PM IAS EDITORIAL ANALYSIS – JAN 04

Editorial #1: The Looming Threat to Federalism and Democratic Tenets

Context

The proposal for ‘One Nation, One Election’ (ONOE) has reignited debates about its potential impact on India’s federal structure and democratic ethos. While the central government advocates the plan for its administrative and fiscal efficiencies, critics argue that it risks undermining the autonomy of states and the spirit of federalism enshrined in the Constitution.

Introduction

The ONOE framework, championed by the Bharatiya Janata Party-led National Democratic Alliance government, aims to synchronize Lok Sabha and State Assembly elections into a single electoral cycle. Proponents highlight the efficiency and cost-saving aspects, but opponents caution against its implications on India’s democratic and federal fabric. The proposal, while ambitious, raises critical constitutional, logistical, and governance-related challenges.

Historical Context of Simultaneous Elections

Simultaneous elections are not novel to India.

• Initial Practice: In the years following Independence, the Election Commission of India (ECI) conducted synchronized elections for both Parliament and State Assemblies.
• Disruption: This practice was disrupted with the imposition of Article 356 (President’s Rule) in Kerala in 1959, signaling the beginning of federal overreach.
  • The Union’s will began to override state autonomy, altering the cooperative federal framework.

Purpose and Misuse of Article 356

• Constitutional Mechanism: Article 356 was envisioned as a safeguard to restore governance in states where administration had collapsed.
• Dr. B.R. Ambedkar’s Optimism: Dr. Ambedkar described it as a “dead letter,” emphasizing its sparing use.
• Reality: Contrary to this intent, successive governments misused Article 356 to dismiss elected state governments, often for political expediency.
  • Over 130 instances of its invocation since Independence reflect the distortion of its original purpose.
  • Even after the landmark S.R. Bommai Case (1994) judgment, which sought to curb arbitrary dismissals, such practices persisted.

Challenges of Defection and Anti-Defection Laws

• Threat to Stability: Defections have destabilized democratically elected governments, leading to unconstitutional regime changes.
• Anti-Defection Law: Introduced through the 52nd Amendment (1985) and enshrined in the Tenth Schedule, this law penalizes defectors but has loopholes:
  • Lack of a time-bound framework for Speakers to decide disqualification petitions.
  • Provisions for “group defections” dilute its efficacy.
  • Consequently, defections remain rampant, undermining democratic governance.

ONOE Proposal and Concerns

• Constitutional Amendments Required: ONOE necessitates amendments to Articles 83 and 172, which guarantee fixed five-year terms for Parliament and State Assemblies.
• Erosion of State Autonomy: Aligning state elections with the Lok Sabha would curtail or extend state governments’ tenures, compromising federal principles.
  • The federal structure, a basic feature of the Constitution, ensures states function as relatively independent units addressing localized issues.
  • Synchronizing elections risks diluting this independence, reducing states to subordinate entities.

Impact on Democratic Processes

• Blurred Electoral Accountability: Concurrent elections may hinder voters’ ability to assess state and national governments distinctly.
• Midterm ONOE Issues: If a state government falls midterm, elections for the remainder of the synchronized cycle could undermine the democratic principle of “one person, one vote, one value.”
  • Example: A government elected for an abbreviated term would lack full democratic legitimacy.

Logistical and Fiscal Challenges

• Enormous Resource Demand: Conducting simultaneous elections for over 900 million voters requires significant logistical and administrative efforts. Aligning Lok Sabha, state, and local body elections would further strain resources.
• Risk of Voter Fatigue: The complexity of managing multiple elections concurrently could confuse and discourage voters, impacting participation rates.

Federalism Under Siege

• Systemic Reforms Needed: Before ONOE can be implemented, structural challenges must be addressed:
  • Misuse of Article 356.
  • Strengthening anti-defection laws to ensure stability.
  • Providing a realistic governance period for governments to deliver on policies.
• Threat to Plurality: The federal structure is not merely procedural; it recognizes India’s diversity and plurality. Forcing states into a unified electoral cycle erodes their autonomy and weakens the federal framework.

Conclusion

The ONOE proposal, while aiming for administrative efficiencies, must not compromise the democratic and federal principles of governance. Its implementation without addressing foundational issues could exacerbate systemic vulnerabilities. True democratic governance demands strengthening the autonomy of state governments and ensuring their partnership in the federal polity. Hastily imposed ONOE reforms risk becoming a tool for centralization rather than a step toward democratic deliverance. Addressing these challenges is essential to uphold the letter and spirit of the Indian Constitution.

