Report of the Committee to Identify the Central Acts Which Are Not Relevant Or No Longer Needed Or Require Repeal/ Re-Enactment in the Present Socio-Economic Context

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REPORT OF THE COMMITTEE TO IDENTIFY THE CENTRAL ACTS WHICH ARE NOT RELEVANT OR NO LONGER NEEDED OR REQUIRE REPEAL/ RE-ENACTMENT IN THE PRESENT SOCIO-ECONOMIC CONTEXT

VOLUME IV (PART-III)

[COPIES OF REPORT OF FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION, REPORT OF JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT, REPORT OF THE 13T" FINANCE COMMISSION, GAZETTE NOTIFICATION FOR CONSTITUTION OF 14T" FINANCE COMMISSION AND THE COPY OF THE DRUGS (CONTROL) REPEAL BILL, 2006 PERSUED AND CITED IN THIS REPORT] INDEX

SI. Subject Dated Page No. No. 1. Report of Financial Sector Legislative 223.2013 1-213 Reforms Commission (FSLRC) (Volume -I ) 3. Report of the Financial Sector Reforms March 2013 214-421 Commission, (FSLRC) (Volume-lk Draft Law) 3. Report of Joint Committee to examine the 422-610 Constitutional and Legal Position Relating to Office of Profit (Presented to Lok Sabha on 22.12.2008 and laid in the Rajya Sabha on 22.12.2008) 4. Report of the Thirteenth Finance December 2009 611-645 Commission 2010-2015, (Volume- I) 5. Copy of the Gazette Notification for 2.1.2013 646-653 Constitution of 14th Finance Commission 6. The Drugs (Control) Repeal Bill, 2006 65if-656 (Introduced in Lok Sabha on 1m March, 2006) FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION

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Acron2 — s Acknav,ledgemenc Erecmie Sum(-2y rw

Introduction :SLR!: and h Narrlace 021thera ons n the Co, mission eaper¢ end s ake holders 4 1; Anal sis anc assessment

The tasks of financial law 11 1 1 Shill9 gav,a. from a sec oral 9.9:peCive 12 -2 2 .24.47'ing a 72 ciples based app oach 13

23 92.17 each c drafting 14 2 4 Finanua replater9 922emance 2 5 0 97ership neu,rality ens cermet lo^

3 Structure of the regulator 21

3 2 Comsssit.on of the board oithe regulator 22 33 92na on 2g c'the boarc 24 3.5 '.essurce sllocaion 9:the reg212r.or 3 5 .oei:ormz roe assessmer: and eporting 27

4 Functions and powers of the regulator 29 42 Issuing regi7 279 ans. and guidelines 29. Jr Exec.itive uncliar7 3 Ad -nil-RW.3[1%e law anc ole sltrisra 5 37 0 Lyclusicn 40 s Consumer protection 43 3 I 57r27egic plc: r 4 ■: = 2 Scope sr the la., 5.3 objectives 2 7d princp192 42 5A ProLections for aft 79 sumo 9 45 5.13 tkcIdilicrial crotLetirs lenetail consumers eB

5E Fur: isoSand powers 211--e ator 5r uneon cons...nor potect o- 5 8 7 redress agency 54 C — nlon 12 o and policy

6 Micro-prudential regulation 55 61 Rationale or mico-preential rezulation 55 6> Ao o taunt nizcpodennalf arrme k 63 Soape of micro prudert al rog(212 oo 58 6.5 Fwrerso( micro pr.oen■al regulor 59 65 P inciples to go de' e „se °Mowers

7 Resolution 69 69 72 An ellooOve resolL :ion —ework Ocject ves of thin resaL000 ogrooratio- TA I-Vera: von betWeon agencies 75 =.thoers o'Lhe resolution corporation 16 RoSOlutioo tools 77 Furdlo- compersation rd resoiJo on 8 Con5o9Jences o'oso.ution

8 Capitalcontrols el 81 Cujecti esol capital oar J71s e2 rent fa o-aum"k E.4 83 Proposed fire./Y0

9 Systemic k 89 gl The ppOb ernclo,ge nic fsc 83 91 Orojectives and pr n, ioles 90 93 Irstit.uono' arrangement cc 9A 1ho'veeleme'3or the oostemic regJla oon process eg 95 Canstr_olingo'd a^a1.9irg a syse otabase 9o. 56 de'llooation o sos or call/ imoorta 95 97 Systemwide rneasJ es 95 9.8 Inteoregu ocore r'ge'0.? (.0 3dination 99 is s maoager

io Financial inclusion and market development 99 10 0Menves 10 2 'lead oriel e- rectu IC 3 or -op es that guide ThS roof m e 11

11 Monetary policy 111 Sojen,e of monetary co icy 2 cen-ral Lz 13 The oonetoryq proms= II The monetary poi Cy :Orrl LLeo, 115 oocaJntabihty 116 ns utionals !ono- 11 / Temporary Lommdi „los stance Ire

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CONTENTS

12 Public debt management 2 1 An ,ncepensent push: deb: mi.'...agemen■agency 2 2 Strucurecithe pLa. c debt managemem agercy 23 C.bJec.Nesa'dNZtOnsoltte ublie deb'. management pg..exy 114

13 undations of contracts and property n9 3 1 the interaz isn of iransial .3.,..s.mth other laws 32 Princ ples rels ingTo certzil contRci-s 33 Ir.fratri.h.0....11nstirL !Dna 122 3A RegJlatory ss...es o,- Infrastruc....r.2 Ins , utiols 12: 35 Special provis ons for nf .oliucti, einstftution, 125 36 oki c 1.5.D1 e 6 J trade Of Sefurit eS '26 12?

14 'nanclal regulatory althlte(U1re in 81 7 .-olciz. regulatory architecture as a c.isL. )ct reature Or I iarc al la ,.. 4 2 :.• °Nem si the p eseir arr2ngements -32 -43 Co..1 deral ontf.al. gJide a ■ernative 4 ciitecturechaice= 132 d 4 -. inanc .31 leg.. t ory architecture 56:e..1 for Inc an :and!' oils 33

15 Transition issues 137

16 Summary of recommendations not embedded in the draft Code 141 c ship neutrality and co-Ipctiticn el 7; 2 Par amentDry revi2 go- subot -2.ce legislatic - - E.3 RECD'IMel1C2t 011S Df i.Drking G oups '42 6.4 ' boVer rat t c.- 142 6 5 SySr^ss e mic risk E6 T ansitro °S

17 C446199144 145

18 Notes of dissent 107 `A' ecicssent ly .R 147 18.2 Noxafu sse-.:oy KJ. Jdesl. 148

154 R. e d =Aro by H

19 Annexes 197 19 I Formation of the F_RC 167 her-a -Toth:1 cffic ats ..kdloas..ds'ec the Com

103 _is!. ol.r.oreefor aeon vith FS 161 94 issuQs Fo ciscassiomoitn exo2rsand crake helders '62 195 1.-11-e'

AIq ..zcouw, and (we 's Division ARC Asset Reconstruct o- Comps - ASIC Australian SecJric es and Investment ammiss o eDD Bc7.rd oOlrecors Board of Ma nagerr Bar SabsldlaryModel r.troll=r and Auciror Gene al 01 Irdi Cc nontior Comr. :sic - ofl -d le Ce-:a! COJIlte' Parry CAA CgieT Econol- c Ad CAD Cale Exec..1, 2 Ofri,tr : ARC Sun elczincity Reg, a wryCommissiD-1 CEASAF tental Rens 'vat Sesu itisation Asset Reconstn,c ion and Security titerest off -idle :cm - [tee on Fi anCia Sector Assessment CFTC Commodities Fut., e5Tradma COMMIS510- CAI combatirg the ina-o ng al Te srn CAC Code tor Civil Focedure 19Ce C.ash Reserve :atIO DEA ▪ ailment of ECOCISMI2 Affair: Deocs,InsJra -ceand ed GJereilLA2 Co ry ration India Cepa -MEC a- Post Deb RecoveryAlp:1101C Tribunal DPI Debi- Ran :Hy intuna, =CV Drouder Frd Organisa:Ion EPF Enp eyee, Ponder: FLd ESIC Picloyees Slate Inurenze:crporation -Al t E mare alrction Task -Jr“ Flnanc al COnCOCI Aul -onty le: Fireir` I) CAC iwesi-mAnt Financial Daft, vlaregement Centre FAA Financial Holdrg Company 1:11 Fore g^ ional F MC PD 'ward Mums Commission F -a xiBI Market hitermedia Fina -col Redress Age-cy ▪

FSAT nancial Ak.pellaVa sribusal FinanCial ses..cersAstherts FS DC and Development Council F Se:tor Leg slati e arms CDRIMIS5 or Fedi soreig, Venture Capital in.estor GDP G1055 D.Orne5t1. odust General lnsJrnace Coyne ;DI Gayer ent of Ircia FIR Hunan kesurces IBA Indian Bank; Associatior IMF I -tern? on a. lionetpiry Fund IPA ndepesdert Segs story Agen:‘ IRA Independent RegJatory .,genc, t Authsr IRDA Insurance kngulstoryanc De.ielspmer KYC LIG file Insurance paratior. en: of ndia MCA Ministry sj Sompary Affairs Gcse — MD Manage DireC:01 IAPC Monerary PoScs Corrsti:ree National Be.sS for Agriculture and Rural Development 1413CC Non Banking Financial Car- sany NODPC Nation; Conss —erDiSOLItes Red CSS21Commiss;on N ■113 Naicna; Housing Barix NC-IC Non aserassg Ho ding Co— sa Non Performing Asset NPS New Panto- System NatlorialSrall Savings Fund Over Irs Ccsster Public Deb: ManacernentAgencs PFRDA Pension Fsrd .Regulatory and Deydasmen: ri PPF Pubic Provident Fund P53 PkIbl c Sector Sank PSJ Public Sector Undertaking QuaSSed Foreign Investor ale Qualned Instsssonsleuyer QBI Reserve Sank of India The Recoveryof Sebts Due :o Banks and F nar.cia Instsul:or

Regis: r si Companies CR3 Segicnal 'al Bank te Werra:op SPNCAESI The Se:sr :Eason and Reconssscr on at Financial Asse d En forcemert of Secunt.,(Inte est Art SecusSes.spsellateTricunal SBI State Banko■Inc.a Securs es and Exchange Board of Ind a SZ: Us Secustios and Exchargeamr.ssion

Statutory L ordify Ratio SOn Standard Opera:ins; Proceduss Terms .of elere rre UCB Urban Cooneero.e Bank Uni ied Fmene alAgenzi Jn,q UC l cmHI cation Autio Indic JK Pmandal S.? vices and Mail e sAct 1C00 Jni ed Kingdom Jup Jni _Inked cin.e plan Union u b k ServieC<'.miss On Jni rd Sees

whpuy Owned Subs diary Acknowledgement

hnen the Ministry of P -arse approached me in early 2011 1:)rvir a Commission -- I nanzial iemslaL - s 1 »VaS wrte.,,haL dauntx by le magnaLde of the HOVV2Ve my.6hes ta-ion c ssapeared /Then saw the ms -IdE..eol boo). anc he ist c expers seing p °posed its ne-oers The rem tne Con -ission was ID, an externely ir- Dortant nat issue and the propo.e. members were renowned expertsue from an c,loc, c x o relevant a.eas That ciminishee my L.-epics:10- and imb d me ▪ cleconlidence -eeded totakecn hetask F nancre sector .eformc affect e.er.Jone in' e coLntrit. d beycr d given thegrov% ing interlace of our economy v, the es of tire ..orld Dole Is eg slat ons en.cted ro^ he 1873: we e found:. ions c this mpotant .:2.talyuc sector Ma -I; of them ve..e. enacted nnen I nancial economic: was -o' born and t-e franc al sector was at in t tsr ).ears imancia and p-ac ces have Jncergsne Da ao gm shi-s s legal ouncatia-s though amended in p t ashionhe nor: or less sta h serious rastures sibly ar -ng the systc.ri ThTr eseese rault es,once more orle,so hidden are -tors,o..,. bvidei...openl th., form of lack of egalclarityo. cespons ard D regula [Wei- regalatorr sputes regu cgutated so_.rt battles adventul SIT of marke pan wants and I c growing sgacm, anki -gardJiadcn inanc 81sec or H.SN JO %..f.t,Acd.es: nth we transformnance...ith the he Institut ons anc the equiprent t rom a non linanoal cra' now do ssif ed instt on

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Ccharya or Avinasc Persadd the :SCC Sub Sow- Lo.c [Dr. D Sdbbarco Prof.Vouch k AshokC)awls 17r R Basu, rn-.Li2U.K.Eirha, Mr -Ian Narava and Mr ecg:sc Acarwed -occl Gop Mr R;'b kganhol Mcrkel-cCommic on amoncothe c I alsoack SSOCI-ec'v, and edgecce - cuircrovidec .aricus industry acsocir o-ssuch IBA The Working Groups Which scre sec up by the Commission to delve drupe" is o secto spec fic idsues on bank, g sezur tics kublc oebt mascgeme-t paymen 5 n- sdrance persic-s &srna'l saqings cnned the co sulfa on/irteracion rocess lu, her The riuts sroalded ay those eve-Ls also Acct. alucale Earl evorci-c group -epos chaired by a `12mber of rce FSdRC dorain exserts as Memberc, becamea V a 1.125A addi on to true source base o Nis Peooa. c3 'relate the ororts c all - these Working Group,

raCtIC e had nith regulator. I alco ackroodedge wilt great sansfaction tae: ': policy nake-s a -d othe eepe s in select jdricc ,ctionc - AusLral a 5 rgapone, UK sod

Canada I am also grater,. LO Id 3 , Sho en ,iinicte- or Supera -uat on and :man- cialIS ces 4ustralin theInc° SBusircssCodncil Cityof cncon and Ice LIS Fede al Reserve Ram who met v9in ic-e Commits on and sh:ec their ‘aluaLle s.The swholelsec sdppeclOf •Ir ,lat Crooke Ms ISM George GldeCs sdnd“o r anc o he- in orgy nisng thaw meetings B also aPPreciated eased on:he broad contours of the framec.o'k emerging (rcm oc interactions, re sezrche anc de iberations tseSssion re ccsecm an Approach paper in October 1C12 rece%,ed a nd -ber of sdggesmonswhiich v.ere „ the'cle,ibe ated dpcn and some 01 them ck., cab y nco potated inLc sf Reps - -he lecc macksv,ere car' cdlartybeto{ul strengtheningth -he internal cc ste-cy of the reco-mendalJons Ciearegratefu to Voce Afaisave an '-c RBI Departmer, of Co-sorric) Affairs and several other cspe The Corm-, ssion cou d e nbarl< os i■stcck soo- alter its Ho ificaLicc c Math e•Cli because c'ne t rely logicccal support provided Sy SEBI Notions Inc „ceof ci mance one colicy iNEPrP and katiolal insutdte o Securities MaCce.INISI I ealue nc support ors co.=( by Mese orgccisaLions'cricn x.d the Commics on cc focus Ls el Forts onifs main tcsk Ircrn thee@ 1■. days !ask orthe Comr iss on has been ouiteonerous but r disc erg. ric it ever% Her. her clthe Ccr r sspon wee cdto his/her nare and ccritribiced sdbstarC vely SS30 Co this Repot I appreciate and acccoxlcdge -e contncuhe of each Icente- of the Com- 5 and recall [he i-s ght and -atec deliberations 1- meetings accd thro, gh electronic com nicac ocs I app Lie addi re^pc -sibilicy illirgl cischarced Swarup as E r entor crc ac sor on Orgarll`r One cad cnt cal icch n cal cs, es The role played )y Dr. C KG hcir Sec &talc)? o the So- - scion n ce execumngthr cud:Li-es and Tocessec or the seamlesc funcconig o ha Corrmissicr 2 d “cseflectice erdentions n -cc del oeratc rescicrg COMJ CA Is sueswas exert plaryand ueser.,es sarticuic co-mencarion The untimo y demise c r Achuthan iasabreat losc cc all cf.IS WeV ere Iccnc capped dy the cosi- health o ccstiLs (Dr) Debi cracao Pal & -g the la „er half o'oc'ho Dr M Soonda the FSLCc almost ill ficalisingthoReportp ced -heFodrteentc FISISSISS:ommi:sion 0- 4th February 2.13 Joir secretaci Ccpital MetsINOMIlleeNemb. ; could not e the r ee' cgs dur ro othE CO'•mitmcnLs The Commission bac the Le-el of cediceLed resea,ch ecc-,5 set!, c by ;he NIcFc and by Cce NICH Thesetearric ovrced as = Dingle unite Dr "ca Shah playec -E rcle of ar •csp atonal Wide, -o he research earns vichronrsing hevar ocsyoucg mind= arid hei, odtpdts intoz, ocganic Ahaleand sccc lcrl% p'esont -gissues before ceComo mrssi- zormend the elo o Cr Shah C Ila catlaik c -d ever!, other cnembe, this ccinted grcup ycirg people who wonted u cringly about V.3 years I also

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c.p.p eciate eflot of the consultants of the Commission SornaseThar Srioaresa1, bob.vPankh and RPISS2 char Ras In guic ng the reset 0, tam or many issLes as wet as nuibuhcto he set perat orb of the 0o-missi,,n .41 number ..)- expE. Ts peo L ,e draftdocuments K.P. Krishnan, Yaca Yacav, and manyothers provides ex7ersi ,e suppol In nevi¢wing the drafts I a); eciate r help a -c reful suggestions F na-cialSeCtO se,-g a catalythe ea P-2C orgrLmsi hasm. ”dynamicEnDJE1-1 to supper( he growtr asprabons. He institutional ramework-,aws,policiesandor- ganisa ions- gaver-ingtielinancialsecic -shou ,.enabIG itsa -der ., gr,,w h ‘uc" asp -a SPFS ASS.: ps-OJD SEPPOP/POsk I,fae,,rnntec 'inane a sector sap- -ring the cvrer" modest :Jour nar on s incapailend incurl,cien ro pe-kym th s SOlational ch curet.° o- c institunonssho, cr play for o,,r futt.r> anc:,rt -tithecr framework e ,ragesthe gro,,,rh of rwilightzancsliOshado., banking man: al a 'Ines le4oirg to major issues of consL^,er protectior 13 SySIBMIC sS. Gwen th s he :or-NisL,ion Nasfullyconvrced °Rile need b cisbardirg t-esectorel thirkinganc incirseito,ga- satin orswhile design rg a new To— stitur anal fodndat on lo- theapinng Axe Ind an eco-icry efiniingsa^d,e—mmenlrior= ,:rho .0,•crr ^ sz or amthe rosito- di died A15- decome alerIS of hir .22 ibre mindsard extensi e esear.th on nancial sector 13ws, po ries and practices Inc 3 Slid SC ne DI thc majorr aoroad the la :Q.- mainly fcnocusing on pOSL -rsis de,,eloomenv, Usingtheseern' iews, feeobacks research ma erial and the expertise -e Commission, we cebat.:d and deliberated on the rost asp ppric e model for ndia gthegroJno o ,e Ind .5-15).a em on bspro After al the r osel we shouls iAcourtr) tail,:recfluid state to ou - e,,s car be Toinulatad, thcur ,.- model in The lapis...RI were con s ol Pr, fact t a we wep,,L,erni ,ornething - gnitude with pernapsrid saral el ndepe-deit ndia ails suchleg sla clp -ges on a hs st c qfP e are not a mr .3Cint,, v.e can urdttue effort has peer lu a ratt y to be sJyarin ,or cceeda, irst Utiprkchanges )pen o' ,,, ratter of decades as ramoslysta.es Nobel La_reate011, The suggcstec full-s..ale legislative re orm. may look PPPIDILIOLS The :o-missizr debatedissue ength and despite raw o on-affilio ed ,p,as convinced at s erfuscalee revamp was needed PS p ece-eal amendments to the ng slations inadequare fora capic y grcvd-g and test globaib -g Indian inaoc al sec-or It was alsr -o us a, the roridat o, s modern egjlatary structures should beereeted duringTea:eV limes rether -han rr, a crisis o un anc then embark on a dre ighting mode or institution ch woulc be mucd ed end fragile The need for Areamliningt-e laws ano reducingis zhe nLmber of rogt ono woingt eri c ef.r -no-ids'ewas a common of thoJgh- of all the expeqs consulted In bnet Rep, L the, sJlcuicripr-nous e forts put n by -hc Comrss on Mem PP'S Secre-ary Cc^su, ants and ResearchersRe nders. and t-,e MILS' ?CUL idp.ts a,,c, (re a arge numbe-c, expertsxpft and s'ake-no I rate,JIly asp eciaie ackrowledge a I hs.S.2 indut- supp., t noir bvhic have Fad o SEPLIE for sub optim:,1

21Merci 2013 RNL S III

Executive Summary

Mandate Tre sector Legislative Reforms Comm ,ss an was constituted by the Govern mentol-da, 1..?1,r st yof Finance,in"/arch. lull. These trg up of the fort ssian v.as t^essut or a felt need tha the lega arc ins Jonal s ructures of the Han:. al secto' ir India neec to be rev .7acc. and ,ccas in tune wish the :criCemporan, requirements c the sector The Institut o-a ameofork governing the inEncial sec or has been b AT up ode's cefiery. -he c are over Go Acts and -. tiple -.les and reg. scions that &oder, the nanual sbctor Many of the 1,na voia sectsr laus date bad several decades, when Gal lancaape Was very c 'fee- from that saen tz.cay. For example, t o Poser:P. Bann of 1^dia {RBI; Act and thz nsuran net z e of 1934 and 1938 vintage rtapettvey . Financial Konomic governance as been modified in a p ecemeal fasr ion ro- time to t tJb=iantial changes come Jridelyigg ourmations Over cho years, as the economy and the fira -dalgystem have grown 'n size and gophigt at on, an Increasing ga0os care abour ....een the evir) rents -rtheccuntryans th.e.Prese bga 8 d reg. sr; arrangenen s Jnintenced consequences induce regulatory gaps overlaps, inconsis ercies anc re4u 2-0P, I'LlLrage The fragmented reg. nog,. arch,■ectse has led to a ogs of scale End scope that cold De awname from a seamless financial ma -get with all 1 s atter dantbenee sof mini-isiggtheintermediationcost 818 -,xrciexperrcon ttees .-)@d et t these d screpanfies. and rezommended the -eec for re:I:lung the financial sector leg slai- ons to rec ify ne- These resorts geip ug gncerstand the economic and ira c al roligvtra sformationthanq requirec hagocel lied [h.? polio, framework with:r ch -eform of financial lawcan comma-ice The rentt o the Commiss on Js. o comprehensivelyand redraft the legisla t onsgove f ai °alsystem 2.rde..cs evolve scosimila rset the inziolesfo 5ove■garcc o'figanz al secLor regula -StItUtIG-G This is simila o the tradition LCV.Corn-lisi.;ns 1-1 I whic evieh, legislat on and p epo3e nee f cations outcpm2cr toe Co-Imissicn swon. ig a drft Incian FinancialCode whic- on-sesto al in nturereferrec o asthe draft Codetly-o..ghauci ....hid, is in folurre II of the repo and replaces the buk o ex sting I naicialla‘h,

Work process of the Commission hecommisslos tooka comp ehensi 1-'51.pr nolesappioact tletas.■, rooting lc ysisand decisirsir a csnceptJaloro ysisor inancial egulaticnanc tg, c.volexpe r ense da-s Sosaeelersenrsof èv..ork vocessthatareusec India LasaiCo arm intenset, >ear process .ahlah sons ,aer.o Jtilised heComm ss on emberkec upo- stageo Apr 2011 Three eleme-s .vere erphasised in the aork process Commis sion has lo laaec a cans.. , t5■0/P acprooch mac- -gout -to Knoaledge and persoectiae across alla amen s of Indian ìna -ce Commis% on haSCJIIIVated diSCIPilnON co- 2'0 CW70, draain on the ie ds of puo econo- finarse -aaraeconomics Juno adm stra-inn Fria% Commission has dia.. on the exc.oences of erergirg markets aô ceooed u so ct,s^3 uncers'anding how lisancial law and agensies have been corratrse ed %soda:. de The draftirg of a‘s in a ce-oc acy must necessar Si give oppar amities Sara et. siJerabletasna ooints -o be hea d la adaitics the s'afting cf aa in haance con - Icel. challenge.) Over [las .ss ) ear period more --an 20 ind ucsals oar °poled - process of t'eCammtssass ir sanJus capact cs This has hslped ensu-sr that divers Code is charac viewpoints fed inco the debV-es of theCorms:ion aaal tso dm- tensed by Isessical sound -ess terrs MCI-aft:a ecanomics am. and sJblic adminis t ratio!

