Expectations and Predictions – Big Law on the newly elected Modi government

With the BJP-led NDA winning the elections with a sweeping majority and Narendra Modi ready to take oath as the Prime Minister on May 26, all eyes are on him to bring about the change his party has promised..The Modi government, winning a clear mandate, is expected to push forward an economic agenda for greater stability, growth and good governance. As one of the frequently used slogans in the BJP campaign goes, the country is hoping that, “acche din aane wale hain” (better days are ahead)..The Indian legal fraternity, and India Inc. are no different in this regard. We speak with the big names in the Indian legal world and this is what they had to say on the new government..Amarchand Mangaldas Managing Partner Cyril Shroff says, “India, with the new government, would see better governance and a strongly focused administration. We will witness more investment and an unleashing of entrepreneurial spirits. We hope to see faster clearances of projects and an uplift of the manufacturing sector.”.Building a core team.The first hurdle before Modi is to appoint his team of core ministers. AZB & Partners Managing Partner Ajay Bahl says, “Considering the inaction of the last couple of years, the first single need is to demonstrate that India is “back”. He needs to announce the cabinet at the earliest and constitute it with people of substance, particularly the key ministries.”.“The bureaucracy that has to head these should also be identified at the earliest. This bureaucracy is a very key factor in policy formulation and confidence needs to be restored in the decision making process”.[[{“type”:”media”,”view_mode”:”media_original”,”fid”:”23185″,”attributes”:{“alt”:””,”class”:”media-image”,”style”:”line-height: 1.538em; width: 400px; height: 318px; margin: 5px; float: right;”,”typeof”:”foaf:Image”}}]].“Making the policy making, particularly in key economic ministries, transparent and interactive is the very key and the government should clarify that as one of its early goals. The “secrecy” of policy making, particularly in key economic ministries must also reduce”, adds Ajay Bahl..Platinum Partners’ Nihar Mody says, “Most of our clients give us one message: the Government needs to make it easier to do business in India.”.Retrospective Tax/Vodafone issue.To make it easier to do business in India, one of the first things that most, if not all, lawyers want is a clear tax policy. S&R Associates’ Founding Partner, Sandip Bhagat says, “Delete the retrospective tax amendment and give more certainty on tax issues (less tax aggression in both direct and indirect tax).” Bhagat feels that this would send an immediate, and strong message to investors. Bhagat has also sought for the immediate implementation of the GST regime..Nihar Mody adds, “The Government cannot change the rules of the game mid-way. The new Government must not only commit to this but also needs to ‘walk the talk’ and undo the damage already done by reversing the retrospective legislation on the Vodafone issue”..Luthra & Luthra Senior Partner Mohit Saraf too says that Vodafone tax dispute needs to be settled immediately so that it sends a strong signal that we have fixed the Vodafone issue and going forward there will be no retrospective change..“One thing that the UPA-II did in the last five years is to damage India’s reputation on issues like Vodafone”, says Trilegal Partner Karan Singh. He says the new government needs to aggressively deal with the Vodafone issue and the retrospective levy of any tax..Fair and Predictable Tax Regime.Another thing that both Nihar Mody and Karan Singh point out is that the new government needs to reign in unreasonable and arbitrary aggression of the tax authorities..Karan Singh says, “Modi needs to make sure that the tax administration officials are not getting overzealous in the notices that they are sending to multinationals.” Referring to the $348-million tax notice that Nokia was recently served with, Karan says, “look at what has happened with Nokia because of the order from the tax department.”.Another pressing need is that of better-drafted laws that have certainty in interpretation. Nihar Mody says, “Investors cannot be at the mercy of different bureaucrats subsequently interpreting the law differently as suits them because the unclear drafting gives them the ability to do so.”.Implementation of Companies Act 2013.The new Act, which replaces the Companies Act of 1956, came into force from 1 April and the concerned Rules have been notified recently..Saraf says, “Given the Rules under the new Companies Act are not well thought about, the new government needs to form a Committee, which should have companies, lawyers, bankers, and industrialists to come together and give their comments and immediately come up with modified Rules to solve the problem so that it facilitates growth.”.Sandip Bhagat also feels that given the ambiguity with provisions – a help desk should be set up to answer questions or any queries..Project Clearances and Implementation.Predictably, the demand for faster clearances and simplifying the clearance procedures is one of the common demands across all the corporates..Saraf, whose firm has been working on infrastructure projects deals, says that there has to be “multiple levels of attack” to boost investor sentiment, one of them being quicker project clearances..[[{“type”:”media”,”view_mode”:”media_original”,”fid”:”23186″,”attributes”:{“alt”:””,”class”:”media-image”,”style”:”line-height: 1.538em; width: 400px; height: 317px; margin: 5px; float: left;”,”typeof”:”foaf:Image”}}]]He says, “The first thing for Modi to do is to set up a high level multi disciplinary body like a FIPB which looks after all approvals required from the central government (related to infrastructure and manufacturing projects). What he can do is, set up one window clearance like an FIPB body which will talk internally and get all the approvals.”