Bureau-of-Indian-Standards-inks-an-MoU-with-IIT,-Delhi
Current Affair Analysis

4th April 2019 Current Affairs Analysis -IASToppers

Bureau of Indian Standards (BIS); Centre for Cellular & Molecular Biology (CCMB); What is Non est factum? Insolvency and Bankruptcy Code, 2016; International Centre for Automotive Technology (ICAT); Advance Pricing Agreement (APA); National Investment and Infrastructure Fund (NIIF); 5G networks; etc.
By IT's Current Affairs Analysis Team
April 04, 2019

Contents

Government Schemes & Policies

  • SC holds ultra vires RBI’s February 12 circular mandating insolvency proceedings

Issues related to Health & Education

  • Bureau of Indian Standards inks an MoU with IIT, Delhi

Economy

  • Central Board of Direct Taxes (CBDT) has entered into 18 Advance Pricing Agreements (APAs) in March 2019.
  • Roadis, NIIF to invest $2 billion in road projects in India

Science & Technology

  • South Korea launches 5G networks early
  • NuGen Mobility Summit 2019
  • Enzyme to arrest bacteria cell growth discovered

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Government Schemes & Policies

SC holds ultra vires RBI’s February 12 circular mandating insolvency proceedings

The Supreme Court struck down a February 2018 Reserve Bank of India (RBI) circular giving lender banks 6 months to resolve their stressed assets or move under the Insolvency Code against private entities who have defaulted in loans worth over ₹2000 crore.

Supreme Court may curb advocates from speaking on cases 1 - Copy

About the SC judgement:

  • The judgment spells relief across sectors, ranging from power to telecom to steel, infrastructure, sugar and fertilizer. All insolvency (unable to pay the money owed) proceedings initiated against debtors under the circular have been declared non est.

What is Non est factum?

  • Non est factum is a defence in contract law that allows a signing party to escape performance of an agreement “which is fundamentally different from what he or she intended to execute or sign.”
  • A claim of non est factum means that the signature on the contract was signed by mistake, without knowledge of its meaning.

Counter arguments by RBI and petitioner companies:

  • The RBI countered the petitioner-companies’ claim that its February 12, 2018 circular was manifestly arbitrary. Moreover, it said that the circular was in the public interest and in the interest of the national economy to see that ever greening of debts does not carry on indefinitely.
  • The RBI argued that these huge amounts that are due should come back into the economy for further productive use.
  • However, the court found favour with the arguments made by the companies that a general direction by the RBI, applying the 180-day limit to all sectors, without going into the special problems faced by each sector, would “treat unequals equally”.
  • The companies argued that the circular was arbitrary and discriminatory, and therefore, violative of Article 14 of the Constitution.
  • According to supreme court, the February 2018 circular missed two vital factors required under Section 35AA of the Banking Regulation (Amendment) Act of 2017 which are authorization of the government and the general nature of the circular which did not concern a “specific default” were missing from the 2018 central bank order.
  • Section 35AA of the Banking Regulation (Amendment) Act of 2017 says that the “central government may, by order, authorise the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016.”

Background:

What is the February 12 circular of RBI all about?

  • According to the circular, lenders had to classify a loan account as stressed if there was even a day of default.
  • The bankers had to mandatorily refer all accounts with over Rs 2,000 crore loans to the National Company Law Tribunal (NCLT) or the bankruptcy court if they failed to resolve the problem within 180 days of default.
  • Lenders had to file an insolvency application under the Insolvency and Bankruptcy Code 2016 within 15 days of the completion of the 180-day deadline.
  • The circular also withdrew the loan resolution mechanisms the RBI had implemented, such as Corporate Debt Restructuring and Strategic Debt Restructuring.

Why are borrowers and lenders opposed to it? 

  • There may be genuine cases where customer payment is overdue, like the Ministry of Roadwaysand State Electricity Boards due to typical slow processing by government departments which could worry companies.
  • Companies don’t want to be labelled ‘defaulters’ for mistakes made by others. But RBI points out that many companies delay payments to banks and earn income by investing the money that belongs to banks. Some wait till the 75th day or 85th day to make payment even though they have the money to pay by the 30th day.

Why did RBI come with one-day default rule? 

  • To compel lenders identify stress in loan account without delay for borrowers facing inability to repay. 
    To encourage prompt repayment of loans and to stop instances of deliberate delay in repayment by some borrowers despite their having the ability to pay by due date.
  • Moreover, The RBI wants the system to penalise the defaulter by way of rating downgrade, which would, in turn, increase the cost of fresh borrowing or raising capital. 

How were defaults dealt with earlier? 

