INDIA UNLEASHEDMarch 2018

Dear Readers, IN BRIEFThe last full budget of the NDA Government saw the expected transition in focus from 'ease of doing business in India' to 'ease of living.' In the last year of its term, one shouldn't expect any bold big ticket reforms.

As the f i rs t term of NDA government enters its last phase, it is time to critically analyse the performance of the government. One area, ostensibly overlooked by commentators is the area of labour law reforms. Historically labour laws have been a no-go area for all previous Governments and the need for transformation has always been a sore point for policymakers. The NDA Government deserves the credit for 'biting the bullet' by launching several initiatives to rejig labour laws. Understandably, even the Government prefers to downplay its achievements on this front.

This edition of India Unleashed attempts to look at labour law reforms int roduced by the Government. For a policymaker it is a hard task to marry social equity in the form of employee rights and benefits with freedom and flexibility to employers for efficiency and growth. The current Government seems to be on the right track of a long and challenging path that may straddle over multiple lives of Government. A right start has been made and it should be applauded.

We hope you find this edition of India Unleasehed useful. Please feel free to provide your feedback atIndiaUnleashed@Khaitanlegal.com

For a better Arbitration Ecosystem

Talking Business: Inter Regulator Cooperation

Warm Regards,

Sakate Khaitan Senior Partner

Easing out hurdles and bottlenecks in the arbitration framework of India towards creating a more efficient dispute resolution ecosystem has been one of the major objectives of policymakers. Towards this end, the Government has mooted the Arbitration and Conciliation (Amendment) Bill 2018 (“Bill”) that inter alia aims at promoting institutional arbitration and also attempts to resolve few anomalies created by the earlier amendments to the (Indian) Arbitration and Conciliation Act 1996 in 2015.

The Bill has been approved by the Union Cabinet for introduction in the Parliament.

With the objective of popularising institutional arbitration, the Bill seeks to improve and formalise institutional arbitration by bringing the practice in India in line with popular international destinations for arbitration. It is widely felt that India has not been able to position itself as a popu la r dest inat ion fo r institutional arbitration even for parties in India and parties frequently choose destinations such as Singapore and London with established arbitral institutions.

One of the key proposal is the formation of an independent body corporation, called the Arbitration Council of India (“ACI”). The primary function of the ACI will be to grade arbitral institutions across the country, accredit arbitrators, establish, operate and maintain uniform professional standards in respect of all matters relating to alternate dispute resolution mechanism.

Some of the other key proposed amendments entailed in the Bill are: (i) excluding international commercial arbitrations from the present timeline of 12 months for making an award, for other arbitrations, the timeline of 12 months is proposed to commence from the date of completion of pleadings of the parties; (ii) an explicit confidentiality section is proposed, to keep all arbitral proceedings, except the award, confidential; (iii) provision in respect of specific protection to arbitrators from any suit or other legal proceedings for any action or omission done in good faith in the course of the proceedings.

Turf wars between regulators are not infamously uncommon especially when the frontiers of their respective interests either converge or collide. In a first of its kind inter-regulator cooperation, the Reserve Bank of India (“RBI”) and the newly formed Insolvency and Bankruptcy Board of India (“IBBI”) have joined hands for the effective implementation of the new insolvency regime.

Readers will recollect that in 2016, India enacted the Insolvency and Bankruptcy Code, 2016 (“Code”), which essentially provides for the reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner so as to maximize the value of assets of such persons and thereby increase the availability of

credit in the economy.

The IBBI and RBI are both interested in the effective implementation of the Code through a quick and efficient r e s o l u t i o n p ro c e s s . I n alignment with their mutual interests, the IBBI and the RBI have signed a Memorandum of Understanding (“MOU”) on 12 March 2018 to formalise their co-operation with each other.

Pursuant to the MOU, while both regulators will now assist and co-operate with each other for the effective implementation of the Code, it is subject to the limitations imposed by applicable laws.

