil Procedure Code (Amendment) Act, 2002

OBJECTIVES

— To speed up the courts;

— To allow modern technologies to cope up the arrears;

— To bring down burden on public exchequer;

— To compress life cycle of a civil case without compromising quality of an order;

— To meet expectations of the people

The problem of delay in disposal of cases has shaken the confidence of people in the capacity of the courts to redress their grievances and grant adequate and timely relief.8 In a civil case, delay may take place because of the conduct of parties or their representatives, court procedure, court administration, nature of cases or due to difficulty in getting expert's report.

All these aspects referred to above were studied and deliberated upon in a holistic manner and accordingly amendments9 have been made. The combined effect of these amendments may be highlighted in three stages. Firstly, to reduce delay at pre-trial stage; every plaint is required to be supported by an affidavit and such plaint shall be submitted in duplicate. Where a suit has been duly instituted, summons may be issued by the court to the defendant to appear and answer the claim and such summons should be served on a day not beyond 30 days from the date of the institution of the suit. Every summon is to be accompanied by a copy of the plaint. Plaintiff would be required to file copies of the plaint and pay requisite fees within 7 days from the date of the order of the court. The mode for delivery of summons would ordinarily be the courts, however, the plaintiff, if so authorized by the court, may also deliver summons. Modern means of communication for service of summons have also been incorporated like courier service, fax etc. A defendant is required to file written statement within 30 days of date of serving of summons extendable upto 90 days by the court for reasons to be recorded in writing.

Secondly, at the hearing stage it has now been left to the discretion of the court as to whether the recording of evidence (cross-examination and re-examination) of witnesses should be done by the court or should be entrusted to the Commissioner. In case where evidence is recorded by the Commissioner, the Commissioner shall submit to the court his report within 60 days from the date of issue of Commission unless the court, for reasons to be recorded in writing, extends the period. However, the Examination-in-Chief of the witnesses has to be made on affidavit. A limit of three adjournments has been provided. Further, the court may also order as to the cost associated by the adjournment of such higher costs as it deems fit. As long arguments often prolong a case, court may fix a time limit for the oral arguments by either of the parties. The court may also ask the parties to file written submissions before the court.

Thirdly, at the stage of judgment, execution of decree etc., it has been provided that judgment shall be pronounced,10 either at once or within a period of 30 days from the date on which the hearing of the case was concluded. With respect to execution of decree, ambiguity has been removed.11

Lastly, with a view to simplify procedure for filing appeals, revision etc. second appeal has been abolished in money suits where value does not exceed Rs 25,000; an appeal may be filed without filing a copy of the decree; registry of memorandum of appeal shall be maintained by the court from whose decree an appeal lies revisional jurisdiction in respect of an interlocutory order passed in appeal; trial or other proceedings are curtailed and the filing of a Revision Application in the subordinate court and the records of the subordinate court shall not be called unless the High Court specifically orders to do so.

The Repeal and Amending Act, 2001

OBJECTIVES

— Repeal of obsolete laws

— Scavenging of statute

— Providing unambiguous legal framework

— Avoiding duplication

All the amending Acts that have been brought into force during 1984 to 1999 (357) were reviewed. A total of 305 Acts have been wholly repealed while 52 have been partially repealed and amended through this Act.12

With the aforementioned exercise, the major scavenging work to clean the Statute Book has been completed. It will strengthen the "Transaction Governance Capacity" (TGC) of the country to facilitate better governance through better legal framework.13

The Registration and other Related Laws (Amendment) Act, 2001

OBJECTIVES

— To avert mischief in the enforcement of law relating to transfer of immovable property.

Mischief Rectified

— Made Compulsory:

(i) Registration of the documents containing contracts to transfer for consideration any immovable property,

(ii) Affixing of photographs,

(iii) Fingerprints on the documents at the time of registration.

— The provision which permits the Registrar of certain districts to register a document without regard to the situation in any part of India of a property deleted.14

— State Governments enable to computerize registration records.

The Registration of Other Related Laws (Amendment) Act, 2001, has inserted a new provision15 for making registration of the documents containing contracts to transfer for consideration any immovable property compulsory for the purpose of the Transfer of Property Act, 188216 The power of certain Registrars to register a document without regard to the situation in any part of India of a property to which the document relates is deleted. The State Governments are enable to computerize registration records17 Affixing of the photographs and fingerprints on the documents have been made compulsory at the time of registration. It is hoped that with the aforementioned amendment that lot of mischief in the enforcement of these laws can be averted.

