Companies (Amendment)Act , 2017 enacted; Out of total 93 Sections , 92 Sections brought into force along with relevant Rules MCA proposes to introduce Companies (Amendment) Bill, 2018 to replace Companies (Amendment) Ordinance 2018 in the ongoing Winter Session of Parliament Insolvency and Bankruptcy Code (Amendment) Act, 2018 & Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 notified
NFRA established to enhance investor & public confidence in financial disclosures of companies
E-governance initiatives launched for streamlining various processes In pursuance to objective of providing greater “ Ease of Doing Business” to all stakeholders, bring about greater transparency in corporate structure and better Corporate compliance so as to enhance the efficiency of the processes under Companies Act ,2013 , the Ministry of Corporate Affairs ( MCA) has taken several landmark initiatives / decisions during last one year ( January-November ,2018) .
The important ones are Companies ( Amendment ) Act ,2017 , Companies ( Amendment) Ordinance 2018 , establishment of National Financial Reporting Authority ( NFRA) , amendments in Insolvency and Bankruptcy Code , eKYC drive for Directors of all companies and speedier processing of incorporation related applications , uniformity in application of rules and eradicating discretion.
India has improved its ranking on the World Bank’s “Doing Business” 2019 report released on 31st October, 2018. As per the report, India has moved up 23 spots to 77th position as compared to 100th position in 2017 by improving its rank in six out of ten parameters relating to starting and doing business in India. Ministry of Corporate Affairs has contributed towards starting a business, insolvency resolution and protection of minority interests.
COMPANIES ACT, 2013: Till date, all sections of the Companies Act, 2013 [CA-13] except one section viz. Section 465 have been notified. Part of section 2 [clause 67(ix)] and part of section 230 [sub-section (11) and (12)] are yet to be commenced.
COMPANIES (AMENDMENT) ACT, 2017: Companies (Amendment) Bill, 2017 was assented by Honourable President of India on 3rd January, 2018 and got enacted as the Companies (Amendment) Act, 2017 [CAA-17]. The CAA-17 contains total 93 sections. Till date, out of total 93 sections of CAA-17, 92 sections have been brought into force alongwith relevant rules. Commencement of one section (section 81 - relating to Nidhis) and parts of section 23 and 80 of CAA-17 requires amendment in 3 sets of Rules and Forms notified under the Companies Act, 2013 which requires examination in the Ministry and is likely to take some more time. The Ministry proposes to notify section 81 of CAA-17 and part of section 23 of such Act along with relevant rules by 31st December 2018.
The Committee to review the existing framework dealing with offences under the Companies Act, 2013 and related matters submitted its report to the Union Minister for Finance & Corporate Affairs Shri Arun Jaitley. The Committee broke down all penal provisions into eight categories based on the nature of offences.
The Committee recommended that the existing rigour of the law should continue for serious offences, covering six categories, whereas for lapses that are essentially technical or procedural in nature, mainly falling under two categories may be shifted to in-house adjudication process. This would serve the twin purposes promoting of Ease of Doing Business and better corporate compliance.
It would also reduce the number of prosecutions filed in the Special Courts, which would, in turn, facilitate speedier disposal of serious offences and bring serious offenders to book. The cross-cutting liability under section 447, which deals with corporate fraud, would continue to apply wherever fraud is found. Most sections under review and recommendation have been notified for commencement.
Based on the recommendations of the Committee and to achieve objectives of promotion of Ease of Doing Business and better Corporate Compliance the Government decided to promulgate an Ordinance. Accordingly the Companies (Amendment) Ordinance, 2018 was promulgated on 2.11.2018.
The MCA proposes to introduce a Replacement Bill (viz. Companies (Amendment) Bill, 2018) to replace the Companies (Amendment) Ordinance 2018 in the Winter Session (2018) of Parliament.
In year 2018, the President gave assent to promulgate Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. Insolvency and Bankruptcy process has taken good shape since 2017 and is a fast evolving legislation. A major factor behind the effectiveness of the new Code has been the adjudication by the Judiciary.
The Code provides strict time limits for various procedures under it. In this process a rich- case law has evolved reducing the scope of legal uncertainty.