The tasks of financial law The st SE of asostiors t atme :calm's:ran it.11 was about aie purpose of the ncial legal fra -sewora RegUlatICI is not an e-d itself; exists - order IC address ^ar,Act fa lures. Hon tl- s phni Crv1evu. nine Lomponemswereesdisionau

is sot arlegaatenlisascejesulaLcss rust p OC2 the burden soon financial rms ,suit o consume.- p otectio^ s perspaa ve sl-apes n ▪ coinGmo e -e oa arventions airnec at pravarsion (of indusinsfina -cielrirmsLoaards fair playa a -c. is Irsdress of graranoesi 2 in..rro prucentral egWat - v nen f irrns make prom ses to consumers. 2 g the r:payment of bankdeaosit.r.s.Eis flys are reqairec to rt.- Ito- the a JlE yobabiltyoltheananalei irm ands-der-aka inlervenionsL`r Tducethisfa urs

3 seasitThaa -Micro prudential regulation - sh b.a.nsteliminte We failure o f finana al arris A saecis sec reso -apaoility is requiiad ch swiftla ads &as.- stressed financia fr-s end protect5 ini-eresEs sniP11

n. CoaAOlmnrols -These are estricrions 311 Go'barde'az mry on thecapit2 ac car' The Comrr'sor has no slay.. on 'he seeuencinc - d .irisg of capita coLat iberalisaason TheAor

fl Public cool cronoperierr - A speciHsec rramewcrin on public d.=ot panagen-err has to be sew) vat rakes a comprehensive view of the frabii,iat o'Gsvamment, and establishes the ciyaLeL., for oy, cost inanc, na in she long run. Crrcc boding and marker an.he - Certain adaptations c. the !erica ions of yerzial y suariding contracts and proper y, o rocuired to enable „he financial e-r Alongs,de this the legs !arida io-s for:he securities markets are esi-a6 shed. The recall task of corstm:tingf -ancal lx,v comprises he above nine elements and of estab shngsoJnd Iona Ears cl egulatsry govena -s This ptcblo slnVmer dihrs mr9tleabv Ivm a.Dyoach taOr. existing ams India which arc s.=cmr-s,ec ic Theezts rg laws deal *it' sectors 3uch as banking secun ies a'd par-e- The Commission ana ysed this ssue at eng h and conduced *hat non sencial ays constit.te supetr StratCes ps an example a PCP-sec:0R consumerprote: ion law yypuld I.2ad to harmonisation oMe:consumer protection oss nultiplesec s If thisapproach‘orcyno t'ycn,cnure )cksit like ales certain sector more lax standards cr consumer prote...tn an another ProHsociy nrrancial I rmsvuoyld nysh to exala tthe sip itopportun LieS anc It si.tycturc of me f -anchai system In sir lar ..shior nan sectoral micrs-pnycentisyst wouldem. e-surethat rea soning no. risk is aplieJ ail across the financial systIf nue :woe- regales on is done eren■y - dife'en[ secto s, then srofil-see, ng firrs will e an incentive tz portray r:Ctivit.eS bet0 ging rC senors wherecapital iequirementS are

Vsn sectoral Laos are closely re atec to the idea of p sased law The &a+ ._ode ny: eztoral pinziples-baed Regularys IN I issue regubtiors that w I or se secto a and cren be ules-based ire adiantage olthis aran;ement thatS,e- arcs details of -echno ogy and market process are not errbecdec t-e Over the ;ear changes tech h-logv enc tuliptwould saes c 'Path 1.2 ions in 1- 2.uLations -ime essp-inc Dles mc, Id beCom interp e ed Ives lure bycou rts ano :re tribUnal, whiC con madificatio-s rep esent -r e essence [inane al am pr many decades Lc cone In „h s respectthe worY of ie Commssio vas taken Indian f lav, closer o roc) s t loop nmym law IrediLion At present,pangs inanoa fairly co -nplex r-e drafting style uset in most pu reit s rels co-slex and thus ..r■earesle La ron sp=e alists T-e commis s on has: ied achieyea simplewriting style orrie dralLiode The, niflya: on of ryai y la,vs ^ta a c-a-Csde ras greegasistedSimp ificahor As ngle setaf ccrinitions siterms ut ised across all 45C sections of thc law inc. ontiro c'yft Coda nternaly, consis ent and has a simple tzble conl-ents This e ey-asis on pkitd re.loce the con y face by a1/2 maYeN, oureaucrats ecal p-ofessionaIs end fra -ice praai oners in understanding lb: lawand vorki-g Nithin The firs- task a inaroal is to establish a clam s,rateg for the nire areas listed above. The second cask of financial law sto estaolish firancial mgulalors In a liberal Jen oyra.2y,[i e sepa'ation poe,ers dsc r -eencoly ages a separation oe-yeeen hc ceslative execut and ucicialTund ons Financial Yegulators are un que the exteni- o »thich three ltiococriszre placed r asiigles.ge-cy lhistone2nLratio' of There iso strongyase lo ircependenceo, regyilators regulatcrswoule Yiele grdatdr legal cryainty The quest for independence of the ego ror rcyJires planks of :JD, k On one hanc rdeoerdence neat:: to be ershr el n- lep) sysett ng -I4-

• processes ingpatdet n thelav, 0- reotherhana alongsice indepencerce tiere s a req Jirement of .-Cesuntabil y Mechanism, Tre (-aim ss on has adopted ivep tnti y p-oceses 'hat the regulator must adhre ha‘..e been Ante-. Goan co-siderabc deta 1- draltCode creunc the,ogulation--akingprozessi.e.-ereoarl amenthaceicgredlav, making oov,re-ro egulato'b) as bee- establbhel n the draft Codevoth great cae voith elaborate c-ee

The footprint of regulator! As a f -st sap - determining -e approon: eh -^ and extent rcAu'a, on for the Ira Clan Franc al sector :he Commission began with en icentrizat o- of the basic sat act matter of regulation - financia procucts and se-oces, In the e.n of the Commission, parizular forms D deallnr 1-1 inenzial products =uch assec.rities insualceco-,tract deocu:szro credit arraggcm -'s constitutethr rerderng of frcncial .tory ces 1 - • .er ice; such as, sole cf secun ies nerarce of public deposits operating - vestrrenr schcmos ant crcdit facilhes Corm+ ss on -ov,ever recogrpsrs that a pr rc p es-based approa,h to defining mantra', products and rinancia Se comes with I,"e risk of ....m -tenti..wally cast -g the net...f regular o- oo aide Tere-...re v.Ts dxided that financr.1 r..-EJ =Lion apply only those persons who are e- gage° en I% Lts ^ess icarqf 'q or nnonc sery :es Whilo Yoposing a 1st on..-cia products a-o serucec in the drart .:ode the C..:m miss cci yawarecIthe con. ant nic‘at o- l'e nree - onder 'a e-s thatthe awoui kerppace - thesecirzese hec sft.:odeempo...cr;theGoverntie -rent to erpand the 311manc al p °ducts end r ,ces as required Al same' re "E draltioce ? ows 1-e rezdiato-sto exc. _de soecifermarc el ,er..izes carried br specific categories of oe sois ism t1e scope 71 inaneia:se-..ices Lsing Lhis pcv.e.r;H regulator:. 112apieto.-peciNere-ptions,c g or hedgefundstfra- do no■acce,=11, d, lam moiethan a particular -umC.er of pe,son_orinvestmen eir prared oersons In coinc 'in regulate 42.1J[C CSUrse JOL`J ty 'he c.D cst de= and guiced e pill-v..01;2s Set OJI under the draftCode 5--

Structure of the regulator Just as the draft epee d.ne note -fere^ aie between dlrereofsectorsl n the financtal nes- tem the draft C700 25IBUISreS 3 sirs e frame,non.lor regulatory governance across agencies This is tooted in the In tiles ye require — onte^f incepende, e and acccsnt abi ite are I's sane ac oss the I -sere el seeste — 8 E8Ork is usediile draft Ceeefor a agesc c'ered .herein The draft nodecreares a seneso oeheaLicnsfor heGoseremer I and fo egulators Tre haft covers all funs ions ci regulators, and der ses the behaviour -hat s spired freer, regulator . All regelato swill -ev — w ered Dome TeeConnssiones (ened a pec ise se ^ arch pocessforhe°pro o all members. FOLK kinds of mem on earner's sinned „hechseparson executivemembere ine Amgen acmin,straLive law ^ember, son execezue memSers and GT,VernIne I nemrees The r0 e of each of these AMC_ern s Ken ids seen canned f appointment en-ditions. far board members nave been def The eras. sodees ab certai elementsof thefirctonineof Sparc mee ings so • o ens. e adequace o srsieSnnfteeLoard oeer. .heorgsnise fort and an emphas s trana33.E1Cv ^ gcnere I amesone To- estsclish gedsisory coeneils ftat eseporL he hcarc has seen sreaLeJ This ssome IMeS "doked in the dra t nede in cons ructings:atu ors • isory sauns on Apar S-om this Lhe 'Doers will bet o sonst, est acdit analadvisory ssune Is based on s needs . The Commiss on ensesages sat fees csarged to the f nane al syste-nnel fund al reg teat° v agencies F nencial regeetinn ern ore, genera ly impose no burden tinny the exchesser sh s assis ndependencens gierg renslatersgienteras,oromy and help the creation of a speciat sed worst r.e.

Functions and powers of the regulator The actin functioning ce the regelator lies in Is ee n nes o- makirg, execs s e fcrnbnsanc adm 2.1v: law=ennions Inesen area Se d'aftendeden ne tnerenc eosins pr ngelatois th considerable specificity At present, in India there's a conitsing situstion nen .nliulaLers utilising.— any in • uments se:, as -egelatio's ires, circulars, lette s notices en d press elease. he omit [zee pow es all regelstarsOoserarethioegh asmall ser he- of nvel defined instrume only the(a- a- task o a regulator that cf issuing segelatiens Ilene are poorly drafted , there s a pess,tihr, AYCe551, e delegn-innbyearl ament where a regulatory agency g ven sweeping powers to c al eguls ions TheCommission has censinter Issoeghe to del es - edftc obi es s dere e spec, lc possess anc articulate p ric plestsa gu ae tee use el powers Theugh nA reel lation raking at the regule-or vrculo not aka place in

strus s pc process has been oe ined in the draft Code, through welch egulaLion making ....cute aka pure. The pgula c no. d Je (Nis ed to adulate :he object of 'he regu Ian ata erne'd 0"he2-oDienor re ket fa lure IV: he regu Seek: ts address, and analyse the costs ono tenents eSSDCSCed neth the proDO5ed ...nve-erna le public consulLe le process s written ins the craft cede. This structured reguia or making process would Reuse arbitrariness and help improve the quality o rege a or% T^rs aructs:ed regu steer raking process equires a sonsicere ;In expenditure of Te and efor at tee reguleor shis .siessurate snits the remarkable fast L'iat Par- liament hsn celega en a.v reeking sone -a a regslator V en nriergenzy, the regulator -16-

can issue egilat onswithr,ut go -...gthroughl e fullregulation Takirgprsc...P.ss He...eve ■ these regulations apsewlC-F sr errs . Alce.gs de regJlatio^s the draft tle envisage process ouLh which Tv, tars can IsSJe juidelines Guidelinesi clarcit -teroretation regulahors but dp not thems=Jvcs, corstirute 'op_ at o-s spocaica violation of guideiinds -lone would no' zsistitute io aio of the a... At prase nL reELlations.. are not subject ol.A1.213 re., ew 1^e Commis on ena es an importalt p ozess of Jud c al re, ea of regulations It would be possible to cl-allenEe re.e.J1.2 isns 3fi orcces 5)Les e the full cgulation ma< ssS orn:ess was not 101 nwed substane con en! e re regula on does no, pus he tne obiectivoc. or ex °ends he po6rrs or v 012 est-e thal. are r neapAtli re-miss on belia. es that the.e L.-ec (.5 and balances vyi yield _onside able npr_..eme.-Its in the qualit, of regula' on-mak ng India. :Ur Lot . ecunvefu-c-io-c,thedrakCocehasspecifics Dout eachelementof r-e executive pov..e s The firs' st ge is -e processingofDS. permo's given. Ay ematic esesSSS has been laid downIt:cur m ssio-s The ti Dr e ement s informati.:n gathering ReGulatars equire a substantial sca E o: regular ir Drmarion fl.cm. from rs I he Commis on e sages a single F. nancial Hanngemen Ce- e finaicial f, rs mllsubr.; regula, informztior I hgs clectro-cllv to Ibis singe fa_il Th d rec.-co'ha ccst o cs.moliance arc )elp mprovc dare mansge-r regulators pe fre drah Code has a systc.mzLic aro oach certa - stan dard categonesareclefined,s-c principlesgude heasplicat onof renaltie o, d help inducr greater con isteicy and help produce greater deter ence tical comps nent of t-e frarevork penaft eb is the icc anisms for comp.,- iing, which are laid on a sound su-dalion anc csrbist.rilly applied acros eri re f".-12.-c al sysFern Once an est.gation has taken placP. and t-e sJperviscry eam ■-in a regulatcr bel...e.es there ay. peen violation...lc princip es of pialiLadminis rat c..-Isuggesi a' he a:eh al osiershould writte, sysisriter=ster At ne of,are ard an ac minist at .913 vy.sulc `.a...=.ovorsight. el ELT!" strati 2 ....olcers would not ha...an. resoonsib les Thin theorganisal. o- of Derforminc qua; func on 5y:emetic process.pcu .2 operate r heregt. ... -ereadministrs ./e low cheer_ and the ad ninistra law Temper ...cule be prese- ed r eviderce write order The ....ark of the regulator ultimately results in regulaticns and orde's would faceiLdie reviee at Itunal TheComn sagbsa un rted F -311E121 Sector Apseate rilbUISS ,FSATIthel would her all t3.:tals finance A consideTbi: ocus has oxen p'aced, n fredrz..f. rode. Lhe Lincioning of ne re‘iztry of FSA- Se a_ achieve hinfl err SIMS!

Consumer protection hov.orko Commissisn ield ccis_rer pre echo- ma-k.say.atershed co' oa ed approaohesin idiar Randal it me xsa break ...vittit-etrad ecremptor and MeSesSOSeardS a pas nor ..riere a SIE- kart burden of c...” sume oratectio, is placed upon financial cra- _ode hrs Ps'al h.,=1:. right= for a I I ancial s In additio^, the Code defines what is an unsoph sticate 19n and an acditio-al step of pro ect o-sare defired lo these consume s The band prctectisns are =inanua se riceoveers musr act ... ofessional cil gence 2 -rcrestion agains- L'a con ract terms 17-

Protec lc - agairstuntai co-th.ct L Protec,is- ,na,..rA3 ir for natio-i, c Requ eTent sf fa rdisclosve G Redress olcorm;laints by inancal .er.eice providers In addlos -, 5c,phismoted consumers have three additional otectio's elle rgof to ale adrice, 2 Protecion from conflicts o interest olad,. berg, 3 to the edress agency For recressaredress ;fie...Br ce, The ret Aator has bee; giver or envneratpc s=r, pov,eers through ;dm& rr us' rzCaro rro ec ions A ongside these ccie.tives and oov,ers the regulator has been given a set or p in,Joes 'ha guide the use cf the powers. This ,iamemorx of rghts - pr p es toll shape he caftirg of reLulatiois G^ce his has poen dorc reigdlatcrs reasliged 3 urclertakesdpe-disoryzctidrislo er dythal regdIddrins ale sang:on-plied with Thi.Eoes g r'ilorte-enL and c c e yacti_ns 7his reFJlatory and superr scrystrategy considerable ga ns consumer protection, when csid ed 417 the prdsedit Indian practises it the sare ime e A II be cetain consume s whir. d&rie“..d eCommis,on env sages aumer, :Ingle led kedre5s Aten„,,, ',1-RA) v.oL'd serve a-, aggrieve:• consacross all sec ors This wou d featurt. [civics' procers Ehragl ..hich the cxrpla nt of the cersurneragoirst -he inancial m woule be learc anc enenes marded with the -5.7 cancIde ao pew( -as beei made ,ythe Com-, ssion ob-ain FRP. hash gh orieratianalcasasil t es add [Hs irposed loostra -sacto-Iscos-sLpo- par:ic oants The FRA s miper an as a median's- for address t-e toeerne- of one consumer The is a so en iszgec as a eakable measureme-, system, fo' the Case database of the FP, that shc,k, Orfe' a 3roblerns co^sJmerprraectio) liof Felice, the Comrr eni sages a systema ic process ^roJg!,,,t ch the analysis of this datar,oulr eed t3ctp impro eme-ts egu anon and supevision The Cor mbsion lecog-,ses tha zompet or s sceve Tut L.:J for the voted- on of consurrer The Compe, tio- e-shnnes, a non se‘torl app oac Lo•Lornpoto. pcy I -c 1.,:;mrni,s on envisagedd a deta es rechanism for better co operat on between )s-cial egulators a -d the Competit cr Com -issisn tivedg- ich there is greater harrrot he quest forreater camp= ,non

~~Micro-prudential regulation~~

The sursJit o consumer protection proteclrnlogically recpres micrs-pru,erfial regulation Ce of constraining toe behcvOur off fir-s so am reduce the probability of failure Vire- a 'man,: alfirm makoS3 promise to a. cons no' ii shouldbe ragulated so y.s. '0 .-chicw..2 certain hign p °baba)? ,a this promise isLpheld The first co-rponent of the dott Code is a dehnit on of -eclass of-oar situ-tiorswl-cre rinds Druce-dal legdIdLion req red Ihis 1, do e in a p ina9 eS ed -ay focus ing -)o'consLriers o t ide sta-d firm fai Jie, to co ord betAeen ther, se %,e5 arc the cor s'qunces ere ha _refor:onJ,mers Rcgu'zOrs have fi.e powers Lhrough i‘hich ley ca - purue the micrs-D'udon-,aI g„,o1 regulation of entr/ regulation at risk taking, regular c - of loss aosorpt on tip,. tun of go.,cr-a -ce and ma-age-ent a-d monitor i'les eau, thebe sowcrs in precise loge ddai UNMANS

~~o -es° powers. A OrIPHIde Ha it specif es a sec of peecip es Ina_ guide re use~~

~~- a- Eleven princ Dies have been oenrified that -lust be comelied‘dth eor evemple pe~~

~~,` equal treatmere ,equa eles require erspomono T., egreate r restrictions or e carer r sk treat-lent of equal that,reanc so oer~~

~~at's v pursue he miere-orudeetie et ective by e ri' ree. I is en vieaego that ons woe d have 'he se -etime. these regJl e regulet oats -12. utilise tee e e poe.ers At~~

~~o saeely'e ten O 'inciples~~

~~inth s rE reeeerk there may be b oadle re eegroundsror eppeal age eel.regulations~~

~~-die nic orprudentialregulatisn of anacte, g erere micro prde A regulatisn e e agesi -~~

~~- e regulatio- is no required e. regulation urISES pceere which are not prescribed -~~

~~Resolution~~

~~ed al pubic sector ir-s The Indie eneneial system has aedeicralle aeon domina t~~

~~ndeitak eg (es bank or insurance :cm When cone-ers deal with a Public Sector , i~~

~~yeses they are dealing voffl the uciee-rent and there is ns pany For a ' p ecr ical pe ,~~

