insolvency proceedings

What Will Happen to Your Home? Supertech’s Insolvency Proceedings

By Banking No Comments

Supertech Insolvency Proceedings Against Debtor

More than 10,000 home buyers have not yet received possession of their hard-earned flats by the Supertech group. This is all you need to know about the whole case. The Supertech Group is a reputed real estate development firm.

Insolvency Proceedings: One of the financial creditors of Suprectech Ltd., Union Bank, filed a petition before the National Company Law Tribunal under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate an insolvency resolution proceeding against Supertech. Section 7 gives the power to a financial creditor to initiate insolvency proceedings against the debtor.

In 2013, an alleged loan amount of around 430 crore rupees was taken for the construction of a project, namely Eco Village II in Greater Noida, Uttar Pradesh.

NCLT Decision on The Insolvency Proceedings

NCLT, after examining all the documents submitted by the debtor and financial creditor, came to the conclusion that there was a debt and Supertech Ltd had defaulted. The Court has agreed to initiate the Corporate Insolvency Resolution Proceedings (CIRP) against Supertech Ltd. and appointed Mr. Hitesh Goel as Interim Resolution Professional.

CIRP is a proceeding or a mechanism through which creditors can recover their money. After the proceedings are initiated against the company, it would be examined whether the defaulter would be able to repay the loan or not. If the debtor is unable to repay the loan, then the creditor can file an application to NCLT for liquidation or restructuring of the company.

What Happens When a Company is Declared Insolvent?

When a company is declared insolvent by the court, a moratorium is placed on all the pending civil, consumer, or other cases till a resolution is achieved. In the present case, Supertech is also barred from disposing of its assets in any form.

Usually, after such proceedings, there are chances that the assets of the company are auctioned and a new owner altogether takes over the whole project. So there will definitely be a delay in the construction of the remaining houses and all the other formalities will need some time to be fulfilled. But this would be really painful and frustrating for the buyers who have spent more than 10 years on the projects.

But in the present case, Supertech knocked on the doors of NCLAT and took the matter into their own hands.

Current Status of The Case:

Supertech Ltd. filed an appeal with NCLAT against the order of NCLT. The company contended that reverse CIRP should be allowed in the present case. Now, reverse CIRP is a very new concept and originated in the matter of Umang Realtech. This is a process exclusively for real estate companies that are on the verge of completing their projects but could not do so due to lack of funds and CIRP proceedings.

In this process, a promoter agrees to stay outside the CIRP process but wants to act as a lender by injecting funds or cash flow. To put it simply, another company provides additional funds for the completion of the projects undertaken by a real estate defaulter.

This innovative process helps the homebuyers get early possession of their houses. But it is pertinent to note that the courts have limited this process to just a single project in order to drive the major focus toward that project. This is done to ensure that the asset value maximization remains project-specific. As a result, the company’s assets are not maximized. The project’s assets should be maximized in order to balance the project’s creditors, including allottees, financial institutions, and operational creditors.

In the present case, NCLAT gave the green light to the Reverse CIRP for the project Eco Village II and for all the other projects for which IRP is responsible. The NCLAT ruled that no funds from any account could be withdrawn from the corporate debtor’s other projects without the permission of the IRP.IRP is directed to constitute the COC for just one project, i.e., Project Eco Village II, and claims received in the name of the project must be separated from other projects.

The Reverse CIRP definitely gives an edge to the unsecured financial creditors, i.e., the home buyers, because the financial creditors will not be provided with the assets of the company. The home buyers would be handed possession of the completed project, and the financial creditors could not claim those flats and land.

The process looks quite promising from the theoretical point of view, but it is still under examination. Now the question arises, what if a home buyer does not want possession of the flat but wants their money back? This would be a problem because the reverse insolvency process only allows the completion of a project and provides the possession of flats. The only thing a home buyer can do after receiving their allotment is a request that the in-charge find a suitable buyer for their flats and refund their money.

Analysis

The home buyers are currently worried about their hard-earned money, which they invested in the project. But one should have faith in the process of the law. The NCLAT has established an insolvency process that would help unsecured financial creditors. Unlike the usual insolvency proceedings, real estate insolvency proceedings can now be different, which would help the home buyers over financial creditors (banks).

All a home buyer could do now is wait and trust the legal system.

upi credit cards

Linking of UPI Credit Cards

By Banking No Comments

UPI Credit Cards

UPI is a single platform that brings together a variety of banking services and features into one place. The National Payments Corporation of India (NPCI), in collaboration with the Reserve Bank of India and the Indian Banks Association (IBA), has launched the Unified Payments Interface (UPI).

With the introduction of the Unified Payment Interface (UPI), India has made a significant step toward becoming a cashless economy. You may now use your smartphone as a virtual debit card thanks to a new payment methodology. It has also made instant money sending and receiving possible. The QR code concept has completely eliminated the use of digital wallets.

How Does UPI Work?

Transactions using UPI employ a highly secure encryption format that is difficult to mess with. Every day, the IMPS network of the National Payments Corporation of India (NPCI) processes Rs.8,000 crore in transactions. With the advent of UPI technology, this is projected to skyrocket. Every transaction is verified using a two-factor authentication approach similar to OTP. For validation, however, UPI PIN will be used instead of OTP.