  • There were many schemes such as Corporate Debt Restructuring, Strategic Debt Restructuring, Flexible Structuring of Project Loans and the Scheme for Sustainable Structuring of Stressed Assets or S4A. Under these banks could change the tenor and rates for easier payments by the borrower. 

Why did RBI introduce these strict norms? 

  • All other schemes failed to address the problems correctly and that’s why the bad loans (monetary amount owed to a creditor that is unlikely to be paid) became so high, i.e., more than 10% of total bank loans.
  • Those schemes were misused by both borrowers and lenders because it helped hide the true state of stress in the system. Some companies and banks only wanted to avoid NPA classification and not to tackle stress. 

Is this rules applicable to all borrowers? 

  • The new framework for restructuring is not applicable to the micro, small and medium enterprises (MSMEs) with loans of Rs 25 crore or less. 

What is Insolvency?

  • Simply speaking, insolvency is a financial state of being – one that is reached when you are unable to pay off your debts on time.
  • Insolvency is essentially the state of being that prompts one to file for bankruptcy. An entity – a person, family, or company – becomes insolvent when it cannot pay its lenders back on time.
  • Typically, those who become insolvent will take certain steps toward a resolution. One of the most common solutions for insolvency is bankruptcy.

What is Bankruptcy?

  • Bankruptcy, on the other hand, is a legal process that serves the purpose of resolving the issue of insolvency.
  • Bankruptcy is a legal declaration of one’s inability to pay off debts. When one files for bankruptcy, one obliges to pay off what is owed with help from the government.
  • In general, there are two main forms of bankruptcy –
  1. Reorganization: Under reorganization bankruptcy, debtors restructure their repayment plans to make them more easily met.
  2. Liquidation bankruptcy: Under liquidation bankruptcy, debtors sell certain assets in order to make money they can use to pay off their creditors.

It should be noted here that while insolvency is a financial situation and bankruptcy is a legal condition. Insolvency may or may not lead to bankruptcy.

SC-holds-ultra-vires-RBI’s-February-12-circular-mandating-insolvency-proceedings

The Insolvency and Bankruptcy Code, 2016:

  • It is considered as the biggest economic reform next only to GST. It offers a market determined, time bound mechanism for orderly resolution of insolvency, wherever possible, and orderly exit, wherever required.
  • The Code envisages an ecosystem comprising National Company Law Appellate Tribunal (NCLAT), National Company Law Tribunal (NCLT), Debt Recovery Appellate Tribunal (DRAT), Debt Recovery Tribunal (DRT), Insolvency and Bankruptcy Board of India (Board), Information Utilities (IUs), Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs) and Insolvency Professional Entities (IPEs) for implementation of the Code.
  • The Insolvency and Bankruptcy Board of India was established on October 1, 2016 in accordance with the provisions of The Insolvency and Bankruptcy Code, 2016.
  • It provides a market-determined and time bound mechanism for orderly resolution of insolvency, wherever possible, and orderly exit, wherever required.
[Ref: The Hindu]

 

Issues related to Health & Education

Bureau of Indian Standards inks an MoU with IIT, Delhi

A Memorandum of Understanding (MoU) is to collaborate in the field of standardisation and conformity assessment.

Bureau of Indian Standards inks an MoU with IIT, Delhi

  • Both the institutions will jointly organise training and short-term education programmes on standardisation and conformity assessment, besides exploring the possibility of the hiring of IIT Delhi faculty as consultants on secondment basis.
  • IIT Delhi will provide infrastructure support for research and development projects of relevance to standardisation and BIS will provide financial support to IIT Delhi for projects.

About Bureau of Indian Standards (BIS):

BIS_Logo

  • The Bureau of Indian Standards (BIS) is the national Standards Body of India working under the aegis of Ministry of Consumer Affairs, Food & Public Distribution.
  • It is established by the Bureau of Indian Standards Act, 1986.
  • The Minister in charge of the Ministry or Department having administrative control of the BIS is the ex-officio President of the BIS.
  • As a corporate body, it has 25 members drawn from Central or State Governments, industry, scientific and research institutions, and consumer organisations.
  • It also works as WTO-TBT enquiry point for India.
[Ref: Hindustan Times]

 

Economy

Central Board of Direct Taxes (CBDT) has entered into 18 Advance Pricing Agreements (APAs) in March 2019.

One bilateral APA each was signed with Australia, the Netherlands and the United States.

Advance Pricing Agreements (APAs) 1

  • These agreements pertain to various sectors and sub-sectors of the economy like anti-friction bearings, risk management solutions platforms, BPO, IT/ITeS, ATMs, industrial and institutional cleaning and hygiene products.