.“And if this is monitored at the PMO level, it can have a huge benefit”, says Saraf..Saraf further explains, “Our GDP is growing at 4.9%. Today there are large 250 infrastructure and manufacturing projects, which are held up. If Modi can set up a body, which deals with all the approvals and start getting approval in a timely manner then our GDP will immediately jump by 0.5 %!”.Bhagat concurs with Saraf and says that the new government needs to take immediate steps to increase manufacturing and industrial activity in India – deal with issues relating to environmental clearances, coal linkages, land acquisition, etc..Reverse Land Acquisition law.One of the more contentious issues relates to the Land Acquisition Act that was passed last year. The Act mandates the consent of 70 per cent of people whose land is taken for Public-Private Partnership projects, which according to Saraf will delay the projects..Saraf says, “The new government should amend the Act by diluting the provision with respect to approval and maintain the composition provision”. This change will go to show that the government is serious about infrastructure and manufacturing projects..Coordination amidst Regulatory authorities.Sandip Bhagat has another request for the new government. He says there is a need for establishing a coordination mechanism/committee among the various regulators to ease issues in M&A and other deals. For example, in the recent Jet-Etihad deal, three regulators were involved (FIPB, the SEBI and the CCI) and there were three separate regulatory processes in the interpretation of the term control..Saraf goes a step further and says, “It is important to appoint the right people as regulators, who have international experience and are sector or industry specific.”.Corruption and paralysis in decision-making.Nihar Mody says, “Decrease corruption through inter alia reducing red tape”. According to Mody, another important thing the government needs to do is remove the bureaucratic paralysis by giving bureaucrats the confidence that the investigation authorities will not pursue them when they take honest decisions..While Saraf feels that bringing in FCPA (Foreign Corrupt Practice Act prevalent in the US) like law in the country would make a lot of difference and help curbing corruption..Liberalisation and Re-thinking the PPP model.FDI in India had taken a back seat because of uncertainty in economic policies and unreliable tax policies. Nihar Mody wants the government to remove unnecessary and artificial restrictions in FDI (example cap on investment in the insurance sector) and liberalise labour laws..On the other hand, Sandip Bhagat says the government needs to implement steps to ease fund raising by Indian companies in international markets and allow them to compete globally. Also, operationalize the guidelines permitting unlisted companies to list overseas and the draft regulations on REIT listings..When it comes to developing infrastructure, some members of Big Law (India) say that there is a need to re-think traditional models of development..Mohit Saraf says, “Our public-private partnership (PPP) model is outdated and if Modi needs to build India, it needs to be transformed. He has to get the concession agreement right. He has to get the bidding[[{“type”:”media”,”view_mode”:”media_original”,”fid”:”23187″,”attributes”:{“alt”:””,”class”:”media-image”,”style”:”line-height: 1.538em; width: 400px; height: 304px; float: right; margin: 5px;”,”typeof”:”foaf:Image”}}]] document right so that nobody feels cheated in the process. There should be a transparent bidding process..Modi clearly mentioned that there is a lot of corruption at the government level and if you make the document transparent and the process transparent that to a large extent will reduce corruption.”.Judicial reforms.Khaitan & Co Partner Haigreve Khaitan believes that there is an urgent need to increase the number of courts and continuously grade them as per certain parameters to ensure quality and timely judgments..Khaitan says, “Court delays negatively impact the economy. Procedures must be adopted to curb frequent delays and adjournments.”.It is a point that Nihar Mody agrees to; he says it is no use having contracts if they cannot be enforced quickly and effectively. Saraf also wants the new government to bring in judicial reforms as it takes a long time to settle a dispute. “Even if the new government starts taking small steps to bring in these reforms, this will give confidence to the public that in the next 4-5 years a lot will change”, says Saraf..Judicial Appointments Commission.India is one of the very few countries in the world that has a self-appointing higher judiciary where judges are appointed by judges and such decisions are binding on the government..On this, Khaitan says, “We are all eagerly looking forward to the new government’s take and action on the Judicial Appointments Commission Bill, 2013, and the Judicial Standards and Accountability Bill, 2010.”.He feels it is imperative to replace a flawed collegium system of appointment of judges to superior courts by a transparent and collaborative process, as envisaged in the 2013 Bill. Like in the US where the judges of the Supreme Court are appointed by the President and made accountable to this office and also work closely with the officers of the President, will the new government expect the same from our judges, is something to look out for..The challenge ahead.There are huge challenges before the Modi government and the most important being to restore the investor confidence. The priorities for the new government as pointed by lawyers include clarity on tax issues, project clearances and certainty in regulatory regime. Although they all feel that these are not difficult to achieve in the next few months, only time will tell how whether these expectations turn to reality.