PERSONAL LAWS

Marriage Laws (Amendment) Act, 2001

OBJECTIVES

— To curb the tendency to obtain adjournments on frivolous grounds;

— To provide for remedial measures for speedy disposal of cases;

— To fix time-limit for disposal of an application for alimony pendente lite;

— To provide for litigation expenses.

The need for reform of the Personal Laws has been engaging the attention of the Central Government. The Law Commission has recommended18 that the tendency to obtain the adjournments on frivolous grounds in the cases should be curbed, remedial measures should be taken for speedy disposal of the cases pending in courts19

The Indian Divorce Act, 186920, The Parsi Marriage and Divorce Act, 193621, The Special Marriage Act, 195422 and The Hindu Marriage Act, 195523 do not contain any time-limit for disposal of applications for alimony pendente lite or the maintenance and education of minor children.

As part of the judicial reforms process through the aforementioned enactment necessary amendments in the aforementioned enactments have been made through this amendment, with a view to making provisions that an application for alimony pendente lite or the maintenance and education of minor children shall be disposed of within sixty days from the date of service of notice on the respondent. This amendment which, is on line with the expectations of thousands of families waiting for alimony or the maintenance and education of their children would provide immediate relief to them. In each case the maintenance would also be accompanied by litigation expenses. This provision is likely to bring a lot of relief to women who had earlier to wait for years in order to receive maintenance

Indian Divorce (Amendment) Act, 200124

OBJECTIVES

— To remove gender inequality w.r.t. dissolution of marriage25 and to make consequential amendments26

— Grounds of dissolution of marriage widened.

— Dissolution of marriage by mutual consent provided.

— Instead of confirmation of decree of dissolution by District Judge, power of High Court to remove certain suits provided27

— Archaic provision omitted28

— The requirement of confirmation done away29

— Remedy to claim damages from adulterer or adultress provided to both wife and husband.30

— Remarriage simplified31

A provision32 is made for dissolution of marriage by mutual consent. Certain consequential amendments have been made to synergise the scheme of the Act and accordingly number of provisions that had become redundant or archaic have been deleted, e.g. provision regarding relief on the basic principles applied by the English Divorce Courts33; provisions entitling husband to claim damages for adultery in a petition in dissolution of marriage or for judicial separation or in a petition limited to that object, on the ground of his wife having committee adultery with the wife of such petitioner34; provision empowering the court to award cost at the proceedings against the respondent (adulterer) wherein a petition by the husband, the alleged adulterer was made a co-respondent and the adultery was established35; provision ceiling the outer limit of alimony pedente lite to not exceeding one-fifth of the husband's average net income for the three years preceding the date of the order36; and the provision that empowered the court to order settlement of wife's property for benefit of husband and children37

Indian Succession (Amendment) Act, 2001

OBJECTIVES

— Discriminatory provision excluding the Christian women from her distributive share on the basis of valid contract made before her marriage to that effect — Abolished.

— Discriminatory provision regarding a probate or letter of administration or a copy of an authenticated copy of the will by court of competent jurisdiction — Abolished.

The Indian Succession Act, 1925 was aimed at consolidating the Indian law relating to testamentary and intestate succession. Prior to the amendment, the Act of 192538 recognized the Christian widow as one of the heirs to succeed to the property after deceased husband dying in testate. However, it provided that a widow would not be entitled to succeed to such distributive share if there was a valid contract made before her marriage to that effect39 .

The Act of 1925 required that no person claiming right as executor or legatee of a will could establish such right in any court of justice under the will unless he has been granted a probate or letter of administration or an authenticated copy of the will by a court of competent jurisdiction. No such probate or letter of administration was required for a Mohammadan to establish his rights under a will nor there was any such requirement in the case of other communities on all India basis40

Through the Amendment Act, 2001, the discrimination has been abolished.41 This amendment will bring tremendous relief to the Christian widows and the Christian community.

Criminal Procedure Code (Amendment) Act, 2001

OBJECTIVES

— To provide for express provision for interim maintenance;

— To provide time-limit for interim maintenance;

— To remove the ceiling of maintenance.

