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Bill Summary

The Public Procurement Bill, 2012


The Public Procurement Bill, 2012 was introduced by the The CPO may maintain a panel of registered bidders to

Ministry of Finance in the Lok Sabha on May 14, 2012. This Bill seeks to regulate and ensure transparency in the procurement process.
A procuring entity could be a Ministry or Department of

the central government, any Central Public Sector Undertaking, any company in which the government has a stake of more than 50%.
This Bill shall not apply to procurements which are less

help identify reliable bidders for certain class of procurements. The procuring entity may make modifications to the bidding document or issue clarifications before the last date of submission of bids. It may allot extension of time for submitting the bids if the clarifications need to be taken into account while submitting the bids.
The evaluation criteria of the procurement bids shall

than Rs 50 lakh, emergency procurements made for disaster management, and procurement for the purpose of national security.
The basic norms that the procuring entity shall adhere to

include among other factors the price; cost of operating, maintaining, and repairing the goods; time for delivery and completion; terms of payment and guarantee; and qualities such as reliability, and functional competence.
The Bill provides for exclusion of a bid if the procuring

include: (a) ensuring efficiency, economy and transparency; (b) provide fair and equitable treatment to bidders; (c) promote competitiveness; (d) ensure the quality is consistent with the price of the bid; and (e) prevent corruption.
The Bill also defines a Code of Integrity for the procuring

entity determines that the bidder is not qualified; bid contains false information; conflict of interest involved; a bribe or gratification given by a bidder; etc.
The six methods of procurement listed in the Bill are (a)

entity or Central Purchase Organization (CPO) as well as the bidders. It prohibits acceptance of bribe, collusion, misrepresentation, coercion or threat, and obstruction in the auditing process of the procurement made.
The procuring entity shall first determine the need for the

open competitive bidding, (b) limited competitive bidding, (c) single source procurement, (d) two-stage bidding, (e) electronic reverse auction, and (f) request for quotation and stock purchase.
The Bill provides for a Central Public Procurement Portal

procurement and estimate the cost of the procurement based on certain specified matters. It may publish information regarding planned procurements.
The CPO shall not limit participation of bidders or

to ensure transparency in the procurement process. Information such as pre-qualification document and details of bidders shall be displayed on the Portal.
The central government shall constitute one or more

discriminate against or amongst bidders except for the protection of public order and morality, animal or plant life, intellectual, national security. The central government may make procurement mandatory from certain bidders only on the grounds of promotion of domestic industry, socio economic policy, or other considerations in public interest. The procuring entity may specify certain requirements for the qualification of bidders. It may also engage in a prequalification process prior to inviting bids. The prequalification shall ordinarily be for a single procurement.

independent procurement redressal committees. Any prospective bidder aggrieved by the decision of the CPO may file an application with such a committee.
The Bill states different degree of penalties for offences

such as taking gratification in respect of procurement, interference with the process, making vexation, frivolous or malicious complaints, and abetment of offences.
The central government shall debar a bidder if he has been

convicted of an offence under Prevention of Corruption Act, 1998 and the IPC. A bidder shall be debarred from the procurement process if he breaches the code of integrity for a period not exceeding two years.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it. Sana Gangwani sana@prsindia.org
PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 New Delhi 110021

May 16, 2012

Bill Summary

The Public Procurement Bill, 2012


The Public Procurement Bill, 2012 was introduced by the The CPO may maintain a panel of registered bidders to

Ministry of Finance in the Lok Sabha on May 14, 2012. This Bill seeks to regulate and ensure transparency in the procurement process.
A procuring entity could be a Ministry or Department of

the central government, any Central Public Sector Undertaking, any company in which the government has a stake of more than 50%.
This Bill shall not apply to procurements which are less

help identify reliable bidders for certain class of procurements. The procuring entity may make modifications to the bidding document or issue clarifications before the last date of submission of bids. It may allot extension of time for submitting the bids if the clarifications need to be taken into account while submitting the bids.
The evaluation criteria of the procurement bids shall

than Rs 50 lakh, emergency procurements made for disaster management, and procurement for the purpose of national security.
The basic norms that the procuring entity shall adhere to

include among other factors the price; cost of operating, maintaining, and repairing the goods; time for delivery and completion; terms of payment and guarantee; and qualities such as reliability, and functional competence.
The Bill provides for exclusion of a bid if the procuring

include: (a) ensuring efficiency, economy and transparency; (b) provide fair and equitable treatment to bidders; (c) promote competitiveness; (d) ensure the quality is consistent with the price of the bid; and (e) prevent corruption.
The Bill also defines a Code of Integrity for the procuring

entity determines that the bidder is not qualified; bid contains false information; conflict of interest involved; a bribe or gratification given by a bidder; etc.
The six methods of procurement listed in the Bill are (a)

entity or Central Purchase Organization (CPO) as well as the bidders. It prohibits acceptance of bribe, collusion, misrepresentation, coercion or threat, and obstruction in the auditing process of the procurement made.
The procuring entity shall first determine the need for the

open competitive bidding, (b) limited competitive bidding, (c) single source procurement, (d) two-stage bidding, (e) electronic reverse auction, and (f) request for quotation and stock purchase.
The Bill provides for a Central Public Procurement Portal

procurement and estimate the cost of the procurement based on certain specified matters. It may publish information regarding planned procurements.
The CPO shall not limit participation of bidders or

to ensure transparency in the procurement process. Information such as pre-qualification document and details of bidders shall be displayed on the Portal.
The central government shall constitute one or more

discriminate against or amongst bidders except for the protection of public order and morality, animal or plant life, intellectual, national security. The central government may make procurement mandatory from certain bidders only on the grounds of promotion of domestic industry, socio economic policy, or other considerations in public interest. The procuring entity may specify certain requirements for the qualification of bidders. It may also engage in a prequalification process prior to inviting bids. The prequalification shall ordinarily be for a single procurement.

independent procurement redressal committees. Any prospective bidder aggrieved by the decision of the CPO may file an application with such a committee.
The Bill states different degree of penalties for offences

such as taking gratification in respect of procurement, interference with the process, making vexation, frivolous or malicious complaints, and abetment of offences.
The central government shall debar a bidder if he has been

convicted of an offence under Prevention of Corruption Act, 1998 and the IPC. A bidder shall be debarred from the procurement process if he breaches the code of integrity for a period not exceeding two years.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it. Sana Gangwani sana@prsindia.org
PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 New Delhi 110021

May 16, 2012

Bill Summary
The Piracy Bill, 2012
The Piracy Bill, 2012 was introduced in Lok Sabha on April 24, 2012 by the Minister of External Affairs, Shri S.M. Krishna. According to the statement of objects and reasons, piracy as a crime is not included in the Indian Penal Code (IPC). This has led to problems in prosecution of pirates presently in the custody of Indian police authorities. The Piracy Bill intends to fill this gap and provide clarity in the law. The Bill prescribes that its provisions shall also extend to the Exclusive Economic Zone of India1. The Bill defines piracy as any illegal act of violence or detention for private ends by the crew or passengers of a private ship or aircraft on high seas or at a place outside the jurisdiction of any State. It also prescribes that any act which is held to be piratical under international law shall be included in the above definition. The Bill seeks to punish piracy with imprisonment for life. In cases where piracy leads to death, it may be punished with death. The Bill also lays down punishments for attempts to commit and abet piracy. Such acts shall be punishable with imprisonment up to 14 years and a fine. The Bill provides that if arms/ ammunition are recovered from the possession of the accused, or if there is evidence of threat of violence, the burden of proof for proving innocence shall shift to the accused. The Bill empowers the government to set up designated courts for speedy trial of offences and authorizes the court to prosecute the accused regardless of his/ her nationality. It also provides for extradition.

The Territorial Water, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 defines the Exclusive Economic Zone of India. It is a seazone over which India has sovereign rights for exploration and use of marine resources. It stretches outward from the coastal baseline, up to 200 nautical miles into the sea.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Rohit Kumar rohit@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

May 01, 2012

New Delhi 110021

Bill Summary
The Constitution (One Hundred Seventeenth Amendment) Bill, 2012
The Constitution (One Hundred Seventeenth Amendment) In April 2012, the Supreme Court struck down the UP

Bill, 2012 was introduced in the Rajya Sabha on September 5, 2012 by Mr. V Narayansamy, Minister of State for Personnel, Public Grievances and Pensions.
In 1992, the Supreme Court in the case of Indira Sawhney

v Union of India had held reservations in promotions to be unconstitutional. Subsequently in 1995, the central government had amended the Constitution and inserted Article 16(4A). This provided for reservation in promotions for Scheduled Castes and Scheduled Tribes which in the opinion of the state are not adequately represented in the services.
In 2006, the Supreme Court in the case of M. Nagraj v

Government Seniority Rules which provided for reservations in promotions. The court held that the state government had not undertaken any exercise to identify whether there was backwardness and inadequate representation of Scheduled Castes and Scheduled Tribes in the state government.
In light of the recent judgment of the Supreme Court, the

central government has introduced the present Bill amending the Constitution. The Bill seeks to substitute Article 16(4A) of the Constitution of India.
The Bill provides that all the Scheduled Castes and

Union of India upheld the constitutional validity of the amendment. While upholding the validity of the amendment, the court held that before framing any law on this issue, the state will have to satisfy the test of; (a) backwardness of the particular SC and ST group; (b) inadequate representation of the said group; and (c) efficiency of administration.

Scheduled Tribes notified in the Constitutional shall be deemed to be backward.


Article 335 of the Constitution states that the claims of the

Scheduled Castes and Scheduled Tribes have to be balanced with maintaining efficiency in administration. The Bill states that provision of the amendment shall override the provision of Article 355.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Pallavi Bedi pallavi@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

September 5, 2012

New Delhi 110021

Bill Summary

The Constitution 118th Amendment Bill, 2012


The Constitution 118th Amendment Bill, 2012 was The Bill seeks to insert Article 371J in the Constitution to

introduced in the Lok Sabha on September 7, 2012 by the Minister of Home Affairs, Mr. Sushil Kumar Shinde. The Bill was referred to the Standing Committee on Home Affairs (Chairperson: Mr. M. Venkaiah Naidu), which is scheduled to submit its report by the first week of the Winter Session of the Parliament.
A resolution to make special provisions for the Hyderabad

empower the Governor of Karnataka to take steps to develop the Hyderabad-Karnataka Region. As per the Statements of Objects and Reasons of the Bill, this Region includes the districts of Gulbarga, Bidar, Raichur, Koppal, Yadgir and Bellary.
The President may allow the Governor to take the

Karnataka Region was passed by the Legislative Assembly and Legislative Council of Karnataka in March 2012. The resolution aims to establish an institutional mechanism to develop the region and promote inclusive growth. It aims to reduce inter-region and inter-district disparity in the State of Karnataka. This Bill was introduced in Parliament to give effect to this resolution.

following steps for development of the region: (i) setting up a development board for the Region; (ii) ensure equitable allocation of funds for development of the Region; and (iii) provide for reservation in educational and vocational training institutions, and state government positions in the Region for persons from the Region.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Harsimran Kalra harsimran@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

October 17, 2012

New Delhi 110021

Bill Summary

The Indecent Representation of Women (Prohibition) Amendment Bill, 2012


The Indecent Representation of Women (Prohibition)

Amendment Bill, 2012 was introduced in the Rajya Sabha on December 13, 2012 by the Minister of State (Independent), Women and Child Development, Smt Krishna Tirath. The Bill seeks to amend the Indecent Representation of Women (Prohibition) Act, 1986, which prohibits indecent representation of women through advertisements or publications, writings and paintings (primarily the print media). The Bill seeks to widen the scope of the Act to cover new forms of communication such as the internet, satellite based communication, cable television etc. The Bill prohibits the publication or distribution of any material, which contain indecent representation of women. This provision does not apply to material, which may be published in the interest of science, literature or art or for bona fide religious purpose or for sculptures in ancient monuments or temples. The Bill adds new definitions of indecent representation of women, electronic form and publish. Indecent

representation of women means the depiction of the figure or form of a woman in such a way that it has the effect of being indecent or derogatory or is likely to deprave or affect public morality. Electronic form means any information generated, sent or stored in media, magnetic and optical form (as defined in the Information Technology Act, 2000). Publish includes printing or distributing or broadcasting through audio visual media. It amends definitions of advertisement and distribution to include all types of media (printed and electronic). The Bill authorises any police officer of the rank of Inspector or above to investigate offences committed under this law. The Bill enhances penalties for various offences. For representing women indecently, the penalty for the first offence was increased to imprisonment of three years from two years and a fine between Rs 50,000 and Rs 1 lakh from Rs 2,000. For a subsequent offence, the term of imprisonment shall be between two and seven years and fine between Rs 1 lakh and 5 lakh.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

December 26, 2012

New Delhi 110021

Bill Summary

The National Academic Depository Bill, 2011


The National Academic Depository Bill, 2011 was

introduced in the Lok Sabha on September 5, 2011 by the Minister of Human Resource Development, Shri Kapil Sibal. The Bill was referred to the Standing Committee on Human Resource Development (Chairperson: Shri Oscar Fernandes), which is scheduled to submit the report within three months. The Bill seeks to establish a national database of academic awards in electronic format, which can be verified and authenticated. The central government shall appoint a depository as the National Academic Depository to establish and maintain the national database. The Bill makes it mandatory for every academic institution (college, university, and boards that award Class X and XII certificates) to lodge every academic award with the depository. The depository shall provide training to the staff of the academic institution and recover a reasonable cost of the training. Disputes regarding cost shall be adjudicated by the State Educational Tribunal. On a request made by the depository, an academic institution has to verify within seven days that the award was issued by the institution. Any person may apply to the depository or a registered agent to verify and authenticate any specific award. The depository shall inform the person within three days whether the award could be verified and authenticated. A depository has to meet certain conditions: (a) it has to be registered under the Securities and Exchange Board of India Act, 1992 or is a fully owned subsidiary of such a depository; (b) its memorandum of association specifically mentions being a depository service for academic awards as one of its objectives; and (c) it fulfils other terms and conditions that may be prescribed. The central government shall authorize a depository to begin operations only when it is satisfied that there are (i) adequate systems for storage and retrieval of records from the national database, (ii) safeguards to ensure that its automatic data processing system is secure, (iii) adequate network through which the depository shall maintain continuous electronic communication with academic

institutions and other concerned bodies, and (iv) adequate number of facilitation centres, established by the depository, to provide services. The central government shall review the working of the depository every ten years. If satisfied with the working it shall renew the registration for another 10 years. If not, the registration may be revoked. The central government may also revoke the appointment of a depository on certain grounds such as willful default, breach of terms and conditions, and financial viability. The depository has to provide for registration of academic institutions, access to the national database to registered academic institutions, training to academic institutions to lodge and retrieve academic records, verify and authenticate any academic award in the national database and ensure that databases are designed in such a way to facilitate online interaction with the Central Identities Data Repository to be created under the National Identification Authority of India Act, 2011. The depository also has to fulfil certain requirements such as adequate mechanisms for monitoring and evaluating controls, data recovery mechanisms and safeguards, maintain data backup and ensure a secure online connectivity. These measures shall be inspected annually by a panel of independent experts, appointed by the central government. The depository shall register academic depository agents to assist in providing services. These agents cannot be minors, be of unsound mind, hold any equity share capital or have any other interest in the depository. The Bill lists various offences and penalties. For example, if any person, not authorized to do so, accesses the database, downloads or damages any data, introduces computer viruses, shall pay a fine of upto Rs 1 crore. Such cases shall be adjudicated by the National Educational Tribunal. It also includes certain offences such as hacking, and tampering with computer source documents for which the penalty shall be in accordance to the Information Technology Act, 2000.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

September 15, 2011

New Delhi 110021

Bill Summary

The Constitution (One Hundred and Sixteenth Amendment) Bill, 2011


The Constitution (One Hundred and Sixteenth Amendment) Bill, 2011 was introduced in the Lok Sabha by the Minister of Personnel, Public Grievances and Pensions, Mr. V. Narayanasamy on December 22, 2011. The Bill amends the Constitution by inserting a new Part XIVB (adding Articles 323C and 323D) to the Constitution. It provides an outline for establishing a Lokpal for the Union and Lokayukta for the states. The Bill also amends the Third Schedule (insertion of Part IX) to provide for the form of oath to be taken by the Chairperson and members of Lokpal and the Lokayukta. The Bill provides that that there shall be a Lokpal for the Union and a Lokayukta for the States. Lokpal The Bill vests the Lokpal with the power to (a) hold preliminary enquiry which may result in an investigation; and (b) prosecute offences. This power is in relation to a complaint filed under any prevention of corruption law made by Parliament. The Lokpal shall be an autonomous and independent body headed by a Chairperson. The number of members and the conditions of the service of the Lokpal shall be determined by Parliament. The appointment of the Chairperson and the members of the Lokpal shall be made by the President. The Chairperson and members of the Lokpal shall not be eligible to hold any further government posts (including office under the Government of India, State Government or any other officer as may be determined by Parliament). Lokayukta The Bill also provides that there shall be a Lokayukta for every State. The Bill vests the Lokayukta with the power to (a) hold preliminary enquiry which may result in an investigation; and (b) prosecute offences. This power is in relation to a complaint filed under any prevention of corruption of law made by either the Parliament or the State legislatures as the case may be.

The Lokayukta shall be an autonomous and independent body headed by a Chairperson. The number of Members and the conditions of service of the Lokayukta shall be determined by either Parliament or the State Legislatures as the case may be. The appointment of the Chairperson and the Members of the Lokayukta shall be made by the Governor. The Chairperson and Members of the Lokayukta shall not be eligible to hold any further government posts (including office under the Government of India, State Government or any other officer as may be determined by Parliament or state legislature).

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Pallavi Bedi pallavi@prsindia.org


PRS Legislative Research

December 23, 2011


Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

New Delhi 110021

Bill Summary
The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, 2012

The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, 2012 was introduced in the Lok Sabha on September 6, 2012 by Ms. Kumari Selja, Minister of Housing and Urban Poverty Alleviation. The Bill shall not be applicable to land owned or controlled by the Railways under the Railways Act, 1989. The Bill requires every street vendor to be registered with the Town Vending Committee. The Bill states that the minimum age of a street vendor has to be 14 years. Street Vendors have been defined to include any person engaged in vending of articles, goods, food etc or offering services to the general public in a street lane, side walk, footpath, pavement, public park, or any other public or private area. It includes hawkers, peddlers, and squatters. The Bill provides that no person can undertake any street vending activity without obtaining the required vending certificate. Every registered street vendor shall be issued an identity card. The Bill states that a vending certificate shall be issued to (a) stationary vendors; or (b) mobile vendors; or (any other category of vendor recognised by the appropriate government. The Bill requires every local authority to frame a street vending plan. The plan has to be reframed every five years. The plan shall determine the vending zones as (a) restriction-free vending zones; (b) restricted vending zones; and (c) no-vending zones. The plan should also take into account that the areas available for street vending is reasonable, does not lead to overcrowding and is consistent with natural markets. The Bill defines natural markets as a market where sellers and buyers have traditionally congregated for more than a specified period for the sale and purchase of specific products or services and has been determined as such by the local authority. The appropriate government shall frame a street vending scheme. The scheme shall include amongst others: (a) the manner of applying for registration, (b) the period within

which the decision has to be made and, (c) any other condition to be imposed on the vending certificate. The Bill empowers the local authority to relocate street vendors. The authority may do so, of the street vendors are causing a public nuisance or obstructing the movement of the public. A registered street vendor who has been relocated shall be entitled to new site for vending. The local authority is also empowered to confiscate the goods of the vendors in the manner specified in the street vending scheme. The Bill empowers the Town Vending Committee to cancel or suspend the vending certificate. This may be done if the vendor has breached the conditions of street vending either under the Bill or under the street vending scheme. An appeal can be made to the local authority against the decision of the Town Vending Committee. The appeal shall be with respect to (a) decision regarding the grant of registration; or (b) cancellation/suspension of the vending certificate. The local authority shall constitute a grievance redress committee. The committee shall consist of one sub judge/judicial magistrate / executive magistrate and other persons experienced in street vending. Appeal against the decision of Committee shall lie with the local authority. The Bill defines the duties of the local authority to include amongst others; (a) monitoring and supervising the street vendor scheme; (b) monitoring the effectiveness of the Town Vending Committee; and (c) deciding appeals. A penalty may be imposed on the street vendors if the vendor :(a) does not have a vending certificate; or (b) vends beyond the designated zone or specified timings; or (c) contravenes the vending certificate. A maximum penalty of Rs 2000 may be imposed on the street vendor. The appropriate government may provide for credit, insurance and other welfare schemes for the street vendors.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it. Pallavi Bedi Pallavi@prsindia.org
PRS Legislative Research

September 12, 2012

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

Bill Summary
The Juvenile Justice (Care and Protection of Children) Amendment Bill, 2010
The Juvenile Justice (Care and Protection of Children) Amendment Bill, 2010 was introduced in the Lok Sabha on November 16, 2010 by the Minister of State Shrimati Krishna Tirath for the Ministry of Women and Child Development. The Bill seeks to amend the Juvenile Justice (Care and Protection of Children) Act, 2000. The Bill was referred to the Standing Committee on Human Resource Development on December 1, 2010. The Committee submitted its report on February 25, 2011. The Bill omits a provision from the Act which provided for the separate treatment of juveniles or children suffering from leprosy, sexually transmitted disease, Hepatitis B, Tuberculosis, or children with unsound minds. The Bill also replaces a provision which gave competent authorities in special homes or childrens homes the power to move children suffering from leprosy, unsound mind, or drug addiction to special facilities for such children. Under the Bill, the competent authority can move children who are mentally ill or addicted to alcohol or drugs, only if such condition leads to a behavioural change in the children. He can then order their removal to a psychiatric hospital or psychiatric nursing home. In case the child has been removed to a psychiatric facility, the competent authority can remove the child to an Integrated Rehabilitation Centre on the basis of the discharge certificate issued by the psychiatric facility.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Anirudh Burman anirudh@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org New Delhi 110021

April 18, 2011

Bill Summary
The National Commission for Human Resources for Health
Bill, 2011
The National Commission for Human Resources for Health Bill, 2011 was introduced in the Rajya Sabha on December 22, 2011 by the Minister of Health and Family Welfare Shri Ghulam Nabi Azad. It was referred to the Department related Standing Committee on Health and Family Welfare (Chairperson: Shri Brajesh Pathak), which is scheduled to submit its report within three months. The Bill seeks to establish a mechanism to determine and regulate the standard of health education in the country. It shall repeal the Indian Nursing Council Act, 1947; the Pharmacy Act, 1948; the Dentists Act, 1948 and the Indian Medical Council Act, 1956 on such date as decided by the central government. The Bill seeks to set up the National Commission for Human Resources for Health (NCHRH), National Board for Health Education (NBHE), and the National Evaluation and Assessment Council (NEAC). It also establishes various professional councils at the national and state level and a NCHRH Fund to meet expenses. The NCHRH shall take measures to determine and maintain the minimum standard of human resources in health education. The measures may include (a) conducting studies to assess the needs of human resources in states; (b) conducting elections in the national councils; (c) providing grants to the NBHE, NEAC and councils, and (d) regulating the entry of foreign institutions in consultation with NBHE and any law that may come into force. The permission of NCHRH is required to establish an educational institution. The person has to submit a scheme for the institution to NCHRH which shall refer it to NEAC. NCHRH shall give permission based on NEACs recommendation. In case the person is not informed of a decision within one year of submitting the scheme, it shall be deemed to have been approved. The NEAC shall evaluate every institution seeking permission to operate. The central government may appoint national councils such as Medical Council of India, Paramedical Council of India and Nursing Council of India. Every person who wants to practice medicine, sign a medical certificate or give evidence in a court as an expert has to be enrolled in the national or state registers to be maintained by these councils. The NBHE shall take measures to facilitate academic studies and research in emerging areas of health education. It shall conduct a screening test for medical practitioners before they can enroll in a professional council. An Indian citizen who wants to study medicine abroad has to obtain an eligibility certificate from NBHE, certifying that he fulfils minimum norm of getting admission in an MBBS course in India. He shall not be eligible to appear for the screening test if he has not obtained this certificate. A person may be exempted from the test if he is enrolled as a health practitioner outside India for at least three years. Any person who obtains a degree from a government institution and leaves India for higher education, shall endeavour to serve in India for three years. If he does not do so, his name shall be removed from the register. If he opts to return to India, he can get his name re-entered after fulfilling such conditions as specified by NCHRH. Any person who gets a degree from a private institution then goes abroad for higher education has to either return to India within three years or inform the respective council of his whereabouts. If he does not do so, it shall be construed as professional misconduct. The national and state councils shall have the power to inquire into any complaint of professional misconduct against any person enrolled in the register. If the person is found guilty, the council can impose certain penalties such as a warning, suspension, removal or fine. The decision of the national council can be appealed to the ethics committee under the NCHRH. Professional misconduct includes allowing any person to practice in his name falsely, revealing information about a patient without consent, and violating certain laws. If a person is aggrieved by the professional services rendered by a medical practitioner enrolled in the register, he may file a complaint with the state council within 60 days. The council shall decide the complaint within 120 days of receiving the complaint. The Bill constitutes the National Commission for Human Resources for Health Fund to meet the expenses of the various bodies. The Bill lists penalties for various offences such as running institution without permission, practicing without being enrolled, and enroling without a screening test.
March 6, 2012

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org New Delhi 110021

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Bill Summary
The Constitution (One Hundred and Eleventh Amendment) Bill, 2009

The Constitution (One Hundred and Eleventh Amendment) Bill, 2009 was introduced in the Lok Sabha on November 30, 2009 by the Minister of Agriculture, Consumer Affairs and Public Distribution System, Shri Sharad Pawar. The Bill was referred to the Department related Standing Committee on Agriculture (Chairperson: Shri Basudeb Acharia), which is expected to submit its report within three months. The Bill adds a new Directive Principles of State Policy stating that the State shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies. It further inserts a new part IX B in the Constitution (adding Articles 243ZH through 243ZT), which outlines certain guidelines for running co-operative societies. The state legislature shall specify the number of members of the Board of Directors of a co-operative society. The number is limited to 21. The term of the Board is for a period of five years. On every Board of a co-operative society, one seat shall be reserved for a person who is a Scheduled Caste or Schedule Tribe and two seats shall be reserved for women. The election of members to the Board must be conducted before the expiry of the previous one. The state legislature would outline the guidelines for conducting such elections. The state legislature shall make provisions for co-opting any person having experience in the field of banking, management, finance or specialization in a field related to a particular co-operative society as members of the Board. A maximum of two people can be co-opted to the Board. The co-opted member would not have the right to vote in

any election of the co-operative society or be eligible for election as Chairman, President, Vice-Chairman or VicePresident. The Board of a co-operative society can be superseded in case of (a) persistent default; (b) negligence in the performance of its duties; (c) commission of any act prejudicial to the interest of the co-operative society or its members; (d) there is a stalemate in the constitution or function of the Board; or (e) the general body has failed to conduct the elections as per the required procedure. A Board cannot be superseded or suspended for more than six months. In case a Board has been superseded, the administrator appointed to manage the affairs of such a co-operative society shall arrange for conducting elections within the specified time period. The Board of a co-operative society which does not have any shareholding or guarantee or loan or financial assistance from the government cannot be superseded. The provisions of the Banking Regulations Act, 1949 will be applicable to banking co-operative societies. The state legislature may define the offences and penalties related to co-operative societies. An offence would be committed if (a) a co-operative society files a false return, (b) wilfully disobeys any summon or requisition issued under the state Act, (c) any employer who, without sufficient cause, does not pay to the co-operative society the amount deducted from an employee within a period of 14 days, (d) any officer who wilfully does not hand over custody of books, accounts or cash of a co-operative society to an authorized person, and (e) any person who adopts corrupt practices before, during or after the election of Board members or office bearers.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

January 28, 2010

New Delhi 110021

Legislative Brief
The Electronic Delivery of Services Bill, 2011 was introduced in the Lok Sabha by the Minister of Information Technology on December 27, 2011. The Bill was referred to the Standing Committee on Information Technology on January 5, 2012. The Committee submitted its Report on August 30, 2012.

The Electronic Delivery of Services Bill, 2011


Highlights of the Bill
The Bill requires public authorities to deliver all public services electronically within a maximum period of eight years. There are two exceptions to this requirement: (a) services that cannot be delivered electronically; and (b) services that public authorities, in consultation with the Commissions, decide not to deliver electronically. The Bill establishes Central and State Electronic Service Delivery Commissions to monitor compliance of government departments, and hear representations. Public authorities have to establish a mechanism to redress complaints. Complaints may be for: (a) non-delivery of services in an electronic form; or (b) deficiency in the electronic service provided. In the first case, a representation may be made against the mechanisms orders before the Commission. A maximum penalty of Rs 5,000 may be imposed on a defaulting officer by the Central and State Commissions. To provide electronic services, information may be stored electronically. However, the Bill does not provide any safeguards to protect the security of such information. The Bill provides for complaints against: (a) non-availability of electronic services; and (b) deficiency in electronic service. The appellate mechanism is available in the former case and not in the latter case. The grievance redressal mechanism under this Bill may overlap with the grievance redressal mechanism under the Citizens Charter Bill, 2011. Additionally, some states have enacted their own laws on electronic delivery of services. The Bill states that a government order for the appointment of a Commissioner may not be questioned in any manner. This may be in contradiction with the decision of the Supreme Court on the appointment of the Chief Vigilance Commissioner. The Standing Committees recommendations include: (a) the need to simultaneously provide services manually; and (b) that infrastructure costs to be borne by the centre.

Recent Briefs: Nuclear Safety Regulatory Authority Bill, 2011


September 28, 2012

The Citizens Charter Bill, 2011


September 27, 2012

Key Issues and Analysis

Pallavi Bedi pallavi@prsindia.org Harsimran Kalra harsimran@prsindia.org October 5, 2012

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Electronic Delivery of Services Bill, 2011

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
In 2006, the government approved the National e-Governance Plan to provide certain services electronically. These services include electronic processing of passports, tax payments, and registration of companies. In 2008, the Second Administrative Reforms Commission emphasised the need for a legal framework to implement e-governance.2 Additionally, the Information Technology Act, 2000 (IT Act) was amended in 2008 to enable government departments to deliver services electronically.3 It empowers the government to authorise entities to set up, maintain and upgrade computerised facilities. However, the IT Act did not require the government to provide services electronically. The Bill mandates that public authorities provide services electronically and creates a statutory right to such services. At present, some states have notified Rules for electronic service delivery under the IT Act, while Jharkhand has enacted a law.4

Key Features
The Electronic Delivery of Services (EDS) Bill requires public authorities to deliver all public services electronically. There are two exceptions to this: (a) services that cannot be delivered electronically; and (b) services that public authorities, in consultation with the Commissions, decide not to deliver electronically. Public authorities have to provide services electronically within five years. This period may be extended by a maximum of three years in consultation with the Commission.

Public authority
The Bill applies to all public authorities. It defines public authorities to include: (a) constitutional authorities;
(b) statutory authorities; and (c) entities notified by the government. The definition includes bodies and nongovernmental organisations substantially funded, directly or indirectly, by the government.

Notification of services
Every public authority will publish a list of services it will deliver electronically. This list has to be published
within 180 days of enactment of the Bill, and reviewed every year. The list should contain: (a) the date by which the services would be available electronically; and (b) the manner and quality of the delivery of services.

Electronic Service Delivery Commissions


The Bill establishes Central and State Electronic Service Delivery Commissions. The Central (State)
Commission will monitor the compliance of the public authorities under the central (state) government.

Each Commission will comprise a Chief Commissioner and up to two Commissioners. The Commissioners
will be eminent persons with at least 25 years of experience in information technology or governance. They will be appointed on the recommendation of a selection committee, consisting of the Cabinet Secretary (Chief Secretary), a Secretary to the respective government, and an expert in information technology or governance.

Complaint mechanisms
The Bill requires public authorities to set up a grievance redressal mechanism (GRM). Complaints may be
filed with the GRM for: (a) non-availability of electronic services; and (b) deficiency in such services provided. A person aggrieved by the decision of the GRM may make a representation to the Central or State Commission. Representations can only be made for non-availability of an electronic service.

Powers and Functions of the Electronic Service Delivery Commissions


The Commissions functions include: (a) monitoring the publication of services to be delivered electronically;
(b) monitoring the GRM; and (c) simplifying the processes and forms for the electronic delivery of services.

Penalties
The Commissions may impose a maximum penalty of Rs 5,000 on the head of department. Such penalty may
be imposed for violating the provision of the Bill or directions of the Commissions. In case of a wilful and persistent default, the penalty may be increased to Rs 20,000.
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PART B: KEY ISSUES AND ANALYSIS


Inadequate safeguards for private information
Clause 5

The Bill requires all government departments to provide services electronically. This may involve the storage and communication of information in an electronic form. While the right to privacy is a fundamental right, India does not have a law on privacy.5 In the absence of such a law, data that is stored electronically may be misused. The IT Act was enacted to facilitate e-commerce by providing legal recognition to electronic transactions. It only penalises wrongful disclosure of information collected under that Act. It does not penalise disclosure of information collected by the government under other laws, such as under this Bill. For instance, presently, on the income tax website, any individuals PAN number can be accessed if the individuals name and date of birth are known.6 Similarly, on the Municipal Corporation of Delhi website, the details of property owned by any person are available.7 The Bill empowers the government to prescribe e-governance standards. However, these standards may not include safeguards for privacy. The Standing Committee that examined the Bill recommended that suitable amendments be made either to this Bill or to the IT Act to address this issue.8 The Standing Committee on the IT (Amendment) Bill, 2006 had also recommended that suitable provisions be made in the IT Act to protect privacy of personal information.9 Further, the Standing Committee on the National Identification Authority Bill, 2010 recommended that a data protection law be enacted before personal information is collected on a large scale and linked across databases. It noted that in the absence of a data protection law, it would be difficult to deal with issues like access and misuse of personal information. It may be noted that, the Planning Commission has set up a group of experts, under the chairmanship of Justice A.P. Shah, to facilitate the preparation of a Privacy Bill.10

Inconsistency in the appellate mechanism


No appellate mechanism in case of deficiency of services
Clause 7 and 26 (1)

Two types of complaints may be made to the GRM: (a) non-availability of the electronic service; and, (b) deficiency of the electronic service. A person aggrieved by the decision of the GRM in the former instance, may make a representation to the Commissions. However, there is no such provision to approach the Commission for deficiencies in the electronic service. For example, in the case of electronic booking of railway tickets, the customer may complain if: (a) the service is not available electronically; or (b) the railways website does not work. However, a representation to the Commission may only be made in the first case and not in the second case.

Lack of clarity of the term representation


The Bill uses the term representation and not the term appeal to describe the recourse against the decision of the GRM. The meaning of the term representation is not clear. In other legislations, such as the Right to Information Act, 2005 and the Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011 (Citizens Charter Bill, 2011), the term appeal is used. The Standing Committee has recommended that the term representation be replaced with the term appeal.8

Bar on judicial review of appointment of Commissioners


Clause 22

The Central and State Commissioners will be appointed on the recommendations of the selection committee. The Bill states that an order by the government appointing a Commissioner may not be questioned in any manner. This may be in contradiction with a recent Supreme Court decision on the appointment of the Central Vigilance Commissioner (CVC).11 The Court held that it can undertake judicial review in case there are procedural irregularities in the appointment of the CVC. In particular, the Court stated that it can review whether the selection committee has considered the relevant information while making the recommendation.

Overlap with other legislation


The Citizens Charter Bill, 2011, which is currently pending in Parliament, creates a statutory right to delivery of services. Under this Bill, a complaint can be filed for a violation of the citizens charter or any law, policy or scheme.12 The Bill also provides for a mechanism to redress grievances. The EDS Bill also establishes a mechanism to redress grievances. Grievances under this Bill may also fall within the ambit of the Citizens Charter Bill. Thus, in some cases there could be an overlap of jurisdiction of the two
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Bills. It is not clear as to which mechanism may be approached in the first instance, and whether seeking relief under one mechanism would bar opportunities under the other. The Standing Committee recommended that there be no overlap of jurisdiction under the two Bills.8 Additionally, some states have enacted their own electronic service delivery laws. For instance, Kerala, Andhra Pradesh, and Chhattisgarh have prescribed Rules related to electronic service delivery under the IT Act, while Jharkhand has enacted a law.4

Standing Committee Recommendations on the Bill


The Electronic Delivery of Services Bill, 2011 was referred to the Standing Committee on Information Technology. The Committee submitted its Report on August 30, 2012. Some of the recommendations of the Committee are provided in the table below. Table 1: Standing Committee Recommendations on the Bill
Issue Need for the Bill Infrastructure Access to services Exclusion of services Payment for services Penalties Standing Committee Recommendations The need for the Bill should be reviewed as e-governance can be facilitated through amendments in the IT Act. The IT Department should co-ordinate with other Ministries to increase computer literacy and power supply. Services should be provided manually as well as electronically. Consultations should be held with the public to review the services that may be excluded from electronic delivery. The Bill should be amended to specify that no fee be levied on poor persons for accessing electronic services. Private persons authorised to provide access to services through kiosks should be penalised if they violate the Bill.

Financial cost Additional resources to develop infrastructure at the state level should be borne by the central government. Source: 37th Report of the Standing Committee on Information Technology, August 30, 2012; PRS.

Notes
1. This brief was prepared on the basis of the EDS Bill, 2011, that was introduced in the Lok Sabha on December 27, 2011. 2. Promoting e-Governance, 11th Report of the Second Administrative Reforms Commission, December 2008. 3. Section 6A, Information Technology Act, 2000. 4. Andhra Pradesh Information Technology (Electronic Service Delivery) Rules, 2011; Kerala Information Technology (Electronic Delivery of Services) Rules, 2010; Madhya Pradesh Information Technology (Regulation of Electronic Delivery of Citizen Services and Appointment of Service Providers) Rules, 2010; Chhattisgarh Citizen Service (Electronic Governance) Rules, 2003; and Jharkhand Electronic Service Delivery Act, 2011. 5. Peoples Union for Civil Liberties vs. Union of India (1997) 1 SCC 301. 6. The Income Tax website: https://incometaxindiaefiling.gov.in/portal/knowpan.do as accessed on October 3, 2012. 7. The Municipal Corporation of Delhi website: http://111.93.49.17/mnsearchpropid.php as accessed on October 3, 2012. 8. 37th Report of the Standing Committee on Information Technology, August 30, 2012. 9. 50th Report of the Standing Committee on Information Technology, September 7, 2007. 10. Group of Experts on Privacy Issue, Press Information Bureau, January 6, 2012 11. Centre for PIL vs. Union of India AIR 2011 SC 1267. 12. Clause 2 (f), Citizens Charter Bill, 2011.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

October 5, 2012

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Legislative Brief
The Civil Liability for Nuclear Damage Bill, 2010
Highlights of the Bill
The Bill was introduced in the Lok Sabha on May 7, 2010 by the Ministry of Science and Technology and Earth Sciences. The Bill was referred to the Standing Committee on Science & Technology, Environment & Forests (Chairman Dr. T. Subbarami Reddy) on May 13, 2010. The Committee is scheduled to submit its report within two months.

The Civil Liability for Nuclear Damage Bill, 2010 fixes liability for nuclear damage and specifies procedures for compensating victims. The Bill fixes no-fault liability on operators and gives them a right of recourse against certain persons. It caps the liability of the operator at Rs 500 crore. For damage exceeding this amount, and up to 300 million SDR, the central government will be liable. All operators (except the central government) need to take insurance or provide financial security to cover their liability. For facilities owned by the government, the entire liability up to 300 million SDR will be borne by the government. The Bill specifies who can claim compensation and the authorities who will assess and award compensation for nuclear damage. Those not complying with the provisions of the Bill can be penalised. The liability cap on the operator (a) may be inadequate to compensate victims in the event of a major nuclear disaster; (b) may block Indias access to an international pool of funds; (c) is low compared to some other countries. The cap on the operators liability is not required if all plants are owned by the government. It is not clear if the government intends to allow private operators to operate nuclear power plants. The extent of environmental damage and consequent economic loss will be notified by the government. This might create a conflict of interest in cases where the government is also the party liable to pay compensation. The right of recourse against the supplier provided in the Bill is not compliant with international agreements India may wish to sign. The time-limit of ten years for claiming compensation may be inadequate for those suffering from nuclear damage. Though the Bill allows operators and suppliers to be liable under other laws, it is not clear which other laws will be applicable. Different interpretations by courts may constrict or unduly expand the scope of such a provision.

Recent Briefs: The Transplantation of Human Organs (Amendment) Bill, 2009


March 31, 2010

Key Issues and Analysis

The Foreign Trade (Development and Regulation) Amendment Bill, 2009


March 31, 2010

Anirudh Burman anirudh@prsindia.org

July 5, 2010

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Civil Liability for Nuclear Damage Bill, 2010

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
The Civil Liability for Nuclear Damage Bill, 2010 seeks to create a mechanism for compensating victims of nuclear damage arising from a nuclear incident. There are currently 19 nuclear reactors in the country. 2 The Statement of Objects and Reasons of the Bill states that it is being enacted to provide for liability arising out of a nuclear incident, and also due to the necessity of joining an international liability regime. There are three major international agreements which form the international framework of nuclear liability: (a) The Paris Convention of 19603, (b) The Vienna Convention of 19634, and (c) The Convention on Supplementary Compensation for Nuclear Damage of 1997. India is not a party to any of these conventions presently. India has also signed some agreements with other countries (including USA, UK, Russia, France, and Canada) for co-operation in use of nuclear energy for civilian purposes.5 The India-France agreement explicitly states that India has to create a civil nuclear liability regime for compensating damage caused by incidents involving nuclear material and nuclear facilities.6 Though there are more than four hundred nuclear reactors operating worldwide 7, there have been only three major accidents in nuclear reactors in which human lives have been lost8. However, damage caused in a major nuclear accident (such as Chernobyl9) may be huge. The objective of this Bill is to provide quick compensation in the event of a nuclear incident. International agreements have certain common features to address this issue10:
Fixing no-fault liability on operators and requiring them to take insurance or provide financial security. Limiting no-fault liability in time and amount. There is a process for expeditious distribution to victims by fixing which court/ authority has jurisdiction.
*

Key Features
The Bill provides for civil liability for nuclear damage, appointment of authorities to assess claims and damages and related matters. The main features of the Bill are: It defines nuclear incidents and nuclear damage, nuclear fuel, material and nuclear installations. It specifies the persons to be held liable for nuclear damage, and the financial limit of the liability for a nuclear incident. It specifies the procedure for claiming compensation. It specifies penalties for not complying with the provisions of the Bill. Some important provisions of the Bill are explained in Table 1.
Table 1: Main provisions of the Civil liability for Nuclear damage Bill, 2010 Subject
Application of the Bill Nuclear incident

Provision
The Bill applies to (a) the whole of India, (b) in and over the territorial waters of India, including economic zones, (c) ships and aircrafts registered in India, and (d) artificial islands and installations under Indias jurisdiction. An occurrence or series of occurrences having the same origin and causing nuclear damage; or, Arising out of preventive measures taken to contain damage causing grave and imminent threat. The Atomic Energy Regulatory Board has to notify each nuclear incident within 15 days of its occurrence, unless the gravity of threat and risk involved is insignificant.

Nuclear damage

It includes (a) loss of life or personal injury, and (b) loss of, or damage to property caused by a nuclear incident. It also includes damage caused to the environment and economic loss caused due to environmental damage. These losses will be included to the extent notified by the central government.

Operator Cases where the operator is liable

An operator is any person so designated by the central government. He is responsible for damage caused by a nuclear incident. Damage is caused by a nuclear incident in that nuclear installation. Damage is caused by nuclear material coming from, or originating in a nuclear installation, and before its responsibility has been assumed by another operator. Damage is caused by nuclear material sent to that installation, and after the operator has assumed charge of the nuclear material. Exceptions: (a) grave natural disasters, (b) armed conflict, (c) civil war, or (d) terrorism, or (e) damage suffered by person due to his

Liability may be fault liability or no-fault liability. No-fault liability means that liability can be imposed on a person regardless of whether he was at fault. There is no requirement for proving that the person intentionally or negligently committed the action which caused damage. To impose with fault liability, intent or negligence has to be proved. Also, liability may be either civil or criminal. Civil liability results in compensation to victims, whereas criminal liability also includes a fine and imprisonment.
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The Civil Liability for Nuclear Damage Bill, 2010

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own negligence or acts of commission or omission. Liability amounts The maximum amount of liability for each nuclear incident shall be 300 million Special Drawing Rights (SDR is an artificial currency used by the IMF which is defined in terms of a combination of five currencies. SDR300 million equals approximately Rs 2100 crore at current exchange rates). The maximum liability on an operator is Rs 500 crore; this amount can be changed by a central government notification but cannot be reduced below Rs 100 crore. The central government will cover any liability higher than this up to SDR 300 million. In case the plant is owned by the central Government, it will bear the entire liability. The operator cannot begin operating the nuclear installation without getting an insurance policy or financial security to cover his liability. (except where the nuclear installation is owned by the central government) Recourse against party actually causing damage The operator has a right of recourse when: There is an express contract in writing giving the operator such a right. The nuclear incident has occurred due to a deliberate or negligent act of the supplier , or his employee, and The incident has been caused by a deliberate act or omission of a person done with intent to cause damage. Persons who can claim compensation Any person suffering nuclear damage has a right to claim compensation. An application can be made by (a) person sustaining injury, (b) owner of damaged property, (c) legal representative of a deceased person, or (d) an authorised agent. An application is required to be made within three years from the date of the person having knowledge of nuclear damage. This right expires after ten years from the date of notification of the nuclear incident. Persons who will assess compensation The Bill allows the central government to create two authorities by notification: Claims Commissioner: The Commissioner will invite applications for claiming compensation once a nuclear incident has been notified. Nuclear Damage Claims Commission: The Commission can be established by the central government if it thinks that (a) the compensation may exceed Rs 500 crore, or (b) it is necessary that claims will be heard by the Commission and not the Claims Commissioner, or (c) that it is in public interest. Sources: Civil Liability for Nuclear Damage Bill, 2010; PRS.

PART B: KEY ISSUES AND ANALYSIS


We discuss the following issues. Entry of private operators in the nuclear power generation sector. Adequacy of the liability limit and the financial security covering the operators liability. Assessment of compensation due for nuclear damage. Compliance with international agreements (if such compliance is a necessity). The time-period over which compensation can be claimed by victims. Determining the nature and extent of fault liability for those actually responsible for causing damage.
Clauses 6(2) and 7

Entry of private operators


The Bill sets a cap on total liability at 300 million SDR for each nuclear incident, and limits liability of the operator to Rs 500 crore. It also states that for nuclear power plants owned by the central government, the entire liability is that of the government. Currently, all nuclear power plants are owned by the government or government owned entities (such as NPCIL). This proposed law may be necessary to safeguard suppliers from no-fault liability if the government needs to import equipment and fuel. However, in such a situation, limiting the operators liability would not be a requirement, since the government would be liable for the entire amount (either directly or through a fully owned company). A cap on the operators liability is required only if private sector participation is permitted; that would require an amendment to the Atomic Energy Act, 1962. The government has not indicated any such plans. However, under current law, joint ventures between private and government companies are permitted if the government holds the majority stake. The government has not announced any plans for forming such joint venture companies.

Clause 6(1)

Liability of the operator and the central government


The total liability for a nuclear incident is limited
Regardless of the extent of damage, the total liability would be limited to SDR 300 million. This amount may not be sufficient to provide adequate compensation in case of a major incident. More than six lakh people were affected in 9 Chernobyl . More than five lakh people were affected after the chemical leakage in Bhopal in the Union Carbide incident (not a nuclear incident).11 For that incident, the Supreme Court required Union Carbide to provide compensation of 470

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million dollars and asked the government to meet any further liability.12 Many other countries which are major producers of nuclear energy do not have a cap on the overall liability for nuclear damage (See Table 2). Table 2: Liability of the operator and the government in the top 10 nuclear power generating countries, and India.
Country
United States France Japan Russia Germany South Korea Ukraine Canada United Kingdom Sweden India**

Total generation (MW(e))


1,00,683 63,130 46,823 22,693 20,480 17,705 13,107 12,569 10,137 9,041 4,189

Operators Liability (USD million)


11,900 861 Unlimited No amount specified Unlimited 474 237 71 228 474 109

State Compensation (USD million)


Unlimited 300 Unlimited Unlimited 2,500 Unlimited Unlimited Unlimited 50 198 345

Total Liability* (USD million)


Unlimited 1,161 Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited 278 672 454

Sources: Various Sources13; PRS. * Values have been converted into USD in source document as of December 2009. ** The values for India have been taken from the Bill and calculated at current exchange rates. Clause Clause 6(2)6(1)

The operators liability is lower than in several other countries


The liability of the operator has been capped at Rs 500 crore (USD 109 million at current exchange rates). This means that if the nuclear damage exceeds this amount, the central government is liable to compensate victims subject to a cap of 300 million SDR. Several countries which are major producers of nuclear power have a higher limit on the liability of the operator (See Table 2).

Insurance cover
Operators need to take insurance or provide financial security covering their liability. A higher insurance cover implies higher electricity costs. Our calculations indicate that the electricity cost would go up by about 1 paisa for insurance cover of Rs 500 crore by a 500 MW power plant assuming the international premium rate of 0.3% - 0.5% per annum.

Indias access to international funds may be blocked


The Statement of Objects and Reasons of the Bill lists four international conventions and states the need to enact a legislation that enables joining an appropriate international liability regime. The Convention on Supplementary Compensation of 1997 creates an international pool of funds which can be accessed in case liability due to nuclear damage exceeds SDR 300 million.14 Clause 6(1) of the Bill limits the total liability for a nuclear incident at SDR 300 million. This implies that India will not be able to utilize funds available under the Convention as the additional compensation under that Convention is only available if the liability exceeds this amount.

Payment of compensation
In situations where the damage exceeds the upper limit set by the Bill, there is no criteria to determine the manner in which those suffering damage will be compensated. The Bill does not mention in what priority payment of claims for compensation will be made, or in what proportion if any, claims for compensation will be made. Some other countries such as Brazil and Belgium specify that in such cases the government will have the right to reduce the compensation for each victim on a proportional basis.15
Clause 17

Variance with international agreements


The Bill permits the operator to take recourse against the supplier. This may be an impediment if India wants to join international agreements on civil liability for nuclear damage. One of the reasons for enacting the Bill is to join an international nuclear liability agreement (as stated in the Statement of Objects and Reasons). The three major international agreements on civil liability for nuclear damage provide for a right of recourse against the person actually causing damage only if (a) there is a written contract, or (b) if the damage results from an act or omission of someone with intent to cause damage (Table 3). However, the Bill provides an additional right of recourse against suppliers of nuclear material if damage has been caused by their wilful act or negligence. This clause is additional to the requirements under these international agreements and may prevent India from becoming a party to any

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The Civil Liability for Nuclear Damage Bill, 2010

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of these agreements. Most countries do not provide for a right of recourse against suppliers of nuclear material (Table 3); South Korea and Japan provide for recourse against suppliers, but they are not parties to these conventions13. Table 3: Right of recourse provided in some countries and under the three major international treaties.
International Agreement/ Law of a country
Vienna Convention, 1963 Paris Convention, 1961 Convention on Supplementary Compensation, 1997 Brazil, Canada, France Japan South Korea

Right of Recourse
Only, (a) if it is fully expressed in writing, and (b) If the damage results from an act or omission done with intent to cause damage, against the person who caused the damage. Only, (a) against someone for an act of commission or omission with intent to cause damage, and (b) If there is a clear contract giving such a right. Only, (a) if it is fully expressed in writing, and (b) If the damage results from an act or omission done with intent to cause damage, against the person who caused the damage. There is no provision giving a right against the supplier. Right of recourse exists against third party causing damage. Provides for recourse against supplier in case of willful act or omission.

Sources: Various legislations and international agreements16; PRS. Clause 2(f)

The extent of damage caused will be notified by the government in some cases
The Bill states that for (a) economic loss arising from loss of life or personal injury, (b) costs of measuring damaged environment, and (c) loss of income resulting from damage caused to the environment, the extent of damage will be notified by the central government. The extent of damage suffered in these cases is being determined by the government which is also the party liable to pay compensation in some cases. There may be a conflict of interest if the same party that is liable to pay compensation for damage also has the power to determine the extent of damage caused. Also, there is no independent or judicial authority which will assess the damage suffered, as the jurisdiction of civil courts in these cases is barred. Thus, a core judicial function of determining a fair amount of compensation will be performed by the executive; this could violate the constitutional scheme of separation of powers.

Clause 18

The time limit specified for claiming compensation may be inadequate


Claims for compensation can be filed within ten years of the date of notification of a nuclear incident. This may be inadequate in cases where the effects of radiation are discovered after a substantial period of time. In some cases the effects of damage may also be discovered only in the next generation of those exposed to nuclear radiation. Some countries provide for a period greater than ten years for claiming compensation (Table 4). Table 4: Time limits for claiming compensation in some countries Country
Germany South Korea Netherlands

Time-limit
More than 10years; claims brought before 10 years will have priority. For loss of life and injury - within 30 years. For damage to persons - within 30 years.

Romania For loss of life and injury - within 30 years. Sources: Legislations of various countries17; PRS.

