Land Acquisition, Rehabilitation And Resettlement Bill, 2011

Demand for land has gone up drastically over the past few years, due to rapid infrastructural development, setting up of new industries and mining plants, and fast urbanisation including real estate. Before 1990, land was acquired by government for clear public purposes; yet, the last two decades have seen an boost in land acquisition for private industry and real estate—which is solely driven by profit motives. In many cases, the acquisition has been forced and without paying landowners adequate compensation. And because the present Land Acquisition Act, 1894 has been quite hostile to the interests of the landowner, the acquisition of land has increased conflicts. The problem thus, warrants fundamental changes in the present Land Acquisition law. The Ministry of Rural Development, Government of India, in consultation with the National Advisory Council (NAC), introduced a new Bill in the Parliament in 2011 to address this problem. The salient features of the Bill are:
(1) In case of land acquisition by government for public sector companies,  or PPP projects, or for private companies for the production of public goods or provision of public services, written consent of at least 80% of the project affected people (including agricultural labour, tenant, etc.) is necessarily to be taken through a prior informed process; compensation of the land, as has been stipulated in the Bill, should be to a minimum of four times the present registered value for land in rural areas and double in urban areas, excluding solatium; provision for guaranteed compensation in future, for at least twenty years, to the original landowner over further escalation in the prices of the land.
(2) All project-affected people, irrespective of their areas of acquisition, who lose their livelihood would be entitled for R&R package which includes Subsistence Allowance of Rs. 3,000 pm per family for over 12 months; one time Resettlement Allowance of  Rs. 50,000; Rs. 50,000 for transportation; allotment of constructed house in case of house loss in rural as well as urban areas, or equivalent cost in lieu of the house; allotment of one acre of land in lieu of land acquired for irrigation project; a job or Rs. 5 lakh per family or Rs. 2,000 pm for 20 years per family will be provided to the displaced landowner; and
(3) Fixed timeline for awarding compensation. Moreover, there are many other changes in the Bill which will help in safeguarding landowner’s interests.

Legislative Measures for the Protection of Rights of Minority Shareholders

I.            Protection of minority shareholders

Company law provides that a company can be wound up if the Court is of the opinion that it is just and equitable to do so. This is, of course, the ultimate resort for a shareholder to enforce his ownership rights. Rather than let the value of his shareholding be frittered away by the enrichment of the dominant shareholder, he approaches the court to wind up the company and give him his share of the assets of the company. In most realistic situations, this is hardly a  meaningful remedy as the break-up value of a company when it is wound up is far less than its value as a “going concern”. It is well known that winding up and other bankruptcy procedures usually lead only to the enrichment of the lawyers and other intermediaries involved.

Company law also provides for another remedy if the minority shareholders can show that the company’s affairs are being conducted in a manner prejudicial to the interests of the company or its shareholders to such an extent as to make it just and equitable to wind it up. Instead of approaching the Court, they can approach the Company Law Tribunal). The Company Law Tribunal which is a quasi-judicial body can make suitable orders if it is satisfied that it is just and equitable to wind up the company on these grounds, but that such winding up would unfairly prejudice the members. In particular, the Tribunal may regulate the conduct of the company’s affairs in future, order the buyout of the minority shareholders by the other shareholders or by the company itself, set aside or modify certain contracts entered into by the company, or appoint a receiver. The Tribunal could also provide for some directors of the company to be appointed by the Central Government, or by proportional representation. The Tribunal normally entertains such complaints only from a group of shareholders who are at least one hundred in number or constitute 10% of the shareholders by number or by value.

II.            Special majority

Another safeguard in the company law is the requirement that certain major decisions have to be approved by a special majority of 75% or 90% of the shareholders by value. This may not be an effective safeguard where the dominant shareholders hold a large majority of the shares so that they need to get the approval of only a small chunk of minority shareholders to reach the 75% level. Even otherwise, it may not be a sufficient safeguard if the process of conducting shareholder meetings is not conducive to broader participation by a large section of the shareholding public. The Indian system does not allow for postal ballots. Effective participation by small shareholders is possible only if there is a cost effective way of waging a proxy campaign. This would enable dissenting shareholders to collect proxies from others and prevent measures which are prejudicial to the minority shareholders.