It has been provided that during the pendency of the proceedings, the Magistrate may order payment of interim maintenance allowance and such expenses of the proceedings as the Magistrate considers reasonable, to the aggrieved person. It is also provided that this order be made ordinarily within 60 days from the date of service of the notice.42

It was largely felt, in view of the cost of living index centrally rising, retention of the maximum ceiling was not justified43 Accordingly, Section 125 has been amended and consequential changes under Section 127 of the Code of Criminal Procedure made to remove the ceiling of maintenance allowance.44

This amendment that is on line with the expectations of thousands of families waiting for justice would provide immediate relief to them. In each case litigation expenses would also accompany the maintenance. This provision is likely to bring a lot of relief to women who had earlier to wait for years in order to receive interim maintenance and also in terms of adequate quantum of relief.

ELECTION LAWS

The Constitution (Eighty-Fourth Amendment) Act, 2001

OBJECTIVES

— To extend the current freeze in fresh delimitation extended upto the year 2026;

— To extend re-adjust and rationalize electoral constituencies;

— To re-adjust the SC and the ST seats based on the population census.

Since the census to be taken after the year 2000 had already been completed and the constitutional embargo on undertaking fresh delimitation was to lapse as soon as the figures of this census were published45 The Government, as part of the National Population Policy strategy, decided to extend the embargo on undertaking fresh delimitation up to the year 2026 as a motivational measure to enable State Governments to fearlessly pursue the agenda for population stabilization. The Government also decided to undertake re-adjustment and rationalization of electoral constituencies, including those reserved for the Scheduled Castes and the Scheduled Tribes, based on the population census for the year 1991, without affecting the number of seats allocated to States in the legislative bodies. Accordingly, the requisite law46 has been enacted.

The Delimitation Act, 2002

OBJECTIVES

— To constitute a Delimitation Commission;

— To re-adjust the Parliamentary and Assembly Constituencies;

— To re-fix seats reserved for the Scheduled Castes and the Scheduled Tribes.

SALIENT FEATURES

— The Delimitation Act, 2002 has been enacted to constitute a Delimitation Commission to give effect to the Constitution (Eighty-fourth Amendment) Act, 2001.

— The main object of the Commission is to correct the distortion following the uneven growth of population in different constituencies as also the migration of electorate from one place to other resulting in differing sizes of electoral constituencies even within the same State.

— The present delimitation of Parliamentary and Assembly Constituencies is based on the population figure of the 1971.

— The object is also of effecting delimitation on the basis of population as ascertained at the census of 1991.

The Election Laws (Amendment) Bill, 1999

(Proxy voting )

OBJECTIVES

— To provide an additional option to the Armed Forces and Forces to which Army Act, 1950 applies to vote through proxy.

— To make the right to franchise more effective.

The members of the Armed Forces at present have the option to vote in person or through the system of postal ballot at elections, which has, however, not proved to be an effective system. The Armed Forces personnel are posted in distant and remote places and are not effectively able to exercise their right to vote due to the delays in the receipt of ballot papers and delay in delivery of postal ballots before the counting, with the result that even when the right to vote is exercised within the prescribed period there is no guarantee that the postal ballots will be received before the counting of votes. Further, on account of the reduction of campaign period for the polls to 14 days, time is not adequate for service voters, as the choice of candidate for voting can be exercised only after the list of candidates is finalized and ballot papers are printed. In view of the demerits of the postal ballot system and to ensure that the service voters are not deprived of their statutory right of exercise of their franchise at elections, on the recommendation of the Election Commission of India, Government decided to provide an additional option to the members of the Armed Forces of the Union and of Forces to which the provisions of Army Act, 1950 have been made applicable, whether with or without modifications, to vote through the system of proxy at elections. The Election Laws (Amendment) Bill, 1999 was accordingly introduced in the Lok Sabha on 9.12.1999. The Bill was referred to the Department-Related Parliamentary Standing Committee on Home Affairs for examination and report. The Committee in its report has suggested that consensus may be evolved on the issue in consultation with the political parties. Consensus is yet to be evolved.47

The Representation of the People (Amendment) Bill, 2001

OBJECTIVES

— Seeks to do away the requirement of residential qualification for contesting elections to the Council of States.

— Seeks to introduce open-ballot system for election to the Council of States

— This will bring transparency and will do away the role of money power and muscle power in the election of the Council of States.

