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We wrote a piece for ibnlive.com on the major differences between the government’s Lok Pal Bill, 2011 and the Jan Lok Pal Bill drafted by Anna Hazare’s group.  The note is reproduced below.

The streets are witnessing a demand that the government’s Lok Pal Bill be replaced by the Jan Lok Pal Bill (JLP) as drafted by the team led by Anna Hazare.  There are several significant differences between the two bills.  In this note, we describe the some of these differences. (See here for more on the Lok Pal Bill).

First, there is a divergence on the jurisdiction of the Lok Pal.  Both bills include ministers, MPs for any action outside Parliament, and Group A officers (and equivalent) of the government.  The government bill includes the prime minister after he demits office whereas the JLP includes a sitting prime minister.  The JLP includes any act of an MP in respect of a speech or vote in Parliament (which is now protected by Article 105 of the Constitution).  The JLP includes judges; the government bill excludes them.  The JLP includes all government officials, while the government bill does not include junior (below Group A) officials.  The government bill also includes officers of NGOs who receive government funds or any funds from the public; JLP does not cover NGOs.

Second, the two Bills differ on the composition.  The government bill has a chairperson and upto 8 members; at least half the members must have a judicial background.  The JLP has a chairperson and 10 members, of which 4 have a judicial background.

Third, the process of selecting the Lok Pal members is different.  The JLP has a two stage process.  A search committee will shortlist potential candidates.  The search committee will have 10 members; five of these would have retired as Chief Justice of India, Chief Election Commissioner or Comptroller and Auditor General; they will select the other five from civil society.   The Lok Pal chairperson and members will be selected from this shortlist by a selection committee.  The selection committee consists of the prime minister, the leader of opposition in Lok Sabha, two supreme court judges, two high court chief justices, the chief election commissioner, the comptroller and auditor general, and all previous Lok Pal chairpersons.

The government bill has a simpler process.  The selection will be made by a committee consisting of the prime minister, the leaders of opposition in both Houses of Parliament, a supreme court judge, a high court chief justice, an eminent jurist, and an eminent person in public life.  The selection committee may, at its discretion, appoint a search committee to shortlist candidates.

Fourth, there are some differences in the qualifications of a member of the Lok Pal.  The JLP requires a judicial member to have held judicial office for 10 years or been a high court or supreme court advocate for 15 years.  The government bill requires the judicial member to be a supreme court judge or a high court chief justice.  For other members, the government bill requires at least 25 years experience in anti-corruption policy, public administration, vigilance or finance.  The JLP has a lower age limit of 45 years, and disqualifies anyone who has been in government service in the previous two years.

Fifth, the process for removal of Lok Pal members is different.  The government bill permits the president to make a reference to the Supreme Court for an inquiry, followed by removal if the member is found to be biased or corrupt.  The reference may be made by the president (a) on his own, (a) on a petition signed by 100 MPs, or (c) on a petition by a citizen if the President is then satisfied that it should be referred.  The President may also remove any member for insolvency, infirmity of mind or body, or engaging in paid employment.

The JLP has a different process. The process starts with a complaint by any person to the Supreme Court.  If the court finds misbehaviour, infirmity of mind or body, insolvency or paid employment, it may recommend his removal to the President.

Sixth, the offences covered by the Bills vary.  The government bill deals only with offences under the Prevention of Corruption Act.  The JLP, in addition, includes offences by public servants under the Indian Penal Code, victimization of whistleblowers and repeated violation of citizen’s charter.

Seventh, the government bill provides for an investigation wing under the Lok Pal.  The JLP states that the CBI will be under the Lok Pal while investigating corruption cases.

Eighth, the government bill provides for a prosecution wing of the Lok Pal.  In the JLP, the CBI’s prosecution wing will conduct this function.

Ninth, the process for prosecution is different.  In the government bill, the Lok Pal may initiate prosecution in a special court.  A copy of the report is to be sent to the competent authority.  No prior sanction is required.  In the JLP, prosecution of the prime minister, ministers, MPs and judges of supreme court and high courts may be initiated only with the permission of a 7-judge bench of the Lok Pal.