The MOU inter alia envisages: (a) sharing of information and resources that are available with each other; (b) holding of periodic meetings to discuss matters of mutual interest, such as regulatory requirements, enforcement cases, research and data analysis and information technology; (c) cross-training of staff between the regulators for effective utilisation of collective resources; (d) capacity building of insolvency professionals and financial creditors; and (e) joint efforts towards enhancing the level of awareness.

In the wake of the Nirav Modi scandal that shook the Indian banking industry earlier this year, while such co-operation and co-ordination between different regulators is a welcome move and a step in the right direction, it remains to be seen whether such regulatory co-operation will deliver the desired results. If it does, then it may serve as a template of such future MoUs between other regulators.

Labour law reform is not only a political quagmire but also a governance minefield. Successive governments have therefore unsurprisingly shied away from any sort of adventurism in this area. While there has been acknowledgment of the crying need for reforms, none of the policymakers ever showed the courage to move beyond the usual platitudes. With 'ease of doing business' as its driving mantra, the NDA Government has tried to catch the bull by its horns by making bold first moves in labour reforms.

Given the peculiarly complex edifice of labour law framework, reforms will be a long drawn and layered process that will require to tackle, legis lat ive and regulatory changes, administrative and governance reforms and strike the right balance with the labour welfare and social equity. From rationalisation and consolidation of laws to simplification of compl iances and procedures , the

Government has attempted to kick-start the reforms during the last couple of years. The story of reform has just begun and will take shape in months and years to come. This article takes a sneak peek into the several initiatives launched by the Government.

Labour law regime in India is infamous for a plethora of laws, rules and regulations; framed by both central and state government. The Government accepted the recommendation of the Second National Commission on Labour and other stakeholders that the labour laws be grouped and classified on functional basis into 4 codes. Accordingly, the Government has taken steps for drafting 4 Labour Codes, namely on, Wages; Industrial Relations; Social Security & Welfare; and Occupation Safety, Health and Working Conditions. It is the intent that this exercise will simplify labour law regime through amalgamating and rationalizing the relevant

1. Rationalisation and Consolidation of Laws:

provisions of the existing labour laws framed by the central government. Except for the Labour Code on Wages, all other codes are in a pre-legislative consultative stage.

• Labour Code on Wages: The Code on Wages Bill 2017 (“Wage Code”), aims to replace 4 laws pertaining to salary and wages such as the Payment of Wages Act 1936, the Minimum Wages Act 1948, the Payment of Bonus Act 1965 and the Equal Remuneration Act 1976. The Wage Code has already been approved by the Union Cabinet and has been introduced in Lok Sabha. Once implemented, the central government will introduce a national minimum wage and the state government will not be permitted to set minimum wage below the rate set out by the central government. Further, the Wage Code will also ensure timely payment of wages to employees.

• Labour Code on Industrial Relations: The

labour Code on Industrial Relations Bill 2015 (“Industrial Relations Code”) proposes to substitute 3 legislations such as the Trade Union Act 1926, the Industrial Disputes Act 1947 and the Industrial Employment (Standing Orders) Act 1946. The Industrial Relations Code will help in building a systematic approach for developing and enhancing the relation between employer and employee.

• Labour Code on Social Security & Welfare: F o r e a s i e r c o m p r e h e n s i o n a n d implementation of social security, the code on Social Security Bill 2017 (“Social Security Code”) has been introduced. The Social Security Code proposes to simplify and rationalise all the laws in India relating to social security such as gratuity, provident and pension fund.

• Labour Code on Safety and Working Conditions: The ministry has drafted a code on Occupational Safety, Health and Working

Conditions 2018 (“Safety Code”) by amalgamating 13 labour laws relating to health and safety. The Safety Code is presently in the draft stage and is open for public comments. It will subsume important laws including but not limited to the Factories Act 1948 and the Contract Labour (Regulation and Abolition) Act 1970 and host of other laws relating to occupational safety and working conditions.