Why is UPI in News Again?

The Reserve Bank of India (RBI) suggested that credit cards be linked to UPI networks on June 8. For the time being, Governor Shaktikanta Das said that the operation will begin with RuPay credit cards. As of now UPI only allows users to make purchases by connecting their debit cards to their savings or checking accounts.

According to RBI Governor Shaktikanta Das, 594.63 crore transactions worth 10.40 lakh crore were overseen using UPI in May 2022 alone. The inability to use credit cards for any purchase has been a key downside of UPI transactions thus far. Until now, clients’ debit cards were only able to be used for transactions if they were linked to their savings or current accounts.

This is a significant step since purchasers will now be able to use UPI transactions to pay using their credit cards. While transactions will initially be limited to RuPay credit cards, other major credit card issuers such as Visa and Mastercard are likely to join in the future.

“This arrangement is expected to provide more avenues and convenience to the customers in making payments through the UPI platform. This facility would be available after the required system development is complete,” the RBI said on June 8.

UPI accounted for more than 60% of all non-cash transactions in FY22, according to a joint study by PhonePe and the Boston Consulting Group. PoS transactions, on the other hand, only made about 5% of all transactions. As a result, it is evident that, if properly implemented, this effort has the potential to greatly improve credit card acceptance and adoption.

Benefits of linking UPI and Credit Cards:

At first, UPI payments could only be processed through bank accounts. Later, UPI applications started allowing users to add debit cards to their accounts and make payments. The ease of usage of UPI makes it popular. Experts believe that the linkage of UPI and credit cards will also be extremely beneficial for small merchants.

Users may now link their credit cards to UPI, enabling further adoption of fast and easy payments for even minor transactions without the necessity of a PoS (Point of Sale), as previously Credit Cards needed PoS machines for payment services that were to be bought by merchants at high prices. Only a few applications and banks have been allowed to use credit limits for UPI transactions. With the most recent statement, the RBI has made the UPI credit facility available to all participants.

Because the feature is being rolled out to RuPay, India’s local payment method, it would be interesting to observe if this offers RuPay a competitive advantage over global competitors like Visa and Mastercard and if this increases RuPay’s market share. Also, while paying with a credit card has advantages such as reward points on your spending and a credit-free period of up to 45 days, it may also draw up to 48 percent annual interest on the outstanding amount if not managed properly.

Challenges:

While this is an intriguing start, there are still a few unsolved questions. Let us see what they are.
Because UPI payments are free, merchants prefer to accept them. However, it is unclear how credit card companies can recoup their capital costs and how the current infrastructure would allow this if credit cards were accepted through UPI Payments. At a press briefing, when asked about pricing, RBI deputy governor T Rabi Sankar said, “How the pricing will work out, that we will have to see as we go forward.”

Credit card transaction revenues (mostly from MDR) account for 30% of overall bank revenue. If banks do not see this as a win-win situation, they cannot be blamed. This might put a part of bank profits at risk in the long term unless the RBI is ready to foot the tab through the Payment Infrastructure Development Fund, just as it is for UPI-dependent merchants.

That’s not all, though. Banks may become subject to revolving credit risk if the number of credit card users increases dramatically because of low-ticket transactions.

Credit cards, furthermore, are a sort of soft loan or short-term debt that must be responsibly managed. Credit rotation and extra debt reinvestment in investing, trading, and other activities are possibilities.
It has the potential to significantly raise UPI volumes and average order amounts, which are far greater in the case of credit cards than UPI, but the simplicity of payments may lead to consumer overspending and a debt trap for many individuals.

A four- or six-digit PIN is required for all UPI transactions, whereas credit cards require a PIN for offline purchases and an OTP for online purchases. Payment authentication is unknown, which might lead to an increase in fraud cases if the necessary infrastructure and standards are not in place.

Conclusion:

Through this suggestion, The RBI’s goal is to increase the digital payments and keep also to clients from falling prey to some of these players’ shady business methods from other third-party applications. It should be emphasized, however, that both UPI and RuPay are now NPCI products, and the RBI is only piloting this initiative with RuPay cards, which account for less than 5% of all credit cards in use. If the pilot is successful, the RBI will need to consider MDR costs and the risk credit risks before moving forward with a full-scale roll-out to other care providers.

ecommerce industry

Compliance and Control in The Ecommerce Industry: Sufficient or Crippling?

By Economy No Comments

Compliance and Control in The Ecommerce Industry

The eCommerce industry in India is a burgeoning business that is taking the Indian e-commerce market by storm. With increasing integration and usage in the economy, the government is trying to concoct compliance schemes that will help regulate the sector. The proposed amendments to the Consumer Protection Act reveal the government’s penchant and willingness to intensify its scrutiny and intervention in India’s burgeoning e-commerce business which might give fair competition to its global peers.

With the introduction of new changes in the e-commerce act, it can be scrutinized that the industry might be waltzing towards greater compliance which in hindsight appears to protect the interests of a powerful domestic retailer lobby rather than the interests of consumers, an agenda that is being vehemently supported by the government.

