SC: personal guarantors liable for corporate debt #GS2 #Governance
The Supreme Court upheld a government move to allow lenders to initiate insolvency proceedings against personal guarantors, who are usually promoters of big business houses, along with the stressed corporate entities for whom they gave guarantee.
In a judgment which will ring loud and clear across the business community, a Bench of Justices L. Nageswara Rao and S. Ravindra Bhat held that the November 15, 2019, government notification allowing creditors, usually financial institutions and banks, to move against personal guarantors under the Indian Bankruptcy and Insolvency Code (IBC) was “legal and valid”.
The November 15, 2019, notification was challenged before several High Courts initially. The Supreme Court had transferred the petitions from the High Courts to itself on a request from the government.
The court said there was an “intrinsic connection” between personal guarantors and their corporate debtors. Justice Bhat, who authored the 82-page verdict, said it was this “intimate” connection that made the government recognise personal guarantors as a “separate species” under the IBC.
It was again this intimacy that made the government decide that corporate debtors and their personal guarantors should be dealt with by a common forum — National Company Law Tribunal (NCLT) — through the same adjudicatory process.
In this context, Justice Bhat referred to how the November 2019 notification had not strayed from the original intent of the IBC. In fact, Section 60(2) of the Code had required the bankruptcy proceedings of corporate debtors and their personal guarantors to be held before a common forum — the NCLT.
“The adjudicating authority for personal guarantors will be the NCLT if a parallel resolution process is pending in respect of a corporate debtor for whom the guarantee is given.
In fact, side by side bankruptcy proceedings before the same forum for both the corporate debtors and their personal guarantors would help the NCLT “consider the whole picture, as it were, about the nature of the assets available, either during the corporate debtor’s insolvency process, or even later”.
“This would facilitate the Committee of Creditors to frame realistic plans, keeping in mind the prospect of realising some part of the creditors’ dues from personal guarantors,” the judgment reasoned.
The court further corrected a misunderstanding among petitioners that approval of a resolution plan in respect of corporate debtors would also extinguish the liability of the personal guarantor.
The petitioners, mostly personal guarantors to stressed companies, had argued that an approved resolution plan in respect of a corporate debtor amounts to extinction of all outstanding claims against that debtor. Consequently, the liability of the guarantor, which is co-extensive with that of the corporate debtor, would also be extinguished.
“The release or discharge of a principal borrower from the debt by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract.
During the hearings, the government had justified the November 2019 notification extending bankruptcy proceedings to personal guarantors.
Attorney General K.K. Venugopal argued that by roping in guarantors, there was a greater likelihood that they would “arrange” for the payment of the debt to the creditor bank in order to obtain a quick discharge.
Vaccinate, wear masks, Fauci tells India #GS3 #SnT
As India’s daily COVID-19 infections approached the 2,60,000 mark, Anthony Fauci, Chief Medical Adviser to the U.S. President, urged the government to push very hard to get as many people vaccinated as possible.
“As I’ve said over and over, do whatever you can to upgrade and keep getting people vaccinated. You’ve got to continue to push very hard to get as many people vaccinated.
The infectious disease specialist led the White House response (including having to work around non-science based messaging from former U.S. President Donald Trump) as the U.S. faced a surge in coronavirus cases last year. On India, he said the timing of the end of the current wave would depend on a number of factors like vaccinations, targeted shutdowns and mask wearing, including indoors.
“Until more people get vaccinated, one needs to be concerned about making sure people wear masks, particularly in indoor settings when the ventilation is not as good as you would expect, compared to the outdoors,” Dr. Fauci said, adding that indoor mask wearing was a good idea until one was fully (not halfway) vaccinated. He also recommended shutting down States or regions experiencing a surge.
“You don’t need to shut down for an extended period of time. You could shut down just enough to break the transmission cycle.
HC quashes GST on oxygen concentrators #GS2 #Governance
The Delhi High Court on Friday held the government’s imposition of GST on oxygen concentrators imported for personal use as “unconstitutional” and said oxygen concentrators constitute a life-saving device during the COVID-19 pandemic.
“Oxygen concentrator, on the face of it, is a life-saving device,” Justice Shakdher said. “In times of war, floods… pandemic, a different approach needs to be adopted,” he noted.
The petitioner in the case, a senior citizen whose nephew had shipped him a concentrator as a gift, had challenged a May 1 notification that levied 12% GST on such imports from 28% earlier. He invoked Article 21 of the Constitution which enshrines the fundamental right to life.
When the matter was initially taken up, the bench ‘carried the impression that because of the prevailing chaos and confusion caused by the raging pandemic’, the State had not granted the GST exemption on such imports ‘due to an oversight.’