Clauses 5, 46

Liability under other laws is not clearly defined


The Bill explicitly states that (a) compensation to be paid by an operator under this Bill shall not reduce his liability under any other law, and (b) this Bill will not override any other law in force in India that the operator can be held liable under. However, the Bill does not clearly define what type of laws will be applicable. Differing interpretation by courts may constrict or unduly expand the scope of these provisions. Some laws under which those involved in nuclear power generation may be liable for nuclear damage are mentioned in Table 5 below: Table 5: Types of liability under some relevant legislations in India
Law
Environment Protection Act, 1986 Water Act, 1974 and Air Act, 1981 Indian Penal Code, 1860 General principle of liability in tort law

Types of Penalties
Imprisonment for up to five years, and fines. Imprisonment for up to six years, and fines. Imprisonment and fines for offences such as criminal negligence, public nuisance, and culpable homicide. Compensation to the extent of damage caused. Exemplary damages can also be awarded.

Sources: Environment Protection Act, 1986; Water Act, 1974; Air Act, 1981; Indian Penal Code, 1860; PRS.
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The Civil Liability for Nuclear Damage Bill, 2010

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Clause 36

Time-limit for central government to comply with awards for compensation


The Bill states that the insurer (to the extent of his liability) and the operator must deposit the amount to be distributed as compensation within the time limit specified in the award made by the Claims Commissioner. It does not state whether the Commissioner or the Commission can ask the Central Government to do so within a time-limit as well. This would be a factor where the damage exceeds Rs 500 crore and the central government is liable to pay the remaining amount.

Clause 36

Inconsistency on insurance cover required


Operators of nuclear installations (except those owned by the central government) are required to take out an insurance policy or other financial security covering the amount of their liability (Rs 500 crore) before they can operate nuclear installations. However, clause 36(a) of the Bill requires insurers to deposit the amount they have insured the operator for before the Claims Commissioner or the Commission if an award giving compensation is made. Clause 36 (b) then requires operators to deposit the remaining amount by which such award exceed s the amount deposited by the insurers. It is not clear as to how there can be any amount remaining if the entire liability of the operator needs to be insured.
Notes 1. This Brief has been written on the basis of the Civil Liability for Nuclear Damage Bill, 2010, which was introduced in the Lok Sabha on May 7, 2010. The Bill was referred to the Standing Committee on Science & Technology, Environment & Forests (Chairman Dr. T. Subbarami Reddy) on May 13, 2010. 2. NPCIL Plants under operation, http://www.npcil.nic.in/main/AllProjectOperationDisplay.aspx 3. The 1960 Paris Convention on Third Party Liability in the field of Nuclear Energy. 4. The 1963 Vienna Convention on Civil Liability for Nuclear Damages. 5. India-United States: Agreement for cooperation between India and the United States of America concerning peaceful uses of nuclear energy; India-United Kingdom: Joint Declaration by India and the United Kingdom on Civil Nuclear Cooperation; India-France: Cooperation agreement between the Government of India and the government of the French republic on the development of peaceful uses of nuclear energy; India-Russia: India and Russia sign civil nuclear agreement (Original text not available). 6. Article 8 of the India-France agreement on the development of peaceful uses of nuclear energy. 7. World Nuclear Power Reactors & Uranium Requirements, http://www.world-nuclear.org/info/reactors.html. 8. Appendix 2: Serious nuclear reactor accidents, Safety of Nuclear Power Reactors, http://www.world-nuclear.org/info/inf06app.html 9. Backgrounder on Chernobyl Accident, http://www.nrc.gov/reading-rm/doc-collections/fact-sheets/chernobyl-bg.html 10. Chapter on Nuclear Liability and Coverage, Handbook on Nuclear Law, International Atomic Energy Agency, 2003. 11. Bhopal Gas Tragedy Relief and Rehabilitation, http://www.mp.gov.in/bgtrrdmp/facts.htm. 12. Union Carbide Corporation v. Union of India (1991)4SCC584, (Decided on October 3, 1991). 13. Nuclear Operator Liability Amounts & Financial Security Limits, AEN-Nuclear Energy Agency, December 2009; International Atomic Energy Agency Power reactor Information System; French Act on Transparency and Security in the Nuclear Field, 2006. 14. The Convention on Supplementary Compensation is not yet in force. A minimum of five countries with the capacity to generate 4,00,000 units of nuclear power will have to sign for the agreement to come into force. The Convention would create an international pool of funds where every member would contribute according to their generating capacity. 15. Civil Liability for Nuclear Damage and Criminal Responsibility for Acts Relating to Nuclear Activities, 1977; Bill on Third Party Liability in the Field of Nuclear Energy, 1981 16. The Paris Convention; The Vienna Convention; The Convention on Supplementary Compensation, 1997; Brazil - Civil Liability for Nuclear Damage and Criminal Responsibility for Acts Relating to Nuclear Activities, 1977; Canada - Nuclear Liability Act, 1970; France - Act on Third Party Liability in the Field of Nuclear Energy, 1968, amended in 1990; Japan - Law on compensation for nuclear Damage, 1961; South Korea - Act on compensation for nuclear damage, 1969. 17. Germany - Act on the Peaceful Utilisation of Atomic Energy and the Protection Against its Hazards, 2002; South Korea - Act on compensation for nuclear damage, 1969; Romania - Law on Civil Liability for Nuclear Damage, 2001; Netherlands - Nuclear Third Party Liability Act of 1979 (as amended in 1991).
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for noncommercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

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Legislative Brief
The Criminal Law (Amendment) Bill, 2012 and Ordinance, 2013
The Bill was introduced in the Lok Sabha on December 4, 2012 by the Minister of Home Affairs, Mr Sushil Kumar Shinde. It was referred to the Department related Standing Committee on Home Affairs (Chairperson: Mr. Venkaiah Naidu), which submitted its report on March 1, 2013. On February 3, 2013 the government notified the Criminal Law (Amendment) Ordinance to amend the IPC, CrPC and the Evidence Act.

Highlights of the Bill


The Bill and the Ordinance amend the Indian Penal Code, the Code of Criminal Procedure, and the Evidence Act. The amendments proposed seek to replace the offence of rape with sexual assault which has a wider definition. The Bill and the Ordinance protect the victim by penalising public servants who fail to record FIRs relating to sexual offences. They also require the victims to be provided with legal and medical assistance. The Bill specifies a separate offence for acid attack. The Ordinance provides for other new offences as well, such as stalking, voyeurism, assault to disrobe a woman and sexual harassment. The Ordinance prescribes higher punishments for sexual assault resulting in death or persistent vegetative state, gang sexual assault and repeat offenders. The Bill and the Ordinance increase the punishment for sexual assault upon a judicially separated wife. The Ordinance requires the court to be prima facie satisfied of the offence before it takes cognizance. The Bill and the Ordinance increase the consent age from 16 to 18 years.

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Key Issues and Analysis


Under the Ordinance, penalties for certain offences are inconsistent. For instance, minimum punishment for gang assault by private persons is 20 years, and for gang assault by a police officer is 10 years. The Ordinance penalises certain acts which are also punishable under special laws such as SC/ST (Prevention of Atrocities) Act, 1989. Punishments under the Ordinance are higher than under these laws. The Ordinance specifies the same punishment for penetrative and nonpenetrative sexual assault. It does not provide a gradation of penalties on the basis of the gravity of the offence. The Bill and the Ordinance exempts un-consented penetration or touching of private parts for medical purposes from punishment. Age of consent has been increased from 16 to 18 years. There is a divergent view among various commissions on the age of consent. Marital sexual assault upon a woman is not an offence. This is at variance with the recommendation of certain commissions.

Harsimran Kalra harsimran@prsindia.org

March 4, 2013

PRS Legislative Research Institute for Policy Research Studies 3rd Floor, Gandharva Mahavidyalaya 212, Deen Dayal Upadhyaya Marg New Delhi 110002 Tel: (011) 43434035-36 www.prsindia.org

The Criminal Law (Amendment) Bill, 2012 and Ordinance, 2013

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL AND ORDINANCE


Context
Sexual offences are penalised under various laws including the Indian Penal Code, 1860 (IPC), the Immoral Trafficking (Prevention) Act, 1956, the Protection of Children from Sexual Offences Act, 2012 (PCSO Act) and the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989. On December 4, 2012 the Criminal Law (Amendment) Bill, 2012 was introduced in Parliament to amend criminal laws on the recommendations of the National Commission for Women and the Law Commissions 176th Report.1 The Bill defines rape as a gender neutral offence, specifies punishment for acid attacks and failure of a public servant to perform his duties. The Bill was referred to the Standing Committee on Home Affairs, which submitted its report on March 1, 2013. Following protests against the Delhi gang rape case dated December 16, 2012, the government constituted a committee to review the law on crimes against women. The three member committee, chaired by Justice J.S. Verma, submitted its report on January 23, 2012.2 Subsequently, on February 3, 2013 the Criminal Law Amendment Ordinance, 2013 that gave effect to some of the provisions of the Bill, came into force. In this Brief, we discuss both the Criminal Laws (Amendment) Bill and the Ordinance. The major changes in the definition of offences and penalties are summarised in Table 1 on page 3.

Key Features
The Bill and the Ordinance amend the IPC, the Code of Criminal Procedures, 1973 and the Evidence Act, 1872. They amend the definition of existing sexual offences and their penalties. They also amend the procedure to be followed in investigation and trial of sexual offences.

Procedural amendments
The Ordinance requires certain steps to be taken when the statement of a victimised woman or a differentlyabled person is being recorded in sexual offence cases. These are: (a) that the statements should be recorded at a place of the victims choice; and (b) that the victim should be provided with assistance from lawyers, health care workers or womens organisations. Furthermore, statements of physically or mentally disabled victims would have to be video-graphed and the victims have to be provided with special educators. The Bill also includes these provisions. However, it does not make special provisions for disabled persons. Under both, the Bill and the Ordinance, men below 18 years and above 65 years of age, and women cannot be required to attend as witnesses at any place other than the persons residence. Prior to the Ordinance, apart from women, this provision only applied to men below 15 years of age. Under both, the Bill and the Ordinance, the Court may take steps to ensure that victims of sexual offences, who are minors, should not be confronted by the accused at the time of taking the victims evidence.

Evidence on past sexual experience


The Bill and the Ordinance provide that the persons previous sexual experience would not be relevant while determining whether there was consent with respect to offences related to sexual assault, sexual harassment and assault to outrage the modesty of a woman.

Sexual offences
The Bill and the Ordinance substitute the offence of rape with sexual assault which is a gender neutral offence. Under the Ordinance, sexual assault constitutes un-consented: (a) penetration of the vagina, urethra, anus or the mouth; and (b) touching of private parts (vagina, anus, penis and breasts). However, under the Bill, it does not include un-consented touching. The Ordinance also defines and penalises certain other acts, such as voyeurism, stalking, disrobing a woman and sexual harassment, which were punishable under the IPC under the broader offence of assaults upon the modesty of a woman. The Ordinance specifies punishment for rape resulting in death or persistent vegetative state, and higher punishment for repeat offenders. These offences may be awarded the death sentence. The Bill does not provide for these offences.

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Table 1: Comparison between provisions of the IPC, Bill and the Ordinance
Issue Disobedience of law by a public servant Meaning of sexual assault (SA) or rape Exception to SA or rape Indian Penal Code, 1860 No specific provision. Un-consented penetration of the vagina by the penis. Criminal Law (Amendment) Bill, 2012 Knowingly disobeying laws relating to investigation is punishable with imprisonment for one year and/or fine. Un-consented penetration of the mouth, anus, urethra or vagina with the penis or other object; un-consented oral sex; the offence is gender neutral. Same as the IPC. The age of consent for the wife is increased to 16 years. Un-consented acts for medical or hygienic purpose. 18 years. Bars use of previous conduct or character of the victim to prove consent. Not an offence against a wife over 16 years. 7 years to life imprisonment and fine. 10 years to life imprisonment and fine. Punishable with 2 to 7 years imprisonment. Same as under the IPC. Criminal Law (Amendment) Ordinance 2013 Also penalises failure to record information in sexual offence cases of sexual assault and stalking. Same as the provisions of the Bill. Also includes un-consented touching of private parts. Same as the provisions of the Bill.

Sexual act between a man and his wife if: (a) she is over 15 years old; and (b) the wife is not judicially separated from the man. 16 years. No bar on evidence of immoral character of a victim to prove consent in a rape case. Is not an offence if the wife is over 15 years of age. 7 years to life imprisonment and fine. 10 years to life imprisonment and fine. Maximum 2 years imprisonment. No specific provision. Public servant includes armed personnel. Punishment: 10 years to life imprisonment and fine. No specific provision. Rape and murder dealt with as two separate offences. Outraging a womans modesty. Punishment: imprisonment for maximum 2 years and fine.

Age of consent Relevance of character of victim to prove consent Marital SA/ rape Punishment for SA/ rape Punishment for gang rape SA/Rape upon judicially separated wife SA/ Rape by armed personnel SA resulting in death or vegetative state Touching

18 years. Same as the provisions of the Bill. Same as the provisions of the Bill. Same as the provisions of the Bill. 10 or 20 years to life imprisonment. Punishable with 2 to 7 years imprisonment. Courts to take cognizance if there is prima facie evidence of offence. Specific offence. SA by armed personnel within the area they are deployed in. Penalty remains same. Requirement for sanction not removed. Specific offence. Punishment 20 years to life imprisonment or death. Outraging a womans modesty:1 to 5 years imprisonment and fine. Physical contact involving unwelcome and explicit sexual overtures: up to 5 years imprisonment and or fine. Touching of private parts: 7 years to life imprisonment. Demand/ request for sexual favours: up to 5 years imprisonment. Verbally outraging modesty: up to 3 years imprisonment. Sexually coloured remarks, forcible show of pornography: up to 1 year Specific offence. Life imprisonment or death, except SA by a man on his judicially separated wife. Specific offence. Punishable with 3 to 7 years imprisonment. Specific offence. Punishable with 1 to 3 years imprisonment. Specific offence. Punishable with 1 to 3 years imprisonment. Same as provisions of the Bill. Also penalises recruitment, transfer, transport, harbouring a person for the purpose of prostitution, forced labour, organ removal by use of threats or inducement. Punishment: 7 to 10 years imprisonment.
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Same as under the IPC. No specific provision.

Verbal SA

Use of words or gestures to insult a womans modesty. Punishment: 1 years imprisonment and/or fine. No specific provision for this offence. Outraging a womans modesty. Punishment: imprisonment for maximum 2 years and fine. No specific provision for this offence. No specific provision for this offence. No specific provision. Covered under grievous hurt. Punishment: up to 7 years imprisonment. Covered under slavery, abduction and kidnapping for purposes of prostitution. Also provided for under the Immoral Trafficking Prevention Act, 1956.

No specific provision.

Punishment repeat SA offenders Assault to disrobe a woman Voyeurism Stalking Acid attack Trafficking

Same as under the IPC. No specific provision. Same as under the IPC. Same as under the IPC. Specific offence. Punishment: 7 to 10 years imprisonment and up to10 lakh fine as compensation. Same as under the IPC.

March 4, 2013

The Criminal Law (Amendment) Bill, 2012 and Ordinance, 2013

PRS Legislative Research

PART B: KEY ISSUES AND ANALYSIS


Inconsistencies within the Ordinance
Under the Ordinance, certain acts may constitute separate offences under different sections of IPC and may bear different penalties. This issue did not arise under the Bill as it did not provide for the offences detailed below. Table 2: Comparison of provisions relating to similar offences Offence
Gang sexual assault by a private person Gang sexual assault by a public servant Touching by use of criminal force to outrage the modesty of a woman Unwelcome physical contact as sexual harassment Verbally outraging a womans modesty Making sexually coloured remarks Demanding sexual favour

Ordinance
Sec. 376D Explanation 2, Sec. 376(2) Sec. 354 Sec. 354A Sec. 509 Sec. 354A Sec. 354A

Punishment
20 years to life imprisonment and compensation. 10 years to life imprisonment and fine. 1 to 5 years imprisonment and fine. Up to 5 years imprisonment and/or fine. Up to 3 years imprisonment and fine. Up to 1 year imprisonment and/or fine. Up to 5 years imprisonment and/or fine.

Sources: Criminal Law (Amendment) Ordinance, 2013; PRS.

Overlap and inconsistencies of the Ordinance with other laws


The IPC is a general law. Actions penalised under the IPC may also be punishable under special laws. Special laws such as SC/ST Prevention of Atrocities Act and the PCSO Act seek to protect certain class of persons on account of their vulnerable position in society. The punishment for offences under the Ordinance is higher than under these special laws. Furthermore, some offences under the Ordinance only protect women, whereas, under the special laws, they protect both men and women. The following table depicts the variance in these provisions. Table 3: Comparison of offences and punishments under the Ordinance and other laws
Offence against minors Age of consent Sexual assault excluding touching Touching of private parts Touching by a public servant Gang assault of touching Forcing a child to strip or parade naked in public PCSO Act, 2012 18 years. No reduction within marriage. 7 years to life imprisonment. 3 to 5 years imprisonment. 5 to 7 years imprisonment. 5 to 7 years imprisonment. Protects both boys and girls. Punishment: 5 to 7 years imprisonment. Up to 3 years for making a child exhibit any part of his body with a sexual intent. Information Technology Act, 2000 Protects both men and women. Punishment: up to 3 years and/or fine up to Rs 2 lakh. SC/ ST Prevention of Atrocities Act, 1989 Protects both men and women. Offence need not take place at public place. Punishment: 6 months to 5 years. Ordinance, 2013 18 years. In marriage 16 years for girls. 10 years to life imprisonment. 10 years to life imprisonment. 10 years to life imprisonment. 20 years to life imprisonment. Protects women. Punishment: 3 to 7 years.

Offence Capturing the image of private parts

Ordinance, 2013 Only protects women. Punishment: 1 to 3 years imprisonment and fine. Second offence with 3 to 7 years . Ordinance, 2013 Only protects women. Punishable when committed at public place. Punishment: 3 to 7 years.

Offence Disrobing

Sources: Protection of Children from Sexual Offences Act, 2012; Information Technology Act, 2000, Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989 and the Criminal Law (Amendment) Ordinance, 2013.

Gravity of offence vs. gradation of punishment


Ordinance, New Section 375(e) and 376 (1)

Under the Bill, sexual assault only included penetrative sexual assault: by objects or body parts. However, under the Ordinance sexual assault includes a variety of un-consented sexual conduct, ranging from touching of private parts to penetrative sexual assault. The punishment for all forms of sexual assault under the Ordinance is the same: seven years to life imprisonment. It does not provide a gradation in penalties on the basis of the gravity of the offence. The Ordinance is at variance with the PCSO Act that penalises touching a minors private parts with imprisonment for three to five years3 and penetrative assaults with imprisonment for seven years to life imprisonment. 4 As per

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The Criminal Law (Amendment) Bill, 2012 and Ordinance, 2013

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the Verma Committee Report, the punishment for penetrative sexual assault should seven years to life imprisonment, and for non-penetrative assaults should be up to five years. In various countries penetrative and non-penetrative assaults carry different penalties. For instance, in UK, France, Germany non-penetrative assaults carry a lower punishment than penetrative assaults.5 In Canada, where sexual assault includes both penetrative and non-penetrative acts, the term of imprisonment extends from one to ten years based on the gravity of the offence.6

Meaning of sexual assault


Bill, Clause 5; Ordinance Exemption New Section 375 Bill and Clause 5; Ordinance New Section 376(2)(e)

Exemption for medical or hygienic purposes


Under the Ordinance, penetration or touching by the penis, other body parts or objects for proper medical or hygienic purposes, even if without the victims consent, is not punishable. It is unclear under what circumstances penile penetration may serve a hygienic or medical purpose.

Assault on a person in a hospital


The Bill and the Ordinance penalise different categories of sexual assault with different penalties dependent on the nature of the relationship between the victim and the perpetrator. The term of imprisonment for sexual assault is seven years to life imprisonment; and for custodial sexual assault is from 10 years to life imprisonment. Sexual assault by a member of the hospital management or staff upon a person in the hospital carries the same penalty as a custodial assault. The provision does not distinguish the relationship between a hospital staff with a patient, and any other person in the premises of the hospital.

Age of consent
Bill and Clause 5; Ordinance New Section 375

The Ordinance and the Bill provide an age of consent of 18 years. Previously, the IPC provided an age of consent of 16 years. This new provision is in conformity with the PCSO Act, 2012.7 However, various committees have differed on their recommendations on the age of consent. These are indicated in the table below. Table 4: Age of consent as per different commissions
Commissions LCR 1971 LCR 84th, 1980 LCR 156th, 1997 LCR 172nd, 2000 NCW, 2006 Verma, 2013 42nd, Age of consent 16 18 18 16 18 16 Reasons/ remarks Misinformation about victims age should be a defence when the victim is between 12 -16 years. As marriage of a girl below 18 is prohibited, sexual intercourse should also be prohibited. As age for kidnapping was increased from 16 - 18 years. Consented activity is exempt if victim is 16-18 years old and accused 5 years older than victim. Consented sexual activity with persons above 16 years should not be penalised.

Sources: Law Commission Reports; NCWs draft Indian Penal Code Bill, 2006; Report of the Verma Committee to Amend Criminal Laws, 2013.

Some countries have a different age of consent as well as a defence of low age gap between consensual participants. Provisions of five such countries are depicted in Table 5 below.
Table 5: Comparison of age of consent in different countries and the defence of low age gap Country Canada UK USA Finland Australia Age of Consent 16 16 16-18 16 16 Exemption in case of low age difference when acts are consensual If the accused is not more than 2 years older than a complainant of 12 to 14 years; If the accused is not more than 5 years older than a complainant of 14 to 16 years. If the victim is 13 to 16 years old and the accused is less than 18, and the accused is mistaken about the age of the victim, there is a defence. 37 states provide an age of consent of 16 years; 6 states have an age of consent of 17 years; 8 provide an age of consent of 18 years. Age gap exemption ranges from 2 to 5 years. If there is no great age difference between complainant and the accused. In four states consensual sexual intercourse is not punishable if both parties are below the consent age.

Sources: Canadian Criminal Code, 1985; Sexual Offences Act, 2003; Criminal Code of Finland, 1996; Statutory Rape, ASPE, Department of Health and Human Services, United States of America, 2004; Australian State Laws.

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The Criminal Law (Amendment) Bill, 2012 and Ordinance, 2013

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Marital sexual assault


Bill and Clause 5; Ordinance New Section 375, Exception

The Bill and the Ordinance penalise un-consented sexual activity against a man or a woman. The same acts would not be punishable if a man engages in un-consented activity with his wife when she is over 16 years of age. A similar exemption also existed under the IPC. This raises two issues. Various Commissions have taken different views on the issue of whether marital rape should be an offence. Table 6 indicates the opinion of these Commissions. Table 6: Arguments on whether marital rape should be an offence
Issues Imprisonment for rape Marital rape as an offence Reasons LCR,1980 Max. 14 years. No. No reason given. LCR, 2000 7 years to life imprisonment. Not an offence unless wife is 18. Excessive intervention in marital relationship. 2 to 7 years. Lower punishment as bond of marriage exists. NCW draft Bill 7 to 10 years. Yes. Punishment: 7 to10 years. No reason given. Verma Committee 7 years to life imprisonment. Yes. Punishment: 7 to10 years. Relationship should not determine consent. Treat like rape. Ordinance 7 years to life imprisonment. Not an offence unless wife is 16. -

Punishment for rape of a judicially separated wife

Max. 14 years. Includes wife living separately.

Treat like rape.

2 to 7 years. For cognizance satisfy prima facie case.

Sources: 84th Law Commission Report, 1980; 172nd Law Commission Report, 2000; draft Bill of the National Commission for Women, 2006; Report of the Committee on Amendments to Criminal Law, 2013; Criminal Law (Amendment) Ordinance, 2013

Marital rape is a crime in a number of countries, such as UK, Turkey, Canada, USA. 8 In 1993, the United Nations General Assembly had adopted a Declaration of Elimination of Vio lence against Women which specifically included marital rape as a crime against women. 9 Before the Ordinance, rape could be committed by a man on a woman. The Ordinance changes this to an offence of sexual assault that is gender neutral. However, the exception to marital rape is provided only to the husband, and not to the wife (if she engages in sexual activity with the husband without his consent). When a judicially separated wife is raped the Ordinance requires the court to be satisfied that a prima facie case is made out before taking cognizance on a complaint. This was not required under the IPC. It may be noted that the punishment in this case has been increased from up to two years to two to seven years imprisonment.
Notes 1. Statement of Objects and Reasons, Criminal Law (Amendment) Bill, 2012. 2. Report of the Committee on Amendments to Criminal Law, January 23, 2013. 3. Section 7 and 8, Protection of Children from Sexual Offences Act, 2012. 4. Section 3 and 4, Protection of Children from Sexual Offences Act, 2012. 5. Section 222-23 and 222-27, French Penal Code; Section 177(1) and (2), German Criminal Code, 1998; Sections 1, 2 and 3 United Kingdoms Sexual Offences Act, 2003. 6. Section 271, Canadian Criminal Code, 1985. 7. Section 2(d), Protection of Children from Sexual Offences Act, 2012. 8. UKs Criminal Justice and Public Order Act, 1994 and the Sexual Offences Act, 2003; Article 102, Turkish Penal Code, 2004; Criminal Code of Canada, 1970; In 1993 all states in the United States of America had ended their penal laws to delete the exception to marital rape. 9. Article 1, Declaration on the Elimination of Violence against Women.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

March 4, 2013

-6-

Legislative Brief
The Bill was introduced in the Lok Sabha on May 3, 2010 by the Ministry of Human Resource Development. The Bill was referred to the Standing Committee on Human Resource Development (Chairperson: Shri Oscar Fernandes), which submitted its report on August 20, 2010.

The Educational Tribunals Bill, 2010


Highlights of the Bill
The Bill seeks to set up Educational Tribunals at the national and state level to adjudicate disputes involving teachers and other employees of higher educational institutions and other stakeholders such as students, universities and statutory regulatory authorities. The state tribunals shall adjudicate cases related to service matters of teachers and other employees of higher educational institution; dispute over affiliation of a higher educational institution with an affiliating university and unfair practices of a higher educational institution prohibited by any law. The national tribunal shall adjudicate cases of dispute between higher educational institutions and statutory authorities; higher educational institution and affiliating university (in case of central universities), and any reference made to it by an appropriate statutory authority. It shall have appellate jurisdiction on orders of the state tribunals. An order of the tribunal shall be treated as decree of a civil court. If orders of the national or state tribunal are not complied with, the person shall be liable to imprisonment for a maximum of three years or with fine of upto Rs 10 lakh or with both.

Related Briefs: The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010 The Foreign Educational Institutions (Regulation of Entry and Operations) Bill, 2010 The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Educational Institutions and Universities Bill, 2010

Key Issues and Analysis


The composition of the tribunals may not be in conformity with certain broad principles laid down in a recent Supreme Court judgement. In the state educational tribunals, only the Chairperson is a judicial member. However, the Bill allows the two members to hear cases if the chairpersons seat is vacant. This provision leaves the possibility of cases being heard without a judicial member. The Bill requires members of both tribunals to be at least 55 years old. This is higher than the minimum age required for other high offices.

Kaushiki Sanyal kaushiki@prsindia.org August 25, 2010

One of the stated purposes of the Bill is to provide for speedy resolution of disputes because of increased litigation. However, no data on the number of pending cases is available in the public domain. The Standing Committee has made several recommendations. They suggest that there should be flexibility in the number of tribunals in each state, and each such tribunal should have five members.

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The Educational Tribunals Bill, 2010

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PART A: HIGHLIGHTS OF THE BILL1


Context
Presently, disputes between educational institutions and students or staff are adjudicated by internal dispute redressal mechanisms. Most universities have set up such a mechanism.2 Some states such as Gujarat, Maharashtra and Jharkhand have enacted laws to set up tribunals for adjudicating teacher-management disputes.3 These tribunals generally have appellate jurisdiction. From the tribunals, cases can be appealed in the High Courts and Supreme Court.2 The idea of setting up educational tribunals to adjudicate education related disputes was first mooted by the National Policy on Education, 1986.4 The Law Commission of Indias 123rd Report in 1988 made a detailed study and concluded that a three-tier structure of tribunals is necessary to effectively handle disputes in the education sector.2 The Supreme Court in the 2002 T.M.A. Pai judgment and the Yash Pal Committee Report of 2009 also recommended setting up educational tribunals.5

Key Features
The Bill seeks to set up educational tribunals at the national and state level to adjudicate disputes related to higher education. Disputes may be between universities and teachers or students, universities and statutory regulatory authorities. The law shall not be applicable to minority educational institutions to the extent of the powers of the National Commission for Minority Educational Institutions. The Bill bars the jurisdiction of civil courts on any matters that the state or national educational tribunal is empowered to determine.

State and National Educational Tribunals


Table 1: Composition and jurisdiction of the State and National Educational Tribunals
State Educational Tribunal Establishment Composition Mode of Appointment Eligibility To be established by the state government A Chairperson and two other members (one of whom should be a woman). To be appointed by the state government on the recommendation of a Selection Committee. The Chairperson shall be a current or former Judge in the High Court. A member shall be at least 55 years old, with knowledge and experience in higher education or public affairs for 20 years, and who has been the Vice Chancellor or the Chief Secretary in the state government. Jurisdiction shall be over service matters of teacher and other employees of higher educational institution; dispute over affiliation of a higher educational institution with an affiliating university and unfair practices of a higher educational institution prohibited by any law. No acceptance of application related to service matters unless the tribunal is satisfied that the applicant has availed of all remedies available to him under the relevant service rules. National Educational Tribunal To be established by the central government A Chairperson and a maximum of eight members (2 shall be judicial, 3 shall be academic and 3 shall be administrative). To be appointed by the central government on the recommendation of a Selection Committee. The chairperson and the judicial members shall be a current or former Judge of the Supreme Court, to be appointed in consultation with the Chief Justice of India. Academic and administrative members shall be at least 55 years old with experience in higher education or public affairs for 25 years. An academic member shall be a current or former Vice Chancellor or Director of an institution of national importance. An administrative member shall be current or former Secretary to the government of India. Jurisdiction shall be over cases of dispute between higher educational institutions and statutory authorities; higher educational institution and affiliating university (in case of central universities), and any reference made to it by an appropriate statutory authority. It shall have appellate jurisdiction on orders of the state tribunals. Orders of the national tribunal can be appealed in the Supreme Court. The jurisdiction of the tribunal may be exercised by benches consisting of three members. The benches, to be constituted by the Chairperson, shall include one judicial member, one academic member and one administrative member.

Jurisdiction

Penalties
An order of the tribunal shall be treated as decree of a civil court. If orders of the national or state tribunal are not complied with, the person shall be liable to imprisonment for a maximum of three years or with fine of upto Rs 10 lakh or with both. The Collector may be informed of an order against a higher educational institution or person. The amount shall be recoverable as arrears of land revenue if payment is not made. No court shall take cognizance of an offence except on the complaint of an officer authorised by the national or state tribunals.
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PART B: KEY ISSUES AND ANALYSIS


Non-Conformity with Supreme Court Judgement
Composition of tribunals
Statement of Objects and Reasons and Clauses 5, 12, 21

In a recent judgment (R. Gandhi vs Union of India6), the Supreme Court examined issues such as the difference between courts and tribunals, independence of the judiciary and separation of powers. This case addressed the constitution of National Company Law Tribunal and the National Company Law Appellate Tribunal. The Court made certain general observations and certain observations specific to the NCLT. Some of the general observations of the Supreme Court were (a) tribunals should be treated as judicial tribunals, i.e., its members should be of similar rank and capacity as the court which was dealing with the matter; (b) if a matter has been shifted to the tribunal solely to reduce pendency, the tribunal should not have technical members; (c) technical members are required if there is a technical aspect. Some of the specific observations on NCLT were: (a) two-member benches of the Tribunal should have a judicial member; (b) for larger benches, the number of technical members should not exceed that of judicial members. Certain provisions of the Bill may not be in conformity with the broad principles laid down in the judgment in three respects. First, the Statement of Objects and Reasons of the Bill states that Tribunals are required for speedy resolution of disputes. However, the Tribunals constitute judicial, academic and administrative members. This may not be in conformity with the observations of the Supreme Court which state that if tribunals are constituted only to expedite cases, technical members are not required. Second, both the national and state tribunals, in addition to judicial members, have members with academic and administrative experience, presumably because they can bring technical expertise. In both the state tribunal as well as each bench of the national tribunal, the number of technical members exceeds that of judicial members. This provision is again in conflict with the Supreme Courts direction on the composition of NCLT. Third, the Bill states that if the chairperson of a state education tribunal resigns or dies, the senior most member of the tribunal shall act as the chairperson till a new chairperson is appointed. The Bill also allows the two members (who are non-judicial members) to hear cases if the chairpersons seat is vacant due to absence or illness. Both these provisions leave the possibility of cases being heard without a judicial member. The Standing Committee7 which examined the Bill also stated that the above provisions of the Bill are not in conformity with the Supreme Court judgment. Also, a 1988 Law Commission of India report also recommended that state educational tribunals should consist of five members: Chairman (sitting or retired High Court Judge); 2 judicial members (eligible for appointment as a High Court judge), and 2 members (former Vice Chancellor or an eminent professor). It further stated that tribunals could sit in benches but one of the members of the bench should be a judicial member.8

Minimum Age Requirement for Tribunal Members


Clauses 6(2)(a), 22(2)(a) & (3)(a)

The Bill requires members of the National and State Tribunals to be at least 55 years old. This is higher than the minimum age required for other high officer. For example, the minimum age for a Member of Parliament is 25 years for Lok Sabha and 30 years for Rajya Sabha and for the post of President it is 35 years.9 An advocate with 10 years experience in a High Court is eligible to be appointed as a judge in a High Court or the Supreme Court. This implies that a person who is below the age of 55 years may become a High Court or Supreme Court judge. The Standing Committee recommended that competent people with adequate knowledge and experience, irrespective of age, should be considered.7

Lack of Data on Pending Cases Related to Higher Education


Statement of Objects and Reasons

The Statement of Objects and Reasons of the Bill does not mention any data with regard to the number of matters related to the higher educational sector pending in courts at various levels, the time spent in litigating processes, and the cost involved in processing the litigation. A 1988 Law Commission of India report also pointed out the inadequacy of data available on the magnitude of litigation.2 It mentioned that a study10 was conducted between 1969 and 1980 to assess the magnitude of litigation. However, the study covered only four universities. The Standing Committee also recommended that before setting up tribunals, the magnitude of cases and costs incurred in litigation should be assessed.7

Dispute settlement mechanisms in other countries


Various countries have mechanisms to settle disputes among stakeholders in the higher education sector.
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USA: Both private and public universities have internal grievance settlement mechanisms for students and staff. If not satisfied with the internal mechanism both have the right of recourse to courts.11 UK: UKs Higher Education Act, 2004 states that student complaints may be reviewed by a body corporate to be designated by the Secretary of State (Britain) and National Assembly for Wales. Each higher education institution has a formal procedure for addressing complaints of students. In case the issue is not resolved, the student can take the complaint to the Office of the Independent Adjudicator (England and Wales) or Office of the Ombudsman (Scotland). For staff, after exhausting internal procedure, they can approach the courts.12 Australia: In case a student has a complaint, he can use the internal grievance redressal procedures in the first instance. After that, the students may contact the relevant Commonwealth, state or territory Ombudsman or the government accreditation authority (in case the university is non-self-accrediting). The staff has the option to explore internal complaint procedure through trade unions and certain external mechanisms (Equal Opportunity Commission or Employee Assistance Programme) before approaching the courts for redressal.13 Sweden: Swedens Higher Education Act, 1992 (modified in 2006) states that a joint board shall decide on the expulsion of a student. The student and the institution may appeal to general administrative courts against decisions of the board. The Equal Treatment of Students at Universities Act, 2001 promotes equal rights of students and applicants in higher education institutions. The universitys decision can be appealed to the University Appeals Board on the grounds that the decision is against prohibition of discrimination.14

Other Key Recommendations of Standing Committee


The Standing Committee7 submitted its report on the Bill on August 20, 2010. Some of its recommendations are: (a) a minimum court fee should be fixed to ensure viability of the tribunals; (b) instead of three member state educational tribunal, the number should be increased to five; (c) since number of educational institutions vary from state to state, one tribunal per state should not be uniformly applicable; (d) unfair practices should be defined in the Bill; (e) the national tribunal with three persons of the rank of secretaries to the government may lead to bureaucratization of tribunals; and (f) there should be adequate representation of the academia in the selection committee.
Notes 1. This Brief has been written on the basis of the Educational Tribunals Bill, 2010, which was introduced in the Lok Sabha on May 3, 2010. The Bill was referred to the Standing Committee on Human Resource Development (Chairperson: Shri Oscar Fernandes), which submitted its report on August 20, 2010. 2. Decentralisation of Administration of Justice: Disputes Involving Centres of Higher Education, 123rd Report of the Law Commission of India, January 1988. 3. The Gujarat Affiliated Colleges Services Tribunal Act, 1982; the Maharashtra Universities Act, 1994 (Sections 58 to 70); the Jharkhand Education Tribunal Act, 2005. 4. National Policy on Education, 1986. 5. T.M.A. Pai Foundation and Others vs State of Karnataka and others, Writ Petitions (C) No. 317 of 1993, Nov 25, 2002 and Yash Pal Committee Report, 2009. 6. Union of India vs R. Gandhi, Madras Bar Association, Civil Appeal No. 3067 of 2004, Supreme Court Judgment on May 11, 2010. 7. 225th Report on the Educational Tribunals Bill, 2010, Standing Committee on Human Resource Development, August 20, 2010. 8. Decentralisation of Administration of Justice: Disputes Involving Centres of Higher Education, 123rd Report of the Law Commission of India, January 1988. 9. Constitution of India. 10. Elizabeth C. Wright, Courts and Universities: Impact of Litigation on University Autonomy, 1985 Vol 27, Journal of Indian Law Institute, p. 35. 11. U.S. Department of Education & various individual universities websites. 12. The Higher Education Act, 2004. 13. Australian Department of Education, Employment and Workplace Relations. 14. The Higher Education Act, 1992, The Equal Treatment of Students at Universities Act, 2001.
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Legislative Brief
The Bill was introduced in the Lok Sabha on August 26, 2010 by the Ministry of Personnel, Public Grievance and Pensions. The Bill was referred to the Standing Committee on Personnel, Public Grievances, Law and Justice (Chairperson: Smt Jayanthi Natarajan), which is scheduled to submit its report by February 14, 2011.

The Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010
Highlights of the Bill
The Bill seeks to protect whistleblowers, i.e. persons making a public interest disclosure related to an act of corruption, misuse of power, or criminal offence by a public servant. Any public servant or any other person including a non-governmental organization may make such a disclosure to the Central or State Vigilance Commission. Every complaint has to include the identity of the complainant. The Vigilance Commission shall not disclose the identity of the complainant except to the head of the department if he deems it necessary. The Bill penalises any person who has disclosed the identity of the complainant. The Bill prescribes penalties for knowingly making false complaints.
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October 29, 2010

Key Issues and Analysis


The Bill aims to balance the need to protect honest officials from undue harassment with protecting persons making a public interest disclosure. It punishes any person making false complaints. However, it does not provide any penalty for victimising a complainant. The CVC was designated to receive public interest disclosures since 2004 through a government resolution. There have been only a few hundred complaints every year. The provisions of the Bill are similar to that of the resolution. Therefore, it is unlikely that the number of complaints will differ significantly. The power of the CVC is limited to making recommendations. Also it does not have any power to impose penalties. This is in contrast to the powers of the Karnataka Lokayukta and the Delhi Lokayukta.

The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010
October 29, 2010

Kaushiki Sanyal kaushiki@prsindia.org

The Bill has a limited definition of disclosure and does not define victimisation. Other countries such as US, UK, and Canada define disclosure more widely and define victimisation. The Bill differs on many issues with the proposed Bill of the Law Commission and the 2nd Administrative Reform Commissions report. These include non-admission of anonymous complaints and lack of penalties for officials who victimise whistleblowers.

January 24, 2011

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Public Interest Disclosure Bill, 2010

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL 1


Context
Whistleblowing is the act of disclosing information by an employee or any stakeholder about an illegal or unethical conduct within an organisation. The Law Commission of India 2 in 2001 had recommended that in order to eliminate corruption, a law to protect whistleblowers was essential. It had also drafted a Bill in its report. In 2004, in response to a petition filed after the murder of Satyendra Dubey, the Supreme Court directed that a machinery be put in place for acting on complaints from whistleblowers till a law is enacted. 3 The government notified a resolution in 2004 4 that gave the Central Vigilance Commission (CVC) the power to act on complaints from whistleblowers. Since 2004, CVC has received 1,354 complaints from whistleblowers (see Table 2). In 2007, the report of the Second Administrative Reforms Commission 5 also recommended that a specific law be enacted to protect whistleblowers. India is also a signatory (not ratified) to the UN Convention against Corruption since 2005, which enjoins states to facilitate reporting of corruption by public officials and provide protection against retaliation for witnesses and experts. 6 The Bill replaces the 2004 government resolution and sets up a mechanism to receive complaints of corruption or wilful misuse of power by a public servant. It also provides safeguards against victimization of the person making the complaint.

Key Features
Public Interest Disclosure
Any public servant or any other person including a non-governmental organization may make a public interest disclosure to a Competent Authority (defined as the Central or State Vigilance Commission). Disclosure is defined as any complaint made in writing or electronic mail against a public servant on matters related to (a) attempt to or commission of an offence under the Prevention of Corruption Act, 1988; (b) wilful misuse of power which leads to demonstrable loss to the government or gain to the public servant; or (c) attempt or commission of a criminal offence by a public servant. A public servant is any person who is an employee of the central government or the state government or any company or society owned or controlled by the central or state government. However, no public interest disclosure shall be accepted against defence, police and intelligence personnel. Each disclosure shall be accompanied by full particulars and supporting documents. The Vigilance Commission shall not entertain anonymous complaints.

Procedure of Inquiry
First, the Vigilance Commission has to verify the identity of the complainant, and then conceal his identity (unless the complainant has revealed it to any other authority). Then it shall decide whether the matter needs to be investigated based on the disclosure or after making discreet inquiries. If it decides to investigate, it shall seek an explanation from the head of the concerned organisation. The Vigilance Commission shall not reveal the identity of the complainant to the head of the organisation unless it is of the opinion that it is necessary to do so. The head of the organisation cannot reveal the identity of the complainant. After conducting the inquiry, if the Vigilance Commission feels that the complaint is frivolous or there is no sufficient ground to proceed, it shall close the matter. If the inquiry substantiates allegation of corruption or misuse of power, it shall recommend certain measures to the public authority (anybody falling within the jurisdiction of the Vigilance Commission). Measures include initiating proceedings against the concerned public servant, taking steps to redress the loss to the government, and recommending criminal proceedings to the appropriate authority. Every public authority shall create a mechanism to deal with inquiries into disclosures. The mechanism shall be supervised by the Vigilance Commission. The Vigilance Commission may take the assistance of the Central Bureau of Investigation or police authorities to make inquiries or to obtain information.

Exemption from Inquiry


The Vigilance Commission shall not entertain any matter (a) if it has been decided by a Court or Tribunal, (b) if a public inquiry has been ordered, or (c) if the complaint is made five years after the action.
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The Bill exempts disclosure of proceedings of the Cabinet if it is likely to affect the sovereignty of India, security of the state, friendly relations with foreign states, public order, decency or morality. Such an exemption has to be certified by the Secretary to the central or state government.

Safeguards for Persons Making Disclosure


A person shall not be victimised or proceeded against merely on the grounds that he has made a disclosure or assisted in an inquiry. The directions of the Vigilance Commission are binding in this regard. The Vigilance Commission may give directions to a concerned public servant or authority to protect a complainant or witness either on an application by the complainant or based on its own information. It may direct that the public servant who made the disclosure be restored to his previous position. If the Vigilance Commission decides that a complainant or a witness or a person assisting an inquiry needs protection (either based on an application filed by the complaint or a witness or on its own information), it shall issue directions to the concerned government authorities to protect such persons. The Vigilance Commission shall protect the identity of the complainant and related documents, unless it decides against doing so, or is required by a court to do so.

Penalties
The Bill lays down penalties for various offences. For not furnishing reports to the Vigilance Commission, a fine of upto Rs 250 shall be imposed for each day till the report is submitted. The total penalty amount however cannot exceed Rs 50,000. For revealing the identity of complainant negligently or due to mala fide reasons, the penalty is imprisonment for upto 3 years and a fine of upto Rs 50,000. For knowingly making false or misleading disclosures with mala fide intentions, the penalty is imprisonment upto 2 years and a fine of upto Rs 30,000. Any person aggrieved by an order of the Vigilance Commission relating to imposition of penalty for not furnishing reports or revealing identity of complainant may file an appeal to the High Court within 60 days.

PART B: KEY ISSUES AND ANALYSIS


Protection of Both Complainant and Public Official
Preamble, Statement of Objects and Reasons and Clauses 3(3), 3(6), 4(2), 4(4), 10, 14, 15, 16 and 19

The Bill seeks to strike a balance between protecting persons making a public interest disclosure and preventing undue harassment of public officials. 7 Table 1: Comparison of protection provided to complainant and public official
Identity Protection of complainant Vigilance Commission and the Head of the organisation have to protect the identity of the complainant. However, the Vigilance Commission can reveal the identity of the complainant to the Head if it is of the opinion that it is necessary to do so. Identity revelation carries a penalty of upto 3 years and fine of upto Rs 50,000 prescribed. The central government shall ensure that no complainant is victimised through proceedings against him merely because he made a disclosure. If a complainant is being victimised by a public servant, the Vigilance Commission may issue directions to the concerned public servant, including that the complainant be restored to his previous position. No appeal process specified if a complainant is penalized for false complaints. Protection of public official Every complainant has to furnish his identity (no anonymous complaint to be entertained). No complaint made after 5 years of the action shall be entertained. A false complaint carries a penalty of imprisonment upto 2 years and fine of upto Rs 30,000. No penalty prescribed for public official

Penalty Victimisation

Appeal

If a public official is penalized for revealing identity or obstructing investigation of the complaint, he can appeal to the high court.

Sources: Public Interest Disclosure Bill; PRS.

The protection provided to both parties raises certain issues. Identity: The Bill does not allow anonymous complainants. But there are no clear provisions on what grounds the Vigilance Commission may reveal the identity of a complainant to the Head of an organisation. Some experts contend that allowing anonymous reporting provide protection to whistleblowers while others have expressed
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concern about difficulty of investigation and possibility of frivolous complaints. 8 Countries such as the U.S., U.K., Canada and Australia 9 have some provision to investigate anonymous complaints, while Italy and Slovakia 10 do not allow anonymous complaints. However, even countries which allow anonymous complaints do not provide protection against victimisation if the identity of such a whistleblower becomes known. Victimisation: (a) The Bill does not define what constitutes victimisation. (b) There is no penalty against the public servant who may be victimising the complainant. (c) This Bill does not provide for witness protection programme to protect witnesses during investigation and trial. The Law Commission has recommended guidelines for witness identity protection. 11 Countries such as the US, Canada, Australia, Germany, Italy and South Africa have witness protection programmes. 12 Penalty: The Vigilance Commission may reveal the identity of the complainant in certain circumstances (which may lead to victimisation) but the Bill does not provide for any penalty for victimising a complainant. However, a complainant may be penalised with imprisonment and a fine for making false complaints. This was recommended by the Law Commission report2 and the Cabinet Note stated that the Bill aimed to protect honest officials.7 Such provisions may deter persons from making a disclosure to the Vigilance Commission. Appeal: The public official may appeal to the High Court against penalty for revealing identity or obstructing investigation. However, the Bill also penalises any malafide complaint, but does not specify an appeal process.

Performance of Present Mechanism


Clauses 2(b) and 4

The CVC was designated to receive and act on complaints by Table 2: Number of whistleblower whistleblowers through a 2004 Government Resolution. This Bill complaints under 2004 Resolution gives statutory status to that Resolution. However, as the data in Year Complaints Table 2 shows, the number of complaints has only been a few 2005 412 hundreds between 2005 and 2008. 2006 338 There is no official study that indicates whether the number of 2007 328 complaints reflect the level of corruption, or whether potential 2008 276 whistleblowers feel threatened. Given that the provisions of this Bill Source: Annual Reports of Central Vigilance Commission are similar to that of the Resolution, there is unlikely to be a significant change in the number of persons who are willing to disclose acts of corruption.

Powers of the Vigilance Commissions


Clauses 2, 4, and 9

The Central and State Vigilance Commissions shall be the nodal body to receive complaints from whistleblowers. However, their power is restricted to recommend corrective action to the public authority (including any penal action) on public officials after investigation. Various state Lokayuktas have different powers. For example, the Karnataka Lokayukta Act states that in case a public servant is found to have committed any criminal offence, the Lokayukta may initiate prosecution without prior sanction from the concerned authority. 13 The Delhi Lokayukta Act states that if the Lokayukta is not satisfied with the action taken by a competent authority on its report, he can make a special report to the Lt Governor and inform the complainant. 14 The Andhra Pradesh Lokayukta and Upalokayukta Act provides a time-limit of one year to complete the investigation. Both the Andhra Pradesh and Himachal Pradesh Lokayukta Acts state that if an offence has been committed, a report is sent to the concerned authority who has to report within three months any action taken. If the Lokayukta is not satisfied with the action taken, he can report to the Governor and inform the complainant. 15 Furthermore, an ARC report pointed out that there are few cases where CVC was able to initiate disciplinary action on government servants or impose major penalties. 16 According to CVCs data, between 2004 and 2008, there were 946 cases in which the department did not comply with the CVCs recommendation on penalty. 17

Definitions
Clause 2(d)

The Bill defines disclosure as a complaint related to corruption, any criminal offence or wilful misuse of power that leads to loss to the government or gain to the public servant. This definition is narrower that the one recommended by the Law Commission, which included mal-administration (any action which is unjust, causes undue delay or negligence, leads to waste of public funds). Countries such as Canada, US and Ghana have wider definition of disclosure (see Table 5). The Bill does not define victimisation. The proposed Law Commission Bill defines victimisation to include suspension, transfer, dilution of power, adverse entries in the service record, and punishments under disciplinary rules. Countries such as US, UK, Canada, South Africa and Ghana define victimisation (see Table 5).

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The Law Commission and Administrative Reforms Commission


In December 2001, the 179th report of the Law Commission of India examined the issue of whistle-blowing and made certain recommendations. The scope of these recommendations were wider that in the current Bill, as they included ministers within the purview, provided powers to the Authority to initiate criminal proceedings, and fixed a time limit. Table 3 compares the recommendations of the Commission with the provisions of the Bill. Table 3: Comparison of the Law Commission Report and the Bill
Law Commission of India Scope Definitions Disclosure can be against Minister and public servant. Defines disclosure as a complaint against abuse or misuse of power; commission of an offence under any law; or mal-administration. Defines victimisation. Disclosure of Identity The name of person making the disclosure shall be revealed to the public servant unless the complainant requests that his identity be kept hidden or it is necessary in public interest. The Competent Authority has the power to direct the appropriate authority to initiate criminal proceedings against the guilty official. The Competent Authority has to complete the inquiry within 6 months to 2 years after receiving the complaint. In case a complainant is victimised the burden of proof is on the employer or public servant who is accused of victimisation. Penalty for false complaints is imprisonment upto 3 years and fine of upto Rs 50,000. Bill Disclosure can be only against public servant. Defines disclosure as a complaint against a public servant on commission of an offence under the Prevention of Corruption Act, 1988 or misuse of power leading to demonstrable loss to the government or gain to the public servant; or a criminal offence. No definition. The Vigilance Commission shall not reveal the identity of the complainant to the head of the organisation except if it is of the opinion that it is necessary to do so. The Vigilance Commission has the power to recommend measures such as initiating proceedings and taking steps to redress the loss to the government. No time limit prescribed for discreet inquiry. Time limit for explanation to be given by the concerned head of department shall be prescribed. No provision.

Powers of Competent Authority Time limit

Burden of proof Penalty

Penalty for false complaints is imprisonment upto 2 years and fine of upto Rs 30,000.

Sources: 179th Law Commission Report, Bill 2010, PRS.

In 2007, the 2nd Administrative Reforms Commission (ARC) made certain recommendations related to whistleblowing, which have not been incorporated in the Bill. It included acts of whistle-blowing in the private sector and prescribed penalties for victimising complainants. The issue of the private sector is now addressed by the Companies Bill, 2009. Table 4 compares the ARC report with the Bill. Table 4: Comparison of the ARC Report and 2010 Bill
4th Report of the Second ARC Identity Protection Private sector Penalty for Victimisation Whistleblowers should be protected by ensuring confidentiality and anonymity. Should cover corporate whistleblowers unearthing fraud or serious damage to public interest. Acts of harassment or victimization of or retaliation against a whistleblower should be criminal offences with substantial penalty and sentence. Bill Makes provision to ensure confidentiality but does not allow anonymous complaints. Not covered in this Bill. The Companies Bill, 2009 addresses this issue. No penalty for victimisation.

Sources: Ethics in Governance, Fourth Report of the Second Administrative Reforms Commission, Bill 2010, PRS.

Laws in other countries related to whistleblowing


Different countries protect whistleblowers in different ways. Some allow multiple agencies to receive complaints, some allow anonymous complaints, and some define victimisation and provide protection against it. Table 5 gives an overview of the laws related to whistleblowing in some countries.