~~n c a has mereas oerce ,ed possibi y of fade e Over' tne ae 20 (23 howe, e I~~

~~vE e hnarcialremsSasansen These opened Jpee re nes ena,ce a e d a new breed~~

~~srupteiefa, sehodswho "ere eemscenfe and e'er shaPeees 'teen be-~~

~~ery es a %hole e ustorners o t erm anc for tneccenc~~

~~of irm failu e 1 1 0 Sound miuo-prudelial regulation will educe „he Jltb8011 0~~

~~feasib eereesi able Fetreo inencialfieres san eveT eliminat rg If ailere~~

~~^ I the -arkec cxncmies eeakof s eoe 'c e tegra pee c t ee regeeerative zesses~~

~~- bean ised b .. Defter Terme HON fail e c ceeisf ree up labsur and cop eal that eoule Lhe~~

~~e teee over, is impertant to ersee-emea-^ functi:ningo the ecomerne and aesid disne~~

~~firm fa re~~

~~s eoreeration V.POJ d -M115 r ecee esa specialised rase etionmec - anispromisern~~

~~e made ir ense promises to eoeeeeo cs and inte w atch all ineneidl nrmseee cr ha%~~

~~oiteeerre isneareceeibutnateetneezeive; I eoeldfo CPthCCIOSJle when r ene-~~

~~-erring the- tee or sa eof the f naneial erm z e e pre eetsme I r enseme-seither ten~~

~~solvent o J.( perr g~~

~~^ oesleilure be2 arge et orese- t a I pre:I cal ee'poses at ',resent an CKincerero~~

~~formalres.:Juno - corpo preaLef narca f ree dralS 'Dt politica le teas 'ele LO~~

~~ef eanciolfirmsare p aces escencusesme rano - in -die lie ercle' emsJ eel -egprivE-~~

~~:Ken unfair arre.nee- tax ee Les aro heshoreeo dersof e.eilicee(ee financialfirees~~

~~ment~~

~~-Igor, the Establishing a sop - sticated resolutior corporation isthusessential Drawl~~

~~rpora ont - a- besti, -ernat onel practice, thed aft Code en.leages a e efiedresslec or co~~

~~w will deal roe h an array of ranziek rens such as be - es and iesurance companies It if~~

~~sc prerniees to conee -lers concer e iteelf evite all financial f a whirl make h g e lemte e~~

~~such as bane, Insurance ...moan es, defined tenehl pensio - funds, and oayrent ees~~

~~r eee-er- ically imperten tem , IL I a so take ressees,bility for the grece ul resolulioe o~~

~~eranoiel even they ha ro eirec- lines consemers~~

~~A eed feature of the esolutisn corpore-ion begoeedoe cn mug' ;Op a n~~

~~-e °ere ience has shee - nanc al e'en v e l le the irm is rot yet bank „DI T - e eternat o~~

~~leg; that celays resoluteoe Amos always e 2tIon " here "E "et worth is '~~

~~e ehciee that .4e -cee ative v would gene rally ir pose cos = upon the ax-paverfind ar~~

~~Firms e betv ee e resolutioe zorpsratior,whieh stop nc al :then Lee,~~

~~weak bu r eol ye" and e s ea) 'Juan corporation which will make ea lids uson Co~~

~~tax °seer -lenec, sophistica ed eget appa ratus l e brinLdceignee fere esole on ear~~

~~poratisr cea me acts:. le le stop :weak inanele firms we c thee ore ill .101 Bent T^e -19-~~

'Gs° tit or co-porauon will choose tigtween n- any tools tirsiggh which the ir-erests e co-su--iers erg protectec,irclucing sales assisted 33 es and -ergers imporrant make a eaii1J0C on between micrc•prudertial regig,:rion and esoiutor cro•pngdentialregu no- and gupe vision is a continuous aflalr, Occasion al (her a irm approaghelailu e comellt0attpland hwoJld be ho very dlTerenty horn mic o p-Jdenlial e-gula on The 'esolutio-i corpornicr would be analogous 'co a Specialised disaster 'flanagemer agenC,, L erydaymatte-sof gswerrance,b1r3SSUrleS prima: a smaal on T-gresolution corporggon have c ose co-prcinatic - m cro-p-Jder ,a regula ion gor strong I -ms the reso Jtion corpora:on will lie in he bockgroLid As the -irm approaches ce fault he reso Jtion Dsrppration gillassJme primacy. The resell. ion zorooraticn w ill Charge lees to a com.geo enti es who per ent fro - g este Ingsr urap ro5 Ica ec censirers his Igewill gar, baseo c - tne p ocabilitv of failure, and o- ■he co-sequences for th: resoLtion cargo-at on e, the even of fare This nsg-hasec premium o.ot 0 -do improve the Srcr risk in he economy and generate incennves for hrangial firm to be ITOle mincfgl of risrtgtak ng Ihefirsnh egg, larsortre,Norkof 115$13'- zonsumer protection micr:.-pruden t al regulation ggid esolution- are Icghtly IL(Jcgrnectec Al 7.-ree are --,otig.g oy the goal -I llr7L -er °tactic^ glicro prgd^itig egutat on 2 -s tc re-luce ,ot - mate 'he poL y el the railurg of financial Foe Resolution gongs into „gig picture espitethese ef er,s I na-ciai rirm do fah

Capital controls India hasa iiiy open cur en ggcort but -iany restrictionson the capital aozoun are paws r or. ceba'e in he field c economic pollq concerns the sequenc anc ~ngforuards capital accoir y TheCommission )as viewo- tl- soJes LioFocus of the Csmmiss on hag be Lon gs-aolisr iggougd princolcs of public admir strgt 0- anc lag 'or gab's acceur restrict ons A large al a, of the citicu tie gresentarra -•gemen,s giould acdr:sse Dy emphasising tre rule orzwznd bgestablisgingsounc pring °log or p ohs adminis a ion I- erms of creation Df I ,Igg IL is env sagee -at the `Anis -yof F -lance would make rules hatcont ol ,-bcgnd cap a lchs;andt eirrepatrigtion)anc gat 1713icol, oould ma,e regu ano s aLou bo.Ind zap fto,..s ianc the,-repat ation) g -hg regulai. on- nigking process would ce exgctlg he same as tha- used r 1 regulatioi makirg Commiss on ira -iewcrk INi.hf..nnist of I- inance,1 ru le Marling p °gesswould be sub oan Iheyarmpar I he impla en-a-ion of 1 capital co- rols Ao,ld yes aith ue Rai The d-ag Coce sages -Fg operation of the IA of lava gnplerner sue -

Systerrac risk The he d of financial -egalatco was vadiL 3-21 y primarLy focused on ccr,:u-r er protgg- usn, nic-o-xucential regu a ion and resolution I , reggrt > ears fresh foes on the thirc ficld or systemic is'g has ar sen Sysrom c risk is about a collagse functioning the finarcial sysLegr throug,` Mich the real ece-omy gets ad, ergel affected In the aftermath of the 2c09 crigts go,,e„ nregts and ap,-rakes gorld,,. de ces 12 regAgtog. sr stag eg Nogli aggad syg'emic c :es ano reduce Ire costs to societync to the exchequer of resolving systemic a ges The p ch gm of system c risk requires ab cs ege pe SDECtIVe cf the martial sys Le- it requ res seging wc.ods a-c rot -Le yees Ths s g ,ery d ftepr-Lperspect ve when :or par. d w Lh the engagenent crivg- io-ralfiranciglregu,at on wrlcM1 tends ESECPTIVE

anal....se one co.-Isumer one francial. product, one f nano:. marble one finatis irmat a time Theessenceof &e systemic r pe-spec ive to 1-e< al- the financial system as a whe e This differs 'Tom the perspeetweof y one imancial regulator, age cy and y to. particular ?d12222211t from r leoerspectiveo, an, olesectoro, regulatpr hich see that ect.or and not the overaq Financol. yster- lc someererft, sys emi.: cr ses arethe testatioio,filures on -ecc...e task5cf financial .,. gJlation e _crsurer pri,octo- - c c-prucer ial. regulatic - anc 1CP( J Pion •tre three pillars of fnarc al regulation wsr.■.-.-anv of L'ecn.ses o L-c szst and 'yap -et calc isis.tnoriesf bedcl,,sec .5.1s.emic ns.< .-11n tha v. go institui Una capacity is built cr nc o cb emsoko-sumer prc'ec micrs YudentiE. -.4ulaticr and resolution I Imcier te eliminated F rst, despite the best n tent. o-s, curs of cons-...c-ing the i^stitut o elf arney.ork and M1Um will. take Ow. Second ever if al, hree lars so-e systemic ...rises would n...:I. ae srestalled This calls for work in the geld systemic rigx ass fou-Lh aro! regu,s e s a clear case lo establishing insi-ftu onal eavc y ese a,es.s also imkenan bespec nth&drafting of lay. ESE system c ris.< regulabon sioned as a OISCISC set° stepsthz De perfo'-cd byGthiernmer: agenoes,there isthe dancer that system c la. degenerates nto eaguelyspec 12C saeeping pov.ers with lack of of objec-ke The C:mm ssion deeplyana ysed the problem ol re-lucirg the pro sability 0 a break. down o h= Fr-Ian:hal syst-rn s equirs understanding system as whole, cppoced to indr. 'dual secto.'s or I -5 and undertak,-g -c ions which reduz.- theposs OdIF) DTP _ollaoselithehnanoalsys cm Hanc al aviator tendsrorocus on regulating r,d super sing s....me zom.so-ents of 'le linancial system We pf2D1012 regula financial.reg.Aa-or“o-etimess-arrne.,..orldvie , o the rreg_iateoe- tres What is of es.en.:e.n f eld c'sys ernic ayoiding the v,cilcr o any c.-e se: tor anc undeNt2 - ding reo er2. financials..4T. m In c dertc sages a fiv.=-,.'<.rt process

"he irs s es sthc..,ons.ructicn andzraArimferystemmAdudralbase This eta which will be loca ed e the DIC131-SID 5bbllltyed cinancia Ste hilil.., and Deeelosment znak.v. meent e f -arc al system and nc supse- o- It. The discusiors at as would cormuni....,tet'e esi_. sof anaksis o all reEL orwoo woad mapeate in propos Ig.Enc impleme-i^t so utions The sesoi d stes c tle.Yi:Jtiono .S‘ste^ c-.,1 1 nportant -ric.ris --P rialysSO■re unwed rtabase using rules whic - am ?greed upon at FSDC will be _..sed 2 checklist of SIDS Mese. will se subiected to heightened prude-tia eEulahon ,espective supe mscrs . The thirc step is the LC ,structio- and aspli.:5:o, - of syste Nice tools for ryssmlc rick rtulatie - The fourth step n'er--egulatsrg cJcif -at cn Efrec co ororacion a nos a wide arra; o rolicyquestion 12." essenti.Cl f, system c risk ecir on the nit- step is crisiz. managere-T TieCommission° IV 2212D5 'he Minis r,

role Four aft?e h.feeleme-,tsothe sys...emic risk process inv.° leader,h o roler -SSC -he con, n sscn envisages ha FEDC woJd se a -Qv% statute-, ?gen:. n canvas ifs ela yelyrrormal exis'ence present. -21-

~~Financial inclusion and market development~~

The develop' ent agenda m Indian fine-cial economic policy comprses Iv:: elements (n -be de,e spr,cnt of market inf 'ast,ust e and pcssesses anc ( Redistribution ant fi -acciol inclusion ritiat yes ,Rhere, certain sectors incor. e0, cscupatiora zatego ies be be elicianes rrycwor,propsseR by !Fe Crrnmission Involves placing he 1st oplective .1-1 rag,. a ore a - d the second cc th the Go, e-nmentTM1 drs- Code e-B Baps regulats uncle ng -motives -thc f area Foctieseco (I area, ceGc.er-men vocld issue nonf eatiors ReGo:ORB, •nris crhng regulators to moose certain requirements upon scared 'RETRO ham rte coven Tient R.o„ild Le oLt ged to make pa.ments o firms to ref es ce scRts borne OR then' neCOMMISSIOn Eltt an a I in ■Iati,es of thisnaRte-inlet p.lisui of ins Rs on orof ceReloprmot- shsu d be sublec'ta systematic e, aluatior aft a ke isd of tcreeyears Res sion racing v.o.ils Be IITIJ ovian ova process o a- ctor ^I specific goats, fol ov,ed by sc evaluatio" of the ex Ent to ,Rn Gh these got s Isere met.

Monetary polity Pc en.csaged b, [he Comm 35 on reaturBs a strong comhinatioc cdepen dercc and accountabil c, for et ,lbmnagormonetarypollry. The first stage es in accirlug the oojeGtve of -cone r, pal Tt e >try or Fi -a -ce woBld But ou a 5-atom: (defin Big a gLant at ve^sni oraBle predBmirant ar ge- Roditiocal 5 cc, diary ta c could alsobespes fied,.hicad he pRcst edwhen there are no diflia. RR:Inmeeting the pcbminam target The 0 -anCs& BIB,Bs an a ca,,ol sov,erswitc kki in ye ve Ce io n t- B ceofMese pCheSRad betarcer atan exec veRnetayRoliyCom cnS te'eB (R:oR I meetreg.a ly, arm %ore -e exercise o, --ese powers oased on fcresosts tha xroneviand the ex ent to w- ich the ocjech, es arc likelc

The m cc c,ould operate u,fer Londitcris of high transparency, baba e ing Oral -Be csol()M) at large has a good sense about how the central bank responcs c future ecents Alongsidethis sore Fteery Rolicy BurictFOR RBI WOUld cperatea realtme gross sala ement system thatwocd Be used by ban sand cReancg Bouses B would a so Operate mechanism for IR assis ancethrour which see4nhancsfurr.S ,Bould be a °le Le oRLam c'edir agailst co late-al

Public debt management agency The management° pub kdebtzcuYesa spezia isec in csrren Ls king opab twoaascr3. sett 11-2^dge e II/ Go res n n egoccd pi lurnalall anshora and pan the Con ernarer Al Plbe this ii rna ior ink rbganerken aikr sn PSI and the k nisnyolFirnrce rg h sir fornct (ndm relattl debtsuss ,E112 Rid! Bs nil a d ter de Bons acc

ss ILlul bank nal sc ant bonds laces coillictine ob anti /4 len RBI is given the Obinan o oh Bin ng oB cost inancig orthe Govcriment thiS mak e ke eel a b as in lakour of low irtarent rakes alincbCCJ intoler:oath thecoalof price Ct2bil ty n its er ire y the probleT o debt mBiagenecc for he Government irc „mes l caccs RI cash management acd e, Ovarc I nietune of nine nortingenk liabkEtiins olthe Gs,- ern an nr These function., or. Regroted Ind a single agen.y.ircug L-e draft Code

~~nen~~

~~2.9---~~

Contracts, trading and market abuse Thefhelas csmpone^ of ancial la 't IS ;he se c tl o:scions ti coin ional cam-ier a cial law cue.tions of C319 property 11E15 that is re:. iiec 'ields securitiesnd nsi.sance Statutes as mell as case ave shapee the rules regarding s creation o contracis trans er of ricii= tit e or interest sue- contracts as enforciiirentorsuth rights hesedeveiopme- s largely Dee- sector speci ale rne,,orii of We sec, ItIES rarxets requires eFalloiridsii ons foi the issu,nse and ciao cr Issuzi%c of secur es requires three 4iiids of restrictions netimecf tie issuo,adequc ormaiiir -LSI DedVdllable or zn in.astor to maxi:. 4^ ^formes dec SID" DbOULV.SUEbeau ■on Oice lie traiing commerce; a costirucus of information alaDliiihroughwhic the iniestor can make infoimed deco.. 5 Finall}, a set of rules mist oe place through which all holcuic of g clags of se cunt es airi the de, tica pspfis These( roe 03jedIVPS'62.1.11C De achieved thrciigli epons Franual rarkets Jre a important role or Irstrucu e tuicin The riii2s. made sy lhee oianisations ssisis” 'le design of mari

Financial regulatory architecture n tun Live linarcis g laioyac- ezture intedosio^ ofheaeall ,iot of fna c a cgListion acrossa sei. of regulotoiiii age-cie= Many alte - siruct can be envisionedfor the fina-ci: ieGul‘tory architect. Parlis-ent musi evaluate site name b ock ) rvhicM1 a 5. atle group of scatutor, -,bnfes is hander uetvtliterho k associatedthe - ss These ccisis oss conceivably change ci,,es

A present Indian am features aaht co inert o^s between a °articular agens, SeCLi 1`.'S arc Exchango (5:31, a -c funet on= tha, ric rms g secunt es regi. a an} The code does -o -a integion Changes -he work 2 ISCEA1:- should not =quire changisq to the uncerlying thcitiselves Fro- the Outset arid c.ef co-rig decacciisi aeisis ascot the ra-ev,ork g2iiersiinc fino dorcseed srporatek fromdec therianci- regiilsitoryar.hitec tu e y cid greater legs .eirLainlii. hile SCEta:mg Ltior■ate oices atou I nanc al egu aiory archd-aCtIOCITSIVated Dy consrlaradric :uLlicadmirastration ant Public =cosoni orese-t has a financial regulatorn e oresent wo k allocai on bei.ween Rs sser ancei Regulator, and Deielopmes Authorlt} P-IRGAl`-c :or.va'd Marko secm run on tAIC) has not designsd owed o ertherears - seouen,auf piece-veal decisisiris cis:nnaing immed ate D'essures riirn -e to c me presert arrangemest -as v 'PAPP' no regulator isIn in ishaiige- such as „he ci verse kinds oloonz schemes A hioF suriai.e in a %Old" are regulated b EXECJ -23-

-one°, lhe ex stmgage-cscs Ka spool ainsovcrlapsAmereconf ims between lams has consumed the ene gyu op eco-,omic policymiters mverth2vears Mese spcole nsm beepacerbated gh tech° oval andfnar c o, inaovpt on Financial fir names innePp. on To place the -actimues mm ne 2,Pps ss to avoid regulat on When sere are P vraps irancaNcros wir. undecee -a-shopping, whem me most lenient regulator is chopen anc Dog ay Wpm acovities as pplongint to [M13[1m:sumo misdicton An approao of tiple secoral regulator2 mat construct silos nduces monom c Pel ioncy.Atpreesc- mary Pc mtesthat na t rally stogetherir P21 ripalirm are 'pm plv spread across mulLiole financial f rm, in order to su =Moss of the Ind ar p^aPc!al regJImary teGre rinpric a egulatsr, ch Mauro shopld oe conoimme to gleam' economie2 cf scale and SCGDE r the financial system In addition, ;Mar he true actrut es D franc m are solit up acres= mcnyerGS, each 2. whim has OVE ghL m different supervisop ro on sJperviso has a uli DT:Wit of the risks ha. are Prment Arm- replato focuses an one2P-Mm thereare cermr umque problems of pLcIc atl -nwh(P. Mmd ar 2e Assisted by ohbying of famp! fir ps me regu etc te-ds .0 share the aspirators o regp ated financial f These ob ec Ives °per conl 2Lp im the co e economic peals of ra9Clai regJlatinn sum) as 2o-imp me Votes aJ2mit resolutio- In order to analyse te native proposals n I vomos repplabary ar.hitevlpre. Gem rissivn estabIlsha0 me fp low n g Prim sles Accountability Aecour:ab is> bes ach eved wren an agency has a c ear sprpcse Tne madmed al Indian notom the a reg. atm has poem, s cm' a sector but lace specs objectives and accopntab v mechanisms, Ban unsatisfactory one Conflicts of interest V pan-Lila! three- conflicts of interest are harmfu fp' occcunt phi im and rr.st De avo ded A complete picture of firms Pfinalcial regulammarchr ecmre enablesa con ;re vermi.2 , evy or complex mild-modpct firms, and-his a full vmdprmanding of the risks that they take isdesirable Avoiding sectoralregulators When a financis regulatm Loam Pn seam here is 3 DO.S1b11 tv of an alignrnenL Poming about oermeen 12 gaal2 °tete sector Lgrom.h arid pr.liia'p ity, and tve goals o the regulator The mgi, a hen terds ad m- sate policv direct on; ITlich are Ponducp vfov gromth c] ,es sod-or Such prod lens arc Inns 'a when regulatere agency mo ks Wee rds sosnorr purpcsesuch as consume' ;Totem on acmss al mai. mast rnam, see ors E conomies of scale in Government agencies - ere is a ppmcitv, P talem and domain expel- - Gpvern ne and pans u Ling p ge Hunter of agencies .2 relat ,ely difficul F!om a staling pempec ive It is elizient vo place functions chat r, ro ccmelated skills rto a single agency. Transition issues I extol to envision a ull an, elan nte a seal 2ma I and 'mole mentable measure2 -P Commisson proposes a f vancial al-DTV:repitecture maturing semen agPv os imsp Pposal feaThressepe- agenoesand Pence ota Lined Priancial egulato Proposal It eatures a modest Pet olPhe -ges.vvhizh renders impiementable The vximingippi v,p1l co^ inipeop ems hoJgh mth modil clians 2 The existing PEP -Pc !RDA and pimp w I pe merged ntoa rim, unified agency. a. The existing Seam hes ,ppel ate Tr punp %mil oe sphspres imo .he -SAT The g 02pcsil. Visurc -re a ^d Credit uuaranteeCProoraPon of 'nom Micce sill bc vupsumpd Into the Resclut ov Corporator a

~~5 A new PI-annul Redreesel Agency (amen: Demented~~

~~6 A -ma Des ManagementCeTce will hc' cased . -mends stasis 7 -Moen st ngrsommillcoll - Jets exit' hough ea t mod lineman:up ton rummer* The lune muse! ac o these seen proposed agencies her ea chowe~~

