Revisit of India-China Border Dispute

 Ahead of the 20th round of the now moribund talks between the Special Representatives of India and
China entrusted with finding an early settlement of the border question, set out parameters that needed to be
bilaterally addressed with urgency.
 A course correction is being sought, months after the Doklam crisis has been perceived to have been set
at rest.
 The most important thing to do was genuine cultivation of mutual trust. So long as mutual trust continued
to be absent, some individual issues will keep fermenting and spilling over, thus eroding the overall situation
of bilateral relations.
 That the Dong Lang incident caused by the Indian border troops’ illegal crossing of the China-India
boundary into the Chinese territory was a severe test for bilateral relations.
 That the two countries should properly control and handle problems left over from history and some
specific issues in bilateral relations by putting them in the right place of China-India relations, without
politicizing and complicating them to hamper the overall development of China-India relations.
 Both sides should enhance strategic communications at all levels, restore established dialogue
mechanisms (emphasis added), deepen practical cooperation in various fields and meanwhile, well manage
existing differences and well safeguard peace and tranquility in border areas.
 The benefits that await India were it to come aboard the Belt and Road Initiative, which New Delhi has
shown some reluctance towards. Thus some of the Chinese goals and the problems have been clearly set out
in public.
 This is the clearest confirmation yet that the dialogue mechanism —where the two Special
Representatives (SR) meet, and set up with so much fanfare in 2003 — may have over the last decade-and-a-
half or so, been more or less transformed into an exercise in general fatuity.
 Just like the Joint Working Group that looked at clarifying the border areas before the SRs came along. In
the meanwhile, four Special Representatives have changed — Brajesh Mishra, J.N. Dixit, M.K. Narayanan,
as well as Shivshankar Menon.
 It is also significant that Mr. Wang’s candid remarks should come days after the tenth round of the
Working Mechanism for Consultation and Co-ordination on India China Border Affairs, (WMCC) which
concluded with a positive spin having been imparted to them as having been constructive and forward
looking, but without firm dates for the next meeting.
 The SR dialogue was set up after lengthy diplomatic negotiations had yielded the Political Parameters and
Guiding Principles for the Settlement of the Boundary Question.
 The hard-fought principles set out that the eventually delineated boundary would be along well-defined
and easily identifiable natural geographical features and that the due interest of the settled populations in the
border areas would be taken care of. It was expected that the exploration for the framework for the boundary
settlement would commence thereafter.
 In the meanwhile, some of the expectations had rewritten themselves. The Joint Working Group — that
had been clarifying the border areas with a view to leading up to exchange of maps on a mutually agreed
scale on where the Line of Actual Control (LAC) lay in each others’ perception — had run itself into the
ground. This was after sample maps were exchanged in the Middle Sector without having been able to
progress to the Western and Eastern Sectors.
 There was a time when as many as four lines ran across the border areas: one where we perceived the
LAC to be, one where the Chinese perceived the LAC to be, one where we perceived the Chinese perceived
the line to be and one where the Chinese perceived where we thought our line lay.
 The last two lines were somewhat guess-worked from the military graffiti, tell-tale traces that our armies
leave behind when they foray into the border areas asserting perceptional rights through patrols, the same
way as animals mark territory. It is not even clear whether we have spoken of each other’s perception of the
LAC for the last decade.
 This after China had till the middle of the 1980s seemed open to a process that would let India keep the
areas in the East while they held on to those in the West. The fond hope was of an “LAC plus” solution. That
changed as well. As did the pious intention to earnestly look for an early solution.
 Utterances of visiting Chinese premiers introduced new nuances into the diplomatic liturgy, emphasizing
the complexity of the issue, underlining the difficulty of its resolution, and, thereby, leaving it to future
generations to grapple with.
Lessons for India
 Instead of enlarging commonalities, what is being expanded instead are the divergences: whether it is
China’s opposition to India’s entry into the Nuclear Suppliers Group, or its steadfast support to Pakistan’s
mollycoddling of terrorist groups that are inimical to India, or its pointed message to encourage Bhutan to
settle its boundary dispute with China in a way that would make the Indian Army’s presence in Doklam
eventually redundant.
 Just look at the Chinese penetration of the area we consider to be our backyard: whether it is Sri Lanka,
Nepal, and now the Maldives.
 To this day, even though a military hotline between the two army headquarters had been agreed upon
years ago, it has not materialized. This is something that would be logical, even imperative, given that both
countries have improved their border infrastructure in terms of roads and accessibility in such a way that
increases the possibilities of troops chancing upon each other.
 Therefore, transgressions will increase in terms of frequency, duration, depth, and intensity. The aim
should be to evolve a stronger mechanism to manage the border areas more effectively to ensure equilibrium.
This must include a more robust code of military conduct, even though neither side has sought to alter border
reality through use of force.
 It is time New Delhi put more effort into strengthening India’s presence in those areas where we are
present, where we consider to be them as our border, and live with it rather than to wait for Beijing to alter
reality again.
 It is easier to make provisions to better live with it than to squander energies resolving it. If we don’t let
the boundary question detain us, we will be in a better position to enlarge the areas where we can more
fruitfully, in the Asian Century, engage the Chinese in line with the bilateral intentions that envisaged the
simultaneous rise of both China and India
 Bad Loans and Corporate Defaulting
 It is ironical that while the 2017 Forbes India List says that the combined net worth of India’s 100 wealthiest stood
at a whopping $479 billion, top corporate borrower groups in India are unable to repay loans and make timely interest
payments.
 The government has taken the high moral ground to deal with the menace of non-performing assets or NPAs that
have brought many public sector banks on the verge of bankruptcy.
 It sounded the bugle for errant promoters with its ordinance of November 23 amending the Insolvency and
Bankruptcy Code (IBC) 2016.
 Many are of the view that if the errant promoter is disqualified from the bidding process it will lead to further
losses for banks.
 However, the ordinance is not likely to either eliminate errant promoters or hugely escalate bank losses apart from
the deep haircuts already suffered. It merely signals the government’s intent to shift attention away from recovery of
bad loans to selling the assets of defaulting corporates.
 The May 2017 ordinance directed banks to accept deep haircuts on their non-performing loans. However, there was
no explicit direction from the government as the majority owner of public sector banks to recall the outstanding loans
and recover as much as possible against the personal guarantees of promoters.
 The Mumbai and Delhi airports are being cited as examples of the success of the public-private partnership (PPP)
model.
 The fact that defaulting corporates such as GMR Infrastructure, GVK Power and Infrastructure, and Jaiprakash
Associates borrowed more money than they could repay is being overlooked and their inability to repay is sought to be
justified by circumstances beyond their control.
 These corporates have not been downgraded on their creditworthiness parameter although the Reserve Bank of
India (RBI) has been monitoring all large loans through the Central Repository of Information on Large Credits
(CRILC) since 2014.
 The fact that lending banks in case of large borrowers were operating as a consortium of a score or more of banks
