Tuesday, October 26, 2021
View PointA regime for reforms and better rules

A regime for reforms and better rules

Published: 7th Oct 2021 12:46 am

By B Yerram Raju

- Advertisement -

The Centre recently passed the Account Aggregators’ Bill in Parliament and claimed that the subjects of the Bill, viz, Micro, Small and Medium Enterprises, would get easy access to the credit window through Open Credit Enablement Networks. Last June, the MSME Development Act, 2006, was amended to give credence to the twin criteria of investment and turnover as the basis for categorisation. Both are Acts from the Union government on a subject that is the domain of the State governments.

‘Law’ is said to be a ‘social vehicle’, which moves on irrespective of the hurdles it comes across. The vehicle with a simple wheel of spokes has been transformed into a gigantic and complex wheel moving towards the new horizon of cyber life. Any enactment, viewed in the context of its objectives, cannot be treated as redundant. But when viewed from the point of the burden it imposes on the subjects, the Doctrine of Proportionality demands that such laws be rendered inapplicable to those subjects whose compliance is either irrelevant to the spirit of the laws or the ability to comply simply does not exist.

Tax laws secure revenue for the needs of governance. There are also laws, which seek that commerce and industry should serve the national interest and public policy. All these laws vest governments with powers to administer them in the means to verify and enforce compliance. To this extent, at least in principle, there ought to be no disagreements. However, when these very means and powers become ends in themselves, the objects get obscure and eventually benefit only unscrupulous interests.
During the years 2014-21, several laws have been made redundant and rules amended to get a better ranking in the World Bank’s Ease of Doing Business criteria. This article analyses the legal position of the Acts and Rules constitutionally for such laws.

Initiatives for Change

• Multiplicity of laws, rules and regulations will continue to exist and will be applicable to even MSMEs. The irrelevance of such laws and their redundancy have not been fully examined. Mere removal of the requirements of returns or records is sufficient if the substantive laws remain applicable even though they are not redundant and regressive.

• Rules have not been framed under the MSMED Act, 2006, barring the section relating to Delayed Payments – MSE Facilitation Council. The GoI advised all States to frame rules and establish regional benches for the Council as warranted.

• Constitution of District and State Authorities as jumbo bodies and the functions and roles assigned to them need continual scrutiny to avoid implementation delays. It has not distinguished properly between regulation necessary in the public interest and needless officiousness. It seeks to provide either abdication in toto or unwarranted interference by new authorities. The Zonal Committees for revival set up under the RBI mandate for revival and restructuring serve as an example.

• The Act ignores the delegated legislative competence of the State government in providing substantial relief without the full legislative process.

Compulsions of Legislative Procedures

Under Article 246(1), Parliament has the exclusive power to make laws on the subjects listed in the Union List of the Seventh Schedule. These include income taxe, excise duties, taxes on interstate trade or commerce. Under Article 248, Parliament has the exclusive power to make laws on subjects that are not included in any of the three lists in the Seventh Schedule.

Under Article 246(2), both Parliament and the State legislature have the power to make laws on the subjects in the Concurrent List. These include most labour laws. Under Article 254, the laws made by Parliament prevail, in case of repugnance, over any State law; except when the State law has been reserved for the assent of the President. If the assent is received, the State law prevails; but Parliament has the power to repeal or amend it. Under Article 246(3), the State legislature has the exclusive power to make laws on subjects listed in the State List of the Seventh Schedule.

In most labour laws dealing with factories, payment of wages, bonus, gratuity, the State government is empowered to make rules and/or grant substantial exemptions.

Under the General Clauses Act, the power to notify or to make rules includes the power to amend, repeal and rescind. Therefore, any burden caused by the rules and the procedures prescribed thereby can be relieved quickly and effectively by notifications of the State government without going through a protracted legislative process.

While there can be no doubt that the plethora of laws requires consolidation, since the problems arise more from bureaucratically convenient rules than laws per se, the ease of doing business as a principle would require that governments amend, repeal, rescind the problematic rules and de-mystify the laws.

Another area that deserves reform is the Treasury rules. Every rule in the Treasury code built during the British regime suited both the Union and State governments for manoeuvrability in Budget provisions. For example, when the Budget is passed with quarterly allocations under different heads, the releases do not conform to those sanctions in the Budget. Many times, even the cheques issued by the drawing authority have been withheld by the State government concerned or the Union government causing serious business disruption. Treasury rules also have loopholes that provide for unholy deals. Many of these rules have become redundant with the introduction of technology.

Information Technology

Multiple apps have caused insecurity leading to frauds of huge dimensions. Therefore, while digitising firms, they should be insulated from the harm that could damage them. Here, a manual of ‘do’s and don’ts’ should be part of an auto operative mechanism for micro and small firms. New technologies should be put to the rigour of compliance at least risk.

Firms operating through call centres are one source of entry for fraudsters. A call centre can call any number and communicate but can restrict a return communication. There will always be a caution held out that the call is being recorded but at the receiving end, the person may not be recording it. All networks claim building firewalls but several cybercrimes reveal these firewalls are easily broken.

When the IT Act was formulated, the nation did not imagine the extent of its use. The interoperability of systems has consequences both beneficial and harmful.

Telecommunications, therefore, gave an opportunity for exploitation. One way to arrest this is restricting all the operators to issue only one SIM card to the user against the approved KYC. No company can process a request for a duplicate SIM without proper due diligence and without blocking all transactions of the previous SIM from the date and time of reporting. Multiple SMSes should also be restricted to only those institutions that could take the consequences of abuse of such messages by any recipient.

During the pandemic, when several have resorted to online purchases and sales, the rise in frauds scaled up 31% over 2019-20. Countries that are cyber secure are quite a few: Spain, US, Canada, UK, France, Malaysia, Russia, and China. It is worthwhile for India to filter all its IT Act provisions by looking at those comparatively secure nations.

The author is Economist and Risk Management Specialist

Also Read

- Advertisement -

Latest News

- Advertisement -
- Advertisement -