Though, one should make no mistake, that regulation in the eCommerce industry is long overdue. This is due to the fact that there have been various instances and episodes of sharing of consumers’ data without consent which has emphatically rendered them the quality of being a product that is being used by the multinational companies for its benefits.

Thus, increasing compliance in the industry has been a burgeoning need in recent times. The time for better alternatives for consumers needs to be provided by the government, which extensively has been exploited by the money-mongering capitalists.

The recent advisory’s requirement effectively requires eCommerce platforms to emphatically register themselves with the Department of Industry and Internal Trade. This needs to be additionally carried out with the appointment of a chief compliance officer as a nodal point for effective and positive law enforcement. This law enforcement will be enforced by the agencies and will be a useful way for the government to track the clandestine activities of the platforms.

However, suspicions have been brewing in the industry that such a compliance order will hinder the working of the platforms that already find it difficult to comply with the crippling laws. With the need for compliance through nodal officers, delays in decision-making will be seen. This will be complemented by delayed decision making and in business given the companies are still recuperating from the covid-induced slowdown and supply chain shocks.

E-commerce, as is no news, is an online-based business model. This sector or niche has been set up to effectively provide the consumers with an online market service through an online portal used by people for several functions like selling and buying products. Many might argue that it is quite a newer concept for transforming India, especially the Rural area, which is still tasting the fruit of the success of such businesses.

India’s compliance policy in a relatively newer domain raises the question about its archaic structure which might not be quite suitable for the newly invented venture. With relatively new businesses cropping up in e-commerce, it is quite odious to comply with the policies that hinder the businesses which are in their nascent stage of growth.

India, for years now, has been bearing the brunt of a low position on the freedom of business index. Such policies exacerbate the already battered business circumstances in the country.

The problem is particularly arduous and debilitating for the e-commerce sector as the legal compliances make it particularly arduous for the effective functioning of the supply chain ecosystem. However, not every law under the Indian legal system can be characterized as illegitimate or crippling. One such act is the Legal Metrology Act which is also defined as the “E-commerce entity”.

According to the aforementioned act, the entity is entitled to comply with and meet certain specific standards relating to packaging and labeling that have been set by the Legal Metrology Act of 2009. According to many deflectors, the act proves to be particularly cumbersome as it provides a hindrance at the very first step of the sale of a product.

According to the Legal Metrology (Packaged Commodity) Rules of 2011, it has been stated that an entity is needed to display mandatory information about the goods on the network. Though many might argue that this proves a specific hindrance in the ecosystem, it cannot be denied that an act of such a character is required as the right to information is a considerable, legitimate right of a consumer. Here, such an act cannot be confirmed as a hindrance as it effectively provides a customer a legitimate right to delve deeper into what he or she is consuming.

Thus, in totality, it cannot be denied that the e-commerce industry’s rapid growth reflects the public’s growing acceptance of it, but it also cannot be denied that it has also been brought to the fore that there are certain concerns that the country’s legal system has been dealing with for quite some time now. Here, particularly cumbersome is the fact that the laws pertaining to e-commerce are quite uncondensed of statutes.

This can be argued on the fact that there is no specific codified law for the functioning of the e-commerce sector. Thus, this will lead the companies to particularly look at such a perspective of the particular situation for which the laws are to be considered. To succeed in such an uncodified legal system in the sector, many multinationals and e-commerce enterprises will have to have a thorough awareness of the legal regime.

This will also include potential challenges that an e-commerce business will face due to sheer negligence and crippling laws prevailing at the moment. Further, it might not be farther than the truth to argue that the regulation of the e-commerce sector is quite emphatically dynamic in nature.

This effectively means that laws are quite scattered in nature. Thus, given such variability in the legal system, it becomes of utmost importance that entrepreneurs that are willing to venture into the e-commerce business must be quite mindful of the legal and regulatory compliances. Thus, such a structure does not very well fit with the theme of making business in India accessible for entrepreneurs. On the contrary, India’s crippling laws need a replacement, the sooner it comes the better.

Cryptocurrency is money

Crypto Currency is Money For the Information Age

By cryptocurrency No Comments

What is Crypto Currency?

Crypto currency is a type of digital currency which uses secure communication called cryptography and verifies the transactions by a decentralized system. Crypto currencies are digital assets that don’t have any regulating authority. However, the decentralized system records all crypto money transactions and issues new units.

Crypto Currency and The Information Age

Due to the old trickery of events, individuals are usually seen accepting the old tricks and concepts as simply “the way things are.” However, the same individuals, in the changing world order, use their prerequisite knowledge to reach certain explanations of the theories that are new and interesting to delve into.

Take the financial sector and crypto currencies for example. Rarely is an individual seen questioning the genesis of money and the banking system? However, in contrast to such arcane behavior, we now witness a radical shift toward questioning the cryptocurrency legitimacy or digital currency. With the dissemination of data that has readily become decentralized, the internet has been seen as ushering in a revolution, which can be seen as radically democratizing information. 

If crypto currencies were invented in the previous decade, chances are that people might have abstained from its use and might have loathed the newer entry into the market. But with the rise of the information age and the increasing need for autonomy, digital currencies have been deciphered as a friend rather than a foe. What entices the audience about crypto money is the fact that Crypto can automatically and instantaneously share your data’s value with you, unlike the arcane financial system that didn’t recognize an individual as a partner but as a product.

