Parliament sessions are usually held thrice a year: once in February for the Budget Session, once around July or August for the Monsoon Session, and once in November for the Winter Session.  This year, the government is yet to announce the dates for the Winter Session.  While there has been uncertainty around whether Parliament will meet, ministers in the government have indicated that the Session will be held soon.[1]

The practice of allowing the government to convene Parliament differs from those followed in other countries.  Some of these countries have a limited role for the government in summoning the legislature, because in a parliamentary democracy the executive is accountable to Parliament.  Allowing the government to call the Parliament to meet could be in conflict with this principle.  While we wait for the government to announce the dates for the Winter Session, this post looks at the relationship between Parliament and the government, recommendations made over the years on improving some parliamentary customs, and discusses certain practices followed by other countries.

What is the role of Parliament in a democracy?

The Constitution provides for the legislature to make laws, the government to implement laws, and the courts to interpret and enforce these laws.  While the judiciary is independent from the other two branches, the government is formed with the support of a majority of members in the legislature.  Therefore, the government is collectively responsible to Parliament for its actions.  This implies that Parliament (i.e. Lok Sabha and Rajya Sabha) can hold the government accountable for its decisions, and scrutinise its functioning.  This may be done using various methods including, during debates on Bills or issues on the floor of Parliament, by posing questions to ministers during Question Hour, and in parliamentary committees.

Who convenes Parliament?

Parliament must be convened by the President at least once in every six months.  Since the President acts on the advice of the central government, the duration of the session is decided by the government.

Given the legislature’s role in keeping the executive accountable for its actions, one argument is that the government should not have the power to convene Parliament.  Instead, Parliament should convene itself, if a certain number of MPs agree, so that it can effectively exercise its oversight functions and address issues without delay.  Some countries such as the United Kingdom and Australia release an annual calendar with the sitting dates at the beginning of the year.

How regularly has Parliament been meeting over the years?

Over the years, there has been a decline in the sitting days of Parliament.  While Lok Sabha met for an average of 130 days in a year during the 1950s, these sittings came down to 70 days in the 2000s.  Lesser number of sittings indicates that Parliament was able to transact less business compared to previous years.  To address this, the National Commission to Review the Working of the Constitution has recommended that Lok Sabha should have at least 120 sittings in a year, while Rajya Sabha should have 100 sittings.[2] Sitting days of Parliament

The Constituent Assembly, while drafting the Constitution had debated the power that should be given to Parliament with regard to convening itself.  Mr. K. T. Shah, a member of the Assembly, had suggested that in case the President or the Prime Minister are unable or unwilling to call for a Parliament session, the power to convene the Houses should be given to the presiding officers of those Houses (i.e., the Chairman of Rajya Sabha and the Speaker of Lok Sabha).  In addition, he had also suggested that Parliament should itself regulate its procedure, sittings and timings.[3]

How does Parliament hold the government accountable?

One of the forums of holding the government accountable for its actions is the Question Hour.  During Question Hour, MPs may pose questions to ministers related to the implementation of laws and policies by the government.questions answered

In the 16th Lok Sabha, question hour has functioned in Lok Sabha for 77% of the scheduled time, while in Rajya Sabha it has functioned for 47%.  A lower rate of functioning reflects time lost due to disruptions which reduces the number of questions that may be answered orally.  While Parliament may sit for extra hours to transact other business, time lost during Question Hour is not made up.  Consequently, this time lost indicates a lost opportunity to hold the government accountable for its actions.

Further, there is no mechanism currently for answering questions which require inter-ministerial expertise or relate to broader government policy.  Since the Prime Minister does not answer questions other than the ones pertaining to his ministries, such questions may either not get adequately addressed or remain unanswered.  In countries such as the UK, the Prime Minister’s Question Time is conducted on a weekly basis.  During the 30 minutes the Prime Minister answers questions posed by various MPs.  These questions relate to broader government policies, engagements, and issues affecting the country.[4]

How is public opinion reflected in Parliament?