• Fixed term employment was only permitted in apparel manufacturing sector, however, recently the government notified the Industrial Employment (Standing Orders) Central (Amendment) Rules 2018 and allowed fixed term employment across all sectors. This amendment has brought the fixed term workers at par with the permanent worker.

• The government launched an action plan for start-ups in India in January 2016. To foster growth and to help entrepreneurs to set up businesses, the labour and employment department exempted all eligible start-up companies for a period of 3 years from labour inspection under 9 legislations, namely the Industrial Disputes Act 1947, the Trade Union Act 1926, the Bui lding and Other Constructions Workers (Regulation of Employment and Conditions of Service) Act 1996, the Industrial Employment (Standing Orders) Act 1946, the Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act 1979, the Payment of Gratuity Act 1972, the Contract Labour (Regulation and Abolition) Act 1970, the E m p l o y e e P r o v i d e n t F u n d s a n d Miscellaneous Provisions Act 1952, the Employee State Insurance Act 1948.

2. Ease of Doing Business:

INDIA UNLEASHED

Labour Law Reforms in India – Is Well Begun Half Done?

Courtesy: Twitter

• required to be maintained under labour law statutes to 9. Prior to this amendment there was a requirement to maintain registers under various labour laws providing details of employees such as working hours, overtime w a g e s , l e a v e s , e t c , w h i c h w a s counterproductive and in turn lead to duplicity of efforts. In order to avoid duplicity and to save cost and efforts, maintenance of combined registers was introduced. Similarly, to facilitate simplified filing of returns, the number of forms and returns required to be filed by employers has been reduced to a total number of 12. • In a move to bring consistency in the regulation of employment and also to boost employment opportunities, the Union Cabinet a p p ro v e d t h e M o d e l S h o p s a n d Establishment (Regulation of Employment and Conditions of Service) Bill 2016. The state government of Maharashtra is the first state to adopt the Maharashtra Shops and Establishment (Regulation of Employment and Conditions of Service) Act 2017. Other states such as Karnataka, Telangana and Gujarat are working towards adoption of the model legislation.

• In furtherance to the e-governance initiative and to facilitate the ease of doing business, the government has undertaken following initiatives:

• The registration process under the E m p l o y e e P r o v i d e n t F u n d s a n d Miscellaneous Provisions Act 1952 and the Employee State Insurance Act 1948 has been made online with no registration cost and manual intervention.

• To ensure transparency and accountability in inspection, the Ministry of Labour and Employment launched a portal known as the shram suvidha portal. This portal serves as a one stop shop for online registration of units, reporting of inspection and submission of annual returns. This portal operates through common unique labour identification number for each establishment. This is a remarkable initiative by the government. Till date approximately 200,000 establishments have registered themselves on the portal.

The government reduced the registers

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• registration service for registration under 5 central labour laws viz the Employee Provident Funds and Miscellaneous Provisions Act 1952, the Employee State Insurance Act 1948, The Building & Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996, the Contract Labour (Regulation & Abolition) Act, 1970, and the Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979.

The government has taken some important steps for enhancing benefits and entitlements of employees. Some of the initiatives taken by the government towards welfare of employees include:

• In order to enable women employees to strike a balance between personal life and professional life and for proper care of the infants, the maternity leave was increased from 12 weeks to 26 weeks. With this increase, India now ranks third in terms of number of maternity leave.

• To protect the rights of persons with disabilities, the Rights of Persons with

The government also launched a common

3. Enhancing Social Equity and Welfare:

Disabilities Act 2016 was introduced by the government (“Disabil i t ies Act”). The Disabilities Act aimed at prohibiting discrimination against persons with disabilities and provides for equality of opportunity of disabled people at workplace. • The Apprentice Act 1961 was amended in furtherance to 'Make in India' and 'Skill India' agenda. The amendment aimed at creating employment opportunities for the youth and also simplified some of the compliances in order to promote ease of doing business in India.