The genesis crypto currency

With the rise of the information age, we witness that the financial system remains stubbornly stuck in an industrial age. Such an industrialized notion of functioning is based on the fact that the financial systems presume that the needs of oil-based manufacturing are paramount. However, this no longer stands true. Experts and academia have testified to the fact that the World’s Most Valuable Resource is empathically and effectively no longer Oil, but rather it is Data. 

Even though we discredit the industrialized age, we cannot help but deny the fact that the information age to has been disastrous in itself. With the power of data, the information age has led the existing economic system to hoard and extract vast amounts of wealth for a few in one place. A very glaring example of the same is Silicon Valley.

It is to be noted here that information is finding its way wherever the value is being generated by that information. Thus, information finds its way to all the social networks which make huge amounts of money.

How the crypto currency seeps in?

It is not news that individuals or the public realize the importance of the decentralized world. Thus, it is quite a collory to state that the same individuals will also value crypto currency highly. But why is it so? It is to be noted that crypto currency has immense potential to offer a set of Information Age economic tools that can efficiently and effectively increase the efficiency of how money travels around various sectors.

On top of the dismantling of information, it also takes into consideration how value is distributed amongst these sectors. With the invention of UPI, payments have suddenly been made instantaneously. With the help of technological advancement, stimulus payments, welfare checks, etc. can be all distributed and collected instantaneously. Crypto currency through its decentralized state can help transactions and capital to flow between parties without the meddling of all the costly intermediaries which persistently and arduously slow the financial system down.

Much of this advantage is being reaped by a number of crypto billionaires and as the billionaires climb, so will the number of nonprofits which will start accepting these decentralized, contentious digital assets. This will highly bring about integration in the technology and the crypto sectors.

On top of the decentralized financial sector, the crypto currency also offers a more fair and efficient distribution of wealth itself which was a major problem in the industrialized world. This can be explained by the mechanism that as enormous new amounts of wealth and value are being generated by this information economy, information age economic tools emphatically a rightly have the power and immense ability to distribute that wealth and value amongst the masses as quickly.

In a contrast to the game where Facebook takes all of your data and sells it making humungous profits for itself, crypto can automatically share your data’s value with you. This is due to the fact that crypto offers you the power to become a partner and not a product. This crypto currency can rightfully be stated as the currency of the information age.

With much-needed integration, wealth would effectively flow just as information does. It won’t be concentrated at a singular point where it’s hoarded by a small class of billionaires but would rather be seen flowing in every way. This might be a long short to state but with the flowing of information and crypto currency around the globe, it can also create the opportunity to eliminate poverty worldwide.

This model of universal income can be realized by imagining every person as an endless and regenerative source of value. With all the information that is needed which effectively at the moment makes a few people extraordinarily wealthy, can now provide the same luxury to all around the globe.

Thus, decentralized crypto currency has much potential to eliminate global poverty but it needs to be accepted worldwide, unlike some nations that have an antagonistic and aversive stance against it. With a dream of an egalitarian world, perhaps the policymakers will be able to use the information technology more sagaciously. The threat is not of disapproval, but rather that of negligence and underutilization of the potential that has the power to alter the world wealth scenario.

Nationalization of banks in comparison to Covid effects

Nationalization of Banks in Comparison to Covid Effects on the Indian Economy

By Banking No Comments

Nationalization of Banks in Comparison to Covid Effects

If there are two things that have grabbed the political attention of the masses in India, it has to be the odious covid-19 pandemic that ravaged the already battered economy and the nationalization of the public assets. Public assets, time and again have been a touchy subject for the masses of India.

This is especially is true given the widespread notion or belief that government assets are invariably and emphatically public assets. The government assets have been the talk of the town for two specific reasons.

First is the selling off of the public’s property and heavy corporatization of the banking sector and secondly, the government’s close relations with the Ambani-Adani. With outrage pouring in from the masses the idea has become a contentious issue of debate.

