Note4Students
From UPSC perspective, the following things are important :
Prelims level: IBC
Mains level: Asset reconstructions with IBC
The Supreme Court has upheld a government moves 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 a guarantee.
What is the Judgement?
- The judgment has allowed 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 apex court said there was an “intrinsic connection” between personal guarantors and their corporate debtors.
What is a personal guarantee? How do promoters use this route to get funds?
- A personal guarantee is most likely to be furnished by a promoter or promoter entity when the banks demand collateral which equals the risk they are taking by lending to the firm, which may not be doing so well.
- It is different from the collateral that firms give to banks to take loans, as Indian corporate laws say that individuals such as promoters are different from businesses and the two are very separate entities.
- A personal guarantee, therefore, is an assurance from the promoters or promoter group that if the lender allows them the fund, they will be able to turn around the loss-making unit and repay the said loan on time.
Impact of the move
- The apex court ruling will help banks go after those who have offered guarantees to recover dues in case the resolution amount is short of the claims filed by them in the National Company Law Tribunal.
- Over the years, many companies have repeatedly defaulted in loan repayment and got banks to restructure the debt, often citing systemic issues.
- But as part of the clean-up initiated five years ago, the IBC was enacted and banks were told to go after those who were not paying their dues.
About the Insolvency and Bankruptcy Code, 2016
- IBC is the bankruptcy law of India that seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
- It is a one-stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
- The code aims to protect the interests of small investors and make the process of doing business less cumbersome.
Key features of the code
(1) Insolvency Resolution:
- The Code outlines separate insolvency resolution processes for individuals, companies, and partnership firms. The process may be initiated by either the debtor or the creditors.
- A maximum time limit, for completion of the insolvency resolution process, has been set for corporates and individuals.
(2) Insolvency regulator:
- The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it.
- The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.
(3) Insolvency professionals:
- The insolvency process will be managed by licensed professionals.
- These professionals will also control the assets of the debtor during the insolvency process.
(4) Bankruptcy and Insolvency Adjudicator:
The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies:
- the National Company Law Tribunal for Companies and Limited Liability Partnership firms; and
- the Debt Recovery Tribunal for individuals and partnerships
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not Much
Mains level: Vaccine for covid
A couple of days ago, reports emerged of a Dubai-based tour operator offering a 24-day package tour from Delhi to Moscow that has included two shots of the Russian Sputnik-V vaccine.
What is vaccine tourism?
- In India, the term “vaccine tourism” became popular late last year when reports emerged of several tour operators offering packages to the US with the additional benefit of a vaccine shot.
- Meanwhile, South Africans are said to be flying to Zimbabwe, Canadians and South Americans are traveling to the US for jabs, while tour operators in Europe are offering trips to Russia for Sputnik V shots.
- It is said that Russia and the Maldives are already working on programs to offer people abroad the chance to get vaccinated during a visit; similar offerings are sprouting in the US as well.
Why is it gaining popularity?
- In fact, vaccine tourism is an emerging trend in countries where vaccines are in short supply, or where certain groups are still restricted from being inoculated.
- Still, there are only a few countries in the world (parts of the US, Russia, Slovakia, Zimbabwe, etc) that don’t restrict their vaccination policy to local residents.
- Currently, it is not illegal to travel to a foreign country to get vaccinated if air travel is allowed.
- Recently, Seychelles announced that only vaccinated visitors from India, Pakistan, and Bangladesh who have completed two weeks after their second dose are permitted to travel to and enter the island nation, with proof.
Can Indians go abroad to get vaccinated for Covid-19?
- There may be no need for anyone from India to go abroad for vaccination since all eligible Indians will be vaccinated in the country by the end of this year – that too, at the most reasonable rates possible.
- However, the idea of vaccine tourism is gaining momentum in India.
- Many Indians, who fled to Dubai just before the international flight ban came into effect last month, are said to be availing of the Chinese vaccine Sinopharm shots in the UAE.
Not to be confused with Vaccine Passport
- Sometimes, vaccine tourism is confused with vaccine passports, which is a more regulated practice gaining currency around the world.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: SUnderlal Bahuguna
Mains level: Various conservation movements in India
Veteran environmentalist and architect of the Chipko Movement Sundarlal Bahuguna, 94 has succumbed to COVID.
Answer this PYQ in the comment box:
Q.In India, the problem of soil erosion is associated with which of the following?
- Terrace cultivation
- Deforestation
- Tropical climate
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Sunderlal Bahuguna
- Bahuguna was one of the leaders of the Chipko movement, fighting for the preservation of forests in the Himalayas.
- Chipko means ‘embrace’ or ‘tree huggers’ and this vast movement was a decentralized one with many leaders usually being village women.
- Often, they would chain themselves to trees so that loggers could not cut down forests.
- These actions slowed down the destruction, but more importantly, they brought deforestation to the public’s attention.