Reserve Tank of India It ispresesee theteseell pe tonne-roelei aloe. rl=ie a e pa icy regale ise end en:enlace of earl erretereade Pete ee Meerne- Trete:tier 131mndthee opcave nue potent ai no end teatiatio, hncisugerasga et aatment sat 2re in -earl &teasel

pmafloat Ag¢ncy uniaof r angel 'eat hin eeelei mend elle smolt me °simnel ma ether tam Taming and netnews Trotect en en and nacre prmlerciel mote I hriefiC13 me d end as 1, toren e -moon es elseepo and male le the inanaal svemin yoh ere koc ACI.Ild help ederves tnedis et ies of lied ode!:

I nercialtradingfrom eel r Ilea eat tea nsated aith Is Pend ['rare, Deetatates Net. a ac hem mote commed ditties t eangiving a erif ester el ell emanoad hear °Muddied Inc ud equ governmen- bend, cueennee cenumen a (tures me corporate coeds

cemperie, and a dears= etre/ thalamic!" are rot Fa-gear pah reit przeders weds certmertt ea men r ccesumm e mecum- TM inermprocionl air:gala IClec CI5b a el mere mnancial suctenppellate tribunal e mese, e II be stemmas n se- mom eve hear ad peals stalest eet to its sego Mu mations the treed Hamm! amec dee sons or te tat and sone o enemaDi v,en et Meese Mier co pervuun Resolution Corporation -n_ pr_errotee ad best haunted into the ipselatahoy Tomervueleven

~~Fin a coal dressal Agency tn. Feb sa Imagoes. ale ca e I have te bee eared Is implemur tine~~

Vas hie cal egu la cry philter() c It will SE up e ate:made erecomen Se Temme e ore a ea stop .a consume s as earyeomplartsagainst a I Vienna 9m Public Debt management Agency indepem r dr)L. r eragee ea office a er atenet meangal stab (thy and Development °Weed nee r ch shag:sac ga hetet-lea stteog aehata aid have mended Functions le Met yids° sTatemo r and &leisure-re

~~The Commission believes that this p mooned financial regulaterd areniteCts e is a modest stes away from pleSent :ranee er pads imparter improvements, and wit~~

Oacr -o Ton or f years after'ureposed laws come - o effect it met' e advocate a Fresh look at t-ese quvetiOnS, with ono possible so Miens one possitil thus eonsf action of a a -gle idea onarmal moult on age ea tote mould comb rte all the ant:lees c the proposed Unified Mrannal Autoritt sec also tho xor'A an sea mentsana barking Anot-erposath Ty is os- --on imes-agonm striae emoithoneCon sumo- Prefect an Agency :Mich enforcesasecond Old pro tosec consume- oratoction lay. across the eo ire Tramiel system aid 'manna al tegulatice Agency which :es the rue o predential reguldt 0- Ian across tho edam Insane a' system C. the these paths eel got d then coecentra c an mole ary pate)

These changes in the Fnannial regulator, architect-re ...maid he relatively rots^e' clone seeered, giver the :LID egjOf '111Ph:Slarg 5CparahltILyl.e. ene, tmosavhich de line lo-ctiens and the agentes that would eel) cc Lae lams Coe heaears, based cri a peag--at c nssessment Mae at nodes and e he roes not ware tee Covernmen ate Par tame-. ca- neon° the financial regalatortm c Mee' Tesonsaaathim e the bes possible onlo'cemerm ore stable set aws

~~X", .: ■Ar pri-ORNIS COM"SSION -25~~

~~The outputs of the Commission~~

The csul Otte work of neComni,s or s the dr;ft hdian Financial Coce, a sin gte u - gied and internally consbtent raft law -he replaces E. la ge part V'e exist -g Indian legal lramewcrk govern ng finance. AS has been emphasised earler t-e use a Erg shsloulc helpensure that evervo-e.o-Inec,ed with the re.d would seable to ,-derstor -I the Iran C,ce T- = relatively large draft law - which L: corrnnsed of 450 sections-czn.stitu:es \ plume sf the repot VD -rneie‘presses the .Rrguren sthat led up to 'he ke. J_clsi - embecJed it the draft Cede . I Fe ..amm ssic - ,,gorojs y debt ced the ides expressed in the drat Code over a period ol two years in twenty four full cay teKLIngs ▪ e bpJnd to pearl-air .vcF.srf lisagreement TFE ide ara,soldisaa eemer,w hin the Commisso-1 which are exp s-sed in four r sse-trotes,E.re as follows . I Autr orisar on eq. orer er 1-s Pro I _Nan th amaespresses zoncems a DC'S" IhecJ- rnonsetlSIrequ -emerks for finar c a sere ce provide's ayak end Y H plaiegam d szg-ee witn allocat o-1 of raso-sib on capital contra s betwee-, the Mi- st-v c F. ranse a - d he -o,e2..- f the ‘4”-s«y QI Fin orke C J Nays.< disarees mt., the role e- risa5ec for he ii -istryof F -a -cc in draft Coee cseziallyt-e role cf -e ISP- ayak expresses Concern. abettmestrategyortleCcmrrissisn hat Fas favoired a Lornmsn based ap 'race') ”N1322212 Mr H. wielegsT disag ees "3"Pk `mork- 5 ecTLIP1-”j'nc)with tHallocat ”cn on of regula Dry responsibilities for sees

~~Conclusion~~

Fmencial economic cv Is lcoIemensd syftrt lireagencies HD ;reassigned IL no trans oy Parliament purpose of firniat law is to put these agencies on a sorc foot -g nett o of objectives, powcrs anc acco- OthellISMS CO- 22125102 has sc.seo tsclf L.Don th sIF:sk of cstz:,sh ng a sound regulatory m,cess MossDO cideca es in a el n L3t laSUbOrdi -atedlegislatonthar sdr3fLd the lancilregulacoriagencies hcr< of Commission coes no o rectlytim co- gage h tnese debates As an exampe Corn" does ot oew on ard sequencing of coot a:count lib=frisatien a,1%,,a large - Jmner or -e realm menerions o' the Work ^ig GILLS'S ed individua sectors a I sonar! a- modify -a- ens ro subordirated legislation T-e ,cmolCommiss s focuses on the irceniAes n.pub,c administrethatshasethe drafting anc IMPIellElltDt102 itSUb02 of t-c iegisp an 4.s a coibeauence e the aor-niss cr i-as %, take-, c.,gn san= ool em analisec by the ex,ert ccmn- cteec.cit^,e last five %wears and Fy its 0✓ 11Wykrig Groups coes otc -ectlyadc-ess by W-Irn he s or ommissioi art. ens. etl by -32 Cl they et -no tic- a mocifik.d set of -cent ves 1- public adr- - station Clear °hies Ives - !Mt a 5:sund re:4u a' on makwg process mpro,e qteilty of SL. JOrdrOte7 lepslat on that is issued by regulatory agencies The emphasis on legal procos- in the la,ees drafted bvCommiss on willirduceirproded Aing of Lb- super) soryprosess 2.COMMD1203112 5122 er srotezt on Is-Ane greatly bene !Me USES of fine - ial seHices Thee e emen s whL yield a wacual P 0e:tee el e drige The Commissio- b mindful thaIc%er -ecomng 25 Is 30 years Inc a:GDPIS

ht e: CD= as OdDy 0-e. hese co îng ye: 2 mere rfili besubs.an' ?I _ranges the iiâirlal system The temnclogi.,a change e ìnancia' produ-ts and procsses which core ir Lo play, co no seenvisagec today. The asp at on ol the Cormiss on is to d aft a- Loc.., of that '411 stand soJi,e m-cal reg., at( ^ of time. 7ê Commission has -ence ocused eIg fcorrn agencies, .v- ich rElrlfeplengriClp[eq-LOSed IEV.5 Sat serve the rpeds of [Fe Ind an porar, zhaige, and dral- sutordinatec - ejui sprucence Guilt Lo at the cecncrm s sub riiinsteo legislation,cp.ipled with t - dia- =SA1 and the Supreme Cour will continue"' ,efiest !Tie :hong -g needs of the I - econom,

~~I Introduction~~

~~FSLRC and its Mandate~~

m uy o Finance Go% Jrnmer el Ildia,cons' lute° the Ccrnn ssior" ,ideReseiu ritirg and clear irq; up the inarcial ion date: ihe 24th 'larch, 2011 wWasdew to requirements I he Resoui. on, det‘il sector taws to brinthem. t.relned the 'heCommission ir,...-,nex191 ing he impo

~~-28-~~

~~1.2. Deliberations in the Commission~~

-icCommssio -ollowec 2 m.)11 prolgeo aJprsac- in camp ehig t,tasko precar ng his repor ss Aell as ir draft ^g alp= Th Id ,drenniru2.n.p=1 co-- ttee recor mencatio-s exte-sive research• delta atio^s cy the Commission; deliberations n ireWo,king Sroups(wGsj,o- soz_ific issues. r eral exset anc sta 4e holdersfromthef -ancia sec o na^cial poiicyCakea, expert and regu- latorsolselect abrax Aream of coos-Inn s researe-eisanc °that o'lic alb assisted the Co-nr ssion ,n itstsk the I4R'saden n Annex 142 The objedi..e has beei to assemble a so 'id info-nation :ago ro ring co the c, re- skateoft-c econo-yanc I- her n?.-c alsector re in, u ionalcons ra ^ seveloomeni., elsewherea - J m rakean e«essnentorwhat s iocded o IrsttuconahsemestrJcture of the mnanual sec:or fr tu-e w1r the requirerne- s o a last gra.... mg economy. In its nquin, the Commission a sr unc,,r,1-0 the -eason, ,or --e 20 08 Pnancis sr =is and t-e le,scr‘st-a, n-a, De fol owed icr tie futurp ,ndia ons have to achiel.e hes 'rig" and maturn, tow thstand DaaS zdelnanciale saes me ;Our. The Zsmr, ssion hae twenty !cur nett span of two'. ear,. Duringtheearld days rse apsrsach cs completing s task o,as desig--" I' 1 Pcd...c that the COT nig, on mould ellite-ate on the basic framehot anc the funcamental p( ncr ales the nansial senor and °cod: the same Based c - this ramewcr,a -d princip es the %GS would de de seep into se est seem' specir c Issues ^atrequire de tailed aralysis Basedon 110 d2 La thiQns and ceci,iors in the Com^ ,ssion and 's .raft cocJme- swoJld be preparedbvtheresearch teamanddebatedttherin subse quent meetings Frcmthe Jeginr irig,there -as been a ccnsens„, thaL the lido - l renc al sec °Hiss been cper'ink„ata low-10 ,01 ec. ibnum al hough int swede ,mall mance' ma, be doing reasoraLly weli am'dinglo ,,st;„,t shec siring The Commissisn lernec a lot [for the varoJs expert committee repots alr.ady aveilabe on the I -dian financial sector ere was, elso unanimitytha- the t Fie,t,ry eac to be ed D from NS Lev, evel Jri [ha' t-e inaroal sector -Ifec ,e perorms s catalytic role sr a -ewassiringl -cia ,vhch sexpec e-Ito reacl- -esize of the ,01>GrsssD3MeStICP,SLI COP) •thd Js../JsSs t- 2025,30 while India wan es to a.oic he pan m-- *2yfnansalL d ^Lgz d sktaki -g n-- ledto"e2oo2 ,inancia sis co-inue, o -ireate- gl-bzioconDmi thereuran that the Indian fi nancial star neecs grov, zonsicerably asle this the liSL rional needs o re,Emped green -atsucportinglaeosa e ^ o gar sationals-ruc tJrcsfreement=d In shams ,o^scl Lationci'hefillarCI:' S&L(' I, arc stenisati, was an esse-qiel prorequ,si e lo unleashmg t'e o'C'e inanci,i sector and r' `uPPort ng toe ,,au ing amu . o -s. of the real seere

~~1.3. Interaction with experts and stake-holders~~

Interactions mitt experts and stake `o dersv,ere held in parallel fro- txo rd meeting of the Commission T act on is in Annex le 3 A arced list of issues a c questions ',lees to these aro'. is -s 1st n Arced I9 s1. -he Co- nissior a so in ra,tod with acllry rnAers experts ,nd regulatcr,, ,J horitie sel-c jurisdictions =3.-Dad hells, is in Ann=x 195. lac,: tnat merged from theses:-t- rc'io,-, have also ocE, ,sed in calit, oting t-e pOSIL 0 of the steno that the Commi,sisn has ed ,oted t: approach The araid 'here= cm=-ging fror these interactions are as ro loyes 2-9

- o'irtt a s 8nancial sec or 5 oo cozzolox :TT cumoer The lop:tatty: e_ndatto ecemea' —anr: e eTtdate withcccasianalpi som: T hese iegis ations o f whic dist': Itarnettork for zeharm.niouscezcloprzett arrc ilCiMent tto net trovidr a - ne ds of tho econcm As suvh oC e tinancial sezto- at. Ts iteiplay1/2 l of 'me legi 51 t ze-regulatzry frare.vork cf . zap tig.M need fcv an we-hai zero zd to tte woes: the f nanetalseCto vowett8 mere werediftetantvi a.M{h rega Some sbggestez a complete oonizil g s famewer8 of zor set dating and zaz ezzork. overhaul while a lew sJggested sutstantize surgery .itneexist -; frav- The regulatsiy a zchitocture is too iragmcnted, lesv vg. substantial smog for gay 2 areas and secrlaos capture, ald bargaining. Whil many =toe ts zzere agnostic 30130 a dLalst u: about the eracIT'ode to'oead.pteo (from a zing esuper reg. 8 z eo number of Jrc regula t oo aid cond 'gICo tu of pruden 332 Littn.LV homogeneous iegulatos zzitz a strong co rdioat o MEC[331313CH, 33E31 8e legal o taitiar^ v e zeed for grzater co vs° dat oz ruche t expressed t tory tworkshozld pro ide I./ of purpoza, sow° sanc I nzticns az tvel zz as atu the txpert vietws nezhar sm sccot.ntsaility for the regulates ghile cry author!' es, argued were for totzz or g ea e zonsolidation, the ex sting regulaz forsat-s goo te.s ng the 353ICS ama h The a.-en arch toclure is not cooduci onoug for add nont Ftat8—ented regulation nati g orn toe COeDi :ottext Cif -snaa' developz onc rez tla ory rzsponsibil ries and laciz or : say vtzulf hincer both oomestic aria gloszl zo-crdinat on elov. addressing issues of tontagica and gtoza finarcia o-. w.coitectse addrezz szozks Thz elaS needle-strengthening to s8stemic sk irg SUL' izsTes zs at so for e.ol.ing raiz-R.8.0dtes or dealinovi

smut ora strbc :res ava able in seleatUrisdiot ons s ch inc board some v Ithe - ze :ssent al tor yezerziog rhe stabil y as re:mu° ramezzo tav-tp oved to ! lso needed for zlealing tar inancials8szern A more s eamlinec structure is a her cove:red ssues. which are a ma- fizz. ciol issues reiz ed ts torrcri.7 and ot ough international ter global concern tha tato-alauto° hies navc zddre.s It-T provoco s L -nitre Is a "eed 'or streng aening ha consumer protection dnc gne tanze reoress - the lov lcvei meczzaism thetina v e alsedoz r s ispattio. a raceortzitgive ci inancia' :craze:, absenCC C clear egt5 ct nanzial I erazyt low panet ati ory roancato on comps' e ans complex produrts and on tne !oleo of product la t ktsx issues, -he ^-a - distributors and znanc al advi SiVer h2 corp exitycf r 1 the cent ea, the pzi focav,ascn the lecess of plazing cons!, nor P- .3 te lozczhy on 'war c al reguiatio, Tvis issuz Teeds to se 800ressed bo.h fror t pre ertive ano curative vides by the regula tors as whll as n. rec ess agency e spe- ley Worse encourages turf asttle. z id co if :its al inte est This is 5 The current aro- icus regulator> st. honties ss a result co .ne lack s clarity o furze s of I' c vre regzidtezy agency bespit: z as ot vss gning cengivting unzticns t: the sz the evplto d.z.zelopmentObj.\11‘,E5Elve- to the sector specific regulato'S W'ke de.elsorrar has been far Iron satisfactory as is evidercein the It — c-fra — e on z Vets These oezeloping products and systems such ash the corporate bond — Ilee0t be ripreved by c ar ne statutory provisionv,strearnl rung eguz1Lry tecIL e anoIEMO` vg th2csoilicting unczors I on Ile mar date oisome o arc- ne egTIFIGrs f adoptingt onrc ples bzsec Thew have been v.: icTs arguments on tze i ised in some Jurisdictions prior' to t c approach 'o regulation pats. anv av pract e time there has been strongsupportfel adopting a oonc g cbal cri.is At theva - pies-based azzroach izo grog legs voisrsvc hzi .hese ogislati,rsco no, go for

~~3 FIN331CIALCE3TOP LECIS133313E3CP3msCOHHISSIGN 30~~

amendmeltsfrequen'b anc ^ thepre....bss. lead toregu ?tory briber amities Itv.a, a l5o a gued :bat the pr rary leg slat c - shoulc Gmiaez template '-obexpano nr the L -oplesirlDcotrebe Ybgtbations hich t-besbould be rules oased It was also a.- -gued that the I 1- ed regulatory cababoities availat es-ould se bar named abd consol &red Co promote fie skillstsradrr steal the principlbs bbsbc eproach to regulation, ather can spreading surd scarce sk Ils across a Irge number of ebohs ,yt lragMente.J mandate. Theo pi -ciples and reblb- t ensshould address -be ince- ve issue= tubc.ambritallv so as to mir Tbse frb2b- yal market ycbentureb rater -an mire manage prod teLstrtr. es and make[ micro St'JCIUres 7 e e tegu:albr should encourage compe mon in Ihair se:1,r, the ultimate respo-sibility of M4baginE ecoborny vbde :or Detitio, issub.s shoule by lb ft -o be bor pet Commission. While this deDU C address rra-r racro lavacan sume ssus such c oIbvel SUPb10,d be addressed byte sectobryc bos e the gnec.-ce recgessgoraf forurb bicyc bhcl, d be greater anc Ire sb ur onahsed interfac=pabictbn the Comset Comrbission andsectors' Cr,. 17.'0'S in porotingso-ipe blob and :Or OaLIL practibbs an.; culture. 8 Whilethere has been a b ehttha- the rat' ersm thcbil5M undert -e csnsumet- Pr^ -ectiontyro has been funbticningsatisfa: orib there were alb° argo-entsthz bis iramews,br as bey ststobab sinsufbabr- to seal g thtbeg cy. ng complex' es in the bnancy sector While someof the responder-y brgued s betbartherlIng bon- -evecressmebhabism tbach sec b.r bndet- thea.egrs c the Ybis- n;regt. atom there v.erb also sugceb- obs consahcat bgtheco sume- res -ess me:hen lay bbb. sib s recress agency for I r iinbby al bector 9 YThilebbyre ob.heargbimentsforreta ribgseztorspebific reguiro'sfo cures fete- orcorimoditymarke .-eEb's- on abb:b.barfeyreathere.be.-e sr argu nentb tb: oenbabye marke-s are lin, col markets bere grovonb Imp-cake:on of even p cal COMMOdbleS 912) 013in thbsys'er- arethesb. m.e.1 ebsective of he ubter -rs. and there ithe need for consblidat.a. egu).a. io- of orgab sed -g Lobe ebecbbe ID Thatcb e also strong views .^n 'he need or strb.-.2.LhYning the corporate g..b...er nbnce p °Gess of robb. brs pro.b2sb bibo,ointmery LOYbbb compensat c and brall sb I formation i=velop-ent ci d^main expertise Rcgulatory ey per be t gas 'eft - b-obt supply and sbo, d oe made a thrbst a. ea of Drub rebbplan'ing ser, ce s-nytbres reg '2"C bbthcri eb aEoinst the basi- prcmise by setting up inbependencrogula'orr authsr bys b.bc ne...culturybbo., d oe lilt bicrtgstee deconstyb tincnew s Co ssytas e tot-ens lisn a-ranger erg; rewere - c- encarageo z wasbo re sitron one. t -tobe tarch arzbed for d budcbn shift The orYner way Lasec t-e p emisethat brganisationsabd bet ent estaye -ge o adibs- rev.. ardregulal orbyvn tela-tyrarybed tbatgmateflexibilitb would ead to bbrgaini g or lobge- --e Immo and r ocess d Ibte the efforts tcbiards Jt10 restructur rib

~~14. Working Group Process~~

in ce he ben., he Cbrnmission uendbc mult task tb approach bib bb ?Vet proc=bs tbs F re de Wed nor celp led -bakes= in Balking re f becunt es it Public Debt iblany3erie L bv) 03y-ebi. Systems and ,.. Insbianee ons&brnallba ings fact tgork gGrb.upwcs h tb a mernb rof -e Commission C her .ember be e I a Ibtoin ebb o hPlAtt3b2Sbtbr eirprelb en e aria attend di. Lir

~~4 IN-taatICTION %-~~

he meeting; Secretary -E. Commission was part of ah was and aced as a 'ink be en .heComrission and the fes ;fell as oety,eer he yyneus hGS In e 'mans( thy!' approac` anc deas ntune ththe cesivensof heCy ryes o- Thecompositicn An -ex 19 6, te'res of rele.fer ce. a-d recommendations of these five 'yes an be Louod'n.