The Insolvency and Bankruptcy Code (Amendment) Act, 2018 notified on 19.01.2018 replaced IBC (Amendment) Ordinance which further amended provisions relating to prohibition on certain persons from submitting a resolution plan, so as to provide more clarity. Further, Second amendment was also done by the way of Ordinance in August, 2018 on the recommendations of Insolvency Law Committee.
The Ordinance was promulgated vide notification dated 06.06.2018 to amend the Code to balance the interests of various stakeholders in the Code, especially interests of home buyers and micro, small and medium enterprises, promoting resolution over liquidation of corporate debtor by lowering the voting threshold of committee of creditors and streamlining provisions relating to eligibility of resolution applicants.
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 notified on 17.08.2018 has replaced IBC (Amendment) Ordinance, 2018.
In the wake of accounting scams and frauds in the corporate sector, National Financial Reporting authority (NFRA) was notified as an independent regulator for auditing profession which is one of the key changes brought in by the Companies Act 2013.
NFRA will review the quality of corporate financial reporting in certain classes and subclasses of companies and take disciplinary action against auditors/audit firms for not discharging their statutory duties with due diligence.
The decision is expected to result in higher foreign/domestic investments, acceleration of economic growth while supporting greater globalization of business by conforming to international standards and assisting in the evolution of audit profession.
The jurisdiction of NFRA for investigation of Chartered Accountants and their firms under section 132 of the Act would extend to listed companies and large unlisted public companies, the threshold for which shall be prescribed in the rules.
The Government has constituted this Authority and has prescribed NFRA (Manner of Appointment and other Terms and Conditions of Service of Chairperson and Members) Rules, 2018 and NFRA Rules, 2018. Shri R. Sridharan and Dr. Prasenjit Mukherjee, have been appointed as Chairperson and Full time Member respectively of NFRA on 1st October, 2018.
Rules Under sub-section (2) and (4) of Section 132 of the Companies Act, 2013, the Ministry vide Notification GSR No. 1111(E) dated 13th November, 2018 notified the National Financial Reporting Authority Rules, 2018.
To provide for faster and transparent processes, the MCA took the following major initiatives towards Ease of Doing Business and standardisation:
Introduction of ”RUN – Reserve Unique Name” web service for name: Introduced a web base service name as “RUN – Reserve Unique Name” for making the “Name Reservation” process Speedy, Smooth, Simple and reducing the number of procedures with effective from 26th January 2018 for Companies and from 2nd October 2018 for LLPs (Limited Liability Partnership).
Re-engineering the process of allotment of DIN: Re-engineering the process of allotment of DIN by allotting it through the combined SPICe form only at the time of an individual’s appointment as Director (in case he/she doesn’t have a DIN).
Exemption of MCA fee for company incorporation: A Government process of Re-engineering has been implemented where zero fee for incorporation of all companies with authorized capital upto Rs10 lakh or those companies with no share capital but have upto 20 members.
Deployment of e-forms due to IFSC & exemption notifications, amendment to Companies Act, CRL-1, implementation of Condonation of Delay Scheme (CODS): 16 e-form changes were deployed on account of IFSC notification related changes, Exemption notification related changes, and Companies Act amendment along with deployment of CRL-01 (Information to the Registrar by company regarding the number of layers of subsidiaries) and CODS 2018 in the month of Feb-Mar ‘2018.
eKYC drive for directors of all companies: MCA has introduced a mandatory eform viz. DIR-3 KYC for all DIN holders who have been allotted DIN on or before 31st March 2018 and whose DIN is in approved status. This drive is aimed at verification of individual DIN holders and weed out non-existent/dummy DIN holders and ultimately to clean up the Directors’ e-Registry.
The KYC process is obtaining additional details such as AADHAAR, Passport, personal Mobile Number and personal E-mail ID. Further, for stakeholders who do not possess AADHAAR, an exception management is provided. There are around 33 Lakh DINs in the registry and around 15.88 Lakh DIN holders have filed DIR KYC as on 30th November, 2018. In this drive, MCA managed to seed 11 lakh Aadhar card holders. This is one of its kinds of drive carried out anywhere in India.