Tenth, the JLP deals with grievance redressal of citizens, in addition to the process for prosecuting corruption cases.  It requires every public authority to publish citizen’s charters listing its commitments to citizens.  The government bill does not deal with grievance redressal.

Given the widespread media coverage and public discussions, it is important that citizens understand the differences and nuances.  This may be a good opportunity to enact a law which includes the better provisions of each of these two bills.

We wrote an FAQ on the Lok Pal Bill for Rediff.  See http://www.rediff.com/news/slide-show/slide-show-1-all-you-wanted-to-know-about-the-lokpal-bill/20110808.htm

The full text is reproduced below.

What is the purpose of the Lok Pal Bill?

The Bill seeks to establish an institution that will inquire into allegations of corruption against certain public functionaries.  It establishes the office of the Lok Pal for this purpose.

What is the composition of the Lok Pal?

The Lok Pal shall consist of a Chairperson and up to eight members.  The Chairperson, and at least half of the members have to be current or former judges of the Supreme Court or Chief Justices of High Courts.  The other members will have at least 25 years experience in matters related to anti-corruption policy, vigilance, public administration, finance, law and management.

Who selects the Lok Pal?

The Selection Committee consists of the Prime Minister, Lok Sabha Speaker, the Leader of Opposition in each House of Parliament, a Union Cabinet Minister, a sitting Supreme Court Judge, a sitting High Court Chief Justice, an eminent jurist, a person of eminence in public life.  The two judges on this Committee will be nominated by the Chief Justice of India.

Who comes under the jurisdiction of the Lok Pal?

There are seven categories of persons under the Lok Pal: (a) Prime Minister after demitting office; (b) current and former Ministers; (c) current and former MPs (d) all Group A officers of the central government; (e) all Group A equivalent officers or PSUs and other government bodies; (f) directors and officers of NGOs which receive government financing; (g) directors and officers of NGOs which receive funds from the public, and have annual income above a level to be notified by the government. The speech and vote of MPs in Parliament are exempt from the purview of the Lok Pal.

What are the major powers of the Lok Pal?

The Lok Pal has two major wings: investigation wing and prosecution wing.  The Lok Pal can ask the investigation wing to conduct preliminary investigation of any offence alleged to be committed under the Prevention of Corruption Act, 1988.  It can then conduct an inquiry.  If the inquiry concludes that an offence was committed, the Lok Pal can recommend disciplinary action.  It can also file a case in the Special Court.

Does the Lok Pal need any prior sanction to initiate any action?

No.  The Bill states that the Lok Pal does not need prior sanction to inquire into an offence, or to initiate prosecution in the special court.

What are special courts under this Bill?

The central government is required to constitute special courts to hear and decide cases under this Bill.  The Lok Pal shall recommend the number of such courts.

What are the various time limits for conducting inquiry and trial?

All preliminary investigation or inquiry must be completed within 30 days of the complaints (and can be extended for a further three months, with written reasons).  The inquiry is to be completed within six months (extendable by six months).  The trial is to be completed within one year of filing the case.  This time may be extended by three months (and in further periods of three months each time) with written reasons, but the total time should not exceed two years.

How can the Lok Pal be removed from office?

The President may make a reference to the Supreme Court, (a) either on his own, or (b) if 100 MPs sign a petition, or (c) if a citizen makes a petition and the President is satisfied that it should be referred.  If the Supreme Court, after an inquiry, finds the charge of misbehaviour was valid against the Chairperson or a Member and recommends removal, he shall be removed by the President.

What are the provisions for the expenses of the Lok Pal?

The Bill provides that all expenses will be charged, i.e., the amount will be provided without requiring a vote in Parliament.  The Bill estimates recurring expenditure of Rs 100 crore per annum, and a non-recurring expenditure of Rs 50 crore.  It also estimates a further Rs 400 crore for a building.

What are the major differences from the Jan Lok Pal Bill drafted by Team-Anna?