Apar' rrotleehal peryon eash Yeyernprised dorra newels,.obroycntin sflefa yledorna Ix ow edge the delihera fo-s ellaes we esuppered bythe resea 'eh team of re Cyrnm ssie^,theteam prey ded suestancive iroyts and drafted documents Each G had intersive Jeliffcraucesand in fereaed with a Yu elect- of stake hoJers ard expe 'from anous es eut ons, a list c these tytic -sis 1A- neX19.11 Alter sjbsty .e eel oe-atiansand inte.acticns each vie came cut with sector-sseV 'leaf Season consc-,er is econ m cro prucertiyIreguIa rocess and asher aspects specific tc the sector v. thin the broad colours designed by f Commrse on - Chairpe sees 3111-e was pies ec their reports be e .he Commission Their pe srnmeedytros were dented, a -al”ey and r - accepteo yy the on,wlcd -heheyfork nee of t-ese eIGS ha$ beer incemora-cd ▪ opnate nadir cy fens ccemed . in he re'ev: et parts c repel. er renew b f he Coreress on, mary. o the d aft documents we e peer reviewed by d^ma ^ experts ofhosenames are ir IC 2 The craneop also intensively 5cruhlrtieie bysut: greue,of the Commiysion

~~1.5. Analysis and assessment~~

T-e.Torrrn ss.on eas seen fayeefc Nr the mar da eorreAt.... eg a-c e.yrif in; inanely SeL'Or le251 ionsbat up ()VP a century Homyer, laws yanrot Se sceptec n yearn a..s have Is ycopor a cert.= n po icy c ga isebonalframeyo k le co- texto- finEn c sectcr aws the lay.s shade support India s franc: sector structure a -d the de - cafe Defence betmer -a state edify and insfo, -.cnts and the ma key. The inancia e-c.oi is a catakt 5Uf.portf -.g."2 eccnor c f ar ev.ork -cerefore w.-,ire designing the egislatfve rramewo k for he financial se:toy the contou :et he finan.c.al seenr. as vey I as rem nfours of the macro ecoeory need to be c ly undeatcod and 1-e inkages manisec for synergy. After sysytantive :Oberst ons and 1- erec ions the Csmmiss on *eased ar. Ap each Paper of dime, the Diced contours of -he eroposed rinanciff vector i -sti rameaork fhe feecback on this Approach Paser, &eyed from .anous s aye Yolcere, a -d e oub c as ne I as in geneial through NeJ511-e and ccr eypande-ces (Annex 1913' has also bee arelysec cod incorporated into the arety Kai famelyork

1.5.1. Long-term views on the Indian economy Cy, errs co-tyf np acec sythecomaixson areo high -off, - .do in terms of s mpar on iry efut,ons As sych [he recommeeda- ons of the Commission eynno b e VIOWed - a sn c-e m framework tar an he implerentaton andmpc pmts yecoypetec o ho- a hey -core Therefore, the Commission has en...sore.] a medium- long- tee-1..iew Or the Incian omnomy and tried to et yclAlre the EC Jl'ern.?");, of the inarcial yecter interms lay.s and insttf. o suppcY rely vision 2o12 the size e. el^dian ecoeo ny wasabaurus52.frilh0'Cheeconomyls ex pectedto gm. at a moders e high pea, dESD'E periodic luctabo's on afcoun o structural and cycI cal reasyf rs Given toe non'a:grmr rate in the vicinity a 15 per ceet tic no - nal CDP )01J double ir aPout Syears anc efocld reach aboyt cs$1.5 fril on sy 2024 -his elas ze of the us econsmy in 20 2 -Viz reel es t-a. arcynd 2026 India yeY 3e ItheSIZe of t-e present cay ILS con -eere v. I bechanges in me sectera zomrosrion of cpc,.,s..,.e I Newer aco% ' es v. II enter Lhe zervi.ces anc ra-L. Ec ngsectors r-,axngthp(imar: secorsmal er 1%/ a reduced hare of agr ture in the overall rielP All M's means a g-eater of t'e fsector no ugh forefleGVeeao cJa'itativef ^anc.ial infermeceC o- Even by keeping aside inc u c - as s exoerted m grow ranifold -iter -5 ze,st engs, ▪n ob active, -he I -ancol and erir.iencv ,-o sJpportt-e groeonr require -a t“ a est grc,,,, -seso-orny Thesma aorla of inane: at exits in Irina n f hpK,cever effect■ve not be ab1(... -el cater meresu,tmenrs o'rth- tigeecon:r.it opooitunitie‘ d 'ashec growth p ecess T`erefere static term: assr ngpst nor-al growth cs s onec -he car grevrh 7. es ne nancial sect° needs to cxnane innovate and ex perime-,t I e agenda ofinclusion magnifies Nis need rnanfolc

Fragility of the current system -hrough s.mn da 'bee' on, ps_a-ch,and , erac with car expe-ts, re Com mission was cenvinced arthecurrelt regula or.. c elsrrurture c- t c l'ahrnnted not also frag le This's eicent from-c 1>e- ▪ regulation is not Gni,: that there s _,niform onilcsooft, o, regu or d ffeTrLL regulators ,p,'•oach s • issues n ei-en' ways The lirannal sector a , -iform process, uniform nellaw mechanism anc 2 unifon- appoiniment pa This lack ol rc,-erence -e ihilosop” cf atien s cncamental weeoes= e .he regulatc J arch tecure The missio-, also n...7.tcd se.era, instan4s 1-he nd=o-ndent.statutory nog. olatory authom-Jes were considered simile Is the d age,c of the execu' e 1- structio-a are prised on Lo regu'a crs ( e, a e eetensicns of hz execume I hi-, blurred vsio- of egency struc e -ceds be cove: ed asstatutory l-cepende- Reg, 'ater,Agenc cs !IRAs, arequite diffe entfror- adit o^a fielc agenJosof the Gs,e-- ment The IR.:, Ere statutcr lvempawerec perorm the th functic -s of the state -siiLdi 'egul2 lon-rrak ng(legis a on _dr -nstration e4ecuti el. a d adjudication (qu clap-even at the sercer. ec cost of blurring the pr nciole c`separation of powers em bedded r Cnstitu on z a consciou. deasicn whim cv toe 7.arliam.n. In ernpowe ing RAs to help erf-ciertl, Derforr` (heir tasrt for 'which' Mary were created In order to prevent regu or; exce=ses enEnirise cerccrat,c cer c a-d make the Ii4s r -hemse %,es electi,ely 'peronnuig-heir --andated respo'i ties an eiectiv.,. accounts:Ai k is to be DraMed inthesta e irsel. T-,s,s atutoryaut'emy oi performingt-e "mandatesic Etatutoryacreu- aic, he bala-cing olllars p ela re ces gningt e IRAs Somefrineancm of he cevelcprnen. - „he mnins.r.h.Ye Ind theIssE.f as haveaised cortsorhr et12c ofhecu ccel of delegatiz.^ o regulatory autior ties Inc easing te-sions be ...Ed- the Governme-t anc regulatc end :et* ecn the regulators, he,,..orre to Me fs e during this period -nese mter-ec -e steps were C-c. result of an ,mce-ec, baln ^g of aurelenT., and sccountabilit...ard a blurrec p c Jr: on the bie of principal agent relationciip it dentec the basic found bons ....I _end io -al de egaticn cnd the of Ire model t i C2ymgulafe-e fina sisre n 1-st: -ces of wch nutual v cc- lictirg postur... adopted b eg,, ators are mc'y. These inc ,de .-leoversigit DOM° oner Ur 'Linked raice betwozn .7Eei and !RDA the conflicig between sae! and re: On CGMIGICAIGGeased exchange aced • inns, the co-f icts betweer rwC and Central ectricity Regulatory Co- -ission (xErRol evn when Me latter is a non 1-- ,dalsec o- ,-e17.1atcri or o ecmcity Jtures -g t..1 en Corr set cr ComT saon of hdia (cci, ano sctr.siorif r ors the requency which --egulated e- rues leige -e -e2u13 al! e nappened in he ast fey: years uncerlir ng e growing tenio-s anc fssure.s - -E egu r ornevoolk if financial s2ctor rEgulat o^ -33

Tne dile( ul-y In addressing gnanco sector regelation on a holistic bass ass given age to a '-aala v growing shedag, 9nanelal sector This logludes shadow banking and oLher shadow 'inangialserviee provider= ,ggin collect hgige a -ounts of monecoma nc pualig par Ware/ me role investors eading to fundamental conge, ns sr consume preeec ion a ed at timee gereratirg issues o financial s-ebi ty and systemic leg I here hg.,e seen nereasec irgooencesof 51/.71 eoggesooe along be gyeen the egg latse, nou -d- anes at the r cerregding investors - the name af erngs pla -ations and pyram d forrnatiogs Jrileas isegesof regulaLorg ,eg areasandgoiernancee e eseeo early n sys-emg ig meager al these ssgesare kely agggavele ir the fat e givea t-at in a- vaLie gs p °sag s oranges ana o ganisational stractures very oflen [lapse^ Buts c9 'cE la Theselingupelhe gseganc he,rma Log c theCo-gnisoio- se Ihaebeen aciear moos-mar o the limitations of gieex 5 ing matutcy a- d a"ganis2 anal aaaggemegos hr =en as aa apex cognol for reggla:c e ordinatr, e - If nanciel seaor dC elopment, gas an intr,m reyponse Comm esion, 'eaodated iewr e and clee - up the firagcol sector legislat ces arc aregreciere was to provide the lorg-term lean tar onal ens:. [0'112 ambers eaunigngr cg ,egt inso atonal et-oe of the -I.-team sener. This he. ass been at emote: - .es en01

1.5.3. Financial inclusion and literacy iralusion is a mafor policyabiecrive eat ledia his been eying to acniegeo er he veers The Comminior notec rhatnclus on eve ir -erms o bas c banking ac. counts, has reached only ?DOA half zhe population Ie ',arms OT figs -1021 instrurnen 2 such as insgrange and gecur ties ;lc us on is far limited. -Though ee level of Indus on shee d dependon tgerg gee ling noial prodec s fry Keilse-vices sucgasbay c backlog and pureinsuralce crodurts should each alrost all, athe productgoenab ng riskman- ageren,a -d egenerat,on shoulc rcerhe sizeable papela ion sothat rhe benefigg of neode - Ilra ,ce a E. a ailab ets la g€ yar c populaticr. The Commissigr De bated isuoscaanatngfommancred goeiopmeat andf nan 015 - y osa egulato eseanobili While expert cp man s c dec on he • jet. L -e ne ying ineof thinking has see- thatreguAtor5 g a odeeing has o beDV° ded because the regulatory approach shoals be •-,o provide an enabling Trameogarg wherein ser ce pre,idg SWO,IS beableto use nnovnyeapsroazhes,includ ng usage& modem tecg nalogies,i^ achieving ■-ie deemed mac- o cb eggyes goreover, miego leveltargetrg and llmrcing apprcaggee me. ec. Lae s IP ache./ ng t- s oLiectg,e

1.5.4. Financial globalization and lessons from the crisis No major economy in he Nada today can be viewed In isolation f cm the rest cf the d Given the s ze s -d the growing maggituce 0interaction - in terms of tryde ser ces, and capital leggy - and the greater openness 'a glosaligation gdia 23 n a differeat ecsaomic r Lod.). t-an Inge: twodegadgs egg India wart'. ale pe 1Wthaw° le glot alised araece enC s learngto eg k nego.a-ing die nong gur entsboth posO ge end nege ve generated by eve forces., inane al global eg - on gegat reaspectg , inanc'alglobaf.rion and ton away innovelicrs In gerrein pars CS'leWC C 1.2SUIIG., in the glDsalfrarc sf 200a The NOr[d has leave. a number c lessong fro - this crisis The Comrossian throe ge lsreseartlr.InlaactionsrvM regg- atoo. authorft os and expets ram digerei t parts of he ho ,d, and throug- India's own mach ceang the xis haeu-deretaoc Lre nee° fort carefully :a ibrated rage Eon, a eproach to address rnelimg-ationso ,e mane, parbeglar y its tencency toTvel too fgsl- and boceme tog crap c bg'n in ermsof produo, and 0,ge - sy 'anal irravat ons 31 - -1- INTRODUCTO.

The Ccrnmissio- unzerstood that'hev,s d -as learnt the lessons sr 'mance inst.:, bilityesd therehx orov pee rors-efvecivea.rdmmlvousneC^ansmrmaddasing issues of saemir ,isk a. well as she seed for adcre:s -g fai .res of indvidual enti les irough rEsolut on The mesagescorningclea, and loud from thernands. cdsiaan the - ■ seed for myc eosely and “--t eh, -egulatinF the market, c Tiphas s on sy,te and as eflrtivo resolution frar-e,,,,o1, have Dee- -actred Into the recor - unda ions of the CommiSSior

15.5. Regulatory developments elsewhere "ollo,,ing the financial cis s of 2008 the,: ha)e seer several ?hors in some . isdiz ions Dr stre-g he, ng, anc - a few cases rxas' -g stn ct.ires Thaw are particu'a y p cno,icec in the ...ase of the us and the ux. while o junsdictic,is a-e zonteriplatinglim ted range. in s',engthe - -g thz,,,eaker Inks ^ Lheirst uctu-E3 Commission hid extens interictnn witht he chic akand expe't â. changes be riL made in he JK Canada,A.b Singapore?ne lim Led dialog'. em,ir- age-Iciessxh ‘LS FeJ and Inc° us Sus ness Council most rar cal oranges are begCanter slated in the u‘, ..riere the super regulate' Firancio SArvices=uthrit,I-sA, his bee divioed and 'ne nanoate relatirg o prudent al regu'ati .11 rrar s e Ed o the Bank cr Eng land as tss,,Lsid aryand -onver-rg -eFs intoa =irancial Conduct AJ Dr ty(Fcp` r unders,anc ng vereasons fc-this.ThanF0%2 ilEFSAS fo.t sor the market (..';11d1J21. diMenS ans at he costa, relo reg ecto'l plUdr.131diren,ic - ed ID build g sr intrie Inth...case o Australia sr ▪ rtsLcsò hz.,ankingsectc.r wihich has no.cLs.r Che0 crLcent al reaulatis - and ocricLc egulation -ad been divioecia-ol dateC to t^/0 istina agenre;IAus ahan orucenria Regulatory -.ur-o,i14 and tie Fus raller Sezur es investmee. Corr miss.omi- t-cir t»fin-peak node ethi.h was adcDtec in the mid 93 s T moceHristr c The sb el‘luelvuerter S nitar'y in Canada p dent al regu c.nd =dust ation M1a. ceen ac:d tuo c flere-it agenc es, tè Office of the Sir e' Mercer!' c, Ir.t L. ion: DS Nell as LIB Fi -ancialCoir,,,scurr,„ einr "tenc, h etkc mpertonceof tre&inF, prucential end concuc regulatio- dis thrsejur sdizt xis has been wet rde stc.ct, r-e Commission hzs not recommerce, similar appross-iin the Irdian context beca,se of thareason tiatthe re_jired leg, a ory expense is yet availat e -e-ce the recommendation for -e same rflulatc deal ng wit- both prudential anc market cond_ct aspec s or the redium R.-, while in the long ru- this cou berr oc Tlel cepe-ding Sri -eexpe iencesgairpi me-in this coLnt'y andi else.nre Tx legallegs and .tptJtc,ry Ire n: ork a so masts prs, ide for easy cranges regulatory zhanres rune: o-sv,ould clde c - y - -ed sta.; to shangeb

5 6 Global co-ordination in the emerging context Along' Onmanc alglota 152IICr nplexitieso francol rep a or -are also increasec This se_aine -lore complex afte-the a'c to ICIWII7g theado ptisn of greater scrutiny of the concerns al sing I-em tor cm,m ed tlaandzl activities The new obligatio-.s unde t-e Fmuicia Act c- 132k :orce (FA-F) and Combating the c n -,c,nz of ierrnrism cFT; regimes ry necessi tated: co ordinal- on between dorestic firancitl regularop; amo-gs aA Lhe drisdictians %sic satweer toeglosalcoordirstiglnr.Jtions. Geyer co-crc 'at on visFlso becore -nprra'ive co.' ex of cc-ce nson f anci: stabil ;y The Commission is rut y aware of the onus that these addit cnal tasks would Dr -1g Jpor dares,- .-eplatory os as tho Vab[ing legal framework

~~!.5.7. HarMarliSdtIOn of Laws All the ems incC in she ) eyous Sob-SECI107iS necessitatee t'e 'fed CO redraft egstaticls am: -armor se them. Cur lays have bee- built us over a :entry 7rIC rave -35-~~

LeriMOdilledITWILipletime c eating letter z -, greater complexi t es Sector Alse Tag urtierampl fled these basicInc; c-s menC lomtvd seg nented 24 roach rag- atral t nere sa so lack o'Conerenc, in terms° M1 lie ng pnilosopm, sins: thesela.vn had been enacted at citerent- pe Fads.; timett,h..^ mans': sec or ncEds were of a 61 011E n where recent typc and na t te Marn of these laps at ots ar of prit-inoependence is desirable a mode interde the c itective uncusns here also othe,ent tom what for pencent Kan.:my Given th.?se iron ling lac o,s about cle - age. ,alitosoph. ucture and con -lehut carrot be usec elective's strain sc'tne c-.41- 2 orf, frametto-k. the ettst tg Ira -ty in about vso S, a resurge- Inc a expe,cling to retch he s ze o' cur ert us scsno - desades car-oi also be uscdtcacc'es issuesemanating rom inansialg onalisatio and Tatandressing ne iessons learnt fittm t-eg oba ems lusannstacdress the enure ie merits of rge, wodern ecc tism wnercin the inancialseztcr plats a sign 'cant rc cannot addre; issues ot efrcctips glocal.to-ordination ho las a reit' cment for global mart alste5ihria-dupartiscry equirarrentfcrtambating errcr sm prid related r nan CIF issues agrrencJ app oacn. based on -nut iple lans and a ganisations. cannot effective y inc'..dethnexclucec population into he modern inancis sector Givenn these reasons, the Commission re: he need for a co-ip ete eve c the stat,tory fra -ie s ntolves repealtric many o tne statues sbstan nending anatnerset of ▪ o k slaticns amencing seta 11Y9,elsiSlis other atec et, sle tions

~~1.5.8. Strengtheningthe regulatory framework~~

✓tewiSne regulars j -nv onment r India is ag-ented and corrplex Ther, are rr.il egulators, each one tasked with a slo within the li -anitial sect, Lite- the rlit d and the trigib it. of linanc al ma tkets sJcc e badmen ed approach cannot Doss bly achieve the results des red In tc yr sof ovidini an om}nicunitymthe=ectorineddmvt- ingdomereand&sallm_ordnetlor,addvs ng tinansic develop,nexard inclusion and dealingw n systemic5 ab dry a^c otter t.oi cents le fact, the experience ni regula ..0-opeiation Irina his -ot been v ,-.y ensojiaginga-d has vdttessec cscalatisn .t,r conflicts in the recent past TheC.:m-11s: on terelo e reels Inatthe fragmented an p °ants financis sector regcabon ' n mole has fel ad or many co.incs ct need to be co'rectcr Bute ttesam. LIME tearni -grron theglcba c sisnrd the cces-quent a' rest. aro y net- inking it mu e iunsc cucns, and the need for ellgn mgt-e regulatory requireme-t, ta cur own mil eu, the COMMIS5crIlYrztec the :sun nit appropriate regu s of .-JCILIre - detail .

~~—saw—~~

~~The tasks of financial law~~

ra eCcormissico has onvisagedCerair key sem pcnensof ale man.: al egaifrmevm aaell eSeammingoents is guden one elebr understanding or market 'churns Regina t on is nc gn end in !Teel! existe Drubr nedd'essnrket Lien me Cnmmiss on strongly feels that tags runt bedorinup n in le "is of their canner c purpoee, rerber [bee ir 'err soitlin eceee CO-car ed age-10E3er in re meal the entil eSaro are agentee oy tee lag/ g co 'DAC: VeS is essential Ihm 00thinirg becourtz nil y anew, lobo- If ea aFene ego. en Ibe oth &bee or elation. Wen gecobnLabibt, is lost, becausea egence always be able to de an-legate that it lies noeed regulated Frco~hls nom con(ive the tas cl i, 'al law caF been !agree he ne fel °ging r Cer Ivories te matbaban of ad Image agulatia a p egg+ ocrsomeg Thu rag oashp bet:gen metallira s [Ibar:us orm ane Ague manyt me; memanomos aa auStCT215 hese prcblerm are as- sp oradgicb &oder al but 2 r = Fe, rooted n be= c emblemsa inlonnebol gee rives arid gill not be allevan: group linaaml e campaigns gm central OJ poseu Ire ner Foreleg map bomoor I nancalfimeard Maraisemu al2 addreuse TWke'P Ts aquae; a cameo-chum de

~~e gam a-edema:1 amulet o -2Ion e it oi orot.8c nine col mole', sloaonstgia Franca ms~~

a e tpbeld s rho •esk of micro Suder ■al eguktor Ir add on to tegg Tonyaled by M1g ra prearg g reohlet 01 alm odmes necterno nsk 1 s cal alb a co —p enonso Fr I cram mlenbagramemark Resole:or The Lea eiona o miampomeneel egu abonall mole:a Tat rot aurrirate theta I. u e Mna at rt area sod- apnoeas arise a spec a bed resoltlion ceahla lib' la gauged cc jogaceml miring p ala Ir arca, m bat has become cable era arab on le cuaamers alma e sada a irm ensure formal orrangsmarl such :alms a key dilterencona vo I be mimed b, a re=olu on cc each on all be ,unseen burger or as sayer resources la ling h long al 115 hP19 a financellor son] h1, Itiseffi: n o prt rjeNoto5guln, on