obviates the need for any investigation into the corporates-bank nexus that caused this loss of lakh-crores of depositors’
money.
 In all fairness, this hit being taken by banks for the sake of development should be treated as a government bailout
of the corporate sector. Alternatively, it could be seen as the RBI making credit available to defaulting corporates at
negative rates of interest.
 The recent ordinance makes the resolution professional all powerful. It is now up to the resolution professional to
decide who will be eligible to bid for the defaulter companies or their assets.
 The ordinance conveys the urgency of impeccable antecedents of bidders so as to exclude wilful defaulters as well
as companies whose interest and charges are outstanding for a period of one year or more.
 An existing promoter is eligible to bid for majority control only if all dues are paid. A defaulting promoter is not
even allowed to bid indirectly through or along with other parties since “connected persons” are excluded from
eligibility.
 A strict interpretation of the ordinance would mean that the loan accounts of each one of the 400-odd defaulter
corporate borrowers are technically classified as NPAs. Otherwise they would not have reached this stage of resolution.
 These accounts are likely to have been through various rounds of unsuccessful restructuring in the past. Having
failed to repay even the reduced amounts of loan and interest to the banks, their past credit history should raise serious
questions on their antecedents.
 Hence, the promoters of these companies should not qualify as eligible bidders. So far, none of the first 12
corporates referred to the IBC has been debarred from bidding back their companies after driving them aground. Thus,
the ordinance creates the scope for disqualifying an existing promoter or including a rank outsider into the bidding
process.
Role of the New Regulator
 The Insolvency and Bankruptcy Board of India (IBBI) is the regulator set up on October 1, 2016 under the
Insolvency and Bankruptcy Code. The resolution professionals entrusted with the responsibility of sorting out the
insolvent companies or individuals can be registered with any one of the three insolvency professional agencies.
 The IBBI is assisted by the disciplinary, advisory and technical committees. A quick glance at the IBBI website
reveals that the advisory committees on corporate insolvency and liquidation are chaired by several top corporates.
 While there is nothing unusual about government consultation with corporate India, the appointment of corporates
as heads of important corporate insolvency advisory committees under IBBI does not inspire confidence in the
credibility of the resolution process.
 The recent ordinance may end up being used selectively to defeat the very objective of penalising the errant
promoter. The banks will only lose if resolution is sidetracked by the ensuing power struggle among corporate India to
purchase distressed assets at rock-bottom prices.
1. Gender-based laws: a double-edged sword
In news:
Context:
 The Supreme Court’s notice to the government regarding Section 497 of the Indian Penal Code (IPC),
relating to adultery laws, has brought dated assumptions about gender to light
About the provisions of the law:
 The law allows the husband to initiate criminal proceedings against his wife’s lover
 It does not punish his wife since it presumes that only a man can seduce a woman into a sexual act
 Also, it is the husband who has suffered due to the sexual relationship of his wife, carried out without his
consent
 At the same time, the wife is not protected from similar behavior committed by her husband
Problems:
 The problem with this law is that it treats men and women differently
 It perpetuates the notion that women are somehow naive, gullible, and lack the agency a man possesses
Is this the only law doing discrimination?
 The law criminalizes consensual sex between minors as rape committed by the boy
 Women are legally entitled to maintenance from their father until they get married, while boys are only
allowed this until they are 18
 If a woman dies without a will, the Hindu inheritance laws put the rights of her husband’s heirs above
those of her parents
 Women cannot be jailed for not filing their income tax
 Marital rape is considered an oxymoron
Provisions related to Women’s security:
 In the light of its failure to provide security, the state has resorted to protecting the interests of women
through ad hoc provisions.These have proved to be counterproductive
 Example: The recent legislation mandating paid maternity leave of 26 weeks and crèche facility in
companies hiring more than 50 employees
 The law intends to benefit working women, but the second-order effects of the piece of legislation will
likely be that firms will hire fewer women, and pay those they hire less salary to compensate for the
maternity benefits
 The law furthers several stereotypes as well—that all women want to have babies, that all women want
26 weeks of paid leave, that it is only the woman’s job to take care of the newborn
State has used the law to perpetuate cultural practices
 If relationships are abusive, it should be easy for the parties to leave them
 But till as recently as September 2017, the Hindu Marriage Act required that even couples seeking
divorce through mutual consent demonstrate that they had tried to work on their marriage
 They should wait for at least six months after they had first filed for divorce
 There is, however, still no provision for divorce on grounds of ‘irretrievable breakdown of marriage’—a
standard practice in other countries
Way forward
 In a civilized society, physical strength should not determine your options in life
 In the West, more social progress on gender equality has been made because women are relatively freer
to live independent lives
 It’s time to remove from the law all privileges and disadvantages that are based on gender
Changed priorities
Context:
The President of India gave his assent to an amendment in the Insolvency and Bankruptcy Code that barred a majority of
defaulting promoters from buying back their assets.
The changes via an ordinance made at least nine categories of persons ineligible for submitting a resolution plan for the
indebted companies facing insolvency action at the National Company Law Tribunal.
Amendments to the code said that those whose accounts have been non-performing for a year will not be allowed to
participate in the resolution plan.
The move came at a time when about 50 of the India’s biggest defaulting companies face insolvency proceedings.
What is bankruptcy? What is the IBC’s intent?
A company is bankrupt if it is unable to repay debts to its creditors (banks, suppliers etc). The inability to repay debts by
some Indian firms has resulted in a huge pile of NPAs for the banking system.
The Indian government had introduced the IBC as a method to tackle the issue. Under the Code, a resolution has to be
found for the indebted company within 270 days. Otherwise, a liquidator is appointed. The company can also opt for
voluntary liquidation by a special resolution in a general meeting.
The Insolvency and Bankruptcy Board of India (IBBI) is the regulator set up on October 1, 2016 under the Insolvency and
Bankruptcy Code. The resolution professionals entrusted with the responsibility of sorting out the insolvent companies. The
IBBI is assisted by the disciplinary, advisory and technical committees.
How has IBC progressed? Why was the amendment needed?
The resolution to stressed assets picked up steam under IBC and investors started warming up to the huge opportunity. The
question was whether existing sponsors / promoters of corporate debtors (i.e. the company with debt and under the
insolvency proceedings) can directly or indirectly acquire stake in these firms post acceptance of a resolution plan which
would have entailed substantial discount to outstanding loans of lenders.
The key questions were —
 Can promoters seek a huge cut from lenders and be back in the business?
 Does this provide a level playing field to other prospective bidders?
 Does this send the right political and economic signals?
The government took note of all these concerns expressed by investors, and that’s what led to the recent (amendment)
ordinance.
What are the key elements of the amendment?
The amendment has inserted two new sections in the insolvency code —
 Section 29A, which provides for persons ineligible to be a Resolution Applicant;
 