The court had asked the government to consider temporarily dropping the 12% GST levied on such imports altogether, citing the shortage of oxygen in the second wave of the pandemic. Its hopes of ‘a course correction’ from the Centre, however, didn’t materialise.
“Our attempt at nudging the State to take, what we thought was a reasonable stand, [and we dare say, a morally right position] has come a cropper,” the judgement averred, before holding the GST levy unconstitutional.
Jaishankar to meet Blinken, UN chief #GS2 #IR
External Affairs Minister S. Jaishankar will travel to the United States next week to discuss bilateral issues and “COVID-related cooperation. Mr. Jaishankar will travel to New York and Washington in a visit scheduled from May 24 to 28, and will meet UN Secretary-General Antonio Guterres and U.S. Secretary of State Antony Blinken.
Mr. Jaishankar is also expected to meet American vaccine manufacturers, and discussions are expected to focus on commercial procurement of vaccine doses from industry, including Pfizer, Moderna and Johnson & Johnson, as well as gifts of extra doses of AstraZeneca’s vaccine that the U.S. plans to share with other countries.
“The External Affairs Minister will have two interactions with business forums on economic and COVID-related cooperation between India and the U.S. Mr. Jaishankar is expected to meet business representatives at the U.S.-India Strategic Partnership Forum (USISPF) and the U.S.-India Business Council (USIBC) during the visit.
In recent weeks, both groups have formed a “Global Task Force on Pandemic Response” along with the U.S. Chamber of Commerce to work on several aspects of pandemic relief, including provision of 1,000 ventilators required by hospitals in India, 25,000 oxygen concentrators and coordination of human resources executives in India and the U.S.
Industry sources said Mr. Jaishankar would address a round table with CEOs of various vaccine and pharmaceutical companies, where U.S. manufacturers are keen to discuss a more centralised procurement, rather than the current State by State mechanism, and would like to see India grant Emergency Use Authorisation for the U.S. vaccines soon.
Mr. Jaishankar is expected to make a stop at the United Nations, his first visit since India assumed its two-year term at the Security Council this January. Officials said the meeting with Mr. Guterres would focus on a range of issues, expected to include India’s efforts against the pandemic, the Afghanistan talks process, where India plays a role as Chair of Taliban Sanctions Committee at the UNSC, the violence between Israel and Palestine, and UN reforms.
SC stays HC order on U.P. healthcare #GS2 #Governance
The Supreme Court on Friday stayed a May 17 order of the Allahabad High Court, which described the medical system in smaller cities and villages of Uttar Pradesh during the pandemic as Ram Bharose (at God’s mercy).
A Vacation Bench of Justices Vineet Saran and B.R. Gavai remarked that the High Court’s directions for COVID-19 management in its May 17 order may be difficult to implement.
In fact, the High Court had issued a slew of directions to the government, which included ensuring that nursing homes in the State have oxygen facility for every bed; certain percentages of beds, ventilators, high flow nasal cannula facility and beds with bipap machines in every nursing home/hospital; every nursing home/ hospital which has more than 30 beds to compulsorily have an oxygen production plant; and medical colleges in Prayagraj, Agra, Meerut, Kanpur and Gorakhpur be provided enhanced facilities like Sanjay Gandhi Postgraduate Institute within four months.
The High Court had ordered the State to provide within a month at least 20 ambulances in small towns of the States and have at least two ambulances with ICU facilities in every village
The High Court had said these arrangements would help “patients from smaller towns and villages to be brought to bigger hospitals in bigger towns” for medical treatment. Solicitor General Tushar Mehta agreed that improvements to health infrastructure cannot be ignored. “But these directions are impossible to comply with.
He submitted that high courts should exhibit restraint before passing such orders. Mr. Mehta, for Uttar Pradesh, said the State government caters to a population of over 24 crores. He said the High Court order has encroached into the “arena of governance” and breached the principle of separation of powers. The order needs to be set aside.
What did Israel achieve in Gaza? #GS2 #IR
After 11 days of airstrikes on and rocket attacks from Gaza, Israel and Hamas agreed to an Egypt-mediated ceasefire on Thursday night. The truce appears to be holding on Friday with Palestinians taking out celebratory gatherings across the occupied territories and Israel removing the emergency restrictions in areas hit by rockets.
Pressure from all sides
Unlike in 2014, when the last major fighting between Israel and Hamas occurred, the Israeli troops were wary of launching a ground invasion this time. In a ground attack, Israel could inflict more damage on Hamas, but the risk of losing Israeli soldiers would also be high.
This time, the focus of Israel’s military campaign, which started on May 10, was on causing maximum damage to Hamas’s militant infrastructure through airstrikes. In the first 10 days of the fighting, Israel carried out more than 1,800 airstrikes on Gaza, according to the UN.