There are several differences.  The composition of the Lok Pal and the selection process are different; the Jan Lok Pal draft included a search committee with civil society members to shortlist the eligible members of the Lok Pal.  The Lok Pal had jurisdiction over the PM, the judiciary and all public servants (only Group A officers in the government Bill); it included the speech and vote of MPs in Parliament; it did not include NGOs.  The Jan Lok Pal Bill provided that the investigation and prosecution wings of the CBI shall report to the Lok Pal for corruption cases.  It also had penalties ranging from six months to life imprisonment (under the government Bill, the maximum imprisonment is derived from the Prevention of Corruption Act, 1988, and is 7 years).

The government’s acquisition of land for projects has been facing protests across the country, the violence in Uttar Pradesh being only the latest.

What is Land Acquisition?

Land acquisition is the process by which the government forcibly acquires private property for public purpose without the consent of the land-owner. It is thus different from a land purchase, in which the sale is made by a willing seller.

How is this process governed?

Land Acquisition is governed by the Land Acquisition Act, 1894.  The government has to follow a process of declaring the land to be acquired, notify the interested persons, and acquire the land after paying due compensation. Various state legislatures have also passed Acts that detail various aspects of the acquisition process.

Land is a state subject.  Why is Parliament passing a law?

Though land is a state subject, “acquisition and requisitioning of property” is in the concurrent list. Both Parliament and state legislatures can make laws on this subject.

Is there a new Act being proposed?

The government had introduced a Bill to amend this Act in 2007. That Bill lapsed in 2009 at the time of the general elections. The government has stated its intent to re-introduce a similar Bill, but has not yet done so.

What are the major changes being proposed?

There are significant changes proposed in the 2007 Bill with regard to (a) the purpose for which land may be acquired; (b) the amount of compensation to be paid; (c) the process of acquisition; (d) use of the land acquired; and (e) dispute settlement mechanisms. We explain these briefly below.

Purpose: Currently, land may be acquired for a range of uses such as village sites, town or rural planning, residential purposes for poor or displaced persons, planned development (education, housing, health, slum clearance), and for state corporations.

Land may also be acquired for use by private companies for the above purposes or if the work “is likely to prove useful to the public”.

The 2007 Bill had a narrower list: (a) for strategic naval, military or air force purposes; (b) for public infrastructure projects; and (c) for any purpose useful to the general public if 70% of the land has been purchased from willing sellers through the free market.

Compensation: The current Act requires market value to be paid for the land and any other property on it (buildings, trees, irrigation work etc) as well as expenses for compelling the person change place of residence or business. It explicitly prohibits taking into account the intended use of land while computing market value. The 2007 Bill requires payment of the highest of three items: the minimum value specified for stamp duty, the average of the top 50 per cent by price of land sale in the vicinity, and the average of the top 50 pc of the land purchased for the project from willing sellers. For computing recent land sale, the intended land use is to be used. Thus, agricultural land being acquired for an industrial project will be paid the price of industrial land.

Process of acquisition: Several changes are proposed, including the requirement of a social impact assessment. Any project that displaces more than 400 families (200 in hilly, tribal and desert areas) will require an SIA before the acquisition is approved.

Use of land acquired: The 2007 Bill requires the land acquired to be used for that purpose within five years. If this condition is not met, the land reverts to the government (it is not returned to the original land owners). If any acquired land is transferred to another entity, 80 pc of the capital gains has to be shared with the original land-owners and their legal heirs.

Dispute Settlement: Currently, all disputes are resolved by civil courts, which results in delays. The 2007 Bill sets up Land Acquisition Compensation Dispute Resolution Authority at the state and national levels. These authorities will have the power of civil courts, and will adjudicate disputes related to compensation claims.

Does the proposed Bill address the major issues?

The Bill narrows the uses for which land may be acquired. It also changes the compensation due and links that to the market price for which land is to be used.

There could be significant changes in acquisition for use by private industry. Firstly, they would have to purchase at least 70 pc of the required land from willing sellers (presumably, at fair market price). Second, the compensation amount for the remaining (upto 30 pc of land) could be significantly higher than the current method. This would be at a premium to the average paid to the willing sellers, and it would be based on intended industrial or commercial use which usually commands a higher price than agricultural land.

