daily news simplified - dns€¦ · daily news simplified - dns 07 03 2020 sl. no. topics the hindu...

Daily News Simplified - DNS

07 03 2020

SL. NO.

TOPICS THE HINDU

PAGE NO.

1 Centre cannot brand an organisation ‘political’ 01

2 Supreme Court upholds 2018 order on land acquisition 01

3 India joins Indian Ocean Commission as observer 12

4

As part of RBI bailout, SBI to pick up 49% in Yes Bank Banking on Bailout Thirty days is outer limit for Yes bank Resolution, says Das Say yes to troubled borrowers cost lender dear

01, 10, 10 and

15

5 Delimitation of J&K & North Eastern States set up 09

Dated:07. Mar. 2020 DNS Notes - Revision

Title 1. Centre cannot brand an organisation ‘political’ (The Hindu, Page no. 01)

Syllabus Mains: Paper II – Polity and Governance

Theme Powers of government

Highlights Context: Supreme Court held that Central government cannot brand an organisation ‘political’ and deprive it of its right to receive foreign funds for using “legitimate forms of dissent” like bandh, hartal, road roko or jail ‘bharo’ to aid a public cause under FCRA. The Petition – Challenged Centre Authority under FCRA provision and Rules

• A petition was filed by Indian Social Action Forum (INSAF) challenging certain provisions of the

Foreign Contribution Regulation Act (FCRA), 2010 and the Foreign Contribution (Regulation)

Rules of 2011, both of which confer the Centre with power to brand organisations ‘political’

and shut down their access to foreign funds.

• As per Section 3(1)(f) of FCRA, an "organization of political nature not being a political party" as

specified by the Central Government is banned from receiving foreign contributions. The

norms for declaring an organization were laid down by the Centre as per Rule 3 of the FCRA

Rules 2011.

The Judgment

• Any organisation which supports the cause of a group of citizens agitating for their rights

without a political goal or objective cannot be penalized by being declared as an organisation

of a political nature.

• Organizations that support public causes by resorting to legitimate means for dissent such as

organizing bandhs, hartals, strikes etc. shall not come within the ambit of the ban in terms of

the FCRA.

• A balance has to be drawn between the object that is sought to be achieved by the legislation

and the rights of the voluntary organisations to have access to foreign funds.

• The purpose for which the law prevents organisations of a political nature from receiving

foreign funds is to ensure that the administration is not influenced by foreign funds.

• Prohibition from receiving foreign aid, either directly or indirectly, by those who are involved in

active politics is to ensure that the values of a sovereign democratic republic are protected.

• On the other hand, such of those voluntary organisations which have absolutely no connection

with either party politics or active politics cannot be denied access to foreign contributions.

• The Bench further noted that the organisations that channel foreign funds by political parties

comes within the prohibition clause.

it is only those organisations which have connection with active politics or take part in party politics are

covered by Rule 3 (vi) and those organisations which are not involved in active politics or party politics

do not fall within the purview of Rule 3 (vi).


Personal

Notes


Title 2. Supreme Court upholds 2018 order on land acquisition (page no. 01)

Syllabus Mains: GS Paper II: Polity and Governance

Theme Land acquisition and fair compensation

Highlights Context: Constitution Bench of the Supreme Court held that land acquisition proceedings under the 1894 Act will not be deemed to have lapsed under Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, if the authorities have tendered the compensation by deposit in the Treasury. Supreme Court Judgment 2020

• A five-judge Bench, led by Justice Arun Mishra, held that landowners, who had refused to accept

compensation or who sought reference for higher compensation, cannot claim that the acquisition

proceedings had lapsed under Section 24(2) of the 2013 Act.

• With this, the Constitution Bench has affirmed the February 2018 ruling on Section 24 by a three-

judge Bench, led by Justice Mishra himself, in the Indore Development Authority case. The Bench

has overruled an earlier co-ordinate Bench ruling in the Pune Municipal Corporation case of 2014.

Compensation

Section 24(1) – It provides for the following instances where land acquisition which took place under the 1894 Act would have lapsed:

(a) Where no award under Land Acquisition Act 1894 has been made, then, the award shall be given as per the 2013 Act which provides for higher compensation.

