📰 India, China going through 'bad patch' in bilateral ties: Jaishankar
Beijing has ‘no credible explanation’ on violation of agreements: Jaishankar
•External Affairs Minister S. Jaishankar said on Friday that India and China were going through a “particularly bad patch” in their ties because Beijing had taken a set of actions in violation of agreements for which it still did not have a “credible explanation” and it was for the Chinese leadership to answer where they wanted to take the bilateral relationship.
•India had told China that progress in the disengagement process in eastern Ladakh was essential for the restoration of peace and tranquillity and that it was the basis for the development of overall bilateral ties.
•During his previous meeting with his Chinese counterpart Wang Yi in Tajikistan’s capital Dushanbe on September 16, Mr. Jaishankar emphasised that the two sides should work towards early resolution of the remaining issues along the Line of Actual Control (LAC) in eastern Ladakh while fully abiding by bilateral agreements and protocols.
•“I don’t think the Chinese have any doubt on where we stand on our relationship and what’s not gone right with it. I’ve been meeting my counterpart Wang Yi a number of times. As you would’ve experienced, I speak fairly clear, reasonably understandably [and] there is no lack of clarity so if they want to hear it, I am sure they would have heard it,” Mr. Jaishankar said in response to a question at a panel discussion on “Greater Power Competition: The Emerging World Order” at the Bloomberg New Economic Forum in Singapore.
•“We are going through a particularly bad patch in our relationship because they have taken a set of actions in violation of agreements for which they still don’t have a credible explanation and that indicates some rethink about where they want to take our relationship, but that’s for them to answer,” he further said, in an apparent reference to the eastern Ladakh border clash with China.
•The eastern Ladakh border stand-off between the Indian and Chinese militaries erupted on May 5 last year following a violent clash in the Pangong Lake areas and both sides gradually enhanced their deployment by rushing in tens of thousands of soldiers as well as heavy weaponry.
•The tension escalated following a deadly clash in the Galwan Valley on June 15 last year.
•As a result of a series of military and diplomatic talks, the two sides completed the disengagement process in the north and south banks of the Pangong Lake in February and in the Gogra area in August. The last round of military talks on October 10 to end the stand-off in the remaining friction points along the LAC in eastern Ladakh ended in a stalemate.
14th round of talks
•Meanwhile, on Thursday the two sides agreed to hold the 14th round of military talks at an early date to achieve the objective of complete disengagement in remaining friction points along the LAC in eastern Ladakh.
•Mr. Jaishankar also dismissed as “ridiculous” the notion that the United States had been strategically contracting and yielding space to others amidst a global rebalancing of power.
•He said the U.S. was today a much more flexible partner, much more open to ideas, suggestions, and working arrangements than in the past.
•“Don’t confuse it with the decline of the United States. I think that’s ridiculous,” he said in response to a question from the moderator at the session, also attended by former U.S. Secretary of State Hillary Clinton and former British Prime Minister Tony Blair.
•“It’s clear China has been expanding. But the nature of China, the manner of its growing influence is very different. And we don’t have a situation where China necessarily replaces the United States. Well, it’s natural to think of China, U.S. [and] China as the overarching happening. The fact is, there are also a lot of other countries including India, which have come much more into play. There’s been a rebalancing in the world,” he said.
•Citing Quad as an example, he pointed out that some countries were coming together on a certain set of concerns and issues or interests. The Quad comprising India, Japan, the U.S. and Australia was formed to develop a new strategy to keep the critical sea routes in the resource-rich Indo-Pacific free of any influence.
Bench reverses HC order on accident victim
•The real possibility that a bright future was in store for a young accident victim before it was cut short tragically should be considered while determining compensation, the Supreme Court observed in a judgment.
•“To have the perception that he is likely to remain static and his income to remain stagnant is contrary to the fundamental concept of human attitude which always intends to live with dynamism and move and change with the time,” a Bench led by Justice M.R. Shah said.
•The court was dealing with the death of a 21-year-old engineering student in an accident. The Madhya Pradesh High Court calculated his monthly income at Rs. 5,000. Justice Shah said the court had committed a grave error.