The Representation of the People Act, 1951 prescribes residential qualification48 for contesting elections to the Council of States. There have been numerous instances where the persons who are normally not residing in a particular State have got themselves registered as voters in that State, simply to contest an election to the Council of States. The Chief Election Commissioner, while discussing this aspect in the all party meeting held on 29th April, 2001 was of the view that a precise definition of "ordinarily resident" was very difficult and emphasized that it was for the political parties, acting through Parliament, to carry out what is their judgment, might be the best possible solution, in the light of the experience of the past fifty years.

The Ethics Committee of Parliament in para 19 of its first report presented to Parliament on 8th December, 1998 recommended that the issue relating to open-ballot system for elections to the Rajya Sabha be examined.49

In the light of the above, the aforesaid issues were examined in depth by the Government and it has introduced the Representation of People (Amendment) Bill, 2001 which seeks to make suitable amendments in Sections 3, 59, 94 and 128 of the Representation of the People Act, 1951 relating to qualification for membership of the Council of States, the manner of voting of elections, secrecy of voting and maintenance of secrecy of voting by officers, clerks, agents or other persons performing the election duty.50

The Election and Other Related Laws (Amendment) Bill, 2002

(State Funding)

OBJECTIVES

— To streamline donations received by the political parties;

— To give suitable tax exemptions;

— To provide safeguards against misuse of the facility;

— To provide for allocation of equitable sharing of time on the Cable Television Network and other electronic media for election campaign;

— To provide for State-funding in kind.

The Inderjit Gupta Committee in its report recommended, inter alia, partial State funding of elections, in kind only, to recognized political parties and candidates set up by them. Accordingly, the Election and Other Related Laws (Amendment) Bill, 2002 has been introduced by the Government in the Lok Sabha, which has been referred to the Department-Related Parliamentary Standing Committee on Home Affairs for consideration and report. The Bill seeks to streamline donations received by the political parties for elections by giving suitable tax-exemptions; providing safeguards against misuse of the facility and providing for allocation of equitable sharing of time on the cable television network and other electronic media for the purposes of election campaign and for State funding, in kind, such as supplying of free copies of electoral rolls to the candidates by the Government and identity slips of electors and other prescribed items by the Election Commission to the candidates. The Bill also seeks to substitute Explanation in Section 77 of the Representation of the People Act, 1951 in place of the existing Explanations 1 and 3 which removes the doubt and declares that the expenditure on general party campaign as referred to in Section 29-D of the said Act incurred by the leaders of a political party shall not be deemed to be the expenditure in connection with the election incurred or authorized by a candidate of that political party or his election agent.

Electronic Voting Machines

An amount of Rs 150 crores was provided to the Election Commission during the year 2000- 2001 for the purpose, out of which a total of 1,33,800 Electronic Voting Machines were purchased from two Public Sector Undertakings. Also, the use of the machines in its present form and with existing technology has passed the test of judicial scrutiny, whenever it has been challenged. All stakeholders, namely, the political parties, the electorates and the staff involved in election duty have accepted the machines and the total number of Electronic Voting Machines bought by the Election Commission so far are as under:

No. of Machines	Cost	Year
1,50,000	Rs. 75 crores	1989-90
1,33,800	Rs. 150 crores	2000-01
7000	Adjusted against overpayment during 2000-01	2001-02
1,34,480	Rs 142.29 crores	2002-03
Total 4,25,280

A provision of Rs 100.61 crores has been made for the year 2002-03 for purchase of Electronic Voting Machines. Procurement of balance 5.75 lakh Electronic Voting Machines is necessary to cover all the 8,00,000 polling stations in the year 2002-03 and 2003-04.

DEPARTMENT OF LEGAL AFFAIRS

The Department of Legal Affairs has been rendering legal advice to the various Departments of the Government of India, thus, helping them in exercise of their administrative power in a objective and reasonable manner. The Legal Advisers/Law Officers, while advising on various matters, provide expert legal opinion and, thus, shield the various administrative decisions of the Government in a faceless manner.

During the year 2001 i.e. w.e.f. 1.1. 2001 TO 31.12. 2001, a total of 49,186 references of advice/arbitration matters were received and 47,527 cases were disposed of and 1659 were pending as on 1.1. 2002. A tabulated information in this respect i.e. various references from various Ministries/Departments dealt with in the last three years is given under:

Year	References Received	References Disposed of	References Pending as on at the end of the Year.
1999	38,989	38,989	Nil
2000	39,256	39,256	Nil
2001	49,186	47,527	1659 (as on 1.1. 2002)

Advocates' Welfare Act 2001

OBJECTIVES

— To provide for social security to junior lawyers.