• It has also been proposed to amend the Contract Labour (Regulation and Abolition) Act 1970 (“Contract Act”) and the Payment of Gratuity Act 1972 (“Gratuity Act”). The Contract Act is proposed to be amended to exclude regularly employed workmen from the definition of contract labour and it has also been proposed to ease procedural compliances under the Contract Act. The Gratuity Act is amended to ease the statutory ceiling of gratuity from INR 1,000,000 to INR 2,000,000 to bring the private sector employees at par with the government employees.

Revamping the labour law regime in India, to bring it in alignment with global peers and address the changing needs of the industry, cannot be achieved overnight. Apart from evoking divergent and polarising views, labour reforms will also have to straddle the tricky hurdle of centre-state issues while implementing any change. However, every ambitious journey begins with small single steps. The Government has displayed courage, conviction and intent by taking the

first big step followed by a host of other measures. It is difficult to expect the Government to be successful in taking these herculean reforms through during the currency of its current term and one can only expect that the subsequent Government rises above partisan politics and embraces the spirit of reforms. Well begun is half done and it should be no different for labour law reforms as well!

INDIA UNLEASHED

This briefing has been written for the general interest of our clients and business contacts. It is not intended to be exhaustive or a substitute for legal advice. We accept no legal liability for any errors or omissions.

@KhaitanLegal

E: indiaunleashed@khaitanlegal.com

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IN OTHER NEWS...

On 19 January 2018, the Federation of Indian Chambers of Commerce & Industry organized its 19th annual conference on 'India Insurance – The next wave of growth and efficiency'. The conference focussed on transforming the investment opportunities in insurance companies, product innovation, role of the regulator in growth of insurance space and next phase growth driving factors. Our senior partner, Sakate Khaitan, shared his thoughts on the implications on the insurers upon listing on stock exchange, post listing the changes in management, responsibilities and risks. The discussion covered various facets of the pre and post listing scenario, value creation, digitisation of insurance industry and innovative distribution methods. The day-long conference witnessed active participation of the audience and was a highly interactive session with the audience getting an opportunity with the panelists. Seated left to right: Ashish Agarwal; Sakate Khaitan; G Murlidhar; Arijit Basu; Rajesh Sud.

19th Annual Insurance Conference of FICCI

Incorporation of a company just got simpler. After integrating the three staged process of incorporation into one single step process, the Government has now merged the process of other mandatory registrations into the single step thereby further simplifying the setting up of a company. With ease of doing business as the driving theme of the Government, it has in the last two years significantly rationalised the process of incorporating a company through a slew of measures.

Ease of incorporation and doing business Border Control

Clipping the wings before they fly!

As the Indian Government continues with its relentless effort to extradite liquor baron Vijay Mallay from the United Kingdom and the diamantaire Nirav Modi, news reports suggest that the Government is planning to take steps to ensure that bigshots involved in economic offences or those that have been declared wilful defaulters are not able to escape the national frontiers. It is believed that the Government has drawn up a list of 91 individuals who are involved with the companies which h a v e b e e n categor ised as wilful defaulters a n d d i r e c t e d relevant agencies not to allow these individuals to leave the country. A wilful defaulter is an entity or a person that has not paid back the l oan despite the ability to do so.

The Supreme Court of India in its recent judgment has held that the consent of the family or the community or the clan is not necessary once the two consenting adult individuals agree to enter into a wedlock. Their consent has to be piously given primacy. The judgment emanates due to the rising trend of 'honour killing' in rural India. The Supreme Court observed that there has been an increase in the violation of human rights and destruction of fundamental rights in the name of class honour. Individuals of parallel law enforcement agencies (known as “Khap Panchayats”) are exercising their self-proclaimed authority by handling punishment to the couple and their families assuming to themselves the role of social or

c o m m u n i t y guardians. The Supreme Court has recommended the legislature to frame appropriate laws and have r e c o m m e n d e d p r e v e n t i v e , r e m e d i a l a n d punitive measures in order to evolve a robust mechanism to curb honour killing.

Consenting Adults: Not about the family!

Courtesy: Twitter