Those ineligible to be a Resolution Applicant include:
 Wilful defaulters
 Persons convicted for any offence punishable with imprisonment for two or more years 
 Undischarged insolvent
 Persons disqualified as directors
 Persons barred by SEBI from the securities markets
 Those whose accounts are classified as Non-Performing Assets (NPAs) for one year or more and are unable to
settle overdue amounts including interest and charges relating to the account before submission of the Resolution
Plan.
 Persons who have given a guarantee to a creditor in respect to a corporate debtor in IBC
 Persons from foreign jurisdictions
 Section 235A, which provides for punishment for contravention of the provisions where no specific penalty or
punishment is provided. The punishment is fine which shall not be less than one lakh rupees but which may extend to
two crore rupees.
What the amendment means in terms of NPA resolution? What are the key challenges?
The government has taken the high moral ground to deal with the menace of non-performing assets or NPAs that have
brought many public sector banks on the verge of bankruptcy.
Many are of the view that if the errant promoter is disqualified from the bidding process it will lead to further losses for
banks.
Challenges –
1. Deciding who will be eligible to bid:
The key challenge would be to invite expression of interests and resolution plans from applicants who are not related to the
Corporate Debtor after conducting due diligence about the creditworthiness of such buyers.
It is now up to the resolution professional to decide who will be eligible to bid for the defaulter companies or their assets.
 