(b) If an award has been made under Land Acquisition Act 1894, then such proceedings shall continue under the old Act of 1894.

Section 24(2) - In cases where an award under the 1894 Act has been made five years or more before the commencement of the 2013 Act but

✓ the physical possession of the land has not been taken or ✓ the compensation has not been paid

Then the proceedings for compensation shall be initiated as per the new Act of 2013.

What is the provision and why does it need interpretation?

• Under Section 24(2), land acquisition made under the old law of 1894 lapses if the award of

compensation had been made five years before the new Act came into force, but has not been

paid. In such cases, the process will have to be gone through afresh under the new Act, which

mandates higher compensation.

• There are cases in which farmers and other land-owners have refused the compensation, leading

to delay in the government taking possession. In this situation, the compensation amount is

deposited in the government treasury.

• According to one interpretation, if this is done, the acquisition process is saved. However, others

contend that such cases will fall under the new Act because compensation has not been paid to

the land-owners, and the lapsing clause in Section 24 should be applied.

Complexity of taking compensation from the two Acts of 2013 or 1894..!

• The provision for higher compensation under the 2013 Act has prompted many farmers and land

owners not to take compensation from the government whose award were granted through the

old Act of 1894.

• When compensation for land acquisition is given by the court, the Collector of a particular

district shall tender the payment to the parties concerned. If award provided by the Collector is

not received or there is dispute about the title of land, then in such situations the Collector shall

deposit the amount in the Court.


• However, refusal to take such compensation from the treasury of government has resulted in a

legal problem i.e. whether to consider the amount of compensation for land acquisition

transferred to treasury as compensation being paid by the government or not.

• It was this point which was decided in contradicting ways by Three Judge Bench of Supreme

Court in the case of Pune Municipal Corporation v Harakchand M. Solanki and in Indore

Development Authority vs. Shailendra.

Pune Municipal Corporation v Harakchand M. Solanki (2014)

• In 2014, in the case of Pune Municipal Corporation v Harakchand M. Solanki, notice was issued to

the landowners to receive the compensation and since they did not receive the compensation, the

amount (Rs.27 crores) was deposited in the government treasury. An award for compensation in

this case was made on 31st January, 2008.

• So, the question was whether deposit of amount of compensation in the government treasury can

be said to be equivalent to the amount of compensation paid to the landowners/persons

interested.

• Three-judge Bench (R.M. Lodha, Madan B. Lokur, Kurian Joseph) ruled that for the purpose of

Section 24(2), the compensation shall be regarded as “paid” if -

✓ the compensation has been offered to the person interested; and

✓ such compensation has been deposited in the court and such amount is available to the

interested person.

• The Court also held that the award for compensation pertaining to the land was made by the

Special Land Acquisition Officer more than five years prior to the commencement of the 2013 Act.

• Based on this judgment, subsequent cases were decided on the same principle: acquisition that

had taken place earlier than five years before the new Act commenced would lapse if compensation

amount was not paid to the land-owners or, in cases in which the owners refused to accept

compensation, deposited in court.

Indore Development Authority vs. Shailendra (2018)

• In Indore Development Authority vs. Shailendra, another three-judge Bench, (Justice Arun Mishra,

A.K. Goel and M.M. Shantanagoudar), did not accept the judgment given in Pune Municipal

Corporation v Harakchand M. Solanki. Justice Arun Mishra authored this judgment.

• It ruled that the acquisition would not lapse merely because the compensation amount was not

deposited in court, but was instead deposited in the treasury. So, depositing the amount in

treasury will amount to compensation being paid to the land owners or interested parties.

• The Court said that considering conflict of view on Pune Municipal Corporation case, it should be

reconsidered by a larger bench as it was also decided by a bench of three judges.

Accordingly, Chief Justice of India has constituted a Five Judge Bench to give a final verdict and this Bench shall be chaired by Justice Arun Mishra.


Title 3. India joins Indian Ocean Commission as observer (The Hindu Page No. 12)

Syllabus Mains: Paper III: International Relations

Theme International Organization

Highlights Context: India has been approved as an observer state for Indian Ocean Commission (IOC). The decision was taken at the meeting of the IOC Conference of ministers in Seychelles making India the fifth observer. About IOC

• The IOC was created in 1982 at Port Louis, Mauritius, and later institutionalised in 1984 under

the General Victoria Agreement. It has five member nations- Comoros, Madagascar, Mauritius,

Reunion (an overseas region of France) and Seychelles.