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Table 5: International comparison of whistleblowing laws


Definition of disclosure US Violation of laws, gross mismanagement, waste of funds and abuse of authority Crimes, civil offences (including negligence), miscarriages of justice, dangers to health and safety of the environment Serious wrongdoing such as violation of law, misuse of public funds, gross mismanagement. Criminal offence, failure to comply with legal obligations, miscarriage of justice, endangering health and safety of individuals, damaging environment, unfair discrimination. Breach of Code of Conduct (be honest, comply with all laws, no improper use of inside information) Impropriety such as economic crime, noncompliance of a law, likely to break the law, miscarriage of justice, mismanagement or waste of public resources. Authority Office of Special Counsel or Office of Inspector General Employer, any prescribed persons, police, media or MP Supervisor or Public Sector Integrity Commissioner Various authorities such as legal adviser, employer, Cabinet member, and any prescribed person Public Service Commissioner, Merit Protection Commissioner, Agency Head Various authorities such as employer, police, MP, Commission on Human Rights, President Protection Allow anonymous complaints. Protect employees from victimisation in appointment, promotion, transfer, or pay. Allow anonymous complaints. Employment tribunal decides compensation if victimised by unfair dismissal or denial of promotion. Allow anonymous complaints. Has protection from reprisals (disciplinary measure, demotion, termination). Right to approach court, including Labour court if subjected to occupational detriment (disciplinary action, dismissal, suspension, demotion, transfer, no reference Protection against victimisation and discrimination Allow oral or written complaints. Has right to bring action to High Court for victimisation (dismissal, suspension, transfer, harassment)

UK

Canada

South Africa

Australia

Ghana

Sources: US: Whistleblower Protection Act, 1989; UK: Public Interest Disclosure Act, 1998; Canada: Public Servants Disclosure Protection Act, 2004; South Africa: Protected Disclosure Act, 2000; Australia: Public Service Act, 1999; Ghana: Whistleblower Act, 2006 and PRS

Notes
1. This Brief was written on the basis of the Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010, which was introduced in the Lok Sabha on Aug 26, 2010. The Bill was referred to the Standing Committee on Personnel, Public Grievances, Law & Justice, which is scheduled to submit its report by Feb 14, 2011. 2. 179th Report of the Law Commission of India. 3. Writ Petition (Civil) 539/2003. 4. Resolution no. 89 dated April 21, 2004, Government of India. 5. Ethics in Governance, Fourth Report of the Second Administrative Reforms Commission. 6. UN Convention Against Corruption (see http://www.unodc.org/unodc/en/treaties/CAC/index.html). 7. Cabinet Note on Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010, July 30, 2010. 8. Alternative to Silence: Whistleblower Protection in 10 European Countries, Transparency International, 2009; David Banisar, Whistleblowing: International Standards and Development, presented at the 2006 Primera Conferencia Internacional sobre Corrupcion y la Transparencia, Mexico; 179th Law Commission of India Report. 9. Whistleblower Protection Act (USA); Public Interest Disclosure Act, 1998 (UK); Public Servants Disclosure Protection Act (Canada); and Public Interest Disclosure Act (Australia). 10. Alternative to Silence: Whistleblower Protection in 10 European Countries, Transparency International, 2009. 11. Witness Identity Protection and Witness Protection Programmes, 198th Report of Law Commission of India, 2006. 12. US: Witness Security Program; Canada: Witness Protection Program Act, 1996; Australia: Witness Protection Act, 1994; Germany: Act to Harmonize the Protection of Witnesses at Risk, 2001; Italy: Decree Law no. 82 (2001); South Africa: Witness Protection Act 112 of 1998. 13. Karnataka Lokayukta Act, 2002. 14. The Delhi Lokayukta and Uplokayuka Act, 1995. 15. The Andhra Pradesh Lokayukta and Upalokayukta Act, 1983 and the Himachal Pradesh Lokayukta Act, 1983. 16. Refurbishing of Personnel Administration: Scaling New Heights, 10th Report of the Second Administrative Reforms Commission, Nov 2008. 17. 2004 to 2008 Annual Reports of CVC.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

January 24, 2011

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Legislative Brief

The Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011
The Bill was introduced in the Lok Sabha on December 20, 2011. The Bill was referred to the Department Related Standing Committee on Personnel, Public Grievances, Law and Justice (Chairperson: Mr. Shantaram Naik). The Report was submitted on August 30, 2012.

Highlights of the Bill


The Bill seeks to create a mechanism to ensure timely delivery of goods and services to citizens. Every public authority is required to publish a citizens charter within six months of the commencement of the Act. The Charter will detail the goods and services to be provided and their timelines for delivery. A citizen may file a complaint regarding any grievance related to: (a) citizens charter; (b) functioning of a public authority; or (c) violation of a law, policy or scheme. The Bill requires all public authorities to appoint officers to redress grievances. Grievances are to be redressed within 30 working days. The Bill also provides for the appointment of Central and State Public Grievance Redressal Commissions.

Recent Briefs: The National Food Security Bill, 2011


September 26, 2012

A penalty of up to Rs 50,000 may be levied upon the responsible officer or the Grievance Redressal Officer for failure to render services.

Key Issues and Analysis


Parliament may not have the jurisdiction to regulate the functioning of state public officials as state public services fall within the purview of state legislatures. This Bill may create a parallel grievance redressal mechanism as many central and state laws have established similar mechanisms. Companies that render services under a statutory obligation or a licence may be required to publish citizens charters and provide a grievance redressal mechanism. The Commissioners may be removed without a judicial inquiry on an allegation of misbehaviour or incapacity. This differs from the procedure under other legislations. Appeals from the Commissions decisions on matters of corruption will lie before the Lokpal or Lokayuktas. The Lokpal and some Lokayuktas have not been established. Only citizens can seek redressal of grievances under the Bill. The Bill does not enable foreign nationals who also use services such as driving licenses, electricity, etc., to file complaints.
PRS Legislative Research

The Constitution 115th Amendment Bill, 2011 (GST)


May 24, 2012.

Harsimran Kalra harsimran@prsindia.org

Pallavi Bedi pallavi@prsindia.org

September 27, 2012

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

Citizens Charter Bill, 2011

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
The Bill refers to a citizens charter which is a document that defines the standard of services to be provided by an entity. The citizens charter will also provide the time frame within which goods and services are to be provided. The concept of citizens charter was introduced in the United Kingdom in 1991 and subsequently was adopted by various countries such as Belgium (1992), Malaysia (1993) and Australia (1997).2 In 1997, at a chief ministers conference, an Action Plan was approved requiring the central and state governments to formulate citizens charters for enterprises with a large public interface.3 In 2007, the Second Administrative Reforms Commission recommended that citizens charters should stipulate penalties for noncompliance.4 In 2008, the Standing Committee on Personnel, Public Grievances, Law and Justice recommended giving statutory status to grievance redressal mechanisms.5 The Central Information Commission also recommended that grievance redressal systems should be strengthened to reduce the use of the Right to Information Act, 2005 to redress grievances.6 The President, in her address to Parliament in June 2009, had stated that the government would focus on ensuring effective delivery of public services.7 The Standing Committee that had examined the Lokpal Bill, 2011 recommended the creation of a separate legislation to deal with citizens charter and grievance redressal. The Parliament on August 27, 2011 while adopting the Sense of the House Resolution on Lokpal, agreed in principle to the establishment of a citizens charter. 8 Currently, government departments deal with grievances internally. Persons may also approach the High Court through writ petitions. As of January 2011, 131 citizens charters were finalised by the central government departments and 729 citizens charters were finalised by state government departments.9 Additionally, by March 2012, several states had enacted laws providing for grievance redressal mechanisms.10

Key Features
The Bill requires public authorities to publish a citizens charter within six months of enactment of the Bill. The charter should specify the services and the quality of services to be provided by the public authority. The head of departments are responsible for disseminating and updating the citizens charter.

Public Authority
Public authorities include: (a) constitutional and statutory authorities; (b) entities established under a notification; and (c) public-private partnerships. They also include NGOs that are substantially government funded, government companies, and companies that provide services under a licence or a statutory obligation. Public authorities are required to establish Information Facilitation Centres for efficient and effective delivery of services and redressal of grievances. Information Facilitation Centres may include customer care centres, call centres, help desks and peoples support centres.

Public Grievance Redressal Commissions


The Bill establishes Central and State Grievance Redressal Commissions. Each Commission would consist of a Chief Commissioner and up to 10 Commissioners. The Commissioners would be appointed by the President (Governor) on the recommendation of a selection committee. This committee would consist of the Prime Minister (Chief Minister), the Leader of the Opposition in the Lok Sabha (Legislative Assembly) and a sitting Supreme Court (High Court) judge. The Commissioners should be: (a) present or former Secretaries to the central (state) government; or (b) present or former Supreme Court judges or Chief Justices of a High Court (district court judges for 10 years, or High Court judges); or (c) eminent persons with at least 20 years (15 years) of experience in social sectors with a post graduate degree in a relevant sector. The Commissioners may be removed by an order of the President (Governor) under certain conditions.

Complaint mechanism
Complaint: Any citizen may file a complaint for: (a) failure in delivery of goods or services listed in the citizens charter; (b) the functioning of the public authority; and (c) any violation of a law, policy, programme, order or scheme. Complaints have to be redressed within 30 working days.
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Citizens Charter Bill, 2011

PRS Legislative Research

Complaints have to be made to the Grievance Redressal Officer (GRO). GROs are to be appointed by each public authority at the central, state, district, sub-district, municipality and panchayat levels. The GRO is required to: (a) ensure that grievances are redressed within 30 working days; (b) ensure that disciplinary action is taken against a defaulting officer if he has acted negligently; and (c) recommend penalties and compensation where an individual has wilfully neglected to deliver services or there is a prima facie ground for a case under the Prevention of Corruption Act, 1988. The GRO has to inform the complainant about the action taken on the complaint. Appeal: The orders of the GRO may be appealed before the Designated Authority (DA). The DA shall be an officer above the rank of the GRO and outside the concerned public authority. (According to a statement made by the Minister of State for Personnel, Public Grievances and Pensions, the DA shall be an officer at the district level.11) The DA shall dispose of appeals within 30 working days of their receipt. If a complaint with the GRO is not redressed within 30 working days, the GRO has to forward it as an appeal to the DA. The DA may penalise the defaulting officers. Second Appeal: The DAs orders may be appealed before the Central or State Public Grievance Redressal Commission within 30 working days. Appeals relating to complaints arising out of functioning of the central (state) departments would lie before the Central (State) Commission. The Commissions have to dispose of the appeal within 60 working days. Third Appeal: In relation to an offence under the Prevention of Corruption Act, 1988, an appeal against the decision of the Commissions shall lie with the Lokpal or the Lokayukta. Suo motu mechanism: The Central and State Commissions can suo motu refer matters related to nondelivery of goods and services to the heads of government departments. The Commissions may also initiate suo motu inquiry if they believe that there are reasonable grounds to inquire into the matter. Complaints may also be made to the Commissions in certain cases. It is the duty of the Commissions to inquire into complaints by persons: (a) who are unable to file appeals before the DA; (b) who are refused redress of grievances; (c) whose complaints are not disposed of within 30 days; and (d) who are denied access to the citizens charter because it has not been prepared or has not been widely disseminated.

Penalties
GRO: The Bill requires the GRO to recommend penalties to the DA when: (a) he is convinced that the default was due to wilful neglect by an officer; or (b) when there is prima facie evidence of corruption. DA and Commissions: The Bill empowers the DA and the Commissions to impose a maximum penalty of Rs 50,000 upon the defaulting officer and the GRO. Penalties may be imposed upon the defaulting officer when he has acted in a mala fide manner or has failed to discharge his responsibility in a proper manner. A portion of the penalty may be awarded as compensation to the complainant. If there is evidence of corruption against the defaulting officer, the DA and the Commissions would have to refer the matter to appropriate authorities. Additionally, the DA may initiate proceedings in such cases. Disciplinary proceedings may be initiated by the GRO, DA and the Commissions against the defaulting officer if there is evidence of mala fide action. In any appeal proceeding, where it is alleged that the grievance has not been redressed by the GRO, the burden of proof shall be on the GRO.

PART B: KEY ISSUES AND ANALYSIS


Parliaments jurisdiction to regulate state public officials
The Bill regulates the functioning of departments and public officials at the central and state level. It also establishes Commissions at the central and state level. State public services; State Public Service Commission is included in the State List (Entry 41) of the Seventh Schedule of the Constitution. This implies that the power to make laws to regulate the functioning of state public officials lies solely with state legislatures. Thus, Parliament may not have jurisdiction to enact laws governing such services and officials. In this regard, the Ministry has stated that the provisions of the Bill relate to actionable wrongs which comes under the concurrent list. This view was accepted by the Standing Committee.
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Citizens Charter Bill, 2011

PRS Legislative Research

The Supreme Court has held that, Wrong means an actionable wrong and it must consist of: (a) an act or omission amounting to an infringement of a legal right of a person or a breach of legal duty towards him; and (b) the act or omission must have caused harm or damage to that person in some way, the damage being either actual or presumed.12 Under the Bill, complaints may be filed for violation of any policy or scheme. The claims under these schemes and policies may be non-justiciable (unenforceable by courts). It is unclear whether schemes and policies which are not justiciable would fall under the meaning of actionable wrong. Several states such as Delhi, Punjab and Bihar have also enacted their own grievance redressal laws. The mechanism provided under these laws is different from that provided under the Bill. (See Appendix 1, page 6)

Lack of clarity on the meaning of public authority


Clause 2(n)

It is not clear whether the Bill applies to private entities only if they are established or constituted under a notification. The term public authorities has been defined broadly to mean authorities constituted under: (a) the Constitution or under any central or state law; (b) an agreement between the government and a private entity as a PPP; and (c) any entity established under a notification or order of the government. This definition also includes: (i) non-governmental organizations that receive government finances either directly or indirectly, and (ii) other companies that are supplying goods or services to fulfil a statutory obligation, or under a license or authorisation by law. It is not clear if these organisations are required to be established under a notification. It is pertinent to note that the Right to Information Act, 2005 includes private entities as long as they are controlled or financed by the government. Private sector companies are covered by other laws such as Consumer Protection Act, 1986 and the Competition Act, 2002. Inclusion under this Bill may lead to multiple dispute settlement forums being available for the same dispute. For instance, grievances related to services to be provided under a contract would fall under the Consumer Protection Act and this Bill.

Multiplicity of Grievance Redressal Forums


Clause 2(f)

This Bill provides grievance redressal under several circumstances including violation of any law, policy or scheme. Some existing and proposed laws provide their own grievance redressal mechanisms, for instance, the Mahatma Gandhi National Rural Employment Guarantee Act, 2005, Right of Children to Free and Compulsory Education, 2009, National Food Security Bill, 2011, and the Public Procurement Bill, 2012. There could be an overlap of jurisdictions in some cases, as grievances under these legislations may be covered under this Bill as well. It is unclear as to which mechanism may be approached first, and whether seeking relief under one law bars remedies under the other. Furthermore, the commissions established under these legislations are specialised in nature. They comprise persons of eminence in the field to which the laws relate. For instance, commissions under the National Food Security Bill, 2011 comprise persons with experience in the field of food security, agriculture and health.13

Exclusion of non-citizens
Clause 2(f)

A complaint may only be filed by a citizen. However, certain services may be used by both citizens and foreign nationals. For example, a foreign national is eligible to apply for a driving license under Indian law. The rationale for excluding foreign nationals from the purview of the redressal mechanism is unclear. Under some state laws, the criterion for accessing greiavnce redressal mechanism is the eligibility of the complainant and not his citizenship. The Punjab Right to Services Act, 2011 and the Rajasthan Guaranteed Delivery of Public Services Act, 2011 provide access to the redressal mechanism to all eligible persons. Under these Acts an eligible person is defined as any person who is eligible for the notified services. The Standing Committee has recommended that the Ministry review whether non-citizens can be brought under the Bill.

Inconsistencies in the appeals procedure


Clause 47, 28 and 44

Under the Bill, if the Commission is satisfied that a prima facie case of corruption exists, it will refer the matter to the appropriate authority. The Bill also provides that the Commissions decisions related to corruption may be appealed before the Lokpal or the Lokayuktas. This raises three issues. First, under the Bill, the Commission is not empowered to adjudicate matters related to corruption. It is only empowered to refer the matter to the appropriate authority. It is unclear how an appeal may be made before the Lokpal or the Lokayuktas in the absence of the Commissions power to decide on cases of corruption.

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Citizens Charter Bill, 2011

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Second, the Bill does not provide a process to appeal against the Commissions orders that do not relate to corruption. Third, the Lokpal is yet to be instituted at the centre and a number of states have not yet established Lokayuktas. The Standing Committee has recommended that appeals to the Lokpal and Lokayuktas should not be provided. It observed that the Lokpal and Lokayuktas are anti-corruption agencies, whereas, the Bill addresses the issue of delivery of services. It also noted that the Bill already provided for three levels of appeal, and that a fourth appeal to the Lokpal or the Lokayuktas is not required.

Removal of members of the Central and State Grievance Commissions


Clause 20 and 37

Members of the Commissions can be removed by an order of the President or the Governor. The Bill states that the government may by rules regulate the investigation procedure for removal of the Commissioners for misbehaviour or incapacity. However, it does not require a judicial inquiry to be conducted in case there is an allegation of misbehaviour (acquisition of financial or such other interest) or incapacity of the Commissioners. This is different from the process provided under some legislations. For example, the Competition Act, 2002, the Right to Information Act, 2005 and the Protection of Human Rights Act, 1993 require a judicial inquiry to be conducted before removal of the Commissioners when there is an allegation of misbehaviour or incapacity against them. The Electronic Delivery of Services Bill, 2011 and the Lokpal and Lokayuktas Bill, 2011 also have a similar inquiry procedure.

Inconsistency between the powers of the DA and the Commissions


Clause 11(10) and 28

The Bill provides for two levels of appeals by a complainant: first to the DA, and then to the Commission. There is an inconsistency between the powers of the two. If there is a prima facie indication of corruption, the DA may either refer the matter to the appropriate authority or initiate proceedings. However, if the complainant appeals against the DAs decision to the Commission, it can only refer the matter to the appropriate authority. Unlike the DA, the Commission does not have the power to initiate proceedings.
Notes 1. The brief has been written on the basis of the Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011 introduced in the Lok Sabha on December 20, 2011. 2. Citizens Charter - A Handbook, Department of Administrative Reforms and Public Grievances, available at http://darpg.gov.in/ArticleContent.aspx?category=184. 3. Citizens charter: Indian Experience available at http://darpg.gov.in/ArticleContent.aspx?category=182. 4. Fourth Report of the Second Administrative Reforms Commission on Ethics in Governance, January 2007. 5. Twenty Ninth Report of the Standing Committee on Personnel, Public Grievance, Law and Justice, on Public Grievance Redressal Mechanism, October 21, 2008. 6. Annual Report of the Chief Information Commission 2005, p. 64 available at http://www.cic.gov.in/AnnualReports/AR-200506/MainReport.pdf. 7. Address by the President of India to Parliament on June 4, 2009 available at http://presidentofindia.nic.in/sp040609.html. 8. Sense of the House Resolution, Lok Sabha debate on August 27, 2011 p. 428. 9. Citizens charters in Government of India, Department of Administrative Reforms and Public Grievances, http://goiCharters.nic.in/Charter.htm. 10. Madhya Pradesh Lok Sewaon Ke Pradan Ki Guarantee Vidheyak, 2010, Uttar Pradesh Janhit Guarantee Adhiniyam, 2011, Jammu and Kashmir Public Services Guarantee Act, 2011, Bihar Right to Public Services Act, 2011. 11. Under the New Bill Citizens Grievances to be redressed at Block Level: V. Narayanasamy, Press Information Bureau, Ministry of Personnel, Public Grievances and Pensions, December 23, 2011. 12. State of Tripura vs. The Province of East Bengal 1951 AIR (SC) 23. 13. Section 22(3)(a), The National Food Security Bill, 2011.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

September 27, 2012

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The Citizens Charter Bill, 2011

PRS Legislative Research

APPENDIX: Comparison with some Acts on Right to Public Services


Table 1: Comparison between the Central Bill and State laws
Issues Complainants Entities to which the Bill/law applies Central Bill Citizens of India. (a) constitutional and statutory authorities; (b) entities notified by government; (c) NGOs; (d) some private entities. Application for services to the designated officer with four rounds of appeal. The third round of appeal is before Commissions at the Centre or the State. In corruption cases, an appeal would lie before the Lokpal or Lokayukta. Maximum penalty of Rs 50,000 on the designated officer or the grievance redressal officer. J&K All persons eligible to obtain the services. State government. Delhi Citizen of India. (a) constitutional and statutory authorities; (b) entities notified by the government, (c) NGOs; and (d) state agencies. Application for services is to be filed with concerned department, with one round of appeal for the public official. Bihar/MP/UP/Rajasthan All persons eligible to obtain the services. State government. Punjab/Uttarakhand All persons eligible to obtain the services. State government. Himachal Pradesh All persons eligible to obtain the services. State government.

Procedure

Penalty

Disciplinary action

The DA may In case of habitual Disciplinary action may be Disciplinary action may be recommend to the offenders the competent recommended against the recommended against the disciplinary authority to officer can take designated officer or other designated officer. initiate action against the appropriate officials. designated officer. administrative action. Compensation Not mandatory. Amount Mandatory. Amount not Not mandatory. Amount Not mandatory. Amount shall not exceed the specified. shall not exceed the penalty shall not exceed the penalty imposed and it imposed and it shall be penalty imposed and it shall be deducted from deducted from the penalty. shall be deducted from the the penalty. penalty. Commissions At the central and state No provision. Punjab: 5 Commissioners. No provision. level. UK: 3 Commissioners. Sources: Madhya Pradesh Lok Sewaon Ke Pradan Ki Guarantee Vidheyak, 2010; Uttar Pradesh Janhit Guarantee Adhiniyam, 2011; Jammu and Kashmir Public Services Guarantee Act, 2011; Delhi (Right of Citizen to Time Bound Delivery of Services) Act, 2011; Bihar Right to Public Services Act, 2011; Himachal Pradesh Public Services Guarantee Act, 2011; Rajasthan Guaranteed Delivery of Public Services Act, 2011; Uttarakhand Right to Service Act, 2011; Punjab Right to Service Act, 2011; Right of Citizens for Time Bound Delivery of Services and Redressal of their Grievances Bill, 2011; PRS.

Application for services to the designated officer with two rounds of appeal. If a designated officer or the first appellate authority is aggrieved by the order of the second appellate authority he may file a revision before the special tribunal. Penalty of Rs 500 Rs 5,000 on the designated officer for non-delivery of services and on first appellate authority for delay in case disposal. Delay may be penalised with Rs 250 per day not exceeding Rs 5,000. Disciplinary action may be recommended against the designated officer or the first appellate authority. Not mandatory. Amount shall not exceed the penalty imposed and it shall be deducted from the penalty. No provision.

Application for services to the designated officer with two rounds of appeal. An aggrieved designated officer or the first appellate authority may file a revision before a nominated officer. Penalty of Rs 500 Rs 5,000 on the designated officer for non-delivery of services and on first appellate authority for delay in disposal of case. Delay may be penalised with Rs 250 per day not exceeding Rs 5,000. Disciplinary action may be recommended against the designated officer or the first appellate authority. Not mandatory. Amount shall not exceed the penalty imposed and it shall be deducted from the penalty. No provision.

Application for services to the designated officer with three rounds of appeal. The third round of appeal is before the Commission. Any person may file a revision against orders of second appellate authority before the Commission. Penalty of Rs 500 Rs 5,000 on the designated officer for non-delivery of services. Delay may be penalised with Rs 250 per day not exceeding Rs 5,000.

Application for services to the designated officer with two rounds of appeal.

Every government servant who fails to deliver the services within the stipulated time period shall be liable to pay cost at Rs 10 per application.

Penalty of Rs 1000 Rs 5,000 on the designated officer for non-delivery of services.

Legislative Brief
The Insurance Laws (Amendment) Bill, 2008
Highlights of the Bill
The Bill was introduced in the Rajya Sabha on 22nd December, 2008 and was referred to the Standing Committee on Finance (Chairperson: Shri Ananth Kumar). The Standing Committee is yet to submit its report.

The Bill allows foreign investors to hold up to 49% of the capital in an Indian insurance company. It allows for nationalised general insurance companies to raise funds from the capital markets. Companies or co-operative societies in the life or general insurance business must have a minimum equity capital of Rs 100 crore, while those in health insurance must have a minimum equity capital of Rs 50 crore. An insurer cannot challenge a life insurance policy for any reason, after a period of five years. Insurers who fail to meet their obligations with respect to underwriting third party motor insurance, or underwriting policies in rural and social sectors or with vulnerable sections, face a fine of Rs 25 crore. The Bill provides for appeals against decisions by Insurance Regulatory and Development Authority to lie with the Securities Appellate Tribunal set up under the SEBI Act, 1992. The Bill provides for Lloyds of London to be included within the definition of a foreign company. However, it is unclear whether the members of Lloyds who ultimately bear all risks of policies which are written, will be able to operate in the country. The IRDA Act, 1999 required Indian promoters of an insurance company to reduce their stake to 26% over a period of ten years. The Bill does away with this requirement. The Bill permits a policyholder to completely assign all rights under the policy to a third party, while allowing an insurer to decline such a transfer. The validity of such transfers is under legal challenge. While the Mumbai High Court has ruled that such transfers are valid, the case is currently facing appeal in the Supreme Court. While appeals against decisions by IRDA lie with the Securities Appellate Tribunal, the Bill does not provide for the tribunal to appoint a member with experience in insurance law. The Law Commission had suggested the merger of key provisions of the IRDA Act with the Insurance Act. This has not been implemented.

Recent Briefs: The Companies Bill, 2008


February 18, 2009

Key Issues and Analysis

The Right of Children to Free and Compulsory Education Bill, 2008


February 11, 2009

Avinash Celestine avinash@prsindia.org

May 12, 2009

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Insurance Laws (Amendment) Bill, 2008

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL 1


Context
There are a number of laws which govern the insurance business in India. The Insurance Act, 1938 provides the main legal framework within which insurance businesses function and regulates the relationship between an insurer, its policyholders, its shareholders, and the regulator. The life insurance business was nationalised in 1956 with the establishment of the Life Insurance Corporation under the LIC Act, 1956. The general insurance business in India was nationalised in 1972 with the enactment of the General Insurance Business (Nationalisation) Act, 1972. The IRDA Act, 1999 provided for the setting up of the Insurance Regulatory and Development Authority, which regulates the industry. It also provided for the re-entry of the private sector into the insurance business. In 2007-08, the total premium income of life and non-life insurers in India was about Rs 2,30,000 crore, or 5.3% of GDP (Table 1). Table 1: Insurance Market in India (2007-08) In 2004, the Law Commission recommended Life Insurance Non-life Insurance comprehensive reforms to the Insurance Act, 1938 Premium income (Rs crore) 2,01,351 27,823 which included changes to rights enjoyed by policyholders and the setting up of an independent Market Share (%) Public Sector 74% 60% grievance redressal mechanism and an insurance Private Sector 26% 40% appellate tribunal. 2 The Report of the Committee on No. of Insurers Public Sector 1 7 Provisions of the Insurance Act, 1938 (Chairman: Shri Private Sector 20 14 K.P. Narasimhan), released in 2005, made further Sources: IRDA Annual Report (2007-08), PRS recommendations for changes to the Act with respect to investment and accounting norms for insurance companies. 3 The Bill incorporates some recommendations of the Law Commission as well as the K.P. Narasimhan Committee. It amends the Insurance Act, 1938, the General Insurance Business (Nationalisation) Act, 1972, and the IRDA Act, 1999.

Key Features
The Bill redefines certain types of insurance and allows for foreign investors to hold up to 49% of the capital in an insurance company. It provides for nationalised general insurance companies to raise funds from capital markets with the permission of the central government. The Bill changes norms governing the rights of policyholders and insurers with respect to insurance policies. It enhances penalties for a range of offences and prescribes a procedure for appeals against decisions by IRDA. It allows for a number of issues, currently specified in the Act, to be specified in the rules.

Definitions
The Bill defines health insurance separately. Health insurance includes policies issued to cover medical, surgical, and hospitalisation costs related to in-patient and out-patient treatment. Such policies can include assured benefits, cover long term care, and provide overseas travel or personal accident cover. A foreign company has been defined as a company or body established or incorporated under the law of any country outside India. Lloyds, established under the Lloyds Act, 1871 in the UK, is specifically covered by this definition.

Entry Criteria and Corporate Governance


The Bill specifies four kinds of entities who are allowed to act as insurers public companies, co-operative societies, foreign companies operating through a branch, and statutory bodies established by acts of Parliament to carry on insurance. It also specifies the minimum equity capital that various insurance businesses must maintain (Table 2). Table 2: Eligibility Norms for Entry into the Insurance Business
Entity Company Co-operative Society Branch of a foreign company Criteria for formation The Company must be a public company. Foreign investors can hold up to 49% of shares in the company. Must be registered under central or state Acts. Foreign investment limit of 26%. Cannot be re-insurers. Branches of foreign companies can only be re-insurers. Indian partner not needed. Capital Requirements (Equity) Life Insurance / General Insurance: Rs 100 crore Health Insurance: Rs 50 crore Re-insurance: Rs 200 crore Net owned funds of the company must be at least Rs 5000 crore.

Sources: The Insurance Laws (Amendment) Bill, 2008, PRS

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The Bill provides for the General Insurance Corporation, the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Insurance Company Limited and the United India Insurance Company Limited, to raise capital with the permission of the central government. The Insurance Act restricts the capital of a publicly held life insurance company to equity shares only. The Bill requires all public insurance companies to hold capital as equity and in other forms to be specified by regulations. The Insurance Act requires an Indian promoter to reduce their stake in an insurance company to 26% within ten years. The Bill removes this requirement. Insurers may invest up to 5% of assets in promoter companies. They cannot invest in private companies. Agents, insurance brokers or other insurance intermediaries cannot be directors of an insurance company. IRDA must approve any transfer of shares which results in a single investor owning more than 5% of the equity of an insurance company. The regulator must also approve a transfer of more than 1% of the equity of an insurance company by an individual or firm or group under the same management.

Insurance Policies and Rights of Policyholders


All general insurers must underwrite a minimum amount of insurance business in third party motor insurance. The Bill provides for policyholders to assign or transfer the rights enjoyed by them to others. Conditional transfers allow for only certain rights to be transferred till the policy matures. Absolute transfers provide for the transfer of all rights of the policy unconditionally. Unless specifically allowed otherwise, all transfers are to be treated as absolute. Insurers can decline the assignment of a policy if they feel it is against the interests of the policyholder, that it is not bona fide, or that it is against the public interest. Policyholders can appeal to IRDA against such a refusal. The Bill distinguishes collector nominees from beneficiary nominees. Beneficiary nominees are entitled to benefits payable under a policy. A collector nominee must pay benefits of the policy to legal heirs or the beneficiary nominee. Unless a policyholder makes such a distinction, all nominees are to be treated as beneficiary nominees. The Insurance Act allows an insurer to cancel a life insurance policy within two years on the grounds that material facts, on the basis of which the policy was issued, were inaccurate or false. After two years, a policy can still be cancelled on grounds of fraud. The Bill expands the window within which policies can be cancelled to five years. However, a policy cannot be challenged on any grounds after a period of five years. If an insurer cancels a policy on grounds of misstatement or suppression of facts, premiums collected must be returned within 90 days.

Solvency and Investments


All insurers and re-insurers must maintain an excess of assets over liabilities (solvency margin) of 50% of the minimum amount of capital prescribed. A further control level of solvency shall also be prescribed in the rules. Table 3: Investment Norms (% of total assets) The Bill specifies investment norms for insurers (Table 3). Investments other than those approved by IRDA must be cleared by all directors and reported to the regulator.
Investment Life Insurance 25% 25% 50% 15% Government Securities (minimum) Government/other approved Securities (minimum) Approved Investments (maximum) Other Investments (maximum) 20% 10% 70% 15%

General Insurance

Penalties and Adjudication Mechanism


The Bill provides for the Securities Appellate Tribunal, established under the SEBI Act, 1992, to be the appellate authority for decisions made by IRDA.

Insurers who violate norms on investment and the underwriting of third party motor insurance, or obligations towards rural and social sectors or vulnerable sections, face a fine of Rs 25 crore.

Sources: Insurance Laws (Amendment) Bill, 2008; PRS

Miscellaneous
The Bill does away with the requirement that insurance agents be licenced by IRDA. It allows insurers to appoint persons with specified qualifications and training, as insurance agents. No person can act as an agent for more than one life insurer or general insurer. Norms for commission and brokerage are to be specified in regulations. The Bill provides for separate Life and General Insurance Councils to be constituted from amongst industry representatives and nominees of IRDA. The councils will set standards of conduct for insurers and advise the regulator. The Bill deletes provisions in the Act which provide for a Tariff Advisory Committee.
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The Insurance Laws (Amendment) Bill, 2008

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PART B: KEY ISSUES AND ANALYSIS


Entry into the Insurance Business
Clause 3(iv), Statement of Objects and Reasons

Lloyds of London
The Bill provides for Lloyds, covered by the Lloyds Act, 1871 of the UK, to be treated as a foreign company. The Statement of Objects and Reasons specifies one of the aims of the Bill as being to facilitate entry of Lloyds of London in insurance business in India Lloyds is not a company but an insurance market, established as a society and comprised of members, who are distinct legal entities in their own right. It is the members, rather than Lloyds itself, who bear the risks of any policies written. While the Bill allows for the entry of Lloyds, it is unclear as to whether the individual members will also be allowed to practice in the country. In India, the Insurance Act, 1938 currently defines an insurer to include persons in India who have contracts with Lloyds underwriters. 4 Lloyds is regulated by the Financial Services Authority, which regulates financial services in the UK. In China, Lloyds has a licence only for reinsurance and operates through a wholly owned subsidiary, incorporated as a company. 5 In the US, Lloyds is an accredited reinsurer in all states.

Capital Structure
Capital Requirements specified in the Bill
Clause 3

The Bill requires life and general insurers to have a minimum capital of Rs 100 crore. Health insurers are required to have a minimum capital of Rs 50 crore. The Bill does not give any flexibility to the regulator to revise capital requirements upward over time. This regulatory structure for insurers differs from that for banks. The Banking Regulation Act, 1949 allows the RBI to licence banks who fulfil conditions imposed on them by the central bank. 6 The Act gives broad guidelines as to what those conditions should be but leaves it to the central bank to impose specific conditions, including minimum capital norms, without needing to seek parliamentary approval.

The Insurance Act and LIC


The state-owned LIC is incorporated under the LIC Act, 1956 and is the countrys largest life insurer. The IRDA Act, 1999 did away with LICs exclusive privilege to carry on life insurance in the country and applied all the provisions of the Insurance Act, 1938 to LIC. 7 However, unlike other life insurers in the country, all policies issued by LIC are guaranteed by the government. LIC currently does not meet the minimum capital requirement of Rs 100 crore specified in the Insurance Act as its paid up equity capital is Rs 5 crore. The Life Insurance Corporation (Amendment) Bill, 2008, introduced in December last year in the Lok Sabha provided for an increase in LICs capital to Rs 100 crore. It also allowed for the government to specify the extent to which it guarantees policies issued by LIC. However the Bill will lapse with the dissolution of the 14th Lok Sabha.

Divestment by Indian Promoters


Clause 14

The IRDA Act, 1999 amended the Insurance Act, requiring Indian promoters to reduce their stake to 26% within ten years. The Bill does away with this requirement. The Reserve Bank of India requires promoters of private sector banks to reduce their stake to 40% within one year. 8 The RBI, at its discretion, can allow promoters to dilute their stake over a longer period.

Insurance Policies
Assignment and Transfer of Policies
Clause 48

The Bill provides for a policyholder to assign or transfer their rights under a policy, either completely or only partly, to a third party. A basic requirement for any policy of life insurance to be issued is that of insurable interest i.e. whether the person who enjoys all rights under the policy also has an interest in the insured person remaining alive. If a policyholder sells the policy, it is unclear whether the new buyer is also required to have insurable interest. The Mumbai High Court has ruled that while insurable interest must exist when the policy is first taken, it is not necessary for such interest to exist when rights in the policy are subsequently transferred to a third party. It ruled that such assignments are legal in India. 9 The case is currently facing appeal in the Supreme Court. 10

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The Insurance Laws (Amendment) Bill, 2008

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Internationally, the ability to completely assign all rights under a policy to a third party has led to a secondary market for life insurance policies. Policies can be sold for a price which is lower than the face value of the policy but higher than the surrender value. The buyer pays the remaining premiums on the policy and is entitled to the sum paid by the insurer when the insured person dies or the policy matures. In the US, the market for such policies was estimated at about $13 billion in 2005. 11 In the US, such secondary market transactions in life policies are regulated in 28 states. Thirty-eight states regulate such transactions in cases where the insured person has a short life expectancy (2-3 years). 12 In Canada, such transactions are illegal in 9 provinces. 13 India does not have laws which specifically regulate the secondary market in insurance policies. The Bill allows an insurer to decline to recognise the transfer of rights of a life policy to a third party. While this is in line with recommendations made by the Law Commission, it could deter the growth of a secondary market in such policies. The K.P. Narasimhan Committee had suggested that IRDA be given the power to regulate such transfers of rights.

Reports of the Law Commission and the K.P. Narasimhan Committee


Grievance Redressal
Policyholders with complaints can approach the consumer courts or insurance ombudsmen. Such ombudsmen are appointed based on recommendations made by a committee consisting of the chairpersons of IRDA, LIC, General Insurance Corporation and a representative of the central government. This creates the possibility of a conflict of interest. In comparison, ombudsmen in the banking sector are appointed by a committee comprising the deputy governors of the Reserve Bank of India and a representative of the finance ministry. The Law Commission found the ombudsmen system in insurance unsatisfactory and said that alternative fora such as the Consumer Courts were also ineffective given the large backlog of cases still pending. It proposed that amendments be made to the Insurance Act to put in place an independent grievance redressal authority (GRA) with all powers and functions of a civil court and composed of judicial and technical members. It proposed that existing cases in consumer courts be transferred to the GRA. The K.P. Narasimhan Committee disagreed, saying that consumer courts were more easily accessible than a GRA would be. Further, it was not clear whether consumer courts were so overburdened as to be unable to handle complaints by policyholders. It suggested instead that the existing system be continued with some changes. The Bill does not provide for an independent GRA.

Appeals Process
The Bill provides for appeals against decisions by IRDA to lie with the Securities Appellate Tribunal, set up under the SEBI Act, 1992. This is in line with recommendations made by the K.P. Narasimhan Committee. Since SAT currently deals with issues related to the capital markets only, its expertise in dealing with matters of insurance law may be limited. The committee had suggested that amendments be made to the SEBI Act to provide for the appointment of a member with a background in insurance. This recommendation has not been implemented. The Law Commission had suggested a separate appellate authority for the insurance industry, which would hear appeals against decisions by IRDA or the GRA (see above). Appeals against decisions by the proposed insurance appellate authority (IAT) would lie directly with the Supreme Court.

Other Recommendations
Table 4: Status of Other Recommendations made by Law Commission
Topic Simplification of laws Cancellation of Policy Nomination of policies Penalties Recommendation Suggested the merger of a number of key provisions of IRDA Act with Insurance Act. Insurer should be allowed to challenge a policy on grounds of misstatements/suppression of facts or fraud within 5 years. No challenge to be allowed on any grounds after 5 years. Allow policyholders to distinguish between beneficiary and collector nominees. Increase penalties for violation of investment norms, or obligations towards rural /social sectors or vulnerable sections. Status Not implemented. As recommended. As recommended. As recommended.

Sources: Insurance Laws (Amendment) Bill, 2008; PRS; Law Commission Report.

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Table 5: Status of Other Recommendations made by K.P. Narasimhan Committee


Topic Definitions Recommendation Define Contract of Insurance as any contract effected by an insurer by which he assumes a degree of risk of loss or assured benefit as may be specified by regulations made by the Authority. Minimum of 25% of investible funds in government securities and a further 25% in government/approved securities. Types of approved investments to be specified in regulations. Specify limits on non-approved investments in regulations. Capital Requirements Minimum capital of Rs 100 crore prescribed for life and general insurers and Rs 200 crore for general insurers. Minimum capital for health/agricultural insurance to be specified in regulations. Specify valuation norms for assets/ liabilities in regulations. Every insurer to maintain an excess of assets over liabilities of 50% of minimum capital. Actuaries Powers of Statutory Councils Insurance Agents Insert provision in the Insurance Act which makes it mandatory for every insurer to appoint an actuary. Shift power to set rates and terms from Tariff Advisory Council to General Insurance Council. Bring TAC under the General Insurance Council. Do away with licensing of insurance agents while allowing IRDA to specify minimum qualifications. Entrust insurers with the power to appoint agents. No change to Act. Not implemented. Currently required by IRDA regulations. TAC done away with. Powers of General Insurance Council left unchanged. As recommended. Status Not implemented.

Investments

As recommended. Types of approved investments to be specified in regulations. Act specifies a maximum limit of 15% on non-approved investments. As recommended. Act prescribes minimum capital of Rs 50 crore for health insurers.

Solvency

As recommended.

Cancellation of Policy

Window within which policy can be cancelled on grounds of misstatement/suppression of facts or fraud expanded to five years from two. However, policy cannot be challenged on any grounds after five years.

Sources: Insurance Laws (Amendment) Bill, 2008; K.P. Narasimhan Committee; PRS

Notes 1. This Brief has been written on the basis of the Insurance Laws (Amendment) Bill, 2008, which was introduced in the Lok Sabha on December 22nd, 2008 and referred to the Standing Committee on Finance (Chairperson: Shri Anant Kumar). The Standing Committee is yet to submit its report. 2. Law Commission of India, The Revision of the Insurance Act, 1938 and the IRDA Act, 1999, 190th Report. 3. Report of the K.P. Narasimhan Committee on Provisions of the Insurance Act, 1938 (Chairperson: Shri K.P. Narasimhan). Report submitted in July 2005. 4.The Insurance Act, 1938, Clause 2(9)(c). 5. See Lloyds Annual Report, 2008, p. 27: http://www.lloyds.com/Lloyds_Market/Financial_performance/Financial_reports/2008_Annual_Report.htm 6. Banking Regulation Act, 1949, Section 22. 7. See LIC Act, 1956, Section 30A. 8. See RBI website: http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=4350 9.Writ Petition No. 2159 of 2004, Insure Policy Plus Services and others vs. The Life Insurance Corporation of India and others. 10. Special Leave Petition (Civil) No. 10783 of 2007, LIC of India vs. Insure Policy Plus Services and others. 11. Blake, David and Debbie Harrison, And death shall have no dominion: Life settlements and the ethics of profiting from mortality, July 2008, Pensions Institute, p. 5. Available at : http://www.pensions-institute.org/DeathShallHaveNoDominion_Final_3July08.pdf 12. See Life Settlement ABS Developments, DBRS, June 2008, p. 11. http://www.dbrs.com/research/221027/select-commentaries-life-settlement-abs-developments.pdf 13. Study Paper on Viatical Settlements, Canadian Centre for Elder Law Studies, May 2006, p. 11.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for noncommercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

May 12, 2009

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Legislative Brief
The Pension Fund Regulatory and Development Authority Bill, 2011 was introduced in the Lok Sabha by Mr. Pranab Mukherjee, Minister for Finance on March 24, 2011. The Bill was referred to the Standing Committee on Finance (Chairperson Mr. Yashwant Sinha) on April 8, 2011. The Committee submitted its report on August 30, 2011.

The Pension Fund Regulatory and Development Authority Bill, 2011


Highlights of the Bill
The Pension Fund Regulatory and Development Authority Bill, 2011 seeks to give statutory powers to the interim authority set up in 2003. It also alters the name of the New Pension System to National Pension System (NPS). NPS is a defined contribution scheme for all central government employees who joined after January 2004. It is implemented through a combination of retailers, pension fund managers, and a record keeper. This scheme is different from the earlier defined benefit scheme. Under the NPS, every subscriber will have an individual pension account, which will be portable across job changes. The subscribers will choose fund managers and schemes to manage their pension wealth. They will also have the option of switching schemes and fund managers. The NPS was extended to all general citizens through central government notification in May 2009.

Recent Briefs: The Enemy Property (Amendment and Validation) Second Bill, 2010 July 6, 2011 The National Identification Authority of India Bill, 2010 June 2, 2011

Key Issues and Analysis


The Bill provides a structure (NPS) to plan for old age income security. However, it is optional for those in the unorganised sector. This differs from the system in countries such as the United States, which have a mandatory system to ensure that all persons have old age income security. The NPS is a defined contribution scheme. It is different from existing pension schemes in the organised sector such as the EPS, and the GPF. Both the EPS and GPF are defined benefit schemes. In the NPS, the investment risk is entirely borne by the employees. They are no longer exposed to the risk of default by the government as was the case under the defined benefit system. There will be no explicit or implicit guarantee on the pension wealth, except in cases where the subscriber purchases market based guarantees. This rule is different from the case of bank deposits, where deposits up to Rs 1 lakh are guaranteed. The total corpus and number of enrolments to the NPS have been lower than expected. Recommendations have been made by different committees to the government to make efforts to popularise the scheme.

M R Madhavan madhavan@prsindia.org Sana Gangwani sana@prsindia.org

November 28, 2011

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The PFRDA Bill, 2011

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL


Context
Till 2009, old age pension was available only to government employees and individuals in the organised sector. In 2000, the Old Age Social and Income Security (OASIS) Report, under the chairmanship of Dr. S.A. Dave, recommended that pension schemes be extended to the unorganised sector as well. In October 2003, an interim Pension Fund Regulatory and Development Authority (PFRDA) was constituted through a notification to develop and regulate the pension sector. In December 2003, the central government (through a notification1) implemented the New Pension Scheme (NPS) for its employees appointed from January 2004 onwards. The NPS shifted the pension scheme for government employees from the defined benefits (DB) system to a defined contribution (DC) system.* In order to give statutory powers to the interim body, a Bill was introduced in Parliament in March 2005. This Bill defined the architecture of the pension system. However, it lapsed with the dissolution of the 14th Lok Sabha in 2009. In the meantime, the interim PFRDA appointed 22 retailers (Points of Presence - PoPs), seven pension fund managers (PFMs), and a central record-keeper (CRA). In May 20092 the NPS was extended to all citizens (including workers in the unorganised sector, on a voluntary basis). In March 2011, the PFRDA Bill, 2011 was introduced in the Lok Sabha. It seeks to give statutory status to the interim PFRDA, and changes the name of the New Pension System under the previous bill to the National Pension System (NPS). As of July 2011, the NPS had 24 lakh subscribers, and managed funds of Rs 10,000 crore.3

Key Features
The Bill gives statutory recognition to the PFRDA, defines its powers and duties, and sets the broad contours of NPS.

The NPS Architecture


The NPS is a DC pension system set up by the PFRDA. It comprises the following: Central Recordkeeping Agency (CRA) - The CRA shall maintain records and accounts, and execute all instructions regarding subscription, switching of options, and withdrawals by the subscriber4. The subscriber may obtain information about his account directly from the CRA. Pension Fund Manager (PFM) - The PFMs shall provide a set of schemes with varying risk-return profiles (i.e., balance between risk taken and returns expected), and manage assets of subscribers. Point of Presence (PoP) - The PoPs shall function as the retailers of the NPS. They shall receive instructions and contributions from subscribers, transmit these to the CRA, and pay out benefits to subscribers. They will be the initial point of contact between subscribers and the system.

Chart 1: The NPS Architecture

PFRDA
R e g u la tio n s
In s tru c tio n s a n d S u b s c rip tio n s

In s tru c tio n s a n d S u b s c rip tio n s

In s tru c tio n s a n d S u b s c rip tio n s

S u b s c rib e r
In fo rm a tio n a n d b e n e fits

PoP
In fo rm a tio n a n d b e n e fits

CRA
B e n e fits

PFM

Source: PRS

In the Defined Benefit (DB) system, pension payable at the time of retirement is fixed on the basis of the last pay-scale drawn. In the Defined Contribution (DC) system the pension payable is determined by the funds accumulated through contribution, and investment gains during the service of the employee.
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Working of the NPS


The working of the NPS can be explained under the following heads: Eligibility norms - The PFRDA shall prescribe norms on matters such as minimum capital requirement, past track-record (including ability to provide guaranteed returns), costs and fees, information technology capability, and customer base. Foreign investment Subscribers funds may not be invested abroad by PFMs. Individual Pension Account - Every subscriber shall have an individual pension account (IPA). The subscriber has the option of selecting the PFMs and schemes5; he can switch his funds across PFMs and schemes. The IPA will be portable in case of change of employment.6 The subscriber cannot exit from the system except as specified by the notification. The current notification specifies two options: (a) if the subscriber chooses to exit at the normal age of retirement (60 years), he shall use at least 40 per cent of accumulated pension wealth to purchase an annuity7 from a life insurance company. This annuity will provide pension for the lifetime of the employee, his dependent parents and spouse; (b) if the subscriber chooses to exit prior to retirement, 80 per cent of the accumulated pension wealth shall be converted to an annuity. Permanent Retirement Account Number (PRAN) Every subscriber on registering with the NPS gets a unique PRAN issued by the CRA. Two tier structure - The notification mentions a two tier structure for government employees under the NPS. In Tier-I both the employee and the government will contribute 10 per cent of (basic+DA)8, and there will be no withdrawals till exit. The employee can opt to contribute a further amount into a Tier-II account, which will not have any contribution by the government and from which he can make withdrawals.9

Establishment, powers and duties of the PFRDA


The PFRDA shall perform promotional, developmental and regulatory functions relating to the pension system. It shall also impose penalties in case of any regulatory violations. The PFRDA comprising a Chairman, three whole time members, and three part time members shall be appointed by the central government for a five year term, and may be removed from office only under specified conditions. The PFRDA shall regulate the NPS, and all intermediaries including the CRA, PFMs and PoPs. It shall approve the schemes and norms (including investment guidelines) for management of the investments by PFMs. It shall be responsible for protecting the interests of subscribers and establishing a mechanism for redressal of their grievances. It shall standardise dissemination of information about performance of pension funds and performance benchmarks. The PFRDA may establish a Pension Advisory Committee, with a maximum of 25 members. This committee would represent the interests of employee associations, commerce and industry, subscribers, intermediaries and organizations engaged in pension research. It would also advise the PFRDA on matters referred to it.

Extent of the Bill


The Bill exempts certain schemes and funds. These include the Coal Mines Provident Fund and Miscellaneous Provisions Act 1948, the Employees Provident Funds and Miscellaneous Provisions Act 1952, the Seamens Provident Fund Act 1966, the Assam Tea Plantations Provident Fund and Pension Fund Scheme Act 1955, and the Jammu and Kashmir Employees Provident Funds Act 1961, and contracts covered by the Insurance Act 1938. It also exempts employees of the central government and All-India Services appointed before January 1, 2004.10 Any person governed by any of these exempt schemes may voluntarily choose to join NPS in addition to their mandatory cover. The Bill permits state governments and union territories to extend the NPS to their employees. Any employee in the excluded category can opt to join the NPS in addition to his mandatory cover.

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PART B: KEY ISSUES AND ANALYSIS


EPS versus NPS
Employees who joined the central government after January 2004 are covered under the NPS. Those employed with the government before 2004 are covered by the General Provident Fund (GPF). Employees in the organised sector subscribing to the Employee Pension Scheme (EPS) also have a pension facility. In Table 1, we compare the NPS with other pension schemes such as the EPS, and GPF. Table 1: Comparison of features of EPS and NPS
Feature Coverage Eligibility Requirement Portability across job changes Type of account Type of pension Risks For government employees (covered by GPF) EPS / GPF Organised sector employees through EPS, and government employees before 2004 under GPF. Minimum term of employment (typically 10 -20 years). None for government employees. Limited portability for those covered under EPS. Pooled. Defined benefit. The employee carries no investment risk. However, there is a risk of default/delay in pension payments by GPF/EPS. For existing central government employees, the government pays 50% of the average of last 10 months pay (Basic+DA) if employee has 33 years service. There is no contribution by the employee or the government into a fund but this is paid out of the Consolidated Fund of India. For those covered by EPS, the employer pays 8.33% of Basic+DA to the EPS (maintained by EPFO), and the government pays 1.16%. Pension after retirement will be paid based on the years of service and last pay drawn. Not mandated. There is no regular update on performance of the EPS. Government pensions are unfunded. The EPS board decides the strategy. This strategy and the investment portfolio are not disclosed to the employee. NPS Available to all subscribers, including the unorganised sector. None. Portable. Individual pension account (IPA). Defined Contribution. The employee carries the entire investment risk. There is no risk of default by PFMs. Government and the employee will each pay 10% of Basic+DA into a scheme of a PFM. Separate account for each employee will be maintained. At the time of exit, a part (40%) of the pension wealth will be used to buy an annuity, and the remaining paid as a lump sum amount. No contribution from the employer. The employee selects a particular scheme.

For those not employed by the government Disclosure of Performance Investment strategy

Each PFM will publish the performance of schemes managed by him at regular intervals. The subscriber can see the balance in his IPA. Each scheme has to follow a specified investment pattern. The subscriber chooses his portfolio of schemes.