1. Advisory committees chaired by several top corporates

The advisory committees on corporate insolvency and liquidation are chaired by several top corporates.
The appointment of corporates as heads of important corporate insolvency advisory committees under IBBI may not inspire
confidence in the credibility of the resolution process.
The recent ordinance may end up being used selectively to defeat the very objective of penalising the errant promoter. 
The banks will only lose if resolution is side-tracked by the ensuing power struggle among corporate India to purchase
distressed assets at rock-bottom prices.
 

1. The Ordinance gives incentives to the banks to delay NPA recognition for as long as possible
By disqualifying a large number of persons, the Ordinance will lower the amount that the banks as the main financial
creditors in most of the IBC cases expect to recover. This may result in the banks not recognising accounts as NPA so that
the promoters can submit their bids in the IBC resolution process. 
 

1. Affect the incentives of the government

The Ordinance may also affect the incentives of the government as the majority shareholder in these banks. The
government maybe incentivised to encourage public sector firms (PSUs) to bid in the IBC resolution process so that the
deals go through at relatively higher prices and the PSU banks do not face large haircuts.
What is the likely impact of this Ordinance on IBC?
1. Procedural impact:
The Ordinance introduces substantial procedural uncertainty in the resolution process and opens it up to disputes and
litigation. These insolvency professionals now have the task of determining the eligibility of applicants as per this
Ordinance.
1. Economic impact on resolution
The Ordinance effectively disqualifies vast sections of the corporate world, both in India and abroad, from participating in
the IBC bidding process.
In doing so, it significantly reduces the number of likely resolution plans that maybe submitted in any IBC case in an
already gloomy landscape. The lack of competition among the narrow pool of eligible bidders will depress the financial
value of any resolution plan
1. Impact on IBC principles:
By substantially shrinking the universe of eligible resolution applicants as well as potential buyers in liquidation, the
Ordinance violates the core principles of the IBC.
The IBC is based on the premise that all business failure is not fraud. The Ordinance by its very design goes against this
principle. A person may have faced adverse economic shocks such as a business cycle downturn or a commodity price
shock. This is different from a fraudulent or an unscrupulous promoter who may have been siphoning off assets from her
own firm.
But, The Ordinance treats both these categories on par.
Way forward
An ultimate test of the success of IBC is the recovery rate. As the preamble to IBC clearly states, the primary objective of
the law is maximisation of value of assets of the debtor firm undergoing the insolvency and bankruptcy proceedings.
Fulfilling this objective requires a competitive bidding process such that there is a fair price discovery mechanism.
One way to resolve this conundrum maybe to bar promoters from participating in the IBC bidding process in their full
capacity while permitting them to make deals with third parties such as private equity funds, who would be the primary
bidders.
Even though there have been concerns about the amendment, it should ensure that errant promoters don’t end up getting the
business back with all sacrifices being made by the lenders.