Integrated form for LLP (FiLLiP) incorporation: Introduction of a new integrated Form christened FiLLiP (Form for incorporation of Limited Liability Partnership) replacing the erstwhile Form 2 (Incorporation document and subscriber’s statement) combining therein 3 services of name reservation, allotment of Designated Partner Identification Number (DPIN/DIN) and incorporation of the LLP.
Setting up Central Registration Centre (CRC) for “name reservation” and “incorporation” for LLPs: CRC for “Name Reservation” and “Incorporation” of Companies has been successfully implemented. As operation of CRC has been stabilised, since past two years, Ministry has taken up similar GPR exercise for “Name Reservation” and “Incorporation” for LLPs (Limited Liability Partnership) and brought under the operation of CRC.
The Government Process Re-engineering (GPR) exercise is in pursuance of the ministry’s objective of providing greater “Ease of Doing Business” to all stakeholders and has resulted in speedier processing of incorporation related applications, uniformity in application of rules, and eradicating discretion.
To speed up matter related to resolution of bankruptcy and insolvency, MCA proposed setting up 8 special courts under the National Company Law Tribunal to deal with the insolvency cases.
These courts are proposed to be set up in Mumbai, Delhi, Chennai, Kolkata and Hyderabad. The proposal aims to reduce the mounting burden on the tribunal despite it having 11 benches all over India.
To facilitate timely resolution of IBC cases, it is envisaged to set up exclusive IBC Courts under the NCLT benches of Delhi, Mumbai to start with and step up infrastructure of NCLT.
The aim is also to strengthen the insolvency process for faster resolution of NPAs.
In order to bring more transparent accounting, MCA has notified Indian Accounting Standard (Ind AS) 115 which would be effective from 1st April 2018.
Ind AS 115 is a new revenue recognition standard for customer contracts in line with the International Financial Reporting Standards which will help in more transparent accounting of revenues with an impact on companies operating in diverse sectors, including technology, real estate and telecom.
Objective of Ind AS 115 is to establish the principles that should be applied when reporting useful information to users of financial statements.
The standard requires an entity to recognize revenue “to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services”
In order to bring about greater transparency in Corporate structure and in view of advantages of dematerialisation of securities, especially in terms of KYC and investor protection, the Government’s focus on “Digital India” and the enabling provisions available under section 29(1)(b) of the CA-13, the Ministry has amended the relevant rules to apply the dematerialisation requirements to unlisted public companies, in addition to listed companies.
Consultation were held in this regard with all stakeholders and rules were amended on 10th September, 2018 to mandate, w.e.f. 2nd October, 2018, issue and transfer of securities by unlisted public companies in demat form only.
The Investor Education & Protection Fund (IEPF) Authority unveiled its new logo in 2018 to provide for strong brand presence and recognition. The IEPF authority also signed a Memorandum of Understanding (MoU) with the CSC e-governance Services India, wherein the latter would identify village level entrepreneurs for investor awareness projects, among other activities. MCA is actively looking at further reforms in IEPF.
To review the existing claim settlement processes a committee of practicing company secretaries was constituted through the Institute of Company Secretaries of India (ICSI). The committee had reviewed the existing processes and have recommended that the entire process should be made online with e-verification of the claims by the companies, online PAN based verification of the claimant etc.
A new portal namely www.iepfportal.in has been developed for increasing the outreach of IAPs and monitoring the programmes conducted by the professional institutes, CSC e-governance and other partner institutions. The portal provides access to the partner institutions like ICAI, ICSI, ICoAI& IICA and CSC e-Governance for uploading the details of past & future programmes.
COMPETITION MATTERS: To enlarge the scope of debate of competition in India and to bring the best practices from around the world on competition issues, Competition Commission of India (CCI) successfully hosted the 17th International Competition Network (ICN) Annual Conference in March 2018 in New Delhi. Around 500 professional attended the conference from 70 plus countries, which included heads of competition agencies, representatives and stakeholders consisting of legal and economic professionals, international organizations and academics.
The MCA constituted an Inter-Ministerial Committee for carrying out “Competition Assessment of existing policies” under the chairmanship of Shri. Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion with representation from seven other Ministries/Organizations on dated 1st June, 2018. The prime focus of the Committee was to conduct a review of select Acts/Rules/Policies/Regulations formulated in the recent past and some upcoming acts to look into issues of anti-competition aspects and to focus on any restrictions/provisions in laws that pose great threat to competition.