However, the effect on acquisition for projects such as highways and railways will not be significant, as there is no benchmark for price determination for such use.

This article appeared in Rediff News on May 12, 2011 and can be accessed here.

All companies are currently governed by the Companies Act, 1956. The Act has been amended 24 times since then. Three committees were formed in the last ten years, chaired by Justice V B Eradi (2001), Naresh Chandra (2002) and J J Irani (2005) to look into various aspects of corporate governance and company law. The Companies Bill, 2009 incorporates some of these recommendations.

Main features
The major themes of the Bill are as follows: It moves a number of issues that are currently specified in the Act (and its schedules) to the Rules; this change will make the law more flexible, as changes can be made through government notification, and would not require an amendment bill in Parliament. On a number of issues, the Bill moves the onus of oversight towards shareholders and away from the government. It also requires a super-majority of 75 percent shareholder votes for certain decisions. The powers of creditors have been enhanced in cases where a company is in financial distress. It has new provisions regarding independent directors and auditors in order to strengthen corporate governance. Finally, the bill increases penalties, and provides for special courts.

Types of companies
The Bill provides for six types of companies. Public companies need to have at least seven shareholders, and private companies between two and 50 shareholders. Charitable companies should have at least one shareholder, may have only certain specified objectives, and may not distribute dividend. Three new types of companies have been defined, which have less stringent provisions. These are one-person companies, small companies (private companies with capital less than Rs 50 million and turnover below Rs 200 million), and dormant companies (formed for future projects, or no operations for two years).

Corporate Governance
The Bill defines the duties of directors and norms for composition of boards. The number of directors is capped at 12. At least one director should be resident in India for at least 183 days in a calendar year and at least a third of the board should consist of independent directors. The Bill also sets guidelines for auditors. Certain related persons such as creditors, debtors, shareholders and guarantors cannot be appointed as auditors. Certain services such as book-keeping, internal audit and management services may not be undertaken by the auditors. Removal of an auditor before completion of term requires approval of 75 percent of the shareholders.

Adjudication
The Bill provides for a National Company Law Tribunal (NCLT) to adjudicate disputes between companies and their stakeholders. It also establishes an Appellate Tribunal. The NCLT may ask the government to investigate the working of a company on an application made by 100 shareholders or those who hold 10 percent of the voting power.

Arrangements
All arrangements such as mergers, takeovers, debt split, share splits and reduction in share capital must be approved by 75 percent of creditors or shareholders, and sanctioned by the NCLT.

Standing Committee’s Recommendations
The Parliamentary Standing Committee on Finance has submitted its report, and suggested several significant amendments.

Corporate governance
Substantive matters covered in various corporate governance guidelines should be contained in the Bill. These include: separation of offices of Chairman and Chief Executive Officer; limiting the number of companies in which an individual may become director; attributes for independent directors; appointment of auditors.

Delegated legislation
The Committee noted that the Bill provided excessive scope for delegated legislation. Several substantive provisions were left for rule-making and the Ministry was asked to reconsider provisions made for excessive delegated legislation.

The Ministry has agreed to make some changes to include the following provisions in the Act: the definition of small companies; the manner of subscribing names to the Memorandum of Association; the format of Memorandum of Association to be prescribed in the Schedule; the manner of conducting Extraordinary General Meetings; documents to be filed with the Registrar of Companies.

The Committee recommended that provisions relating to independent directors in the Bill should be distinguished from other directors. There should be a clear expression of their mode of appointment, qualifications, extent of independence from management, roles, responsibilities, and liabilities. The Committee also recommended that the appointment process of independent Directors should be made independent of the company’s management. This should be done by constituting a panel to be maintained by the Ministry of Corporate Affairs, out of which companies can choose their requirement of independent directors.