— To provide for welfare scheme to indigent or disabled advocates.

There has been a felt need for a Central legislation for constitution of "Advocates" Welfare Fund.51 This Act makes it compulsory for every advocate to affix stamps of the requisite value on every vakalatnama filed in any court, tribunal or other authority. Sums collected by way of sale of "Advocates' Welfare Fund Stamps" constitute an important source of the Advocates' Welfare Fund.52

All practicing advocates shall become members of the Advocates' Welfare Fund on payment of an application fee and annunal subscription. The Fund shall vest in, and be held and applied by, the Trustee Committee established by the appropriate Government. The Fund shall, inter alia, be used for making ex gratia grant to a member of the Fund in case of a serious health problem, payment of a fixed amount on cessation of practice and in case of death of a member, to his nominee or legal heir, medical and educational facilities for the members and their dependants, purchase of books and for common facilities for advocates.

The Legal Service Authority (Amendment Act, 2002

OBJECTIVES

— To strengthen alternative dispute resolution.

— To provide for compulsory pre-Iitigative mechanism for conciliation.

— To tackle the problem of growing pendency of cases.

The amendment aims to set up permanent Lok Adalats53 for providing compulsory pre-litigative mechanism for conciliation and settlement of cases in certain cases relating to public utility service. Under the new scheme, the Lok Adalats will in the first instance try to bring about conciliation between the parties and in case the parties are not able to arrive at any compromise or settlement the Lok Adalat shall proceed to dispose of the matter on merits, if it does not relates to an offence. Permanent Lok Adalat will take up cases up to monetary value of Rs 10 lakhs.

The Lok Adalat will consist of Chairperson having judicial experience and to other persons having adequate experience in public utility service. After an application is filed by any party before the Lok Adalat for settlement, no party shall invoke jurisdiction of any court or tribunal. Award made by the Lok Adalats shall be final, binding and shall not be questioned in any original suit, application or adjudication proceeding. An award shall be deemed to be a decree of civil court.

FEMA TRIBUNAL

With the repealing of the Foreign Exchange Regulations Act, 1973 and its replacement by the Foreign Exchange Management Act, 1999, Foreign Exchange Appellate Board (FERA Board) was dismantled w.e.f. June 1, 2000 and in place Foreign Exchange Management Appellate Tribunal set up. The Tribunal has become fully functional.

National Commission for Review of the Working of the Constitution

In keeping with the national agenda of NDA Government, the National Commission to Review the Working of the Constitution (NCRWC) was set up by the Government on 22nd February, 2000 under the Chairmanship of Justice M.N. Venkatachalliah, retired Chief Justice of India. The Commission submitted its report to the Government on 31st March, 2002.

The report of the Commission has been made public by putting the same on internet. The report will be available for sale shortly to the public.

The Commission has made 58 recommendations involving amendment in Constitution, 86 involving legislative measures and the rest involving executive action. The recommendation relate to various articles of the Constitution and in brief, relate to the following subjects.

(i) Fundamental Rights, Directive Principles and Fundamental Duties.

(ii) Electoral Processes and Political Parties

(iii) Parliament and State Legislatures

(iv) Executive and Public Administration

(v) The Judiciary

(vi) Union-State Relations

(vii) Decentralisation and Devolution

(viii) Pace of Socio-Economic Change and Development

DEPARTMENT OF JUSTICE

Initiatives taken by the Department of Justice

— Fast Track Courts - 1734

— Filling up of vacant posts of Judges/Magistrates in District courts 1854 ,

— Total of 3580 additional courts will get added to the present number of courts 12737, which works out to 29% more courts.

— Computerisation and networking of courts — Pilot project for Delhi and the other three major metros.

— Filling up of posts in High Courts.

— Upgradation of the computer network of High Courts to the level of the Supreme Court — starting with the High Courts of Delhi, Bombay, Calcutta and Madras.

— Electronic Filing System (EFS) in bounced cheques cases in District/Subordinate Courts of Delhi — this year.

— EFS in the High Court of Delhi, this year in cases relating to intellectual property rights.