Further, in pursuance of its objective to ensure that legislation is in sync with the needs of strong economic fundamentals, the Government constituted a Competition Law Review Committee under Shri Injeti Srinivas, Secretary Corporate Affairs on dated 1st October, 2018. The Committee is mandated to review the Competition Act/Rules/Regulation, to look into international best practices and sectoral interfaces etc.
Competition Commission of India (CCI) has amended the Combination Regulations. The post amendment regulations among others includes permitting withdrawal of notice and refilling the same by parties, allowing submission of voluntary modifications in response to notice, appointing agencies to supervise implementation of modification etc.
As part of competition Advocacy initiative at national and state level, CCI organised Roadshows in Mumbai, Delhi and Ahmedabad, including a National Conference on “Public procurement and Competition Law.” Similar Roadshows with focus on competition matters are being held periodically and more are planned to be held in the coming months.
Motion of thanks to President’s Address What is “Motion of Thanks” and what it contains? The President makes an address to a joint sitting of Parliament at the start of the Budget session, which is prepared by the government and lists its achievements. It is essentially a statement of the legislative and policy achievements of the government during the preceding year and gives a broad indication of the agenda for the year ahead.
The address is followed by a motion of thanks moved in each House by ruling party MPs. During the session, political parties discuss the motion of thanks also suggesting amendments.
Amendments to the “Motion of Thanks”: Notices of amendments to Motion of Thanks on the President’s Address can be tabled after the President has delivered his Address. Amendments may refer to matters contained in the Address as well as to matters, in the opinion of the member, the Address has failed to mention. Amendments can be moved to the Motion of Thanks in such form as may be considered appropriate by the Speaker.
Limitations: The only limitations are that members cannot refer to matters which are not the direct responsibility of the Central Government and that the name of the President cannot be brought in during the debate since the Government and not the President is responsible for the contents of the Address.
Provisions governing them: President’s Address and Motion of Thanks are governed by Articles 86 (1) and 87 (1) of the Constitution and Rules 16 to 24 of the Rules of Procedure and Conduct of Business in Lok Sabha.
Its passage: Members of Parliament vote on this motion of thanks. This motion must be passed in both of the houses. A failure to get motion of thanks passed amounts to defeat of government and leads to collapse of government. This is why, the Motion of Thanks is deemed to be a no-confidence motion.
Constitutional provisions on this: Article 86(1) of the Constitution provides that the President may address either House of Parliament or both Houses assembled together, and for that purpose require the attendance of members.
Article 87 provides for the special address by the President. Clause (1) of that article provides that at the commencement of the first session after each general election to the House of the People and at the commencement of the first session of each year, the President shall address both Houses of Parliament assembled together and inform Parliament of the causes of its summons. No other business is transacted till the President has addressed both Houses of Parliament assembled together.
About Small Grants Programme (SGP): Global Environment Facility GEF Small Grants Programme (SGP) provides financial and technical support to communities and Civil Society Organizations to meet the overall objective of global environmental benefits secured through community-based initiatives and actions.
It was launched in 1992 with 33 participating countries. The Program is specifically designed to mobilize bottom-up actions by empowering local civil society organizations, and poor and vulnerable communities, including women and Indigenous Peoples.
How it functions? Through a decentralized, national-level delivery mechanism, SGP finances community-led initiatives to address global environmental issues. It is currently implemented by UNDP on behalf of the GEF partnership.
The Programme funds grants up to a maximum of $50,000. In practice, the average grant has been around $25,000. In addition, the SGP provides a maximum of $150,000 for strategic projects. These larger projects allow for scaling up and cover a large number of communities within a critical landscape or seascape.
Significance: Community-driven and civil society-led initiatives can generate environmental benefits, while supporting sustainable livelihoods, gender equality and civil society empowerment. These are actions needed at the local and regional level to address global environmental challenges and complement other areas where the GEF works.