III.            Information disclosure and audit

Company law provides for regular accounting information to be supplied to the shareholders along with a report by the auditors. It also requires that when shareholder approval is sought for various decisions, the company must provide all material facts relating to these resolutions including the interest of directors and their relatives in the matter. Disclosure does not by itself provide the means to block the dominant shareholders, but it is a prerequisite for the minority shareholders to be able to exercise any of the other means available to them. Disclosure is also a vital element in the ability of the capital market to exercise its discipline on the issuers of capital.

IV.            Voting Rights

(i) Ten percent: The approval of at least 10% of the shareholders is required for the requisition of an extraordinary general meeting for an application to the Company Law Board (CLT) for relief, if there is oppression or mismanagement (as defined in the Companies Act, 1956 by the majority shareholders.

(ii) Fifty-one percent: The approval of a minimum of 50% of the shareholders is required for an ordinary resolution, including for alteration of the share capital; declaration of dividend; election, removal, and remuneration of directors; approval of annual accounts; appointment of external auditors; appointment of other officers; and other routine matters relating to the conduct of a company.

(iii) Seventy-five percent: At least 75% of the shareholders must approve a matter before it is passed as a special resolution, including for capital increases, alteration in the memorandum and articles of the company, changing the registered office address of the company from one state to another, change in the name of the company, buy-back of shares, proposed mergers or liquidation. Therefore, a minority shareholder with more than 25% voting rights would have the ability to block special resolutions.

V.            Qualified Minority

Minority shareholders with qualified minority may initiate action against decisions of the majority in a court of law. According to section 399 of the act, a qualified minority consists of at least one hundred shareholders or one tenth of the total number of shareholders, whichever is less, or any shareholder(s) holding one-tenth of the issued share capital of the company fully paid-up. Moreover, minority shareholders who hold more than 25% of the shares will have the ability to obstruct special resolutions, seek intervention of the CLT and, therefore, impede the functioning of the company at some level.

VI.            Company Law Tribunal (CLT)

The Indian company law shields minorities’ interest by providing an adequate platform at CLT to raise grievances in case of oppression or mismanagement by the majority shareholders of a company. In circumstances when the minority is forced to exit the company by way of offering a nominal value for the shares held by them, the minority shareholders can approach the CLT to seek appropriate relief. The latter, if satisfied, has the power to intervene in the decisions of the majority shareholders. The CLT can order the majority shareholders to purchase the shares of the minority shareholders at a fair price. Further, if the minority shareholders wish to continue to be stakeholders in the company and do not want to sell their shares, they can obtain an injunction from CLT prohibiting the majority shareholders or acquirer from taking any action that may be averse to their interest.

VII.            Minority Representation

It is important for Corporations to ensure that board membership reflects the interest of minority shareholders. In this regard, the Independent Directors (IDs) have an important role to play in ensuring minority shareholders’ interests are protected. The IDs also need to be easily accessible for minority shareholders to convey or raise their concerns. Minority shareholders can also nominate candidates for the ID position.

Tax Crimes under the Money Laundering Law

The government is considering placing tax crimes at the sama level as money laundering offences that have severe criminal and financial implications. Income-tax offences could come under its anti-money laundering law, which would make prosecution, rigorous imprisonment, fines and shifting onus on the accused to prove he is not guilty a lot more easier. The offences will include concealment of income, failure to deposit tax deducted at source and false evidence.

Recommendations could be placed before Parliament and changes could be made to the Prevention of Money Laundering (Amendment) Bill, 2011.

These changes are in accordance with a global plan drawn up by the Finance Action Task force, an inter-governmental body to combat money laundering and terror financing, of which India is a member.Many countries have incorporated these offences in their money laundering laws even though the FATF adopted them as part of new standards in February this year.

If the changes take place, the trial in these cases will be faster as offences under PMLA are tried in special courts and the onus to prove innocence lies on the accused.

Amendments to the Finance Bill

Finance Minister Pranab Mukherjee has announced that the General Anti-Avoidance Rules (GAAR) will be applied from 2013-14 onwards, deferring its application by a year. He also said  that the onus of proof will lie with the tax authorities and that the proposed retrospective amendment of income tax laws will not override DTAAs with 82 countries. He also proposed an STT of 0.2% on the sale of unlisted securities. and that the capital gains tax on private equity will be halved to 10 per cent.