Editorial #2: India, Cross-Border Insolvency, and the Need for Legal Reform

Context

The globalization of trade and commerce has intensified the complexities of cross-border insolvencies. India’s existing legal framework is insufficient to address these challenges, with dormant statutory provisions and delayed amendments hindering progress. A robust and predictable cross-border insolvency mechanism is critical to ensuring economic stability, facilitating foreign investment, and fostering corporate restructuring.

Introduction

India’s historical journey with insolvency laws began under colonial rule. Despite early legislative attempts such as the Indian Insolvency Act of 1848, and subsequent enactments like the Presidency-Towns Insolvency Act, 1909, and the Provincial Insolvency Act, 1920, these laws catered only to domestic insolvencies. The absence of provisions for cross-border insolvency left a significant void in the legal framework, which remains inadequately addressed even today.

Evolution of Insolvency Laws in India

• Post-Independence Stagnation: After Independence, insolvency laws remained largely unchanged despite recommendations for modernization, such as the Third Law Commission’s 26th Report (1964).
• Economic Liberalization: The 1990s ushered in a focus on comprehensive insolvency reform, driven by globalization and liberalization.
• Committee Recommendations: Various expert committees, including the Eradi Committee (2000), Mitra Committee (2001), and Irani Committee (2005), advocated adopting the UNCITRAL Model Law on Cross-Border Insolvency (1997) to address these issues effectively.

The Insolvency and Bankruptcy Code (IBC), 2016

• The IBC marked a transformative step in India’s insolvency landscape. However, the absence of cross-border insolvency provisions in its initial draft led to the incorporation of Sections 234 and 235:
  • Section 234: Permits reciprocal agreements with foreign countries for cross-border insolvency.
  • Section 235: Allows Indian courts to seek assistance from foreign courts via a “letter of request.”

Challenges in Cross-Border Insolvency

The Jet Airways Case (2019): A Critical Turning Point

• The State Bank of India vs. Jet Airways (India) Limited case exposed critical flaws in the cross-border insolvency framework:
  • Lack of reciprocal arrangements between India and the Netherlands.
  • Non-notification of Sections 234 and 235, rendering them unenforceable.
• These provisions remain “dead letters,” existing in theory but devoid of practical utility.

Ad Hoc Protocols and Judicial Burden

• In response to the regulatory void, courts have resorted to ad hoc cross-border insolvency protocols, including in the Jet Airways case. While these protocols offer temporary relief, they:
  • Increase judicial workload.
  • Escalate transaction costs.
  • Delay resolutions, diminishing the value of debtors’ assets.

Addressing the Regulatory Gaps

Committee Recommendations

• The Insolvency Law Committee (2018) and the Cross-Border Insolvency Rules/Regulation Committee (2020) identified significant shortcomings in the existing framework.
• Both committees recommended adopting the UNCITRAL Model Law on Cross-Border Insolvency to establish a comprehensive, predictable, and efficient framework.

Parliamentary Standing Committee Reports

• The 32nd Report (2021) and 67th Report (2024) underscored the urgency of incorporating cross-border insolvency provisions into the IBC. Despite these recommendations, progress has been sluggish.

Need for Reform

1. Adopting the UNCITRAL Model Law:
   • Provides a structured, internationally recognized framework.
   • Encourages foreign investment by ensuring predictability in cross-border insolvency resolutions.
2. Judicial Modernization:
   • Adoption of Judicial Insolvency Network (JIN) Guidelines (2016) and its Modalities of Court-to-Court Communication (2018) would:
     • Streamline judicial coordination.
     • Enhance transparency.
     • Improve efficiency in handling cross-border insolvency cases.
3. Expanding NCLT Powers:
   • The National Company Law Tribunal (NCLT) is the sole adjudicating authority under Section 60(5) of the IBC. However:
     • It lacks the power to recognize or enforce foreign judgments.
     • Rule 11 of the NCLAT Rules (2016), which could grant inherent jurisdiction for cross-border matters, remains unimplemented.

The Way Forward

To address systemic inefficiencies, India must:

• Accelerate Legislative Amendments: Enforce Sections 234 and 235 of the IBC or replace them with more effective provisions aligned with the UNCITRAL Model Law.
• Enhance Institutional Capacity: Strengthen the NCLT’s jurisdiction to handle cross-border cases and streamline communication with foreign courts.
• Focus on Global Integration: Modernize India’s insolvency framework to align with international best practices, thereby enhancing the nation’s global economic competitiveness.

Conclusion

India’s dismal state of cross-border insolvency regulation demands urgent reform. Adopting the UNCITRAL Model Law, empowering judicial institutions, and addressing systemic lacunae are essential to create a robust and reliable framework. A forward-looking approach will not only attract foreign investments but also uphold India’s economic resilience and global standing. Ensuring timely action in this domain is vital for fostering investor confidence and achieving sustainable economic growth.