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Current Affairs – 7 April 2021

Current Affairs (7th April 2021)

EVM transport & campaign bans

Context:

  • Last week, Assembly elections in Assam saw the Election Commission of India (ECI)at the centre of two controversies. Both drew strong political reactions with Congress accusing the Commission of failing in it duties.
  • I Controversy: An Electronic Voting Machine (EVM) was found in a private vehicle belonging to a BJP candidate’s spouse.
  • II Controversy: ECI’s decision to relax its decision to ban BJP minister Himanta Biswa Sarma for 48 hours from campaigning.

What is the ECI’s protocol for the transportation of EVMs?

  • The Commission’s transport protocol for polled and reserve EVMs dictates that the voting machines, under no circumstances, should be taken in private custody or a private place.
  • All EVMs, after voting is complete, should be under cover of armed police at all times.

Features of ECI-EVMs

  • ECI-EVMs are stand-alone non-networked machines
  • The ECI-EVMs are manufactured in two PSUs namely ECIL and BEL, unlike machines used in other countries, which were manufactured entirely by private entities. Hence there is no chance of involvement of vested interest of private players or technology vendors in decision making or production of the ECI-EVMs.
  • ECI-EVMs have been time and again successfully verified and certified by an independent Technical Experts Committee after an end-to-end testing process. Standardisation Testing and Quality Certification (STQC) under Ministry of Information and Technology, an accredited third party entity, conducts standardization and certification of ECI EVMs produced by manufacturers, unlike the machines used in Netherlands.
  • In ECI EVMs data is stored internally and not transferrable by any device, unlike other countries where voting data recorded in the DRM is transferred by means of CD, etc.
  • Commission has evolved full end to end security protocol and administrative safeguards for the use, storage, transportation and tracking of ECI EVMs, unlike in other countries where NEDAP machines were used.
  • Every EVM has a unique number attached to it, which is recorded in the Election Commission’s database through EVM Tracking Software. This number of the EVM can always be cross-checked against the database.
  • The software used in these EVMs is One Time Programmable (OTP), which can’t be re-written after manufacture.
  • The ECI-EVMs are always under strict, uniform, high profile administrative and physical security as per legal framework across the country.

 

Insolvency and Bankruptcy Code

Context:

  • The central government has promulgated an ordinance allowing the use of pre-packs as an insolvency resolution mechanism for Micro, Small and Medium Enterprises (MSMEs) with defaults up to Rs 1 crore, under the Insolvency and Bankruptcy Code.

About:

  • The move comes soon after the end of a one-year suspension of insolvency initiation imposed by the government in light of the Covid-19 pandemic.
  • The government had last year also increased the minimum default threshold for insolvency proceedings from Rs 1 lakh to Rs 1 crore.

What are pre-packs?

  • A pre-pack is the resolution of the debt of a distressed company through an agreement between secured creditors and investors instead of a public bidding process.
  • This system of insolvency proceedings has become an increasingly popular mechanism for insolvency resolution in the UK and Europe over the past decade.
  • Under the pre-pack system, financial creditors will agree to terms with a potential investor and seek approval of the resolution plan from the National Company Law Tribunal (NCLT).
  • The approval of a minimum of 66 per cent of financial creditors that are unrelated to the corporate debtor would be required before a resolution plan is submitted to the NCLT.
  • Further NCLTs are also required to either accept or reject any application for a pre-pack insolvency proceeding before considering a petition for a Corporate Insolvency Resolution Process (CIRP).

Benefits of pre-packs over the CIRP:

  • One of the key criticisms of the CIRP has been the time taken for resolution.  At the end of December 2020, over 86 per cent of the 1717 ongoing insolvency resolution proceedings had crossed the 270-day threshold.
  • One of the key reasons behind delays in the CIRPs are prolonged litigations by erstwhile promoters and potential bidders.
  • The pre-pack in contrast is limited to a maximum of 120 days with only 90 days available to the stakeholders to bring the resolution plan to the NCLT.
  • Another key difference between pre-packs and CIRP is that the existing management retains control in the case of pre-packs while a resolution professional takes control of the debtor as a representative of financial creditors in the case of CIRP. This allows for minimal disruption of operations relative to a CIRP.