Reduced capital flows prompted the RBI to raise the interest rates banks can offer non-resident Indians to encourage them to bring in dollars. The Sensex ended below the 17,000 mark for the first time since January 24, 2012, closing at 16,831 -down 320 points.

The mass disparagement evoked scepticism and annoyance among officials of the finance ministry.

Print and Electronic Media Standards and Regulation Bill, 2012

A bill on media regulation was proposed by  Meenakshi Natarajan, a Lok Sabha MP called the "Print and Electronic Media Standards and Regulation Bill, 2012",. It aims at establishing a regulatory authority with powers to impose a ban or suspend coverage of an event or an incident that may pose a threat to national security from foreign or internal sources. However, she was not present in the Lok Sabha and so the Bill was not introduced.

There has been opposition to the bill on the ground that the press should be accorded freedom and there should be no attempt to gag the media.

Though it will be appropriate to regulate the media, the regulation must not be absolute. No right can be absolute, every right is subject to reasonable restrictions in the public interest. Any action or restriction on action of the media shouldn’t adversely affect the security of the state, public order, morality, etc.

Debt Recovery Laws in India

The Debts Recovery Tribunal has been constituted under Section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The original aim of the Debts Recovery Tribunal was to receive claim applications from Banks and Financial Institutions against their defaulting borrowers. For this the Debts Recovery Tribunal (Procedure) Rules 1993 were also drafted.

Initially they performed really when in helping the Banks and Financial Institutions recover their bad debts and huge parts of their non – performing assets. Problems occurred when several large borrowers would create hindrances in DRT’s work primarily on the ground that their claims were pending before the civil courts and if the DRT would adjudicate the matter and auction off their properties, they would have to face irreparable damages.

The dues of work men against a company, the State dues, and the dues of other non secured creditors all got ensnared before the DRTs. Furthermore, there was clash of jurisdiction between the Official Liquidators appointed by the High Courts and the Recovery Officers of the Debts Recovery Tribunals. The Official Liquidator, an appointee of a superior authority, took into his possession all the properties, which actually belonged to secured creditors who before the Debts Recovery Tribunal. The High Courts also took offence on the activities of the Recovery Officers who took away the entire amounts and paid off to the banks leaving nothing for the other claimants, including the workmen. All this lead to drastic amendments to the Recovery of Debts Due to Banks and Financial Institutions Act by means of an amending notification in the year 2000.

While the Amendment in 2000 brought some rationalization in the mechanism of the Debts Recovery Tribunal, it was not sufficient to wheedle the big borrowers. This led to the enactment of one more drastic act titled as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, also called as SRFAESI Act or SRFAESIA for short.

The SRFAESI Act, gave the lenders the right to take into their possession the secured assets of their borrowers just by providing them notices, and without the need to go through the rigors of a Court procedure. At the start this brought in lot of conformity from several defaulters. However the tougher ones punched whole in the new Act too. This led Supreme court striking down certain provisions and allowing the borrowers an adjudicatory forum before their properties could be taken over by the lenders.

And the adjudicatory forum turned out to be the Debts Recovery Tribunal. The Debts Recovery Tribunal now deals with two different Acts, namely the Recovery of Debts Due to Banks and Financial Institutions Act as well as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act. While they both aim at the same thing, their procedures are different.

The Debts Recovery Tribunals have to deal with complex commercial laws within the narrow ambit of the two laws.

Right to Education Act

The Supreme Court in a recent judgement, upheld the constitutional validity of Right to Education (RTE) Act. Private schools had opposed provisions of the RTE on the ground that they infringed on their right to do business or trade.

The Act sets out minimum norms and makes running of schools less exploitative, especially with relation to capitation fees and underpaid. Section 19 of the Act clearly states that recognition to schools will be withdrawn where a school fails to adhere to the norms and standards and any one who violates this stipulation can face a fine of Rs 1 lakh. New schools must meet the norms.

In most states, government schools lack quality education which prompts people to move to privately run schools.