• The five islands share geographic proximity, historical and demographic relationships, natural

resources and common development issues.

• The official language of communication is French.

• The other four observers are China, Malta, European Union and International Organisation of La

Francophonie (OIF).

• IOC's mission is to strengthen regional cooperation while defending the common interests of

these countries.

• In 2008 the IOC launched the Acclimate project, designed to strengthen climate-resilience and

build capacity of IOC's State members, focusing on adaptation and the promotion of a regional

climate governance.

Benefits for India

• Admission of India, even as an observer, to IOC is of great strategic significance since it will allow

collective engagement with the island nations of western Indian Ocean (WIO).

• Decision to join IOC is part of the government’s push for greater salience in the whole Indian

Ocean Region (IOR), including what is called the Western or African Indian Ocean.

• The IOC is also significant for its geographical location, as the islands sit around a “key choke-

point” in the Indian Ocean — the Mozambique Channel. This channel is being watched more

closely as the U.S.-Iran tensions threaten the Strait of Hormuz.

• Given China’s growing presence in the region, India hopes to increase its naval presence and gain

support for its maritime projects across the Indo-Pacific, beginning at East African shores.

The move will also lend greater significance to India’s SAGAR (Security and Growth for all in the Region) policy.


Personal Notes


Title 4. As part of RBI bailout, SBI to pick up 49% in Yes Bank (The Hindu Page No. 01)

Banking on Bailout (The Hindu Page No. 10) Thirty days is outer limit for Yes bank Resolution, says Das (The Hindu, Page No. 15) Say yes to troubled borrowers cost lender dear (The Hindu, Page No. 15)

Syllabus Mains: GS Paper III – Economy

Theme Problems in Banking Sector

Highlights Context: India's fifth largest private sector bank "Yes Bank" has been placed under moratorium by the Central Government due to its poor financial position. In response, the RBI has come up with the scheme for Reconstruction to improve the financial position of Yes bank. The financial crisis within the Yes Bank raises grave concerns since it could have contagion impact on the entire financial sector. Further, it also raises questions over the failure of RBI to prevent the escalation of the financial crisis in the Yes Bank. Some of the economists have pointed out that RBI should have acted much earlier rather than waiting for the crisis to reach such a level.

What is the present crisis in the Yes Bank?

Most of the economists have pointed out that the just like the IL&FS Crisis, the crisis at YES Bank did not happen overnight. It had been brewing for over a year-and-a-half due to concerns over its financial health, including exposure to risky corporate accounts and governance issues. Presently, the Yes Bank has come under serious financial crisis mainly on account of two simultaneous reasons. Firstly, there has been increase in the NPAs of bank which has increased from 0.31% in March 2014 to 7.39% in September 2019. Secondly, as the depositors came to know about the poor financial position of Yes Bank, they started withdrawing more amount of money. For instance, since March 2019, more than Rs 1 lakh crore has been withdrawn by its depositors. On the other hand, loans worth Rs. 17,000 crores have turned NPAs. These two simultaneous developments led to huge mismatches in their asset-liability. This can be seen from the fact the as on September 2019, the Yes Bank has total deposits worth Rs 2.10 lakh crores while the outstanding loan amount is Rs 2.24 lakh crores. In order to improve its financial position, Yes bank was required to bring in more capital from the private sector investment. However, due to ratings downgrade, it found greater difficulty to bring in private sector capital leading to the present crisis.

Factors which have led to Present Crisis Bad Lending Practices: The Balance sheet of Yes Bank has come to be dominated by the loans to certain high risk corporate borrowers such as IL&FS, Anil Ambani group, DHFL etc. It is to be noted that other banks reduced their exposure to these high risk corporate entities after they defaulted on their loan repayments.