Sources: PFRDA website, EPS-1995, PRS

Defined Benefit versus Defined Contribution


The DB system, applicable to government servants appointed before 2004, and EPS subscribers, promises a fixed monthly pension. This amount is linked to the pay drawn, number of years of service etc., and has no direct linkage to the contribution of the employee or employer towards a pension fund. The entire investment risk is borne by the pension fund manager and the government. The total benefits liable from such a scheme could amount to be higher than the funds available, which can lead to delays and defaults. Traditionally, a large proportion of pension funds around the world have been of the DB type11. However, many have been under funded, and some have collapsed12. This has led to a debate in a number of countries regarding the sustainability of their pension and social security systems.13 In the DC system (as proposed in the NPS), each employee contributes a proportion of his monthly income to an individual account. The funds in this account are invested in one or more schemes offered by pension fund(s). The balance in the account belongs to the employee, which will be accessible at the time of exit. The employee bears the entire investment risk and there is no risk of default by the fund as the liability of the fund to its subscriber equals the assets owned. Table 2 lists some advantages and disadvantages of the DB and DC system. Table 2: Defined Benefits versus Defined Contributions
Advantages Defined Benefits - Guaranteed retirement income - Employees do not bear investment risk - Flexibility for inflation and wage adjustments - Independent of participants savings - Not beneficial to employees who leave before minimum eligible service - Less portable in switching employers - Fund manager could default if funds are not invested appropriately Defined Contribution - Participants have more choice in investing - Participants can benefit from better returns - Plans are easily portable across job changes - Option to switch fund managers and schemes - No risk of default by fund managers - Returns are subject to market performance - Participants bear investment risk and may make misinformed choices - Difficult to build a fund for those who enter late - Shifts administration costs to employees

Disadvantages

Source:PRS

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Coverage
The Bill excludes employees of the central government who joined before January 1, 2004. Those who joined from this date must be part of the NPS. State governments may mandate NPS for their employees by issuing a notification. Sixteen state governments14 have notified NPS for their employees. The Bill excludes all schemes covered by EPF Act. Thus, employees covered by the EPS are exempt from the provisions of this Bill. The Bill makes the NPS available to the unorganised sector. However, there is no compulsion to join the system. Many countries (e.g., the social security system in the US) require a mandatory contribution from individuals to ensure that they have old age income security. According to the Standing Committee Report submitted in August 2011, approximately 51,000 individuals have joined the voluntary part of the NPS as of July 2011. The government extended pension schemes to the unorganized sector in May 2009. However, according to a committee15 report, the scheme has drawn few subscribers as of May 2011. In order to attract more subscribers in the unorganized sector, the government initiated new schemes such as the NPS Lite16 and Swavalamban17, which provide additional facilities and benefits.

Risks
Under the NPS, PFMs offer an array of schemes5 with differing risk-return profiles. The subscriber divides his contribution (as well as existing pension wealth) into these schemes, and has the option of changing this combination at any time. The final pension wealth will depend on the performance of the schemes chosen by the subscriber. Thus, the subscriber takes the entire investment risk. The premise is that fluctuations in market value will smooth out over the working life of the subscriber. However, the subscriber is exposed to two major risks at the time of exit. If there is a major market shock at the time of retirement (say, an incident such as a terror attack or financial crisis), leading to a fall in asset prices, the entire accumulated wealth is at risk. A subscriber with a few years remaining before exiting would be more likely to ride over this shock but a subscriber retiring at that time will be affected adversely. Second, the subscriber has to purchase an annuity at the time of exit, and is similarly exposed to any sharp downturn in the annuity market at that time. The Bill states that there will not be any explicit or implicit assurance of benefits except market based guarantees to be purchased by the subscriber. This rule is different from the case of bank deposits, where deposits up to Rs 1 lakh are guaranteed by the Deposit Insurance and Credit Guarantee Corporation.

Committee recommendations
Standing Committee Report, 2011
The PFRDA Bill, 2011 has incorporated a number of recommendations made by the Standing Committee in its 2005 report. Two key recommendations of this committee are not incorporated. These were: More flexibility in the Tier 1 account to allow subscribers to withdraw funds in case of any exigency. Restrictions on foreign investment in pension funds, bringing it in line with the restrictions in the insurance sector; (26% cap on foreign investments). The Standing Committee on Finance submitted its report on the PFRDA Bill, 2011 in August 2011. It reiterated the above two recommendations made in 2005. In addition, the Committee made other recommendations. These include: Need for efforts to popularise the different schemes. Stringent monitoring and implementation of the schemes. Insuring funds of subscribers and giving minimum guaranteed returns to ensure safety of their deposits. Making the schemes more broad based and flexible.

Report of the Committee to Review Implementation of Informal Sector Pension (CRIISP), 2011
This Committee was constituted in August 2010 under the chairmanship of Mr. G.N. Bajpai to look into the implementation of the NPS, especially in the informal sector. The report was released in July 2011. The recommendations include: Removing entry barriers Minimum requirement of Rs 6000 for the NPS should be removed.

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Rationalise CRA charges - CRA charges for the NPS members should be made the same as those for the members of NPS Lite. Change the structure for subscription A new structure with a charge at the rate of 0.5 per cent of the subscription raised by the PoPs from each subscriber. This maximum amount of subscription at which this rate is charged by the retailer (PoP) is Rs 50,000. This is to prevent the PoPs from chasing high value clients only. Customer ownership PFRDA should set up a marketing division to ensure proper branding of the schemes and the different products.
Notes 1.Notification number F. No. 5/7/2003-ECB&PR dated December 22, 2003. 2. PFRDA Press Release dated April 30, 2009. 3. According to the report of the Standing Committee on Finance on PFRDA Bill, 2011 submitted in August 2011. 4. A subscriber is an individual who joins NPS. 5. The current notification specifies that 3 types of schemes of various risk-return combinations shall be offered through investments in differing combinations of government securities, corporate bonds, and equity shares. 6. As in the case of a bank account, the IPA is independent of employment details. 7. An annuity is a contract by which one receives fixed payments on an investment for a lifetime 8. Basic+DA: Basic salary + Dearness Allowance 9. This is more like a savings account or a liquid mutual fund. 10. Referred to as existing government employees in this Brief 11. The High Level Expert Group on New Pension System, 2002 (Chairman BK Bhattacharya) lists Canada, Japan, Denmark, Germany, France and the US among countries following the DB system. 12. Delphi Corp, an auto parts maker, which filed for bankruptcy in October 2005, had an estimated pension liability of $14.5 billion. See http://news.bbc.co.uk/2/hi/business/4323854.stm 13. A recent paper suggests that in 25 years the pension liability for the UK government could amount to 3.1 trillion pounds http://www.economicpolicycentre.com/2010/04/19/government-pension-liabilities-understated-by-1trillion/ 14. Andhra Pradesh, Assam, Bihar, Chattisgarh, Gujarat, Goa, Himachal Pradesh, Jharkhand, Madhya Pradesh, Maharashtra, Manipur, Orissa, Rajasthan, Tamil Nadu, Uttarakhand, and Uttar Pradesh 15. Committee to Review the Implementation of Informal Sector Pension (CRIISP) 16. The PFRDA introduced a new scheme called the NPS Lite for the economically disadvantaged sections of the society in 2010. The scheme is operated through aggregators such as the Self Help Groups and has a very low cost structure. The beneficiary of this scheme shall invest any amount every year. 17. Under the Swavalamban scheme, for every new account opened during 2010-2011 the government shall contribute Rs 1000 every year. The subscribers to the scheme would have to contribute a minimum of Rs 1000 every year (maximum of Rs 12000). The contribution from the government would continue for the following five years for all those who join the scheme during the years 2010-11 and 2011-12.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

November 28, 2011

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Legislative Brief
The Micro Finance Institutions (Development and Regulation) Bill, 2012
The Bill was introduced in the Lok Sabha by the Minister of Finance on May 22, 2012. The Bill was referred to the Standing Committee on Finance (Chairperson: Shri Yashwant Sinha) on May 28, 2012. The Committee was due to submit its report in August 2012.

Highlights of the Bill


The Bill seeks to provide a statutory framework to regulate and develop the micro finance industry. The Reserve Bank of India (RBI) shall regulate the micro finance sector; it may set an upper limit on the lending rate and margins of Micro Finance Institutions (MFIs). MFIs are defined as organisations providing micro credit facilities up to Rs 5 lakh, thrift collection services, pension or insurance services, or remittance services. The Bill provides for the creation of councils and committees at central, state and district level to monitor the sector. The Bill provides for a Micro Finance Development Fund managed by RBI; proceeds from this fund can be used for loans, refinance or investment to MFIs.

Recent Briefs: The Higher Education and Research Bill, 2011


December 28, 2012

The Bill requires the RBI to create a grievance redressal mechanism.

Key Issues and Analysis


The Bill provides safeguards against misuse of market dominance by MFIs to charge excessive rates. It allows RBI to set upper limits on lending rates and margins. However, there is no provision for consultation with the Competition Commission of India. The Bill allows MFIs to accept deposits. Unlike banks, there is no facility for insuring customer deposits against default by MFIs. The minimum capital requirement is also lower, though RBI may prescribe higher requirements. The Development Fund for MFIs is to be managed by the RBI. The Bill also enables regulatory powers to be delegated to NABARD. Both these provisions could lead to conflict of interest. The Bill provides for the creation of micro finance committees at central, state and district levels to oversee the sector. However, the formations of these committees are not mandatory. The Bill allows MFIs to provide pension and insurance services. However, it does not provide for regulation by or coordination of RBI with the respective sector regulators.

The Mines and Minerals (Development and Regulation) Bill, 2011


December 28, 2012

Vishnu Padmanabhan vishnu@prsindia.org December 28, 2012

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Micro Finance Institutions (Development & Regulation) Bill, 2012

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
Micro finance is the extension of financial services, notably small loans, to low income groups. It can serve as a vehicle for financial inclusion. Regular banks tend not to lend to the poor because of the high cost per individual loan and lack of collateral. In India, micro finance overcomes these issues by lending to Self Help Groups* (SHGs), i.e., groups of pooled borrowings, and Joint Liability Groups (JLGs), i.e., groups of pooled liability. Delivery largely takes place through two mechanisms: the National Bank for Agriculture and Rural Development (NABARD) sponsored SHG Bank Linkage programme, where banks lend directly to SHGs and through micro finance institutions (MFIs) lending to SHGs, JLGs, rural banks and individual clients. Taken together, the BanksSHG programme and MFIs reached 76.7 million people in 2010-11, a 71% growth over 2006-07. 2 MFIs exist in various forms such as societies, trusts, co-operatives and non banking financial companies (NBFCs). In terms of market share, NBFCs dominate the industry, accounting for an estimated 90% of loan volume in 201011.2 NBFC-MFIs are regulated by the Reserve Bank of India (RBI) Act, 1934. There is no statute regulating the rest of the microfinance industry consisting of societies, trusts and co-operatives. Figure 1: Current flow of credit and regulation in Indian micro finance

Sources: RBI; NABARD; PRS

In order to regulate the sector, the government introduced the Micro Financial Sector (Development and Regulation) Bill, 2007, which designated NABARD as the regulator. This Bill lapsed with the dissolution of the 14th Lok Sabha. In 2010, following allegations of aggressive debt-recovery methods by MFIs, the Andhra Pradesh government passed an Act regulating MFI activity in the state. Following this, the RBI appointed the Malegam Committee to study issues and concerns in the sector.3 Based on the recommendations of the committee, RBI created a separate category of NBFCs (NBFC MFIs) in December, 2011. All NBFCs providing micro finance services come under RBIs regulations. The Committee also recommended introducing legislation to regulate the sector (See Appendix on page 5 for a summary of the Malegam Committees recommendations). In May 2012, the Micro Finance Institutions (Development and Regulation) Bill was introduced in the Lok Sabha.

Key Features
The Bill establishes the RBI as the regulator for all entities providing micro finance services.

Definitions
The Bill defines MFIs as organisations engaged in providing micro finance services. These organisations could include a society, company or a trust, whose object is to provide micro finance services. The Bill specifically excludes: banking companies, co-operative societies engaged in agriculture or industrial activity and any moneylender (including those registered under state laws). Micro finance services are defined as micro-credit facilities not exceeding Rs 5 lakh; this can be exceeded (up to Rs 10 lakh) for purposes specified by the RBI. MFIs can also collect thrift (small deposits other than current accounts or demand deposits); provide pension and insurance services; and engage in remittance services.
*

Banks/MFIs lend to SHGs as a whole. Individual members can contribute to and borrow from SHGs. In JLGs, member contributions are pooled to form the liability for individual members to borrow from banks or MFIs directly.
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The Micro Finance Institutions (Development & Regulation) Bill, 2012

PRS Legislative Research

The RBI is empowered to issue directions about the classification of a micro finance institution based on the deployment of assets and proportion of clients.

Registering Micro Finance Institutions


The Bill requires any institution providing micro finance services to register with the RBI. The RBI should be certain that the institution will engage in providing micro finance services and have a net-owned fund (aggregate of paid up capital and reserves) of at least Rs 5 lakh. All organisations providing micro finance services will have to register within three months of the Acts commencement. Existing organisations registered with the RBI as an NBFC may continue to engage in micro finance activities subject to the rules and regulations issued by the RBI. Certificates of registration may be cancelled by the RBI if MFIs cease to provide micro finance services or fail to comply with any condition imposed by the RBI. MFIs can appeal to the central government against any rejection or cancellation of certificate.

Functioning of MFIs
Registered MFIs will have to create a reserve fund containing an RBI-specified percentage of net profit or surplus. The fund can only be used for purposes specified by the RBI. NBFCs registered with the RBI are not obliged to create this reserve fund. The RBI can set a maximum limit on the interest rate an MFI can charge for micro credit facilities and the margin an MFI can make. In addition, the RBI can set a ceiling on the amount of loans given to clients and the number of individual clients an MFI has. The RBI can specify the tenure of micro credit facilities and other terms and conditions like periodicity of repayment schedules. MFIs will have to provide a breakdown of interest rates, processing fees or other charges on the loan document. For deposit acceptance, the RBI can provide directions relating to prudential norms like capital adequacy based on risk weights, accounting standards and deployment of funds. Any MFI restructuring, amalgamation or closure will have to be approved by the RBI.

Micro Finance Development Fund


The RBI will create a Micro Finance Development Fund comprising of government grants, sums raised by donors and the public and any interest made out of investments. The Fund shall be used to provide loans, refinance, grant seed capital or any other micro credit facilities to any MFI. The fund can also be used to invest in existing MFIs.

Micro Finance Councils and Committees


District Micro Finance Committees may be formed by the RBI and would be responsible for overseeing micro finance activities at the district level, including monitoring over indebtedness and methods of recovery and submit quarterly reports to the RBI. State Micro Finance Councils may be created by the central government to coordinate activities of the District Committees. The Councils will oversee micro finance activities of the state including methods of recovery and indebtedness. Each State Micro Finance Council would be required to prepare a quarterly report for the central government. At the national level, the Micro Finance Development Council can be constituted by the central government and would have an advisory role regarding the formulation of policies and measures. The council shall also create a credit information bureau for MFIs to store data about clients and loans.

Customer Protection
The Bill requires the RBI to create a grievance redressal mechanism for MFI clients. The scheme should provide for the nature of grievance and procedure for redressal of these grievances and complaints. The RBI shall specify performance standards for methods of operation, methods of recovery and governance. In addition, the RBI will be responsible for promoting customer education of MFIs for greater awareness.

Offences and Penalties


If an offence is committed, both the person responsible and the MFI will be guilty. Contravening provisions of the Bill or default can result in a prison term not exceeding two years or a fine of up to Rs 5 lakh.

Exemptions
The central government, in public interest, can exempt certain classes of MFIs from the provisions of the Bill.
December 28, 2012 -3-

The Micro Finance Institutions (Development & Regulation) Bill, 2012

PRS Legislative Research

PART B: KEY ISSUES AND ANALYSIS


Interest Rates
Clause 24 (2) (c)

The interest rates charged by MFIs for loans are usually much higher than the rates charged by banks. This is because the cost structures of MFIs are higher than that of banks on two counts. Firstly, funding for MFIs is costlier; for example in 2009-10 the average cost of funds for MFIs was 9.3% (of the loan portfolio)4 while for banks the equivalent figure was 5.1%.5 Secondly, MFI loans are smaller; individual loans typically range between Rs 10,000 and Rs 15,000.3 Consequently, the transaction cost as a percentage of the loan is higher for MFIs. In 2009-10, operating costs, which include administrative and personnel costs, was 12.3% of the amount lent for MFIs, while the equivalent figure for banks was 1.8%.4,5 In order to prevent MFIs from charging excessive interest rates, the Bill enables RBI to set a limit on the interest rate and the margin (the difference between interest rates and cost of funds). In addition, RBI can specify the number of loans, size of loans and number of clients. Currently, the RBI has capped the margin at 10% for large NBFC MFIs (and 12% for the rest).6 The provision allowing RBI to set a cap on interest rates is designed to address an issue that arises from limited competition. In micro finance, the price of the product is the lending rate charged by an MFI. Price ceilings are introduced to prevent a monopoly or dominant power in the market from setting too high a price; an issue that comes under the purview of the Competition Commission of India (CCI). However, the Bill does not include any provision for RBI to consult the CCI when setting interest rates.

Depositor Protection
Clauses 25 (2) (m) and 18

The Bill permits MFIs to accept deposits. This would create an additional source of funding for MFIs, and also enable clients to have an option to save. However, depositor clients will bear the risk of default by an MFI, unlike borrower clients. Currently, banks and certain types of NBFCs can accept deposits and both are regulated by the RBI (see Table 1). The Bill empowers the RBI to issue directions to MFIs on prudential norms such as income recognition, accounting standards and capital adequacy.
Table 1: Key current prudential norms Banks Public deposit accepting NBFCs Rs 2 crore Min. 15% 20% of profits 1-5 years

Deposit Insurance
The possibility of a financial institution defaulting and unable to repay deposits poses a significant risk to clients. Deposits in banks are protected, up to Rs 1 lakh, through the Deposit Insurance and Credit Guarantee Corporation. The Bill does not explicitly set out a similar provision for MFIs. Although the Bill requires MFIs to create a reserve fund which could potentially serve as protection for depositors, contributions to this fund are a percentage of profits or surplus. Consequently, any loss-making MFI would not have a fund, leaving depositors without a safety net.

Net owned fund Capital adequacy ratio Transfer to reserve fund Period of deposit
Source: RBI; PRS

Rs 300 crore Min. 9% None No limit

Capital Requirement
Clause 15(1)(c)

While the Bill gives RBI the authority to set prudential norms, it specifically lays out the requirement for a minimum net-owned fund of Rs 5 lakh for MFIs. It is not clear whether RBI will specify a higher net-owned fund requirement for deposit taking MFIs. In comparison, banks require a net owned fund of Rs 300 crore while public-deposit accepting NBFCs require Rs 2 crore.

Borrower Protection
Clauses 25 (2)(i) and 33

One of the major issues arising from the micro finance crisis in Andhra Pradesh was the method of debt-recovery; it was felt to be too aggressive and forceful. According to the Malegam Committee, methods of debt recovery are the responsibility of MFIs and every MFI should establish a proper grievance redressal procedure.3 The Bill provides for RBI to specify guidelines for fair and reasonable methods of recovery, but does not specify what this would entail. RBI has the power to issue directions to MFIs about observing codes of conduct and setting up MFIspecific grievance redressal mechanisms. In addition, it will also issue a code of conduct for field staff, laying out minimum qualifications and training tools.
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The Micro Finance Institutions (Development & Regulation) Bill, 2012

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Currently the RBI has provided an NBFC Fair Practices Code7 which issues directions on fair practices to NBFCs and in particular, NBFC-MFIs. With regard to debt-recovery, the RBI has specified that recovery should be made at a designated central place and recovery at place of residence should only happen when the borrower fails to appear at the central location.

Conflict of Interest
Development Fund
Clause 32

The Bill designates RBI to create a Micro Finance Development Fund. The fund will be managed by the RBI (under directions of the Central Board of Directors) and can be used to provide loans or grants to MFIs and invest in equity or any other form of capital for MFIs. This allows an RBI-managed Fund to be a shareholder of an MFI or act as a creditor to an MFI. This could create a conflict of interest given the role of RBI as a regulator. The Committee on Banking Sector Reforms (Narasimham Committee II) had observed that it was inconsistent with the principles of effective supervision for the regulator to be the owner of a bank.8 Consequently, ownership of the State Bank of India was transferred to the central government with the enactment of the State Bank of India (Amendment) Act, 2007. Given that a precedent has been set to prevent a conflict of interest, it is unclear why an RBI-managed fund is allowed to invest in and lend to MFIs.

Delegation of powers
Clause 42

The central government may, in consultation with RBI, delegate the powers of RBI to NABARD or any other agency. The only exceptions are the powers related to winding up of MFIs and imposition of penalties. As NABARD is also a lender to MFIs, there could be a conflict of interest if it is also given regulatory powers.

Inclusion of Insurance and Pension under Micro Finance


Clause 2 (1) (j)

Pensions and insurance services are included under the definition of micro finance services. Typically, MFIs provide these services acting as agents. Currently, the insurance sector is regulated by the Insurance Regulatory and Development Authority while the pension sector is regulated by Pension Fund Regulatory Development Authority. There is no mention of either regulator in the Bill. The 2007 Bill did include insurance and pension services under the definition of micro finance services. However, unlike the current Bill, the 2007 Bill explicitly stated that insurance and pension services would be regulated by the respective regulatory authorities.

Micro Finance Development Councils and Committees


Clauses 3, 8 and 10

The Bill provides for the appropriate government to create the Micro Finance Development Council/Committee at the central, state and district levels to oversee the sector. The national council would promote the industry by advising the central government on policies, establishing a credit information bureau and the working of the grievance redressal mechanism. In addition, the central government is responsible for examining reports about recovery practices from states. The State Councils and District Committees also oversee micro finance activities in the states including methods of recovery and indebtedness. The Bill uses the word may and not shall for the constitution of these bodies. It is unclear why the establishment of the central and state councils and district committees is not mandatory.

Appendix: Malegam Committee Recommendations


In October 2010, the RBIs Central Board of Directors set up a Sub -Committee, chaired by Y.H. Malegam, to study the issues and concerns in the micro finance sector. In the terms of reference, the sub-committee was asked to review, examine and make recommendations regarding: The definition of microfinance and MFIs Prevalent practices with respect to interest rates, lending and recovery practices Role of associations and bodies of MFIs could play A grievance redressal system The Table on the next page provides a summary of the key observations and recommendations of the Malegam committee.

December 28, 2012

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The Micro Finance Institutions (Development & Regulation) Bill, 2012

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Table 2. Key observations and recommendations of the Malegam Committee Issue Regulatory scope Interest rate Recommendations Separate category to be created for NBFCs operating in the microfinance sector. NBFC-MFIs can only lend to borrowers with a household income of less than Rs 50,000. 24% cap on individual loans; margin cap of 10% on large MFIs (loan portfolio exceeding Rs 100 crore) and 12% for rest. There should only be 3 components in pricing of the loan: (i) processing fee (not exceeding 1% of the gross loan amount), (ii) interest charge and (iii) insurance premium. Maximum loan amount of Rs 25,000. Individual borrowers have to be a member of a JLG; borrower cannot be a member of more than one SHG/JLG. No more than two MFIs should lend to the same borrower. All NBFC-MFIs should have a minimum net worth of Rs 15 crore composed of Tier 1 capital. NBFC MFIs should maintain a capital adequacy ratio of 15%. MFIs should maintain an aggregate provision for loan losses (at least 1% of outstanding loan portfolio). Responsibility of not using coercive methods of recovery lies with the MFIs. Each MFI should establish a grievance redressal procedure. Regulator should monitor that MFIs have a proper Code of Conduct and system of supervision of field staff. All recoveries should be made at a central place. Regulator should publish a client protection code to be be accepted and observed by MFIs. One or more credit information bureaus should be established; all MFIs should join a bureau.

Loans

Prudential norms

Conduct of MFIs

Credit information bureau

Sources: Malegam Committee; PRS.

Notes
1. This Brief was prepared on the basis of the Micro Finance Institutions (Development and Regulation Bill, 2012 introduced in Lok Sabha on May 22, 2012. 2. N. Srinivasan, Microfinance India State of the Sector Report 2011, SAGE Publications, 2012. 3. Report of the Sub-Committee of the Central Board of Directors of Reserve Bank of India to Study Issues and Concerns in the MFI Sector, Reserve Bank of India, (Chairmain: Shri Y. H. Malegam), January, 2011. 4. Study on Interest Rates and Costs of Microfinance institutions, Small Industries Development Bank of India, January 2011. 5. Statistical Tables Relating to Banks in India 2009-10, Reserve Bank of India, March, 2011. 6. Non Banking Financial Company-Micro Finance Institutions (NBFC-MFIs) Directions Modifications, Reserve Bank of India, August 3, 2012. 7. Guidelines on Fair Practices Code for NBFCs, Reserve Bank of India, March 26, 2012. 8. Report on Banking Sector Reforms, Narasimham Committee II, Reserve Bank of India, 1998.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

December 28, 2012

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Bill Summary
The Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010
The Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010 was introduced in the Lok Sabha on August 26, 2010 by the Minister of State for Personnel, Public Grievance and Pensions, Shri Prithviraj Chavan. The Bill seeks to set up a mechanism to receive complaints of corruption or willful misuse of discretion against a public servant and provide safeguards against victimization of the person making the complaint. Any public servant or any other person including a nongovernmental organization may make a public interest disclosure to a Competent Authority (Central or State Vigilance Commission). Each disclosure shall be accompanied by full particulars and supporting documents. The Competent Authority shall not take any action on a disclosure if the identity of the complainant is not included or is found to be false. Disclosure is defined as any complaint made in writing or electronic mail against a public servant on matters related to attempt to or commission of an offence under the Prevention of Corruption Act, 1988; willful misuse of power which leads to demonstrable loss to the government or gain to the public servant; attempt or commission of a criminal offence by a public servant. A public servant is any person who is an employee of the central government or the state government or any company or society owned or controlled by the central or state government. The Bill lays down the procedure of inquiry to be followed by the Competent Authority on receipt of a public interest disclosure. It is mandated to conceal the identity of the complainant unless the complainant has revealed his identity to any other authority. After conducting the inquiry, if the Competent Authority feels that the complaint is frivolous or there is no sufficient ground to proceed, it shall close the matter. If the inquiry substantiates allegation of corruption or misuse of power, it shall recommend certain measures to the public authority (any body falling within the jurisdiction of the Competent Authority). Measures include initiating proceedings against the concerned public servant, taking steps to redress the loss to the government, and recommend criminal proceedings to appropriate authority. The Competent Authority shall not entertain any matter if it has been decided by a Court or Tribunal, if public inquiry has been ordered under the Public Servants (Inquiries) Act, 1850 or the Commissions of Inquiry Act, 1952 or the complaint is on an action that took place five years from the date of the complaint. The Bill exempts certain matters from disclosure if it is likely to affect the sovereignty of India, security of the state, friendly relations with foreign states, public order, decency or morality. Every public authority shall create a machinery to deal with inquiry into disclosures. The machinery shall be supervised by the Competent Authority. The Competent Authority may take the assistance of police authorities to make discreet inquiries or obtain information. The Bill creates certain safeguards against victimization of a complainant. There shall be no initiation of proceedings against such person merely on the grounds that the person has made a disclosure. The Competent Authority may give directions to a concerned public servant or authority to protect a complainant or witness either on an application by the complainant or based on its own information. The Competent Authority shall protect the identity of the complainant and the related documents, unless the Authority decides against it or is required by a court to do so. The Bill lays down penalties for various offences such as not furnishing reports to the Competent Authority, revealing identity of complainant, for false or frivolous disclosure, etc. Any person aggrieved by an order of the Competent Authority relating to imposition of penalty may file an appeal to the High Court within 60 days.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it. Kaushiki Sanyal kaushiki@prsindia.org
PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 New Delhi 110021

September 4, 2010

Legislative Brief
Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005
Highlights of the Bill
Bill introduced in the Rajya Sabha on Dec 5, 2005 Standing Committee Report due by first week of monsoon session, 2006

The Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005 provides for (a) prevention and control of communal violence, (b) speedy investigation and trials, and (c) rehabilitation of victims. The state government can declare an area as communally disturbed under certain conditions. The district magistrate or the competent authority appointed by the state government can take measures such as regulating assembly, directing persons to deposit their arms, searching premises etc. to control communal violence. The Bill provides double the punishment as provided by other existing laws. The state government shall establish special courts to try offences under this law. These courts may direct convicted persons to pay compensation to victims or dependents. Communal Disturbance Relief and Rehabilitation Councils will be formed at the national, state and district levels. The district council shall pay at least 20 percent of total compensation as immediate compensation to victims.

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Key Issues and Analysis


The Bill makes it lawful for the state government to take all measures necessary to control the situation. These could include measures that are currently illegal. Most of the provisions pertaining to prevention and control of communal violence are already covered under existing laws. The draft law may prove ineffective if the executive dithers from taking prompt action to control communal violence. Given the requirement of prior sanction of the state government to take cognizance of an offence by a public servant and the absence of a chain of command responsibility, any prosecution is unlikely. The competent authorities appointed by the state government and the district magistrates have been given the same powers. This could lead to dual authority within an area. The Bill lays down the procedure for payment of immediate compensation but does not discuss when and by whom the remaining compensation will be paid.

The Indian Medical Council (Amendment) Bill, 2005


February 17, 2006

Ruchita Manghnani ruchita@prsindia.org

April 4, 2006

Parliamentary Research Service

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

New Delhi 110021

The Communal Violence Bill, 2005

Parliamentary Research Service

PART A: HIGHLIGHTS OF THE BILL1


Context
India has witnessed several large-scale communal riots in recent years such as those in Gujarat (2002), Mumbai (1992-93), and Delhi (1984). In addition, there are reports of frequent clashes between caste and linguistic groups. The Common Minimum Programme of the UPA government highlighted the need for a comprehensive law to deal with communal violence. The Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005 seeks to empower the government to prevent and control communal violence, provide for speedy investigation and trial of offences and rehabilitate victims of such violence.

Key Features
Prevention and Control of Communal Violence
The Bill defines communal violence as any offence specified in the schedule.* The state government can notify an area as communally disturbed if a scheduled offence is committed against any group, caste or community, which results in death or destruction of property, creates enmity between groups and poses a threat to security. Such notification is valid for a maximum of 30 days, but can be extended. Measures to prevent and control violence shall be enforced by the District Magistrate, and other officers of the state government appointed as competent authorities. The competent authority can direct persons in the area to deposit their arms, ammunition, explosives and corrosive substances (even if they hold a license). When such directions are issued, the local police officer can search any house or premises for such items. The competent authority can regulate assembly and movement of persons, and prohibit acts which could disturb peace, such as carrying of arms, knives etc., usage of loudspeakers and burning of effigies. Offences shall be investigated by an officer who is at least the rank of a sub inspector. Women police officers shall be provided to record information on offences committed against women and children. A review committee constituted by the state government will investigate cases where a charge sheet has not been filed within three months of registering an FIR and may review cases where the trial ends in acquittal. The state government can constitute special investigation teams to investigate offences if these offences were not investigated in a fair and impartial manner. The state government shall establish Special Courts for the trial of scheduled offences. The Bill also provides for the establishment of Additional Special Courts outside the state if the state government feels that the trial within the state is not likely to be fair and impartial, it is in the interest of justice, or it is required for the safety of the accused, witnesses, public prosecutor or the Judge. Judges will be appointed by the state government in concurrence with the Chief Justice of the High Court. The Special Court can conduct proceedings at a protected place, avoid mentioning the identity of the witness in its orders and judgments and issue directions to protect the identity of the witness if it considers it necessary or on the basis of an application by the witness or public prosecutor. The Special Court can order the removal of a person likely to commit a scheduled violence from the communally disturbed area. Any person not in compliance with such orders can be taken into custody. The Supreme Court may transfer cases from one Special Court to another. The punishment provided in the Bill is double that provided under other Acts for the same offence. Any convicted person cannot hold public office for six years from the date of conviction. A public servant is liable to be punished with a fine and/ or imprisonment upto a year if he acts in bad faith such that he causes death or destruction of property or if he fails to exercise his authority to prevent communal violence or maintain essential supplies to the community. The prior sanction of the state government is required to prosecute a public servant. Communal Disturbance Relief and Rehabilitation Councils will be formed at the national, state and district levels. These national and state level councils will make recommendations and issue guidelines on relief, rehabilitation and compensation to victims. The district council will assess compensation to victims, set up relief camps and prepare plans for prevention of communal violence.

Investigation and Punishment of Offences under the Act


Relief and Rehabilitation

* Specific sections under the (a) Indian Penal Code (b) Arms Act, 1959 (c) Explosives Act, 1884 (d) Prevention of Damages to Public Property Act, 1884 (e) Places of Worship (Special Provisions) Act, 1991 (f) Religious Institutions (Prevention of Misuse Act, 1988 have been listed in the schedule of the Bill.

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The Communal Violence Bill, 2005

Parliamentary Research Service

A Communal Disturbance Relief and Rehabilitation Fund will be constituted in every state and a Victims Assistance Fund will be established in each district. Every state government shall notify a scheme to provide immediate compensation to victims or dependants. The Special Court may direct a convicted person to pay compensation to victims or dependants. There can be no discrimination on grounds of sex, caste or community while providing compensation. The central government can draw the attention of a state government to communal violence occurring in the state and direct it to take necessary action within a specified time. If such directions are not followed, the central government can notify any area in the state to be communally disturbed. The central government can deploy armed forces to control communal violence in a state but only on the request of the state government.

Powers of the Central Government

PART B: KEY ISSUES AND ANALYSIS


While the provisions for prevention and control of violence under this Bill just reaffirm provisions of other Acts, the Bill breaks new ground in establishing a framework for compensation and rehabilitation of victims.

Declaration of an area as communally disturbed


The state government may declare an area as communally disturbed if scheduled offences are committed such that three conditions are satisfied: (a) violence is committed against a group, caste or community resulting in death or destruction of property, (b) the violence is committed with the intention of creating ill will and enmity between groups, castes and communities and (c) unless immediate action is taken, there is a threat to the secular fabric, unity or internal security of the country. According to the Bill, all three conditions have to be satisfied before an area may be declared as communally disturbed. Communal crimes may be committed with just one or two of these conditions being met but this draft law cannot be invoked in such cases. (e.g. A serious crime like rape may not result in death or destruction of property but may be committed against a particular caste, group or community to create ill will or enmity.)

Prevention and Control of Communal Violence


The Bill makes it lawful for the state government to take all measures necessary to deal with the situation in a communally disturbed area. These could include measures that are illegal under the present legal system. This provision gives the government a wide range of powers and immunity for its actions without any corresponding accountability. If the executive intends to prevent and control communal violence, the existing laws provide the means to the state machinery to do so. (For e.g. under section 144, the magistrate can issue directions to individuals or to the public to abstain from a certain act if he feels that such order will prevent danger to human life, riots etc. Under Section 129 of the Code of Criminal Procedure, a magistrate or an officer in charge of a police station can use civil forces to disperse an assembly of five or more persons if the assembly is likely to disturb public peace. Under Section 130, the magistrate can also direct the armed forces to disperse the assembly and make necessary arrests.) The Bill does not address the possible situation of the executive dithering from taking steps to control the riots. Law and Order is on the state list of the Constitution of India and the central government cannot intervene on the subject. There may be a case for an independent commission to take cognizance of communal violence and supervise operations to tackle such violence. Article 51 (c), Article 253 and Article 355 of the Constitution2 provide scope for the Parliament to legislate and vest such powers in an independent commission (for example, the National Human Rights Commission has been established by an Act of Parliament).

Command Structure
The state government may appoint competent authorities in a communally disturbed area. The district magistrate and the competent authorities have been provided with identical powers. This could result in a case of dual authority within an area.

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The Communal Violence Bill, 2005

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If the armed forces are deployed, the central or the state government may constitute an authority called the Unified Command to coordinate and monitor the role of the forces. The Bill does not clarify the composition of Unified Command even though such a civilian authority will be issuing directions to the armed forces.

Accountability of Public Servants


If a public servant acts in a mala fide manner and causes harm to any person or property or if he fails to exercise his authority to prevent communal violence or the disruption in maintenance of essential services to a community, he may be punished with imprisonment upto a year or a fine or both. However, the Bill does not bar him from holding public office. The court requires the prior sanction of the state government to take cognizance of an offence committed by a public servant. Also, the Bill fails to assign a chain of command responsibility holding everyone from the local official to senior levels in the government responsible for failing to prevent or control communal violence. The provision providing for punishment of public servants might prove to be ineffective if there is no intent on part of the state government to prevent and control communal violence.

Witness Protection
The Bill has provisions for protecting the identity and address of the witnesses. However, it does not provide for physical protection of witnesses. The Supreme Court and the Law Commission have highlighted the need for both witness identity protection and witness protection programmes.3

Relief and Rehabilitation


Guidelines on assessment of compensation to be paid by the government will be issued by the State Council while the District Councils will assess the actual compensation to be paid. The Bill provides for payment of immediate compensation by the District Council. The amount of immediate compensation will be at least twenty percent of full rate of compensation and will be paid after an inquiry completed within one month from the date of claim. The Bill however does not discuss who will pay the remaining compensation and does not provide a timeline within which it shall be paid. Notes 1. Bill introduced in the Rajya Sabha on Dec 5, 2005. Report of the Standing Committee on Home Affairs (chairperson: Ms.
Sushma Swaraj) is due by the first week of the Monsoon Session, 2006 of the Parliament. 2. Article 51 (c) The State shall endeavour to foster respect for international law and treaty obligations in the dealings of organized peoples with one another. Article 253 Parliament has power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body. Article 355 It shall be the duty of the Union to protect every State against external aggression and internal disturbance and to ensure that the government of every State is carried on in accordance with the provisions of this Constitution. 3. Consultation Paper on Witness Identity and Witness Protection Programmes, Law Commission, Government of India, Aug 2004

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of Parliamentary Research Service (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

April 4, 2006

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Legislative Brief
The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007
The Bill was introduced in the Lok Sabha on March 20, 2007. The Bill has been referred to the Department-related Parliamentary Standing Committee on Social Justice and Empowerment (Chairperson: Smt. Sumitra Mahajan).

Highlights of the Bill


The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 seeks to make it a legal obligation for children and heirs to provide maintenance to senior citizens. It also permits state governments to establish old age homes in every district. Senior citizens who are unable to maintain themselves shall have the right to apply to a maintenance tribunal seeking a monthly allowance from their children or heirs. State governments may set up maintenance tribunals in every sub-division to decide the level of maintenance. Appellate tribunals may be established at the district level. State governments shall set the maximum monthly maintenance allowance. The Bill caps the maximum monthly allowance at Rs 10,000 per month.

Recent Briefs: The Limited Liability Partnership Bill, 2006


May 22, 2007

Punishment for not paying the required monthly allowance shall be Rs 5,000 or up to three months imprisonment or both.

Key Issues and Analysis


It is unclear whether the creation of maintenance tribunals will ensure financial independence for senior citizens, or whether parents will likely take their children to court to obtain a maintenance allowance from them. The definition of senior citizen includes both Indian citizens aged over 60 years, and all parents irrespective of age. Also, the

The Competition (Amendment) Bill, 2006


May 4, 2007

Bill does not address the needs of senior citizens who do not have children or property.
Priya Narayan Parker priya@prsindia.org

June 20, 2007

Relatives are obliged to provide maintenance to childless senior citizens. The Bill defines relative as someone who is in possession of or would inherit a senior citizens property. As wills are changeable, it is unclear how one would determine who would inherit the property after death.

Only parents may appeal against the decision of the maintenance tribunal. Neither childless senior citizens nor children are permitted to appeal.
State governments may establish old age homes and prescribe standards for services provided by them. However, the Bill does not require them to do so.

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
Indias success in increasing life expectancy has led to a larger number of the elderly in the country. The Registrar General of India forecasts the share of older persons (age 60 years and above) in the total population to rise from 6.9% in 2001 to 12.4% in 2026.2 Issues related to the financial and social security of older people will become increasingly important. Indeed, the National Policy on Older Persons states, Some areas of concern in the situations of older persons will also emerge, signs of which are already evident, resulting in pressures and fissures in living arrangements for older persons.3 The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 seeks to make it a legal obligation for children and heirs to provide sufficient maintenance to senior citizens, and proposes to make provisions for state governments to establish old age homes in every district.

Key Features
Care of ElderlyApplication for Maintenance
The Bill places an obligation on children and relatives to maintain a senior citizen (anyone above the age of 60 years) or a parent to the extent that they can live a normal life. This obligation applies to all Indian citizens, including those residing abroad. A senior citizen who is unable to maintain himself based on his own earnings or property shall have the right to apply to a maintenance tribunal for a monthly allowance from their child or relative. If he is incapable of filing the application on his own, he may authorise any other person or registered voluntary association to apply on his behalf. The maintenance tribunal may also, on its own, initiate the process for maintenance. The Bill defines children as sons, daughters, grandsons and granddaughters and relative as any legal heir of a childless senior citizen who is in possession of or would inherit his property upon death. Minors are excluded from both definitions. Parents include biological, adoptive or step parents. In cases in which more than one relative will inherit the property of a senior citizen, each relative will be responsible to pay the maintenance fee in proportion to the property they will inherit. The state government may establish one or more maintenance tribunals per sub-division to decide upon the order for maintenance. The tribunal will be presided over by an officer not below the rank of sub-divisional officer. The tribunal shall have all the powers of a civil court. No civil court shall have jurisdiction in respect of any matter dealing with any provisions of this Bill. If the tribunal is satisfied that the senior citizen is unable to take care of himself and that there is neglect or refusal of maintenance on the part of the children or relative, it may order children or relatives to give a monthly maintenance allowance to the senior citizen. The maximum maintenance allowance shall be prescribed by the state government, and shall not exceed Rs 10,000 per month. Before hearing an application, the tribunal may refer the case to a conciliation officer to reach amicable settlement within one month. If such agreement is reached, the tribunal may pass that order. The tribunal may order children or relative to make a monthly allowance as interim maintenance while the application is pending. The application shall, as far as possible, be disposed of within 90 days. The maintenance allowance shall be payable from either the date of the order or the application, to be deposited within 30 days of the order. A simple interest payment between 5% and 18% on the monthly allowance from the date of the application may also be required. The tribunal may alter the allowance for maintenance on proof of misrepresentation or mistake of fact or a change in the circumstance of the senior citizen or parent receiving the monthly payment. Any maintenance order made by the tribunal shall have the same force as an order passed under Chapter IX of the Code of Criminal Procedure, 1973 (CrPC), which also provides for maintenance of senior citizens. If a senior citizen is entitled for maintenance under both Acts, he can claim maintenance under only one Act. The State Government may establish one appellate tribunal per district to be presided over by an officer not below the rank of District Magistrate. The appellate tribunal shall try to pronounce its order in writing within one month of the appeal.

Maintenance Tribunals

Appellate Tribunals

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The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007

PRS Legislative Research

Offences and Penalties


On failure to comply with the maintenance fee, the tribunal may issue a warrant for collection within three months of the due date. Should the fee remain unpaid, the accused may be imprisoned for up to one month or until payment, whichever is earlier. Punishment for abandoning a senior citizen shall include an imprisonment of up to three months or fine of up to Rs 5,000, or both. The tribunal can declare a transfer of property (as gift or otherwise) from a senior citizen to a transferee as void if the transfer was made under the condition of maintenance, and the transferee neglects the agreement. A registered voluntary organization may take action on behalf of the senior citizen if he or she is unable to enforce these rights. A party before a maintenance or appellate tribunal shall not be represented by a legal practitioner. A senior citizen may choose to be represented by the maintenance officer (a district social welfare officer). The state government may establish and maintain at least one old age home per district with a minimum capacity of 150 senior citizens per home. The state government may also prescribe a scheme for the management of such homes. The scheme shall specify standards and services to be provided including those required for medical care and entertainment of residents of these old age homes. The state government shall ensure that government hospitals and those funded by the government provide beds for all senior citizens as far as possible. It shall ensure separate queues for senior citizens, expand facilities for treatment of diseases and expand research for chronic elderly diseases and aging. Every district hospital shall also earmark facilities for geriatric patients. The state government is responsible for publicizing the provisions, as well as ensuring that government officers undergo periodic sensitizations and awareness training on issues relating to the Bill. The district magistrate shall be responsible for implementing the provisions of the Bill.

Representation in Tribunals

Other Provisions for Elderly Care

PART B: KEY ISSUES AND ANALYSIS


Old Age Security
The purpose of the Bill is to secure financial stability for parents who are unable to maintain themselves. The Constitution through its Directive Principles directs the State, not private citizens, to make effective provision for maintenance of senior citizens. Two Actsthe Code of Criminal Procedure, 1973, and the Hindu Adoption and Maintenance Act, 1956currently mandate the care of parents by their children if they are unable to take care of themselves. In this Bill too, the onus has been placed on children and relatives of senior citizens. Additionally, while the Bill allows state governments to establish old age homes, it does not make it mandatory. Also, this Bill does not address the needs of senior citizens who do not have either children or property. Table 1: Laws Regarding Maintenance and Care of Senior Citizens and Parents
Law Constitution of India, Directive Principles, Article 41 Code of Criminal Procedure (Chapter IX, Section 125(1)(2)) Hindu Adoption and Maintenance Act, 1956 Requirement The State shall, within the limits of its economic capacity and development, make effective provision forold age, sickness and disablement, and in other cases of undeserved want. Requires persons who have sufficient means to take care of his or her parents if they are unable to take care of themselves. Maintenance Allowance Not justiciable

Rs 500/month maximum To be determined by court

Requires Hindu sons and daughters to maintain their elderly parents when parents are unable to maintain themselves Sources: Constitution of India; Respective Acts; PRS.

The state of Himachal Pradesh enacted a similar law in 2001. That law, the Himachal Pradesh Maintenance of Parents and Dependents Act, 2001, requires adequate maintenance for parents and dependents who are unable to take care of themselves.

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The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007

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Table 2: Comparison with the Himachal Pradesh Act


Provision Eligible applicants Himachal Pradesh Maintenance of Parents and Dependants Act, 2001 Applicants must be below poverty line, parents and grandparents wife, minor son, unmarried daughter, and widow if all not able to maintain themselves; not applicable to Muslims. Rs 5,000 per month. To cover basic amenities. If the person liable for payment is a government employee, maintenance may be deducted from his salary. If applicant is unable to make an application, any member of his family, any person in whose care he resides, any other authorised person by him, or maintenance officer may file application. Must be just and equitable', and the respondent should be able to first provide maintenance for himself, his wife and children Tribunal must consider manner in which the applicant spent his savings, and if applicant is justified living separately. The applicant, maintenance officer on behalf of the applicant, respondent, or approved person or organisation or any other affected party may appeal to the district judge from the decision of the tribunal upon any question of law or of mixed law and fact. Sources: Respective Act and Bill. Appeals The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 Applicable to senior citizens and parents of children above 18 years of age; applicable to all Indian citizens irrespective of religion. To be specified by states, maximum limit of Rs 10,000 per month. To maintain normal life. No such provision. If applicant is unable to make an application, any person or organisation authorised by him, or the maintenance tribunal may file application. The maintenance tribunal may make a maintenance order on satisfaction of neglect or refusal or maintenance. No such provision. State government may set up an appellate tribunal in each district. Any parent may file an appeal to the appellate tribunal within 60 days from the date of order. Respondents and childless senior citizens are not granted the same right.

Maximum amount for maintenance Amount of maintenance Enforcement of maintenance order Application on behalf of senior citizen or parent Provisions for maintenance order

Financial Independence
The goal of old age security programmes is to ensure the financial independence and dignity of senior citizens. In addition to this Bill, there are some financial schemes that also attempt to achieve old age security. Two such schemes are the recently announced reverse mortgage concept and the New Pension Scheme.

Some new schemes for old age income security Reverse Mortgages: The 2007 Budget speech announced the introduction of reverse mortgage for senior citizens by The National Housing Bank (NHB).4 The NHB Draft Guidelines state: The scheme involves the senior citizen borrower(s) mortgaging the house property to a lender, who then makes periodic payments to the borrower(s) during the latters lifetime.5 New Pension Scheme: The New Pension Scheme (NPS) seeks to provide old age security for all individuals, including the unorganised sector by creating a mechanism to enable them to save through their working lives. Under NPS every subscriber is to have an individual pension account, portable across job changes.6 The amount (including income on the investments) will be available at the age of 60 years, with at least 40% to be converted into monthly payments for the rest of their lives.

The Bill sets the maximum cap for monthly maintenance allowance for senior citizens at Rs 10,000 per month, which is significantly higher than what is given by both the central and state governments under the National Old Age Pension Scheme (NOAPS). Under NOAPS, central assistance amounts to Rs 200 per month7 and state government pensions range from Rs 75 per month in Andhra Pradesh to Rs 400 per month in West Bengal.8

International Comparison
Some other countries have enacted laws related to the protection and security of the elderly. Sri Lanka and China require children to take care of their elderly parents, and the State to take care of childless senior citizens. Table 3: Laws in Some Countries Regarding Elder Care
Act Sri Lanka: Protection of the Rights of Elders Act, 2000 Purpose/Broad Provisions Establishes National Older Persons Council; requires children to provide care for their parents and makes provisions for parents to obtain maintenance from children; requires state to provide appropriate residential facilities to destitute elderly without children. Creates the Administration on Ageing within the Department of Health, Education and Welfare; authorises grants to States for community planning, services for elderly, and research and training in the field of aging. Places responsibility on families to care for elderly; establishes a state-based old-age insurance system, increases legal protection of elderly with speedy court procedure. Provides strict controls for registered old-age facilities; makes abuse of the elderly a criminal offence; creates social and cultural community-based services for elderly. Mandates children to pay maintenance to dependent parents up to $20 per week.

United States: Older Americans Act of 1965

China: Law of the Peoples Republic of China on Protection of the Rights and Interests of the Elderly, 1996 South Africa: Older Persons Act no 13 of 1996 Canada (Saskatchewan & Manitoba): Parents Maintenance Act, 1978 & 1993 respectively Sources: Respective Acts; PRS.

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The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007

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In India, existing schemes for old age pension include the Employees Provident Fund and the New Pension Scheme, which cover roughly 13% of the working population (10% as government servants and 3% from the formal private sector). In addition, the National Old Age Pension Scheme provides for destitute persons of 65 years and above.9 Table 4 summarises the schemes for providing for old age security and financial independence in some countries. Table 4: Government Schemes for Old Age Pension and Social Security in Some Countries
Country Malaysia Primary State Old Age Scheme Employees Provident Fund Central Provident Fund Law & Year Established Employees Provident Fund Act, 1991 Central Provident Fund Ordinance, 1955 Target Audience Private and nonpensionable public sector employees All working citizens (employers and selfemployed) to save for retirement. Target age to begin withdrawals: 62 years Type Mandatory contribution based on monthly wages (paid jointly by employee and employer) Compulsory comprehensive social security savings plan (monthly contributions by working Singaporeans and employers) that covers retirement, healthcare, home ownership, family protection, and asset enhancement Based on tax tables, number of years of work, contributions, and average indexed monthly earnings % Population it covers 11.4 million members or roughly 50% of population 3.12 million (in Jan- March, 2007) or roughly 70% of population

Singapore

US

Social Security & Medicare

Social Security Act, 1935 & Federal Insurance Contributions Act (FICA), 1939

Citizens over age 65 years, plus disabled. Not intended to be used as full retirement plan, but in addition to pensions, savings, etc Citizens over 65 years of age

163 million people work and pay Social Security taxes & 49 million people receive monthly SS payments 36% of population aged 65 -74 years, and 43% of population aged 75-84

UK

Old Age Pension

Old Age Pensions Act, 1908 & National Insurance Act, 1946

Contributory state pension for all, based on National Insurance payment record, paid to men at 65 years, women at 60 years

People aged 80+ receive noncontributory pension Sources: See endnote 10 for Malaysia, 11 for Singapore, 12 for United States, and 13 for United Kingdom.

Tribunal Procedure
Constitution of Tribunal
The Bill states that state governments may establish one or more maintenance tribunals for each sub-division. It does not make this mandatory.

Right to Legal Representation and Appeal


The Bill specifically states that no party to a tribunal or appellate tribunal can be represented by a legal practitioner. However, a parent (though not a childless senior citizen) may be represented by a maintenance officer designated by the state government. It is not clear why the parties are denied the right to defend their interests with the help of qualified legal practitioners, and whether this is against the principle of natural justice. While the Bill permits states to establish one appellate tribunal per district, the Bill grants only parents the right to appeal. There is no facility for appeal available to childless senior citizens, children or relatives.

Declaring Transfer of Property Void


The Bill states that a tribunal can declare a transfer of property to be void if it was made by way of gift or otherwise with the condition that the transferee would maintain the transferer and has not done so. Under the Gift Tax Act, 1958, a gift is unconditional therefore such a transfer cannot be termed a gift. Alternatively, if the property is given under condition to maintain the transferer, and the transferee does not adhere to these conditions, then it would be breach of contract under The Indian Contracts Act, 1872, making this provision redundant.

Provision for Old Age Homes


The Bill grants state governments permission to establish and maintain old age homes as it may deem necessary, in a phased manner, beginning with at least one in each district. There is no obligation on state governments to establish these homes. The Bill specifies that each old age home should accommodate at least 150 senior citizens. Specifying such details in the Bill reduces the flexibility to cater to differing local conditions and needs.
As of 2005, there were 1,018 Old Age Homes in India. Of the 739 homes for which detailed information is available, 427 homes are free of cost, 153 old age homes are on a pay and stay basis, and 146 homes have both free as well as pay and stay facilities. Kerala has 186 old age homes, the most 8 of any state.