We need more experimentation in methods of delivering education and better governance to make teachers teach in state-run schools and regulate the conduct of private schools that often pay their staff a pittance even while collecting extortionate tuition fees from students.

Though implementation of RTE will be extremely beneficial, educational reforms are required at a larger scale than RTE legislation and a court order. The government must fix its public schools and use its fiscal resources optimally.  

CAG Draft Report on Coal Allocation

The recent draft report of the Comptroller and Auditor General estimated a Rs 10.6 lakh crore loss to the exchequer on account of allotment of coal blocks without auction, during 2004 to 2009, to 100 private and public sector companies. It disrupted the proceedings of the Lok Sabha and the Rajya Sabha. The process followed by the government on handing over coal blocks to private sector power developers had been criticised earlier, especially by those with plans to sell generated electricity at market rates instead of regulated tariffs. In response, the Cabinet had in April 2008, approved the introduction of the Mines & Minerals (Development & Regulation) Amendment Bill, 2008, that suggested the auction of blocks for captive use. Presently, blocks are allocated to players by a government screening panel.

The Bill was moved in the Rajya Sabha on August 13 2010, then Mines Minister B K Handique, admitted that the system was “vulnerable to criticism on the ground of lack of transparency and objectivity”.

Problems arose when merchant power plants which sell electricity at market-determined rates were also included in this process. The additional profits from the availability of cheap coal would accrue solely to the project developer and the consumer was unlikely to benefit. The power ministry pressed for the diversion of coal to private merchant projects.

In the power sector, it is believed that NTPC and state-sector generating units, which supply power at regulated tariffs to customers deserves access to cheap coal.  Furthermore, coal blocks have been allocated to non-serious players, many of which were behind the prescribed time-schedule.

The allocation process was unable to maximise value of the coal mines. Besides, blocks were mainly allocated to power generators that sell most of the power under long-term power purchase agreements to state government distribution companies through competitive bidding process where the lowest power tariff wins.

Hence, the existing policy can be improved by restricting coal allocation to power companies with long-term PPAs only and by auction of coal mines, which shall be a more transparent process. Also, auctions should be opened not just to actual users, but to mining companies, including foreign ones. This will make certain greater access to technology and sustainable mining practices, plus effectiveness and competitiveness of the coal mining industry. A few amendments may be required in the Coal Mines Nationalisation Act, 1973.

Coal India v. Canadian Commercial Corporation

The Calcutta High Court in the case of Coal India v. Canadian Commercial Corporation said that any annulment proceedings in respect of a foreign award can only be made in the country that was the juridical seat of the arbitration.

Facts

The parties entered into an agreement 1989 for the Respondent to set up a coal extracting facility for the Petitioner in the Rajmahal area in the state of Jharkhand. The parties agreed that the agreement was to be governed by the laws of India; that the dispute- resolution mechanism to be followed was of arbitration; and, that the arbitration was to take place under the rules of the International Chamber of Commerce (ICC) in Geneva, Switzerland.

When disputes arose the petitioner sought a reference. The parties nominated their representatives on the arbitral tribunal and the presiding arbitrator was filled in by the ICC. The arbitral tribunal held its meetings in the United Kingdom but acknowledged that the seat of the arbitration was Switzerland. An award was passed in favor of the Respondent.

The Petitioner challenged it under Section 48 of the Arbitration and Conciliation Act, 1996 (“Act”) and also invoked the provisions of Section 34 of the Act and Sections 47 of the Act and 151 of the Code of Civil Procedure, 1908 (“CPC”) to have the award set aside to be able to pursue afresh in support of its claim (“Challenge”)

Arguments by the Parties

A preliminary objection was raised by the respondent, regarding the jurisdiction of any Indian court to receive a challenge to an arbitral award passed in a reference conducted beyond the territorial limits of India. The Respondent argued that in an international commercial arbitration, if the parties agree to a seat of the reference, the law of the seat of the reference would govern a challenge in the nature of setting aside the award unless the parties have expressly agreed otherwise. It is only a competent authority in the country, which is the seat of the arbitration that may receive such a challenge to the exclusion of all other forums.