nationalization
Government’s inspiration

  1. But what exactly inspired the government’s decision for disinvestment in the economy? The answer to the question lies in the arrival of the pandemic which severely affected and crippled the finances of the government.
  2. With the need for robust public finance and expenditure in the economy, lower expenditure and finances spelled trouble for the battered economy. Thus, in order to finance the needs of the economy, the government innovatively thought of disinvestment of the public assets on which it could cash on.
  3. But is disinvestment such a bad though Afterall? It is to be noted that privatization might actually ramp up the efficiency of the asset which had been reductant under the government’s rule. With higher NPAs in the public banking sector, the introduction of healthy competition can lead to the revamping of the banking sector. What more pertinent reason for such a disinvestment spree can be?
  4. covid
  5. Given, the circumstances of the pandemic which the banking sector weathered, NPAs were reported to surge. Mortarium on payments and easy lending had put immense pressure on the banking sector.
  6. Though many banks did reduce their NPA ratio, that was merely due to the act of writing off of the loans from the financial books. As a matter of fact, RBI’s Financial Stability Report of 2020 effectively and emphatically foresaw a huge surge in the Gross NPA ratio of the banking sector.
  7. This was projected to be at a significant 13.5 percent for the month of September for the financial year 2021. The NPAs were projected to heavily surge from 7.5 percent in September 2020.
  8. What made the Indian banking industry suffer the wrath of the covid more than the other countries was due to India’s despicable legacy of bad debt even before the COVID-19.
  9. nationalization
  10. Thus, one can strongly argue that as the odious variants of the virus despicably assailed the country which had pervasive and floundering health sector, the already battered pre-pandemic financial infrastructure, cracked and worsened
  11. The aforementioned situation is even more exacerbated for the public sector, which is inefficient even under normal circumstances.
  12. Thus, the government’s solemn decision to privatize certain banks and cash on them has some merit to it. With increased efficiency and losses, one can effectively expect the better performance of the sector in the economy which is in the nascent stage of recovery.
  13. However, taking an ill view of the banking sector too can be a biased opinion. With strict, increased monitoring, the immense increase in market capitalization in the stock market, and the introduction of stimulus packages, there is hope that green shoots for the sector and the economy are a possibility.
  14. This can be effectively corroborated by the fact that throughout 2020-21, SCBs’ RoE and RoA sustained a positive rise of an impressive 6% in March 2021 on their CRAR.
  15. nationalization
  16. In fact, the GNPA and NNPA ratios too displayed signs of stability over a period of time, which spells good for the economy. As aforementioned, last year, the moratorium on compound interest, which was sanctioned by the RBI, had a despicable effect on the bank’s finances.
  17. But it is to be noted that contrary to the earlier inferences, banks are now much better equipped to manage profitability.
  18. Their resilience in terms of higher recoveries and as higher capital buffers too has been improved. Thus, one can maintain that the moratorium and the pandemic did have a silver lining for the banking sector.
  19. Thus, in totality, disinvestment, which has been a petulant topic for the public, can be a step in the right direction for the industry. Given the immense importance of the banking sector in the economy, which drives the demand and the investment, its timely resolution is the need of the hour.
  20. If this required extreme means, one should brace themselves for the inevitable. Thus, one should not be much abrasive or unappreciative of the scheme the government is concocting for the banking sector. As for the future, one can only be patient to witness what the scheme will offer for the industry and how will impact the economy in the long run.
the unilateral appointment of arbitrator

Can an Arbitrator Be Appointed Unilaterally by One Party if Permitted in Contract?

By arbitrator No Comments

Understanding The Unilateral Appointment of Arbitrator

The whispers, arbitrariness, and confusion surrounding the topic of unilaterally appointing an arbitrator have been put to rest by the Delhi high court. The Court has emphatically and effectively stated that no party is allowed or could specifically be permitted to unilaterally appoint an Arbitrator. The aforementioned judgment is based on the rationale that such an attempt to appoint an arbitrator will significantly defeat the purpose of unbiased adjudication in the state of a dispute between the parties.

unilateral appointment of arbitrator in India

Though it is to be noted here that there was quite a huge accommodating stance by the disputing parties which were largely in the favor of the same, the recent court’s dismissal comes as a disheartening note for the petitioners. This can be corroborated by the fact that the crux of the petitions was emphatically and largely seeking for the appointment of Arbitrators for adjudication of disputes between the parties.

The case was being attended by the single-judge bench of Justice Suresh Kumar Kait. It was comprehensively noted here that dismissal was based on the principle of unbiased adjudication of disputes between the parties. This was enshrined in the Act and hence it can’t be compromised under any circumstances.

According to the petitioner firm, it has been conjured that a license agreement along with a supplementary agreement was entered between the respondent of shops that were under question and the petitioner. The agreement was strategically renewable every five years at the option of the specific petitioner.

unilateral appointment of arbitrator

The petition that was submitted maintained that after the change of name of the petitioner/firm from M/S Virender Kumar & Co. to M/S Sital Dass Sons, it was guaranteed an additional space. This additional space was guaranteed adjacent to shopping in the same shopping arcade.

This was effectively granted by the respondent to M/S Sital Dass Sons vide supplementary agreement. Here, it is to be noted that it also had included the terms of the original license agreement which were to be strategically and effectively read with the other agreement. Here, M/S Sital Dass Sons through its partners had informed the respondent about their preference of operating under two different names.
Given the smooth transition and agreement in the initial phases, on the ground, reality stuck hard.

According to the petitioners, it was found that in reality, the internal fittings of the aforementioned shopping arcade were disappointing as it was nearly 40 years old. What infuriated the petitioners was also the fact that there was an urgent and important need for repair and that it was no longer viable or financially profitable to continue with the shopping arcade. This was led by the respondent to vide a notice revoking the license in respect of the shops.

Here, it was contested by the petitioners that they were in exclusive possession of shops that were under consideration. The had further retreated that the notice hadn’t mentioned any violation of the conditions and terms of the license or lease agreement by petitioners.

This further brought to the fore the argument that petitioners had the right to carry on business at the hours suited to them. Thus, in its entirety, it was argued that the respondent on its will couldn’t have terminated the license or lease agreement.