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The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007

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Financial Considerations
The Financial Memorandum states that since the existing government machinery is proposed to be utilised, there would be no additional expenditure. Any expenditure on establishing old age homes would be borne by state governments. The Financial Memorandum does not estimate this expenditure.

Definitions
Senior Citizen
The Bill defines senior citizen as (a) Indian citizens 60 years of age or older and (b) all parents with children above the age of 18 years. For example, the provisions of this Bill would be applicable to even a 40-year-old parent of a 20-year-old person. This definition differs from that in the National Policy on Older People, which sets the age at 60 years or older.

Parent and Child


The Bill defines parent as a biological, adoptive or step mother or father. It defines children as sons, daughters, grandsons and granddaughters. These two definitions do not mirror each other.

Relative
The Bill defines relative as someone who is in possession of or would inherit a senior citizens property after death. As wills are changeable, it is unclear how one would determine who would inherit the property after death, and therefore who would be obliged to maintain the senior citizen.

Normal Life
The Bill states that the obligation of the children or relative to maintain a senior citizen extends to the needs of the senior citizen so that they may lead a normal life. The Bill does not define what consists of a normal life.

Organisation
The Bill clarifies that an organisation that may file an application for maintenance on behalf of a senior citizen means any voluntary organisation registered under the Societies Registration Act, 1860, or any other law for the time being in force. However, the Societies Registration Act does not define voluntary organisation.
Notes 1. This Brief has been developed on the basis of The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 introduced in Lok Sabha on March 20, 2007. The Bill has been referred to the Department-related Parliamentary Standing Committee on Social Justice and Empowerment (Chairperson: Smt. Sumitra Mahajan). 2. 2001 Census, Government of India, see http://www.censusindia.net/Projection_Report.pdf. 3. National Policy on Older Persons, 1999, Ministry of Social Justice and Empowerment, Government of India, see http://socialjustice.nic.in/social/sdcop/npop.pdf. 4. Union Budget Speech 2007-08, see http://indiabudget.nic.in/ub2007-08/bs/speecha.htm para 89. 5. Reverse Mortgage Loan (RML): Draft Operational Guidelines, National Housing Bank, see http://www.nhb.org.in/Whats_new/Reverse_Mortgage_Operations_Guidelines.htm. 6. For more details, see our Legislative Brief on The Pension Fund Regulatory and Development Authority Bill, 2005 (http://www.prsindia.org/docs/bills/1167471772/bill74_2006123074_legislative_brief_pfrda_bill_2005_final_english.pdf). 7. Union Budget Speech 2006-07, see http://indiabudget.nic.in/ub2006-07/bs/speecha.htm para 29. 8. Senior Citizens Guide 2005, Helpage India, see http://www.helpageindia.org/downloads/SeniorGuide.pdf. 9. National Old Age Pension Increased to Rs 200, Press Information Bureau, see http://pib.nic.in/release/release.asp?relid=18839&kwd=. 10. Employees Provident Fund, Government of Malaysia, see http://www.kwsp.gov.my/index.php?lang=en; 11. Central Provident Fund, Government of Singapore, see http://mycpf.cpf.gov.sg/Members/Gen-Info/Sch-Svc/S-and-S.htm. 12. Social Security Administration, Government of United States of America, Understanding the Benefits, see http://www.ssa.gov/pubs/10024.html and Social Security Benefit Amounts and http://www.ssa.gov/OACT/COLA/Benefits.html. 13. At a Glance: Pension Report, The Future of Pensions, see http://news.bbc.co.uk/2/hi/business/4462404.stm.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

June 20, 2007

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Bill Summary
The Piracy Bill, 2012
The Piracy Bill, 2012 was introduced in Lok Sabha on April 24, 2012 by the Minister of External Affairs, Shri S.M. Krishna. According to the statement of objects and reasons, piracy as a crime is not included in the Indian Penal Code (IPC). This has led to problems in prosecution of pirates presently in the custody of Indian police authorities. The Piracy Bill intends to fill this gap and provide clarity in the law. The Bill prescribes that its provisions shall also extend to the Exclusive Economic Zone of India1. The Bill defines piracy as any illegal act of violence or detention for private ends by the crew or passengers of a private ship or aircraft on high seas or at a place outside the jurisdiction of any State. It also prescribes that any act which is held to be piratical under international law shall be included in the above definition. The Bill seeks to punish piracy with imprisonment for life. In cases where piracy leads to death, it may be punished with death. The Bill also lays down punishments for attempts to commit and abet piracy. Such acts shall be punishable with imprisonment up to 14 years and a fine. The Bill provides that if arms/ ammunition are recovered from the possession of the accused, or if there is evidence of threat of violence, the burden of proof for proving innocence shall shift to the accused. The Bill empowers the government to set up designated courts for speedy trial of offences and authorizes the court to prosecute the accused regardless of his/ her nationality. It also provides for extradition.

The Territorial Water, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 defines the Exclusive Economic Zone of India. It is a seazone over which India has sovereign rights for exploration and use of marine resources. It stretches outward from the coastal baseline, up to 200 nautical miles into the sea.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Rohit Kumar rohit@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

May 01, 2012

New Delhi 110021

Bill Summary
The Constitution (One Hundred Seventeenth Amendment) Bill, 2012
The Constitution (One Hundred Seventeenth Amendment) In April 2012, the Supreme Court struck down the UP

Bill, 2012 was introduced in the Rajya Sabha on September 5, 2012 by Mr. V Narayansamy, Minister of State for Personnel, Public Grievances and Pensions.
In 1992, the Supreme Court in the case of Indira Sawhney

v Union of India had held reservations in promotions to be unconstitutional. Subsequently in 1995, the central government had amended the Constitution and inserted Article 16(4A). This provided for reservation in promotions for Scheduled Castes and Scheduled Tribes which in the opinion of the state are not adequately represented in the services.
In 2006, the Supreme Court in the case of M. Nagraj v

Government Seniority Rules which provided for reservations in promotions. The court held that the state government had not undertaken any exercise to identify whether there was backwardness and inadequate representation of Scheduled Castes and Scheduled Tribes in the state government.
In light of the recent judgment of the Supreme Court, the

central government has introduced the present Bill amending the Constitution. The Bill seeks to substitute Article 16(4A) of the Constitution of India.
The Bill provides that all the Scheduled Castes and

Union of India upheld the constitutional validity of the amendment. While upholding the validity of the amendment, the court held that before framing any law on this issue, the state will have to satisfy the test of; (a) backwardness of the particular SC and ST group; (b) inadequate representation of the said group; and (c) efficiency of administration.

Scheduled Tribes notified in the Constitutional shall be deemed to be backward.


Article 335 of the Constitution states that the claims of the

Scheduled Castes and Scheduled Tribes have to be balanced with maintaining efficiency in administration. The Bill states that provision of the amendment shall override the provision of Article 355.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Pallavi Bedi pallavi@prsindia.org


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September 5, 2012

New Delhi 110021

Bill Summary

The Constitution 118th Amendment Bill, 2012


The Constitution 118th Amendment Bill, 2012 was The Bill seeks to insert Article 371J in the Constitution to

introduced in the Lok Sabha on September 7, 2012 by the Minister of Home Affairs, Mr. Sushil Kumar Shinde. The Bill was referred to the Standing Committee on Home Affairs (Chairperson: Mr. M. Venkaiah Naidu), which is scheduled to submit its report by the first week of the Winter Session of the Parliament.
A resolution to make special provisions for the Hyderabad

empower the Governor of Karnataka to take steps to develop the Hyderabad-Karnataka Region. As per the Statements of Objects and Reasons of the Bill, this Region includes the districts of Gulbarga, Bidar, Raichur, Koppal, Yadgir and Bellary.
The President may allow the Governor to take the

Karnataka Region was passed by the Legislative Assembly and Legislative Council of Karnataka in March 2012. The resolution aims to establish an institutional mechanism to develop the region and promote inclusive growth. It aims to reduce inter-region and inter-district disparity in the State of Karnataka. This Bill was introduced in Parliament to give effect to this resolution.

following steps for development of the region: (i) setting up a development board for the Region; (ii) ensure equitable allocation of funds for development of the Region; and (iii) provide for reservation in educational and vocational training institutions, and state government positions in the Region for persons from the Region.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Harsimran Kalra harsimran@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

October 17, 2012

New Delhi 110021

Bill Summary

The Indecent Representation of Women (Prohibition) Amendment Bill, 2012


The Indecent Representation of Women (Prohibition)

Amendment Bill, 2012 was introduced in the Rajya Sabha on December 13, 2012 by the Minister of State (Independent), Women and Child Development, Smt Krishna Tirath. The Bill seeks to amend the Indecent Representation of Women (Prohibition) Act, 1986, which prohibits indecent representation of women through advertisements or publications, writings and paintings (primarily the print media). The Bill seeks to widen the scope of the Act to cover new forms of communication such as the internet, satellite based communication, cable television etc. The Bill prohibits the publication or distribution of any material, which contain indecent representation of women. This provision does not apply to material, which may be published in the interest of science, literature or art or for bona fide religious purpose or for sculptures in ancient monuments or temples. The Bill adds new definitions of indecent representation of women, electronic form and publish. Indecent

representation of women means the depiction of the figure or form of a woman in such a way that it has the effect of being indecent or derogatory or is likely to deprave or affect public morality. Electronic form means any information generated, sent or stored in media, magnetic and optical form (as defined in the Information Technology Act, 2000). Publish includes printing or distributing or broadcasting through audio visual media. It amends definitions of advertisement and distribution to include all types of media (printed and electronic). The Bill authorises any police officer of the rank of Inspector or above to investigate offences committed under this law. The Bill enhances penalties for various offences. For representing women indecently, the penalty for the first offence was increased to imprisonment of three years from two years and a fine between Rs 50,000 and Rs 1 lakh from Rs 2,000. For a subsequent offence, the term of imprisonment shall be between two and seven years and fine between Rs 1 lakh and 5 lakh.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

December 26, 2012

New Delhi 110021

Bill Summary

The National Academic Depository Bill, 2011


The National Academic Depository Bill, 2011 was

introduced in the Lok Sabha on September 5, 2011 by the Minister of Human Resource Development, Shri Kapil Sibal. The Bill was referred to the Standing Committee on Human Resource Development (Chairperson: Shri Oscar Fernandes), which is scheduled to submit the report within three months. The Bill seeks to establish a national database of academic awards in electronic format, which can be verified and authenticated. The central government shall appoint a depository as the National Academic Depository to establish and maintain the national database. The Bill makes it mandatory for every academic institution (college, university, and boards that award Class X and XII certificates) to lodge every academic award with the depository. The depository shall provide training to the staff of the academic institution and recover a reasonable cost of the training. Disputes regarding cost shall be adjudicated by the State Educational Tribunal. On a request made by the depository, an academic institution has to verify within seven days that the award was issued by the institution. Any person may apply to the depository or a registered agent to verify and authenticate any specific award. The depository shall inform the person within three days whether the award could be verified and authenticated. A depository has to meet certain conditions: (a) it has to be registered under the Securities and Exchange Board of India Act, 1992 or is a fully owned subsidiary of such a depository; (b) its memorandum of association specifically mentions being a depository service for academic awards as one of its objectives; and (c) it fulfils other terms and conditions that may be prescribed. The central government shall authorize a depository to begin operations only when it is satisfied that there are (i) adequate systems for storage and retrieval of records from the national database, (ii) safeguards to ensure that its automatic data processing system is secure, (iii) adequate network through which the depository shall maintain continuous electronic communication with academic

institutions and other concerned bodies, and (iv) adequate number of facilitation centres, established by the depository, to provide services. The central government shall review the working of the depository every ten years. If satisfied with the working it shall renew the registration for another 10 years. If not, the registration may be revoked. The central government may also revoke the appointment of a depository on certain grounds such as willful default, breach of terms and conditions, and financial viability. The depository has to provide for registration of academic institutions, access to the national database to registered academic institutions, training to academic institutions to lodge and retrieve academic records, verify and authenticate any academic award in the national database and ensure that databases are designed in such a way to facilitate online interaction with the Central Identities Data Repository to be created under the National Identification Authority of India Act, 2011. The depository also has to fulfil certain requirements such as adequate mechanisms for monitoring and evaluating controls, data recovery mechanisms and safeguards, maintain data backup and ensure a secure online connectivity. These measures shall be inspected annually by a panel of independent experts, appointed by the central government. The depository shall register academic depository agents to assist in providing services. These agents cannot be minors, be of unsound mind, hold any equity share capital or have any other interest in the depository. The Bill lists various offences and penalties. For example, if any person, not authorized to do so, accesses the database, downloads or damages any data, introduces computer viruses, shall pay a fine of upto Rs 1 crore. Such cases shall be adjudicated by the National Educational Tribunal. It also includes certain offences such as hacking, and tampering with computer source documents for which the penalty shall be in accordance to the Information Technology Act, 2000.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

September 15, 2011

New Delhi 110021

Bill Summary

The Constitution (One Hundred and Sixteenth Amendment) Bill, 2011


The Constitution (One Hundred and Sixteenth Amendment) Bill, 2011 was introduced in the Lok Sabha by the Minister of Personnel, Public Grievances and Pensions, Mr. V. Narayanasamy on December 22, 2011. The Bill amends the Constitution by inserting a new Part XIVB (adding Articles 323C and 323D) to the Constitution. It provides an outline for establishing a Lokpal for the Union and Lokayukta for the states. The Bill also amends the Third Schedule (insertion of Part IX) to provide for the form of oath to be taken by the Chairperson and members of Lokpal and the Lokayukta. The Bill provides that that there shall be a Lokpal for the Union and a Lokayukta for the States. Lokpal The Bill vests the Lokpal with the power to (a) hold preliminary enquiry which may result in an investigation; and (b) prosecute offences. This power is in relation to a complaint filed under any prevention of corruption law made by Parliament. The Lokpal shall be an autonomous and independent body headed by a Chairperson. The number of members and the conditions of the service of the Lokpal shall be determined by Parliament. The appointment of the Chairperson and the members of the Lokpal shall be made by the President. The Chairperson and members of the Lokpal shall not be eligible to hold any further government posts (including office under the Government of India, State Government or any other officer as may be determined by Parliament). Lokayukta The Bill also provides that there shall be a Lokayukta for every State. The Bill vests the Lokayukta with the power to (a) hold preliminary enquiry which may result in an investigation; and (b) prosecute offences. This power is in relation to a complaint filed under any prevention of corruption of law made by either the Parliament or the State legislatures as the case may be.

The Lokayukta shall be an autonomous and independent body headed by a Chairperson. The number of Members and the conditions of service of the Lokayukta shall be determined by either Parliament or the State Legislatures as the case may be. The appointment of the Chairperson and the Members of the Lokayukta shall be made by the Governor. The Chairperson and Members of the Lokayukta shall not be eligible to hold any further government posts (including office under the Government of India, State Government or any other officer as may be determined by Parliament or state legislature).

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Pallavi Bedi pallavi@prsindia.org


PRS Legislative Research

December 23, 2011


Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

New Delhi 110021

Bill Summary
The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, 2012

The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, 2012 was introduced in the Lok Sabha on September 6, 2012 by Ms. Kumari Selja, Minister of Housing and Urban Poverty Alleviation. The Bill shall not be applicable to land owned or controlled by the Railways under the Railways Act, 1989. The Bill requires every street vendor to be registered with the Town Vending Committee. The Bill states that the minimum age of a street vendor has to be 14 years. Street Vendors have been defined to include any person engaged in vending of articles, goods, food etc or offering services to the general public in a street lane, side walk, footpath, pavement, public park, or any other public or private area. It includes hawkers, peddlers, and squatters. The Bill provides that no person can undertake any street vending activity without obtaining the required vending certificate. Every registered street vendor shall be issued an identity card. The Bill states that a vending certificate shall be issued to (a) stationary vendors; or (b) mobile vendors; or (any other category of vendor recognised by the appropriate government. The Bill requires every local authority to frame a street vending plan. The plan has to be reframed every five years. The plan shall determine the vending zones as (a) restriction-free vending zones; (b) restricted vending zones; and (c) no-vending zones. The plan should also take into account that the areas available for street vending is reasonable, does not lead to overcrowding and is consistent with natural markets. The Bill defines natural markets as a market where sellers and buyers have traditionally congregated for more than a specified period for the sale and purchase of specific products or services and has been determined as such by the local authority. The appropriate government shall frame a street vending scheme. The scheme shall include amongst others: (a) the manner of applying for registration, (b) the period within

which the decision has to be made and, (c) any other condition to be imposed on the vending certificate. The Bill empowers the local authority to relocate street vendors. The authority may do so, of the street vendors are causing a public nuisance or obstructing the movement of the public. A registered street vendor who has been relocated shall be entitled to new site for vending. The local authority is also empowered to confiscate the goods of the vendors in the manner specified in the street vending scheme. The Bill empowers the Town Vending Committee to cancel or suspend the vending certificate. This may be done if the vendor has breached the conditions of street vending either under the Bill or under the street vending scheme. An appeal can be made to the local authority against the decision of the Town Vending Committee. The appeal shall be with respect to (a) decision regarding the grant of registration; or (b) cancellation/suspension of the vending certificate. The local authority shall constitute a grievance redress committee. The committee shall consist of one sub judge/judicial magistrate / executive magistrate and other persons experienced in street vending. Appeal against the decision of Committee shall lie with the local authority. The Bill defines the duties of the local authority to include amongst others; (a) monitoring and supervising the street vendor scheme; (b) monitoring the effectiveness of the Town Vending Committee; and (c) deciding appeals. A penalty may be imposed on the street vendors if the vendor :(a) does not have a vending certificate; or (b) vends beyond the designated zone or specified timings; or (c) contravenes the vending certificate. A maximum penalty of Rs 2000 may be imposed on the street vendor. The appropriate government may provide for credit, insurance and other welfare schemes for the street vendors.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it. Pallavi Bedi Pallavi@prsindia.org
PRS Legislative Research

September 12, 2012

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

Bill Summary
The Juvenile Justice (Care and Protection of Children) Amendment Bill, 2010
The Juvenile Justice (Care and Protection of Children) Amendment Bill, 2010 was introduced in the Lok Sabha on November 16, 2010 by the Minister of State Shrimati Krishna Tirath for the Ministry of Women and Child Development. The Bill seeks to amend the Juvenile Justice (Care and Protection of Children) Act, 2000. The Bill was referred to the Standing Committee on Human Resource Development on December 1, 2010. The Committee submitted its report on February 25, 2011. The Bill omits a provision from the Act which provided for the separate treatment of juveniles or children suffering from leprosy, sexually transmitted disease, Hepatitis B, Tuberculosis, or children with unsound minds. The Bill also replaces a provision which gave competent authorities in special homes or childrens homes the power to move children suffering from leprosy, unsound mind, or drug addiction to special facilities for such children. Under the Bill, the competent authority can move children who are mentally ill or addicted to alcohol or drugs, only if such condition leads to a behavioural change in the children. He can then order their removal to a psychiatric hospital or psychiatric nursing home. In case the child has been removed to a psychiatric facility, the competent authority can remove the child to an Integrated Rehabilitation Centre on the basis of the discharge certificate issued by the psychiatric facility.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Anirudh Burman anirudh@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org New Delhi 110021

April 18, 2011

Bill Summary
The National Commission for Human Resources for Health
Bill, 2011
The National Commission for Human Resources for Health Bill, 2011 was introduced in the Rajya Sabha on December 22, 2011 by the Minister of Health and Family Welfare Shri Ghulam Nabi Azad. It was referred to the Department related Standing Committee on Health and Family Welfare (Chairperson: Shri Brajesh Pathak), which is scheduled to submit its report within three months. The Bill seeks to establish a mechanism to determine and regulate the standard of health education in the country. It shall repeal the Indian Nursing Council Act, 1947; the Pharmacy Act, 1948; the Dentists Act, 1948 and the Indian Medical Council Act, 1956 on such date as decided by the central government. The Bill seeks to set up the National Commission for Human Resources for Health (NCHRH), National Board for Health Education (NBHE), and the National Evaluation and Assessment Council (NEAC). It also establishes various professional councils at the national and state level and a NCHRH Fund to meet expenses. The NCHRH shall take measures to determine and maintain the minimum standard of human resources in health education. The measures may include (a) conducting studies to assess the needs of human resources in states; (b) conducting elections in the national councils; (c) providing grants to the NBHE, NEAC and councils, and (d) regulating the entry of foreign institutions in consultation with NBHE and any law that may come into force. The permission of NCHRH is required to establish an educational institution. The person has to submit a scheme for the institution to NCHRH which shall refer it to NEAC. NCHRH shall give permission based on NEACs recommendation. In case the person is not informed of a decision within one year of submitting the scheme, it shall be deemed to have been approved. The NEAC shall evaluate every institution seeking permission to operate. The central government may appoint national councils such as Medical Council of India, Paramedical Council of India and Nursing Council of India. Every person who wants to practice medicine, sign a medical certificate or give evidence in a court as an expert has to be enrolled in the national or state registers to be maintained by these councils. The NBHE shall take measures to facilitate academic studies and research in emerging areas of health education. It shall conduct a screening test for medical practitioners before they can enroll in a professional council. An Indian citizen who wants to study medicine abroad has to obtain an eligibility certificate from NBHE, certifying that he fulfils minimum norm of getting admission in an MBBS course in India. He shall not be eligible to appear for the screening test if he has not obtained this certificate. A person may be exempted from the test if he is enrolled as a health practitioner outside India for at least three years. Any person who obtains a degree from a government institution and leaves India for higher education, shall endeavour to serve in India for three years. If he does not do so, his name shall be removed from the register. If he opts to return to India, he can get his name re-entered after fulfilling such conditions as specified by NCHRH. Any person who gets a degree from a private institution then goes abroad for higher education has to either return to India within three years or inform the respective council of his whereabouts. If he does not do so, it shall be construed as professional misconduct. The national and state councils shall have the power to inquire into any complaint of professional misconduct against any person enrolled in the register. If the person is found guilty, the council can impose certain penalties such as a warning, suspension, removal or fine. The decision of the national council can be appealed to the ethics committee under the NCHRH. Professional misconduct includes allowing any person to practice in his name falsely, revealing information about a patient without consent, and violating certain laws. If a person is aggrieved by the professional services rendered by a medical practitioner enrolled in the register, he may file a complaint with the state council within 60 days. The council shall decide the complaint within 120 days of receiving the complaint. The Bill constitutes the National Commission for Human Resources for Health Fund to meet the expenses of the various bodies. The Bill lists penalties for various offences such as running institution without permission, practicing without being enrolled, and enroling without a screening test.
March 6, 2012

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org New Delhi 110021

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Bill Summary
The Constitution (One Hundred and Eleventh Amendment) Bill, 2009

The Constitution (One Hundred and Eleventh Amendment) Bill, 2009 was introduced in the Lok Sabha on November 30, 2009 by the Minister of Agriculture, Consumer Affairs and Public Distribution System, Shri Sharad Pawar. The Bill was referred to the Department related Standing Committee on Agriculture (Chairperson: Shri Basudeb Acharia), which is expected to submit its report within three months. The Bill adds a new Directive Principles of State Policy stating that the State shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies. It further inserts a new part IX B in the Constitution (adding Articles 243ZH through 243ZT), which outlines certain guidelines for running co-operative societies. The state legislature shall specify the number of members of the Board of Directors of a co-operative society. The number is limited to 21. The term of the Board is for a period of five years. On every Board of a co-operative society, one seat shall be reserved for a person who is a Scheduled Caste or Schedule Tribe and two seats shall be reserved for women. The election of members to the Board must be conducted before the expiry of the previous one. The state legislature would outline the guidelines for conducting such elections. The state legislature shall make provisions for co-opting any person having experience in the field of banking, management, finance or specialization in a field related to a particular co-operative society as members of the Board. A maximum of two people can be co-opted to the Board. The co-opted member would not have the right to vote in

any election of the co-operative society or be eligible for election as Chairman, President, Vice-Chairman or VicePresident. The Board of a co-operative society can be superseded in case of (a) persistent default; (b) negligence in the performance of its duties; (c) commission of any act prejudicial to the interest of the co-operative society or its members; (d) there is a stalemate in the constitution or function of the Board; or (e) the general body has failed to conduct the elections as per the required procedure. A Board cannot be superseded or suspended for more than six months. In case a Board has been superseded, the administrator appointed to manage the affairs of such a co-operative society shall arrange for conducting elections within the specified time period. The Board of a co-operative society which does not have any shareholding or guarantee or loan or financial assistance from the government cannot be superseded. The provisions of the Banking Regulations Act, 1949 will be applicable to banking co-operative societies. The state legislature may define the offences and penalties related to co-operative societies. An offence would be committed if (a) a co-operative society files a false return, (b) wilfully disobeys any summon or requisition issued under the state Act, (c) any employer who, without sufficient cause, does not pay to the co-operative society the amount deducted from an employee within a period of 14 days, (d) any officer who wilfully does not hand over custody of books, accounts or cash of a co-operative society to an authorized person, and (e) any person who adopts corrupt practices before, during or after the election of Board members or office bearers.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Kaushiki Sanyal kaushiki@prsindia.org


PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

January 28, 2010

New Delhi 110021

Legislative Brief
The Electronic Delivery of Services Bill, 2011 was introduced in the Lok Sabha by the Minister of Information Technology on December 27, 2011. The Bill was referred to the Standing Committee on Information Technology on January 5, 2012. The Committee submitted its Report on August 30, 2012.

The Electronic Delivery of Services Bill, 2011


Highlights of the Bill
The Bill requires public authorities to deliver all public services electronically within a maximum period of eight years. There are two exceptions to this requirement: (a) services that cannot be delivered electronically; and (b) services that public authorities, in consultation with the Commissions, decide not to deliver electronically. The Bill establishes Central and State Electronic Service Delivery Commissions to monitor compliance of government departments, and hear representations. Public authorities have to establish a mechanism to redress complaints. Complaints may be for: (a) non-delivery of services in an electronic form; or (b) deficiency in the electronic service provided. In the first case, a representation may be made against the mechanisms orders before the Commission. A maximum penalty of Rs 5,000 may be imposed on a defaulting officer by the Central and State Commissions. To provide electronic services, information may be stored electronically. However, the Bill does not provide any safeguards to protect the security of such information. The Bill provides for complaints against: (a) non-availability of electronic services; and (b) deficiency in electronic service. The appellate mechanism is available in the former case and not in the latter case. The grievance redressal mechanism under this Bill may overlap with the grievance redressal mechanism under the Citizens Charter Bill, 2011. Additionally, some states have enacted their own laws on electronic delivery of services. The Bill states that a government order for the appointment of a Commissioner may not be questioned in any manner. This may be in contradiction with the decision of the Supreme Court on the appointment of the Chief Vigilance Commissioner. The Standing Committees recommendations include: (a) the need to simultaneously provide services manually; and (b) that infrastructure costs to be borne by the centre.

Recent Briefs: Nuclear Safety Regulatory Authority Bill, 2011


September 28, 2012

The Citizens Charter Bill, 2011


September 27, 2012

Key Issues and Analysis

Pallavi Bedi pallavi@prsindia.org Harsimran Kalra harsimran@prsindia.org October 5, 2012

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Electronic Delivery of Services Bill, 2011

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
In 2006, the government approved the National e-Governance Plan to provide certain services electronically. These services include electronic processing of passports, tax payments, and registration of companies. In 2008, the Second Administrative Reforms Commission emphasised the need for a legal framework to implement e-governance.2 Additionally, the Information Technology Act, 2000 (IT Act) was amended in 2008 to enable government departments to deliver services electronically.3 It empowers the government to authorise entities to set up, maintain and upgrade computerised facilities. However, the IT Act did not require the government to provide services electronically. The Bill mandates that public authorities provide services electronically and creates a statutory right to such services. At present, some states have notified Rules for electronic service delivery under the IT Act, while Jharkhand has enacted a law.4

Key Features
The Electronic Delivery of Services (EDS) Bill requires public authorities to deliver all public services electronically. There are two exceptions to this: (a) services that cannot be delivered electronically; and (b) services that public authorities, in consultation with the Commissions, decide not to deliver electronically. Public authorities have to provide services electronically within five years. This period may be extended by a maximum of three years in consultation with the Commission.

Public authority
The Bill applies to all public authorities. It defines public authorities to include: (a) constitutional authorities;
(b) statutory authorities; and (c) entities notified by the government. The definition includes bodies and nongovernmental organisations substantially funded, directly or indirectly, by the government.

Notification of services
Every public authority will publish a list of services it will deliver electronically. This list has to be published
within 180 days of enactment of the Bill, and reviewed every year. The list should contain: (a) the date by which the services would be available electronically; and (b) the manner and quality of the delivery of services.

Electronic Service Delivery Commissions


The Bill establishes Central and State Electronic Service Delivery Commissions. The Central (State)
Commission will monitor the compliance of the public authorities under the central (state) government.

Each Commission will comprise a Chief Commissioner and up to two Commissioners. The Commissioners
will be eminent persons with at least 25 years of experience in information technology or governance. They will be appointed on the recommendation of a selection committee, consisting of the Cabinet Secretary (Chief Secretary), a Secretary to the respective government, and an expert in information technology or governance.

Complaint mechanisms
The Bill requires public authorities to set up a grievance redressal mechanism (GRM). Complaints may be
filed with the GRM for: (a) non-availability of electronic services; and (b) deficiency in such services provided. A person aggrieved by the decision of the GRM may make a representation to the Central or State Commission. Representations can only be made for non-availability of an electronic service.

Powers and Functions of the Electronic Service Delivery Commissions


The Commissions functions include: (a) monitoring the publication of services to be delivered electronically;
(b) monitoring the GRM; and (c) simplifying the processes and forms for the electronic delivery of services.

Penalties
The Commissions may impose a maximum penalty of Rs 5,000 on the head of department. Such penalty may
be imposed for violating the provision of the Bill or directions of the Commissions. In case of a wilful and persistent default, the penalty may be increased to Rs 20,000.
October 5, 2012 -2-

The Electronic Delivery of Services Bill, 2011

PRS Legislative Research

PART B: KEY ISSUES AND ANALYSIS


Inadequate safeguards for private information
Clause 5

The Bill requires all government departments to provide services electronically. This may involve the storage and communication of information in an electronic form. While the right to privacy is a fundamental right, India does not have a law on privacy.5 In the absence of such a law, data that is stored electronically may be misused. The IT Act was enacted to facilitate e-commerce by providing legal recognition to electronic transactions. It only penalises wrongful disclosure of information collected under that Act. It does not penalise disclosure of information collected by the government under other laws, such as under this Bill. For instance, presently, on the income tax website, any individuals PAN number can be accessed if the individuals name and date of birth are known.6 Similarly, on the Municipal Corporation of Delhi website, the details of property owned by any person are available.7 The Bill empowers the government to prescribe e-governance standards. However, these standards may not include safeguards for privacy. The Standing Committee that examined the Bill recommended that suitable amendments be made either to this Bill or to the IT Act to address this issue.8 The Standing Committee on the IT (Amendment) Bill, 2006 had also recommended that suitable provisions be made in the IT Act to protect privacy of personal information.9 Further, the Standing Committee on the National Identification Authority Bill, 2010 recommended that a data protection law be enacted before personal information is collected on a large scale and linked across databases. It noted that in the absence of a data protection law, it would be difficult to deal with issues like access and misuse of personal information. It may be noted that, the Planning Commission has set up a group of experts, under the chairmanship of Justice A.P. Shah, to facilitate the preparation of a Privacy Bill.10

Inconsistency in the appellate mechanism


No appellate mechanism in case of deficiency of services
Clause 7 and 26 (1)

Two types of complaints may be made to the GRM: (a) non-availability of the electronic service; and, (b) deficiency of the electronic service. A person aggrieved by the decision of the GRM in the former instance, may make a representation to the Commissions. However, there is no such provision to approach the Commission for deficiencies in the electronic service. For example, in the case of electronic booking of railway tickets, the customer may complain if: (a) the service is not available electronically; or (b) the railways website does not work. However, a representation to the Commission may only be made in the first case and not in the second case.

Lack of clarity of the term representation


The Bill uses the term representation and not the term appeal to describe the recourse against the decision of the GRM. The meaning of the term representation is not clear. In other legislations, such as the Right to Information Act, 2005 and the Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011 (Citizens Charter Bill, 2011), the term appeal is used. The Standing Committee has recommended that the term representation be replaced with the term appeal.8

Bar on judicial review of appointment of Commissioners


Clause 22

The Central and State Commissioners will be appointed on the recommendations of the selection committee. The Bill states that an order by the government appointing a Commissioner may not be questioned in any manner. This may be in contradiction with a recent Supreme Court decision on the appointment of the Central Vigilance Commissioner (CVC).11 The Court held that it can undertake judicial review in case there are procedural irregularities in the appointment of the CVC. In particular, the Court stated that it can review whether the selection committee has considered the relevant information while making the recommendation.

Overlap with other legislation


The Citizens Charter Bill, 2011, which is currently pending in Parliament, creates a statutory right to delivery of services. Under this Bill, a complaint can be filed for a violation of the citizens charter or any law, policy or scheme.12 The Bill also provides for a mechanism to redress grievances. The EDS Bill also establishes a mechanism to redress grievances. Grievances under this Bill may also fall within the ambit of the Citizens Charter Bill. Thus, in some cases there could be an overlap of jurisdiction of the two
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The Electronic Delivery of Services Bill, 2011

PRS Legislative Research

Bills. It is not clear as to which mechanism may be approached in the first instance, and whether seeking relief under one mechanism would bar opportunities under the other. The Standing Committee recommended that there be no overlap of jurisdiction under the two Bills.8 Additionally, some states have enacted their own electronic service delivery laws. For instance, Kerala, Andhra Pradesh, and Chhattisgarh have prescribed Rules related to electronic service delivery under the IT Act, while Jharkhand has enacted a law.4

Standing Committee Recommendations on the Bill


The Electronic Delivery of Services Bill, 2011 was referred to the Standing Committee on Information Technology. The Committee submitted its Report on August 30, 2012. Some of the recommendations of the Committee are provided in the table below. Table 1: Standing Committee Recommendations on the Bill
Issue Need for the Bill Infrastructure Access to services Exclusion of services Payment for services Penalties Standing Committee Recommendations The need for the Bill should be reviewed as e-governance can be facilitated through amendments in the IT Act. The IT Department should co-ordinate with other Ministries to increase computer literacy and power supply. Services should be provided manually as well as electronically. Consultations should be held with the public to review the services that may be excluded from electronic delivery. The Bill should be amended to specify that no fee be levied on poor persons for accessing electronic services. Private persons authorised to provide access to services through kiosks should be penalised if they violate the Bill.

Financial cost Additional resources to develop infrastructure at the state level should be borne by the central government. Source: 37th Report of the Standing Committee on Information Technology, August 30, 2012; PRS.

Notes
1. This brief was prepared on the basis of the EDS Bill, 2011, that was introduced in the Lok Sabha on December 27, 2011. 2. Promoting e-Governance, 11th Report of the Second Administrative Reforms Commission, December 2008. 3. Section 6A, Information Technology Act, 2000. 4. Andhra Pradesh Information Technology (Electronic Service Delivery) Rules, 2011; Kerala Information Technology (Electronic Delivery of Services) Rules, 2010; Madhya Pradesh Information Technology (Regulation of Electronic Delivery of Citizen Services and Appointment of Service Providers) Rules, 2010; Chhattisgarh Citizen Service (Electronic Governance) Rules, 2003; and Jharkhand Electronic Service Delivery Act, 2011. 5. Peoples Union for Civil Liberties vs. Union of India (1997) 1 SCC 301. 6. The Income Tax website: https://incometaxindiaefiling.gov.in/portal/knowpan.do as accessed on October 3, 2012. 7. The Municipal Corporation of Delhi website: http://111.93.49.17/mnsearchpropid.php as accessed on October 3, 2012. 8. 37th Report of the Standing Committee on Information Technology, August 30, 2012. 9. 50th Report of the Standing Committee on Information Technology, September 7, 2007. 10. Group of Experts on Privacy Issue, Press Information Bureau, January 6, 2012 11. Centre for PIL vs. Union of India AIR 2011 SC 1267. 12. Clause 2 (f), Citizens Charter Bill, 2011.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

October 5, 2012

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Legislative Brief
The Civil Liability for Nuclear Damage Bill, 2010
Highlights of the Bill
The Bill was introduced in the Lok Sabha on May 7, 2010 by the Ministry of Science and Technology and Earth Sciences. The Bill was referred to the Standing Committee on Science & Technology, Environment & Forests (Chairman Dr. T. Subbarami Reddy) on May 13, 2010. The Committee is scheduled to submit its report within two months.

The Civil Liability for Nuclear Damage Bill, 2010 fixes liability for nuclear damage and specifies procedures for compensating victims. The Bill fixes no-fault liability on operators and gives them a right of recourse against certain persons. It caps the liability of the operator at Rs 500 crore. For damage exceeding this amount, and up to 300 million SDR, the central government will be liable. All operators (except the central government) need to take insurance or provide financial security to cover their liability. For facilities owned by the government, the entire liability up to 300 million SDR will be borne by the government. The Bill specifies who can claim compensation and the authorities who will assess and award compensation for nuclear damage. Those not complying with the provisions of the Bill can be penalised. The liability cap on the operator (a) may be inadequate to compensate victims in the event of a major nuclear disaster; (b) may block Indias access to an international pool of funds; (c) is low compared to some other countries. The cap on the operators liability is not required if all plants are owned by the government. It is not clear if the government intends to allow private operators to operate nuclear power plants. The extent of environmental damage and consequent economic loss will be notified by the government. This might create a conflict of interest in cases where the government is also the party liable to pay compensation. The right of recourse against the supplier provided in the Bill is not compliant with international agreements India may wish to sign. The time-limit of ten years for claiming compensation may be inadequate for those suffering from nuclear damage. Though the Bill allows operators and suppliers to be liable under other laws, it is not clear which other laws will be applicable. Different interpretations by courts may constrict or unduly expand the scope of such a provision.

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Anirudh Burman anirudh@prsindia.org

July 5, 2010

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Civil Liability for Nuclear Damage Bill, 2010

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
The Civil Liability for Nuclear Damage Bill, 2010 seeks to create a mechanism for compensating victims of nuclear damage arising from a nuclear incident. There are currently 19 nuclear reactors in the country. 2 The Statement of Objects and Reasons of the Bill states that it is being enacted to provide for liability arising out of a nuclear incident, and also due to the necessity of joining an international liability regime. There are three major international agreements which form the international framework of nuclear liability: (a) The Paris Convention of 19603, (b) The Vienna Convention of 19634, and (c) The Convention on Supplementary Compensation for Nuclear Damage of 1997. India is not a party to any of these conventions presently. India has also signed some agreements with other countries (including USA, UK, Russia, France, and Canada) for co-operation in use of nuclear energy for civilian purposes.5 The India-France agreement explicitly states that India has to create a civil nuclear liability regime for compensating damage caused by incidents involving nuclear material and nuclear facilities.6 Though there are more than four hundred nuclear reactors operating worldwide 7, there have been only three major accidents in nuclear reactors in which human lives have been lost8. However, damage caused in a major nuclear accident (such as Chernobyl9) may be huge. The objective of this Bill is to provide quick compensation in the event of a nuclear incident. International agreements have certain common features to address this issue10:
Fixing no-fault liability on operators and requiring them to take insurance or provide financial security. Limiting no-fault liability in time and amount. There is a process for expeditious distribution to victims by fixing which court/ authority has jurisdiction.
*

Key Features
The Bill provides for civil liability for nuclear damage, appointment of authorities to assess claims and damages and related matters. The main features of the Bill are: It defines nuclear incidents and nuclear damage, nuclear fuel, material and nuclear installations. It specifies the persons to be held liable for nuclear damage, and the financial limit of the liability for a nuclear incident. It specifies the procedure for claiming compensation. It specifies penalties for not complying with the provisions of the Bill. Some important provisions of the Bill are explained in Table 1.
Table 1: Main provisions of the Civil liability for Nuclear damage Bill, 2010 Subject
Application of the Bill Nuclear incident

Provision
The Bill applies to (a) the whole of India, (b) in and over the territorial waters of India, including economic zones, (c) ships and aircrafts registered in India, and (d) artificial islands and installations under Indias jurisdiction. An occurrence or series of occurrences having the same origin and causing nuclear damage; or, Arising out of preventive measures taken to contain damage causing grave and imminent threat. The Atomic Energy Regulatory Board has to notify each nuclear incident within 15 days of its occurrence, unless the gravity of threat and risk involved is insignificant.

Nuclear damage

It includes (a) loss of life or personal injury, and (b) loss of, or damage to property caused by a nuclear incident. It also includes damage caused to the environment and economic loss caused due to environmental damage. These losses will be included to the extent notified by the central government.

Operator Cases where the operator is liable

An operator is any person so designated by the central government. He is responsible for damage caused by a nuclear incident. Damage is caused by a nuclear incident in that nuclear installation. Damage is caused by nuclear material coming from, or originating in a nuclear installation, and before its responsibility has been assumed by another operator. Damage is caused by nuclear material sent to that installation, and after the operator has assumed charge of the nuclear material. Exceptions: (a) grave natural disasters, (b) armed conflict, (c) civil war, or (d) terrorism, or (e) damage suffered by person due to his

Liability may be fault liability or no-fault liability. No-fault liability means that liability can be imposed on a person regardless of whether he was at fault. There is no requirement for proving that the person intentionally or negligently committed the action which caused damage. To impose with fault liability, intent or negligence has to be proved. Also, liability may be either civil or criminal. Civil liability results in compensation to victims, whereas criminal liability also includes a fine and imprisonment.
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The Civil Liability for Nuclear Damage Bill, 2010

PRS Legislative Research

own negligence or acts of commission or omission. Liability amounts The maximum amount of liability for each nuclear incident shall be 300 million Special Drawing Rights (SDR is an artificial currency used by the IMF which is defined in terms of a combination of five currencies. SDR300 million equals approximately Rs 2100 crore at current exchange rates). The maximum liability on an operator is Rs 500 crore; this amount can be changed by a central government notification but cannot be reduced below Rs 100 crore. The central government will cover any liability higher than this up to SDR 300 million. In case the plant is owned by the central Government, it will bear the entire liability. The operator cannot begin operating the nuclear installation without getting an insurance policy or financial security to cover his liability. (except where the nuclear installation is owned by the central government) Recourse against party actually causing damage The operator has a right of recourse when: There is an express contract in writing giving the operator such a right. The nuclear incident has occurred due to a deliberate or negligent act of the supplier , or his employee, and The incident has been caused by a deliberate act or omission of a person done with intent to cause damage. Persons who can claim compensation Any person suffering nuclear damage has a right to claim compensation. An application can be made by (a) person sustaining injury, (b) owner of damaged property, (c) legal representative of a deceased person, or (d) an authorised agent. An application is required to be made within three years from the date of the person having knowledge of nuclear damage. This right expires after ten years from the date of notification of the nuclear incident. Persons who will assess compensation The Bill allows the central government to create two authorities by notification: Claims Commissioner: The Commissioner will invite applications for claiming compensation once a nuclear incident has been notified. Nuclear Damage Claims Commission: The Commission can be established by the central government if it thinks that (a) the compensation may exceed Rs 500 crore, or (b) it is necessary that claims will be heard by the Commission and not the Claims Commissioner, or (c) that it is in public interest. Sources: Civil Liability for Nuclear Damage Bill, 2010; PRS.

PART B: KEY ISSUES AND ANALYSIS


We discuss the following issues. Entry of private operators in the nuclear power generation sector. Adequacy of the liability limit and the financial security covering the operators liability. Assessment of compensation due for nuclear damage. Compliance with international agreements (if such compliance is a necessity). The time-period over which compensation can be claimed by victims. Determining the nature and extent of fault liability for those actually responsible for causing damage.
Clauses 6(2) and 7

Entry of private operators


The Bill sets a cap on total liability at 300 million SDR for each nuclear incident, and limits liability of the operator to Rs 500 crore. It also states that for nuclear power plants owned by the central government, the entire liability is that of the government. Currently, all nuclear power plants are owned by the government or government owned entities (such as NPCIL). This proposed law may be necessary to safeguard suppliers from no-fault liability if the government needs to import equipment and fuel. However, in such a situation, limiting the operators liability would not be a requirement, since the government would be liable for the entire amount (either directly or through a fully owned company). A cap on the operators liability is required only if private sector participation is permitted; that would require an amendment to the Atomic Energy Act, 1962. The government has not indicated any such plans. However, under current law, joint ventures between private and government companies are permitted if the government holds the majority stake. The government has not announced any plans for forming such joint venture companies.

Clause 6(1)

Liability of the operator and the central government


The total liability for a nuclear incident is limited
Regardless of the extent of damage, the total liability would be limited to SDR 300 million. This amount may not be sufficient to provide adequate compensation in case of a major incident. More than six lakh people were affected in 9 Chernobyl . More than five lakh people were affected after the chemical leakage in Bhopal in the Union Carbide incident (not a nuclear incident).11 For that incident, the Supreme Court required Union Carbide to provide compensation of 470

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The Civil Liability for Nuclear Damage Bill, 2010

PRS Legislative Research

million dollars and asked the government to meet any further liability.12 Many other countries which are major producers of nuclear energy do not have a cap on the overall liability for nuclear damage (See Table 2). Table 2: Liability of the operator and the government in the top 10 nuclear power generating countries, and India.
Country
United States France Japan Russia Germany South Korea Ukraine Canada United Kingdom Sweden India**

Total generation (MW(e))


1,00,683 63,130 46,823 22,693 20,480 17,705 13,107 12,569 10,137 9,041 4,189

Operators Liability (USD million)


11,900 861 Unlimited No amount specified Unlimited 474 237 71 228 474 109

State Compensation (USD million)


Unlimited 300 Unlimited Unlimited 2,500 Unlimited Unlimited Unlimited 50 198 345

Total Liability* (USD million)


Unlimited 1,161 Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited 278 672 454

Sources: Various Sources13; PRS. * Values have been converted into USD in source document as of December 2009. ** The values for India have been taken from the Bill and calculated at current exchange rates. Clause Clause 6(2)6(1)

The operators liability is lower than in several other countries


The liability of the operator has been capped at Rs 500 crore (USD 109 million at current exchange rates). This means that if the nuclear damage exceeds this amount, the central government is liable to compensate victims subject to a cap of 300 million SDR. Several countries which are major producers of nuclear power have a higher limit on the liability of the operator (See Table 2).

Insurance cover
Operators need to take insurance or provide financial security covering their liability. A higher insurance cover implies higher electricity costs. Our calculations indicate that the electricity cost would go up by about 1 paisa for insurance cover of Rs 500 crore by a 500 MW power plant assuming the international premium rate of 0.3% - 0.5% per annum.

Indias access to international funds may be blocked


The Statement of Objects and Reasons of the Bill lists four international conventions and states the need to enact a legislation that enables joining an appropriate international liability regime. The Convention on Supplementary Compensation of 1997 creates an international pool of funds which can be accessed in case liability due to nuclear damage exceeds SDR 300 million.14 Clause 6(1) of the Bill limits the total liability for a nuclear incident at SDR 300 million. This implies that India will not be able to utilize funds available under the Convention as the additional compensation under that Convention is only available if the liability exceeds this amount.

Payment of compensation
In situations where the damage exceeds the upper limit set by the Bill, there is no criteria to determine the manner in which those suffering damage will be compensated. The Bill does not mention in what priority payment of claims for compensation will be made, or in what proportion if any, claims for compensation will be made. Some other countries such as Brazil and Belgium specify that in such cases the government will have the right to reduce the compensation for each victim on a proportional basis.15
Clause 17

Variance with international agreements


The Bill permits the operator to take recourse against the supplier. This may be an impediment if India wants to join international agreements on civil liability for nuclear damage. One of the reasons for enacting the Bill is to join an international nuclear liability agreement (as stated in the Statement of Objects and Reasons). The three major international agreements on civil liability for nuclear damage provide for a right of recourse against the person actually causing damage only if (a) there is a written contract, or (b) if the damage results from an act or omission of someone with intent to cause damage (Table 3). However, the Bill provides an additional right of recourse against suppliers of nuclear material if damage has been caused by their wilful act or negligence. This clause is additional to the requirements under these international agreements and may prevent India from becoming a party to any

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The Civil Liability for Nuclear Damage Bill, 2010

PRS Legislative Research

of these agreements. Most countries do not provide for a right of recourse against suppliers of nuclear material (Table 3); South Korea and Japan provide for recourse against suppliers, but they are not parties to these conventions13. Table 3: Right of recourse provided in some countries and under the three major international treaties.
International Agreement/ Law of a country
Vienna Convention, 1963 Paris Convention, 1961 Convention on Supplementary Compensation, 1997 Brazil, Canada, France Japan South Korea

Right of Recourse
Only, (a) if it is fully expressed in writing, and (b) If the damage results from an act or omission done with intent to cause damage, against the person who caused the damage. Only, (a) against someone for an act of commission or omission with intent to cause damage, and (b) If there is a clear contract giving such a right. Only, (a) if it is fully expressed in writing, and (b) If the damage results from an act or omission done with intent to cause damage, against the person who caused the damage. There is no provision giving a right against the supplier. Right of recourse exists against third party causing damage. Provides for recourse against supplier in case of willful act or omission.

Sources: Various legislations and international agreements16; PRS. Clause 2(f)

The extent of damage caused will be notified by the government in some cases
The Bill states that for (a) economic loss arising from loss of life or personal injury, (b) costs of measuring damaged environment, and (c) loss of income resulting from damage caused to the environment, the extent of damage will be notified by the central government. The extent of damage suffered in these cases is being determined by the government which is also the party liable to pay compensation in some cases. There may be a conflict of interest if the same party that is liable to pay compensation for damage also has the power to determine the extent of damage caused. Also, there is no independent or judicial authority which will assess the damage suffered, as the jurisdiction of civil courts in these cases is barred. Thus, a core judicial function of determining a fair amount of compensation will be performed by the executive; this could violate the constitutional scheme of separation of powers.

Clause 18

The time limit specified for claiming compensation may be inadequate


Claims for compensation can be filed within ten years of the date of notification of a nuclear incident. This may be inadequate in cases where the effects of radiation are discovered after a substantial period of time. In some cases the effects of damage may also be discovered only in the next generation of those exposed to nuclear radiation. Some countries provide for a period greater than ten years for claiming compensation (Table 4). Table 4: Time limits for claiming compensation in some countries Country
Germany South Korea Netherlands

Time-limit
More than 10years; claims brought before 10 years will have priority. For loss of life and injury - within 30 years. For damage to persons - within 30 years.

Romania For loss of life and injury - within 30 years. Sources: Legislations of various countries17; PRS.

Clauses 5, 46

Liability under other laws is not clearly defined


The Bill explicitly states that (a) compensation to be paid by an operator under this Bill shall not reduce his liability under any other law, and (b) this Bill will not override any other law in force in India that the operator can be held liable under. However, the Bill does not clearly define what type of laws will be applicable. Differing interpretation by courts may constrict or unduly expand the scope of these provisions. Some laws under which those involved in nuclear power generation may be liable for nuclear damage are mentioned in Table 5 below: Table 5: Types of liability under some relevant legislations in India
Law
Environment Protection Act, 1986 Water Act, 1974 and Air Act, 1981 Indian Penal Code, 1860 General principle of liability in tort law

Types of Penalties
Imprisonment for up to five years, and fines. Imprisonment for up to six years, and fines. Imprisonment and fines for offences such as criminal negligence, public nuisance, and culpable homicide. Compensation to the extent of damage caused. Exemplary damages can also be awarded.

Sources: Environment Protection Act, 1986; Water Act, 1974; Air Act, 1981; Indian Penal Code, 1860; PRS.
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The Civil Liability for Nuclear Damage Bill, 2010

PRS Legislative Research

Clause 36

Time-limit for central government to comply with awards for compensation


The Bill states that the insurer (to the extent of his liability) and the operator must deposit the amount to be distributed as compensation within the time limit specified in the award made by the Claims Commissioner. It does not state whether the Commissioner or the Commission can ask the Central Government to do so within a time-limit as well. This would be a factor where the damage exceeds Rs 500 crore and the central government is liable to pay the remaining amount.