•“Even labourers were getting Rs. 5,000 per month under the Minimum Wages Act... the High Court ought not to have considered the income of the deceased at Rs. 5,000,” the court observed.
•Justice Shah noted “the High Court has not considered the future rise in income while awarding the future loss of income”.
•“Looking to the educational qualification and the family background, the deceased was to have a bright future. We are of the opinion that the income of the deceased at least ought to be Rs. 10,000,” the court said. The future rise of income of the road accident victim should be taken into consideration even if he or she was not earning at the time of death.
•The prospective rise in income should be calculated after considering cumulative factors, namely, passage of time, the changing society, escalation of price, the change in price index, the human attitude to follow a particular pattern of life, etc.
•“We are of the opinion that even in case of a deceased who was not serving at the time of death and had no income at the time of death, their legal heirs shall also be entitled to future prospects by adding future rise in income, i.e., addition of 40% of the income determined on guesswork considering the educational qualification, family background etc., where the deceased was below the age of 40 years,” the court held.
📰 India-built Jaffna Cultural Centre awaits inauguration
Uncertainty over who will run the facility built in 2020
•Nearly two years after its construction, the India-funded Jaffna Cultural Centre in Sri Lanka’s Northern Province awaits inauguration, amid persisting uncertainty over who will run the facility.
•The structure, with 11 floors and facilities, including an auditorium that can seat 600 persons, a conference hall, an amphitheatre and a digital library, was completed in early 2020.
•Built with an Indian grant of $11 million, the centre was envisaged as a public space to “promote, preserve and foster the cultural heritage of Jaffna”, and serve as “a hub of cultural activities” in Sri Lanka. “We hope to open it soon,” Prime Minister Narendra Modi told a rally in Chennai in February 2021, referring to the Jaffna Cultural Centre. But there has been little movement since, despite India’s subsequent offer to Sri Lanka, to absorb the administrative costs of the centre for five years.
•As per the Memorandum of Understanding signed by the Governments of India and Sri Lanka in 2014 — during Prime Minister Mahinda Rajapaksa’s second term as President — the Government of India was to hand over the facility to the Government of Sri Lanka that would, in turn, hand it over to the Jaffna Municipal Council, which was given the responsibility of managing its recurring expenses and maintenance. In effect, it was envisioned as a facility in Jaffna, that would be managed by the local municipal authority, and not the Central Government in Colombo. Now, amid questions about the Municipal Council’s ability to spare funds to run the centre, its future looks uncertain.
Army’s involvement
•Local media had also reported on “attempts” to hand over the administration to the Army, which manages the ‘Nelum Pokuna Mahinda Rajapaksa Theatre’ in Colombo, sparking concern among locals.
•“While we have old auditoriums and public spaces in Jaffna, we do not have a modern facility and that is why such a centre, for the use of our people, is welcome,” said S. Raghuram, head of the Department of Media Studies at the University of Jaffna. Observing that the northern people have wanted a stronger Provincial Government to have a greater say in development activities, he said: “The cultural centre ought to be managed by either the Provincial Government, or the local municipal authority for it to function as a people’s asset. There are fears that the Central Government might gobble up this facility too.”
•Meanwhile, the Mayor of Jaffna said he is “100 % sure” of being able to manage the facility. “I have written to the Indian High Commission, and the offices of the President and Prime Minister, asking for the building to be handed over to us. We have estimated an annual cost of LKR 34 million for that, and I have even made a budgetary allocation from the council’s total budget of LKR 1,466 million for 2022,” Mayor V. Manivannan told The Hindu.
•He is especially optimistic after India pledged further financial assistance for the centre’s administration. Foreign Secretary Harsh Vardhan Shringla made the announcement in Jaffna last month, during his four-day visit to the island nation. “India supporting the centre for five years gives us time to stabilise, use the facility, and make some revenue from it,” Mr. Manivannan added.
•Even India’s offer to absorb administrative costs for five years came as a “pre-emptive measure” to deter any Army involvement, well-placed sources told The Hindu, requesting anonymity.