The curious case of illegal eviction Additionally, it matters that had been also brought to the notice of the Court was that against illegal eviction of petitioners. They had emphatically and effectively preferred a civil suit CS(Comm)) 237/2020 before the Court for declaration and permanent injunction against the respondents. This was disposed of vide order on 21.07.2020 as not maintainable in view of the Arbitration clause between the parties.

Here, it is to be noted that the bench had stated that the arbitration agreement between the invocation of arbitration and the parties was not disputed by the respondents. Hence, in the entirety of the issue, the petitions under consideration deserved to be allowed.

However, as aforementioned that had led to the dismissal of the contention of petitioners to appoint Arbitrator of their choice. This was significantly done as no party could be permitted to unilaterally appoint an Arbitrator in the process of a dispute as this will quite unilaterally defeat the purpose of the Arbitration and Conciliation Act.

Here, it is worthy of mentioning that the Court had relied on the decision of the Supreme Court in Perkins Eastman Architects DPS v. HSCC (India) Ltd., 2019 SCC OnLine SC 1517. It was wherein it had been significantly and emphatically stated that in cases where one specific party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity.

This exclusivity will be determined or charted by the course for dispute resolution. Naturally, it was implied that the person who has any specific interest in the decision of dispute or outcome must not have the exclusive power to appoint a sole arbitrator of choice.

It is to be noted that the aforementioned decision was timely and ardently followed by the Coordinate Benches of this Court in VSK Technologies Private Ltd. v. Delhi Jal Board and the aforementioned Proddatur Cable Tv Digi Services v. Siti Cable Network Limited 2020 SCC OnLIne Del 350.

appointment of arbitrator

Hence, here the High Court had effectively appointed the sole arbitrator to adjudicate the dispute between the parties.
Adding to the above argument about the unilateral appointment of arbitrator, the court also positively envisioned that the fee of the arbitrator shall be effectively governed by the fourth schedule. The fourth schedule of the Arbitration and Conciliation Act, 1996 will help govern the fee of the arbitrator. Consequently, it was noted that the Arbitrator shall ensure compliance with Section 12 of the Arbitration and Conciliation Act, 1996. This should be effectively carried out before commencing the arbitration. This is all about the unilateral appointment of arbitrator.

wage gap

What if the wage gap means everyone earns less?

By Economy, Labour & Employment No Comments

What if the wage gap means everyone earns less?

Wage Gap Pay transparency has been a contentious issue for managers around the world. Companies, including Starbucks, whole foods, and many more have been scrutinizing the raging problems by touting their pay transparency policies as an effective means of ensuring fairness in the workplace.

wage gap

It is no news that pay transparency is a touchy topic for employees, especially when gender and race are involved. Thus, conscious steps to avoid such irregularities have gained top priority for many top-notch firms. But, as it odiously turns out in many cases, pay transparency doesn’t necessarily ensure or effectively increase workers’ wages.

Such a revelation comes as a piece of disturbing news for the employees as more than 10 European Union countries and 20 US states have enacted wage transparency laws that emphatically seek to give workers more bargaining power in the workspace.

This is ensured by making it mandatory for the firm to disclose employee salaries. Given, the law had been enacted for increasing the wage of the workers or to provide them with an instrument to bargain, it has been found out, that strategically opening your pay books for others to scrutinize and read has actually led to 2 to 3 percent less cash in workers’ pockets. This is especially true for the workers in the US private sector.

how does the wage gap work

wage gap

So one might ask what has led such discrepancies to seep into the welfare policymaking? It is to be noted that rather than empowering the workers, these laws have encouraged companies to set lower salaries for their workers in order to preserve their profits and to highly prevent any expensive renegotiations that might come through.

In earlier times, proximity between workers did the work that wage efficiency laws are trying to achieve at the moment. It is to be noted that the workers with comparable similar jobs in the same locations effectively earned around similar amounts.

In contrast, the pay for the same work was different given the varied geographical locations of the work. Thus, given the proximity between the workers, it helped them immensely to talk to one another about their wages. This, unlike today, helped the workers to re-negotiate and thus create opportunities for themselves to increase their odds of earning more.

One might argue, that such a strategy was much more effective than the wage transparency laws to re-negotiate one’s offer for his or her services.

This is due to a pertinent and a threatening fact that though the legal landscape has shifted positively towards the welfare of the workers in recent years through the inculcation of transparency, on the other hand, laws, and policies that had always protected the workers’ ability to discuss their compensation with their colleagues without fear of repercussions have also gained popularity in recent years.

But this still doesn’t concretely or statistically prove that workers in their workspace earn less due to transparency wars. Such a riddle can be resolved by studying how the labor market adjusts itself depending on pay transparency. This can be done by thoroughly analyzing and scrutinizing shifts in wages after transparency laws took effect.

According to the American Community Survey, which analyzed 4 million people living in the states with new transparency laws that were enacted between 2000 and 2016, found that a year after the transparency laws were passed, wages had effectively dropped by 2.2 percent.

What is more interesting is the fact that after three years of enactment of laws the wages had declined by 2.6 percent. Thus, one can state that the wages, after the enactment of the law, have shown a downward trend that indirectly or directly affected the wages and the bargaining power of the employees in the market.