The Petitioner mentioned that courts India are competent to receive a challenge to the award notwithstanding the place of the arbitration having been outside India and despite the Respondent not having attempted to implement it.

Judgment

The Court observed that Sections 2(1)(e) and 42 of the Act  preclude any Indian court from receiving a petition under Section 34 of the Act  unless the situs of the Respondent therein or a part of the cause of action relating to the subject- matter of the arbitration or a part of the immovable property, which was the subject-matter of the arbitration is within the jurisdiction of the court.

An arbitral award rendered in another New York Convention country will always be regarded as a New York Convention award in this country but the legal fiction that is evident from the Act may permit an arbitral award rendered in another New York Convention country to be regarded as a domestic award within the meaning of that expression in Section 2(7) of the Act.

All factors in assessing the territorial jurisdiction of a court under Indian law would then have been taken into account; and the word "domestic" in Section 2(7) of the Act would have been given its full meaning since in an imaginary case of two parties domiciled abroad, entering into an agreement that has no nexus with India or an agreement that relates to an immovable property, which is not in India, a petition under Section 34 of the Act cannot be carried to any Indian court.

An award rendered in a foreign country and which may even be a "foreign award" within the meaning of Section 44 of the Act, can be a domestic award and amenable to annulment proceedings under Indian law in this country only if such award has been made, pursuant to an agreement between the parties, under the law of India. The Court dismissed rejected challenge filed by the Petitioner as not being maintainable.

Row over the Jawaharlal Nehru Solar Mission

The Jawaharlal Nehru Solar Mission (JNSM) has been criticised by the United States and the European Union for its policy which requires use of local content for the project. The mission will be executed by the Ministry of New and Renewable Energy, to promote the use of solar energy.

Though local content is used as a part of several investment policies, it is not in accordance with the General Agreement on Tariffs and Trade(GATT) and the Agreement on Trade Related Investment Measures (TRIMs) as it does not keep the foreign investors on the same footing as the home investors. Local content requirement is mostly placed by a nation to boost its domestic industry.

The JNSM requires solar mission investors to use Indian manufactured solar modules and source 30% of the inputs from within the country. Such a requirement may have trade-distorting effect and can attract provisions of two key agreements within the structure of the WTO. It is likely to violate Article 2.1 of TRIMs as it falls within the category of a trade related investment measure that extends more favourable treatment to domestic products in comparison to imports by stipulating preferred use of products of domestic origin from any domestic source. (Infringement of National Treatment Principle)

Furthermore, appears to be contradictory with Article III: 4 of GATT (National Treatment) as it creates a 'disincentive' against purchase of imported products.

It can be argued that since the solar power generated by the project will be bought by NTPC, a public sector company; it will fall within the purview of government procurement and since India is not a member of the Government Procurement Agreement, it may not be bound by the multilateral agreement which sets the rules for purchases made by government agencies. However, any purchase by NTPC will not be limited to governmental purposes and will involve commercial resale or use in production of goods for commercial sale, thereby attracting the provision of national treatment, pursuant to Article III:8 (a) of GATT.

During the Uruguay Round of negotiations relating to TRIMs, India was one of the few developing countries which had taken a decision to abolish the local content requirements even before the conclusion of the Uruguay Round. Hence, India may find it tricky to prolong its policy of local content in the Solar Mission should her trading partners contradict and decide to raise a dispute at the WTO.

Nuclear Safety Regulatory Authority Bill

The government has introduced the Nuclear Safety Regulatory Authority (NSRA) Bill. It seeks to create two regulatory bodies as part of measures to strengthen safety at the country’s atomic power plants. It provides for the “establishment of the Council of Nuclear Safety to oversee and review the policies with respect to radiation safety, nuclear safety and other matters,” as mentioned in the objects and reasons cited in the Bill. This council will constitute an appellate authority with a Supreme Court judge or a high court chief justice as chairperson and two eminent scientists to consider appeals against orders of NSRA. The proposed regulator will have the authority to stop construction work and order an operating nuclear plant to shut down operations in case of any disaster. The structure and functions of the Nuclear Safety Regulatory Authority (NSRA) proposed in the NSRA Bill are mostly based on the recommendations of the Raja Ramanna committee appointed by the Prime Minister in 1996.