•For now, the cultural centre, located next to the iconic Jaffna Public Library, stands as the tallest building in Jaffna town, waiting to be used by the people it was intended for. Expressing confidence that the facility would be launched “very soon”, Jeevan Thiyagarajah, the recently appointed Governor of the Northern Province said he would like to see the centre grow to become “a Santiniketan”.
•All nine provincial councils in Sri Lanka, including the Northern Provincial Council, are currently under their respective Governors’ rule, after their terms expired in 2018 and 2019. “We are keen to see the cultural centre evolve as a hub, where the arts are taught, shared and performed. It might even be possible to beam down the Chennai December music festival in Jaffna in future,” he said.
📰 Error corrected: On interpreting POCSO Act
Laws should not be interpreted in a way that destroys the intent behind them
•The Supreme Court has done well to correct an egregious error of interpretation committed by a judge in the Nagpur Bench of the Bombay High Court in holding that sexual assault on a child victim would require “skin-to-skin” contact. It has set aside two judgments that acquitted two offenders against children from the graver charge of sexual assault, even while sentencing them to short prison terms for lesser offences. The High Court had construed Section 7 of the Protection of Children from Sexual Offences (POCSO) Act, pertaining to sexual assault on children, in such a way that it concluded that the acts for which the accused were charged did not amount to sexual assault. The Attorney General of India took the initiative to challenge these two verdicts. The NCW also questioned the Court’s understanding of a POCSO provision, arguing that the law does not brook the sort of dilution that led to the Court ignoring the basic fact that the entire Act is aimed at penalising actions rooted in sexual intent. The Supreme Court showed alacrity and sensitivity in staying the portions of the judgment related to the diluted interpretation earlier this year. In one case, the act of groping a 12-year-old girl’s breast over her dress and, in another, the acts preparatory to an assault on a five-year-old were proved in the trial. Even after accepting these facts, the absence of physical contact with the girl’s body part was used to absolve the accused of the charge of sexual assault. In the second case, the Court took a lenient view that the act of “holding the hands of the prosecutrix” and “opening the zip of the pant” did not fit into the definition of sexual assault.
•It was quite apparent that the High Court’s understanding was flawed and out of sync with the legislative intent behind the enactment of a stringent law to protect children based on principles found in the UN Convention on the Rights of the Child. Writing for the Bench, Justice Bela M. Trivedi has said that restricting the interpretation of the words ‘touch’ or ‘physical contact’ to ‘skin to skin contact’ would be a narrow and pedantic interpretation of Section 7, and if such a narrow interpretation is accepted it would frustrate the very object of the Act. The judgment sets right not only a misinterpretation of the statute but also underscores that the core ingredient of a sexual offence is the “sexual intent” behind it. While restoring the trial court’s conviction for ‘sexual assault’ in one case, and ‘aggravated sexual assault’ in the other, the apex court has rejected attempts to interpret a law in favour of the accused when there was no real ambiguity in it. And in any case, as Justice S. Ravindra Bhat has pointed out in his concurring opinion, an interpretation should not be destructive of the law’s intention.
📰 The story of an arrest, a ‘resolution’ and retribution
The recent arrest of a former bank chairman points to attempts to hijack the recovery and resolution process
•The arrest, on October 31, 2021, of the former Chairman, State Bank of India (SBI), Pratip Chaudhuri — in a case that was related to a hotel project in Jaisalmer, Rajasthan that was financed by the bank — became the centre of attention, but reactions were mixed. There are some who consider the arrest of any banker as well-deserved without bothering to ask the reason. Such callous reactions are often spawned by ‘Wiki-pandits’. One such person wrote: “… was arrested... for selling property as (sic) throwaway price to one company and he joined same company after retirement.”
The background
•The group which ran the luxury hotel, GarhRajwada, in Jaisalmer, availed a loan of ₹24 crore and cash credit of ₹1 crore from the SBI in 2007. With repayments not forthcoming and the global financial crisis raging, the bank restructured the account in 2009. It became a non-performing asset in June 2010. The bank recalled the loan. On non-payment, it approached the Debt Recovery Tribunal (DRT) in 2013 for ₹39.69 crore. It also proceeded under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. To secure its financial interest, the bank assigned the loan to the Alchemist Asset Reconstruction Company (AARC) for ₹25 crore.