~~I could increasingly enalut gleam aabar end sent rro ion~~

shohld pecoasea by po makers!! am future abed eng el lag needs to easolali ascend legal bundanor o cap alcoatrals gob a (bac anobjec ana amourtabi av ond nTPE or the r le al lee The egulnars governing ingard flaws seguld •▪

bed at ad 74 the Central aderarnen consult-attar Ara he Iasi tr4r es, ons goverturg med bathe anon curet Itaticr kith theLentral esserrrient our-tr:. ROA odd be la cY Micro prudert egt 1st 09 locusts es err trrsonl firm at a rre While the id 5tutedic ar adri onal art] ulflare It nu-sue-die '51/11right, there g scud-mug imps, dot trtry rancid sys' m on at rrte 14 trod susted as thole This [dud es 2101,r' of tt o t4c rancid ststem trd unreLatind understand natae buildtJo. ()rasa agars aP elernri reduce -I e orosati legal a st retorditt ud actions abreact rn, ird regulator ape, ci

ted.dettan are sometimes used n this :I Thc tuns sa wow swiatty ar d atop pradertot coals ire Comm suer att the cn consisterar ette pirates systart ast :Hays:en lc endguarddar t, coillLrisa ne dr sweets and We Lads comr onents haarcitt err financial 6 De dr, Pert -^dest r rid cm to neabe redraw r sew rarrem ma al r zr weed Alto toe ski-coon of inborn. lt and (artist button A: he tame t me taese dint ionsrex tz be pared Oa spurt legal te tortat on emval barkair dehres the trap otc ttec hes powers ard meow added gechari 8 run- :`jr rusogerrent preualtud frame...Dm or nadir sect martg-dier is needed to ablatieS oat. eatternmen and co e netttut otanatreu g ratirrehens c stuctrerli - dr, e ars el-taro-1g arse-wages sr rriorrood ge coera,e ip tild tutu ot;ra eh

nar a a. con:sacs and nth rg adapagLaisto general roans ereallawa resuireal lot theprose furesirm ink elthe financial woke, par, in Each of these components is assaziated ad:- 3 duster in tds repot and a tsUacco-nonnying draft Inc an Firanzia' Co et. drat Crde )

~~2.1. Shifting away from a sectoral perspective~~

~~The disrtsriot above has focuser on nine arrasJ.40 t~~

~~e De -elerncr-~~

rublit debt mantgerren Founda 'unto .tterracts aro uteserr/ -VP draUdace The ss on has oteparec a draft Core ...Utter cdtheact ne areas also cot ains a p cialtsed art to podutss gctema ce processes assatir so with regu lasers and othe linanUtat agenzier address ng proulerns o -dependence and so P raft Code carat es afairlyerr :sunder- I y Putt tg these ton dements together h- patens ve and it -if ed Lre2 we- i¢ Pa nt Ow Cu rent lhirs rateg. c furs trod the Pt ant Ird ar mw, e is sactPra ramie Idad are orpanirrc aroutc rub sectoruOt Una -re ste aS secu Leo or inswe ice or oes mutts The Coturtission deba ea this at endth and cancludod rat the aas me-it s tong o a tortseatotal approach Laws m tat ar netted dt a' Wion

✓ba s a super.ot ON...ft...Li f or r-eny pain's of ✓iev, Sr - -g away fro^, sec oral lav,syields:on.,istent treat-lent across sactors it ias become increasing); Elea' that the Iresnat.,epa ate bankng cnnsurr.eof mCeal Iu-rs cr pension fund manage-le-t h&rc. -o del ne u-de.t.is s [Lai- o. if sec-oral. laws are app ed regu a:rya b, 'ago becomes aasithe ere lc same activity psrtrayeo as belonging in the settoe the law is zond.ci. co a hisncrprorp-ate `.1.on WEIL al lawsth: asplp. ormly across the anancia sys em elimin:tesucn in.onsrsL2n.iesof renent Theyalso elirnir2 e he p obi nsof gaps 2 -d co.erlapsprop ▪ h Cade Lhe Ccm - sat non secoral in nature it 1., likely na. rogul. srs will draft sLc or-succifir uborn -ated log sle log For examp e 5e • rnle. o' consumes protenon erb€ccsd n the zrsumer prstestion oar sr le draft Coca ....11betrrislatec bymu Dle regu zi-ory bodies nto dra ea regLlatic hat shape ho,h cons.imesorba -,,ng o isurEnce e t eDted I he sJbordina-e rules aid egJI2 icns Nil, however have tone with the Droad pr ncip es :id down in

As ar example, he ter- 5.55 .3 in India inc does a wide array ac it es Rational anc consistent t rea rent a broad class o fans requires a clear conceptual iamc ork The approach taken by the Co,pmis9en ernpr,es ses th aat R3ulabon should prom from theeconomc and legsl concern Matte awseesto address. ICs use'01 -olor.us s - the regulatory concerns ass2ciated main act' ities deposit :akrg rais roJg ,ecuril issuan.e and end' o sum:rs nen U der the °posed byte Commission al, the,e an.) ES wo.ld be a-Iaivsed through theobjectieesanc oswerscsntainec thedrsItCsde under (he parson nue.- p _decrial egula on co sJmerp o ectian anc reso Jt on As a- ex2mcle,..,hen 2 NBFC glvesa loan 'a a consumer, the regula'ory 'sass wouiL be on consJmc p olectio' fa ▪ c does n he mL'mamtlenb.regu atcr, strs 8g...1...Qui-I be co re,onding y diffe-ert Inlr slash cs -ceptJaiclz. itvaocut the SU psseof egu,ationwo_ls helVegJla or, undastand he civeise a rayol firms and actom es,anc applyCesJCable ✓eg,la on, instruments to each slWa on

~~2.2. Adopting a principles-based approach~~

1 he Commission televes na there s valueir hal ^essirg ndia scorman law tradition where laws enacted by Parilar ant k at the revel of high prr-c sles snc co not em bed spezif c deada. these ielstmel. timeless Dr ^cisles are linked to the contin...ouslv • -rode sr tec Inolo;y.institutipnalnangements sector JrCCP55555 ,M1 ghtwome tltPril) Lcus on OISUbirti ^al.`C [Cr ion II- .1 he regJlator,a-d ..cr,r.t, ion by In, judiciry I hi. approach rh may he "cr an Occ ns azo- zapt ed ,p r I o' law h.s 0)0(k:0 wet W P15.5131p0P3P5301 Id an • suc' as the El. d2 ce Actactl the Contra,. Act, bath Olwhi

~~:3 -39-~~

~~T11111115KS~~

and orocesses we-eembedded in lam, -he require-ant of requert arenerenrmre I. oumhinds-oragress. c Jncer ruies This. app oaci also suosts - 015 improves ta e amplianca aased regulation mere is the ak taat inancia irms set up comp ax naTnfulatructurz: eaommanrs that laws sho rip %flag ith thepuua ca es hold f Irna to a hgi [ idac f cc - ea.r er vaierms of p - Central to cormcn is the aaleoljudges aren aas a- cokes the e stud se legitimate c saaternema anout "e nterpretatioa principles. haseara resslaed byjudgeaa,ho suild !JD tha insuaadeace that c a-flea...hat a pima' -Plower, p e -loans t &light of the con- avolu,on °if -once and echna'ogy ,pach The load of accaplexaasesvall go up, aahan 1.1t e etcaharda co-ro- ca. apa l be subsumed Commisaicr -as dezicad to built on Inca- asucaess aith the aka NThich . 'ire financial saste arc will in a -sal- that A I serve as aa appellate M1 to also revieh ,al °au of rul.es an° ragular °as 0- the tou-hatone al DIVC ples basec lay jansprudeace Rulings ofhers -T and the Saare-e Cauraa %subs build a lying body ol a oagsice the p, aaiples-basad iaa a racommended Lithe Commissian

~~2.3. Approach to drafting~~

agrhedrallasce tharlarmisaionsrveaca amrgteraniques adoptedda e 'rash an tha nestcal and intara2 Caeoption wasto d' aft he proviaions I-- readesof Indi- n taw aave been familia with fo'qears [ha' usesco pounc and archaic oionsnmu anepted on v,asto adrpt tie in.criadonalia accepted o a n D-111111ple drafting technique ch affR^ptstcconveyclearanc preaiserneanine au-naveEnglish It saaidausageof ▪ ralia- ideas a e oresentea r. co-aplex archaic shrases aid18ga gon and aimstoens. - :a logical and etecti.e manner brings .7.1ariLy aacer and aa a -cea s - ilic ity and p ecision Ad ramnr, tacnnicae rast be aoraisrentaaa-- oblEctive !M1a. tae draft nte-cs co-yea Same ,rres vague sh ascs an ght indeed zoaaea 'he requis a meaning while on other occssiara prec raJlatiari necessara The draa Code -as alaemred balancethase i - bast poas 'ale manner withal.]: soraptmia ng on the easence of "E

-- After mach daliberatio- Corynissiar deuced to adopt the p ain laagJagetar nique tatheex era practical Th-Cormissian be lades ha tnis sthebes )aaaiblemn nu di waach timeless print pies ca g Pc articulated in -he primal-, law and nter- can be commumca co clearly to tha. regulators anguage cecharq.e avaulJ eac aaoid ng usage c boner, ac- crpted,v.ea unoestoad and iudic recogniaed aaraaea bur in iterea of dor', aad achieving interrational al-a - Yards his is a nasessory baTgain I s expected the u risprudence anc iaterp-etaa- Ne aneoningsof nay, plaraaes aould dezelos airh time Plain language -echr qua also advocates usageganda- nea lanciage While ha Ganaaol C/c-aosact /697 pra.ices -aa arca the an+VCJII^e gender:hall ae taker o I_Je femalaa the. COF -5,101 has delta ately sreered clearer refer, ng au either and :ought to use largu g..a that isgcnrar aeutral to tha aata-t pracucal The alto., !name catiae 1sta-capsulate, thal< do s anda-lat at-aye aaan adop tea in :reser agtae araft Code act ye o ce has been used to the extent sossiole 2 Pis aveda,and s ^- 3 € and shcri- sea enzes havc teen _sec rcicsta ce

~~14 111.11C1.. 3 chez p- a 3 8. have beena roidad tetheextet I poasible le nista -ea eforease~~

~~, Double neLa rres a -d comp eY senre-ce3 reve oven avoideb to trC S:enc possi bie~~

tectt, dausea have been ao aed lobe extenr DOSL ble b Atom's in parr r ave aye dec pataJlarly aet ol the pronis .23 trey le lu mear ng auchas 3 nCrala void agreed and derlrec8"orceand efect "cone; vere sad t a Ito comptr, /freed erd the:ha-get tr Vague ;roma Frzre been avoided to Meat-Ler possielejor lestanca public irter

~~8 La n and fore g- aaores have been 3/31a231 Such 23 Lnara muronJ■s", trG e-GPrF _ad Useof rita niamberec Daragrapra Lea been avo ided.~~

~~2.4. Financial regulatory governance~~

re? t,u1 a' re 18.8" lot finaactalfirms actu8r8ct p 'meat legislation in 8rderro cape cespec a iced technical Jeroands or the ielc 238, he 8- c pato. of mita oc al ano techn8loocal innoaaticr, the -rchitectthe 'he has bee- adopted t he acrid over 8nststscr 8arliamen draft agiews lest estaolish nnanc egrtla[ots aric set in aat1231 ae rag ila cr3 I hen td-raft reg8la ions I, - :herr be] riaate marret knoraledge a evolve ',vie,

rhe cant streak anancel law, then aonsis or set' rig Jp re88'arors anc ensimcg era t-e operate cor rectly roe Commission has Made tae 38u -d s run, ina of "ra - cial gula ta ano thus ayrg thalcunclation lora oulr_ naacialregulate-yeroress a primo obtecr it e ire eon< of 13 e Comnission rereives arcane Iota r memes Clan). or octets ver ana avoiding aonflicts8linte est lb, P eaiselidef aed p^tvers(c)Deerational and 8.81d cal naeaeanence ang td)A88eo -tabilte meria:aisms

~~2 4 1 Independence of regulators~~

ecent dezadrs incependenc regula urs hare become an impode -3 pa t of the pc- iry ts -dscatoe nIncia ard ercrId rat deJ1-a'e am 5L.r arg.. nents in favour or -a8 ng taupe or arr d reg8 a'ian of the -manual seanr dole a regJlatary agencies ,bac are des e 'iMVt Cf rhc Gortbrriment

~~881-.8 almair8r8arn Goo. rreard88 me:m.5 3 ev ths3c1.303313dEe and :10 33ebsc Manor Leird3333/ irdepelLentreguato isableto~~

~~e The preselre of inoreencent egulatosirnsroves egalzentill t byealangrhaar3 regulaa aporoacL doesno-Luc-Lac 81-anges~~

Mere physical sepatatio of the regulator nor the Go,emmer 'ewer er not EL' !pent to eas8re its asependen ae This ^eeds to be accomea -ies by l_gel and edam' 13 -331 3.2pacasesrh3 c'ead, aelineatelr3funztor ng o the regutater rom the rest or the Co/ern-121

~~-4+-~~

In the dormalluncrionindcdeerdn,nent. rde mree 'dnctions regdIs der mading pOnerS On: - separs'e under d-e sepaot on nd elforcement a'd ad udicalidn are des e reddild-cds it places the- VI/non the ned 2ment de eidatesnc.sefudcf ondto -- aloe siature, edeau dnicue position c.` being min sises wiLh pdoe s ^ lad lc -e The Corr' in sde dass- Ned e_hievegreate Ude and uc cia 311 inder a single er seoz ating cur e unctiodng of th. regula.01 particulard seat ratio- c powers ir tl- o ler act iLies ad adicotion I dan es At one ex -eeds to a oid tv.c. extre— A d..ell-si-ru.stu cd ddeoenderd regulator deme edessNe ocleg,atio' As an Ella ^ple legidation sets up an independe^ delta-E. ol ,eresd or rnotv g - -e mandate of senirg the public in u, tor wiLh t - swould r‘ se c^-cerns dbout wha. -ms dlitn s.deeping paders r DEOOleollnth5 and a dsdeolm crc d-angerdent in the -de utile ex' rem? s such an agenc codld do Aid o odd and linanc■2I s-c embea ins dtional deta s of darkets lech- be log To 'egslatio- sding rcepe-oent Olee'd e5 purpcse of to, activities 5he 5 idderedaad. regulators Ed.oid Soth 'nese exr,emes the Codirnissiod ezommends o...ghwhich riCSO ,cs and a sped Fi:LoolkiLci pod.crs shd 'se g en p eriseoLiccd -he ms^ -er in which thd cbjec... des sde to be pursued w tho inadoende-ce decide eaDinette eaten y action of the re.g...'a'o—dd l" °Neve nor air powers art to de ubed A- sive mechanisrs of accOurdaciiit.)

2.42. Accountability of regulators -L al to suppon the ddIctioninEcithe arg.deLa pode, rdgulatory indepenence s esse crdurcemen -a Lc e'sure reg._ a -cguld'or as an expert Cody a Cur independence ro. an urr xer palt cal exec not 11...ctua e .n :Flanges vers,thtsneecdte teacco mparred ciessrigddhenunelecLed odic al:a e given strodg 5y apotd. ateasoduntabi mer-anisms 135 on is ten re note on recemmonOiheas he einstance Ola,narcialregd dedcd — T 53 thrOU‘n:de- N t.. by Parliarend I OdeVer, the p5cce

~~idd eri regthet or and dune ainai °cad] ,rd 3 A 5D rna13-51 renSp2 Ent s 55~~

nesand he oddhe alarge arc cad,Dithereguld'ortoexpad..i335100:,- ro3lale Son- • cdol sorgesshoud dzirr poses adeiLed n Redu-ernents darPgudtdry acdois 'o -artiddid ,1 Jeoe, sord an'5 {doe 'Frac ed (urioasiradrdczr and should 55 de zorr a: ou'exado eddying he concerred ;a ties

~~sand oolccor an end ot aThat cos and ddich wiltersuc g pad- bcru caer '35 5 'lading." ejudinato er5315d2d eregu ato r rds-~~

~~2.5 Ownership neutrality and competition~~

The Indian Fran yste-i hes an ay 01 irm, co operatives ira e Inc en to- frms and :JO sect- Iran -1-e Comrnbsion ew,sage,s- regulacory trariewsr6. ,P. -cregoier andaras mgulred entitie -ci- depend on thetorm olorge -i so ion of the ancesial irrn or s own:r, ip strucWT. This will y eld con-se ve neutra In tHsframewo kr meregulatory ea merit .af companies cs cperal ves 2 rid pa ner ships, pAlicanc kateinanzialfirr s and co rest: sac foreiEr'irms 4911 be ice- ical

2.51. Treatment of foreign firms Uhetl-e■or not, or -he exte-t to whi-h participation St. lyeign rrsshou d be allowed In thr Harr:lelsector is a pc cv ma lens Le cetermind biLheGoverrme-t HOPPPIPT on-e -ecis or to allow lb Clan 7a .id anon in a perticularfnardalparticular market has been made, '-hcrc shoJle 3.2 consistency r 41, iegulatory treatmcrt. of oreian ano do lie paaicipantspebringsi.rHiarlunConsorJrdertakingsimilar risksinne market . Fe example, she to EIE- in (2. Tr-lent pnllcg to- a pprLicu'ar sector permits wholly sr:qr.sub:10 a ustemure tha the e.worth -eqJireme-lis ita'ceua wesime- limits and?. I othe regJI.tord inteRenconsthoJld be the same 'or 1Jr-ign susidiaries ano donstically caned (irms Hence me Cc. nrnission i‘commenos under the capital ositrols evoarx: he o -halm bject to CD- roIrc.tri, ona,pres.:r ce-1 I'r.rothouldt-e lull re cral r earnen- for foreie. irr

2.5.2. Public sector financial. institutions r-efutureo util¢ectorfna da fisan n n pcic si- n I sha heco-it.,u s I1C ar f neice n indeCa es ub I: sector ina rim r I e nJet oe AO us Thc.0,cm niss on 2,-herefore icenti t lam . 1.h earner' of thes,„ irms P Ibl csector finBncia Au is rep, II tfInCtIte lent Wel P nSD ob ems e firms -I fp r ‘.ot2co LpOn th hec. lovorn Si 1-risr...... Pd V It UPICtn.-MI- nee I

~~fyte exter.v.het conpetin n ✓rSin..he nancial n . eels 23. Ownership neutrality and competition~~

The noran hnsne scssm ha: e arra% of Isr's co °per:tics& prsa elndlanrm6 for. ewn firms and pup lc sector firms. The Corrmisso e-visages a -egs atory remess k cere gave canes s and2.nds cues!. atec ent es ecill notdcper cn We form alarszci- scscn inansal'rmorlcosinershipstruc th swill yie o competit de 'les ral 'y In 'Iscrra- ewo-k,-hoccg latorytreatmentcf companies co oseranvescrid salner ships subl rid p ivare Cw-aroal Ism anc den cctic andlopign f ns.wil be der

2.5.1. Treatment of foreign firms 'Atie-he,or no or the esters to which, participa ,cr by sreign ft': should be allowed tM1 e cirsnsial sector o pal cy masa Lc be dete mine° bc tic Co ,err me-t Howe s, once a decis on to 3 Ion lore's part.: pation 1 a particular financial market has been :e,!1-ere s.ould cemrsistencyln the s-gu atcy treame-t of °reign anc don-esti: pedcrr cg lunc yrs or unde,-adngslmllarrsa in the market For eaample, if the foreign in iestn ent policysr a pa i:ular sector per-its %Nihon.? !smiled fore - suLsard es the rsgula co mustensure ensu the -h2 net worth reourerrer s cap tc adequacy 'arms. inveslmenc limits and all veer regulatory Menient ons shsas be t-esamebrfcrelgn subsidy' les and domeslicc Isom ed rims . Sense re the Commis-iscomme. -ds unde - c capita a fra me o k of Ve daftCode nscubACoento etsLoncacresznbedts=scudrysu rat anal Ircatment for fsre gn firms

2.5.2. Public sector financial institutions -he utureaf publics:col I nandalNm5 s 5n Pnpo«ant colis,questio,whiCh sidshape the consoars c mans In :am -gdscadcs psblcssecrof Onercialirms are to continue ace sic' us 1 heCsmmrssion has rerefore dentificd three elemen,s ic Ee sea -lento thesell mc sector f sons's! Ti ass scoreego ise rosslation arc sunsnos On if Soe 3'e d hupe goon in II reduces s ins probicrnsraced sch pubic:sec.:Isms° chic . suns eke time,! draf- ode=mi. 11,ssesthep :Aeso equal Treating andapro-somas

5 le lie FM1 .2r.t flat zonprit or among. in the la sr Gal sector a os or SCCCuntolee sting a/ ins con &lissom proteges., SIOLC irGd sic-uprises theLs suss on essr-sresisarrer d niers he 134: rea ea e el sassing field bengeen sesulated entities irsespoctive of Use r

This Los of achie ing cs-npeht neutrality in the financial sector necessarg in acilsesa set^ nninsos cvssus- astl'e Sae Ronk: isss dcbe Die nsu'a nce Corpora' Ams gas saS weir= Cnantec to create soccif C "'anon _dons. These laws cor provisions that YE 7 or exslude 'he applicability al Eenral corporate end financial a mite insiuvors res d 'Ca alo confer special pviloges asseen in l thecasortheevpms rotiasonernmontg, alantee under the L' Insurance Corso -at onAcc, ice for all. s_msassred or& cic soli: es The exiStecce succ a provision n the law gorge the entry Os private insurers r he roarketinducesanunffrmmpet- vozdvanageinfavonrofLCasma5ycstomerbwouldenc tocnoeselts ccl. cies ove, hose aff-r-cc by pr....atei-suce's on CC3r.t o 'he Sovc'n nentgusra 'see The Ccrnmissisn ,erefore,esommenos ,-e ,cpcc o large scsle amenc.cienc of al so- llegisLUnns L a) estalc ish slataturyrianual instl scions crib) lay sown 5cs cif c poJSOss to go,ern any asses a, the ono aticrt or „nztisning of push: sects-fi nansal !rig Loons ;see Table 2l1. The UndelLEi rigs of a statutory institutions should 14 -

~~Table of Recommendations as Lit of stelutory 'ens ol institutio-o - istalant nuor fratheesiabls mana nrsalaLaylloa.la al ash (103 331-ontains 2of paiLlc 3212 alanala 2t2tnne~~

~~a. ha State Sank 3313dia (Saha. 25 bankalArt 1949~~

De aro-geared co o dinary corloanies incor.oarato2 .rdeetheCorpanics Ace 193.e a -o the r regulats t e2tmee -. c. d be mental as that applicable ms other financial eampeeies -his 202 or2vio.sly beer done in ease of the follcv. nf, -gritutions 2.22:h nomstet...or] cs )(rations [ha, 2e esLbs2c2entl. somertec o ompae es urcer -..: ..1‘cts neentioeed be 01N zremous12 ..211 edthe nd istrial/ n2re2C.2 pc atonof I2J i.ro2gotioeinseriai. n2rcecerpo al on ierrais e o PI Prbkrg 31,2 Repe3 !Act 1232