Poor Financial Position

Increase in NPAs

Decrease in Profits

Withdrawal of Deposits by Depositors

Ratings downgrade

Inability to bring more

Capital


However, economists have pointed out the Yes Bank continued to give loans to these entities at higher rate of interest leading to increase in NPAs. Poor Corporate Governance: The Yes Bank had under-reported bad assets by over Rs 10,000 crores for two consecutive years between 2016-2018. By under-reporting its NPAs, it had maintained to maintain provisioning requirements. Subsequently, the RBI did not allow Yes Bank founder Rana Kapoor to continue as CEO and MD. Evergreening of Loans: It has been pointed out the Yes Bank had resorted to evergreening of loans to keep its NPAs under control. As part of evergreening of loans, a bank gives additional loans to its borrowers so that they do repay back previous loans and do not default on their repayments. This goes against the RBI’s guidelines that caution banks not to evergreen their loans. Delays in Insolvency proceedings: The continued inability of several corporates to repay their loans has resulted in insolvency proceedings against such borrowers. However, the delay in the Insolvency proceedings has prevented the Yes Bank to recover its bad loans. Failure of RBI: The RBI has come up with the Prompt Corrective Action (PCA) framework in order to address the Weak financial position of RBI. As part of PCA, the RBI monitors the financial health of the Banks in terms of certain parameters such as CAR, Net NPAs, Return-on-Assets etc. When these parameters cross a particular threshold, the bank is placed under various restrictions. In case of Yes Bank, even though the parameters had not crossed threshold, but still considering the fact that it was under-reporting its NPAs, the RBI should have made appropriate changes in the PCA framework and then taken a pre-emptive action such as placing Yes bank under the PCA. The RBI should not have waited for the crisis to reach such a stage. What has RBI done now? Under Section 45 of Banking Regulation Act, the RBI has been empowered to make an application before the Central Government to put a Bank under the Moratorium. Based upon such an application, the Central Government has placed moratorium on Yes bank from March 5 till April 3. As part of such a moratorium, depositors are allowed to withdraw a maximum of Rs 50,000. However, the RBI can relax the withdrawal limit up to 5 lakhs in event of medical emergencies, higher education fees or marriage expenses. Further, In exercise of the powers conferred under 36ACA of the Banking Regulation Act 1949, the Reserve Bank has superseded the Board of Directors of Yes Bank for a period of 30 days. This has been done to quickly restore depositors’ confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation. Scheme for the Reconstruction of Yes Bank Increase in Authorised capital of Yes bank: The Yes Bank’s authorised capital shall increase to Rs 5,000 crores from present Rs 800 crore. Increase in number of shares: The number of equity shares will be increased to 2,400 crore from the current 255 crore (face value Rs 2/- each) aggregating to Rs 4,800 crore. SBI as Major Equity Investor: The SBI shall agree to invest in the equity of the reconstructed bank such that post infusion it holds 49 percent. Further, SBI shall not reduce its holding below 26 percent for three years from date of capital infusion. Are there any such instances of Bank taking over another Bank? In the past, some of the bad banks were merged or taken over by other Banks in order to prevent their collapse. Some of these examples include takeover of Bank of Rajasthan by ICICI Bank (2013), merger of Global Trust bank with Oriental Bank of Commerce ( 2013) etc. These mergers basically took place due to financial irregularities in the disclosure by Global trust bank and Bank of Rajasthan. What should be done in order to prevent the repeat of such crisis in future? The Financial system in a country is deeply inter-connected wherein the failure of a particular bank could have contagion impact on the entire financial sector. The financial crisis of 2008 which emanated from Lehmann Brothers and later spread to entire financial sector is a testimony of such a contagion impact.


Hence, the alacrity with which the Government and RBI responded and came out with reconstruction scheme is noteworthy. However, considering the fact that such a crisis was in making, the RBI and Government should not have waited for the crisis to such a stage. Some of the possible suggestions here include:

1. This is the second time within a year that RBI has acted only after the crisis erupted. First was with respect to PMC bank and now it’s the Yes bank. This raises concerns over the way inspects the accounts of the Banks. Considering the workload of the RBI, there is a need for dedicated and specialised cadre within RBI that has to undertake deep and detailed inspection of Bank accounts.

2. The RBI has to strengthen its pre-emptive tools in order to ensure that such crisis are nipped in the bud and do not escalate further. Accordingly, as discussed before, the RBI has to strengthen its PCA framework. It should not wait for the parameters to cross the threshold level for putting banks under PCA. Certain red flags such as financial irregularities in disclosure should put the banks automatically under PCA framework.