Investor protection
The Ministry, in response to the Committee’s concerns for ensuring protection of small investors and minority shareholders, indicated new proposals. These include: enhanced disclosure requirements at the time of incorporation; shareholder’s associations/groups enabled to take legal action in case of any fraudulent action by the company; directors of a company which has defaulted in payment of interest to depositors to be disqualified for future appointment as directors.

The Ministry also made some suggestions on protection of minority shareholders/small investors, which the Committee accepted, including the source of promoter’s contribution to be disclosed in the Prospectus; stricter rules for bigger and solvent companies on acceptance of deposits from the public; return to be filed with Registrar in case of promoters/top ten shareholders stake changing beyond a limit.

Corporate Delinquency
Recommendations include: subsidiary companies not to have further subsidiaries; main objects for raising public offer should be mentioned on the first page of the prospectus; tenure of independent director should be provided in law; the office of the Chairman and the Managing Director/CEO should be separated. The Committee emphasised that the procedural defaults should be viewed in a different perspective from fraudulent practices.

Shareholder democracy
The Committee recommended that the system of proxy voting should be discontinued. It also stated that the quorum for company meetings should be higher than the proposed five members, and should be increased to a reasonable percentage.

Foreign companies
The Bill requires foreign companies having a place of business in India and with Indian shareholding to comply with certain provisions in the proposed Bill. The Committee observed that the Bill does not clearly explain the applicability of the Bill to foreign companies incorporated outside India with a place of business in India. It recommended that all such foreign companies should be brought within the ambit of the chapter dealing with foreign companies.

Next steps
The report of the Standing Committee indicates that the Ministry has accepted many of its recommendations. It is likely that the government will take up the Bill for consideration and passing during the winter session, which starts on 9th November.

This article was published in PRAGATI on November 1, 2010

The Seeds Bill was introduced in 2004, and is listed for discussion in Rajya Sabha this week. We had flagged some issues in our Legislative Brief. The Standing Committee had also made some recommendations (summary available here). These included the following: Farmers selling seeds had to meet the same quality requirements (on physical and genetic purity, minimum level of germination etc.) as seed companies. Second, seed inspectors had the power to enter and search without a warrant, unlike the requirements in the Criminal Procedure Code for the police. Third, the compensation mechanism for farmers was through consumer courts; some other Acts provide separate bodies to settle similar issues.

The government has circulated a list of official amendments. These address most of the issues (tabulated here).

One significant issue has not been addressed. The financial memorandum estimates that Rs 36 lakh would be required for the implementation of the Act during 2004-05 from the Consolidated Fund of India. The amount required by state governments to establish testing laboratories and appointing seed analysts and seed inspectors has not been estimated, which implies that the successful implementation of the bill will depend on adequate provision in state budgets.

Well, that is the number of seats to be reserved for women in Lok Sabha in the first round if the women’s reservation bill is passed.  The rules for determining number of seats to be reserved are as follows.

1. The Bill does not reserve one-third of seats on an All-India basis.  It reserves “as nearly as possible, one-third” of seats in each state.
2. Also, it reserves “as nearly as possible, one-third” of seats reserved for Scheduled Castes in any state for women, and similarly for ST women.  If any state/UT has only 1 seat in any of these categories, that seat will be reserved in the first election, and be open to men in the subsequent two elections.  If a state has 2 seats in any category, one of these will be reserved for women in the first election, the other in the second, and neither in the third election.  One of the two seats nominated for Anglo-Indians will be reserved after the first and second elections.
3. The reservation for general category seats will be done after following Rules 1 and 2 above.  However, if a state has one or two general category seats, they follow rules similar to that for SC and ST seats (cycling through three elections).

Example 1:  Puducherry has one general seat.  This will be reserved for women in the first election and open in second and third elections.

Example 2:  Manipur has two seats, of which one is reserved for STs.  Thus, both seats will be reserved in the first election and open in the second and third elections.

Example 3:  Delhi has seven seats:  six general and one SC.  In the each election 2 seats (seven divided by three, rounded to nearest integer) will be reserved.  In the first election, one general and one SC seat will be reserved, and in the next two elections, two general seats will be reserved.

We compute that this results in 192, 179 and 175 seats (out of 545) being reserved for women in the first three elections.