But one issue with offensives that are heavily dependent on air power is that they need a quicker exit strategy. Airstrikes will leave disproportionate civilian casualties. And disproportionate airstrikes, which was Israel’s strategy, will have even greater damage. While Israel tried to sell the narrative that it’s a victim of terror (which has buyers), the fact remains that Israel is the only sovereign power in this conflict, which continues the occupation of Palestinian territories in violation of UN Security Council resolutions, international laws and norms.
So, when civilian casualties mounted in Gaza, even those countries that initially supported Israel’s “right to defend itself” started calling for a ceasefire. In the UNSC, most countries, including India, backed an immediate ceasefire. The Biden administration, which was facing intense pressure from the liberal wing of the Democratic Party, issued a strong statement on Wednesday asking for “a significant de-escalation”.
Israel was also facing internal pressure as its streets were gripped by riots between Jewish vigilantes and Arab mobs. Protests were spreading in the West Bank and rockets were coming from the Lebanon border. Amid intensifying pressure from all sides, the Israeli Security Cabinet unanimously accepted a “unilateral and mutual” ceasefire with Hamas on Thursday night. The militants immediately confirmed the truce.
What were the goals?
During the course of the attack, Israeli Prime Minister Benjamin Netanyahu said there were two ways to deal with Hamas — one, to conquer Hamas and the other to establish deterrence. The Prime Minister said his aim was “forceful deterrence”, but conquering was “an open possibility”.
Israeli military leaders have claimed that they have killed 225 members of Hamas and Islamic Jihad — a contested claim as the Gaza Health Ministry says 243 Gazans were killed, including 66 children. Israel has also claimed that it has destroyed Hamas’s elaborate tunnel network and military and intelligence infrastructure. ‘We have set Hamas back by years,” said Mr. Netanyahu.
It’s true that Hamas has suffered far greater damage than what its rockets inflicted on Israel, where 12 people were killed, including one child and three foreign nationals. But it will be clearer only in the coming weeks, months or years whether the Israeli campaign has established deterrence.
The facts on the ground tell us that despite the heavy losses Hamas suffered, it continued to fire rockets into Israel till the last moment. On the 11th day, Hamas fired some 300 rockets into Israel.
As soon as the ceasefire was announced, Palestinians took to the streets “celebrating the resistance”. Senior Hamas officials called it “the euphoria of victory”. By launching the rocket attacks on May 10, hours after Israeli forces stormed Al-Aqsa Mosque in East Jerusalem, Hamas was seen to be making a political point — it is the real defender of Jerusalem.
In effect, Hamas was trying to tap the growing Palestinian resentment towards Israel’s high-handedness. The political messaging appeared to have gone down well with the Palestinians as Israel faced unprecedented protests and riots both in the occupied West Bank and Israeli cities when the Gaza attack was under way.
Militarily, Hamas, despite the heavy losses it suffered, demonstrated its growing rocket fire capabilities. Hamas launched at least 4,000 rockets in 11 days, more than the 3,383 rockets it fired during the 50 days of conflict in 2014. By launching barrages of rockets within minutes, it also managed to overwhelm Israel’s Iron Dome defence system. For example, in one day last week, Hamas launched more than 1,000 rockets. In 2014, its daily total never crossed 200. And Hamas rockets killed more civilians in Israel in 11 days this time than the total number of civilian deaths during the seven weeks of 2014, which is a matter of grave concern for Israel.
Ceasefires can be fragile. In 2014, after the ceasefire was announced, Israel attempted to assassinate Hamas’s shadowy military commander Mohammed Deif, but failed. This time, too, the truce is tenuous. Hamas says it accepted truce after Israel promised “to lift their hands off Sheikh Jarrah (where Palestinians face eviction from their houses) and Al-Aqsa Mosque.
The Israeli side has denied any such promise and emphasised that the ceasefire was unconditional. Egypt says concerns in Jerusalem will be “addressed”. Israel has already removed some restrictions it had imposed on Al-Aqsa, which it says was a temporary security measure. Hamas could take credit for the same.
But Sheikh Jarrah is a more complicated matter. The Supreme Court of Israel is supposed to give a final ruling on the eviction of Palestinians in the neighbourhood. If Israel goes ahead with the eviction process, there could be more protests and violence. Israeli leaders say there won’t be lasting peace as long as Hamas has rockets. Hamas says there will be rockets as long as the occupation continues.