Clause 36

Inconsistency on insurance cover required


Operators of nuclear installations (except those owned by the central government) are required to take out an insurance policy or other financial security covering the amount of their liability (Rs 500 crore) before they can operate nuclear installations. However, clause 36(a) of the Bill requires insurers to deposit the amount they have insured the operator for before the Claims Commissioner or the Commission if an award giving compensation is made. Clause 36 (b) then requires operators to deposit the remaining amount by which such award exceed s the amount deposited by the insurers. It is not clear as to how there can be any amount remaining if the entire liability of the operator needs to be insured.
Notes 1. This Brief has been written on the basis of the Civil Liability for Nuclear Damage Bill, 2010, which was introduced in the Lok Sabha on May 7, 2010. The Bill was referred to the Standing Committee on Science & Technology, Environment & Forests (Chairman Dr. T. Subbarami Reddy) on May 13, 2010. 2. NPCIL Plants under operation, http://www.npcil.nic.in/main/AllProjectOperationDisplay.aspx 3. The 1960 Paris Convention on Third Party Liability in the field of Nuclear Energy. 4. The 1963 Vienna Convention on Civil Liability for Nuclear Damages. 5. India-United States: Agreement for cooperation between India and the United States of America concerning peaceful uses of nuclear energy; India-United Kingdom: Joint Declaration by India and the United Kingdom on Civil Nuclear Cooperation; India-France: Cooperation agreement between the Government of India and the government of the French republic on the development of peaceful uses of nuclear energy; India-Russia: India and Russia sign civil nuclear agreement (Original text not available). 6. Article 8 of the India-France agreement on the development of peaceful uses of nuclear energy. 7. World Nuclear Power Reactors & Uranium Requirements, http://www.world-nuclear.org/info/reactors.html. 8. Appendix 2: Serious nuclear reactor accidents, Safety of Nuclear Power Reactors, http://www.world-nuclear.org/info/inf06app.html 9. Backgrounder on Chernobyl Accident, http://www.nrc.gov/reading-rm/doc-collections/fact-sheets/chernobyl-bg.html 10. Chapter on Nuclear Liability and Coverage, Handbook on Nuclear Law, International Atomic Energy Agency, 2003. 11. Bhopal Gas Tragedy Relief and Rehabilitation, http://www.mp.gov.in/bgtrrdmp/facts.htm. 12. Union Carbide Corporation v. Union of India (1991)4SCC584, (Decided on October 3, 1991). 13. Nuclear Operator Liability Amounts & Financial Security Limits, AEN-Nuclear Energy Agency, December 2009; International Atomic Energy Agency Power reactor Information System; French Act on Transparency and Security in the Nuclear Field, 2006. 14. The Convention on Supplementary Compensation is not yet in force. A minimum of five countries with the capacity to generate 4,00,000 units of nuclear power will have to sign for the agreement to come into force. The Convention would create an international pool of funds where every member would contribute according to their generating capacity. 15. Civil Liability for Nuclear Damage and Criminal Responsibility for Acts Relating to Nuclear Activities, 1977; Bill on Third Party Liability in the Field of Nuclear Energy, 1981 16. The Paris Convention; The Vienna Convention; The Convention on Supplementary Compensation, 1997; Brazil - Civil Liability for Nuclear Damage and Criminal Responsibility for Acts Relating to Nuclear Activities, 1977; Canada - Nuclear Liability Act, 1970; France - Act on Third Party Liability in the Field of Nuclear Energy, 1968, amended in 1990; Japan - Law on compensation for nuclear Damage, 1961; South Korea - Act on compensation for nuclear damage, 1969. 17. Germany - Act on the Peaceful Utilisation of Atomic Energy and the Protection Against its Hazards, 2002; South Korea - Act on compensation for nuclear damage, 1969; Romania - Law on Civil Liability for Nuclear Damage, 2001; Netherlands - Nuclear Third Party Liability Act of 1979 (as amended in 1991).
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for noncommercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

July 05, 2010

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Legislative Brief
The Criminal Law (Amendment) Bill, 2012 and Ordinance, 2013
The Bill was introduced in the Lok Sabha on December 4, 2012 by the Minister of Home Affairs, Mr Sushil Kumar Shinde. It was referred to the Department related Standing Committee on Home Affairs (Chairperson: Mr. Venkaiah Naidu), which submitted its report on March 1, 2013. On February 3, 2013 the government notified the Criminal Law (Amendment) Ordinance to amend the IPC, CrPC and the Evidence Act.

Highlights of the Bill


The Bill and the Ordinance amend the Indian Penal Code, the Code of Criminal Procedure, and the Evidence Act. The amendments proposed seek to replace the offence of rape with sexual assault which has a wider definition. The Bill and the Ordinance protect the victim by penalising public servants who fail to record FIRs relating to sexual offences. They also require the victims to be provided with legal and medical assistance. The Bill specifies a separate offence for acid attack. The Ordinance provides for other new offences as well, such as stalking, voyeurism, assault to disrobe a woman and sexual harassment. The Ordinance prescribes higher punishments for sexual assault resulting in death or persistent vegetative state, gang sexual assault and repeat offenders. The Bill and the Ordinance increase the punishment for sexual assault upon a judicially separated wife. The Ordinance requires the court to be prima facie satisfied of the offence before it takes cognizance. The Bill and the Ordinance increase the consent age from 16 to 18 years.

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Under the Ordinance, penalties for certain offences are inconsistent. For instance, minimum punishment for gang assault by private persons is 20 years, and for gang assault by a police officer is 10 years. The Ordinance penalises certain acts which are also punishable under special laws such as SC/ST (Prevention of Atrocities) Act, 1989. Punishments under the Ordinance are higher than under these laws. The Ordinance specifies the same punishment for penetrative and nonpenetrative sexual assault. It does not provide a gradation of penalties on the basis of the gravity of the offence. The Bill and the Ordinance exempts un-consented penetration or touching of private parts for medical purposes from punishment. Age of consent has been increased from 16 to 18 years. There is a divergent view among various commissions on the age of consent. Marital sexual assault upon a woman is not an offence. This is at variance with the recommendation of certain commissions.

Harsimran Kalra harsimran@prsindia.org

March 4, 2013

PRS Legislative Research Institute for Policy Research Studies 3rd Floor, Gandharva Mahavidyalaya 212, Deen Dayal Upadhyaya Marg New Delhi 110002 Tel: (011) 43434035-36 www.prsindia.org

The Criminal Law (Amendment) Bill, 2012 and Ordinance, 2013

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL AND ORDINANCE


Context
Sexual offences are penalised under various laws including the Indian Penal Code, 1860 (IPC), the Immoral Trafficking (Prevention) Act, 1956, the Protection of Children from Sexual Offences Act, 2012 (PCSO Act) and the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989. On December 4, 2012 the Criminal Law (Amendment) Bill, 2012 was introduced in Parliament to amend criminal laws on the recommendations of the National Commission for Women and the Law Commissions 176th Report.1 The Bill defines rape as a gender neutral offence, specifies punishment for acid attacks and failure of a public servant to perform his duties. The Bill was referred to the Standing Committee on Home Affairs, which submitted its report on March 1, 2013. Following protests against the Delhi gang rape case dated December 16, 2012, the government constituted a committee to review the law on crimes against women. The three member committee, chaired by Justice J.S. Verma, submitted its report on January 23, 2012.2 Subsequently, on February 3, 2013 the Criminal Law Amendment Ordinance, 2013 that gave effect to some of the provisions of the Bill, came into force. In this Brief, we discuss both the Criminal Laws (Amendment) Bill and the Ordinance. The major changes in the definition of offences and penalties are summarised in Table 1 on page 3.

Key Features
The Bill and the Ordinance amend the IPC, the Code of Criminal Procedures, 1973 and the Evidence Act, 1872. They amend the definition of existing sexual offences and their penalties. They also amend the procedure to be followed in investigation and trial of sexual offences.

Procedural amendments
The Ordinance requires certain steps to be taken when the statement of a victimised woman or a differentlyabled person is being recorded in sexual offence cases. These are: (a) that the statements should be recorded at a place of the victims choice; and (b) that the victim should be provided with assistance from lawyers, health care workers or womens organisations. Furthermore, statements of physically or mentally disabled victims would have to be video-graphed and the victims have to be provided with special educators. The Bill also includes these provisions. However, it does not make special provisions for disabled persons. Under both, the Bill and the Ordinance, men below 18 years and above 65 years of age, and women cannot be required to attend as witnesses at any place other than the persons residence. Prior to the Ordinance, apart from women, this provision only applied to men below 15 years of age. Under both, the Bill and the Ordinance, the Court may take steps to ensure that victims of sexual offences, who are minors, should not be confronted by the accused at the time of taking the victims evidence.

Evidence on past sexual experience


The Bill and the Ordinance provide that the persons previous sexual experience would not be relevant while determining whether there was consent with respect to offences related to sexual assault, sexual harassment and assault to outrage the modesty of a woman.

Sexual offences
The Bill and the Ordinance substitute the offence of rape with sexual assault which is a gender neutral offence. Under the Ordinance, sexual assault constitutes un-consented: (a) penetration of the vagina, urethra, anus or the mouth; and (b) touching of private parts (vagina, anus, penis and breasts). However, under the Bill, it does not include un-consented touching. The Ordinance also defines and penalises certain other acts, such as voyeurism, stalking, disrobing a woman and sexual harassment, which were punishable under the IPC under the broader offence of assaults upon the modesty of a woman. The Ordinance specifies punishment for rape resulting in death or persistent vegetative state, and higher punishment for repeat offenders. These offences may be awarded the death sentence. The Bill does not provide for these offences.

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Table 1: Comparison between provisions of the IPC, Bill and the Ordinance
Issue Disobedience of law by a public servant Meaning of sexual assault (SA) or rape Exception to SA or rape Indian Penal Code, 1860 No specific provision. Un-consented penetration of the vagina by the penis. Criminal Law (Amendment) Bill, 2012 Knowingly disobeying laws relating to investigation is punishable with imprisonment for one year and/or fine. Un-consented penetration of the mouth, anus, urethra or vagina with the penis or other object; un-consented oral sex; the offence is gender neutral. Same as the IPC. The age of consent for the wife is increased to 16 years. Un-consented acts for medical or hygienic purpose. 18 years. Bars use of previous conduct or character of the victim to prove consent. Not an offence against a wife over 16 years. 7 years to life imprisonment and fine. 10 years to life imprisonment and fine. Punishable with 2 to 7 years imprisonment. Same as under the IPC. Criminal Law (Amendment) Ordinance 2013 Also penalises failure to record information in sexual offence cases of sexual assault and stalking. Same as the provisions of the Bill. Also includes un-consented touching of private parts. Same as the provisions of the Bill.

Sexual act between a man and his wife if: (a) she is over 15 years old; and (b) the wife is not judicially separated from the man. 16 years. No bar on evidence of immoral character of a victim to prove consent in a rape case. Is not an offence if the wife is over 15 years of age. 7 years to life imprisonment and fine. 10 years to life imprisonment and fine. Maximum 2 years imprisonment. No specific provision. Public servant includes armed personnel. Punishment: 10 years to life imprisonment and fine. No specific provision. Rape and murder dealt with as two separate offences. Outraging a womans modesty. Punishment: imprisonment for maximum 2 years and fine.

Age of consent Relevance of character of victim to prove consent Marital SA/ rape Punishment for SA/ rape Punishment for gang rape SA/Rape upon judicially separated wife SA/ Rape by armed personnel SA resulting in death or vegetative state Touching

18 years. Same as the provisions of the Bill. Same as the provisions of the Bill. Same as the provisions of the Bill. 10 or 20 years to life imprisonment. Punishable with 2 to 7 years imprisonment. Courts to take cognizance if there is prima facie evidence of offence. Specific offence. SA by armed personnel within the area they are deployed in. Penalty remains same. Requirement for sanction not removed. Specific offence. Punishment 20 years to life imprisonment or death. Outraging a womans modesty:1 to 5 years imprisonment and fine. Physical contact involving unwelcome and explicit sexual overtures: up to 5 years imprisonment and or fine. Touching of private parts: 7 years to life imprisonment. Demand/ request for sexual favours: up to 5 years imprisonment. Verbally outraging modesty: up to 3 years imprisonment. Sexually coloured remarks, forcible show of pornography: up to 1 year Specific offence. Life imprisonment or death, except SA by a man on his judicially separated wife. Specific offence. Punishable with 3 to 7 years imprisonment. Specific offence. Punishable with 1 to 3 years imprisonment. Specific offence. Punishable with 1 to 3 years imprisonment. Same as provisions of the Bill. Also penalises recruitment, transfer, transport, harbouring a person for the purpose of prostitution, forced labour, organ removal by use of threats or inducement. Punishment: 7 to 10 years imprisonment.
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Same as under the IPC. No specific provision.

Verbal SA

Use of words or gestures to insult a womans modesty. Punishment: 1 years imprisonment and/or fine. No specific provision for this offence. Outraging a womans modesty. Punishment: imprisonment for maximum 2 years and fine. No specific provision for this offence. No specific provision for this offence. No specific provision. Covered under grievous hurt. Punishment: up to 7 years imprisonment. Covered under slavery, abduction and kidnapping for purposes of prostitution. Also provided for under the Immoral Trafficking Prevention Act, 1956.

No specific provision.

Punishment repeat SA offenders Assault to disrobe a woman Voyeurism Stalking Acid attack Trafficking

Same as under the IPC. No specific provision. Same as under the IPC. Same as under the IPC. Specific offence. Punishment: 7 to 10 years imprisonment and up to10 lakh fine as compensation. Same as under the IPC.

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PART B: KEY ISSUES AND ANALYSIS


Inconsistencies within the Ordinance
Under the Ordinance, certain acts may constitute separate offences under different sections of IPC and may bear different penalties. This issue did not arise under the Bill as it did not provide for the offences detailed below. Table 2: Comparison of provisions relating to similar offences Offence
Gang sexual assault by a private person Gang sexual assault by a public servant Touching by use of criminal force to outrage the modesty of a woman Unwelcome physical contact as sexual harassment Verbally outraging a womans modesty Making sexually coloured remarks Demanding sexual favour

Ordinance
Sec. 376D Explanation 2, Sec. 376(2) Sec. 354 Sec. 354A Sec. 509 Sec. 354A Sec. 354A

Punishment
20 years to life imprisonment and compensation. 10 years to life imprisonment and fine. 1 to 5 years imprisonment and fine. Up to 5 years imprisonment and/or fine. Up to 3 years imprisonment and fine. Up to 1 year imprisonment and/or fine. Up to 5 years imprisonment and/or fine.

Sources: Criminal Law (Amendment) Ordinance, 2013; PRS.

Overlap and inconsistencies of the Ordinance with other laws


The IPC is a general law. Actions penalised under the IPC may also be punishable under special laws. Special laws such as SC/ST Prevention of Atrocities Act and the PCSO Act seek to protect certain class of persons on account of their vulnerable position in society. The punishment for offences under the Ordinance is higher than under these special laws. Furthermore, some offences under the Ordinance only protect women, whereas, under the special laws, they protect both men and women. The following table depicts the variance in these provisions. Table 3: Comparison of offences and punishments under the Ordinance and other laws
Offence against minors Age of consent Sexual assault excluding touching Touching of private parts Touching by a public servant Gang assault of touching Forcing a child to strip or parade naked in public PCSO Act, 2012 18 years. No reduction within marriage. 7 years to life imprisonment. 3 to 5 years imprisonment. 5 to 7 years imprisonment. 5 to 7 years imprisonment. Protects both boys and girls. Punishment: 5 to 7 years imprisonment. Up to 3 years for making a child exhibit any part of his body with a sexual intent. Information Technology Act, 2000 Protects both men and women. Punishment: up to 3 years and/or fine up to Rs 2 lakh. SC/ ST Prevention of Atrocities Act, 1989 Protects both men and women. Offence need not take place at public place. Punishment: 6 months to 5 years. Ordinance, 2013 18 years. In marriage 16 years for girls. 10 years to life imprisonment. 10 years to life imprisonment. 10 years to life imprisonment. 20 years to life imprisonment. Protects women. Punishment: 3 to 7 years.

Offence Capturing the image of private parts

Ordinance, 2013 Only protects women. Punishment: 1 to 3 years imprisonment and fine. Second offence with 3 to 7 years . Ordinance, 2013 Only protects women. Punishable when committed at public place. Punishment: 3 to 7 years.

Offence Disrobing

Sources: Protection of Children from Sexual Offences Act, 2012; Information Technology Act, 2000, Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989 and the Criminal Law (Amendment) Ordinance, 2013.

Gravity of offence vs. gradation of punishment


Ordinance, New Section 375(e) and 376 (1)

Under the Bill, sexual assault only included penetrative sexual assault: by objects or body parts. However, under the Ordinance sexual assault includes a variety of un-consented sexual conduct, ranging from touching of private parts to penetrative sexual assault. The punishment for all forms of sexual assault under the Ordinance is the same: seven years to life imprisonment. It does not provide a gradation in penalties on the basis of the gravity of the offence. The Ordinance is at variance with the PCSO Act that penalises touching a minors private parts with imprisonment for three to five years3 and penetrative assaults with imprisonment for seven years to life imprisonment. 4 As per

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the Verma Committee Report, the punishment for penetrative sexual assault should seven years to life imprisonment, and for non-penetrative assaults should be up to five years. In various countries penetrative and non-penetrative assaults carry different penalties. For instance, in UK, France, Germany non-penetrative assaults carry a lower punishment than penetrative assaults.5 In Canada, where sexual assault includes both penetrative and non-penetrative acts, the term of imprisonment extends from one to ten years based on the gravity of the offence.6

Meaning of sexual assault


Bill, Clause 5; Ordinance Exemption New Section 375 Bill and Clause 5; Ordinance New Section 376(2)(e)

Exemption for medical or hygienic purposes


Under the Ordinance, penetration or touching by the penis, other body parts or objects for proper medical or hygienic purposes, even if without the victims consent, is not punishable. It is unclear under what circumstances penile penetration may serve a hygienic or medical purpose.

Assault on a person in a hospital


The Bill and the Ordinance penalise different categories of sexual assault with different penalties dependent on the nature of the relationship between the victim and the perpetrator. The term of imprisonment for sexual assault is seven years to life imprisonment; and for custodial sexual assault is from 10 years to life imprisonment. Sexual assault by a member of the hospital management or staff upon a person in the hospital carries the same penalty as a custodial assault. The provision does not distinguish the relationship between a hospital staff with a patient, and any other person in the premises of the hospital.

Age of consent
Bill and Clause 5; Ordinance New Section 375

The Ordinance and the Bill provide an age of consent of 18 years. Previously, the IPC provided an age of consent of 16 years. This new provision is in conformity with the PCSO Act, 2012.7 However, various committees have differed on their recommendations on the age of consent. These are indicated in the table below. Table 4: Age of consent as per different commissions
Commissions LCR 1971 LCR 84th, 1980 LCR 156th, 1997 LCR 172nd, 2000 NCW, 2006 Verma, 2013 42nd, Age of consent 16 18 18 16 18 16 Reasons/ remarks Misinformation about victims age should be a defence when the victim is between 12 -16 years. As marriage of a girl below 18 is prohibited, sexual intercourse should also be prohibited. As age for kidnapping was increased from 16 - 18 years. Consented activity is exempt if victim is 16-18 years old and accused 5 years older than victim. Consented sexual activity with persons above 16 years should not be penalised.

Sources: Law Commission Reports; NCWs draft Indian Penal Code Bill, 2006; Report of the Verma Committee to Amend Criminal Laws, 2013.

Some countries have a different age of consent as well as a defence of low age gap between consensual participants. Provisions of five such countries are depicted in Table 5 below.
Table 5: Comparison of age of consent in different countries and the defence of low age gap Country Canada UK USA Finland Australia Age of Consent 16 16 16-18 16 16 Exemption in case of low age difference when acts are consensual If the accused is not more than 2 years older than a complainant of 12 to 14 years; If the accused is not more than 5 years older than a complainant of 14 to 16 years. If the victim is 13 to 16 years old and the accused is less than 18, and the accused is mistaken about the age of the victim, there is a defence. 37 states provide an age of consent of 16 years; 6 states have an age of consent of 17 years; 8 provide an age of consent of 18 years. Age gap exemption ranges from 2 to 5 years. If there is no great age difference between complainant and the accused. In four states consensual sexual intercourse is not punishable if both parties are below the consent age.

Sources: Canadian Criminal Code, 1985; Sexual Offences Act, 2003; Criminal Code of Finland, 1996; Statutory Rape, ASPE, Department of Health and Human Services, United States of America, 2004; Australian State Laws.

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Marital sexual assault


Bill and Clause 5; Ordinance New Section 375, Exception

The Bill and the Ordinance penalise un-consented sexual activity against a man or a woman. The same acts would not be punishable if a man engages in un-consented activity with his wife when she is over 16 years of age. A similar exemption also existed under the IPC. This raises two issues. Various Commissions have taken different views on the issue of whether marital rape should be an offence. Table 6 indicates the opinion of these Commissions. Table 6: Arguments on whether marital rape should be an offence
Issues Imprisonment for rape Marital rape as an offence Reasons LCR,1980 Max. 14 years. No. No reason given. LCR, 2000 7 years to life imprisonment. Not an offence unless wife is 18. Excessive intervention in marital relationship. 2 to 7 years. Lower punishment as bond of marriage exists. NCW draft Bill 7 to 10 years. Yes. Punishment: 7 to10 years. No reason given. Verma Committee 7 years to life imprisonment. Yes. Punishment: 7 to10 years. Relationship should not determine consent. Treat like rape. Ordinance 7 years to life imprisonment. Not an offence unless wife is 16. -

Punishment for rape of a judicially separated wife

Max. 14 years. Includes wife living separately.

Treat like rape.

2 to 7 years. For cognizance satisfy prima facie case.

Sources: 84th Law Commission Report, 1980; 172nd Law Commission Report, 2000; draft Bill of the National Commission for Women, 2006; Report of the Committee on Amendments to Criminal Law, 2013; Criminal Law (Amendment) Ordinance, 2013

Marital rape is a crime in a number of countries, such as UK, Turkey, Canada, USA. 8 In 1993, the United Nations General Assembly had adopted a Declaration of Elimination of Vio lence against Women which specifically included marital rape as a crime against women. 9 Before the Ordinance, rape could be committed by a man on a woman. The Ordinance changes this to an offence of sexual assault that is gender neutral. However, the exception to marital rape is provided only to the husband, and not to the wife (if she engages in sexual activity with the husband without his consent). When a judicially separated wife is raped the Ordinance requires the court to be satisfied that a prima facie case is made out before taking cognizance on a complaint. This was not required under the IPC. It may be noted that the punishment in this case has been increased from up to two years to two to seven years imprisonment.
Notes 1. Statement of Objects and Reasons, Criminal Law (Amendment) Bill, 2012. 2. Report of the Committee on Amendments to Criminal Law, January 23, 2013. 3. Section 7 and 8, Protection of Children from Sexual Offences Act, 2012. 4. Section 3 and 4, Protection of Children from Sexual Offences Act, 2012. 5. Section 222-23 and 222-27, French Penal Code; Section 177(1) and (2), German Criminal Code, 1998; Sections 1, 2 and 3 United Kingdoms Sexual Offences Act, 2003. 6. Section 271, Canadian Criminal Code, 1985. 7. Section 2(d), Protection of Children from Sexual Offences Act, 2012. 8. UKs Criminal Justice and Public Order Act, 1994 and the Sexual Offences Act, 2003; Article 102, Turkish Penal Code, 2004; Criminal Code of Canada, 1970; In 1993 all states in the United States of America had ended their penal laws to delete the exception to marital rape. 9. Article 1, Declaration on the Elimination of Violence against Women.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

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Legislative Brief
The Bill was introduced in the Lok Sabha on May 3, 2010 by the Ministry of Human Resource Development. The Bill was referred to the Standing Committee on Human Resource Development (Chairperson: Shri Oscar Fernandes), which submitted its report on August 20, 2010.

The Educational Tribunals Bill, 2010


Highlights of the Bill
The Bill seeks to set up Educational Tribunals at the national and state level to adjudicate disputes involving teachers and other employees of higher educational institutions and other stakeholders such as students, universities and statutory regulatory authorities. The state tribunals shall adjudicate cases related to service matters of teachers and other employees of higher educational institution; dispute over affiliation of a higher educational institution with an affiliating university and unfair practices of a higher educational institution prohibited by any law. The national tribunal shall adjudicate cases of dispute between higher educational institutions and statutory authorities; higher educational institution and affiliating university (in case of central universities), and any reference made to it by an appropriate statutory authority. It shall have appellate jurisdiction on orders of the state tribunals. An order of the tribunal shall be treated as decree of a civil court. If orders of the national or state tribunal are not complied with, the person shall be liable to imprisonment for a maximum of three years or with fine of upto Rs 10 lakh or with both.

Related Briefs: The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010 The Foreign Educational Institutions (Regulation of Entry and Operations) Bill, 2010 The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Educational Institutions and Universities Bill, 2010

Key Issues and Analysis


The composition of the tribunals may not be in conformity with certain broad principles laid down in a recent Supreme Court judgement. In the state educational tribunals, only the Chairperson is a judicial member. However, the Bill allows the two members to hear cases if the chairpersons seat is vacant. This provision leaves the possibility of cases being heard without a judicial member. The Bill requires members of both tribunals to be at least 55 years old. This is higher than the minimum age required for other high offices.

Kaushiki Sanyal kaushiki@prsindia.org August 25, 2010

One of the stated purposes of the Bill is to provide for speedy resolution of disputes because of increased litigation. However, no data on the number of pending cases is available in the public domain. The Standing Committee has made several recommendations. They suggest that there should be flexibility in the number of tribunals in each state, and each such tribunal should have five members.

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

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The Educational Tribunals Bill, 2010

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PART A: HIGHLIGHTS OF THE BILL1


Context
Presently, disputes between educational institutions and students or staff are adjudicated by internal dispute redressal mechanisms. Most universities have set up such a mechanism.2 Some states such as Gujarat, Maharashtra and Jharkhand have enacted laws to set up tribunals for adjudicating teacher-management disputes.3 These tribunals generally have appellate jurisdiction. From the tribunals, cases can be appealed in the High Courts and Supreme Court.2 The idea of setting up educational tribunals to adjudicate education related disputes was first mooted by the National Policy on Education, 1986.4 The Law Commission of Indias 123rd Report in 1988 made a detailed study and concluded that a three-tier structure of tribunals is necessary to effectively handle disputes in the education sector.2 The Supreme Court in the 2002 T.M.A. Pai judgment and the Yash Pal Committee Report of 2009 also recommended setting up educational tribunals.5

Key Features
The Bill seeks to set up educational tribunals at the national and state level to adjudicate disputes related to higher education. Disputes may be between universities and teachers or students, universities and statutory regulatory authorities. The law shall not be applicable to minority educational institutions to the extent of the powers of the National Commission for Minority Educational Institutions. The Bill bars the jurisdiction of civil courts on any matters that the state or national educational tribunal is empowered to determine.

State and National Educational Tribunals


Table 1: Composition and jurisdiction of the State and National Educational Tribunals
State Educational Tribunal Establishment Composition Mode of Appointment Eligibility To be established by the state government A Chairperson and two other members (one of whom should be a woman). To be appointed by the state government on the recommendation of a Selection Committee. The Chairperson shall be a current or former Judge in the High Court. A member shall be at least 55 years old, with knowledge and experience in higher education or public affairs for 20 years, and who has been the Vice Chancellor or the Chief Secretary in the state government. Jurisdiction shall be over service matters of teacher and other employees of higher educational institution; dispute over affiliation of a higher educational institution with an affiliating university and unfair practices of a higher educational institution prohibited by any law. No acceptance of application related to service matters unless the tribunal is satisfied that the applicant has availed of all remedies available to him under the relevant service rules. National Educational Tribunal To be established by the central government A Chairperson and a maximum of eight members (2 shall be judicial, 3 shall be academic and 3 shall be administrative). To be appointed by the central government on the recommendation of a Selection Committee. The chairperson and the judicial members shall be a current or former Judge of the Supreme Court, to be appointed in consultation with the Chief Justice of India. Academic and administrative members shall be at least 55 years old with experience in higher education or public affairs for 25 years. An academic member shall be a current or former Vice Chancellor or Director of an institution of national importance. An administrative member shall be current or former Secretary to the government of India. Jurisdiction shall be over cases of dispute between higher educational institutions and statutory authorities; higher educational institution and affiliating university (in case of central universities), and any reference made to it by an appropriate statutory authority. It shall have appellate jurisdiction on orders of the state tribunals. Orders of the national tribunal can be appealed in the Supreme Court. The jurisdiction of the tribunal may be exercised by benches consisting of three members. The benches, to be constituted by the Chairperson, shall include one judicial member, one academic member and one administrative member.

Jurisdiction

Penalties
An order of the tribunal shall be treated as decree of a civil court. If orders of the national or state tribunal are not complied with, the person shall be liable to imprisonment for a maximum of three years or with fine of upto Rs 10 lakh or with both. The Collector may be informed of an order against a higher educational institution or person. The amount shall be recoverable as arrears of land revenue if payment is not made. No court shall take cognizance of an offence except on the complaint of an officer authorised by the national or state tribunals.
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PART B: KEY ISSUES AND ANALYSIS


Non-Conformity with Supreme Court Judgement
Composition of tribunals
Statement of Objects and Reasons and Clauses 5, 12, 21

In a recent judgment (R. Gandhi vs Union of India6), the Supreme Court examined issues such as the difference between courts and tribunals, independence of the judiciary and separation of powers. This case addressed the constitution of National Company Law Tribunal and the National Company Law Appellate Tribunal. The Court made certain general observations and certain observations specific to the NCLT. Some of the general observations of the Supreme Court were (a) tribunals should be treated as judicial tribunals, i.e., its members should be of similar rank and capacity as the court which was dealing with the matter; (b) if a matter has been shifted to the tribunal solely to reduce pendency, the tribunal should not have technical members; (c) technical members are required if there is a technical aspect. Some of the specific observations on NCLT were: (a) two-member benches of the Tribunal should have a judicial member; (b) for larger benches, the number of technical members should not exceed that of judicial members. Certain provisions of the Bill may not be in conformity with the broad principles laid down in the judgment in three respects. First, the Statement of Objects and Reasons of the Bill states that Tribunals are required for speedy resolution of disputes. However, the Tribunals constitute judicial, academic and administrative members. This may not be in conformity with the observations of the Supreme Court which state that if tribunals are constituted only to expedite cases, technical members are not required. Second, both the national and state tribunals, in addition to judicial members, have members with academic and administrative experience, presumably because they can bring technical expertise. In both the state tribunal as well as each bench of the national tribunal, the number of technical members exceeds that of judicial members. This provision is again in conflict with the Supreme Courts direction on the composition of NCLT. Third, the Bill states that if the chairperson of a state education tribunal resigns or dies, the senior most member of the tribunal shall act as the chairperson till a new chairperson is appointed. The Bill also allows the two members (who are non-judicial members) to hear cases if the chairpersons seat is vacant due to absence or illness. Both these provisions leave the possibility of cases being heard without a judicial member. The Standing Committee7 which examined the Bill also stated that the above provisions of the Bill are not in conformity with the Supreme Court judgment. Also, a 1988 Law Commission of India report also recommended that state educational tribunals should consist of five members: Chairman (sitting or retired High Court Judge); 2 judicial members (eligible for appointment as a High Court judge), and 2 members (former Vice Chancellor or an eminent professor). It further stated that tribunals could sit in benches but one of the members of the bench should be a judicial member.8

Minimum Age Requirement for Tribunal Members


Clauses 6(2)(a), 22(2)(a) & (3)(a)

The Bill requires members of the National and State Tribunals to be at least 55 years old. This is higher than the minimum age required for other high officer. For example, the minimum age for a Member of Parliament is 25 years for Lok Sabha and 30 years for Rajya Sabha and for the post of President it is 35 years.9 An advocate with 10 years experience in a High Court is eligible to be appointed as a judge in a High Court or the Supreme Court. This implies that a person who is below the age of 55 years may become a High Court or Supreme Court judge. The Standing Committee recommended that competent people with adequate knowledge and experience, irrespective of age, should be considered.7

Lack of Data on Pending Cases Related to Higher Education


Statement of Objects and Reasons

The Statement of Objects and Reasons of the Bill does not mention any data with regard to the number of matters related to the higher educational sector pending in courts at various levels, the time spent in litigating processes, and the cost involved in processing the litigation. A 1988 Law Commission of India report also pointed out the inadequacy of data available on the magnitude of litigation.2 It mentioned that a study10 was conducted between 1969 and 1980 to assess the magnitude of litigation. However, the study covered only four universities. The Standing Committee also recommended that before setting up tribunals, the magnitude of cases and costs incurred in litigation should be assessed.7

Dispute settlement mechanisms in other countries


Various countries have mechanisms to settle disputes among stakeholders in the higher education sector.
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USA: Both private and public universities have internal grievance settlement mechanisms for students and staff. If not satisfied with the internal mechanism both have the right of recourse to courts.11 UK: UKs Higher Education Act, 2004 states that student complaints may be reviewed by a body corporate to be designated by the Secretary of State (Britain) and National Assembly for Wales. Each higher education institution has a formal procedure for addressing complaints of students. In case the issue is not resolved, the student can take the complaint to the Office of the Independent Adjudicator (England and Wales) or Office of the Ombudsman (Scotland). For staff, after exhausting internal procedure, they can approach the courts.12 Australia: In case a student has a complaint, he can use the internal grievance redressal procedures in the first instance. After that, the students may contact the relevant Commonwealth, state or territory Ombudsman or the government accreditation authority (in case the university is non-self-accrediting). The staff has the option to explore internal complaint procedure through trade unions and certain external mechanisms (Equal Opportunity Commission or Employee Assistance Programme) before approaching the courts for redressal.13 Sweden: Swedens Higher Education Act, 1992 (modified in 2006) states that a joint board shall decide on the expulsion of a student. The student and the institution may appeal to general administrative courts against decisions of the board. The Equal Treatment of Students at Universities Act, 2001 promotes equal rights of students and applicants in higher education institutions. The universitys decision can be appealed to the University Appeals Board on the grounds that the decision is against prohibition of discrimination.14

Other Key Recommendations of Standing Committee


The Standing Committee7 submitted its report on the Bill on August 20, 2010. Some of its recommendations are: (a) a minimum court fee should be fixed to ensure viability of the tribunals; (b) instead of three member state educational tribunal, the number should be increased to five; (c) since number of educational institutions vary from state to state, one tribunal per state should not be uniformly applicable; (d) unfair practices should be defined in the Bill; (e) the national tribunal with three persons of the rank of secretaries to the government may lead to bureaucratization of tribunals; and (f) there should be adequate representation of the academia in the selection committee.
Notes 1. This Brief has been written on the basis of the Educational Tribunals Bill, 2010, which was introduced in the Lok Sabha on May 3, 2010. The Bill was referred to the Standing Committee on Human Resource Development (Chairperson: Shri Oscar Fernandes), which submitted its report on August 20, 2010. 2. Decentralisation of Administration of Justice: Disputes Involving Centres of Higher Education, 123rd Report of the Law Commission of India, January 1988. 3. The Gujarat Affiliated Colleges Services Tribunal Act, 1982; the Maharashtra Universities Act, 1994 (Sections 58 to 70); the Jharkhand Education Tribunal Act, 2005. 4. National Policy on Education, 1986. 5. T.M.A. Pai Foundation and Others vs State of Karnataka and others, Writ Petitions (C) No. 317 of 1993, Nov 25, 2002 and Yash Pal Committee Report, 2009. 6. Union of India vs R. Gandhi, Madras Bar Association, Civil Appeal No. 3067 of 2004, Supreme Court Judgment on May 11, 2010. 7. 225th Report on the Educational Tribunals Bill, 2010, Standing Committee on Human Resource Development, August 20, 2010. 8. Decentralisation of Administration of Justice: Disputes Involving Centres of Higher Education, 123rd Report of the Law Commission of India, January 1988. 9. Constitution of India. 10. Elizabeth C. Wright, Courts and Universities: Impact of Litigation on University Autonomy, 1985 Vol 27, Journal of Indian Law Institute, p. 35. 11. U.S. Department of Education & various individual universities websites. 12. The Higher Education Act, 2004. 13. Australian Department of Education, Employment and Workplace Relations. 14. The Higher Education Act, 1992, The Equal Treatment of Students at Universities Act, 2001.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

August 25, 2010

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Legislative Brief
The Bill was introduced in the Lok Sabha on August 26, 2010 by the Ministry of Personnel, Public Grievance and Pensions. The Bill was referred to the Standing Committee on Personnel, Public Grievances, Law and Justice (Chairperson: Smt Jayanthi Natarajan), which is scheduled to submit its report by February 14, 2011.

The Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010
Highlights of the Bill
The Bill seeks to protect whistleblowers, i.e. persons making a public interest disclosure related to an act of corruption, misuse of power, or criminal offence by a public servant. Any public servant or any other person including a non-governmental organization may make such a disclosure to the Central or State Vigilance Commission. Every complaint has to include the identity of the complainant. The Vigilance Commission shall not disclose the identity of the complainant except to the head of the department if he deems it necessary. The Bill penalises any person who has disclosed the identity of the complainant. The Bill prescribes penalties for knowingly making false complaints.
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October 29, 2010

Key Issues and Analysis


The Bill aims to balance the need to protect honest officials from undue harassment with protecting persons making a public interest disclosure. It punishes any person making false complaints. However, it does not provide any penalty for victimising a complainant. The CVC was designated to receive public interest disclosures since 2004 through a government resolution. There have been only a few hundred complaints every year. The provisions of the Bill are similar to that of the resolution. Therefore, it is unlikely that the number of complaints will differ significantly. The power of the CVC is limited to making recommendations. Also it does not have any power to impose penalties. This is in contrast to the powers of the Karnataka Lokayukta and the Delhi Lokayukta.

The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010
October 29, 2010

Kaushiki Sanyal kaushiki@prsindia.org

The Bill has a limited definition of disclosure and does not define victimisation. Other countries such as US, UK, and Canada define disclosure more widely and define victimisation. The Bill differs on many issues with the proposed Bill of the Law Commission and the 2nd Administrative Reform Commissions report. These include non-admission of anonymous complaints and lack of penalties for officials who victimise whistleblowers.

January 24, 2011

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Public Interest Disclosure Bill, 2010

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL 1


Context
Whistleblowing is the act of disclosing information by an employee or any stakeholder about an illegal or unethical conduct within an organisation. The Law Commission of India 2 in 2001 had recommended that in order to eliminate corruption, a law to protect whistleblowers was essential. It had also drafted a Bill in its report. In 2004, in response to a petition filed after the murder of Satyendra Dubey, the Supreme Court directed that a machinery be put in place for acting on complaints from whistleblowers till a law is enacted. 3 The government notified a resolution in 2004 4 that gave the Central Vigilance Commission (CVC) the power to act on complaints from whistleblowers. Since 2004, CVC has received 1,354 complaints from whistleblowers (see Table 2). In 2007, the report of the Second Administrative Reforms Commission 5 also recommended that a specific law be enacted to protect whistleblowers. India is also a signatory (not ratified) to the UN Convention against Corruption since 2005, which enjoins states to facilitate reporting of corruption by public officials and provide protection against retaliation for witnesses and experts. 6 The Bill replaces the 2004 government resolution and sets up a mechanism to receive complaints of corruption or wilful misuse of power by a public servant. It also provides safeguards against victimization of the person making the complaint.

Key Features
Public Interest Disclosure
Any public servant or any other person including a non-governmental organization may make a public interest disclosure to a Competent Authority (defined as the Central or State Vigilance Commission). Disclosure is defined as any complaint made in writing or electronic mail against a public servant on matters related to (a) attempt to or commission of an offence under the Prevention of Corruption Act, 1988; (b) wilful misuse of power which leads to demonstrable loss to the government or gain to the public servant; or (c) attempt or commission of a criminal offence by a public servant. A public servant is any person who is an employee of the central government or the state government or any company or society owned or controlled by the central or state government. However, no public interest disclosure shall be accepted against defence, police and intelligence personnel. Each disclosure shall be accompanied by full particulars and supporting documents. The Vigilance Commission shall not entertain anonymous complaints.

Procedure of Inquiry
First, the Vigilance Commission has to verify the identity of the complainant, and then conceal his identity (unless the complainant has revealed it to any other authority). Then it shall decide whether the matter needs to be investigated based on the disclosure or after making discreet inquiries. If it decides to investigate, it shall seek an explanation from the head of the concerned organisation. The Vigilance Commission shall not reveal the identity of the complainant to the head of the organisation unless it is of the opinion that it is necessary to do so. The head of the organisation cannot reveal the identity of the complainant. After conducting the inquiry, if the Vigilance Commission feels that the complaint is frivolous or there is no sufficient ground to proceed, it shall close the matter. If the inquiry substantiates allegation of corruption or misuse of power, it shall recommend certain measures to the public authority (anybody falling within the jurisdiction of the Vigilance Commission). Measures include initiating proceedings against the concerned public servant, taking steps to redress the loss to the government, and recommending criminal proceedings to the appropriate authority. Every public authority shall create a mechanism to deal with inquiries into disclosures. The mechanism shall be supervised by the Vigilance Commission. The Vigilance Commission may take the assistance of the Central Bureau of Investigation or police authorities to make inquiries or to obtain information.

Exemption from Inquiry


The Vigilance Commission shall not entertain any matter (a) if it has been decided by a Court or Tribunal, (b) if a public inquiry has been ordered, or (c) if the complaint is made five years after the action.
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The Public Interest Disclosure Bill, 2010

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The Bill exempts disclosure of proceedings of the Cabinet if it is likely to affect the sovereignty of India, security of the state, friendly relations with foreign states, public order, decency or morality. Such an exemption has to be certified by the Secretary to the central or state government.

Safeguards for Persons Making Disclosure


A person shall not be victimised or proceeded against merely on the grounds that he has made a disclosure or assisted in an inquiry. The directions of the Vigilance Commission are binding in this regard. The Vigilance Commission may give directions to a concerned public servant or authority to protect a complainant or witness either on an application by the complainant or based on its own information. It may direct that the public servant who made the disclosure be restored to his previous position. If the Vigilance Commission decides that a complainant or a witness or a person assisting an inquiry needs protection (either based on an application filed by the complaint or a witness or on its own information), it shall issue directions to the concerned government authorities to protect such persons. The Vigilance Commission shall protect the identity of the complainant and related documents, unless it decides against doing so, or is required by a court to do so.

Penalties
The Bill lays down penalties for various offences. For not furnishing reports to the Vigilance Commission, a fine of upto Rs 250 shall be imposed for each day till the report is submitted. The total penalty amount however cannot exceed Rs 50,000. For revealing the identity of complainant negligently or due to mala fide reasons, the penalty is imprisonment for upto 3 years and a fine of upto Rs 50,000. For knowingly making false or misleading disclosures with mala fide intentions, the penalty is imprisonment upto 2 years and a fine of upto Rs 30,000. Any person aggrieved by an order of the Vigilance Commission relating to imposition of penalty for not furnishing reports or revealing identity of complainant may file an appeal to the High Court within 60 days.

PART B: KEY ISSUES AND ANALYSIS


Protection of Both Complainant and Public Official
Preamble, Statement of Objects and Reasons and Clauses 3(3), 3(6), 4(2), 4(4), 10, 14, 15, 16 and 19

The Bill seeks to strike a balance between protecting persons making a public interest disclosure and preventing undue harassment of public officials. 7 Table 1: Comparison of protection provided to complainant and public official
Identity Protection of complainant Vigilance Commission and the Head of the organisation have to protect the identity of the complainant. However, the Vigilance Commission can reveal the identity of the complainant to the Head if it is of the opinion that it is necessary to do so. Identity revelation carries a penalty of upto 3 years and fine of upto Rs 50,000 prescribed. The central government shall ensure that no complainant is victimised through proceedings against him merely because he made a disclosure. If a complainant is being victimised by a public servant, the Vigilance Commission may issue directions to the concerned public servant, including that the complainant be restored to his previous position. No appeal process specified if a complainant is penalized for false complaints. Protection of public official Every complainant has to furnish his identity (no anonymous complaint to be entertained). No complaint made after 5 years of the action shall be entertained. A false complaint carries a penalty of imprisonment upto 2 years and fine of upto Rs 30,000. No penalty prescribed for public official

Penalty Victimisation

Appeal

If a public official is penalized for revealing identity or obstructing investigation of the complaint, he can appeal to the high court.

Sources: Public Interest Disclosure Bill; PRS.

The protection provided to both parties raises certain issues. Identity: The Bill does not allow anonymous complainants. But there are no clear provisions on what grounds the Vigilance Commission may reveal the identity of a complainant to the Head of an organisation. Some experts contend that allowing anonymous reporting provide protection to whistleblowers while others have expressed
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The Public Interest Disclosure Bill, 2010

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concern about difficulty of investigation and possibility of frivolous complaints. 8 Countries such as the U.S., U.K., Canada and Australia 9 have some provision to investigate anonymous complaints, while Italy and Slovakia 10 do not allow anonymous complaints. However, even countries which allow anonymous complaints do not provide protection against victimisation if the identity of such a whistleblower becomes known. Victimisation: (a) The Bill does not define what constitutes victimisation. (b) There is no penalty against the public servant who may be victimising the complainant. (c) This Bill does not provide for witness protection programme to protect witnesses during investigation and trial. The Law Commission has recommended guidelines for witness identity protection. 11 Countries such as the US, Canada, Australia, Germany, Italy and South Africa have witness protection programmes. 12 Penalty: The Vigilance Commission may reveal the identity of the complainant in certain circumstances (which may lead to victimisation) but the Bill does not provide for any penalty for victimising a complainant. However, a complainant may be penalised with imprisonment and a fine for making false complaints. This was recommended by the Law Commission report2 and the Cabinet Note stated that the Bill aimed to protect honest officials.7 Such provisions may deter persons from making a disclosure to the Vigilance Commission. Appeal: The public official may appeal to the High Court against penalty for revealing identity or obstructing investigation. However, the Bill also penalises any malafide complaint, but does not specify an appeal process.

Performance of Present Mechanism


Clauses 2(b) and 4

The CVC was designated to receive and act on complaints by Table 2: Number of whistleblower whistleblowers through a 2004 Government Resolution. This Bill complaints under 2004 Resolution gives statutory status to that Resolution. However, as the data in Year Complaints Table 2 shows, the number of complaints has only been a few 2005 412 hundreds between 2005 and 2008. 2006 338 There is no official study that indicates whether the number of 2007 328 complaints reflect the level of corruption, or whether potential 2008 276 whistleblowers feel threatened. Given that the provisions of this Bill Source: Annual Reports of Central Vigilance Commission are similar to that of the Resolution, there is unlikely to be a significant change in the number of persons who are willing to disclose acts of corruption.

Powers of the Vigilance Commissions


Clauses 2, 4, and 9

The Central and State Vigilance Commissions shall be the nodal body to receive complaints from whistleblowers. However, their power is restricted to recommend corrective action to the public authority (including any penal action) on public officials after investigation. Various state Lokayuktas have different powers. For example, the Karnataka Lokayukta Act states that in case a public servant is found to have committed any criminal offence, the Lokayukta may initiate prosecution without prior sanction from the concerned authority. 13 The Delhi Lokayukta Act states that if the Lokayukta is not satisfied with the action taken by a competent authority on its report, he can make a special report to the Lt Governor and inform the complainant. 14 The Andhra Pradesh Lokayukta and Upalokayukta Act provides a time-limit of one year to complete the investigation. Both the Andhra Pradesh and Himachal Pradesh Lokayukta Acts state that if an offence has been committed, a report is sent to the concerned authority who has to report within three months any action taken. If the Lokayukta is not satisfied with the action taken, he can report to the Governor and inform the complainant. 15 Furthermore, an ARC report pointed out that there are few cases where CVC was able to initiate disciplinary action on government servants or impose major penalties. 16 According to CVCs data, between 2004 and 2008, there were 946 cases in which the department did not comply with the CVCs recommendation on penalty. 17

Definitions
Clause 2(d)

The Bill defines disclosure as a complaint related to corruption, any criminal offence or wilful misuse of power that leads to loss to the government or gain to the public servant. This definition is narrower that the one recommended by the Law Commission, which included mal-administration (any action which is unjust, causes undue delay or negligence, leads to waste of public funds). Countries such as Canada, US and Ghana have wider definition of disclosure (see Table 5). The Bill does not define victimisation. The proposed Law Commission Bill defines victimisation to include suspension, transfer, dilution of power, adverse entries in the service record, and punishments under disciplinary rules. Countries such as US, UK, Canada, South Africa and Ghana define victimisation (see Table 5).

January 24, 2011

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The Public Interest Disclosure Bill, 2010

PRS Legislative Research

The Law Commission and Administrative Reforms Commission


In December 2001, the 179th report of the Law Commission of India examined the issue of whistle-blowing and made certain recommendations. The scope of these recommendations were wider that in the current Bill, as they included ministers within the purview, provided powers to the Authority to initiate criminal proceedings, and fixed a time limit. Table 3 compares the recommendations of the Commission with the provisions of the Bill. Table 3: Comparison of the Law Commission Report and the Bill
Law Commission of India Scope Definitions Disclosure can be against Minister and public servant. Defines disclosure as a complaint against abuse or misuse of power; commission of an offence under any law; or mal-administration. Defines victimisation. Disclosure of Identity The name of person making the disclosure shall be revealed to the public servant unless the complainant requests that his identity be kept hidden or it is necessary in public interest. The Competent Authority has the power to direct the appropriate authority to initiate criminal proceedings against the guilty official. The Competent Authority has to complete the inquiry within 6 months to 2 years after receiving the complaint. In case a complainant is victimised the burden of proof is on the employer or public servant who is accused of victimisation. Penalty for false complaints is imprisonment upto 3 years and fine of upto Rs 50,000. Bill Disclosure can be only against public servant. Defines disclosure as a complaint against a public servant on commission of an offence under the Prevention of Corruption Act, 1988 or misuse of power leading to demonstrable loss to the government or gain to the public servant; or a criminal offence. No definition. The Vigilance Commission shall not reveal the identity of the complainant to the head of the organisation except if it is of the opinion that it is necessary to do so. The Vigilance Commission has the power to recommend measures such as initiating proceedings and taking steps to redress the loss to the government. No time limit prescribed for discreet inquiry. Time limit for explanation to be given by the concerned head of department shall be prescribed. No provision.

Powers of Competent Authority Time limit

Burden of proof Penalty

Penalty for false complaints is imprisonment upto 2 years and fine of upto Rs 30,000.

Sources: 179th Law Commission Report, Bill 2010, PRS.

In 2007, the 2nd Administrative Reforms Commission (ARC) made certain recommendations related to whistleblowing, which have not been incorporated in the Bill. It included acts of whistle-blowing in the private sector and prescribed penalties for victimising complainants. The issue of the private sector is now addressed by the Companies Bill, 2009. Table 4 compares the ARC report with the Bill. Table 4: Comparison of the ARC Report and 2010 Bill
4th Report of the Second ARC Identity Protection Private sector Penalty for Victimisation Whistleblowers should be protected by ensuring confidentiality and anonymity. Should cover corporate whistleblowers unearthing fraud or serious damage to public interest. Acts of harassment or victimization of or retaliation against a whistleblower should be criminal offences with substantial penalty and sentence. Bill Makes provision to ensure confidentiality but does not allow anonymous complaints. Not covered in this Bill. The Companies Bill, 2009 addresses this issue. No penalty for victimisation.

Sources: Ethics in Governance, Fourth Report of the Second Administrative Reforms Commission, Bill 2010, PRS.

Laws in other countries related to whistleblowing


Different countries protect whistleblowers in different ways. Some allow multiple agencies to receive complaints, some allow anonymous complaints, and some define victimisation and provide protection against it. Table 5 gives an overview of the laws related to whistleblowing in some countries.

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The Public Interest Disclosure Bill, 2010

PRS Legislative Research

Table 5: International comparison of whistleblowing laws


Definition of disclosure US Violation of laws, gross mismanagement, waste of funds and abuse of authority Crimes, civil offences (including negligence), miscarriages of justice, dangers to health and safety of the environment Serious wrongdoing such as violation of law, misuse of public funds, gross mismanagement. Criminal offence, failure to comply with legal obligations, miscarriage of justice, endangering health and safety of individuals, damaging environment, unfair discrimination. Breach of Code of Conduct (be honest, comply with all laws, no improper use of inside information) Impropriety such as economic crime, noncompliance of a law, likely to break the law, miscarriage of justice, mismanagement or waste of public resources. Authority Office of Special Counsel or Office of Inspector General Employer, any prescribed persons, police, media or MP Supervisor or Public Sector Integrity Commissioner Various authorities such as legal adviser, employer, Cabinet member, and any prescribed person Public Service Commissioner, Merit Protection Commissioner, Agency Head Various authorities such as employer, police, MP, Commission on Human Rights, President Protection Allow anonymous complaints. Protect employees from victimisation in appointment, promotion, transfer, or pay. Allow anonymous complaints. Employment tribunal decides compensation if victimised by unfair dismissal or denial of promotion. Allow anonymous complaints. Has protection from reprisals (disciplinary measure, demotion, termination). Right to approach court, including Labour court if subjected to occupational detriment (disciplinary action, dismissal, suspension, demotion, transfer, no reference Protection against victimisation and discrimination Allow oral or written complaints. Has right to bring action to High Court for victimisation (dismissal, suspension, transfer, harassment)

UK

Canada

South Africa

Australia

Ghana

Sources: US: Whistleblower Protection Act, 1989; UK: Public Interest Disclosure Act, 1998; Canada: Public Servants Disclosure Protection Act, 2004; South Africa: Protected Disclosure Act, 2000; Australia: Public Service Act, 1999; Ghana: Whistleblower Act, 2006 and PRS

Notes
1. This Brief was written on the basis of the Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010, which was introduced in the Lok Sabha on Aug 26, 2010. The Bill was referred to the Standing Committee on Personnel, Public Grievances, Law & Justice, which is scheduled to submit its report by Feb 14, 2011. 2. 179th Report of the Law Commission of India. 3. Writ Petition (Civil) 539/2003. 4. Resolution no. 89 dated April 21, 2004, Government of India. 5. Ethics in Governance, Fourth Report of the Second Administrative Reforms Commission. 6. UN Convention Against Corruption (see http://www.unodc.org/unodc/en/treaties/CAC/index.html). 7. Cabinet Note on Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010, July 30, 2010. 8. Alternative to Silence: Whistleblower Protection in 10 European Countries, Transparency International, 2009; David Banisar, Whistleblowing: International Standards and Development, presented at the 2006 Primera Conferencia Internacional sobre Corrupcion y la Transparencia, Mexico; 179th Law Commission of India Report. 9. Whistleblower Protection Act (USA); Public Interest Disclosure Act, 1998 (UK); Public Servants Disclosure Protection Act (Canada); and Public Interest Disclosure Act (Australia). 10. Alternative to Silence: Whistleblower Protection in 10 European Countries, Transparency International, 2009. 11. Witness Identity Protection and Witness Protection Programmes, 198th Report of Law Commission of India, 2006. 12. US: Witness Security Program; Canada: Witness Protection Program Act, 1996; Australia: Witness Protection Act, 1994; Germany: Act to Harmonize the Protection of Witnesses at Risk, 2001; Italy: Decree Law no. 82 (2001); South Africa: Witness Protection Act 112 of 1998. 13. Karnataka Lokayukta Act, 2002. 14. The Delhi Lokayukta and Uplokayuka Act, 1995. 15. The Andhra Pradesh Lokayukta and Upalokayukta Act, 1983 and the Himachal Pradesh Lokayukta Act, 1983. 16. Refurbishing of Personnel Administration: Scaling New Heights, 10th Report of the Second Administrative Reforms Commission, Nov 2008. 17. 2004 to 2008 Annual Reports of CVC.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

January 24, 2011

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Legislative Brief

The Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011
The Bill was introduced in the Lok Sabha on December 20, 2011. The Bill was referred to the Department Related Standing Committee on Personnel, Public Grievances, Law and Justice (Chairperson: Mr. Shantaram Naik). The Report was submitted on August 30, 2012.