•AARC pursued the matter in the DRT and under the SARFAESI Act. It also approached the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC). It had to move the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court of India before the NCLT admitted the matter in March 2017. The dilatory tactics of the promoters, including not handing over company vehicles to the Interim Resolution Professional (IRP), delayed the process. These invited strictures from the NCLAT and the Court. The promoters also filed a first information report against the IRP resulting in his arrest. The Court quashed these proceedings.
•In December 2017, despite the attempts by the promoters to delay things on frivolous grounds, the NCLT permitted the sale of the hotel to JFC Finance. The lenders were paid in full while the promoters received just ₹1 per share, or ₹17.4 lakh. The case was the first such sale after the IBC barred promoters from bidding for their own assets.
Recovery yield
•The bank recovered ₹25 crore out of dues of ₹40 crore. Recovering over 60% is excellent when globally, such sales yield only around 30% or less. In India, recoveries average only 23.2% across various channels. It is highest through the IBC at 45.5% of the amount involved. Recoveries through the SARFAESI route come to 26.7%. Lok Adalats and DRTs come next with 6.2% and 4.1%, respectively.
•As the sale of the underlying security was done by the ARC, the consideration received by the bank when assigning its dues and its appropriateness as compared to the security value is irrelevant. This sale is unrelated to the value of the underlying security. Thus, a transparent process was followed for the sale of the receivables by the bank to the arc, and by the arc to the final buyer.
•So there was no case for malfeasance against any banker including Mr. Chaudhuri. He laid down office as Chairman of the SBI in September 2013, about six months before the bank sold the asset to ARC in March 2014. He joined the board of ARC six months later in October 2014. In any case, such individual cases do not come to the chairman of a bank of the SBI’s standing
•The logic behind accepting smaller amounts in settlement is based on a banker’s judgment that recovering ₹25 crore today is better than recovering an uncertain amount in the distant future, given the time value of money and delays in our judicial processes. The second reason is that banks are in the business of banking, and recovery is not their forte. Investing people and money in messy recovery processes — through specialised branches or otherwise — distracts a bank from its core business.
•Mr. Chaudhuri’s arrest took place in a related case where the same borrower alleged fraud in an apparent act of retribution. The case was initially dismissed for want of criminality. The matter was later revived and a non-bailable warrant issued. The arrest of Mr. Chaudhuri and not that of the other directors indicate that he was either not briefed or defended properly; or he was the victim of overconfidence.
A destabilisation
•The episode betrays a lack of understanding of the recovery process and its underlying principles. These could have been clarified during discussions. That there were none indicates an attempt to put the system under duress through blackmail to get the desired result.
•The balance of power between the lender and borrower has moved like a pendulum. At periodic intervals, the Government and the Reserve Bank of India (RBI) have moved to strengthen the hands of the lender vis-à-vis the borrower, and vice-versa. But, an unstable equilibrium was often restored with the system, bankers and other gatekeepers included, conspiring to put the system back in favour of the borrower.
•In 1962, after the Palai Central Bank failed, an amended RBI Act provided for a de facto credit information bureau, which would have been among the first in the world. What would have strengthened information sharing among bankers soon became dysfunctional. A decade later, in 1971, a study group recommended setting up a Credit Information Trust. The entire system was discontinued in 1995.
•The Credit Authorisation Scheme, inventory norms, and other regulations were started from the late 1960s onwards with similar pious intentions. But, an industry of professionals sprung up to train and advise borrowers on how to cook up figures to get the level of credit they wanted. The Debt Recovery Tribunal was introduced in 1993 following the Narasimham Committee recommendations of 1991. About a decade later, the SARFAESI Act was passed. These were intended to speed up recovery and strengthen the hands of bankers. But, the system, over the years, became compromised in different ways. This included the non-appointment of judges, failed auctions, delayed payments, and so on. The IBP is the most effective system to date to secure the interests of the lender. Mr. Chaudhuri’s arrest is an early symptom of attempts to hijack the system. An alert Government and regulator should move fast to close the gaps. Those who wield high-level fiduciary responsibilities should also be circumspect deciding who they associate with later. Very often they are not after the persons or their worth, but their last designation.