2 ird22 kr std IItl 222 in ksvolReccnAruc 102 Sark of ir sial ;le✓ou2h the ilhgral1ecoimtruct or Sark t-rans121 of Unse 'akin; ard Reped se 9.22 3 UritT usec 11J .gn too uslofind &Pro Undor3.2n,yro 2epeallAct 120". and

Dc. opment 221. rarqer of Uncor1.2122arc REI3eal Aal 2203 Thocs eeeelasion resogr :ES eiLlhefepaalor12-2escaleame-dr...nlsof tnes2tute2 en fi eel nTab e 21 isa Isngdre.- roces. m22 t2/esome tim2 2rtheCent ales:

-12 up and licmcrion of he concerned in.:Murices t '221 al ESE that neec lo Te amended , r ec latelyto g elect c the es.21.1,2ce frarnewsik er.iszgec aytheCOT —1125 Ca his is Le ig done p-I or reso . o ^ thadraftGode It has 212c leeenabfervec certain finaneiz aetiviore.. tha owned and managed be 4...vorrei=nt agexies tent to fall oL. =AP c of menu?. rep a ion al 'hour. vo‘. are functionally idene Cal 10 regule ineoci21221121ties Thia intudesünd nanagemer servizesoffer2d Lhe Emplovees P ident Fund C g.ni.ation (22 0) in suranse of postal lifer's.] ance and the Pip ovees' 2te ele2urancPComoration a - J tee varo2s small qz..eirgs D'OdUct5 la5 eh^ 2orree -ent ta the ex en: that ..-csc sod es are per ormin e facial ‘4.11.2re fun..leo‘,1...... oulo not be prac1 cal or •

desirable to apply all seas of nnenca. regulation to then with the same ego.2r the is ✓eed for en2steer erenses 1-he Cornssion tcommencs teat Leer& 2a neec lc proport anal reyulation of hose par., es particula ly in themd of co-sumer pro Leo isi so that ece2orner2sre e-titlee to the same righ-s and "retecciona rrespect me ownership staasof hesery ce p 0.ieeis Hence,tr e Cc n -12ston rem-menu 'hat -11-12G3/21.221elt 2 221d Isinutate,s alto the e.ieviol 1221211.2222212 ...sand 2c -ernes .221.211 invol2c thepro... 222 alhearc al ser,c2s222.222 v=heGo..e.-22.22t el by agercies c.eatee

~~■• -Fe...2121222es PleVirl.Fugis ard ros swas ▪ as As=a T Tea 11,rat1.221 2n:weertrend Act 955~~

~~Fos Office 2111e nst rata a 7aLlha J22 2 -r2.21.2.2s tit:triers should be sy.rrined or- Pr -spective n12522ssin 2nges re qui ed hi-VIVI-CFI 1.1thIllnt 2uneev. or lirancie egulat or a 1.1 econ,ea~~

2 53. Treatment of co-operatives In urderstancierhe Aidesper .tmci lehrarcial cysterr 2 India the Commissiola,20 focused ei re role of co cpeative societies The subject of co-ope.-a-ive sozieties ells .2neerEl ly 32 List II of the Se ,eith Sciedule of the constitution of India, warn pronice that thercoriord icn/egobtion an° winc ng up of ihesebodiesfa'1222Lh - the pu-2,e2v

adsitio2 when 2.2-epe.-ativesoc etie2en.62ge m the b2sinessolf naecial services the). neec to be reeJlateJ anosuper.2.2d12y franc al regu a ors 2 21 hare e that iscom M2 surate h the nature el the r liminess and the risks 121 dertaken by nem Since{ nancial co operat yes D 'en ca er so [Fe -ceas cl small 222seholds, theCo n - ssion is el- the vie., that s_ch istitu ions should carry ou tear busress under sot 27 prucen ial 22E,212,ic.2 and -esolution erec....ork with strong 2e..Lect onsfor heir ce-su ners end app op: a esareL22'ds o ens.tretha.. theeee tusk,. artheirfa I.2re bvden does nor fall uron paye's Fo .2)2 -UbeDoss ble,thedrelLfeieshould apply it2 Ida ply ts o noopenti...eso.ietie2P2o2idingf n. (12 ser .2.22,-othesa 22tencas to eereLe entn es Undo2the ctere2. -ws ce operative banks are subject to a system let regula toe- theRegistrars ./C.2 ceerati2eSoc et its 2 SteteG2.2ernme-teand the173,23.1w bank ng-egulator T- seas'esulted 032--ationel and gs2er-ancec lerge2 n the reg ule on of co speretide ean5 that ha.e seen aLL2' pted to be acdres-3ed L 'ough re2- 2.andums at unoer2t2 'ding entered ol.ce.veer the 175 a-d Stew Cevernr-ents 2ne Commission reco-rie-ds'-ha ina2cial reg.. s o's should have stab, or2 cver - c regu a-tien and 2upervisio- o' fir ra conts operatives 01.2.1 'laving to rel., on cs. -1-2c uala rangemerts 211h Stair Gave iments h 2eari beaceic cc Jr2,crArLic e25.2of 'he .22onst tut otwhich allows two to net gas LegI51Z2urts to pass a reso Alen accep, fig the authority of the parliame a to ma KP law.forthe State en an., rr atter on Sc hich the -ar iamcm other:. se does not -ave the 2.23321C1t2. egistele Js Lhis pro.isienS'ate riovernmentscould issaresolutionslo re-: -epowe o rake ay.s2r the eguhtio2 a 2d sJpc sip )olco-peerati cssciet es cerrying on linanc se'22cstoteePar orrfni, -

The grant el authorise ion M ra str on Hart al services is Pe prercgatveofthef- nedregulatso The Graft Tonle rot. destsat sh le abingdPirms thecrite S for carrying on s honer] snro ce the rpoulats- mny speciT se permissible forrs of orgenlzt cr for a proposal 9nantial service p scer The regulator may the ele e decide that co SperalDesociebee I om 5aresmathavenvavowec meCem2l cover neirt0 legisiz on the reg.] 5'ic ard sone (Pico oleo operari esssiel °scar sing o I nancial serrises

rsu onset A.9E1 require. ire nee Tic preen la ragbar en or 2 se pranted nerhonsatior c car > Cu seen lc icini sarocesssrocue eosin !inlet el s TT 25 rat amuse :Deese e Tal tree [Dos- sot lorierileT d rccurt ir dery bin re erns des by this central bark arid [Assign Torn he 0 erect On Trbsposit !NJ Tee provided se resektoe corporaDer Tire CDT^ ss on therefore makes the font:its g ECOrnelenJ3LIODS :TM reseecr tc ce operative screeties In:sero Timm-rifle ornnendet ens el Censer e restrsh scopeerst eSeciet escar rg ' unbesubject -0;1in sr p ecential repc 2t on colSeTner probe; tier ard resolution h.-nee/arks 35 cDE e'en le err ile a !senile' act et Es 5 CDM1gN f Indie StateCO.2 relents =Cc a22ep authoTe of

~~Telecee yirg es inane al erozes 3 The rens ater rnay impose pone-lens entre ee DID; or of spec! e I lineic al emcee b,~~

~~the szri nmeni Ingisla e on tr rrg Antics o corspen nesecint esna r ins on imanciai se ▪•~~

~~4.6~~

~~Structure of the regulator~~

Griv=rime-tagercies -re rect,✓red to pe forr .crnplcx -unc ionsr eight,r-oas f" mmLe .3nstrier protects- micro-prucential regulzucli, resrition o fading fir ar cie f m5 sacitz' contro's syslem c risk, deve opmen "lOric ar, and deb rnanagemeit EQ.- theseto -clansI- adoropriatel,, perforrn.?d, st Jcturec oovern nen agencies ere recumed This is soug lc bea:hieved era a srxialiseo and co ,solisatri ,et of p ovcsio-s on regJlaLry governance hedra Coos. lhe...ur miss on believesthatth.roquirementsolindepe-dcnccard a_acu-Lasiliv c a ,egu atorsarethesarnea.,rossthe inancialsytem,7 )ersceit recor me-ds a ulifRd ser of onso Harm al egula cryga‘e 'lance areas of finan:e -he of .he p oroset COJe CC regulatsrY go'a r^ance o create a ser es of obl ga.-iors for tne GO“'llfrert and Dr reE..1a-o s Code will coeer al IJn-ions cr the regulator and lay dr•Nn the pr rripk=sa-d s'andaidso behavrt exprrrp.d ronthe beg_ ulal-or It II also ors,ide tors syster Dfmcnita ingthe unctions of the egJlato th processl-o unsuret-at cre ator ;fullytra -sparentanc thq 2Ct so-pliance eon rib best practices JUWIC adminis ation Fable 31 c; stures t-e recomm,ndaL cos of -1)E,Co-ir span thecrestion of a" aPProriate retinaorys .cture The Commbsion recommcnostha thestruc-Jreollhe regJletorbestncardi,e^ fs, ell manual regula,,ors e ect-ere may oroe ic -s requires in respect of cerain specific funnons where he gcnc egu aty processes !nay not apply These exccp- ionstz gereral p oce^, law should be Aeptts the ninimum and ge^e, al y a‘ciaed

~~3.1. Selection of the regulator's board~~

✓ecuirir e in India a estatJtoryenc ties headec oya board. It is : erespois cilry o- the Gove,rime-t to a opo he rembe s on the bare o t^e regulator. Tie Commiss on believesthatit xessary zreatea statu ory syster fo'sel'act ^,g bOerC MeTMO'S n a fair ancl-ansoment maner it ree,:mmenced hatthorerrme-it should bp aided in th 5p chress bya professional serch and se estio- corn-no-Lee Trlsmtll 112 pensu e .hat I ,e se, ec ed mem tens are ,:mpeLentJer5insv,fth relea rt Irowladge acd expel- ence The Commissi— locked at var ous systern5 of se ectun committees present Lider radian laws along math the pactic2 other common jurkdio: ons. BOW on aralys, It recor.mends that the so% ernme-L should maintain 2. panel of experts who udl sett as cnemLeN of thz. s,lection comric eee all tines. The nexparise Imo..d he

~~:1 V A Nca L SEC TO.R L e !SEAT E REFORMS CON,115e11 0 bravo-nee erre~~

~~Table of Recommendations 3.18as c strudoie of: e roe later~~

~~C171.10y row od7.7111717.111.S. ay-boom tan lem or so 1-.7 a-a~~

~~a cos, of r1.7-ytgotof carnoilonac coralefocc tecan saacte Otte~~

~~Table of Recommendations 3.2 Senction el board members~~

~~la) -11-77 ni1.1. Will be 2.ploin--71,e17 alistcrexp.15,-7111.ned le 30 -7 It a.111-..~~

~~c Pewee I La a terda3poraolo Milan oromor dboard cement no- c - a if e olappleano~~

ertgas, c an netaccroloac war ebb mance ria orawat ace ar morocco' coca calm comb mc shoed cc in year attorney-let ar -.a mart atom cc e earl emenenao re acme s rectioor ries is norm piece the Search ana scar an =a-mincer c we-Mb taawa os

~~macaw, rdgorethecc ern-eritry.sonlble ime to -.axe deovor~~

realised by centre-1 as and h -e- appcintments to coot are to tabe place These ez systlarn %hill be governec the pt.:ass prodded 'Table 32 o These ectionprosedureshoulc be desigred re memer that ach.eves s balancebe Tyveen recArenert5of I 2nd t anspare-cy 7- zrefore thedrakcodeclaes not lay dowr such leve cf detail that e^e ectior co nmitee 5 unable. to sho:lis: deserorg Ta-clida:es °flakes log Coda SS Pt :he same time me otegrity ection ors :ecure be votected by requi- -g war. all shop-Horne and dociPot ^Me rgere done in a transpa en: rE:nner- thc zornricee should c :close E i the re e doc,rieMs:r:• v defied by it sec prepare a repo the amp ripe st the selecyon orocedure ithiS a. I include the minutes of the diSCestaicr for core -sting names. Me ciboria and ere- miss of seleceon and The reasoca why specific sersc-s 'Retie seleced -he comm the ..bald however, no be required to disclose any disci-sane about :and cafes who v era

~~3.2. Composition of the board of the regulator~~

~~The commission sucgests thew, re Board of e regale:: sheuld bade 'sur :ypes of me- pars Table of Recommendatons 3.3 la/Lesof members or L e board at the reguietor~~

~~chairperson el a C Logg~~

~~tic ca eggs's:Fr-Inn-122es 22112p=r3onswid be.: es gN.ted sadminisJouve c?...rrern,ers Co~~

aggecsirg be performanac gr ^carry ng ourMoe carsigat cla design ate] set of eta-Cost ccs of the regulate!' referred ton admin st officers act (b Regev. ng hoc a:Isla-6 caggr by head, strat se avveCeIS Theex-cum: rbTbeeS:IraevoFe elan e urr tobemanagerial. s or the egg ate'. ard csi pace perect ed take tp any eras ampler:lc du mg their appoirtmert These roamers l be resacnsible Isar ne wars chl SI to regulater's ye cannel except for edminlnraSe raw

~~10 as ocotved in the cayv des Iliac ions o the rags!, Norexee,tive cambers may mu tip 01U a-gage-rents a it II acc 3 cialace seabirdmerest issues %benspetlrgF~~

on se boar.: al be regulator Tn-= rierebe s sts II res eseat t eel'saccuse o nor depart n en 1st les mettle quiz r thef too, aced Fe regmaces The Commission Ischeces that it t crucial for me drag Code on regt atary corer ance la; ga ge' the a nccons ;Id powers of each -Ace al rne-be on rte bears us a regu ator Acct dingly the law gill state tattge chairperson a a d executive me noes a e reepots ale tor Lee day to da, actoning a the regulator The role o the acmin- 1st att Itho merr Des vol Le to locus an the regu la -or s adjuc is on and adrrin at ta- Mc lac rtgatit gagrg a categorc ea nen egeectis members is a corcnuatioa of ce present c= ssem of -pp° g aart tire ne nters or the boards o inane regulatort Such execuLtie -,embc swill gra, del souncial-tar bencii s to the managcrneat of the regglator en nd nattiest cm lc rsytatorcrate tic coseremer so en t olat ons of Ices gy the rac, lator 2 sac Irresabcrs shoals 1222 2220 I 2- n Eggs cs aid ally fields d p elerazA also y..rne en penence 0217Ing ancal scar ces s All 2ring In ever Ise and inlermatcn asps c tie

Unlike ordinac °vs sardacts Gerd rrerr oars are ap painted fora hanged rne ago da not hate gt 2 a^ eeolccrilinuecemplovme Therefore ont althecrue alt-eegire rents al ingegerd ce s taat he atmbersshou d orstectecl re th cough change rhelrtalM531-saaaintment -or this eason thoCornmissioa raconmetds that The c al code should pad de thecone tons of appo re-tentof nanbes duration en tit ements, system of removal and s hats o - Lercs's seeTable 3 A1 .

~~33. Functioning of the board~~

-he lung oningoctseboarc of regula orasnou d arewdlybe left to the rules and regt la tiaras ormad by he egulato Howeser Ic e ir eres oc accaun acilays ceitain pr ncip es moat be late down to govern theactians or - e :said The Comic ssion Iso the opin on that boss crag ices or conducting ::e ltric tom el de, beratuc bac es shoule Le -car porated In the function ng cane regulator The recommendations wrt n regard to what scaule be tantained In thg drat Code to govern board aneetiggs is p ovided in Table g 41-

~~Table of Recommendations s 4 App it menL conditions or boo d members~~

~~44 4 b._ tmen ement Ix ommtivo ormoms Lc orre omen crowns errombers must mbrmaier L to thr roe obetremem lot the ommier L.pror mot L pennons~~

~~broteronf Lim IC? .1 pomp cohmai novas lamme am mem~~

~~mmtrrunt M.m...y COL two mil monlymmttstpor~~

~~unte orroatrearun to Lamp me re GOV( corm t J a. amshmuMpai r mourn Lunde~~

~~rester co 14 trmi creme mbn 444 Lb ssm~~

~~MI De no tutot - oppo none co mrtmorn me- bp. mil Malmo= 4 Er mearm 4-4 tenaion444 trocrermernmvatcs I throrionmetmm.terrorismeom Le v tabin hermo~~

~~Table of Recommendations 3.5 LaNEovern- head meetings~~

Thocommisao- -sof Hai very ttgh regard s:-ould MEven ro Lhe nee° for transparency ." the hoard meenigs oche regulator Wh e thore may oe some spec": jeceisiorior de iserat onscIthe regula■or. may n2,.ecomrle cis: imp cscions and may not be 'e sed mmnothatelv this should -of be unholy used es a ire to rod ate from the genera prirmiple or t anscorencv -he Mart Code or thcreforo require me regulators to be :onshore-. ahoy. rnemings cC for rz ocss.ble onc wen t on is kept co ':ficemDI reaso-: 'or co ng so must so &circled rormns..anse pencmg mesitgations and cperies atcur too almns ho a ragtlared emity shob d be kept outs de ie purvie% of prblizotLar as they have an in- saa on the reputeton on the misfit Ltion rothout a r nding of violation of tar s I mriever the cecrtms of ..he reoolmor should to sobEished to oronce ...formation to the regulatec orb .eo on the standards of co.. dust exneced by TM rgu ntoi There s hlso a needic fore dtrmal mechanom to r nalehlm -MLL --,t,:etorc compliance- s; stems This on I DE ach ve by scMing up a (orlon. cu5mr^iftee that w I be comprised onion! 4- coccu. or members el the board (see 3ab e3

~~34. Advisory councils of the regulator~~

T 'e regulators 411 be respons pie for regulating E. arge and LapicILL devolcoing financial 34e-holders. including fmanc al service providers imermethanes oons.mers cd otmer users & the fire al system It is -ot possibLe.o ensmo that all Mese stanomolonrs act: Luntrry represented at all times STRUCT.52 TEE GANN) r - 5 0

~~Table of Recommendations 3.6 t)1:2c)~~

~~5 P=555re al r 55 mar=g=n5 =55ttlio 555515 115 er 5 arc~~

.51.55E r5 of Fre board of the rag, star In particular, s extremely c ficu t is !dem ly oerso ahJcs -,rearese-ithe inte etso0-ecommor ndian housenc d S rTh aIYJOS fin:n:ial seri ce req. re heregJlatorts gain e■pertis.: spx z'eas. 5JCh as insurance algo-i hmic trading, detailed analysis dam, Ihe Con- Tissian p °Doses hat Lliee ssJes should be addressed by creating ovisorycouncils o advise the board ofthe pee_lator see Table 3.71.