Highlights of the Bill


The Bill seeks to create a mechanism to ensure timely delivery of goods and services to citizens. Every public authority is required to publish a citizens charter within six months of the commencement of the Act. The Charter will detail the goods and services to be provided and their timelines for delivery. A citizen may file a complaint regarding any grievance related to: (a) citizens charter; (b) functioning of a public authority; or (c) violation of a law, policy or scheme. The Bill requires all public authorities to appoint officers to redress grievances. Grievances are to be redressed within 30 working days. The Bill also provides for the appointment of Central and State Public Grievance Redressal Commissions.

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September 26, 2012

A penalty of up to Rs 50,000 may be levied upon the responsible officer or the Grievance Redressal Officer for failure to render services.

Key Issues and Analysis


Parliament may not have the jurisdiction to regulate the functioning of state public officials as state public services fall within the purview of state legislatures. This Bill may create a parallel grievance redressal mechanism as many central and state laws have established similar mechanisms. Companies that render services under a statutory obligation or a licence may be required to publish citizens charters and provide a grievance redressal mechanism. The Commissioners may be removed without a judicial inquiry on an allegation of misbehaviour or incapacity. This differs from the procedure under other legislations. Appeals from the Commissions decisions on matters of corruption will lie before the Lokpal or Lokayuktas. The Lokpal and some Lokayuktas have not been established. Only citizens can seek redressal of grievances under the Bill. The Bill does not enable foreign nationals who also use services such as driving licenses, electricity, etc., to file complaints.
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The Constitution 115th Amendment Bill, 2011 (GST)


May 24, 2012.

Harsimran Kalra harsimran@prsindia.org

Pallavi Bedi pallavi@prsindia.org

September 27, 2012

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

Citizens Charter Bill, 2011

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
The Bill refers to a citizens charter which is a document that defines the standard of services to be provided by an entity. The citizens charter will also provide the time frame within which goods and services are to be provided. The concept of citizens charter was introduced in the United Kingdom in 1991 and subsequently was adopted by various countries such as Belgium (1992), Malaysia (1993) and Australia (1997).2 In 1997, at a chief ministers conference, an Action Plan was approved requiring the central and state governments to formulate citizens charters for enterprises with a large public interface.3 In 2007, the Second Administrative Reforms Commission recommended that citizens charters should stipulate penalties for noncompliance.4 In 2008, the Standing Committee on Personnel, Public Grievances, Law and Justice recommended giving statutory status to grievance redressal mechanisms.5 The Central Information Commission also recommended that grievance redressal systems should be strengthened to reduce the use of the Right to Information Act, 2005 to redress grievances.6 The President, in her address to Parliament in June 2009, had stated that the government would focus on ensuring effective delivery of public services.7 The Standing Committee that had examined the Lokpal Bill, 2011 recommended the creation of a separate legislation to deal with citizens charter and grievance redressal. The Parliament on August 27, 2011 while adopting the Sense of the House Resolution on Lokpal, agreed in principle to the establishment of a citizens charter. 8 Currently, government departments deal with grievances internally. Persons may also approach the High Court through writ petitions. As of January 2011, 131 citizens charters were finalised by the central government departments and 729 citizens charters were finalised by state government departments.9 Additionally, by March 2012, several states had enacted laws providing for grievance redressal mechanisms.10

Key Features
The Bill requires public authorities to publish a citizens charter within six months of enactment of the Bill. The charter should specify the services and the quality of services to be provided by the public authority. The head of departments are responsible for disseminating and updating the citizens charter.

Public Authority
Public authorities include: (a) constitutional and statutory authorities; (b) entities established under a notification; and (c) public-private partnerships. They also include NGOs that are substantially government funded, government companies, and companies that provide services under a licence or a statutory obligation. Public authorities are required to establish Information Facilitation Centres for efficient and effective delivery of services and redressal of grievances. Information Facilitation Centres may include customer care centres, call centres, help desks and peoples support centres.

Public Grievance Redressal Commissions


The Bill establishes Central and State Grievance Redressal Commissions. Each Commission would consist of a Chief Commissioner and up to 10 Commissioners. The Commissioners would be appointed by the President (Governor) on the recommendation of a selection committee. This committee would consist of the Prime Minister (Chief Minister), the Leader of the Opposition in the Lok Sabha (Legislative Assembly) and a sitting Supreme Court (High Court) judge. The Commissioners should be: (a) present or former Secretaries to the central (state) government; or (b) present or former Supreme Court judges or Chief Justices of a High Court (district court judges for 10 years, or High Court judges); or (c) eminent persons with at least 20 years (15 years) of experience in social sectors with a post graduate degree in a relevant sector. The Commissioners may be removed by an order of the President (Governor) under certain conditions.

Complaint mechanism
Complaint: Any citizen may file a complaint for: (a) failure in delivery of goods or services listed in the citizens charter; (b) the functioning of the public authority; and (c) any violation of a law, policy, programme, order or scheme. Complaints have to be redressed within 30 working days.
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Citizens Charter Bill, 2011

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Complaints have to be made to the Grievance Redressal Officer (GRO). GROs are to be appointed by each public authority at the central, state, district, sub-district, municipality and panchayat levels. The GRO is required to: (a) ensure that grievances are redressed within 30 working days; (b) ensure that disciplinary action is taken against a defaulting officer if he has acted negligently; and (c) recommend penalties and compensation where an individual has wilfully neglected to deliver services or there is a prima facie ground for a case under the Prevention of Corruption Act, 1988. The GRO has to inform the complainant about the action taken on the complaint. Appeal: The orders of the GRO may be appealed before the Designated Authority (DA). The DA shall be an officer above the rank of the GRO and outside the concerned public authority. (According to a statement made by the Minister of State for Personnel, Public Grievances and Pensions, the DA shall be an officer at the district level.11) The DA shall dispose of appeals within 30 working days of their receipt. If a complaint with the GRO is not redressed within 30 working days, the GRO has to forward it as an appeal to the DA. The DA may penalise the defaulting officers. Second Appeal: The DAs orders may be appealed before the Central or State Public Grievance Redressal Commission within 30 working days. Appeals relating to complaints arising out of functioning of the central (state) departments would lie before the Central (State) Commission. The Commissions have to dispose of the appeal within 60 working days. Third Appeal: In relation to an offence under the Prevention of Corruption Act, 1988, an appeal against the decision of the Commissions shall lie with the Lokpal or the Lokayukta. Suo motu mechanism: The Central and State Commissions can suo motu refer matters related to nondelivery of goods and services to the heads of government departments. The Commissions may also initiate suo motu inquiry if they believe that there are reasonable grounds to inquire into the matter. Complaints may also be made to the Commissions in certain cases. It is the duty of the Commissions to inquire into complaints by persons: (a) who are unable to file appeals before the DA; (b) who are refused redress of grievances; (c) whose complaints are not disposed of within 30 days; and (d) who are denied access to the citizens charter because it has not been prepared or has not been widely disseminated.

Penalties
GRO: The Bill requires the GRO to recommend penalties to the DA when: (a) he is convinced that the default was due to wilful neglect by an officer; or (b) when there is prima facie evidence of corruption. DA and Commissions: The Bill empowers the DA and the Commissions to impose a maximum penalty of Rs 50,000 upon the defaulting officer and the GRO. Penalties may be imposed upon the defaulting officer when he has acted in a mala fide manner or has failed to discharge his responsibility in a proper manner. A portion of the penalty may be awarded as compensation to the complainant. If there is evidence of corruption against the defaulting officer, the DA and the Commissions would have to refer the matter to appropriate authorities. Additionally, the DA may initiate proceedings in such cases. Disciplinary proceedings may be initiated by the GRO, DA and the Commissions against the defaulting officer if there is evidence of mala fide action. In any appeal proceeding, where it is alleged that the grievance has not been redressed by the GRO, the burden of proof shall be on the GRO.

PART B: KEY ISSUES AND ANALYSIS


Parliaments jurisdiction to regulate state public officials
The Bill regulates the functioning of departments and public officials at the central and state level. It also establishes Commissions at the central and state level. State public services; State Public Service Commission is included in the State List (Entry 41) of the Seventh Schedule of the Constitution. This implies that the power to make laws to regulate the functioning of state public officials lies solely with state legislatures. Thus, Parliament may not have jurisdiction to enact laws governing such services and officials. In this regard, the Ministry has stated that the provisions of the Bill relate to actionable wrongs which comes under the concurrent list. This view was accepted by the Standing Committee.
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The Supreme Court has held that, Wrong means an actionable wrong and it must consist of: (a) an act or omission amounting to an infringement of a legal right of a person or a breach of legal duty towards him; and (b) the act or omission must have caused harm or damage to that person in some way, the damage being either actual or presumed.12 Under the Bill, complaints may be filed for violation of any policy or scheme. The claims under these schemes and policies may be non-justiciable (unenforceable by courts). It is unclear whether schemes and policies which are not justiciable would fall under the meaning of actionable wrong. Several states such as Delhi, Punjab and Bihar have also enacted their own grievance redressal laws. The mechanism provided under these laws is different from that provided under the Bill. (See Appendix 1, page 6)

Lack of clarity on the meaning of public authority


Clause 2(n)

It is not clear whether the Bill applies to private entities only if they are established or constituted under a notification. The term public authorities has been defined broadly to mean authorities constituted under: (a) the Constitution or under any central or state law; (b) an agreement between the government and a private entity as a PPP; and (c) any entity established under a notification or order of the government. This definition also includes: (i) non-governmental organizations that receive government finances either directly or indirectly, and (ii) other companies that are supplying goods or services to fulfil a statutory obligation, or under a license or authorisation by law. It is not clear if these organisations are required to be established under a notification. It is pertinent to note that the Right to Information Act, 2005 includes private entities as long as they are controlled or financed by the government. Private sector companies are covered by other laws such as Consumer Protection Act, 1986 and the Competition Act, 2002. Inclusion under this Bill may lead to multiple dispute settlement forums being available for the same dispute. For instance, grievances related to services to be provided under a contract would fall under the Consumer Protection Act and this Bill.

Multiplicity of Grievance Redressal Forums


Clause 2(f)

This Bill provides grievance redressal under several circumstances including violation of any law, policy or scheme. Some existing and proposed laws provide their own grievance redressal mechanisms, for instance, the Mahatma Gandhi National Rural Employment Guarantee Act, 2005, Right of Children to Free and Compulsory Education, 2009, National Food Security Bill, 2011, and the Public Procurement Bill, 2012. There could be an overlap of jurisdictions in some cases, as grievances under these legislations may be covered under this Bill as well. It is unclear as to which mechanism may be approached first, and whether seeking relief under one law bars remedies under the other. Furthermore, the commissions established under these legislations are specialised in nature. They comprise persons of eminence in the field to which the laws relate. For instance, commissions under the National Food Security Bill, 2011 comprise persons with experience in the field of food security, agriculture and health.13

Exclusion of non-citizens
Clause 2(f)

A complaint may only be filed by a citizen. However, certain services may be used by both citizens and foreign nationals. For example, a foreign national is eligible to apply for a driving license under Indian law. The rationale for excluding foreign nationals from the purview of the redressal mechanism is unclear. Under some state laws, the criterion for accessing greiavnce redressal mechanism is the eligibility of the complainant and not his citizenship. The Punjab Right to Services Act, 2011 and the Rajasthan Guaranteed Delivery of Public Services Act, 2011 provide access to the redressal mechanism to all eligible persons. Under these Acts an eligible person is defined as any person who is eligible for the notified services. The Standing Committee has recommended that the Ministry review whether non-citizens can be brought under the Bill.

Inconsistencies in the appeals procedure


Clause 47, 28 and 44

Under the Bill, if the Commission is satisfied that a prima facie case of corruption exists, it will refer the matter to the appropriate authority. The Bill also provides that the Commissions decisions related to corruption may be appealed before the Lokpal or the Lokayuktas. This raises three issues. First, under the Bill, the Commission is not empowered to adjudicate matters related to corruption. It is only empowered to refer the matter to the appropriate authority. It is unclear how an appeal may be made before the Lokpal or the Lokayuktas in the absence of the Commissions power to decide on cases of corruption.

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Second, the Bill does not provide a process to appeal against the Commissions orders that do not relate to corruption. Third, the Lokpal is yet to be instituted at the centre and a number of states have not yet established Lokayuktas. The Standing Committee has recommended that appeals to the Lokpal and Lokayuktas should not be provided. It observed that the Lokpal and Lokayuktas are anti-corruption agencies, whereas, the Bill addresses the issue of delivery of services. It also noted that the Bill already provided for three levels of appeal, and that a fourth appeal to the Lokpal or the Lokayuktas is not required.

Removal of members of the Central and State Grievance Commissions


Clause 20 and 37

Members of the Commissions can be removed by an order of the President or the Governor. The Bill states that the government may by rules regulate the investigation procedure for removal of the Commissioners for misbehaviour or incapacity. However, it does not require a judicial inquiry to be conducted in case there is an allegation of misbehaviour (acquisition of financial or such other interest) or incapacity of the Commissioners. This is different from the process provided under some legislations. For example, the Competition Act, 2002, the Right to Information Act, 2005 and the Protection of Human Rights Act, 1993 require a judicial inquiry to be conducted before removal of the Commissioners when there is an allegation of misbehaviour or incapacity against them. The Electronic Delivery of Services Bill, 2011 and the Lokpal and Lokayuktas Bill, 2011 also have a similar inquiry procedure.

Inconsistency between the powers of the DA and the Commissions


Clause 11(10) and 28

The Bill provides for two levels of appeals by a complainant: first to the DA, and then to the Commission. There is an inconsistency between the powers of the two. If there is a prima facie indication of corruption, the DA may either refer the matter to the appropriate authority or initiate proceedings. However, if the complainant appeals against the DAs decision to the Commission, it can only refer the matter to the appropriate authority. Unlike the DA, the Commission does not have the power to initiate proceedings.
Notes 1. The brief has been written on the basis of the Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011 introduced in the Lok Sabha on December 20, 2011. 2. Citizens Charter - A Handbook, Department of Administrative Reforms and Public Grievances, available at http://darpg.gov.in/ArticleContent.aspx?category=184. 3. Citizens charter: Indian Experience available at http://darpg.gov.in/ArticleContent.aspx?category=182. 4. Fourth Report of the Second Administrative Reforms Commission on Ethics in Governance, January 2007. 5. Twenty Ninth Report of the Standing Committee on Personnel, Public Grievance, Law and Justice, on Public Grievance Redressal Mechanism, October 21, 2008. 6. Annual Report of the Chief Information Commission 2005, p. 64 available at http://www.cic.gov.in/AnnualReports/AR-200506/MainReport.pdf. 7. Address by the President of India to Parliament on June 4, 2009 available at http://presidentofindia.nic.in/sp040609.html. 8. Sense of the House Resolution, Lok Sabha debate on August 27, 2011 p. 428. 9. Citizens charters in Government of India, Department of Administrative Reforms and Public Grievances, http://goiCharters.nic.in/Charter.htm. 10. Madhya Pradesh Lok Sewaon Ke Pradan Ki Guarantee Vidheyak, 2010, Uttar Pradesh Janhit Guarantee Adhiniyam, 2011, Jammu and Kashmir Public Services Guarantee Act, 2011, Bihar Right to Public Services Act, 2011. 11. Under the New Bill Citizens Grievances to be redressed at Block Level: V. Narayanasamy, Press Information Bureau, Ministry of Personnel, Public Grievances and Pensions, December 23, 2011. 12. State of Tripura vs. The Province of East Bengal 1951 AIR (SC) 23. 13. Section 22(3)(a), The National Food Security Bill, 2011.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

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APPENDIX: Comparison with some Acts on Right to Public Services


Table 1: Comparison between the Central Bill and State laws
Issues Complainants Entities to which the Bill/law applies Central Bill Citizens of India. (a) constitutional and statutory authorities; (b) entities notified by government; (c) NGOs; (d) some private entities. Application for services to the designated officer with four rounds of appeal. The third round of appeal is before Commissions at the Centre or the State. In corruption cases, an appeal would lie before the Lokpal or Lokayukta. Maximum penalty of Rs 50,000 on the designated officer or the grievance redressal officer. J&K All persons eligible to obtain the services. State government. Delhi Citizen of India. (a) constitutional and statutory authorities; (b) entities notified by the government, (c) NGOs; and (d) state agencies. Application for services is to be filed with concerned department, with one round of appeal for the public official. Bihar/MP/UP/Rajasthan All persons eligible to obtain the services. State government. Punjab/Uttarakhand All persons eligible to obtain the services. State government. Himachal Pradesh All persons eligible to obtain the services. State government.

Procedure

Penalty

Disciplinary action

The DA may In case of habitual Disciplinary action may be Disciplinary action may be recommend to the offenders the competent recommended against the recommended against the disciplinary authority to officer can take designated officer or other designated officer. initiate action against the appropriate officials. designated officer. administrative action. Compensation Not mandatory. Amount Mandatory. Amount not Not mandatory. Amount Not mandatory. Amount shall not exceed the specified. shall not exceed the penalty shall not exceed the penalty imposed and it imposed and it shall be penalty imposed and it shall be deducted from deducted from the penalty. shall be deducted from the the penalty. penalty. Commissions At the central and state No provision. Punjab: 5 Commissioners. No provision. level. UK: 3 Commissioners. Sources: Madhya Pradesh Lok Sewaon Ke Pradan Ki Guarantee Vidheyak, 2010; Uttar Pradesh Janhit Guarantee Adhiniyam, 2011; Jammu and Kashmir Public Services Guarantee Act, 2011; Delhi (Right of Citizen to Time Bound Delivery of Services) Act, 2011; Bihar Right to Public Services Act, 2011; Himachal Pradesh Public Services Guarantee Act, 2011; Rajasthan Guaranteed Delivery of Public Services Act, 2011; Uttarakhand Right to Service Act, 2011; Punjab Right to Service Act, 2011; Right of Citizens for Time Bound Delivery of Services and Redressal of their Grievances Bill, 2011; PRS.

Application for services to the designated officer with two rounds of appeal. If a designated officer or the first appellate authority is aggrieved by the order of the second appellate authority he may file a revision before the special tribunal. Penalty of Rs 500 Rs 5,000 on the designated officer for non-delivery of services and on first appellate authority for delay in case disposal. Delay may be penalised with Rs 250 per day not exceeding Rs 5,000. Disciplinary action may be recommended against the designated officer or the first appellate authority. Not mandatory. Amount shall not exceed the penalty imposed and it shall be deducted from the penalty. No provision.

Application for services to the designated officer with two rounds of appeal. An aggrieved designated officer or the first appellate authority may file a revision before a nominated officer. Penalty of Rs 500 Rs 5,000 on the designated officer for non-delivery of services and on first appellate authority for delay in disposal of case. Delay may be penalised with Rs 250 per day not exceeding Rs 5,000. Disciplinary action may be recommended against the designated officer or the first appellate authority. Not mandatory. Amount shall not exceed the penalty imposed and it shall be deducted from the penalty. No provision.

Application for services to the designated officer with three rounds of appeal. The third round of appeal is before the Commission. Any person may file a revision against orders of second appellate authority before the Commission. Penalty of Rs 500 Rs 5,000 on the designated officer for non-delivery of services. Delay may be penalised with Rs 250 per day not exceeding Rs 5,000.

Application for services to the designated officer with two rounds of appeal.

Every government servant who fails to deliver the services within the stipulated time period shall be liable to pay cost at Rs 10 per application.

Penalty of Rs 1000 Rs 5,000 on the designated officer for non-delivery of services.

Legislative Brief
The Insurance Laws (Amendment) Bill, 2008
Highlights of the Bill
The Bill was introduced in the Rajya Sabha on 22nd December, 2008 and was referred to the Standing Committee on Finance (Chairperson: Shri Ananth Kumar). The Standing Committee is yet to submit its report.

The Bill allows foreign investors to hold up to 49% of the capital in an Indian insurance company. It allows for nationalised general insurance companies to raise funds from the capital markets. Companies or co-operative societies in the life or general insurance business must have a minimum equity capital of Rs 100 crore, while those in health insurance must have a minimum equity capital of Rs 50 crore. An insurer cannot challenge a life insurance policy for any reason, after a period of five years. Insurers who fail to meet their obligations with respect to underwriting third party motor insurance, or underwriting policies in rural and social sectors or with vulnerable sections, face a fine of Rs 25 crore. The Bill provides for appeals against decisions by Insurance Regulatory and Development Authority to lie with the Securities Appellate Tribunal set up under the SEBI Act, 1992. The Bill provides for Lloyds of London to be included within the definition of a foreign company. However, it is unclear whether the members of Lloyds who ultimately bear all risks of policies which are written, will be able to operate in the country. The IRDA Act, 1999 required Indian promoters of an insurance company to reduce their stake to 26% over a period of ten years. The Bill does away with this requirement. The Bill permits a policyholder to completely assign all rights under the policy to a third party, while allowing an insurer to decline such a transfer. The validity of such transfers is under legal challenge. While the Mumbai High Court has ruled that such transfers are valid, the case is currently facing appeal in the Supreme Court. While appeals against decisions by IRDA lie with the Securities Appellate Tribunal, the Bill does not provide for the tribunal to appoint a member with experience in insurance law. The Law Commission had suggested the merger of key provisions of the IRDA Act with the Insurance Act. This has not been implemented.

Recent Briefs: The Companies Bill, 2008


February 18, 2009

Key Issues and Analysis

The Right of Children to Free and Compulsory Education Bill, 2008


February 11, 2009

Avinash Celestine avinash@prsindia.org

May 12, 2009

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Insurance Laws (Amendment) Bill, 2008

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL 1


Context
There are a number of laws which govern the insurance business in India. The Insurance Act, 1938 provides the main legal framework within which insurance businesses function and regulates the relationship between an insurer, its policyholders, its shareholders, and the regulator. The life insurance business was nationalised in 1956 with the establishment of the Life Insurance Corporation under the LIC Act, 1956. The general insurance business in India was nationalised in 1972 with the enactment of the General Insurance Business (Nationalisation) Act, 1972. The IRDA Act, 1999 provided for the setting up of the Insurance Regulatory and Development Authority, which regulates the industry. It also provided for the re-entry of the private sector into the insurance business. In 2007-08, the total premium income of life and non-life insurers in India was about Rs 2,30,000 crore, or 5.3% of GDP (Table 1). Table 1: Insurance Market in India (2007-08) In 2004, the Law Commission recommended Life Insurance Non-life Insurance comprehensive reforms to the Insurance Act, 1938 Premium income (Rs crore) 2,01,351 27,823 which included changes to rights enjoyed by policyholders and the setting up of an independent Market Share (%) Public Sector 74% 60% grievance redressal mechanism and an insurance Private Sector 26% 40% appellate tribunal. 2 The Report of the Committee on No. of Insurers Public Sector 1 7 Provisions of the Insurance Act, 1938 (Chairman: Shri Private Sector 20 14 K.P. Narasimhan), released in 2005, made further Sources: IRDA Annual Report (2007-08), PRS recommendations for changes to the Act with respect to investment and accounting norms for insurance companies. 3 The Bill incorporates some recommendations of the Law Commission as well as the K.P. Narasimhan Committee. It amends the Insurance Act, 1938, the General Insurance Business (Nationalisation) Act, 1972, and the IRDA Act, 1999.

Key Features
The Bill redefines certain types of insurance and allows for foreign investors to hold up to 49% of the capital in an insurance company. It provides for nationalised general insurance companies to raise funds from capital markets with the permission of the central government. The Bill changes norms governing the rights of policyholders and insurers with respect to insurance policies. It enhances penalties for a range of offences and prescribes a procedure for appeals against decisions by IRDA. It allows for a number of issues, currently specified in the Act, to be specified in the rules.

Definitions
The Bill defines health insurance separately. Health insurance includes policies issued to cover medical, surgical, and hospitalisation costs related to in-patient and out-patient treatment. Such policies can include assured benefits, cover long term care, and provide overseas travel or personal accident cover. A foreign company has been defined as a company or body established or incorporated under the law of any country outside India. Lloyds, established under the Lloyds Act, 1871 in the UK, is specifically covered by this definition.

Entry Criteria and Corporate Governance


The Bill specifies four kinds of entities who are allowed to act as insurers public companies, co-operative societies, foreign companies operating through a branch, and statutory bodies established by acts of Parliament to carry on insurance. It also specifies the minimum equity capital that various insurance businesses must maintain (Table 2). Table 2: Eligibility Norms for Entry into the Insurance Business
Entity Company Co-operative Society Branch of a foreign company Criteria for formation The Company must be a public company. Foreign investors can hold up to 49% of shares in the company. Must be registered under central or state Acts. Foreign investment limit of 26%. Cannot be re-insurers. Branches of foreign companies can only be re-insurers. Indian partner not needed. Capital Requirements (Equity) Life Insurance / General Insurance: Rs 100 crore Health Insurance: Rs 50 crore Re-insurance: Rs 200 crore Net owned funds of the company must be at least Rs 5000 crore.

Sources: The Insurance Laws (Amendment) Bill, 2008, PRS

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The Bill provides for the General Insurance Corporation, the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Insurance Company Limited and the United India Insurance Company Limited, to raise capital with the permission of the central government. The Insurance Act restricts the capital of a publicly held life insurance company to equity shares only. The Bill requires all public insurance companies to hold capital as equity and in other forms to be specified by regulations. The Insurance Act requires an Indian promoter to reduce their stake in an insurance company to 26% within ten years. The Bill removes this requirement. Insurers may invest up to 5% of assets in promoter companies. They cannot invest in private companies. Agents, insurance brokers or other insurance intermediaries cannot be directors of an insurance company. IRDA must approve any transfer of shares which results in a single investor owning more than 5% of the equity of an insurance company. The regulator must also approve a transfer of more than 1% of the equity of an insurance company by an individual or firm or group under the same management.

Insurance Policies and Rights of Policyholders


All general insurers must underwrite a minimum amount of insurance business in third party motor insurance. The Bill provides for policyholders to assign or transfer the rights enjoyed by them to others. Conditional transfers allow for only certain rights to be transferred till the policy matures. Absolute transfers provide for the transfer of all rights of the policy unconditionally. Unless specifically allowed otherwise, all transfers are to be treated as absolute. Insurers can decline the assignment of a policy if they feel it is against the interests of the policyholder, that it is not bona fide, or that it is against the public interest. Policyholders can appeal to IRDA against such a refusal. The Bill distinguishes collector nominees from beneficiary nominees. Beneficiary nominees are entitled to benefits payable under a policy. A collector nominee must pay benefits of the policy to legal heirs or the beneficiary nominee. Unless a policyholder makes such a distinction, all nominees are to be treated as beneficiary nominees. The Insurance Act allows an insurer to cancel a life insurance policy within two years on the grounds that material facts, on the basis of which the policy was issued, were inaccurate or false. After two years, a policy can still be cancelled on grounds of fraud. The Bill expands the window within which policies can be cancelled to five years. However, a policy cannot be challenged on any grounds after a period of five years. If an insurer cancels a policy on grounds of misstatement or suppression of facts, premiums collected must be returned within 90 days.

Solvency and Investments


All insurers and re-insurers must maintain an excess of assets over liabilities (solvency margin) of 50% of the minimum amount of capital prescribed. A further control level of solvency shall also be prescribed in the rules. Table 3: Investment Norms (% of total assets) The Bill specifies investment norms for insurers (Table 3). Investments other than those approved by IRDA must be cleared by all directors and reported to the regulator.
Investment Life Insurance 25% 25% 50% 15% Government Securities (minimum) Government/other approved Securities (minimum) Approved Investments (maximum) Other Investments (maximum) 20% 10% 70% 15%

General Insurance

Penalties and Adjudication Mechanism


The Bill provides for the Securities Appellate Tribunal, established under the SEBI Act, 1992, to be the appellate authority for decisions made by IRDA.

Insurers who violate norms on investment and the underwriting of third party motor insurance, or obligations towards rural and social sectors or vulnerable sections, face a fine of Rs 25 crore.

Sources: Insurance Laws (Amendment) Bill, 2008; PRS

Miscellaneous
The Bill does away with the requirement that insurance agents be licenced by IRDA. It allows insurers to appoint persons with specified qualifications and training, as insurance agents. No person can act as an agent for more than one life insurer or general insurer. Norms for commission and brokerage are to be specified in regulations. The Bill provides for separate Life and General Insurance Councils to be constituted from amongst industry representatives and nominees of IRDA. The councils will set standards of conduct for insurers and advise the regulator. The Bill deletes provisions in the Act which provide for a Tariff Advisory Committee.
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PART B: KEY ISSUES AND ANALYSIS


Entry into the Insurance Business
Clause 3(iv), Statement of Objects and Reasons

Lloyds of London
The Bill provides for Lloyds, covered by the Lloyds Act, 1871 of the UK, to be treated as a foreign company. The Statement of Objects and Reasons specifies one of the aims of the Bill as being to facilitate entry of Lloyds of London in insurance business in India Lloyds is not a company but an insurance market, established as a society and comprised of members, who are distinct legal entities in their own right. It is the members, rather than Lloyds itself, who bear the risks of any policies written. While the Bill allows for the entry of Lloyds, it is unclear as to whether the individual members will also be allowed to practice in the country. In India, the Insurance Act, 1938 currently defines an insurer to include persons in India who have contracts with Lloyds underwriters. 4 Lloyds is regulated by the Financial Services Authority, which regulates financial services in the UK. In China, Lloyds has a licence only for reinsurance and operates through a wholly owned subsidiary, incorporated as a company. 5 In the US, Lloyds is an accredited reinsurer in all states.

Capital Structure
Capital Requirements specified in the Bill
Clause 3

The Bill requires life and general insurers to have a minimum capital of Rs 100 crore. Health insurers are required to have a minimum capital of Rs 50 crore. The Bill does not give any flexibility to the regulator to revise capital requirements upward over time. This regulatory structure for insurers differs from that for banks. The Banking Regulation Act, 1949 allows the RBI to licence banks who fulfil conditions imposed on them by the central bank. 6 The Act gives broad guidelines as to what those conditions should be but leaves it to the central bank to impose specific conditions, including minimum capital norms, without needing to seek parliamentary approval.

The Insurance Act and LIC


The state-owned LIC is incorporated under the LIC Act, 1956 and is the countrys largest life insurer. The IRDA Act, 1999 did away with LICs exclusive privilege to carry on life insurance in the country and applied all the provisions of the Insurance Act, 1938 to LIC. 7 However, unlike other life insurers in the country, all policies issued by LIC are guaranteed by the government. LIC currently does not meet the minimum capital requirement of Rs 100 crore specified in the Insurance Act as its paid up equity capital is Rs 5 crore. The Life Insurance Corporation (Amendment) Bill, 2008, introduced in December last year in the Lok Sabha provided for an increase in LICs capital to Rs 100 crore. It also allowed for the government to specify the extent to which it guarantees policies issued by LIC. However the Bill will lapse with the dissolution of the 14th Lok Sabha.

Divestment by Indian Promoters


Clause 14

The IRDA Act, 1999 amended the Insurance Act, requiring Indian promoters to reduce their stake to 26% within ten years. The Bill does away with this requirement. The Reserve Bank of India requires promoters of private sector banks to reduce their stake to 40% within one year. 8 The RBI, at its discretion, can allow promoters to dilute their stake over a longer period.

Insurance Policies
Assignment and Transfer of Policies
Clause 48

The Bill provides for a policyholder to assign or transfer their rights under a policy, either completely or only partly, to a third party. A basic requirement for any policy of life insurance to be issued is that of insurable interest i.e. whether the person who enjoys all rights under the policy also has an interest in the insured person remaining alive. If a policyholder sells the policy, it is unclear whether the new buyer is also required to have insurable interest. The Mumbai High Court has ruled that while insurable interest must exist when the policy is first taken, it is not necessary for such interest to exist when rights in the policy are subsequently transferred to a third party. It ruled that such assignments are legal in India. 9 The case is currently facing appeal in the Supreme Court. 10

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Internationally, the ability to completely assign all rights under a policy to a third party has led to a secondary market for life insurance policies. Policies can be sold for a price which is lower than the face value of the policy but higher than the surrender value. The buyer pays the remaining premiums on the policy and is entitled to the sum paid by the insurer when the insured person dies or the policy matures. In the US, the market for such policies was estimated at about $13 billion in 2005. 11 In the US, such secondary market transactions in life policies are regulated in 28 states. Thirty-eight states regulate such transactions in cases where the insured person has a short life expectancy (2-3 years). 12 In Canada, such transactions are illegal in 9 provinces. 13 India does not have laws which specifically regulate the secondary market in insurance policies. The Bill allows an insurer to decline to recognise the transfer of rights of a life policy to a third party. While this is in line with recommendations made by the Law Commission, it could deter the growth of a secondary market in such policies. The K.P. Narasimhan Committee had suggested that IRDA be given the power to regulate such transfers of rights.

Reports of the Law Commission and the K.P. Narasimhan Committee


Grievance Redressal
Policyholders with complaints can approach the consumer courts or insurance ombudsmen. Such ombudsmen are appointed based on recommendations made by a committee consisting of the chairpersons of IRDA, LIC, General Insurance Corporation and a representative of the central government. This creates the possibility of a conflict of interest. In comparison, ombudsmen in the banking sector are appointed by a committee comprising the deputy governors of the Reserve Bank of India and a representative of the finance ministry. The Law Commission found the ombudsmen system in insurance unsatisfactory and said that alternative fora such as the Consumer Courts were also ineffective given the large backlog of cases still pending. It proposed that amendments be made to the Insurance Act to put in place an independent grievance redressal authority (GRA) with all powers and functions of a civil court and composed of judicial and technical members. It proposed that existing cases in consumer courts be transferred to the GRA. The K.P. Narasimhan Committee disagreed, saying that consumer courts were more easily accessible than a GRA would be. Further, it was not clear whether consumer courts were so overburdened as to be unable to handle complaints by policyholders. It suggested instead that the existing system be continued with some changes. The Bill does not provide for an independent GRA.

Appeals Process
The Bill provides for appeals against decisions by IRDA to lie with the Securities Appellate Tribunal, set up under the SEBI Act, 1992. This is in line with recommendations made by the K.P. Narasimhan Committee. Since SAT currently deals with issues related to the capital markets only, its expertise in dealing with matters of insurance law may be limited. The committee had suggested that amendments be made to the SEBI Act to provide for the appointment of a member with a background in insurance. This recommendation has not been implemented. The Law Commission had suggested a separate appellate authority for the insurance industry, which would hear appeals against decisions by IRDA or the GRA (see above). Appeals against decisions by the proposed insurance appellate authority (IAT) would lie directly with the Supreme Court.

Other Recommendations
Table 4: Status of Other Recommendations made by Law Commission
Topic Simplification of laws Cancellation of Policy Nomination of policies Penalties Recommendation Suggested the merger of a number of key provisions of IRDA Act with Insurance Act. Insurer should be allowed to challenge a policy on grounds of misstatements/suppression of facts or fraud within 5 years. No challenge to be allowed on any grounds after 5 years. Allow policyholders to distinguish between beneficiary and collector nominees. Increase penalties for violation of investment norms, or obligations towards rural /social sectors or vulnerable sections. Status Not implemented. As recommended. As recommended. As recommended.

Sources: Insurance Laws (Amendment) Bill, 2008; PRS; Law Commission Report.

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Table 5: Status of Other Recommendations made by K.P. Narasimhan Committee


Topic Definitions Recommendation Define Contract of Insurance as any contract effected by an insurer by which he assumes a degree of risk of loss or assured benefit as may be specified by regulations made by the Authority. Minimum of 25% of investible funds in government securities and a further 25% in government/approved securities. Types of approved investments to be specified in regulations. Specify limits on non-approved investments in regulations. Capital Requirements Minimum capital of Rs 100 crore prescribed for life and general insurers and Rs 200 crore for general insurers. Minimum capital for health/agricultural insurance to be specified in regulations. Specify valuation norms for assets/ liabilities in regulations. Every insurer to maintain an excess of assets over liabilities of 50% of minimum capital. Actuaries Powers of Statutory Councils Insurance Agents Insert provision in the Insurance Act which makes it mandatory for every insurer to appoint an actuary. Shift power to set rates and terms from Tariff Advisory Council to General Insurance Council. Bring TAC under the General Insurance Council. Do away with licensing of insurance agents while allowing IRDA to specify minimum qualifications. Entrust insurers with the power to appoint agents. No change to Act. Not implemented. Currently required by IRDA regulations. TAC done away with. Powers of General Insurance Council left unchanged. As recommended. Status Not implemented.

Investments

As recommended. Types of approved investments to be specified in regulations. Act specifies a maximum limit of 15% on non-approved investments. As recommended. Act prescribes minimum capital of Rs 50 crore for health insurers.

Solvency

As recommended.

Cancellation of Policy

Window within which policy can be cancelled on grounds of misstatement/suppression of facts or fraud expanded to five years from two. However, policy cannot be challenged on any grounds after five years.

Sources: Insurance Laws (Amendment) Bill, 2008; K.P. Narasimhan Committee; PRS

Notes 1. This Brief has been written on the basis of the Insurance Laws (Amendment) Bill, 2008, which was introduced in the Lok Sabha on December 22nd, 2008 and referred to the Standing Committee on Finance (Chairperson: Shri Anant Kumar). The Standing Committee is yet to submit its report. 2. Law Commission of India, The Revision of the Insurance Act, 1938 and the IRDA Act, 1999, 190th Report. 3. Report of the K.P. Narasimhan Committee on Provisions of the Insurance Act, 1938 (Chairperson: Shri K.P. Narasimhan). Report submitted in July 2005. 4.The Insurance Act, 1938, Clause 2(9)(c). 5. See Lloyds Annual Report, 2008, p. 27: http://www.lloyds.com/Lloyds_Market/Financial_performance/Financial_reports/2008_Annual_Report.htm 6. Banking Regulation Act, 1949, Section 22. 7. See LIC Act, 1956, Section 30A. 8. See RBI website: http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=4350 9.Writ Petition No. 2159 of 2004, Insure Policy Plus Services and others vs. The Life Insurance Corporation of India and others. 10. Special Leave Petition (Civil) No. 10783 of 2007, LIC of India vs. Insure Policy Plus Services and others. 11. Blake, David and Debbie Harrison, And death shall have no dominion: Life settlements and the ethics of profiting from mortality, July 2008, Pensions Institute, p. 5. Available at : http://www.pensions-institute.org/DeathShallHaveNoDominion_Final_3July08.pdf 12. See Life Settlement ABS Developments, DBRS, June 2008, p. 11. http://www.dbrs.com/research/221027/select-commentaries-life-settlement-abs-developments.pdf 13. Study Paper on Viatical Settlements, Canadian Centre for Elder Law Studies, May 2006, p. 11.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for noncommercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

May 12, 2009

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Legislative Brief
The Pension Fund Regulatory and Development Authority Bill, 2011 was introduced in the Lok Sabha by Mr. Pranab Mukherjee, Minister for Finance on March 24, 2011. The Bill was referred to the Standing Committee on Finance (Chairperson Mr. Yashwant Sinha) on April 8, 2011. The Committee submitted its report on August 30, 2011.

The Pension Fund Regulatory and Development Authority Bill, 2011


Highlights of the Bill
The Pension Fund Regulatory and Development Authority Bill, 2011 seeks to give statutory powers to the interim authority set up in 2003. It also alters the name of the New Pension System to National Pension System (NPS). NPS is a defined contribution scheme for all central government employees who joined after January 2004. It is implemented through a combination of retailers, pension fund managers, and a record keeper. This scheme is different from the earlier defined benefit scheme. Under the NPS, every subscriber will have an individual pension account, which will be portable across job changes. The subscribers will choose fund managers and schemes to manage their pension wealth. They will also have the option of switching schemes and fund managers. The NPS was extended to all general citizens through central government notification in May 2009.

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Key Issues and Analysis


The Bill provides a structure (NPS) to plan for old age income security. However, it is optional for those in the unorganised sector. This differs from the system in countries such as the United States, which have a mandatory system to ensure that all persons have old age income security. The NPS is a defined contribution scheme. It is different from existing pension schemes in the organised sector such as the EPS, and the GPF. Both the EPS and GPF are defined benefit schemes. In the NPS, the investment risk is entirely borne by the employees. They are no longer exposed to the risk of default by the government as was the case under the defined benefit system. There will be no explicit or implicit guarantee on the pension wealth, except in cases where the subscriber purchases market based guarantees. This rule is different from the case of bank deposits, where deposits up to Rs 1 lakh are guaranteed. The total corpus and number of enrolments to the NPS have been lower than expected. Recommendations have been made by different committees to the government to make efforts to popularise the scheme.

M R Madhavan madhavan@prsindia.org Sana Gangwani sana@prsindia.org

November 28, 2011

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The PFRDA Bill, 2011

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL


Context
Till 2009, old age pension was available only to government employees and individuals in the organised sector. In 2000, the Old Age Social and Income Security (OASIS) Report, under the chairmanship of Dr. S.A. Dave, recommended that pension schemes be extended to the unorganised sector as well. In October 2003, an interim Pension Fund Regulatory and Development Authority (PFRDA) was constituted through a notification to develop and regulate the pension sector. In December 2003, the central government (through a notification1) implemented the New Pension Scheme (NPS) for its employees appointed from January 2004 onwards. The NPS shifted the pension scheme for government employees from the defined benefits (DB) system to a defined contribution (DC) system.* In order to give statutory powers to the interim body, a Bill was introduced in Parliament in March 2005. This Bill defined the architecture of the pension system. However, it lapsed with the dissolution of the 14th Lok Sabha in 2009. In the meantime, the interim PFRDA appointed 22 retailers (Points of Presence - PoPs), seven pension fund managers (PFMs), and a central record-keeper (CRA). In May 20092 the NPS was extended to all citizens (including workers in the unorganised sector, on a voluntary basis). In March 2011, the PFRDA Bill, 2011 was introduced in the Lok Sabha. It seeks to give statutory status to the interim PFRDA, and changes the name of the New Pension System under the previous bill to the National Pension System (NPS). As of July 2011, the NPS had 24 lakh subscribers, and managed funds of Rs 10,000 crore.3

Key Features
The Bill gives statutory recognition to the PFRDA, defines its powers and duties, and sets the broad contours of NPS.

The NPS Architecture


The NPS is a DC pension system set up by the PFRDA. It comprises the following: Central Recordkeeping Agency (CRA) - The CRA shall maintain records and accounts, and execute all instructions regarding subscription, switching of options, and withdrawals by the subscriber4. The subscriber may obtain information about his account directly from the CRA. Pension Fund Manager (PFM) - The PFMs shall provide a set of schemes with varying risk-return profiles (i.e., balance between risk taken and returns expected), and manage assets of subscribers. Point of Presence (PoP) - The PoPs shall function as the retailers of the NPS. They shall receive instructions and contributions from subscribers, transmit these to the CRA, and pay out benefits to subscribers. They will be the initial point of contact between subscribers and the system.

Chart 1: The NPS Architecture

PFRDA
R e g u la tio n s
In s tru c tio n s a n d S u b s c rip tio n s

In s tru c tio n s a n d S u b s c rip tio n s

In s tru c tio n s a n d S u b s c rip tio n s

S u b s c rib e r
In fo rm a tio n a n d b e n e fits

PoP
In fo rm a tio n a n d b e n e fits

CRA
B e n e fits

PFM

Source: PRS

In the Defined Benefit (DB) system, pension payable at the time of retirement is fixed on the basis of the last pay-scale drawn. In the Defined Contribution (DC) system the pension payable is determined by the funds accumulated through contribution, and investment gains during the service of the employee.
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November 28, 2011

The PFRDA Bill, 2011

PRS Legislative Research

Working of the NPS


The working of the NPS can be explained under the following heads: Eligibility norms - The PFRDA shall prescribe norms on matters such as minimum capital requirement, past track-record (including ability to provide guaranteed returns), costs and fees, information technology capability, and customer base. Foreign investment Subscribers funds may not be invested abroad by PFMs. Individual Pension Account - Every subscriber shall have an individual pension account (IPA). The subscriber has the option of selecting the PFMs and schemes5; he can switch his funds across PFMs and schemes. The IPA will be portable in case of change of employment.6 The subscriber cannot exit from the system except as specified by the notification. The current notification specifies two options: (a) if the subscriber chooses to exit at the normal age of retirement (60 years), he shall use at least 40 per cent of accumulated pension wealth to purchase an annuity7 from a life insurance company. This annuity will provide pension for the lifetime of the employee, his dependent parents and spouse; (b) if the subscriber chooses to exit prior to retirement, 80 per cent of the accumulated pension wealth shall be converted to an annuity. Permanent Retirement Account Number (PRAN) Every subscriber on registering with the NPS gets a unique PRAN issued by the CRA. Two tier structure - The notification mentions a two tier structure for government employees under the NPS. In Tier-I both the employee and the government will contribute 10 per cent of (basic+DA)8, and there will be no withdrawals till exit. The employee can opt to contribute a further amount into a Tier-II account, which will not have any contribution by the government and from which he can make withdrawals.9

Establishment, powers and duties of the PFRDA


The PFRDA shall perform promotional, developmental and regulatory functions relating to the pension system. It shall also impose penalties in case of any regulatory violations. The PFRDA comprising a Chairman, three whole time members, and three part time members shall be appointed by the central government for a five year term, and may be removed from office only under specified conditions. The PFRDA shall regulate the NPS, and all intermediaries including the CRA, PFMs and PoPs. It shall approve the schemes and norms (including investment guidelines) for management of the investments by PFMs. It shall be responsible for protecting the interests of subscribers and establishing a mechanism for redressal of their grievances. It shall standardise dissemination of information about performance of pension funds and performance benchmarks. The PFRDA may establish a Pension Advisory Committee, with a maximum of 25 members. This committee would represent the interests of employee associations, commerce and industry, subscribers, intermediaries and organizations engaged in pension research. It would also advise the PFRDA on matters referred to it.

Extent of the Bill


The Bill exempts certain schemes and funds. These include the Coal Mines Provident Fund and Miscellaneous Provisions Act 1948, the Employees Provident Funds and Miscellaneous Provisions Act 1952, the Seamens Provident Fund Act 1966, the Assam Tea Plantations Provident Fund and Pension Fund Scheme Act 1955, and the Jammu and Kashmir Employees Provident Funds Act 1961, and contracts covered by the Insurance Act 1938. It also exempts employees of the central government and All-India Services appointed before January 1, 2004.10 Any person governed by any of these exempt schemes may voluntarily choose to join NPS in addition to their mandatory cover. The Bill permits state governments and union territories to extend the NPS to their employees. Any employee in the excluded category can opt to join the NPS in addition to his mandatory cover.

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PART B: KEY ISSUES AND ANALYSIS


EPS versus NPS
Employees who joined the central government after January 2004 are covered under the NPS. Those employed with the government before 2004 are covered by the General Provident Fund (GPF). Employees in the organised sector subscribing to the Employee Pension Scheme (EPS) also have a pension facility. In Table 1, we compare the NPS with other pension schemes such as the EPS, and GPF. Table 1: Comparison of features of EPS and NPS
Feature Coverage Eligibility Requirement Portability across job changes Type of account Type of pension Risks For government employees (covered by GPF) EPS / GPF Organised sector employees through EPS, and government employees before 2004 under GPF. Minimum term of employment (typically 10 -20 years). None for government employees. Limited portability for those covered under EPS. Pooled. Defined benefit. The employee carries no investment risk. However, there is a risk of default/delay in pension payments by GPF/EPS. For existing central government employees, the government pays 50% of the average of last 10 months pay (Basic+DA) if employee has 33 years service. There is no contribution by the employee or the government into a fund but this is paid out of the Consolidated Fund of India. For those covered by EPS, the employer pays 8.33% of Basic+DA to the EPS (maintained by EPFO), and the government pays 1.16%. Pension after retirement will be paid based on the years of service and last pay drawn. Not mandated. There is no regular update on performance of the EPS. Government pensions are unfunded. The EPS board decides the strategy. This strategy and the investment portfolio are not disclosed to the employee. NPS Available to all subscribers, including the unorganised sector. None. Portable. Individual pension account (IPA). Defined Contribution. The employee carries the entire investment risk. There is no risk of default by PFMs. Government and the employee will each pay 10% of Basic+DA into a scheme of a PFM. Separate account for each employee will be maintained. At the time of exit, a part (40%) of the pension wealth will be used to buy an annuity, and the remaining paid as a lump sum amount. No contribution from the employer. The employee selects a particular scheme.

For those not employed by the government Disclosure of Performance Investment strategy

Each PFM will publish the performance of schemes managed by him at regular intervals. The subscriber can see the balance in his IPA. Each scheme has to follow a specified investment pattern. The subscriber chooses his portfolio of schemes.

Sources: PFRDA website, EPS-1995, PRS

Defined Benefit versus Defined Contribution


The DB system, applicable to government servants appointed before 2004, and EPS subscribers, promises a fixed monthly pension. This amount is linked to the pay drawn, number of years of service etc., and has no direct linkage to the contribution of the employee or employer towards a pension fund. The entire investment risk is borne by the pension fund manager and the government. The total benefits liable from such a scheme could amount to be higher than the funds available, which can lead to delays and defaults. Traditionally, a large proportion of pension funds around the world have been of the DB type11. However, many have been under funded, and some have collapsed12. This has led to a debate in a number of countries regarding the sustainability of their pension and social security systems.13 In the DC system (as proposed in the NPS), each employee contributes a proportion of his monthly income to an individual account. The funds in this account are invested in one or more schemes offered by pension fund(s). The balance in the account belongs to the employee, which will be accessible at the time of exit. The employee bears the entire investment risk and there is no risk of default by the fund as the liability of the fund to its subscriber equals the assets owned. Table 2 lists some advantages and disadvantages of the DB and DC system. Table 2: Defined Benefits versus Defined Contributions
Advantages Defined Benefits - Guaranteed retirement income - Employees do not bear investment risk - Flexibility for inflation and wage adjustments - Independent of participants savings - Not beneficial to employees who leave before minimum eligible service - Less portable in switching employers - Fund manager could default if funds are not invested appropriately Defined Contribution - Participants have more choice in investing - Participants can benefit from better returns - Plans are easily portable across job changes - Option to switch fund managers and schemes - No risk of default by fund managers - Returns are subject to market performance - Participants bear investment risk and may make misinformed choices - Difficult to build a fund for those who enter late - Shifts administration costs to employees

Disadvantages

Source:PRS

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The PFRDA Bill, 2011

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Coverage
The Bill excludes employees of the central government who joined before January 1, 2004. Those who joined from this date must be part of the NPS. State governments may mandate NPS for their employees by issuing a notification. Sixteen state governments14 have notified NPS for their employees. The Bill excludes all schemes covered by EPF Act. Thus, employees covered by the EPS are exempt from the provisions of this Bill. The Bill makes the NPS available to the unorganised sector. However, there is no compulsion to join the system. Many countries (e.g., the social security system in the US) require a mandatory contribution from individuals to ensure that they have old age income security. According to the Standing Committee Report submitted in August 2011, approximately 51,000 individuals have joined the voluntary part of the NPS as of July 2011. The government extended pension schemes to the unorganized sector in May 2009. However, according to a committee15 report, the scheme has drawn few subscribers as of May 2011. In order to attract more subscribers in the unorganized sector, the government initiated new schemes such as the NPS Lite16 and Swavalamban17, which provide additional facilities and benefits.

Risks
Under the NPS, PFMs offer an array of schemes5 with differing risk-return profiles. The subscriber divides his contribution (as well as existing pension wealth) into these schemes, and has the option of changing this combination at any time. The final pension wealth will depend on the performance of the schemes chosen by the subscriber. Thus, the subscriber takes the entire investment risk. The premise is that fluctuations in market value will smooth out over the working life of the subscriber. However, the subscriber is exposed to two major risks at the time of exit. If there is a major market shock at the time of retirement (say, an incident such as a terror attack or financial crisis), leading to a fall in asset prices, the entire accumulated wealth is at risk. A subscriber with a few years remaining before exiting would be more likely to ride over this shock but a subscriber retiring at that time will be affected adversely. Second, the subscriber has to purchase an annuity at the time of exit, and is similarly exposed to any sharp downturn in the annuity market at that time. The Bill states that there will not be any explicit or implicit assurance of benefits except market based guarantees to be purchased by the subscriber. This rule is different from the case of bank deposits, where deposits up to Rs 1 lakh are guaranteed by the Deposit Insurance and Credit Guarantee Corporation.