MPs may raise issues of public importance in Parliament, and examine the government’s response to problems being faced by citizens through: (i) a debate, which entails a reply by the concerned minister, or (ii) a motion which entails a vote.  The time allocated for discussing some of these debates or Bills is determined by the Business Advisory Committee of the House, consisting of members from both the ruling and opposition parties.

Using these methods, MPs may discuss important matters, policies, and topical issues.  The concerned minister while replying to the debate may make assurances to the House regarding steps that will be taken to address the situation.  As of August 2017, 50% of the assurances made in the 16th Lok Sabha have been implemented.[5] Motions

Alternatively, MPs may move a motion for: (i) discussing important issues (such as inflation, drought, and corruption), (ii) adjournment of business in a House in order to express displeasure over a government policy, or (iii) expressing no confidence in the government leading to its resignation.  The 16thLok Sabha has only discussed one adjournment motion so far.

To improve government accountability in Parliament, the opposition in some countries such as the UK, Canada, and Australia forms a shadow cabinet.[6],[7]  Under such a system, opposition MPs track a certain portfolio, scrutinise its performance and suggest alternate programs.  This allows for detailed tracking and scrutiny of ministries, and assists MPs in making constructive suggestions.  Some of these countries also provide for days when the opposition parties decide the agenda for Parliament.

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[1] Sonia Gandhi accuses of Modi govt ‘sabotaging’ Parliament Winter session, Arun Jaitley rejects charge’, The Indian Express, November 20, 2017, http://indianexpress.com/article/india/jaitley-refutes-sonia-gandhis-charge-of-sabotaging-parliament-session-says-congress-too-had-delayed-sitting-4946482/; ‘Congress also rescheduled Parliament sessions: Arun Jaitley hits back at Sonia Gandhi’, The Times of India, November 20, 2017, https://timesofindia.indiatimes.com/india/congress-also-rescheduled-parliament-sessions-arun-jaitley-hits-back-at-sonia-gandhi/articleshow/61726787.cms.

[2]  Parliament and State Legislatures, Chapter 5, National Commission to Review the Working of the Constitution, March 31, 2002, http://lawmin.nic.in/ncrwc/finalreport/v1ch5.htm.

[3] Constituent Assembly Debates, May 18, 1949.

[4]  Prime Minister’s Question Time, Parliament of the United Kingdom, http://www.parliament.uk/about/how/business/questions/.

[5]  Lok Sabha and Session Wise Report of Assurances in Lok Sabha, Ministry of Parliamentary Affairs, http://www.mpa.gov.in/mpa/print_summary_lses_ls.aspx.

[6]  Her Majesty’s Official Opposition, Parliament of the United Kingdom, http://www.parliament.uk/mps-lords-and-offices/government-and-opposition1/opposition-holding/.

[7]  Current Shadow Ministry List, Parliament of Australia, http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Parliam

The Insolvency and Bankruptcy Code, 2016 is listed for passage in Rajya Sabha today.  Last week, Lok Sabha passed the Code with changes recommended by the Joint Parliamentary Committee that examined the Code.[1],[2]  We present answers to some of the frequently asked questions in relation to the Insolvency and Bankruptcy Code, 2016. Why do we need a new law?Time resolve insolvency1 As of 2015, insolvency resolution in India took 4.3 years on an average.  This is higher when compared to other countries such as United Kingdom (1 year) and United States of America (1.5 years).  Figure 1 provides a comparison of the time to resolve insolvency for various countries.  These delays are caused due to time taken to resolve cases in courts, and confusion due to a lack of clarity about the current bankruptcy framework. What does the current Code aim to do? The 2016 Code applies to companies and individuals.  It provides for a time-bound process to resolve insolvency.  When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency within a 180-day period.  To ensure an uninterrupted resolution process, the Code also provides immunity to debtors from resolution claims of creditors during this period. The Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency. Who facilitates the insolvency resolution under the Code? The Code creates various institutions to facilitate resolution of insolvency.  These are as follows:

  • Insolvency Professionals: A specialised cadre of licensed professionals is proposed to be created. These professionals will administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.
  • Insolvency Professional Agencies: The insolvency professionals will be registered with insolvency professional agencies. The agencies conduct examinations to certify the insolvency professionals and enforce a code of conduct for their performance.
  • Information Utilities: Creditors will report financial information of the debt owed to them by the debtor. Such information will include records of debt, liabilities and defaults.
  • Adjudicating authorities: The proceedings of the resolution process will be adjudicated by the National Companies Law Tribunal (NCLT), for companies; and the Debt Recovery Tribunal (DRT), for individuals. The duties of the authorities will include approval to initiate the resolution process, appoint the insolvency professional, and approve the final decision of creditors.
  • Insolvency and Bankruptcy Board: The Board will regulate insolvency professionals, insolvency professional agencies and information utilities set up under the Code.  The Board will consist of representatives of Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law.

What is the procedure to resolve insolvency in the Code? The Code proposes the following steps to resolve insolvency:

  • Initiation: When a default occurs, the resolution process may be initiated by the debtor or creditor. The insolvency professional administers the process.  The professional provides financial information of the debtor from the information utilities to the creditor and manage the debtor’s assets.  This process lasts for 180 days and any legal action against the debtor is prohibited during this period.
  • Decision to resolve insolvency: A committee consisting of the financial creditors who lent money to the debtor will be formed by the insolvency professional. The creditors committee will take a decision regarding the future of the outstanding debt owed to them.  They may choose to revive the debt owed to them by changing the repayment schedule, or sell (liquidate) the assets of the debtor to repay the debts owed to them.  If a decision is not taken in 180 days, the debtor’s assets go into liquidation.
  • Liquidation: If the debtor goes into liquidation, an insolvency professional administers the liquidation process. Proceeds from the sale of the debtor’s assets are distributed in the following order of precedence: i) insolvency resolution costs, including the remuneration to the insolvency professional, ii) secured creditors, whose loans are backed by collateral, dues to workers, other employees, iii) unsecured creditors, iv) dues to government, v) priority shareholders and vi) equity shareholders.

What are some issues in the Code that require consideration?

  • The Bankruptcy Board (regulator) will regulate insolvency professional agencies (IPAs), which will further regulate insolvency professionals (IPs).  The rationale behind multiple IPAs overseeing the functioning of their member IPs, instead of a single regulator is unclear. The presence of multiple IPAs  operating simultaneously could enable competition in the sector. However, this may also lead to a conflict of interest between the regulatory and competitive goals of the IPAs.  This structure of regulation varies from the current practice where the regulator directly regulates its registered professionals.  For example, the Institute of Chartered Accountants of India (which regulates chartered accountants) is directly responsible for regulating its registered members.
  • The Code provides an order of priority to distribute assets during liquidation. It is unclear why: (i) secured creditors will receive their entire outstanding amount, rather than up to their collateral value, (ii) unsecured creditors have priority over trade creditors, and (iii) government dues will be repaid after unsecured creditors.
  • The smooth functioning of the Code depends on the functioning of new entities such as insolvency professionals, insolvency professional agencies and information utilities.  These entities will have to evolve over time for the proper functioning of the system.  In addition, the NCLT, which will adjudicate corporate insolvency has not been constituted as yet, and the DRTs are overloaded with pending cases.

 


 

  1. The Insolvency and Bankruptcy Code, 2016, http://www.prsindia.org/administrator/uploads/media/Bankruptcy/Bankruptcy%20Code%20as%20passed%20by%20LS.pdf.
  2. Report of the Joint Committee on the Insolvency and Bankruptcy Code, 2015, April 28, 2016, http://164.100.47.134/lsscommittee/Joint%20Committee%20on%20Insolvency%20and%20Bankruptcy%20Code,%202015/16_Joint_Committee_o n_Insolvency_and_Bankruptcy_Code_2015_1.pdf

A version of this blog appeared in the Business Standard on May 7, 2016.