As per the Bill, all offences under the Act will be cognisable under the Code of Criminal Procedure, 1898, but no action will be taken in respect of any person for any offence under the Act except on the basis of a written complaint made. The law could also regulate the manufacture, custody, transport, transfer, sale, export, import, use or disposal of any radioactive substance.

The proposed legislation, which will further be scrutinized by a parliamentary standing committee before it comes up for discussion and passage in Parliament. The much-awaited Nuclear Safety Regulatory Authority (NSRA) Bill may be submitted to Parliament along with the recommendations of the Parliamentary Committee for Science and Technology in the current session of the House. The evolution of the nuclear regulatory body in India took too long.

A part of sub-section 20(2)(h) which empowers the NSRA to "specify hours of work, minimum leave and periodical medical examinations" to radiation workers is grossly inconsistent with current international norms and practices . This provides an exaggerated sense of risk to workers in the field of atomic energy and in the industrial , medical and research applications of radiation. Amendment of a part of the sub-section shall be helpful as it is not justifiable in the purview of current international practices.Complete text of the Bill

UN resolution on war crimes adopted

Sri Lanka's army defeated the separatist Tamil Tigers in May 2009, putting an end to 26 years of brutal civil war. However, the final phase of that war has been the source of considerable controversy, since both sides were accused of war crimes.

The resolution was tabled by the US asking the government to explain how it will address alleged violations of international humanitarian law and how will Sri Lanka implement the recommendations of an internal inquiry into the war.

Sri Lanka 'war crimes': Main allegations

Civilian deaths

The government was accused of repeatedly shelling safe zones set up to protect civilians. The rebels were accused of holding civilians as human shields and firing on those who tried to flee. Both denied the allegations.

Conduct of war

The report claims the government shelled food distribution lines, government-designated “safe zone” for civilians and near ICRC ships coming to pick up wounded civilians from beaches. The government denied security forces had shelled the safe zone, saying there were a number of rebel suicide blasts in that area. The UN report is also said to condemn the rebels for killing civilians through suicide attacks.

Hospital shelled

The report accuses the government of "systematically" shelling hospitals on the front line. In May 2009, sources in one hospital in rebel-held territory claimed that government forves shelled it, killing dozens of people.

Extra-judicial killings

After the war more allegations emerged. One video obtained by Channel 4 News purported to show the extra-judicial killing of what were thought to be Tamil rebels. Sri Lanka's army spokesman angrily rejected the video as a fabrication.

Civilian ordeal

There were allegations that civilians had lived under constant gunfire, intense shelling and an acute shortage of water, food and medicine. Civilians also confirmed accusations that the rebels were forcibly recruiting children.  The government says that the military inflicted no civilian deaths during the final stages of its victory. International human rights groups, however, say a comprehensive and independent war crimes inquiry is needed.

India has voted against Sri Lanka at the United Nations Human Rights Council, in Geneva today. The top human rights body adopted a resolution calling on Sri Lanka to properly investigate alleged war crimes during its 26-year conflict with the Tamil Tigers.

The US delegation's statement on the resolution on Sri Lanka:

"The United States is pleased to introduce draft resolution L.2, on Promoting Reconciliation and Accountability in Sri Lanka for consideration and approval by this Council.  This resolution enjoys the broad support of 40 co-sponsors.  A copy of the text, including slight revisions, is being circulated in the room today.

It is almost three years since the end of Sri Lanka's long and painful conflict.  For the past three years, my government has worked bilaterally, and with like-minded countries, to engage officials at the highest levels of the Sri Lankan government on the steps that are necessary to build a peaceful future for the Sri Lankan people.  For those three years Sri Lanka has had the time and space to develop its own roadmap for lasting national reconciliation and accountability.  Most recently, we have encouraged Sri Lanka to address actions taken on both sides of the conflict through its domestic Lessons Learned and Reconciliation Commission Process.  We looked forward to the Commission's report, and understood that Sri Lanka would develop its own action plan to implement the LLRC recommendations.

We have also worked bilaterally, and with like-minded countries, to encourage Sri Lanka to take advantage of the resources of the Office of the High Commissioner for Human Rights.  And we have encouraged Sri Lanka to engage with the Council, and to benefit from the broad range of experiences of Member States that have dealt successfully with their own post-conflict situations.