— Various measures on judicial reforms, in consultation with the judiciary, including financial autonomy to judiciary, streamlining vacation in judiciary, implementation of recommendations of Malimath Committee regarding modifications in rules of procedure of High Courts, appointment of Special Judicial Magistrates and Special Metropolitan Magistrates for disposal of petty offences, mechanism in High Courts for prevention of corruption in District Judiciary.

— Development of infrastructure facilities for the judiciary.

Fast Track Courts

The Fast Track Court Scheme to establish 1734 additional courts in the country has been undertaken by the Government of India, among others, to tackle the problem of growing pendency of cases before the courts. Fast Track Courts are taking up sessions cases pending for two years or more and the cases of under-trials in jails on priority.54 The scheme will effect substantial saving in expenditure on jails besides addressing a serious human rights problem. As on 31.5. 2002, 1123 courts have been established out of which 706 courts have been functioning. Out of 1,20,697 cases transferred to Fast Track Courts, 61,153 cases were disposed of as on 31.5. 2002. The scheme has been a success in many States like Maharashtra, Andhra Pradesh, Rajasthan, Madhya Pradesh, Uttaranchal and Uttar Pradesh. The session cases in these courts do not take more than a month after turn on board for clearing and their disposal accordingly. In Rajasthan and Maharashtra, the sessions cases are being disposed of at the rate of 14 cases per month. We are expecting that Judges in all 1734 Fast Track Courts will be appointed in compliance with the Supreme Court's direction dated 6.5. 2002.55 It is expected that the Fast Track Courts will run up to the year 2005 and clear the arrear by that time.

Filling up of vacancies in Subordinate Judiciary.

As held in All-India Judges Association on 21st March, 2002 that all the existing vacancies should be filled in latest by 31st March, 2003, in all the States. There are staggering vacancies of about 1857 Judges/Magistrates in various States. We have requested State Governments and High Courts to take appropriate steps for filling up the vacancies. As per Supreme Court's direction, we should achieve parameter of 50 Judges per million population during the next 5 years and judge strength at the rate of 10 per million population should be increased each year commencing from 2002- 2003 considering pendency of cases in each State.

This year Department of Justice, in consultation with Planning Commission, has introduced a new scheme for the High Courts. The scheme will provide funds for meeting the deficiencies in the infrastructure of High Courts specially for the newly created in the States of Chattisgarh, Uttranchal Pradesh and Jharkhand. Last year also, about Rs 3 crore were made available to these High Courts for this purpose. The other scheme which is being worked out by Department of Justice is the upgradation of the computer system in the High Courts. Hopefully, this year, in conjunction with the other steps i.e. increasing the judges' strength and speedy filling up of vacancies will help in reducing the pendency in the High Courts. The pendency in various High Courts have gone up from 2.19 million in 1990 to about 3.55 million in 2001.

Family Courts

As a measure of resolving the disputes, it was felt that more Family Courts should be set up. The Department of Justice has been intervening actively in the setting up of Family Courts in the country. On the recommendations of the Parliamentary Committee on Empowerment of Women, the Ministry of Finance has sanctioned funds as 50% expenditure for running of Family Courts. For construction of Family Courts and residential premises for Judges, the Central Government will provide 50% assistance/grant under the Centrally-Sponsored Scheme. We hope that State Government will come forward to construct as many Family Courts as possible to resolve family and matrimonial disputes.

Computerisation of City Courts in four major metropolis

The computerization of city courts in four major metropolis in another good scheme undertaken by the Department of Justice from last year. It is hoped that computerization of city courts in Delhi will be completed soon and the other State Governments will also come forward to implement this project by the end of the year 2003. Thereafter, we may further embark upon other 6 large cities in the country after gaining experience from this pilot project. We have requested the State Governments to be in touch with NIC to pay special attention for the computerization of District Courts all over the country.

INFRASTRUCTURAL DEVELOPMENT SCHEME FOR THE JUDICIARY

A Centrally-Sponsored Scheme relating to development of infrastructural facilities for the judiciary is being implemented by the Department of Justice from the year 1993-94. The Scheme is being implemented with a view to augment the resources of the State Governments/UT Administrations. The Scheme includes construction of court buildings and residential accommodation for Judges/Judicial Officers covering High Courts and Subordinate Courts. The expenditure under the Scheme is shared by the Central and State Governments on 50:50 basis.