Need for SGP: Environment degradation such as the destruction of ecosystems and the species that depends upon them, increasing level of carbon dioxide and other greenhouse gases in the atmosphere, pollution of international waters, land degradation and the spread of persistent organic pollutants are life – threatening challenges that endanger us all. However, it is the poor and vulnerable communities that are most at risk as they are directly dependent on natural resources for their livelihoods and subsistence. SGP aims to support these vulnerable communities through community led approaches towards environmental conservation and livelihoods enhancement.
The event was organised under the aegis of Ministry of Petroleum &Natural Gas to encourage, motivate as well as felicitate all frontline field force for their outstanding contribution to PMUY. The occasion also saw the launch of the PMUY anthem – Ujjwala Bharat Ujjwala – composed and developed by eminent singer and film industry personality Padma Shri Kailash Kher.
About Pradhan Mantri Ujjwala Yojana: Pradhan Mantri Ujjwala Yojana aims to provide LPG (liquefied petroleum gas) connections to poor households.
Who is eligible? Under the scheme, an adult woman member of a below poverty line family identified through the Socio-Economic Caste Census (SECC) is given a deposit-free LPG connection with financial assistance of Rs 1,600 per connection by the Centre.
Identification of households: Eligible households will be identified in consultation with state governments and Union territories. The scheme is being implemented by the Ministry of Petroleum and Natural Gas.
Key objectives of the scheme are: Empowering women and protecting their health. Reducing the serious health hazards associated with cooking based on fossil fuel.
Reducing the number of deaths in India due to unclean cooking fuel. Preventing young children from significant number of acute respiratory illnesses caused due to indoor air pollution by burning the fossil fuel.
What makes LPG adoption necessary? A large section of Indians, especially women and girls, are exposed to severe household air pollution (HAP) from the use of solid fuels such as biomass, dung cakes and coal for cooking. A report from the Ministry of Health & Family Welfare places HAP as the second leading risk factor contributing to India’s disease burden.
According to the World Health Organization, solid fuel use is responsible for about 13% of all mortality and morbidity in India (measured as Disability-Adjusted Life Years), and causes about 40% of all pulmonary disorders, nearly 30% of cataract incidences, and over 20% each of ischemic heart disease, lung cancer and lower respiratory infection.
Way ahead: The PMUY is a bold and much-needed initiative, but it should be recognised that this is just a first step. The real test of the PMUY and its successor programmes will be in how they translate the provision of connections to sustained use of LPG or other clean fuels such as electricity or biogas. Truly smokeless kitchens can be realized only if the government follows up with measures that go beyond connections to actual usage of LPG. This may require concerted efforts cutting across Ministries beyond petroleum and natural gas and including those of health, rural development and women and child welfare.
About RIS: What is it? It is a combination of modern tracking equipment related hardware and software designed to optimize traffic and transport processes in inland navigation.
RIS is being implemented under the overall responsibility of Inland Waterway Authority of India, a statutory body administered by the Ministry of Shipping.
The system enhances swift electronic data transfer between mobile vessels and shore (Base stations) through advance and real-time exchange of information.
This would facilitate: Enhancement of inland navigation safety in ports and rivers. Better use of the inland waterways. Environmental protection.
RIS enables achievement of safe and efficient inland water transport by avoiding the following risks: Ship- to – Ship collisions. Ship – Bridge collisions. Groundings
What is it? The Global Fund to Fight AIDS, Tuberculosis and Malaria (or simply the Global Fund) is an international financing organization that aims to “attract, leverage and invest additional resources to end the epidemics of HIV/AIDS, tuberculosis and malaria to support attainment of the Sustainable Development Goals established by the United Nations.”
Founded in 2002, the Global Fund is a partnership between governments, civil society, the private sector and people affected by the diseases. The organization maintains its secretariat in Geneva, Switzerland.
Historical background: The Global Fund was formed as an independent, non-profit foundation under Swiss law and hosted by the World Health Organization in January 2002. In January 2009, the organization became an administratively autonomous organization, terminating its administrative services agreement with the World Health Organization.
To acquire full membership, all 29 current members must ratify the accession protocol.
Why is Russia worried about these developments? Russia has raised concerns against Macedonia becoming part of NATO. Russia has always accused NATO of destabilising the Balkans by pushing Macedonia and Montenegro to join NATO.