Committee recommendations
Standing Committee Report, 2011
The PFRDA Bill, 2011 has incorporated a number of recommendations made by the Standing Committee in its 2005 report. Two key recommendations of this committee are not incorporated. These were: More flexibility in the Tier 1 account to allow subscribers to withdraw funds in case of any exigency. Restrictions on foreign investment in pension funds, bringing it in line with the restrictions in the insurance sector; (26% cap on foreign investments). The Standing Committee on Finance submitted its report on the PFRDA Bill, 2011 in August 2011. It reiterated the above two recommendations made in 2005. In addition, the Committee made other recommendations. These include: Need for efforts to popularise the different schemes. Stringent monitoring and implementation of the schemes. Insuring funds of subscribers and giving minimum guaranteed returns to ensure safety of their deposits. Making the schemes more broad based and flexible.

Report of the Committee to Review Implementation of Informal Sector Pension (CRIISP), 2011
This Committee was constituted in August 2010 under the chairmanship of Mr. G.N. Bajpai to look into the implementation of the NPS, especially in the informal sector. The report was released in July 2011. The recommendations include: Removing entry barriers Minimum requirement of Rs 6000 for the NPS should be removed.

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Rationalise CRA charges - CRA charges for the NPS members should be made the same as those for the members of NPS Lite. Change the structure for subscription A new structure with a charge at the rate of 0.5 per cent of the subscription raised by the PoPs from each subscriber. This maximum amount of subscription at which this rate is charged by the retailer (PoP) is Rs 50,000. This is to prevent the PoPs from chasing high value clients only. Customer ownership PFRDA should set up a marketing division to ensure proper branding of the schemes and the different products.
Notes 1.Notification number F. No. 5/7/2003-ECB&PR dated December 22, 2003. 2. PFRDA Press Release dated April 30, 2009. 3. According to the report of the Standing Committee on Finance on PFRDA Bill, 2011 submitted in August 2011. 4. A subscriber is an individual who joins NPS. 5. The current notification specifies that 3 types of schemes of various risk-return combinations shall be offered through investments in differing combinations of government securities, corporate bonds, and equity shares. 6. As in the case of a bank account, the IPA is independent of employment details. 7. An annuity is a contract by which one receives fixed payments on an investment for a lifetime 8. Basic+DA: Basic salary + Dearness Allowance 9. This is more like a savings account or a liquid mutual fund. 10. Referred to as existing government employees in this Brief 11. The High Level Expert Group on New Pension System, 2002 (Chairman BK Bhattacharya) lists Canada, Japan, Denmark, Germany, France and the US among countries following the DB system. 12. Delphi Corp, an auto parts maker, which filed for bankruptcy in October 2005, had an estimated pension liability of $14.5 billion. See http://news.bbc.co.uk/2/hi/business/4323854.stm 13. A recent paper suggests that in 25 years the pension liability for the UK government could amount to 3.1 trillion pounds http://www.economicpolicycentre.com/2010/04/19/government-pension-liabilities-understated-by-1trillion/ 14. Andhra Pradesh, Assam, Bihar, Chattisgarh, Gujarat, Goa, Himachal Pradesh, Jharkhand, Madhya Pradesh, Maharashtra, Manipur, Orissa, Rajasthan, Tamil Nadu, Uttarakhand, and Uttar Pradesh 15. Committee to Review the Implementation of Informal Sector Pension (CRIISP) 16. The PFRDA introduced a new scheme called the NPS Lite for the economically disadvantaged sections of the society in 2010. The scheme is operated through aggregators such as the Self Help Groups and has a very low cost structure. The beneficiary of this scheme shall invest any amount every year. 17. Under the Swavalamban scheme, for every new account opened during 2010-2011 the government shall contribute Rs 1000 every year. The subscribers to the scheme would have to contribute a minimum of Rs 1000 every year (maximum of Rs 12000). The contribution from the government would continue for the following five years for all those who join the scheme during the years 2010-11 and 2011-12.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

November 28, 2011

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Legislative Brief
The Micro Finance Institutions (Development and Regulation) Bill, 2012
The Bill was introduced in the Lok Sabha by the Minister of Finance on May 22, 2012. The Bill was referred to the Standing Committee on Finance (Chairperson: Shri Yashwant Sinha) on May 28, 2012. The Committee was due to submit its report in August 2012.

Highlights of the Bill


The Bill seeks to provide a statutory framework to regulate and develop the micro finance industry. The Reserve Bank of India (RBI) shall regulate the micro finance sector; it may set an upper limit on the lending rate and margins of Micro Finance Institutions (MFIs). MFIs are defined as organisations providing micro credit facilities up to Rs 5 lakh, thrift collection services, pension or insurance services, or remittance services. The Bill provides for the creation of councils and committees at central, state and district level to monitor the sector. The Bill provides for a Micro Finance Development Fund managed by RBI; proceeds from this fund can be used for loans, refinance or investment to MFIs.

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December 28, 2012

The Bill requires the RBI to create a grievance redressal mechanism.

Key Issues and Analysis


The Bill provides safeguards against misuse of market dominance by MFIs to charge excessive rates. It allows RBI to set upper limits on lending rates and margins. However, there is no provision for consultation with the Competition Commission of India. The Bill allows MFIs to accept deposits. Unlike banks, there is no facility for insuring customer deposits against default by MFIs. The minimum capital requirement is also lower, though RBI may prescribe higher requirements. The Development Fund for MFIs is to be managed by the RBI. The Bill also enables regulatory powers to be delegated to NABARD. Both these provisions could lead to conflict of interest. The Bill provides for the creation of micro finance committees at central, state and district levels to oversee the sector. However, the formations of these committees are not mandatory. The Bill allows MFIs to provide pension and insurance services. However, it does not provide for regulation by or coordination of RBI with the respective sector regulators.

The Mines and Minerals (Development and Regulation) Bill, 2011


December 28, 2012

Vishnu Padmanabhan vishnu@prsindia.org December 28, 2012

PRS Legislative Research

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org

New Delhi 110021

The Micro Finance Institutions (Development & Regulation) Bill, 2012

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
Micro finance is the extension of financial services, notably small loans, to low income groups. It can serve as a vehicle for financial inclusion. Regular banks tend not to lend to the poor because of the high cost per individual loan and lack of collateral. In India, micro finance overcomes these issues by lending to Self Help Groups* (SHGs), i.e., groups of pooled borrowings, and Joint Liability Groups (JLGs), i.e., groups of pooled liability. Delivery largely takes place through two mechanisms: the National Bank for Agriculture and Rural Development (NABARD) sponsored SHG Bank Linkage programme, where banks lend directly to SHGs and through micro finance institutions (MFIs) lending to SHGs, JLGs, rural banks and individual clients. Taken together, the BanksSHG programme and MFIs reached 76.7 million people in 2010-11, a 71% growth over 2006-07. 2 MFIs exist in various forms such as societies, trusts, co-operatives and non banking financial companies (NBFCs). In terms of market share, NBFCs dominate the industry, accounting for an estimated 90% of loan volume in 201011.2 NBFC-MFIs are regulated by the Reserve Bank of India (RBI) Act, 1934. There is no statute regulating the rest of the microfinance industry consisting of societies, trusts and co-operatives. Figure 1: Current flow of credit and regulation in Indian micro finance

Sources: RBI; NABARD; PRS

In order to regulate the sector, the government introduced the Micro Financial Sector (Development and Regulation) Bill, 2007, which designated NABARD as the regulator. This Bill lapsed with the dissolution of the 14th Lok Sabha. In 2010, following allegations of aggressive debt-recovery methods by MFIs, the Andhra Pradesh government passed an Act regulating MFI activity in the state. Following this, the RBI appointed the Malegam Committee to study issues and concerns in the sector.3 Based on the recommendations of the committee, RBI created a separate category of NBFCs (NBFC MFIs) in December, 2011. All NBFCs providing micro finance services come under RBIs regulations. The Committee also recommended introducing legislation to regulate the sector (See Appendix on page 5 for a summary of the Malegam Committees recommendations). In May 2012, the Micro Finance Institutions (Development and Regulation) Bill was introduced in the Lok Sabha.

Key Features
The Bill establishes the RBI as the regulator for all entities providing micro finance services.

Definitions
The Bill defines MFIs as organisations engaged in providing micro finance services. These organisations could include a society, company or a trust, whose object is to provide micro finance services. The Bill specifically excludes: banking companies, co-operative societies engaged in agriculture or industrial activity and any moneylender (including those registered under state laws). Micro finance services are defined as micro-credit facilities not exceeding Rs 5 lakh; this can be exceeded (up to Rs 10 lakh) for purposes specified by the RBI. MFIs can also collect thrift (small deposits other than current accounts or demand deposits); provide pension and insurance services; and engage in remittance services.
*

Banks/MFIs lend to SHGs as a whole. Individual members can contribute to and borrow from SHGs. In JLGs, member contributions are pooled to form the liability for individual members to borrow from banks or MFIs directly.
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The Micro Finance Institutions (Development & Regulation) Bill, 2012

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The RBI is empowered to issue directions about the classification of a micro finance institution based on the deployment of assets and proportion of clients.

Registering Micro Finance Institutions


The Bill requires any institution providing micro finance services to register with the RBI. The RBI should be certain that the institution will engage in providing micro finance services and have a net-owned fund (aggregate of paid up capital and reserves) of at least Rs 5 lakh. All organisations providing micro finance services will have to register within three months of the Acts commencement. Existing organisations registered with the RBI as an NBFC may continue to engage in micro finance activities subject to the rules and regulations issued by the RBI. Certificates of registration may be cancelled by the RBI if MFIs cease to provide micro finance services or fail to comply with any condition imposed by the RBI. MFIs can appeal to the central government against any rejection or cancellation of certificate.

Functioning of MFIs
Registered MFIs will have to create a reserve fund containing an RBI-specified percentage of net profit or surplus. The fund can only be used for purposes specified by the RBI. NBFCs registered with the RBI are not obliged to create this reserve fund. The RBI can set a maximum limit on the interest rate an MFI can charge for micro credit facilities and the margin an MFI can make. In addition, the RBI can set a ceiling on the amount of loans given to clients and the number of individual clients an MFI has. The RBI can specify the tenure of micro credit facilities and other terms and conditions like periodicity of repayment schedules. MFIs will have to provide a breakdown of interest rates, processing fees or other charges on the loan document. For deposit acceptance, the RBI can provide directions relating to prudential norms like capital adequacy based on risk weights, accounting standards and deployment of funds. Any MFI restructuring, amalgamation or closure will have to be approved by the RBI.

Micro Finance Development Fund


The RBI will create a Micro Finance Development Fund comprising of government grants, sums raised by donors and the public and any interest made out of investments. The Fund shall be used to provide loans, refinance, grant seed capital or any other micro credit facilities to any MFI. The fund can also be used to invest in existing MFIs.

Micro Finance Councils and Committees


District Micro Finance Committees may be formed by the RBI and would be responsible for overseeing micro finance activities at the district level, including monitoring over indebtedness and methods of recovery and submit quarterly reports to the RBI. State Micro Finance Councils may be created by the central government to coordinate activities of the District Committees. The Councils will oversee micro finance activities of the state including methods of recovery and indebtedness. Each State Micro Finance Council would be required to prepare a quarterly report for the central government. At the national level, the Micro Finance Development Council can be constituted by the central government and would have an advisory role regarding the formulation of policies and measures. The council shall also create a credit information bureau for MFIs to store data about clients and loans.

Customer Protection
The Bill requires the RBI to create a grievance redressal mechanism for MFI clients. The scheme should provide for the nature of grievance and procedure for redressal of these grievances and complaints. The RBI shall specify performance standards for methods of operation, methods of recovery and governance. In addition, the RBI will be responsible for promoting customer education of MFIs for greater awareness.

Offences and Penalties


If an offence is committed, both the person responsible and the MFI will be guilty. Contravening provisions of the Bill or default can result in a prison term not exceeding two years or a fine of up to Rs 5 lakh.

Exemptions
The central government, in public interest, can exempt certain classes of MFIs from the provisions of the Bill.
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PART B: KEY ISSUES AND ANALYSIS


Interest Rates
Clause 24 (2) (c)

The interest rates charged by MFIs for loans are usually much higher than the rates charged by banks. This is because the cost structures of MFIs are higher than that of banks on two counts. Firstly, funding for MFIs is costlier; for example in 2009-10 the average cost of funds for MFIs was 9.3% (of the loan portfolio)4 while for banks the equivalent figure was 5.1%.5 Secondly, MFI loans are smaller; individual loans typically range between Rs 10,000 and Rs 15,000.3 Consequently, the transaction cost as a percentage of the loan is higher for MFIs. In 2009-10, operating costs, which include administrative and personnel costs, was 12.3% of the amount lent for MFIs, while the equivalent figure for banks was 1.8%.4,5 In order to prevent MFIs from charging excessive interest rates, the Bill enables RBI to set a limit on the interest rate and the margin (the difference between interest rates and cost of funds). In addition, RBI can specify the number of loans, size of loans and number of clients. Currently, the RBI has capped the margin at 10% for large NBFC MFIs (and 12% for the rest).6 The provision allowing RBI to set a cap on interest rates is designed to address an issue that arises from limited competition. In micro finance, the price of the product is the lending rate charged by an MFI. Price ceilings are introduced to prevent a monopoly or dominant power in the market from setting too high a price; an issue that comes under the purview of the Competition Commission of India (CCI). However, the Bill does not include any provision for RBI to consult the CCI when setting interest rates.

Depositor Protection
Clauses 25 (2) (m) and 18

The Bill permits MFIs to accept deposits. This would create an additional source of funding for MFIs, and also enable clients to have an option to save. However, depositor clients will bear the risk of default by an MFI, unlike borrower clients. Currently, banks and certain types of NBFCs can accept deposits and both are regulated by the RBI (see Table 1). The Bill empowers the RBI to issue directions to MFIs on prudential norms such as income recognition, accounting standards and capital adequacy.
Table 1: Key current prudential norms Banks Public deposit accepting NBFCs Rs 2 crore Min. 15% 20% of profits 1-5 years

Deposit Insurance
The possibility of a financial institution defaulting and unable to repay deposits poses a significant risk to clients. Deposits in banks are protected, up to Rs 1 lakh, through the Deposit Insurance and Credit Guarantee Corporation. The Bill does not explicitly set out a similar provision for MFIs. Although the Bill requires MFIs to create a reserve fund which could potentially serve as protection for depositors, contributions to this fund are a percentage of profits or surplus. Consequently, any loss-making MFI would not have a fund, leaving depositors without a safety net.

Net owned fund Capital adequacy ratio Transfer to reserve fund Period of deposit
Source: RBI; PRS

Rs 300 crore Min. 9% None No limit

Capital Requirement
Clause 15(1)(c)

While the Bill gives RBI the authority to set prudential norms, it specifically lays out the requirement for a minimum net-owned fund of Rs 5 lakh for MFIs. It is not clear whether RBI will specify a higher net-owned fund requirement for deposit taking MFIs. In comparison, banks require a net owned fund of Rs 300 crore while public-deposit accepting NBFCs require Rs 2 crore.

Borrower Protection
Clauses 25 (2)(i) and 33

One of the major issues arising from the micro finance crisis in Andhra Pradesh was the method of debt-recovery; it was felt to be too aggressive and forceful. According to the Malegam Committee, methods of debt recovery are the responsibility of MFIs and every MFI should establish a proper grievance redressal procedure.3 The Bill provides for RBI to specify guidelines for fair and reasonable methods of recovery, but does not specify what this would entail. RBI has the power to issue directions to MFIs about observing codes of conduct and setting up MFIspecific grievance redressal mechanisms. In addition, it will also issue a code of conduct for field staff, laying out minimum qualifications and training tools.
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The Micro Finance Institutions (Development & Regulation) Bill, 2012

PRS Legislative Research

Currently the RBI has provided an NBFC Fair Practices Code7 which issues directions on fair practices to NBFCs and in particular, NBFC-MFIs. With regard to debt-recovery, the RBI has specified that recovery should be made at a designated central place and recovery at place of residence should only happen when the borrower fails to appear at the central location.

Conflict of Interest
Development Fund
Clause 32

The Bill designates RBI to create a Micro Finance Development Fund. The fund will be managed by the RBI (under directions of the Central Board of Directors) and can be used to provide loans or grants to MFIs and invest in equity or any other form of capital for MFIs. This allows an RBI-managed Fund to be a shareholder of an MFI or act as a creditor to an MFI. This could create a conflict of interest given the role of RBI as a regulator. The Committee on Banking Sector Reforms (Narasimham Committee II) had observed that it was inconsistent with the principles of effective supervision for the regulator to be the owner of a bank.8 Consequently, ownership of the State Bank of India was transferred to the central government with the enactment of the State Bank of India (Amendment) Act, 2007. Given that a precedent has been set to prevent a conflict of interest, it is unclear why an RBI-managed fund is allowed to invest in and lend to MFIs.

Delegation of powers
Clause 42

The central government may, in consultation with RBI, delegate the powers of RBI to NABARD or any other agency. The only exceptions are the powers related to winding up of MFIs and imposition of penalties. As NABARD is also a lender to MFIs, there could be a conflict of interest if it is also given regulatory powers.

Inclusion of Insurance and Pension under Micro Finance


Clause 2 (1) (j)

Pensions and insurance services are included under the definition of micro finance services. Typically, MFIs provide these services acting as agents. Currently, the insurance sector is regulated by the Insurance Regulatory and Development Authority while the pension sector is regulated by Pension Fund Regulatory Development Authority. There is no mention of either regulator in the Bill. The 2007 Bill did include insurance and pension services under the definition of micro finance services. However, unlike the current Bill, the 2007 Bill explicitly stated that insurance and pension services would be regulated by the respective regulatory authorities.

Micro Finance Development Councils and Committees


Clauses 3, 8 and 10

The Bill provides for the appropriate government to create the Micro Finance Development Council/Committee at the central, state and district levels to oversee the sector. The national council would promote the industry by advising the central government on policies, establishing a credit information bureau and the working of the grievance redressal mechanism. In addition, the central government is responsible for examining reports about recovery practices from states. The State Councils and District Committees also oversee micro finance activities in the states including methods of recovery and indebtedness. The Bill uses the word may and not shall for the constitution of these bodies. It is unclear why the establishment of the central and state councils and district committees is not mandatory.

Appendix: Malegam Committee Recommendations


In October 2010, the RBIs Central Board of Directors set up a Sub -Committee, chaired by Y.H. Malegam, to study the issues and concerns in the micro finance sector. In the terms of reference, the sub-committee was asked to review, examine and make recommendations regarding: The definition of microfinance and MFIs Prevalent practices with respect to interest rates, lending and recovery practices Role of associations and bodies of MFIs could play A grievance redressal system The Table on the next page provides a summary of the key observations and recommendations of the Malegam committee.

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Table 2. Key observations and recommendations of the Malegam Committee Issue Regulatory scope Interest rate Recommendations Separate category to be created for NBFCs operating in the microfinance sector. NBFC-MFIs can only lend to borrowers with a household income of less than Rs 50,000. 24% cap on individual loans; margin cap of 10% on large MFIs (loan portfolio exceeding Rs 100 crore) and 12% for rest. There should only be 3 components in pricing of the loan: (i) processing fee (not exceeding 1% of the gross loan amount), (ii) interest charge and (iii) insurance premium. Maximum loan amount of Rs 25,000. Individual borrowers have to be a member of a JLG; borrower cannot be a member of more than one SHG/JLG. No more than two MFIs should lend to the same borrower. All NBFC-MFIs should have a minimum net worth of Rs 15 crore composed of Tier 1 capital. NBFC MFIs should maintain a capital adequacy ratio of 15%. MFIs should maintain an aggregate provision for loan losses (at least 1% of outstanding loan portfolio). Responsibility of not using coercive methods of recovery lies with the MFIs. Each MFI should establish a grievance redressal procedure. Regulator should monitor that MFIs have a proper Code of Conduct and system of supervision of field staff. All recoveries should be made at a central place. Regulator should publish a client protection code to be be accepted and observed by MFIs. One or more credit information bureaus should be established; all MFIs should join a bureau.

Loans

Prudential norms

Conduct of MFIs

Credit information bureau

Sources: Malegam Committee; PRS.

Notes
1. This Brief was prepared on the basis of the Micro Finance Institutions (Development and Regulation Bill, 2012 introduced in Lok Sabha on May 22, 2012. 2. N. Srinivasan, Microfinance India State of the Sector Report 2011, SAGE Publications, 2012. 3. Report of the Sub-Committee of the Central Board of Directors of Reserve Bank of India to Study Issues and Concerns in the MFI Sector, Reserve Bank of India, (Chairmain: Shri Y. H. Malegam), January, 2011. 4. Study on Interest Rates and Costs of Microfinance institutions, Small Industries Development Bank of India, January 2011. 5. Statistical Tables Relating to Banks in India 2009-10, Reserve Bank of India, March, 2011. 6. Non Banking Financial Company-Micro Finance Institutions (NBFC-MFIs) Directions Modifications, Reserve Bank of India, August 3, 2012. 7. Guidelines on Fair Practices Code for NBFCs, Reserve Bank of India, March 26, 2012. 8. Report on Banking Sector Reforms, Narasimham Committee II, Reserve Bank of India, 1998.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

December 28, 2012

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Bill Summary
The Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010
The Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010 was introduced in the Lok Sabha on August 26, 2010 by the Minister of State for Personnel, Public Grievance and Pensions, Shri Prithviraj Chavan. The Bill seeks to set up a mechanism to receive complaints of corruption or willful misuse of discretion against a public servant and provide safeguards against victimization of the person making the complaint. Any public servant or any other person including a nongovernmental organization may make a public interest disclosure to a Competent Authority (Central or State Vigilance Commission). Each disclosure shall be accompanied by full particulars and supporting documents. The Competent Authority shall not take any action on a disclosure if the identity of the complainant is not included or is found to be false. Disclosure is defined as any complaint made in writing or electronic mail against a public servant on matters related to attempt to or commission of an offence under the Prevention of Corruption Act, 1988; willful misuse of power which leads to demonstrable loss to the government or gain to the public servant; attempt or commission of a criminal offence by a public servant. A public servant is any person who is an employee of the central government or the state government or any company or society owned or controlled by the central or state government. The Bill lays down the procedure of inquiry to be followed by the Competent Authority on receipt of a public interest disclosure. It is mandated to conceal the identity of the complainant unless the complainant has revealed his identity to any other authority. After conducting the inquiry, if the Competent Authority feels that the complaint is frivolous or there is no sufficient ground to proceed, it shall close the matter. If the inquiry substantiates allegation of corruption or misuse of power, it shall recommend certain measures to the public authority (any body falling within the jurisdiction of the Competent Authority). Measures include initiating proceedings against the concerned public servant, taking steps to redress the loss to the government, and recommend criminal proceedings to appropriate authority. The Competent Authority shall not entertain any matter if it has been decided by a Court or Tribunal, if public inquiry has been ordered under the Public Servants (Inquiries) Act, 1850 or the Commissions of Inquiry Act, 1952 or the complaint is on an action that took place five years from the date of the complaint. The Bill exempts certain matters from disclosure if it is likely to affect the sovereignty of India, security of the state, friendly relations with foreign states, public order, decency or morality. Every public authority shall create a machinery to deal with inquiry into disclosures. The machinery shall be supervised by the Competent Authority. The Competent Authority may take the assistance of police authorities to make discreet inquiries or obtain information. The Bill creates certain safeguards against victimization of a complainant. There shall be no initiation of proceedings against such person merely on the grounds that the person has made a disclosure. The Competent Authority may give directions to a concerned public servant or authority to protect a complainant or witness either on an application by the complainant or based on its own information. The Competent Authority shall protect the identity of the complainant and the related documents, unless the Authority decides against it or is required by a court to do so. The Bill lays down penalties for various offences such as not furnishing reports to the Competent Authority, revealing identity of complainant, for false or frivolous disclosure, etc. Any person aggrieved by an order of the Competent Authority relating to imposition of penalty may file an appeal to the High Court within 60 days.

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it. Kaushiki Sanyal kaushiki@prsindia.org
PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746 New Delhi 110021

September 4, 2010

Legislative Brief
Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005
Highlights of the Bill
Bill introduced in the Rajya Sabha on Dec 5, 2005 Standing Committee Report due by first week of monsoon session, 2006

The Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005 provides for (a) prevention and control of communal violence, (b) speedy investigation and trials, and (c) rehabilitation of victims. The state government can declare an area as communally disturbed under certain conditions. The district magistrate or the competent authority appointed by the state government can take measures such as regulating assembly, directing persons to deposit their arms, searching premises etc. to control communal violence. The Bill provides double the punishment as provided by other existing laws. The state government shall establish special courts to try offences under this law. These courts may direct convicted persons to pay compensation to victims or dependents. Communal Disturbance Relief and Rehabilitation Councils will be formed at the national, state and district levels. The district council shall pay at least 20 percent of total compensation as immediate compensation to victims.

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March 29, 2006

Key Issues and Analysis


The Bill makes it lawful for the state government to take all measures necessary to control the situation. These could include measures that are currently illegal. Most of the provisions pertaining to prevention and control of communal violence are already covered under existing laws. The draft law may prove ineffective if the executive dithers from taking prompt action to control communal violence. Given the requirement of prior sanction of the state government to take cognizance of an offence by a public servant and the absence of a chain of command responsibility, any prosecution is unlikely. The competent authorities appointed by the state government and the district magistrates have been given the same powers. This could lead to dual authority within an area. The Bill lays down the procedure for payment of immediate compensation but does not discuss when and by whom the remaining compensation will be paid.

The Indian Medical Council (Amendment) Bill, 2005


February 17, 2006

Ruchita Manghnani ruchita@prsindia.org

April 4, 2006

Parliamentary Research Service

Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2611 5273-76, Fax: 2687 2746

New Delhi 110021

The Communal Violence Bill, 2005

Parliamentary Research Service

PART A: HIGHLIGHTS OF THE BILL1


Context
India has witnessed several large-scale communal riots in recent years such as those in Gujarat (2002), Mumbai (1992-93), and Delhi (1984). In addition, there are reports of frequent clashes between caste and linguistic groups. The Common Minimum Programme of the UPA government highlighted the need for a comprehensive law to deal with communal violence. The Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005 seeks to empower the government to prevent and control communal violence, provide for speedy investigation and trial of offences and rehabilitate victims of such violence.

Key Features
Prevention and Control of Communal Violence
The Bill defines communal violence as any offence specified in the schedule.* The state government can notify an area as communally disturbed if a scheduled offence is committed against any group, caste or community, which results in death or destruction of property, creates enmity between groups and poses a threat to security. Such notification is valid for a maximum of 30 days, but can be extended. Measures to prevent and control violence shall be enforced by the District Magistrate, and other officers of the state government appointed as competent authorities. The competent authority can direct persons in the area to deposit their arms, ammunition, explosives and corrosive substances (even if they hold a license). When such directions are issued, the local police officer can search any house or premises for such items. The competent authority can regulate assembly and movement of persons, and prohibit acts which could disturb peace, such as carrying of arms, knives etc., usage of loudspeakers and burning of effigies. Offences shall be investigated by an officer who is at least the rank of a sub inspector. Women police officers shall be provided to record information on offences committed against women and children. A review committee constituted by the state government will investigate cases where a charge sheet has not been filed within three months of registering an FIR and may review cases where the trial ends in acquittal. The state government can constitute special investigation teams to investigate offences if these offences were not investigated in a fair and impartial manner. The state government shall establish Special Courts for the trial of scheduled offences. The Bill also provides for the establishment of Additional Special Courts outside the state if the state government feels that the trial within the state is not likely to be fair and impartial, it is in the interest of justice, or it is required for the safety of the accused, witnesses, public prosecutor or the Judge. Judges will be appointed by the state government in concurrence with the Chief Justice of the High Court. The Special Court can conduct proceedings at a protected place, avoid mentioning the identity of the witness in its orders and judgments and issue directions to protect the identity of the witness if it considers it necessary or on the basis of an application by the witness or public prosecutor. The Special Court can order the removal of a person likely to commit a scheduled violence from the communally disturbed area. Any person not in compliance with such orders can be taken into custody. The Supreme Court may transfer cases from one Special Court to another. The punishment provided in the Bill is double that provided under other Acts for the same offence. Any convicted person cannot hold public office for six years from the date of conviction. A public servant is liable to be punished with a fine and/ or imprisonment upto a year if he acts in bad faith such that he causes death or destruction of property or if he fails to exercise his authority to prevent communal violence or maintain essential supplies to the community. The prior sanction of the state government is required to prosecute a public servant. Communal Disturbance Relief and Rehabilitation Councils will be formed at the national, state and district levels. These national and state level councils will make recommendations and issue guidelines on relief, rehabilitation and compensation to victims. The district council will assess compensation to victims, set up relief camps and prepare plans for prevention of communal violence.

Investigation and Punishment of Offences under the Act


Relief and Rehabilitation

* Specific sections under the (a) Indian Penal Code (b) Arms Act, 1959 (c) Explosives Act, 1884 (d) Prevention of Damages to Public Property Act, 1884 (e) Places of Worship (Special Provisions) Act, 1991 (f) Religious Institutions (Prevention of Misuse Act, 1988 have been listed in the schedule of the Bill.

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A Communal Disturbance Relief and Rehabilitation Fund will be constituted in every state and a Victims Assistance Fund will be established in each district. Every state government shall notify a scheme to provide immediate compensation to victims or dependants. The Special Court may direct a convicted person to pay compensation to victims or dependants. There can be no discrimination on grounds of sex, caste or community while providing compensation. The central government can draw the attention of a state government to communal violence occurring in the state and direct it to take necessary action within a specified time. If such directions are not followed, the central government can notify any area in the state to be communally disturbed. The central government can deploy armed forces to control communal violence in a state but only on the request of the state government.

Powers of the Central Government

PART B: KEY ISSUES AND ANALYSIS


While the provisions for prevention and control of violence under this Bill just reaffirm provisions of other Acts, the Bill breaks new ground in establishing a framework for compensation and rehabilitation of victims.

Declaration of an area as communally disturbed


The state government may declare an area as communally disturbed if scheduled offences are committed such that three conditions are satisfied: (a) violence is committed against a group, caste or community resulting in death or destruction of property, (b) the violence is committed with the intention of creating ill will and enmity between groups, castes and communities and (c) unless immediate action is taken, there is a threat to the secular fabric, unity or internal security of the country. According to the Bill, all three conditions have to be satisfied before an area may be declared as communally disturbed. Communal crimes may be committed with just one or two of these conditions being met but this draft law cannot be invoked in such cases. (e.g. A serious crime like rape may not result in death or destruction of property but may be committed against a particular caste, group or community to create ill will or enmity.)

Prevention and Control of Communal Violence


The Bill makes it lawful for the state government to take all measures necessary to deal with the situation in a communally disturbed area. These could include measures that are illegal under the present legal system. This provision gives the government a wide range of powers and immunity for its actions without any corresponding accountability. If the executive intends to prevent and control communal violence, the existing laws provide the means to the state machinery to do so. (For e.g. under section 144, the magistrate can issue directions to individuals or to the public to abstain from a certain act if he feels that such order will prevent danger to human life, riots etc. Under Section 129 of the Code of Criminal Procedure, a magistrate or an officer in charge of a police station can use civil forces to disperse an assembly of five or more persons if the assembly is likely to disturb public peace. Under Section 130, the magistrate can also direct the armed forces to disperse the assembly and make necessary arrests.) The Bill does not address the possible situation of the executive dithering from taking steps to control the riots. Law and Order is on the state list of the Constitution of India and the central government cannot intervene on the subject. There may be a case for an independent commission to take cognizance of communal violence and supervise operations to tackle such violence. Article 51 (c), Article 253 and Article 355 of the Constitution2 provide scope for the Parliament to legislate and vest such powers in an independent commission (for example, the National Human Rights Commission has been established by an Act of Parliament).

Command Structure
The state government may appoint competent authorities in a communally disturbed area. The district magistrate and the competent authorities have been provided with identical powers. This could result in a case of dual authority within an area.

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The Communal Violence Bill, 2005

Parliamentary Research Service

If the armed forces are deployed, the central or the state government may constitute an authority called the Unified Command to coordinate and monitor the role of the forces. The Bill does not clarify the composition of Unified Command even though such a civilian authority will be issuing directions to the armed forces.

Accountability of Public Servants


If a public servant acts in a mala fide manner and causes harm to any person or property or if he fails to exercise his authority to prevent communal violence or the disruption in maintenance of essential services to a community, he may be punished with imprisonment upto a year or a fine or both. However, the Bill does not bar him from holding public office. The court requires the prior sanction of the state government to take cognizance of an offence committed by a public servant. Also, the Bill fails to assign a chain of command responsibility holding everyone from the local official to senior levels in the government responsible for failing to prevent or control communal violence. The provision providing for punishment of public servants might prove to be ineffective if there is no intent on part of the state government to prevent and control communal violence.

Witness Protection
The Bill has provisions for protecting the identity and address of the witnesses. However, it does not provide for physical protection of witnesses. The Supreme Court and the Law Commission have highlighted the need for both witness identity protection and witness protection programmes.3

Relief and Rehabilitation


Guidelines on assessment of compensation to be paid by the government will be issued by the State Council while the District Councils will assess the actual compensation to be paid. The Bill provides for payment of immediate compensation by the District Council. The amount of immediate compensation will be at least twenty percent of full rate of compensation and will be paid after an inquiry completed within one month from the date of claim. The Bill however does not discuss who will pay the remaining compensation and does not provide a timeline within which it shall be paid. Notes 1. Bill introduced in the Rajya Sabha on Dec 5, 2005. Report of the Standing Committee on Home Affairs (chairperson: Ms.
Sushma Swaraj) is due by the first week of the Monsoon Session, 2006 of the Parliament. 2. Article 51 (c) The State shall endeavour to foster respect for international law and treaty obligations in the dealings of organized peoples with one another. Article 253 Parliament has power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body. Article 355 It shall be the duty of the Union to protect every State against external aggression and internal disturbance and to ensure that the government of every State is carried on in accordance with the provisions of this Constitution. 3. Consultation Paper on Witness Identity and Witness Protection Programmes, Law Commission, Government of India, Aug 2004

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of Parliamentary Research Service (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

April 4, 2006

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Legislative Brief
The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007
The Bill was introduced in the Lok Sabha on March 20, 2007. The Bill has been referred to the Department-related Parliamentary Standing Committee on Social Justice and Empowerment (Chairperson: Smt. Sumitra Mahajan).

Highlights of the Bill


The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 seeks to make it a legal obligation for children and heirs to provide maintenance to senior citizens. It also permits state governments to establish old age homes in every district. Senior citizens who are unable to maintain themselves shall have the right to apply to a maintenance tribunal seeking a monthly allowance from their children or heirs. State governments may set up maintenance tribunals in every sub-division to decide the level of maintenance. Appellate tribunals may be established at the district level. State governments shall set the maximum monthly maintenance allowance. The Bill caps the maximum monthly allowance at Rs 10,000 per month.

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May 22, 2007

Punishment for not paying the required monthly allowance shall be Rs 5,000 or up to three months imprisonment or both.

Key Issues and Analysis


It is unclear whether the creation of maintenance tribunals will ensure financial independence for senior citizens, or whether parents will likely take their children to court to obtain a maintenance allowance from them. The definition of senior citizen includes both Indian citizens aged over 60 years, and all parents irrespective of age. Also, the

The Competition (Amendment) Bill, 2006


May 4, 2007

Bill does not address the needs of senior citizens who do not have children or property.
Priya Narayan Parker priya@prsindia.org

June 20, 2007

Relatives are obliged to provide maintenance to childless senior citizens. The Bill defines relative as someone who is in possession of or would inherit a senior citizens property. As wills are changeable, it is unclear how one would determine who would inherit the property after death.

Only parents may appeal against the decision of the maintenance tribunal. Neither childless senior citizens nor children are permitted to appeal.
State governments may establish old age homes and prescribe standards for services provided by them. However, the Bill does not require them to do so.

PRS Legislative Research

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The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007

PRS Legislative Research

PART A: HIGHLIGHTS OF THE BILL1


Context
Indias success in increasing life expectancy has led to a larger number of the elderly in the country. The Registrar General of India forecasts the share of older persons (age 60 years and above) in the total population to rise from 6.9% in 2001 to 12.4% in 2026.2 Issues related to the financial and social security of older people will become increasingly important. Indeed, the National Policy on Older Persons states, Some areas of concern in the situations of older persons will also emerge, signs of which are already evident, resulting in pressures and fissures in living arrangements for older persons.3 The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 seeks to make it a legal obligation for children and heirs to provide sufficient maintenance to senior citizens, and proposes to make provisions for state governments to establish old age homes in every district.

Key Features
Care of ElderlyApplication for Maintenance
The Bill places an obligation on children and relatives to maintain a senior citizen (anyone above the age of 60 years) or a parent to the extent that they can live a normal life. This obligation applies to all Indian citizens, including those residing abroad. A senior citizen who is unable to maintain himself based on his own earnings or property shall have the right to apply to a maintenance tribunal for a monthly allowance from their child or relative. If he is incapable of filing the application on his own, he may authorise any other person or registered voluntary association to apply on his behalf. The maintenance tribunal may also, on its own, initiate the process for maintenance. The Bill defines children as sons, daughters, grandsons and granddaughters and relative as any legal heir of a childless senior citizen who is in possession of or would inherit his property upon death. Minors are excluded from both definitions. Parents include biological, adoptive or step parents. In cases in which more than one relative will inherit the property of a senior citizen, each relative will be responsible to pay the maintenance fee in proportion to the property they will inherit. The state government may establish one or more maintenance tribunals per sub-division to decide upon the order for maintenance. The tribunal will be presided over by an officer not below the rank of sub-divisional officer. The tribunal shall have all the powers of a civil court. No civil court shall have jurisdiction in respect of any matter dealing with any provisions of this Bill. If the tribunal is satisfied that the senior citizen is unable to take care of himself and that there is neglect or refusal of maintenance on the part of the children or relative, it may order children or relatives to give a monthly maintenance allowance to the senior citizen. The maximum maintenance allowance shall be prescribed by the state government, and shall not exceed Rs 10,000 per month. Before hearing an application, the tribunal may refer the case to a conciliation officer to reach amicable settlement within one month. If such agreement is reached, the tribunal may pass that order. The tribunal may order children or relative to make a monthly allowance as interim maintenance while the application is pending. The application shall, as far as possible, be disposed of within 90 days. The maintenance allowance shall be payable from either the date of the order or the application, to be deposited within 30 days of the order. A simple interest payment between 5% and 18% on the monthly allowance from the date of the application may also be required. The tribunal may alter the allowance for maintenance on proof of misrepresentation or mistake of fact or a change in the circumstance of the senior citizen or parent receiving the monthly payment. Any maintenance order made by the tribunal shall have the same force as an order passed under Chapter IX of the Code of Criminal Procedure, 1973 (CrPC), which also provides for maintenance of senior citizens. If a senior citizen is entitled for maintenance under both Acts, he can claim maintenance under only one Act. The State Government may establish one appellate tribunal per district to be presided over by an officer not below the rank of District Magistrate. The appellate tribunal shall try to pronounce its order in writing within one month of the appeal.

Maintenance Tribunals

Appellate Tribunals

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Offences and Penalties


On failure to comply with the maintenance fee, the tribunal may issue a warrant for collection within three months of the due date. Should the fee remain unpaid, the accused may be imprisoned for up to one month or until payment, whichever is earlier. Punishment for abandoning a senior citizen shall include an imprisonment of up to three months or fine of up to Rs 5,000, or both. The tribunal can declare a transfer of property (as gift or otherwise) from a senior citizen to a transferee as void if the transfer was made under the condition of maintenance, and the transferee neglects the agreement. A registered voluntary organization may take action on behalf of the senior citizen if he or she is unable to enforce these rights. A party before a maintenance or appellate tribunal shall not be represented by a legal practitioner. A senior citizen may choose to be represented by the maintenance officer (a district social welfare officer). The state government may establish and maintain at least one old age home per district with a minimum capacity of 150 senior citizens per home. The state government may also prescribe a scheme for the management of such homes. The scheme shall specify standards and services to be provided including those required for medical care and entertainment of residents of these old age homes. The state government shall ensure that government hospitals and those funded by the government provide beds for all senior citizens as far as possible. It shall ensure separate queues for senior citizens, expand facilities for treatment of diseases and expand research for chronic elderly diseases and aging. Every district hospital shall also earmark facilities for geriatric patients. The state government is responsible for publicizing the provisions, as well as ensuring that government officers undergo periodic sensitizations and awareness training on issues relating to the Bill. The district magistrate shall be responsible for implementing the provisions of the Bill.

Representation in Tribunals

Other Provisions for Elderly Care

PART B: KEY ISSUES AND ANALYSIS


Old Age Security
The purpose of the Bill is to secure financial stability for parents who are unable to maintain themselves. The Constitution through its Directive Principles directs the State, not private citizens, to make effective provision for maintenance of senior citizens. Two Actsthe Code of Criminal Procedure, 1973, and the Hindu Adoption and Maintenance Act, 1956currently mandate the care of parents by their children if they are unable to take care of themselves. In this Bill too, the onus has been placed on children and relatives of senior citizens. Additionally, while the Bill allows state governments to establish old age homes, it does not make it mandatory. Also, this Bill does not address the needs of senior citizens who do not have either children or property. Table 1: Laws Regarding Maintenance and Care of Senior Citizens and Parents
Law Constitution of India, Directive Principles, Article 41 Code of Criminal Procedure (Chapter IX, Section 125(1)(2)) Hindu Adoption and Maintenance Act, 1956 Requirement The State shall, within the limits of its economic capacity and development, make effective provision forold age, sickness and disablement, and in other cases of undeserved want. Requires persons who have sufficient means to take care of his or her parents if they are unable to take care of themselves. Maintenance Allowance Not justiciable

Rs 500/month maximum To be determined by court

Requires Hindu sons and daughters to maintain their elderly parents when parents are unable to maintain themselves Sources: Constitution of India; Respective Acts; PRS.

The state of Himachal Pradesh enacted a similar law in 2001. That law, the Himachal Pradesh Maintenance of Parents and Dependents Act, 2001, requires adequate maintenance for parents and dependents who are unable to take care of themselves.

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Table 2: Comparison with the Himachal Pradesh Act


Provision Eligible applicants Himachal Pradesh Maintenance of Parents and Dependants Act, 2001 Applicants must be below poverty line, parents and grandparents wife, minor son, unmarried daughter, and widow if all not able to maintain themselves; not applicable to Muslims. Rs 5,000 per month. To cover basic amenities. If the person liable for payment is a government employee, maintenance may be deducted from his salary. If applicant is unable to make an application, any member of his family, any person in whose care he resides, any other authorised person by him, or maintenance officer may file application. Must be just and equitable', and the respondent should be able to first provide maintenance for himself, his wife and children Tribunal must consider manner in which the applicant spent his savings, and if applicant is justified living separately. The applicant, maintenance officer on behalf of the applicant, respondent, or approved person or organisation or any other affected party may appeal to the district judge from the decision of the tribunal upon any question of law or of mixed law and fact. Sources: Respective Act and Bill. Appeals The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 Applicable to senior citizens and parents of children above 18 years of age; applicable to all Indian citizens irrespective of religion. To be specified by states, maximum limit of Rs 10,000 per month. To maintain normal life. No such provision. If applicant is unable to make an application, any person or organisation authorised by him, or the maintenance tribunal may file application. The maintenance tribunal may make a maintenance order on satisfaction of neglect or refusal or maintenance. No such provision. State government may set up an appellate tribunal in each district. Any parent may file an appeal to the appellate tribunal within 60 days from the date of order. Respondents and childless senior citizens are not granted the same right.

Maximum amount for maintenance Amount of maintenance Enforcement of maintenance order Application on behalf of senior citizen or parent Provisions for maintenance order

Financial Independence
The goal of old age security programmes is to ensure the financial independence and dignity of senior citizens. In addition to this Bill, there are some financial schemes that also attempt to achieve old age security. Two such schemes are the recently announced reverse mortgage concept and the New Pension Scheme.

Some new schemes for old age income security Reverse Mortgages: The 2007 Budget speech announced the introduction of reverse mortgage for senior citizens by The National Housing Bank (NHB).4 The NHB Draft Guidelines state: The scheme involves the senior citizen borrower(s) mortgaging the house property to a lender, who then makes periodic payments to the borrower(s) during the latters lifetime.5 New Pension Scheme: The New Pension Scheme (NPS) seeks to provide old age security for all individuals, including the unorganised sector by creating a mechanism to enable them to save through their working lives. Under NPS every subscriber is to have an individual pension account, portable across job changes.6 The amount (including income on the investments) will be available at the age of 60 years, with at least 40% to be converted into monthly payments for the rest of their lives.

The Bill sets the maximum cap for monthly maintenance allowance for senior citizens at Rs 10,000 per month, which is significantly higher than what is given by both the central and state governments under the National Old Age Pension Scheme (NOAPS). Under NOAPS, central assistance amounts to Rs 200 per month7 and state government pensions range from Rs 75 per month in Andhra Pradesh to Rs 400 per month in West Bengal.8

International Comparison
Some other countries have enacted laws related to the protection and security of the elderly. Sri Lanka and China require children to take care of their elderly parents, and the State to take care of childless senior citizens. Table 3: Laws in Some Countries Regarding Elder Care
Act Sri Lanka: Protection of the Rights of Elders Act, 2000 Purpose/Broad Provisions Establishes National Older Persons Council; requires children to provide care for their parents and makes provisions for parents to obtain maintenance from children; requires state to provide appropriate residential facilities to destitute elderly without children. Creates the Administration on Ageing within the Department of Health, Education and Welfare; authorises grants to States for community planning, services for elderly, and research and training in the field of aging. Places responsibility on families to care for elderly; establishes a state-based old-age insurance system, increases legal protection of elderly with speedy court procedure. Provides strict controls for registered old-age facilities; makes abuse of the elderly a criminal offence; creates social and cultural community-based services for elderly. Mandates children to pay maintenance to dependent parents up to $20 per week.

United States: Older Americans Act of 1965

China: Law of the Peoples Republic of China on Protection of the Rights and Interests of the Elderly, 1996 South Africa: Older Persons Act no 13 of 1996 Canada (Saskatchewan & Manitoba): Parents Maintenance Act, 1978 & 1993 respectively Sources: Respective Acts; PRS.

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In India, existing schemes for old age pension include the Employees Provident Fund and the New Pension Scheme, which cover roughly 13% of the working population (10% as government servants and 3% from the formal private sector). In addition, the National Old Age Pension Scheme provides for destitute persons of 65 years and above.9 Table 4 summarises the schemes for providing for old age security and financial independence in some countries. Table 4: Government Schemes for Old Age Pension and Social Security in Some Countries
Country Malaysia Primary State Old Age Scheme Employees Provident Fund Central Provident Fund Law & Year Established Employees Provident Fund Act, 1991 Central Provident Fund Ordinance, 1955 Target Audience Private and nonpensionable public sector employees All working citizens (employers and selfemployed) to save for retirement. Target age to begin withdrawals: 62 years Type Mandatory contribution based on monthly wages (paid jointly by employee and employer) Compulsory comprehensive social security savings plan (monthly contributions by working Singaporeans and employers) that covers retirement, healthcare, home ownership, family protection, and asset enhancement Based on tax tables, number of years of work, contributions, and average indexed monthly earnings % Population it covers 11.4 million members or roughly 50% of population 3.12 million (in Jan- March, 2007) or roughly 70% of population

Singapore

US

Social Security & Medicare

Social Security Act, 1935 & Federal Insurance Contributions Act (FICA), 1939

Citizens over age 65 years, plus disabled. Not intended to be used as full retirement plan, but in addition to pensions, savings, etc Citizens over 65 years of age

163 million people work and pay Social Security taxes & 49 million people receive monthly SS payments 36% of population aged 65 -74 years, and 43% of population aged 75-84

UK

Old Age Pension

Old Age Pensions Act, 1908 & National Insurance Act, 1946

Contributory state pension for all, based on National Insurance payment record, paid to men at 65 years, women at 60 years

People aged 80+ receive noncontributory pension Sources: See endnote 10 for Malaysia, 11 for Singapore, 12 for United States, and 13 for United Kingdom.

Tribunal Procedure
Constitution of Tribunal
The Bill states that state governments may establish one or more maintenance tribunals for each sub-division. It does not make this mandatory.

Right to Legal Representation and Appeal


The Bill specifically states that no party to a tribunal or appellate tribunal can be represented by a legal practitioner. However, a parent (though not a childless senior citizen) may be represented by a maintenance officer designated by the state government. It is not clear why the parties are denied the right to defend their interests with the help of qualified legal practitioners, and whether this is against the principle of natural justice. While the Bill permits states to establish one appellate tribunal per district, the Bill grants only parents the right to appeal. There is no facility for appeal available to childless senior citizens, children or relatives.

Declaring Transfer of Property Void


The Bill states that a tribunal can declare a transfer of property to be void if it was made by way of gift or otherwise with the condition that the transferee would maintain the transferer and has not done so. Under the Gift Tax Act, 1958, a gift is unconditional therefore such a transfer cannot be termed a gift. Alternatively, if the property is given under condition to maintain the transferer, and the transferee does not adhere to these conditions, then it would be breach of contract under The Indian Contracts Act, 1872, making this provision redundant.

Provision for Old Age Homes


The Bill grants state governments permission to establish and maintain old age homes as it may deem necessary, in a phased manner, beginning with at least one in each district. There is no obligation on state governments to establish these homes. The Bill specifies that each old age home should accommodate at least 150 senior citizens. Specifying such details in the Bill reduces the flexibility to cater to differing local conditions and needs.
As of 2005, there were 1,018 Old Age Homes in India. Of the 739 homes for which detailed information is available, 427 homes are free of cost, 153 old age homes are on a pay and stay basis, and 146 homes have both free as well as pay and stay facilities. Kerala has 186 old age homes, the most 8 of any state.

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Financial Considerations
The Financial Memorandum states that since the existing government machinery is proposed to be utilised, there would be no additional expenditure. Any expenditure on establishing old age homes would be borne by state governments. The Financial Memorandum does not estimate this expenditure.

Definitions
Senior Citizen
The Bill defines senior citizen as (a) Indian citizens 60 years of age or older and (b) all parents with children above the age of 18 years. For example, the provisions of this Bill would be applicable to even a 40-year-old parent of a 20-year-old person. This definition differs from that in the National Policy on Older People, which sets the age at 60 years or older.

Parent and Child


The Bill defines parent as a biological, adoptive or step mother or father. It defines children as sons, daughters, grandsons and granddaughters. These two definitions do not mirror each other.

Relative
The Bill defines relative as someone who is in possession of or would inherit a senior citizens property after death. As wills are changeable, it is unclear how one would determine who would inherit the property after death, and therefore who would be obliged to maintain the senior citizen.

Normal Life
The Bill states that the obligation of the children or relative to maintain a senior citizen extends to the needs of the senior citizen so that they may lead a normal life. The Bill does not define what consists of a normal life.

Organisation
The Bill clarifies that an organisation that may file an application for maintenance on behalf of a senior citizen means any voluntary organisation registered under the Societies Registration Act, 1860, or any other law for the time being in force. However, the Societies Registration Act does not define voluntary organisation.
Notes 1. This Brief has been developed on the basis of The Maintenance and Welfare of Parents and Senior Citizens Bill, 2007 introduced in Lok Sabha on March 20, 2007. The Bill has been referred to the Department-related Parliamentary Standing Committee on Social Justice and Empowerment (Chairperson: Smt. Sumitra Mahajan). 2. 2001 Census, Government of India, see http://www.censusindia.net/Projection_Report.pdf. 3. National Policy on Older Persons, 1999, Ministry of Social Justice and Empowerment, Government of India, see http://socialjustice.nic.in/social/sdcop/npop.pdf. 4. Union Budget Speech 2007-08, see http://indiabudget.nic.in/ub2007-08/bs/speecha.htm para 89. 5. Reverse Mortgage Loan (RML): Draft Operational Guidelines, National Housing Bank, see http://www.nhb.org.in/Whats_new/Reverse_Mortgage_Operations_Guidelines.htm. 6. For more details, see our Legislative Brief on The Pension Fund Regulatory and Development Authority Bill, 2005 (http://www.prsindia.org/docs/bills/1167471772/bill74_2006123074_legislative_brief_pfrda_bill_2005_final_english.pdf). 7. Union Budget Speech 2006-07, see http://indiabudget.nic.in/ub2006-07/bs/speecha.htm para 29. 8. Senior Citizens Guide 2005, Helpage India, see http://www.helpageindia.org/downloads/SeniorGuide.pdf. 9. National Old Age Pension Increased to Rs 200, Press Information Bureau, see http://pib.nic.in/release/release.asp?relid=18839&kwd=. 10. Employees Provident Fund, Government of Malaysia, see http://www.kwsp.gov.my/index.php?lang=en; 11. Central Provident Fund, Government of Singapore, see http://mycpf.cpf.gov.sg/Members/Gen-Info/Sch-Svc/S-and-S.htm. 12. Social Security Administration, Government of United States of America, Understanding the Benefits, see http://www.ssa.gov/pubs/10024.html and Social Security Benefit Amounts and http://www.ssa.gov/OACT/COLA/Benefits.html. 13. At a Glance: Pension Report, The Future of Pensions, see http://news.bbc.co.uk/2/hi/business/4462404.stm.
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