A similar computation shows that 1367, 1365 and 1364 (out of 4090 seats of the legislative assemblies of 28 states and Delhi) will be reserved for women in the first three elections.

Excel file with detailed computation is available here.

Speaker Meira Kumar has urged political parties to arrive at a consensus on the women’s reservation bill.  The 2008 Bill has the following main features. 

1. It reserves one-third of all seats in Lok Sabha and Legislative Assemblies within each state for women. 

2. There is quota-within-quota for SCs, STs and Anglo-Indians. 

3. The reserved seats will be rotated after each general elections – thus after a cycle of three elections, all constituencies would have been reserved once.  This reservation will be operational for 15 years.

 This Bill has had a chequered history.  A similar Bill was introduced in 1996, 1998 and 1999 – all of which lapsed after the dissolution of the respective Lok Sabhas.  A Joint Parliamentary Committee chaired by Geeta Mukherjee examined the 1996 Bill and made seven recommendations.  Five of these have been included in the latest 2008 Bill.  These are (i) reservation for a period of 15 years; (ii) including sub-reservation for Anglo Indians; (iii) including reservation in cases where the state has less than three seats in Lok Sabha (or less than three seats for SCs/STs); (iv) including reservation for the Delhi assembly; and (v) changing “not less than one-third” to “as nearly as may be, one-third”.

 Two of the recommendations are not incorporated in the 2008 Bill.  The first is for reserving seats in Rajya Sabha and Legislative Councils.  The second is for sub-reservation for OBC women after the Constitution extends reservation to OBCs.

The 2008 Bill was referred to the Standing Committee on Law and Justice.  This Committee failed to reach a consensus in its final report.  The Committee has recommendedthat the Bill “be passed in Parliament and put in action without further delay.  Two members of the Committee, Virender Bhatia and Shailendra Kumar (both belonging to the Samajwadi Party) dissented stating that they were not against providing reservation to women but disagreed with the way this Bill was drafted.  They had three recommendations:  (i) every political party must distribute 20% of its tickets to women; (ii) even in the current form, reservation should not exceed 20% of seats; and (iii) there should be a quota for women belonging to OBCs and minorities.

The Standing committee considered two other methods of increasing representation.  One suggestion (part of election commission recommendations) was to requite political parties to nominate women for a minimum percentage of seats.  The committee felt that parties could bypass the spirit of the law by nominating women to losing seats.  The second recommendation was to create dual member constituencies, with women filling one of the two seats from those constituencies.  The Committee believed that this move could “result in women being reduced to a subservient status, which will defeat the very purpose of the Bill”.

It is interesting to note that the Committee did not reject the two recommendations of the Geeta Mukherjee Committee that are not reflected in the Bill.  The Committee concluded that the issue of reservations to Rajya Sabha and Legislative Councils needs to be examined thoroughly as the upper Houses play an equally important role under the Constitution.  Incidentally, it is not possible to reserve seats in Rajya Sabha given the current system of elections to that house (see Appendix below).

On the issue of  reservations to OBC women, the Committee said that “all other issues may be considered at an appropriate time by Government without any further delay at the present time in the passage of the Bill”.

Though the Bill does not have a consensus – it has been opposed by SP, RJD and JD(U) – most parties have publicly expressed their support for it.  The government will likely not find it difficult to muster two-third support in each House of Parliament were the Bill be taken up for consideration and passing.  It would be interesting to see whether the Bill is brought before Parliament in the upcoming Budget Session.

Appendix: Impossibility of Reservation in Rajya Sabha

Article 80of the Constitution specifies that members of state assemblies will elect Rajya Sabha MPs through single transferable vote.  This implies that the votes are first allocated to the most preferred candidate, and then to the next preferred candidate, and so on.  This system cannot accommodate the principle of reserving a certain number of seats for a particular group.  Currently, Rajya Sabha does not have reservation for SCs and STs.

Therefore, any system that provides reservation in Rajya Sabha implies that the Constitution must be amended to jettison the Single Transferable Vote system.