Russia sees Balkan nations as its sphere of influence and is against NATO or any other body led by US or EU making inroads to these Balkan countries. Russia is mainly concerned because NATO’s membership provides a guarantee of mutual defence, provides a welcome insurance policy against possible incursions. Russia perceives this as an attempt by the west to contain it by making inroads to the areas which Russia considers its sphere of influence.
About North Atlantic Treaty Organization (North Atlantic Alliance): It is an intergovernmental military alliance. Treaty that was signed on 4 April 1949. Headquarters — Brussels, Belgium. Headquarters of Allied Command Operations — Mons, Belgium. Significance: It constitutes a system of collective defence whereby its independent member states agree to mutual defence in response to an attack by any external party.
Objectives: Political – NATO promotes democratic values and enables members to consult and cooperate on defence and security-related issues to solve problems, build trust and, in the long run, prevent conflict.
Military – NATO is committed to the peaceful resolution of disputes. If diplomatic efforts fail, it has the military power to undertake crisis-management operations. These are carried out under the collective defence clause of NATO’s founding treaty – Article 5 of the Washington Treaty or under a United Nations mandate, alone or in cooperation with other countries and international organisations.
Context: The Union Home Ministry has banned the Tehreek-ul-Mujahideen (TuM) under the Unlawful Activities (Prevention) Act for promoting terrorism and radicalising and recruiting youth for terrorist activities in India. Set up in the 1990s, TuM claims to be fighting for the “liberation of Kashmir.”
About the Unlawful Activities (Prevention) Act (UAPA): This law is aimed at effective prevention of unlawful activities associations in India. Its main objective is to make powers available for dealing with activities directed against the integrity and sovereignty of India. The Act makes it a crime to support any secessionist movement or to support claims by a foreign power to what India claims as its territory. The UAPA, framed in 1967, has been amended twice since: first in 2008 and then in 2012.
The law is contested for few draconian provisions: The Act introduces a vague definition of terrorism to encompass a wide range of non-violent political activity, including political protest. It empowers the government to declare an organisation as ‘terrorist’ and ban it. Mere membership of such a proscribed organisation itself becomes a criminal offence.
It allows detention without a chargesheet for up to 180 days and police custody can be up to 30 days. It creates a strong presumption against bail and anticipatory bail is out of the question. It creates a presumption of guilt for terrorism offences merely based on the evidence allegedly seized.
It authorises the creation of special courts, with wide discretion to hold in-camera proceedings (closed-door hearings) and use secret witnesses but contains no sunset clause and provisions for mandatory periodic review.
What is it? Launched by the US, it is an effort aimed at helping 50 million women in the developing world get ahead economically over the next six years.
It is a government wide project led by the senior adviser and daughter to President Donald Trump- Ivanka Trump. The initiative will involve the State Department, the National Security Council and other agencies. It aims to coordinate current programs and develop new ones to assist women in areas such as job training, financial support, and legal or regulatory reforms.
It seeks to reach 50 million women in the developing world by 2025 through U.S. government activities, private-public partnerships, and a new, innovative fund at USAID.
Kerala to get country’s 2nd longest rail tunnel: What is it? A 10.7-km railway line, including a 9.02-km tunnel, has been proposed to connect the upcoming Vizhinjam International Multipurpose Deepwater Seaport to the railway network.
The 9.02-km tunnel, mooted by Konkan Railway Corporation Ltd (KRCL), will be the second longest railway tunnel in the country. The 11.26-km Pir Panjal rail tunnel, connecting Banihal and Hillar Shahabad, is the longest.
Context: US has approved a foreign military sale to India — two 777 Large Aircraft Infrared Countermeasures (LAIRCM) Self-Protection Suites (SPS), for an estimated $190 million.
What is it? Significance? LAIRCM is a programme meant to protect large aircraft from man-portable missiles. It increases crew-warning time, decreases false alarm rates and automatically counters advanced infrared missile systems.
These systems will protect two Boeing-777 Head-of-State aircraft. This would bring the security of Air India One at par with that of Air Force One, the aircraft used by the American President.
It consists of missile warning sensors (MWS), a laser transmitter assembly, control interface unit (CIU) and processors to detect, track, jam and counter incoming infrared missiles.