From the year 1993-94 to 2001- 2002, an amount of Rs 485.27 crores has been released to the States/UTs. Against this, an amount of Rs 900 crores (approx) has been spent by the States till March 2002.56

1. There were 2.52 lakh defaulting companies and about 1.27 lakh companies availed this Scheme and made their defaults good and thus saved cumbersome prosecution. Return to Text
2. The Scheme was initially launched for a period of three months from 1.6. 2000 to 31.8. 2000. The Scheme became a big success and this Department was able to collect more than Rs 100 Crore under the Scheme during this period of three months. In view of demands from the Industries/Chambers of Commerce etc. the validity of the Scheme was further extended till 30.9. 2000 with the condition that the defaulting companies will have to pay a surcharge of 10% over and above the fees prescribed under the Scheme. Return to Text
3. It had come to the notice of the Department that while a large number of companies had been registered but due to various reasons some of them failed to take off. The promoters of such companies had been requesting the Government to strike off their companies names by a simple  "exit-route".
   Return to Text
4. The Company Law Board, so informed to consider these defaults reported by companies and make an order within thirty days which the company shall be bound to comply with. A company which fails to report or comply with the order of the Company Law Board shall be punishable for imprisonment which may extend to three years and shall also be liable to fine or a fine of not less than Rs 500 per day during which such default continues. Return to Text
5. So as to highlight the accountability of directors in good corporate governance. Return to Text
6. Similarly, in case of any public company, which fails to repay its depositors on maturity of deposit amount/debenture, dividend and interest on deposits/debentures on due dates, the whole time directors of defaulting companies as on such date will be debarred from becoming a director in any other public company for a period of five years. Return to Text
7. As they have become redundant after abolition of the system of managing agent, secretaries and treasures. Return to Text
8. Approximately 25 million cases are pending before the various courts. Over the years, the issue has been a subject matter of study and examination by the various Committees and Commissions such as Reckon Committee (1925); High Court Arrears Committees (1949) and (1969); Law Commission Reports (14th, 27th, 54th, 55th, 70th and 129th). Return to Text
9. Vide the Code of Civil Procedure (Amendment) Act, 1999 and of 2002 Return to Text
10. Judgment shall be pronounced at once or, within a period of 30 days from the date on which the hearing of the case was concluded, but, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances of the case, the court shall fix a future day for the pronouncement of the judgment and such day shall not ordinarily be a day beyond 60 days from the date on which the hearing of the case was concluded. Return to Text
11. Rule 32 and Rule 92 of Order XXI have been amended to set at rest the interpretations given by different High Courts. Return to Text
12. The P.C. Jain Commission on Review of Administrative Laws recommended in 1998 repeal of a total of 166 Central Acts. The recommendations were examined thoroughly and it has been decided not to repeal 69 Acts mentioned therein and out of the remaining 97 Acts 50 have been repealed, against 26 decision to repeal has been taken, 11 Acts are under examination and the remaining 10 Acts pertain to State List. Return to Text
13. The Repealing and Amending Act, 2001 has come into force w.e.f. 03.09. 2001. Return to Text
14. 14 Section 30 and 67 Return to Text
15. Vide sub-section (1-A) in section 17 of the Registration Act, 1908 Return to Text
16. 3 Vide Section 53-A. Besides, consequential amendments in Section 56 of the said Act, Section 53-A of the Transfer of Property Act, 1882 and Schedule I to the Stamp Act, 1899. Return to Text
17. A new Section 16-A has been inserted. Return to Text
18. In its 27th, 54th, 55th and 129th Reports Return to Text
19. The Malimath Committee Return to Text
20. Sections 36 and 41 Return to Text
21. Sections 39 and 49 Return to Text
22. Sections 36 and 38 Return to Text
23. Sections 24 and 26 Return to Text
24. The Indian Divorce (Amendment) Act, 2001 has been brought into force with effect from 3rd October, 2001. Return to Text
25. By amending Section 10 Return to Text
26. Vide Section 11, 13, 14, 15, 16, 18, 19, 22, 23, 27 & 32 Return to Text
27. Vide Section 17 amended. Return to Text
28. For appointment of officer to exercise of King's Power. Return to Text
29. Section 10 omitted to simplify the procedure and obviate delay and consequent hardships to the enstranged couples. Return to Text
30. By amending Section 34 and consequential amendments made in Sections 35, 36, 37, 40, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52 & 55. Return to Text
31. Section 57 Return to Text