Motivation behind the introduction of the pre-pack

  • According to sources aware of developments, pre-packs are largely aimed at providing MSMEs with an opportunity to restructure their liabilities and start with a clean slate while still providing adequate protections so that the system is not misused by firms to avoid making payments to creditors.
  • Prepacks will help corporate debtors to enter into consensual restructuring with lenders and address the entire liability side of the company.
  • Government should consider setting up specific benches of the NCLT to deal with pre-pack resolution plans to ensure that they are implemented in a time-bound manner.
  • Pre-pack provisions introduced by the central government also provided for adequate protection to ensure the provisions were not misused by errant promoters.
  • The pre-pack mechanism allows for a swiss challenge for any resolution plans which proved less than full recovery of dues for operational creditors.
  • Under the swiss challenge mechanism, any third party would be permitted to submit a resolution plan for the distressed company and the original applicant would have to either match the improved resolution plan or forego the investment.
  • Creditors are also permitted to seek resolution plans from any third party if they are not satisfied with the resolution plan put forth by the promoter.
  • The pre-pack is expected to be rolled out to all corporations over time as legal issues around the provisions are settled through case law, according to experts.

 

India growth outlook of 12.5% faces severe risks’ 

Context:

  • The International Monetary Fund’s ‘World Economic Outlook (WEO): Managing Divergent Recoveries’ — released ahead of the virtual World Bank ­IMF Spring Meetings — forecasted India’s economy to expand by a relatively more sedate 6.9%in the next financial year.

About:

  • After an estimated contraction of 8% in the 12 months ended March 31, India is projected to grow at 12.5% in the current fiscal year, an outlook that, however, now faces significant downside risks because of the ongoing wave of COVID­19 in the country.
  • The projections for India were based on evidence to support the normalisation of economic activity,these forecasts had preceded the current wave of COVID­19 in India, “which is quite concerning”.
  • On the global economy, the IMF expected growth to rebound to 6% this year, after an estimated contraction of 3.3% in 2020 (calendar year), before easing to 4.4% in 2022.
  • There were, however, significant divergences within and between countries. Projections for 2021 were slightly higher than they were in October 2020 due to fiscal support in some large economies and a vaccine ­supported recovery.
  • A 1.3 percentage point forecast upgrade for the U.S. especially contributed to this, resulting in U.S. growth projections being reset to 6.4% and 3.5% this calendar year and next.
  • The U.S. GDP level in 2022 is forecast to be higher than in a non-­pandemic scenario — the only large economy for which this is true.
  • Other economies are also expected to rebound this year albeit at a slower rate, as per the IMF. The Euro Area is projected to grow at 4.4% and 3.8% over these time periods; China, at 8.4% and 5.6%.

World economy

  • Global growth is projected to settle at 3.3% in the medium term due to damage inflicted on supply potential as well factors that pre­date the pandemic such as ageing (which has resulted in slower labour force growth in advanced economics and some emerging markets).
  • Averting divergent outcomes would mean “resolving the health crisis everywhere”. The average annual loss in per capita GDP over the 2020-­24 period relative to pre­pandemic forecasts is expected to be 5.7% in low ­income. countries and 4.7% in emerging markets. For advanced economies, this number is lower at 2.3%.

 

National Security Act, 1860

Context:

  • National Security Act, the draconian law, is so readily invoked in some cases to prevent the person from being released from judicial custody even if the accused had got bail.

About:

  • NSA empowers the state to detain a person without a formal charge and without trial.
  • Under the NSA, a person is taken into custody to prevent him or her from acting in any manner prejudicial to “the security of the state” or for “maintenance of the public order.”
  • It is an administrative order passed either by the Divisional Commissioner or the District Magistrate — and not detention ordered by police based on specific allegations or for a specific violation of the law.
  • Even if a person is in police custody, the DM can slap NSA against him. Or, if a person has been granted bail by a trial court, he can be immediately detained under the NSA. If the person has been acquitted by the court, the same person can be detained under the NSA.
  • The law also takes away an individual’s constitutional right to be produced before the magistrate within 24 hours as is the case when the accused is in police custody; the detained person also does not have the right to move a bail application before a criminal court.
  • Also, the DM who passed the detention order is protected under the Act: no prosecution or any legal proceeding can be initiated against the official who carried out the orders.
  • Therefore, the writ of Habeas Corpus is the only protection guaranteed under the Constitution against the unchecked state power of taking people into custody under the NSA.

Judiciary observations:

  • The higher judiciary has held that the preventive detention under NSA has to be strictly construed keeping in view the “delicate balance between social security and citizen freedom”.
  • The Supreme Court has held that to prevent “misuse of this potentially dangerous power, the law of preventive detention has to be strictly construed” and “meticulous compliance with the procedural safeguards” has to be ensured.
  • One crucial procedural safeguard under the NSA is granted under Article 22(5), where all the detained persons have the right to make an effective representation before an independent advisory board, which consists of three members; and the board is chaired by a member who is, or has been, a judge of a High Court.
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