Dard Aryans: Why in News? A seminar was held recently in New Delhi that extensively discussed the need to preserve the legacy of Dard Aryans. Who are they? Some 200 km from Leh are the villages of Dha, Hanu, Garkone and Darchik on both sides of the Indus River, inhabited by the Buddhist Dard Tribes. The villages are together called the “Aryan valley”. The word ‘Dard’ is derived from a Sanskrit word, ‘Daradas’, which means people who live on hillsides.
They might have descended from soldiers in Alexander’s army who had come to the region over 2,000 years ago. The Dard Aryans, however, do not document their history. These tribals are mainly dependent on agriculture.
Threats and the need for their protection: There is a threat to the heritage of the community owing to modernisation, migration and religious conversion. The community now numbers about 4,000. Over the last few decades, many of them have embraced Islam or Buddhism.
The community prohibits marriage with outsiders to keep the gene pool intact. Of late, the Dard men have been migrating to other parts of the region (in search of livelihood) and marrying outside the tribe. The tribe is struggling to find a balance between modernity and traditional values.
The editorial discusses about the recently announced reservation for the economically weaker sections of the society, provisions in the constitution, how it seeks to alter the basic structure, is it justified and analysis of its passage.
What’s the issue? A 10% reservation in government jobs and educational institutions to the economically weaker sections (EWS) among the upper castes, or those who are not covered under any reservation plan has been announced.
Who are weaker sections? As per the reform, EWS is defined as: Families with income (includes agricultural income as well as from profession) below Rs 8 lakh per annum. In rural areas, such families who own agricultural land below five acre and residential house below 1,000 square feet and in urban areas, those with residential plot below 100 yards in notified municipality or residential plot below 200 yards in the non-notified municipal area will be considered as part of this category.
How it seeks to amend the Constitution? It seeks to amend Articles 15 and 16 to enable Parliament and all states to make “special provisions” for the advancement of “any economically weaker sections” of citizens (EWS).
What is basic structure doctrine? Starting from Sajjan Singh case in 1964, basic structure doctrine was evolved by the Supreme Court of India. It found a solid ground in Kesavananda Bharati case. As per the doctrine, the constitution of India has certain basic features which cannot be altered or abrogated.
The court did not define this, and only listed a few principles — federalism, secularism, democracy — as being part of basic structure. Since then, the court has been adding new features to the concept of basic structure. In subsequent years, courts extended the doctrine even to ordinary legislation and executive actions.
How the latest reservation policy affects the basic structure of the constitution? It is said that the new law violates the basic structure of the constitution.
Following are the issues: It violates the landmark Mandal judgment capping reservations at 50%. The constitution talks about only social backwardness (Article 15(4) and Article 16(4)) and nothing about economic backwardness. Moreover, the Constitution makes provisions for commissions to look into matters relating to implementation of constitutional safeguards for Scheduled Castes (Article 338), Scheduled Tribes (338A) and Socially and Educationally Backward Classes (339), but has not created any commission for the economically backward classes.
Govt’s defence: The 124th Amendment mentions Article 46 in its statement and objects. Article 46, which is a non-justiciable Directive Principle, says that the state shall promote educational and economic interests of “weaker sections”, in particular SCs and STs, and protect them from “social injustices” and “all forms of exploitation”.
What lies ahead for the govt? To determine this, the Supreme Court has to examine the principles on which affirmative action is based. As per M Nagraj (2006), it would have to apply two tests.
One is the width test, on the boundaries of the amending power. This would include examination of four issues — quantitative limitations such as violation of the 50% ceiling for all reservations taken together; (ii) exclusion of creamy layer or qualitative exclusion; (iii) compelling reasons such as backwardness of the economically weaker sections for whom this reservation has been made; (iv) that overall administrative efficiency is not obliterated by the new reservation.
The second test is called the identity test, under which the Supreme Court will examine whether, after the amendment, there is any alteration in the identity of the Constitution. The amendment cannot change this.
Conclusion: It is clear from the Constitution that reservation can be for a caste or a class. In fact, caste is a social class and cannot be for individuals; the latest move has made it for the individual. Similarly, the government has to justify “compelling reasons” of going beyond the 50% limit. In some states, upper castes number less than 10% and this scheme may be difficult to justify as for 52% backward classes there is just 27% OBC reservation.