32. On the lines of Section 13-B of the Hindu Marriage Act, 1955 and Section 28 of me Special Marriage Act, 1954. Return to Text
33. Section 34 Return to Text
34. Section 35 Return to Text
35. Proviso to Section 36 Return to Text
36. Proviso to Section 36 Return to Text
37. Section 37 Return to Text
38. Vide Section 32 Return to Text
39. The Women's Commission and some non-governmental organizations had pointed out that that provision of the Act excluding a Christian widow from her distributive share on the basis of the contract was discriminatory and they had suggested that she should be entitled to succeed to her distributive share notwithstanding any contract to the contrary. Return to Text
40. The Law Commission of India, Kerala Women's Commission, Members of Parliament belonging to Christian Community and various other individuals or organizations have pointed out and represented to the Government that this provision is discriminatory and should not apply to Christians alone. Return to Text
41. (a) Deleting Explanation to Section 32; and (b) Section 213 inapplicable to Indian Christians. Return to Text
42. It was felt that an applicant, after filing application in a court under Section 125 of the Code of Criminal Procedure, 1973, has to wait for several years for getting relief from the Court. It was, therefore, felt that express provisions should be made in the said Code for interim maintenance allowance to the aggrieved person under Section 125 of the Code. Return to Text
43. The ceiling of Rs 500 was made in the year 1955 under Section 488 of the Code of Criminal Procedure, 1908 and the same was retained in Section 125 of Code of Criminal Procedure, 1973. Return to Text
44. If a ceiling was prescribed and retained it would require periodic review taking into account the inflation and rise in the cost of living as well as amendment of the provisions of the Act from time to time. This would unnecessarily be time consuming. Return to Text
45. As per the provisos to Articles 82 and 170(3) of the Constitution before their amendment by the Constitution (Eighty-fourth Amendment) Act, 2001, no fresh re-adjustment of Constituencies could be undertaken until the figures of the first census taken after the year 2000 became available. These provisos were added by the Constitution (Forty-second Amendment) Act, 1976 as a measure to boost family planning norms. Return to Text
46. the Constitution (Eighty-fourth Amendment) Act, 2001. Return to Text
47. In an all-party meeting convened on 13.9. 2001 there was no consensus on this issue. Return to Text
48. Vide Section 3 of the Representation of the People Act, 1951. Return to Text
49. The issue has again given rise to concerns in the wake of allegations on money power made in the media in respect to biennial elections to the Council of States held in March-April 2000. Return to Text
50. The Bill has been referred to the Department-Related Parliamentary Standing Committee on Home Affairs for examination and report. Return to Text
51. Certain States enacted their own legislations on the subject. With the enactment of the aforementioned Act, the appropriate Government of the Union Territories and those States which do not have their own enactment are enabled to constitute the Advocates' Welfare Fund. Return to Text
52. The other sources of "the Fund" include contribution made by a State Bar Council, any voluntary donation or contribution by the BCI, Advocates' Associations or other associations or persons or any grant made by the appropriate Government. Return to Text
53. The system of Lok Adalats as one of the alternative dispute resolution system has proved to be an effective mechanism for resolution of disputes in a spirit of conciliation outside the court. The success of the mechanism can be seen from the fact that till 30-11- 2001, 1,19,615 Lok Adalats have been organized in the country in which about 1,34,50,319 cases have been amicably settled. Return to Text
54. At present, there are about two lakh under-trials in jails on whose maintenance State Governments are spending about Rs 401 crore per annum. About 18% of the under-trials are in jails for more than one year. Such cases are likely to be disposed of by the Fast Track Courts soon. Return to Text
55. Vide Brijmohan Lal v. Union of India Return to Text
56. Under the Scheme, the physical assets relating to construction of High Court buildings undertaken were 71 works, out of which 63 works have been completed and 8 are ongoing. Similarly, 1242 works relating to District/Subordinate Court buildings were undertaken, out of which 625 court buildings have been completed and 617 court buildings are still ongoing. In respect of residential quarters, 257 works relating to residences for High Court Judges were undertaken, out of them 107 residential quarters have been completed and 150 works are still ongoing. Similarly, 2779 works relating to residences for Judicial Officers were undertaken. Out of which 1531 residential quarters have been completed and 1248 residential quarters are still ongoing. Return to Text