3. Strengthen the corporate governance of Private sector Banks. So far, the Government has focussed on strengthening the governance of Public sector Banks. However, recent crisis such as IL&FS, PMC bank, Yes Bank point out that due emphasis has to be laid down even on strengthening governance of Private sector banks.

4. Delays in Insolvency proceedings should have to be addressed at the earliest so that the Banks are able to recover the NPAs on time.


Personal Notes


Title 5. Delimitation of J&K & North Eastern States set up (The Hindu Page No. 09)

Syllabus Mains: GS Paper II: Social Justice & Polity and Governance

Theme Children Rights and Issues

Highlights Context: As per the notification of Law Ministry, government has constituted a Delimitation Commission, to be headed by former Supreme Court Judge Ranjana Prakash Desai, to redraw Lok Sabha and assembly constituencies of the Union Territory Jammu and Kashmir and the northeastern states of Assam, Arunachal Pradesh, Manipur and Nagaland.

• The Commission will be headed by former Supreme Court judge Ranjana Prakash Desai and will

have Election Commissioner Sushil Chandra as the ex-officio member of the Commission.

Election Commissioners of the concerned States and UTs will also be members.

• The Commission will delimit the constituencies of Jammu and Kashmir in accordance with the

provisions of the Jammu and Kashmir Reorganisation Act, and of Assam, Arunachal Pradesh,

Manipur and Nagaland in accordance with the provisions of the Delimitation Act, 2002.

• The Commission completed the delimitation exercise and the Delimitation Order, 2008 in respect

of all the states, except in these four northeastern states.

THE JAMMU AND KASHMIR REORGANISATION ACT, 2019

• It provides for delimitation of Parliamentary constituencies of the two Union Territories of

Jammu and Kashmir and Ladakh.

• As per the Reorganisation Act, the number of seats in the Legislative Assembly of the UT of J&K

would be increased from 107 to 114 and delimitation of the constituencies may be determined

by the Election Commission in the following manner:

✓ Number of seats to be reserved for the Scheduled Castes and the Scheduled Tribes in

the Legislative Assembly.

✓ The assembly constituencies into which the Union territory shall be divided, the extent

of each of such constituencies and in which of them seats shall be reserved for the

Scheduled Castes or for the Scheduled Tribe.

✓ The adjustments in the boundaries and description of the extent of the parliamentary

constituencies in each Union territory that may be necessary

• The Act also specifies that delimitation will be based on the 2011 census till 2026.

Purpose of Delimitation

• Delimitation is commonly used in the context of drawing boundaries for Assembly and Lok Sabha

Constituencies based on the recent census.

• As per Article 82, Parliament by law enacts a Delimitation Act after every census. Once the Act

comes into force, the Central Government constitutes a Delimitation Commission.

• The present delimitation of constituencies has been done on the basis of 2001 census and has

been in use since the 2009 Lok Sabha Elections.

• According to a 2002 Constitution Amendment, there will be no further delimitation of

constituencies till the first census after 2026.

Article 82

• Article 82 of Indian Constitution provides for delimitation and it says: Upon the completion of

each census, the allocation of seats in the House of the people to the States and the division of

each State into territorial constituencies shall be readjusted by such authority and in such manner

as Parliament may by law determine.

Delimitation Commission

• Delimitation means the act or process of fixing limits or boundaries of territorial constituencies in

a country or a province having a legislative body. In India, the job of delimitation has been

assigned to a high power body known as Delimitation Commission or Boundary Commission.


• For this, Delimitation Commission have been constituted four times since independence:

➢ In 1952 under Delimitation Commission Act, 1952




• Orders of Delimitation Commission cannot be called in question before any Court of law. The

copies of its orders are laid before the House of People and the State Legislative Assembly

concerned, but no modifications are permissible therein by them.

Delimitation Act, 2002 provides for the following: ✓ Readjustment of the allocation of seats in the House of the People to the States,

✓ Total number of seats in the Legislative Assembly of each State,

Division of each State and each Union territory having a Legislative Assembly into territorial constituencies for elections to the House of the People and Legislative Assemblies of the States and Union territories.

Personal Notes

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