RBI Board approves transfer of ₹99,122 crore as surplus to government #GS3 #Economy
The Reserve Bank of India on Friday approved the transfer of ₹99,122 crore as surplus to the Central government for the accounting period of nine months ended March 31. The decision to transfer the surplus to the Central government was taken at the meeting of the Central Board of Directors of RBI. The meeting was held through video-conferencing.
The RBI Board, according to a release, also reviewed the current economic situation, global and domestic challenges and recent policy measures taken by the Reserve Bank to mitigate the adverse impact of the second wave of COVID-19 on the economy.
With the change in the Reserve Bank’s accounting year to April-March (earlier July-June), the Board discussed the working of the RBI during the transition period of nine months (July 2020-March 2021).
During the meeting, the Board, headed by Governor Shaktikanta Das, “approved the Annual Report and accounts of the Reserve Bank for the transition period.
“The Board also approved the transfer of ₹99,122 crore as surplus to the Central government for the accounting period of nine months ended March 31, 2021 (July 2020-March 2021), while deciding to maintain the Contingency Risk Buffer at 5.50%.” Deputy governors Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar attended the meeting.
Rules for insurance firms’ control tweaked after FDI ceiling raised to 74% #GS3 #Economy
Indian promoters of insurance joint ventures with foreign partners will no longer be able to nominate a majority of the board members, as per the new rules notified under the Insurance Act. This follows the recent amendments to enhance the foreign direct investment (FDI) limit in the sector to 74% from 49%.
However, a majority of board members, key management persons (KMP) need to be resident Indian citizens, as should at least one of the three top positions — the chairperson of the board, the MD and CEO.
Applies to all JVs
This new norm will apply to all insurers, irrespective of the stake held by the foreign partner, said legal experts. The Finance Ministry has also specified further conditions on the composition of the board for firms where foreign investors’ stake exceeds 49%.
“In an Indian insurance company having foreign investment exceeding 49%, not less than 50% of its directors shall be independent directors, unless the chairperson of its board is an independent director, in which case at least one-third of its board shall comprise independent directors,” state the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021, notified by the Finance Ministry.
“The significant change introduced is the deletion of the requirements pertaining to Indian ownership and control, irrespective of whether the insurer has majority foreign ownership or not,” said Shailaja Lall, partner at law firm Shardul Amarchand Mangaldas & Co. “Previously, Indian promoters or investors were required to nominate a majority of the Board. This deletion is being seen favourably by foreign investors proposing to hold stakes in insurance companies.
“However, the requirement to have a majority of the board and KMP comprised of Indian resident citizens will mean that foreign investors will have to continue to rely on Indian citizens who are resident in India to man key roles in the insurance company and its board. Therefore, while the FDI limit in insurance companies has been increased to 74%, the government has sought to provide adequate protection for insurance companies.
While the rules are a step forward for enabling fresh investments in the insurance sector, more changes are needed before transactions can begin, PwC said in a note. Further amendments are now expected in Foreign Exchange Management (Non-debt Instruments) Rules, 2019, and IRDAI guidelines on Indian ownership and control.
How Tauktae compares with other cyclones in severity, damage #GS1 #Geography #GS3 #DM
Cyclone Tauktae has affected more than half of India and badly hit all states on India’s west coast. Starting off from Lakshadweep, the remnants caused rainfall up to Delhi, Bihar and Nepal , and its clouds have even advanced into China.
Formed in the Arabian Sea, Cyclone Tauktae has killed 104 people so far, which is more than the toll from any single cyclone from the Arabian Sea over the last one decade.
Gujarat’s most severe
Tauktae was only the second ‘Extremely Severe Cyclone’ category storm to hit Gujarat in 23 years. Cyclone Tauktae made its landfall east of Diu on May 17 with wind speed ranging between 160–170 km/hr gusting to 185 km/hr.
The last cyclone of equal intensity to hit Gujarat was Cyclone Kandla (wind speed 160 to 170 km/hr) that crossed near Porbandar in 1998. The following year, a ‘Very Severe Cyclone’ formed in the Arabian Sea in May, but it hit the Sindh region of Pakistan.
Climatologically, out of the five cyclones formed annually in the Bay of Bengal and the Arabian Sea, only one develops in the Arabian Sea.
Multiple states affected
States like Andhra Pradesh, Odisha and West Bengal along India’s east coast have frequently faced the brunt of multiple severe cyclones, such as Fani and Hudhud and the recent Super Cyclone Amphan.
Unlike most cyclones that are forced to weaken post landfall as they detach from the sea, Tauktae retained its intensity as a cyclone and maintained wind speeds between 60 and 70 km/hr gusting to 80 km/hr.
Cyclones are formed between the tropics while western disturbances are formed in the mid-latitudes. When the two interact, they influence each other. Such an interaction occurred at the time of landfall on the evening of May 17.