About APA:

Advance Pricing Agreements (APAs)

  • An Advance Pricing Agreement (APA) is a contract, usually for multiple years, between a taxpayer and at least one tax authority specifying the pricing method that the taxpayer will apply to its related-company transactions.
  • These programmes are designed to help taxpayers voluntarily resolve actual or potential transfer pricing disputes in a proactive, cooperative manner, as an alternative to the traditional examination process.
  • In India, the Central Board of Direct Taxes (CBDT) usually signs these agreements.

About the APA scheme:

Advance Pricing Agreements (APAs) 2

  • The APA scheme was introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014.
  • The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance.
  • Since its inception, the APA scheme has attracted tremendous interest and that has resulted in more than 700 applications (both unilateral and bilateral) having been filed in just four years.

Significance of the APA scheme:

  • The progress of the APA Scheme strengthens the Government’s mission of fostering a non-adversarial tax regime.

Key Facts:

  • The total number of APAs entered into by the CBDT in the year 2018-19 stands at 52, which includes 11 bilateral APAs.
  • The total number of APAs entered into by the CBDT as of now stands at 271, which inter alia includes 31 bilateral APAs.
[Ref: Business Standard]

 

Roadis, NIIF to invest $2 billion in road projects in India

Roadis, a private investor and operator of transport infrastructure worldwide and the National Investment and Infrastructure Fund (NIIF) have jointly set up a platform to invest in road projects in India.

National Investment and Infrastructure Fund (NIIF) 2

  • The platform would invest up to $2 billion of equity targeting toll-operate-transfer models, acquisitions of existing road concessions and investment opportunities in the road sector with an aim to create a large roads platform in the country.
  • Roadis is one of the largest European highway concession managers in India.
  • It is a wholly owned subsidiary of the Public Sector Pension Investment Board, one of Canada’s largest pension funds.
  • With strong investment and operational expertise, the platform intends to operate the roads portfolio with the highest global standards, creating maximum value for shareholders.

About National Investment and Infrastructure Fund (NIIF):
NIIF is a professional fund manager, anchored by the Government of India along with participation from institutional investors such as ADIA and leading Indian private financial institutions.

niif-logo-new-1

  • NIIFL through its funds invests in operating assets, greenfield projects and anchor third party managed funds in core infrastructure and related segments.
  • With USD 3 billion commitment from GOI along with commitments from other institutional investors, NIIF has the ability to operate at scale whilst providing long term and patient capital.
  • It intends to be a key channel of investment into Indian infrastructure with a focus on transportation (roads, ports and airports), energy, urban planning and other infrastructure and allied segments.
  • Cash-rich PSUs, pension funds, provident funds, National Small Saving Fund will be able to pick up stake in the fund.

Objective of NIIF:

  • The objective of NIIF is to maximize economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects, NIIF would solicit equity participation from strategic anchor partners.
  • The Fund aims to attract investment from both domestic and international sources.

NIIF Funds:

  • NIIF manages three funds with distinctive investment mandates.
  • These funds are registered as Alternative Investment Fund (AIF) with the Securities and Exchange Board of India (SEBI).
  • The three types of funds are master funds, funds of funds and strategic funds.

Master fund:

  • The Master Fund is an infrastructure fund primarily investing in operating assets in core infrastructure sectors such as roads, ports, airports, power etc.
  • The Master Fund invests in mature businesses with long-term track record, often operating in regulated environments or under concession or long-term agreements.

Funds of Funds:

  • The Fund of Funds (FoF) seeks to invest with experienced fund managers who have a strong track record and have demonstrated their ability to execute their investment strategy successfully.
  • Fund of Funds invests across infrastructure services and allied sectors (traditional infrastructure, green energy, social infrastructure, manufacturing, and services), product strategies (equity, mezzanine, debt) and investment styles (early stage, growth, control).

Strategic Funds:

  • The Strategic Fund is aimed at growth and development stage investments in projects/companies in a broad range of sectors that are of economic and commercial importance and are likely to benefit from India’s growth trajectory over the medium to long-term.
[Ref: The Hindu]

 

Science & Technology

South Korea launches 5G networks early

South Korea launched the world’s first nationwide 5G mobile networks two days early, its top mobile carriers, to be the first providers of the super-fast wireless technology.