Mme President and Distinguished delegates, an enduring peace will be unsustainable without meaningful steps to foster national reconciliation and accountability.

Given the lack of action to implement the recommendations of the Sri Lankan government's own LLRC, and the need for additional steps to address accountability issues not covered in the LLRC report, it is appropriate that the UNHRC consider and adopt this moderate and balanced resolution.  It is a resolution that encourages Sri Lanka to implement the recommendations of it own LLRC and to make concerted efforts at achieving the kind of meaningful accountability upon which lasting reconciliation efforts can be built.

In addition, this Resolution urges Sri Lanka to work with the Office of the High Commissioner for Human Rights, and draw from helpful expertise the Office can offer.

These proposals are reasonable, constructive, and carefully tailored to the needs of the situation.  At our informal session on March 8, none of the many delegations present offered proposals for specific textual modifications.

To close, I wish to emphasize that this resolution is intended to help the people of Sri Lanka achieve a lasting and equitable peace that is marked by equality, dignity, justice and self-respect.

Thank you.”

Retrospective Changes in Tax Law

In the recent Vodafone Judgement, Vodafone had argued that the government had no jurisdiction over a transaction between two foreign companies occurring on a foreign territory. However, there was a strong moral counter-argument. The business that changed hands was entirely based in India. The government got an opportunity to reflect on the requirement of a new legislation. Hence it wants to retrospectively change the rules. The finance minister, Pranab Mukherjee, proposed retrospective changes to India's tax rules during his budget on March 16, prompting speculation that Vodafone's $2.2 billion tax case could be reopened.

The Supreme Court ruled on January 20 that the country's tax department has no jurisdiction over Vodafone's 2007 deal to buy Hutchison Whampoa's Indian mobile business for $11 billion. It was argued that the Indian tax office has no right to tax the transaction between two foreign entities. Government authorities had said the deal was liable to be taxed since most of the assets were based in India.

While reversing the interpretation given by the Supreme Court in the Vodafone case, the Budget proposal broadens the scope of State's power to tax all past income arising as a result of existence of actual economic nexus, irrespective of the place of residence of the entity deriving the income.

It makes it clear that India has taxation right on income derived on offshore transactions where the value is attributable to the underlying asset in India, and that this taxation right is not lost due to the structure or mode through which such gain is realised.

Retrospective amendment in tax legislation is legally permissible, as held by the Supreme Court in several cases. The SC has further held that Validating Acts are not necessarily arbitrary and are often enacted to retrospectively remove infirmities that might have led to invalidation of provisions imposing the levy.

Double non taxation is considered as much of an evil as double taxation. Besides, in equity too, there is no justification for the government favouring large taxpayers indulging in dubious tax planning, in so doing passing on the tax burden to ordinary taxpayers.

General Anti-Avoidance Rules

‘General Anti-Avoidance Rules’ has been introduced under Domestic Tax Laws. It has the same meaning as “anti avoidance rules based on general principles in law” except that it is codified and included in the legislation. According to its provisions, the Commissioner empowered to declare an arrangement as an impermissible avoidance arrangement (IAA) if:

•The whole, a step or a part of the arrangement has been entered with the objective of obtaining tax benefit, and

•The arrangement:

‒Creates rights and obligations not normally created in arm’s length transactions, or

‒Results in direct or indirect misuse or abuse of the provisions of the code, or

‒Lacks commercial substance in whole or part, or

‒Is not bonafide

The onus of proving that the purpose of a transaction is not to avoid taxes is on the assessee. The presumption applies even if the main / overall purpose of the arrangement is not to obtain a tax benefit and only if a step / part of the arrangement is to obtain a benefit.

It is believed that Income-tax officers have been handed discretionary powers that are far-reaching. This will seriously complicate tax administration and has the potential to increase corruption manifold.

In South Africa, GAAR was introduced in 2006, and is apparently the inspiration behind Indian provisions. In Netherlands and Canada, with similar provisions, the burden of proof lies on the tax authorities. In Australia the application determined on the basis of 8 test or factors.