His contributions
- From 1981-1983, Sundarlal Bahuguna led a 5,000-kilometre march across the Himalayas, ending with a meeting with late PM Indira Gandhi, to protect some areas of the Himalayan forests from tree-felling.
- Sundarlal Bahuguna was also a leader in the movement to oppose the Tehri dam project and in defending India’s rivers.
- He also worked for women’s rights and the rights of the poor.
- His methods were Gandhian, making use of peaceful resistance and non-violence.
- The Chipko Movement received the 1987 Right Livelihood Award, also referred to as the Alternative Nobel Prize.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Kalashetra, Bharatanatyam
Mains level: Classical dances of India
The Central government has appointed 12 eminent artists and musicians to the board of the prestigious institution.
Kalakshetra Foundation
- It is an arts and cultural academy dedicated to the preservation of traditional values in Indian art and crafts, especially in the field of Bharatanatyam dance and Gandharvaveda music.
- Based in Chennai, India, the academy was founded in January 1936 by Rukmini Devi Arundale and her husband George Arundale.
- Under Arundale’s guidance, the institution achieved national and international recognition for its unique style and perfectionism.
- In January 1994, an Act of the Parliament of India recognized the Kalakshetra Foundation as an “Institute of National Importance.”
Who was Rukmini Devi Arundale?
- Devi (1904 –1986) was an Indian theosophist, dancer, and choreographer of the Indian classical dance form of Bharatanatyam, and an activist for animal welfare.
- She was the first woman in Indian history to be nominated a member of the Rajya Sabha.
- The most important revivalist of Bharatanatyam from its original ‘sadhir’ style prevalent amongst the temple dancers, the Devadasis, she also worked for the re-establishment of traditional Indian arts and crafts.
- She espoused the cause of Bharata Natyam which was considered a vulgar art.
- She ‘sanitised’ and removed the inherent eroticism of Sadhir to make it palatable to Victorian British morality and Indian upper-caste elites.
Back2Basics: Bharatanatyam
- Bharatanatyam previously called Sadhir Attam is a major form of Indian classical dance that originated in Tamil Nadu.
- It is one of the oldest classical dance traditions in India.
- It has been nurtured in the temples and courts of southern India since the ancient era.
- It is one of eight forms of dance recognized by the Sangeet Natak Akademi (the others being Kathak, Kuchipudi, Odissi, Kathakali, Mohiniyattam, Manipuri, and Sattriya).
- The word Bharata is a mnemonic, consisting of “bha”–”ra”–”ta”.
- According to this belief, bha stands for bhava (feelings, emotions), ra stands for raga (melody, framework for musical notes), and ta stands for tala (rhythm).
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 342A (1)
Mains level: Paper 2- Interpretation of 102nd Amendment
The article highlights the issues with the Supreme Court’s interpretation of the 102nd amendment depriving the States of power to identify the SEBCs.
How 102nd Constitution Amendment was interpreted by the SC?
- Supreme Court held that the 102nd Constitution Amendment has taken away the power of the states to identify and prepare a list of Socially and Economically Backward Classes (SEBCs).
- The Supreme Court has interpreted the 102nd constitutional amendment to the effect that only the President can publish a list of backward classes in relation to each state and that only Parliament can make inclusions and exclusions in that list.
- The Supreme Court has also directed the central government to notify the list of SEBCs for each state and Union Territory.
- Until such lists are prepared, the court directed that the present state list would continue to be in operation.
Time-honoured authority of the States
- The states have been exercising the power to identify the list of SEBCs from the beginning of the 20th century.
- In states like the Madras Presidency, Mysore, Bombay, Travancore-Cochin, reservation and other benefits to OBCs were in practice since the 1920s.
- The Constitution (First Amendment) Act, 1951 and the insertion of Article 15(4), empowered the states to make “special provision for the advancement of socially and educationally backward classes of citizens”.
- In states like Bihar, 26 per cent reservation to OBCs in jobs and educational institutions were provided in 1978 on the recommendations of the Mungeri Lal Commission.
- Similarly, in more than a dozen states, reservation in jobs and educational institutions were provided on recommendations of the respective state commissions.
- Till 1992, there was no central list of SEBCs and no reservation in jobs and educational institutions in the central government.
- In the Indra Sawhney judgment in 1992, the Supreme Court upheld 27 per cent reservation in central government jobs for SEBCs.
- After Indra Sawhney, the Union government was authorised to prepare a central list for reservation of SEBCs in central government jobs and take other affirmative actions.
- Acting on the directions of the Supreme Court in Indra Sawhney, the central and several state governments enacted laws for setting up commissions to ascertain and identify the backward class of citizens.
- Therefore, after 1992, there was a “central list” for central government services and a “state list” that was prepared by state governments for state-specific jobs.
Intention of the Union government
- The intention was not to change the status quo and to take away the power of the state governments to prepare and notify a separate state list of SEBCs.