The ultimate reason that such laws push wages lower is the fact that managers who are required to disclose salaries can credibly state unsettling facts about low-profit margins and unwillingness to give a raised pay to everyone if the concerned person is given the same. This effectively and strategically allows the profit-mongering employers to set overall salaries much lower.

what is the gender pay gap

This usually leads to lower bargain power of the employees which in turn leads to lower pay for all in a certain workspace. This allows employers to set overall salaries lower and hold firm on initial offers when employees are hired—which tends to give companies an advantage in salary negotiations.

It is also worthy of noting here that salaries are not always, monotonously handled in the same way at all companies. This is especially true when the company might not hold the law true for large superstar employees who bring exceptional talent to the table.

Thus, one might actually not have as much bargaining power as he or she might think so. This is also due to the fact that the law is not absolute in nature that guarantees the right to re-negotiate your worth.

Thus, in totality, one can argue that though the law is helping gain pay equity in the workspace, the same is being achieved at the expense of workers’ purchasing power and adequate pay. Thus, can we still appreciate the wage transparency laws in place? Hard to say when your pockets are comparatively less filled now.

universal basic income

Universal Basic Income – UBI’s Time Has Come

By UBI One Comment

Universal basic income: UBI’s time has come

Many might vehemently argue that universal basic income should be a reality throughout. Though such a basic income model is much operated and hyped in the socialistic culture, the capitalistic economy seems to deny such rights to its citizens quite vehemently.

Though one can state that the combined advantages of anarchism and socialism can make the world of universal basic income come true, such a theory is yet to be tested to confirm its validity.

universal basic income
The topic of universal basic income has garnered much attention in recent times due to the pandemic. This was due to the fact that major societal and income inequality have to the fore which has made the society reconsider the aspect.

Secondly, the automation and the rising concern that technology can potentially widen such inequalities or not has also led many to reconsider the debatable topic of income inequality.

But why is there a high need for such debate during the odious pandemic? it is to be noted that, inequality used to persist even before the arrival of the pandemic. but given that economic woes were worsened during the same, inequality is now at an all-time high.

universal basic income india

This leads to a pertinent conclusion that fiscal policy mitigating the same should be concocted as inequality has a high potential of becoming a serious social evil. Secondly, the need for the same also is at an all-time high because it seems abundantly clear that the economic growth is quite likely to be sustainably lower than over the past 50 years.

It is no news that economics is interlinked with the real world in a real sense. Here the economic growth is determined by the population growth and the productivity growth of labor. The latest consensus shows that the population growth has been slowing in emerging economies like China and India.

This implies the fact that now the emerging economies too are joining the west in a declining fertility ratio. This can be corroborated by the fact that there is a piece of considerable anecdotal evidence that empathically shows that many young couples are now increasingly choosing to have one child while many others are simply choosing not to. Thus, it can be argued that the economic growth in the future will be much lower than what it was in the previous years unless productivity growth is rapid.

universal basic income pros and cons
AI technology: a way of efficient work in future

  1. Though population graphics might show a grim picture which might hinder economic growth and hence the universal basic income, it is to be noted that penetration of several technologies will effectively help generate step increases in productivity.

2. AI integration is possible through deeper penetration of smartphones into much lower-income populations which can help provide impetus to the efficiency of the labor. On the other hand, corporates too can take full advantage of AI as blockchain technology is efficiently making transactions more efficient.

3. The AI penetration is being complemented with productivity-enhancing technologies that in their recent discovery and usage are acting as a booster of productivity in the current scenario. These technologies include rampant usage of the internet, personal computers, and mobile phones, which are become the norm of the day.

4. But is internet penetration really contributing to rising efficiency and productivity in the market? The answer to the question is affirmative, as on average, the population is already three times more productive than each individual was back in 1961.

5. Though productivity might have been enhanced by the incessant usage of technology and automation, it is to be noted that efficiency usually tapers off quite frequently over a period of time.

6. A major hindrance in such productivity has been the pandemic. the pandemic can be emphatically blamed for the economic slump and the falling productivity that will hinder the acceptance of the universal basic income model.

7. Talking about the current scenario, with falling productivity and falling population rate, falling economic growth is inevitable. Thus, if the growth is going to be sub-2.63% about half the time, as compared to almost 30% of the time in the past, recessions will be much more frequent in the future compared to the last 50 years.

8. It is no news, that during recessions, growth not only slows down but people also lose their jobs, companies fail, and inequality sets in. Thus, public policy needs to address the odious situation Clearly, public policy needs to recognize this and plan for the implementation of UBI, which garners more importance due to such recessionary discrepancies of the future.

9. Thus, if the recessions and slowing economies have to set in, the government should work towards ensuring the future of the citizens with a universal basic income plan to keep them afloat.

10. Though, it should be agreed that implementing such a strategy will require both sensible planning of existing benefits and much higher taxes to emphatically and strategically ensure that sustainable government surpluses exist. But is the government ready to tax the rich and bring about a change in the corporate world?

11. Here, it is also to be noted that raising corporate taxes or taxes on the rich too can contribute to the recessionary forces. Therefore, whatever might be the way, the government will have to risk something or the other.