South Korea to launch world’s first 5G networks 4

  • For general customers, the services will be available from, 5th April when Samsung Electronics rolls out the Galaxy S10 5G, the world’s first available smartphone using the technology.
  • Verizon’s system will work with Lenovo’s Moto Z3 smartphone.
  • 5G will bring smartphones near-instantaneous connectivity—20 times faster than 4G—allowing users to download entire movies in less than a second.
  • The technology is crucial for the future development of devices such as self-driving vehicles and is expected to bring about $565 billion in global economic benefits by 2034, according to the London-based Global System for Mobile Communications, an industry alliance.
[Ref: Business Standard]

 

NuGen Mobility Summit 2019

The International Centre for Automotive Technology (ICAT) is organizing a NuGen Mobility Summit, 2019, at Manesar, from 27th to 29th November 2019.

International Centre for Automotive Technology (ICAT

About the summit:

NuGen Mobility Summit 2019 1

  • The objective of the Summit is to share new ideas, learnings, global experiences, innovations and future technology trends for faster adoption and development of advanced automotive technologies for a smarter and greener future.
  • This event will help in building a platform for bringing together all stakeholders in the automotive industry to understand global advancements in technologies.

ICAT manesar:

  • ICAT Manesar is a division of NATRIP Implementation Society (NATIS) under the Department of Heavy Industries, Government of India.
  • The International Center for Automotive Technology (iCAT) Manesar, is the principal homologation testing agency and R&D center in North India.
  • It provides services for testing, validation and homologation of all categories of vehicles and has a mission to assist the automotive industry in adopting cutting edge technologies in vehicle evaluation and component development to ensure reliability, and compliance to the current and future regulations in new generation mobility solutions.

Key Facts:

  • Automotive homologation is the process of certifying vehicles or a particular component in a vehicle that it has satisfied the requirements set by various statutory regulatory bodies. It is mandatory to get this approval to export automobile products or components.
[Ref: PIB]

 

Enzyme to arrest bacteria cell growth discovered

Scientists at the Centre for Cellular & Molecular Biology (CCMB) have discovered a new enzyme which helps in breaking cell walls of bacteria and hence, offers a potential for a new drug delivery route to arrest the anti-bacterial resistance through existing antibiotic drugs.

Centre for Cellular & Molecular Biology (CCMB) 1

How does New enzyme work?

  • CCMB have been working on how the cell governs the synthetic machinery to build the cell wall, identified the principal players behind the process and discovered the new enzyme through which the cell regulates growth of its wall.
  • CCMB have been researching on ‘e. coli bacteria’ cells function, mechanism of dividing and growing to understand diseases like cholera, leprosy, tuberculosis and so on for the past decade.
  • Other bacteria, too, have the same enzyme working on cell division as the cell wall is fundamental for bacterial growth and division. Therefore, by blocking this ‘scissors enzyme’ from functioning, new ways to target microbes could be found, leading to a new wave of antibiotic drugs.

How does it differ from classical antibiotic drugs?

  • The classical antibiotic drugs target the last stage of cell synthesis to prevent cell growth like penicillin that hits the machinery that creates the cell wall — a mesh-like structure of cross-linked sugars and peptides.

Way ahead:

  • According to CCMB, the next step is to find out the molecule of the ‘enzyme ‘endo-pepcidine’ which has to follow the drug trials to unravel a new combination of drugs to replace existing antibiotics.

About Centre for Cellular & Molecular Biology (CCMB):

Centre for Cellular & Molecular Biology (CCMB)

  •        The Centre for Cellular & Molecular Biology (CCMB) is a premier research organization in frontier areas of modern biology in Hyderabad, Telangana.
  •   CCMB was set up initially as a semi-autonomous Centre on April 1, 1977 with the Biochemistry Division of Indian Institute of Chemical Technology (IICT) forming its nucleus.
  •   During 1981-82, the CCMB was accorded the status of a full-fledged national laboratory with its own Executive Committee and Scientific Advisory Council.
  • CCMB has started clinical research and Regenerative medicine services at its clinical research facility in collaboration with physicians from Nizam’s Institute of Medical Sciences to conduct bone marrow transplantation.
  • CCMB conducted ‘CCMB Young Innovators programme’ for ‘school children of classes VIII to X.

Awards:

  • Chosen as a Centre of Excellence, by UNESCO’s Global Network of Molecular and Cell Biology.
  • Third World Academy of Sciences (TWAS) Award, Italy and designated as a South Centre of Excellence in Research & Training.
  • Federation of Indian Chambers of Commerce and Industry (FICCI) Award for Outstanding Achievement in Science & Technology.

Member:

  • CCMB is a Member of the ICICI Knowledge Park launched jointly by the Industrial Credit & Investment Corporation of India (ICICI) Ltd., and the Govt. of Andhra Pradesh, Hyderabad.
  • CCMB is a Member of APBioNet, an International Website for the advancement of Bioinformatics.
[Ref: The Hindu]

 

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