- Even during the discussion in the select committee of Parliament on the 102nd Constitution Amendment, the Ministry of Social Justice and Empowerment clarified that the proposed insertion of Article 342A (1) and (2) did not interfere with the power of state governments to identify SEBCs.
- In the affidavit filed by the central government before the Supreme Court, it was submitted that the power of Parliament to identify SEBCs lay with reference to the central list and states would have a separate list of SEBCs for reservation.
Way forward
- If the review petition fails to convince the Supreme Court, the central government would have to expeditiously bring a constitutional amendment to resolve this crisis.
Consider the question “Examine the issues with the Supreme Courts interpretation of the 102nd constitutional amendment regarding the States’ right to identify the socially and economically backward class.”
Conclusion
The majority judgement by 3:2 has failed to appreciate that Article 15 empowers the states to identify socially and economically backward classes of citizens and that this power has not been changed by the 102nd Constitution Amendment.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: TRIPS
Mains level: Paper 3- Ensuring affordability and availability of Covid-19 vaccines
The possibilities of new strain of Covid-19 emerging from any region of the world could derail the global recovery. To prevent that from happening vaccines need to be made available and affordable to all. This article discusses the ways to ensure that.
Ensuring affordability and availability of Covid vaccines
- To achieve global herd immunity and prevent new strains of COVID-19 from emerging, vaccines need to be affordable and available in massive quantities throughout the globe.
- Following three are the ways to ensure vaccine availability and affordability.
- 1) Voluntary linceses: This can happen through patent owners voluntarily licensing their products to other companies, especially Indian producers who are experienced at mass-producing low-cost medications.
- 2) Compulsory licenses: This can also be done by temporarily suspending patent rights for COVID vaccines.
- 3) COVAX option: Some favour ensuring access to COVID-19 vaccines through the COVAX programme.
Options to ensure vaccine availability and affordability
1) Voluntary licencing: Lessons from fight against AIDS
- Due to anti-TRIPS activism from low-income countries and low profits from low-income markets some manufacturers placed licensing agreements to produce AIDS drugs for which they owned patent rights in the UN-affiliated Medicines Patent Pool.
- Several India-based companies then used these voluntary licences to manufacture these drugs on a massive scale and sold them at prices they determined.
- This effort brought down the price of key AIDS medications in these countries.
- The United Nations’ Medicines Patent Pool and the World Health Organization’s COVID-19 Technology Access Pool are important tools in an effort to promote voluntary licensing for COVID products.
- Sharing patent rights through voluntary licensing would need to involve India’s large pharmaceutical sector.
Challenges in voluntary licensing
- So far, no patent holders have joined the WHO’s COVID-19 Technology Access Pool.
- This is why India and South Africa called on the WTO to temporarily waive patent protections for COVID-19.
- Meanwhile, the UN Medicines Patent Pool stands ready to accept voluntary licences for COVID-19.
2) Compulsory licenses
- Compulsory licenses override patent rights to allow local production or import of drugs by generic manufacturers in the event of a public health crisis.
- Since 2003, this right has been enshrined in the Doha Declaration addendum to the WTO’s TRIPS agreement and this is what India and South Africa are lobbying for.
- The Doha addendum, Section 5c, offers AIDS, malaria and tuberculosis as examples of what qualifies as a health emergency.
- By this standard, COVID-19 should easily qualify.
Issues with compulsory licensing
- Good will: Manufacturers in India say they prefer to work with voluntary licences because there is more good will between companies while compulsory licences often come with a legal battle brought by the patent holder.
- Time factor: Voluntary licences also enable production to begin more expeditiously as they usually are accompanied by “technology transfer” meaning that the patent holder reveals to the licensee how to manufacture the medication.
- No need to reverse engineer: Volunatry licensing spares the licensee the lengthy and costly process of figuring out how to reverse engineer the product.
3) COVAX option and issues
- COVAX programme was established to purchase vaccine doses and donate them to low-income countries.
- It does not involve modifying patent rights.
- Underfunded: COVAX is also currently underfunded.
- Delay: The Director-General of WHO warned that people in the lowest-income countries might have to wait until 2022 to get vaccinated through this programme.
Government aid should entail an obligation
- The billions of dollars in government aid given to companies to help develop COVID-19 treatments should entail an obligation to enable the mass production of affordable vaccines.
- Patents are not ironclad ownership rights, they are a temporary contract that balances the public interest with the claims of the innovator.
Consider the question “What is the importance of ensuring availability and affordability of Covid-19 vaccine throughout the world? What are the options available to ensure that?”
Conclusion
This is not just a question of social justice and ensuring life-saving therapies are available to the world’s poor. It is a necessary step to prevent deadlier, more contagious and possibly vaccine-resistant variants of COVID-19 from proliferating in an under-vaccinated world.
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