12. What comes in handy is the fact which methods’ benefits outweigh their costs. While one might argue that there are many models to raise taxes, the best way to do perhaps is the one that does not harm growth.

13. Thus, will the government prove itself efficient enough to make the UBI a reality? It is something the government in collaboration with the central bank will have to figure out.

pca framework

Tightening the screws: what the RBI’s new PCA framework means for large NBFCs

By Banking No Comments

Tightening the screws: what the RBI’s new PCA framework means for large NBFCs

RBI and PCA are on their newer pursuit of correcting the discrepancies in the Indian financial sector. Only now, RBI is after the NBFCs in the financial sector which are usually overlooked and underappreciated. The last prompt corrective action initiated by the RBI was against the cooperative banks in the financial year 2002.

In the financial year 2021, we will effectively witness India’s central bank releasing a comprehensive prompt corrective action framework for the non-banking finance companies with the aim to strategically align the regulation governing the country’s shadow lenders with that of the commercial banks.

pca framework for nbfc
It is to be noted that according to the RBI, the new framework will come into effect from October 1, 2022.
Having mentioned, that the last prompt corrective action was taken in the financial year 2002, what has led the RBI to initiate another this time around?

The prime reason for the same is the burgeoning importance of the NBFCs as a legitimate source of funds that has garnered prominence and popularity markedly in the Indian financial ecosystem.

Given the arduous nature of bank loans that consumers encounter, several shadow lenders have managed to entice people into its gambit of lending leading to faster expansion of operations in the financing world. One can also state that it has been also possible due to the lower regulatory constraints than were imposed on the NBFCs, which made lending a profitable and easy business.

Another reason for a successful model of NBC’s lending is also the fact that NBFCs also take on riskier loans compared to Commercial banks which make them tantalizing enough for the borrowers. Thus, one can strongly state that banks adverse nature towards risky borrowers has led to its slow burial as a lender in the financing world.

Additionally, it is to be noted that it is emphatically and strategically no lowhat is pca frameworknger uncommon for NBFCs to tie up with banks and effectively engage in practices of co-lending.

This model works upon the framework where two entities lend collaboratively based on pre-determined disbursement ratios. Here, it is worthy of mentioning that such ratios usually encounter NBFCs often lending the smaller proportion of a loan.

This leads to a humungous exposure of banks to high risk which consequently is much less appreciated and unwarranted for its financial health. Thus, given the aforementioned arguments, one can conjure that the NBFCs have been expanding at a warp rate in the economy.

So much so, that its collaboration on risker loans with banks is indirectly also affecting the financial health and balance sheets of the banking sector. Given, the already battered and odious condition of the banking sector, such discrepancies need to be rectified.

Though all the aforementioned warnings seem risker enough, these don’t even come close to NBFCs’ latest love affair with the digital lending platforms. Lately, according to an interesting turn of events, NBFCs have also established partnerships with digital lenders in the market.

pca in banking

This can be seen as tapping into the pool of unstable lenders in the market, which at best can be described as the genesis of financial problems in the banking and financial sector in India. Digital lending platforms are usually incapable of lending on their own, this is due to their regulatory constraints. Thus, given its regulatory and financial curtailments, such lending platforms usually enable NBFCs to effectively expand their borrower bases beyond physical channels.

Thus, given the immensely burgeoning inter-connectedness of NBFCs within the financial ecosystem in India, the central bank is duly seeking to reduce risky behaviors in the economy.

This is also the need of the hour due to the fact that India is still struggling with the handling of the pandemic, and any financial fallout will spell doom for the economy. Thus, to emphatically ensure that India’s shadow lenders’ balance sheets remain strongly resilient, we will witness the initiation of prompt corrective action against them.

Given the elaborate discussion of the inherent faulty nature of the NBFC’s; lending system what has prompted the RBI to go after the NBFCs in the middle of the pandemic? it is to be noted that lending risks in the NBFC sector were made abundantly clear in recent years.

This has been due to the collapse of Dewan Housing Finance Ltd, IL&FS, Anil Ambani controlled Reliance Capital, and Srei Group. one cannot deny the fact that the collapse of one NBFC leads to a ripple effect on the economy, thus such contagion effects need to be curtailed before they infect the wider ecosystem.

Talking about the PCA mandate, it has been put in place by the RBI “to further strengthen the supervisory tools” that are increasingly relevant to the NBFC sector. According to the RBI, the NBFC’s financial health will be monitored on three bases asset quality, capital, and leverage. Thus, certain specific thresholds have been laid by the apex bank, which if NBFC breaches, will lead to the initiation of action against it.

Based on the immediate and specific nature and severity of the breach, the RBI will suitably force the NBFC to halt their certain expansions, limit the disbursal of loans to certain risky lenders, suspend their dividend distribution or raise capital or expedite recoveries. Quite evidently, the RBI might also seek to merge two entities as a resolution, if the financial health comes across as too risky.

As far as NBFCs go compared to commercial banks, the reasons to worry are meager as the majority of mid or large NBFCs have comfortable capitalization levels. For those, that might have risker balance sheets, plenty of time has been provided to strengthen their balance sheets. Thus, when it comes to NBFCs odds of any major corrective action are way less compared to the commercial banks.

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