~~3.5 Resource allocation of the regulator~~

na-ciai seMr reg. a io^ 1, a rc so oce intensive Unz ion The sophisticated suer cf financial markets coupled wio 15- )(I lrnovadon= 9 oroduc's and processes make it necesir., or the regula orto har thecapt_il 'voric resourcesto eep pacewih ce,el- opmeits these:to, Th- neer0 -depe-clenzeis aneof the on —laryrersois fc °'eating an irepenac rgu✓a.c allohsthe replatort -eve The equired exi end hum est at ari rnpre J A 't devev, ^ trzdir anal govern Tent setup

.As regL,a or s cripat ,eltd Cr -old asses depende- y can create phyS C3I rastrxtUredediCa ec en r•grsrn2^to financia 'et JIt'ions These resources can bescaled Jpand —odiredqt. (kiy ReinG.rderencen of heCcve 'Imertalsoa reguloto o develop ts can reclJitalerit cr ia and rozesses ch -ecessa^/ to mobil si-greq,,red humar esoLrce, TheCo—nissicr iotes thr heprz■tillisions ins finsrc al rdese-de-ce of the regJlators arc aside arc have e.orkes now There fore,theCommission 'sof the spir o—thattrvere sno reef to s,ostantialq mod N hem re preSer hrianCiaLcv)Saltov. iggulats o chargefeesI-cm he regula eo ro ccier the'. costs of Tunc,tionin In certt, cases the rouvern—ent has also proiised

~~Table of Recommendations 3.7 mcvsaryco_ncils~~

~~nelNle 5.155 55 II 511=1=15 519515a ha= 55. areate4 =r5~~

~~I fe oti` reor tr rra INIfflula Onsp5511 hee 1 y115 =gu15155.1.41112. he courord 55555~~

~~THE ULATOP~~

~~Table of RecoMmendations 3.8 Prins pies governing egg store recce ces~~

~~ileedLT IC IHOralr'le -SOUF.a n ti rs Integra itsreeders -as fr. p 014 452542 is egulataryob 5: 255~~

~~52452251555nert 51 Lie ho ern neat in 45 I anaal ersol ‘elhauld.22544 lobs 2 name~~

-5 aable.5 8 c0ve45 initial giants-sr loaes regulators es a Ceseiret0 Shalt the1101)42152h0 Lle recomraercahors of the aarnmiss en she principles goderemg she e gerces of the segulator esslof Ts tale recommesietier that fee regulator shou d JefugeG pemanly through fees Allowing the regulator Cc sgnd self from fees co egfed from sggasc erffges has 2.12E hollowing acvs-teges- I It ensures chetefancal stake nelse s wigarethemale benehaanes of regulaf snafkess bear

meal 2 It Cie27CS speraascal elaclerca Iv the reaotato2 es :ha linant reflect grces the nunlbercf trensenons en] rms increase ale tha: -evens:x:1 e resafinse floe info tee regu aser in sun the regmeref can infigase sedefe rg en enfoscenent mpg:fee:Is 21Seller fUncliereyyecr helping-off the confOconfidence users

~~ging of expegS afgla on goleg melee; rs 4 nelas addres5 issues of conr 42 o 424552in a col, el ere e e fern oieubig otport golf corsrnf nmeigs the owner!) ef aegregulaf -d Flit es sere Inane al Inns~~

The gc -rise recognises tha the power e imps* fees on regulateg erg lies le:deface:ton a Icessumers of eraiic al rervices g there ore We aft COd2 provides certain gigs' "gp r p es or g e charging ef fee, steed see ple emoof e ngthe rcgu laIsr to rig ketse cellectice ',seereale3 3) It is parheuiarle impogant re eesuse that the srigosgion of ises snouts] no. impee sf es usdur cen o- regulated firms sr frsnsfesthe s °alley the cost os segu'a cne stags ef firms g fraesacs ong cescre. To 34154C go-mission see err-rends the reguletees Men[( herec f °charge ee e 'tenant type< t ees Fin fees for registration as Tce 55cul51bCas 4741n C.2. abere 41521ctaa2 it Coe_ -lc 1>IPPrit arliy cl nevi financial firri= 2 Fees dep arida nt the natuve of the transaction ill SPN of Fee .1, y dee-nding on The flOturf o 'norra,lbusinessbcin;ctriEsou so gra/epic II CI- cob of legfigege en nsuranfe seas 2 552 5444 lc lie'r

on t124 lrecuenhy and cm oltran54454,22 nor ganef:. c .242.52-age mar meg ea. e Oaf fees gegending, pelmenurnberettsensa. boned ,. r PeSOLL SITiarly 2911DU nee erm would be charged depend ng on ties auTber nsured an ref rPUCLIte5

Asr et ed ga her regulatory in cc pen den Ca reef lies that the Cover-Fent e right to mite-gee- in the Ma ars of Use regulage s kep fit a min the2e5Cre 'C[3-24955512 theCovem:neatmustorty¢mrel :51433122y aco perauisite5 el theme's fess of the boarc of se seg. 4201 I he bogie] OJId n fern ge sesoonsib'c tor maintaining adept ate staff a expe-getomeet its stet !tory ob ecueeeff f is finan c alcapgafe e eoard should heeorebethergeC wish the respersile, te eldesign ng a sg, of Human RCYKL) ces Leif gra:fleesmates geneta e Co theg ccornp shmenf of its

~~RCGULATOR 52-~~

~~Table of Recommendations 3.9 Principles governing the charging of Tees by me regulator~~

~~the draftcoths~~

~~Table of Recommendations 3.10 .erlor —a-ce measuremer anr repoling~~

~~3.6. Performance assessment and reporting~~

The Commis,or ',aced Nat the present ste.--) of ranzial accortirg cf re reg. ato, isfocused arimeriy onthe deoodingo expe-ditu es inzurred by the regulE, or unser var iduc hcado. This, according L^ Cc Cor nissi.dn does not constitute'lute a =ufficidd- Wst of the fulfil -nen. of pj ✓ acary oo ecoves or the assessment of he regu'a ors rerlormonra dnerdfore,therr is need to require regulators to adhere to a norecomprehe+trve system of mepsdring the performance mudsordinen d,sle ns (ur addessing performance rdgulet;rss-et idLd.dcari asses refs he egula.or droce=seson metricssuci as,the i—etake- grar idg an app o zi measurererd o efilden., df administrationn sysi-ems cosra imposed 0- recdlated e- it es and dates of sdccessful p-osecution dolat on o 13%ns 11.202.Vg 5JCh a Esvod:1- .d.ule constitute cepmt, e from the present system where r-ost n nancial regulate,. focus on measuing the cc idtied leglliaLeC en d f %dal markets as a sbncsrd for Thed perforrarce Comrr ss on no ed that :Aide these —iessuremedtsarc irdsorte -t reasu er er"Oker OUS2211.1L dg, liert3ke- )) the 'ekdIpt. I ordd de mu g gredte-trrapre-izi ard acountabili y The rras esoff or also needs to tkdo mt^ thd. rad- :a reAurzes spen by regul&tor c card cut thosert vities A sys'em :Mich mdre y dieasured tdd(dperdescf the regt, Mendes redeforo sons,dcded to oe radeqdatc and thecommissicn econ—e-dsa move towros tying the meau-ement of egdlatdryac- -w des anc theexpcnditurc rcdred o'itasd rk for imprdd irdulator don. mice Azdordingly &Corr -rugs oncorr ne-ds -hercl owngneasu ement processes roi the regdlator ‘Table.3 Ci Proteds. fliq p eCeSS II /nen fll-r) o ieSDUICOS b■Ile egUlato fOr r,oln=~nn o-idc Ives ard -rod a,o,ds re.;Liators dem rianden adsuirg-zch oh eCne sr Cue-rues as ras LATOR

Ove manne co sib Smulat ng tee per o rnarcestreasorc based audit rg the most COrtember system seed Ocoalla by tear rogula Ors.this Ofeosto 1 se Ebb the exercise °Hist oesb the reguloter Le its expenses tt- esti e tee regulelorto crease ye Fortnana Te Csaidto gets obich it di oe requires to

the. rackbonal atestele or expen ce to I e proposes or 2 Financial Acee.i nti ng. This v he manta ring heaecial contro ard As /Hob currently :aro done b 'tarots itgulatsts Thefinanc a=ur ts wit be et sited by brew

~~tecistereat PE;~~

~~5-14~~

~~Functions and powers of the regulator~~

he reg.. add, acts e nistatn in hat it exercises ledislabde powes in the cr of d aft -g egulations thata e sinding on regulated entities ■t 2C s as the execut its sidper no- and ddlo cement act and and performs d quas. cicial'urc ddle as sedsing compliance wit the law by regulated entitles and corp iancd. at processes by he regt. n le imposing penalties on re- MeSe wide r52gh a 0.22/C22 to 125 .2.221aors dm draft Code on rep, z- one governance deeds us pia dare appropriate checks a -d balances to ensure that the pddhersdre not misused and prd..d.e regulatory governance processesze follcNed In everyacr on taken by tfe ren aro ire nmids o has dcriLihec Lhe irg Mead. mhich dagulato3 go.,er-ance processes need -o be clear y detailed 'In hedrar Coce P 2.2222122 551202g replations a nc d212225 2-nctic55 2.5222222. rr is= on co 2 on fil arc 212“.ities in'ornosiongathecng \ tignor impos tor clpena i52 and ccmpoundirgo 211 :rice= and

~~4.1. Issuing regulations and guidelines~~

e p irmd/dfunclidn of a nencde deciorregu dtcr is,-oseLdovyris anddrdso behaviour expected f-on regdila Adb endtieS encamc..25ses ng regulations governing hod, me regulated e-ti esou interast. with the regid iror condumers ai marvels dnd o:rdd reguld.od entiLids Redu alkyls alsovide he internal.unctiars ard act onsof regulated entioes,- td..e condxt of financial act d ties In d fiSt°rdig°%er dy enre noanon s dcid d ber.dged spins: unkdown standards Therefore before he g. d'or can ca re cut anyaperd sior o d..djucication. ire functions,t had tie resporsib lit, to lay downy-. clear and unarnoiduous terms oe dediod- that it expec d froregulated entities ande n L e regu'a n&cs to slow strdetd.red 213CeSS theta loe2s all s ade -polder: to be informed of odd Dar- cipate in the regula21212-rna 2g pr.522C55 Some existing regulators ha .e eady Kap ed Eood piance C Carryrg Out publd dsnsdltelisnd It Ir I) JR( dl Making rgulotions I-oce ei, Comm ss on ,5

iloyed are not °Led tha s ce tis uot rn.,ndsfez. uff.f 'egislatiff n he p' e- I r-is faced Pceourtely fosfrfl in a thoroffgh araf,sis of he public adminishe on prosie ' in the reef zfion -aung process In add,tion, as n rost other aspects of the lega ieren ocessn Indian ira -cial rogula ory governance, the pre.of ces zllowec ty di -ancial regulators a Henn idios‘nzra- Asys ine -he process -he Cummission has there ore Je^tified de ailed reqf 'eMents to d` that the regulato sshould fellow A"! e ^eking r:g IF ans anc the mucha-is-ns forthe reQieof a! egis'ative power eee c sed by regulafors -e 'T lav■Ao not selnea mei set sl instrumentstridt can housedd by the eg_lator, ulars noffices oregula of age-c. migf acoptra. tiplereg. ro". ins fumy -.fs-cir- rfi-, L ers regu iuns gu deines mJste pres. notes - sutcomesn ireccrn Tering leg Jr. 1 , flaking ocese. To avo, f_ this s at o^ cue Cf:rnm ssio- d5 that the draft :oue re_ d c early claim: the le.;b'$ ve oo ff2's of the egula,of 2 -c he instru -errs The Cor -isD un recommcncs hat e reg_k or slodlc be en

~~pohered re! sue only two types of I-stn.-lents - regulations and guidelines.~~

Process for making regulations on afffet. a. 'ha draft...ode Js,- derermim: p,ocess to be foil- ued prthe farfrof =L - o-s ste- withth manner - ...hifh Liedfaftingo regulations ate nitiafed Give endsthat heregu 2' on-making -e mdeinpast ',regulations --eComr-issfon -ezprn- nis (fill ensure that proznss hcif J directly oversee- cove ooard o regulato - the issues tha“cJire reguiarcryinte vention arediscused and aporov. tt-eNghest lefel within the regL naffs o gems: ori Therelot after the recess of d aftrg t ors has been in flared r '-e regu

4.1.2. Emergency regulations The Comm! suri ecognise3 that the rer Jlafo ITCY &smut -nes be lake foit^ an emer gency'ado- reoures th facid -itroc, cc on of s regulatis - In such cases ay nct here's ule tor the regJlatp o foiloff L-e det: ed rug. on-mfcing process discussed aboffe Therefore, draft Coca c. !usages a separate emergen.;> rogu ar on ma sing process a outlined n Tab le 43 TheCommis:on recor--enJs fhe the dra- Code !ffil equ -he egu afor to zry of the consul fit on proce., in :flys s acc. e irs ge issw. ice al a sat o rtrod.ctsry ro.umentsts — repuhlir -e p °upset] reg_IPtisns ano rev de s‘,stem sr v ncemmme-ib se.cable 411 -nis ff. I be !Mow, tf. a es!, rernent respondlu tf.e commff nts race e I I" the regulatpr Om' the issuanceof !Ina --egulat cns 1= -Q frao1=4 .2) a. 13 Issuing guidelines a system of punc ules based pfov s ons that Dretu he Interpreted and apulied by if-e regulator :hoc isa genuire n=Qo cr arification ff. c anaf cos 11- 5 ...ould requ fe Table of Recommendations4.1 Issuance of documents for enolicco sukaeon

he Dwpnticgrucn dee= gelmeek 4. miens ti I-Dlter 1-=SU iOn5 the eolatm v..11 have to es .3,115h a Nicol ([9nectirm oeen /*sub Fc noun am. aikernmeeengeneenn erne km Thu naPrsn Lie nartful of eke nItconnieneekket -nowne en bee ek neen

~~pLb IcOn the 7CCOWar yinvoc .Imen idr.9.adewiimnsu -tar tir—Denna onto mode r paDT. speciliec le !TOAD, appropi etuAlaw lot vode=proodnulbc oar icipation~~

~~Table of Recommendations 4.2 Process after receivoig public komments~~

~~r eels stmetkeei eon aencee or sash (Fnnurin~~

~~rev ill".11.1 ls.that befat(mkdric ■ctivb,rh,imdfti- einbe sshcuienx nein nuni iemno~~

~~Table of Recommendations 4.3 Emergerf y regulator making~~

~~Reb tionspB=s-J.-nd^f komeesinenneu erk~~

the mgt. mem to have the power issue gin cokes explaining Lin Metre:a-ion on the regulator of anis and Tgkla. ens fee Pourrniss on opt eves that z Icw g 'he regklats. to senegUidehmem the np eve nonsetu'eun imporian'sceoin ed: one, uncertainte about tie:uproar) net Me eguloty may take The TO Iv- sn of issk gu ce Pes semi 1 nor Oe used o ens I make nuke onsv !recut ear mlying the p ocean requir cm,nts Down for reek. 2.1311- making Femmea eason d aft Code c an ins Lror gin celres are rcrek recommence torn in n ture and no violakons of guidelires a one kllnocone 'mower regu a of ntate enforcemenL ac ago nut egulatnd ent kes ruele Moms -he rekornmon en ions of tie Com relo ior to issuance of gmelines

~~41.4 Accountability to the Pa !Foment~~

~~nethe pmnertc Cake rope aeons kulegis onen eoWerdeegatee Hike Perham& )flo he regu morn rep, a ions "mmeln en on Ina -egulaten0 ould ne placed bele n the Per-~~

~~.31 ■.•~~

~~Table of Recommendations 4.4 ssaneeof guidelines~~

~~Table of Recommendations4.5 leeiitfal review el egulausns~~

th eculao.- acti-gir itscap-r -cric -Yisal'o.sthe Parli ment oYe ethY, ormulating'-e regylatio's ey 2n agent `.2s a led we peolrutho lia-Yer olyryyendingsubo ainate -Lommitteolha- Iron fregyrarions Yier- by thoregula or - pr==-nrcaA) o a diPAre e Commissisn rycorYrn-ndr e one ■cr 4/5 12SVS yreyeni•e( to thel -arl amen 1. ma. ne appropriate !or th-Yr ro Se cons dered Sarre comrnive= a 15 Judicial review of regulations At present Jud c reoew s iYtely Imire; to exYcyl. ye r.sr ons Forever rne Corns- ' o loos rev_ a.ed siyn recognises 0 at Lis eq.c, Important La have a rnryhanis-, -Yle rery'.1-c ^ xe cise of its E.- Litres anc o he'y yo v tbe regulations made br 00Wery regai2r orskseed he ryandateguen -otherezulato.- ynder the 5 has IC" Yeen du y folloyed Yary law or a -le'raprocescfor mrking 'go.] arIC- -- ochallergesurs diary legs s -heCor sy on herelye rescmr.rosthat process - I. on mace sy -erulsoors should rico be p OvISEr in the draftCocc The ryl, °air 0, challenge o; regulations d before Ihe 'SST a specia ised tie 'manual sSata" aS ...hole In auditisr to I'm: the ibunal r. re created !tr. - onue rower of 'he Cynstitu-ionr courtsto re. !eye ler :la ion V.Ould of cyurse co ,0,U Tb codarey en of the rcs. a o--makryg process bi t^eappc ate tribunal5 p dr a' "^CsedErallea aCaltlay thar yomplisyce roth Const ly.yogry 1,rovis ons In the course of rY s process at` realliaLlOas Shauld be c-c.rked fo Dnipliance on the grounds me- iored in Table 4.5.

4.2 Executive functions unytrons This major eannsiti o, an, rerylato invol ees the rye rise of PXCCU" includeyllls3C crs invcs iga otementolo ers and yr ycessr.goloomplr nts e &fed Cr!- - T-e exercise superv.sion y -e rnonftoring pp...cry lundame-al o .- yyrcernent c Iay.s Dy the regula or Howrvei it is ;SW seen th ! 'Ye -anner alexercise ▪

~~=UHL 1-10 -58-~~

~~Table. of Recommendations4.6G: era exwbutivelunctions cl a regu The re-oEr Sts • at ^gillalor IrNou crrarn Serieral =gem' Unctni Sn d nrwirrItide~~

of gxecutbwfurctic - mw■ placea'...weJebbren on regutatedent .iesandlinanc ;b m..>r ke s Lorg sending investig..aisns cwate ubee iwinty fcr bbsinesses Wher news or on going investigations leaks it may ink. a damage to repute Di of am. wncial Sand:- I, injur lens plases cn bt siresses byer igotion have strorm ecogornic i- olicatwr ono shgule be slacedor the ; crest ppss Die penw; -hew, proble-s LE checkco by ib D ace legal Feasures trat eq.ire eestigations Is he rIC ed within sneeified ➢ime, and kep ccr from the g ubl c The .Thwimissio ne ebb that he wee aworoach --edra- Code shstdc be -a provide for s'f ng weebbre DOR?rs hal:need g ealar bransparency and acboun'abiliLy pre)..ent :Muse Fxecutve funcos of reg.b . t.or co rot have standarc sec crIACI7 checks underpr2.c.e't legislations ineretire rhg Corrmissicn r.cornmencs that ace wate rw-spare lequirements, chwAs and inurc at o ersight oe placed an the exercised executiw.i. -dia.: by regulator. -his" II also red wea egarions sr cosable blas arei arwww o It s sc. impoftgit to ensure12. there is ovens in theeglnabvearo exarytwe firctions of the regw o Theexesuo.b should ript be alowed to ,ssue instrwbo's sr a general notice to all regulatec end[es or a cl2s, or regu aLe I enttles. Such instrusu sns shculc only se r.w.s ole aftc IA eguiac - eking gro...es.s has been followed laslea 6 sets OW thcflES r whichthe Co-wows ob Figs made specific recommo, dac ons regaining the exorcise of execubyw poo.ers

42.a- Permissron and approvals e w (mg per hswors to worts bug k funclipn of and regulabwr Wits Is elo c first ban' or t LI enLro" s . Each iwo ss pen- sson inc,ew sethebude- on -ho reg. sarab i wzreaseb he number of cbt es II -as o w o-itoe The draft Code muw.gr-inttbe mgt. atorc acre c .-.1Dzpro...ecs rejebtaJnIca Lobs TheCommis,ilbn has dxisecmaim p the exerc sec lan-a -nergb ded bn regular bw pass -5'e be disc eticn of the regi. atolshou d bew.lIdedthroJe an underbiing duty to abe or the eg....latorto refit asp shou d oe brebnced Wins the er Jire ben - . !or allow' glegic pa-iesgotting apptbals in e bme sauna manner for .roothebfunction -golthe regular.' r bwstem baple 47st rwarise, the rbeorrendatio-sof Che ::crnrriiss on for ■,( e proceJ we for dis.wsing ap. clicatio-s

~~4 2 2 Information gathering~~

Rerl 'star , .-res ar not on abOUT the actp 'es of tbwirregulared entities, l- ma; air. recwire - formiWon from prwate sot wes and o-her gw.esbnent agencies A preserk a ewerse array o' -ecnanisms are used byl submiL insrmatio. to re,wta ary

~~33 51-•~~

~~AnTon~~

~~miss o to seam out a sJs,rese Table of Recommendations 4.7 Ciong Pei-~~

~~Table of Recommendations 4.8 Information go:n=02g~~

^ =vice of ram -a- onise'von in'o a singl. evevhanism sr electronic sub- v genckes -130- reduce `c cosi, e m1'00,9,11100 ne cost of corederce for Ur' s and t o IIldueel- ralagemcm. lo regulator The Corn ression cro2oses vs create a sent el sec data )ase tered 1"/ regulator and c -er agene es A mDre nnugb which a I ne informer on s [pe t- be ou^d tnech.pter or systernie on on 'his sentra !vac Jatzbase:: - dv ailed seal portant Ind cPre oneolalion el sk - ,g a^a onaksmcnis !nisi nation is an le- p eseni -est regnieLars ha..elhenuoier to rem. e previsions 0 rnpri s, uatioes Even s - "eguia:e..1 ntit este 0 educe dssu nsnrs a vimferslaban iormv course ciregulat 0 on Table 2.Contn Ole cc- nis p2e,enshocJ secant !Jed 0e 2roposed sLslEe- regaeding nfermatio n gmnsr -goceveis sqsn also no'al that the usecItechno ogviscrue 2' in heContexto The ler- henrgfu^ctien Using electronic systnrns an affect s'ake holders in the -tormatice 1 anci:a 2v2tee" ee folloairgves,s

eb.,se nnleincn,O rsks Tov.a d tnn.ni d thecomm"nor on:pones ton Late -e-nratnnd ea Ja neteillisestemorqe.r.,nda'arnwagernentsferens-anutefezLia moue= :env lance costs Enr meg 2 Regulatedentitles:Use sInctren c report rg sysLern Lc al urea fared nnnn-s to o 7ndn'nio .-"nnon in tin regulator in via= ernes

~~-1-1 :non cot, rein to gamnInunnion quick!, tv4 I ale: help cc Isuner, to access 0 mores snd check for enarcial vaucv~~

4 2 3 Investigations Lre2 nventiga o and era crenmen- a e led auc Ls 1^ sotal that the pev.ers oe ar-r ssion nJed that exseut leas; arb I- an, ala"-e mos, ellectus manne -nncial market can have seisJs consesuences The informat e- that fences" s in r !! even -c nrrn uncer evestigAion ma cause unsJe ye' in ihe marvel a - the ircervenels' period use - is a pan onnecmc for Lre Tin, s Aar st vivo 2ystem of irv.estga 'repo able danaes ton reeJte or and nneinese Cne tn-rn does not herrn o unduly Lumen the enti-/ u - vle tions seovid weelorebe s.c- -ves gee' on Tam P.211E2.AP): W.ec vuen 2reeess shoul: t"e lhe r - ssien !sof Lhe cp o^ that - carried out in iatcadin -.60-

~~Table of Recommendations 4.9Investigations~~

~~Table of Recommendations4.10 InlOrr-a bon-s'a ing DeDheer replatOnS~~

~~The 2122 amain 2 ma unl ^mown kninad. an-Mt n2odldhararnpahhicva arnrctherregui tens~~

~~leleadd danenork aculci have~~

~~lannie soda -op ea-ulna I C berate any rad rg and~~

~~4 2 4 Shating of information~~

In dYgtlxs are g eatlyaS2 stdd 3sh Dag databaseamviBng Gets Isolthe regu sten er sanothetialsa: ions .hey have jncerta 4e- The :ommissicn recogn sea that .his iiIrmarn- may -or be ave Idhle at a s ngle soave Henze the Csmn,ssion suggests The crea cr of a single database Lhra.gh whic- all inforre ion co lected sy egu ato 'and other sge-oes in The 9rznoal sec or arch e:Ure, wir be routed (see the chap er on ssstem ris.< fora detailed discussion on the issue,. Vo ere 'eg...lator needs to ob tam ferm'i,n From 'her.pultor,c1 or 27( rnrnonI g,o. ries he r Code crowns enr,,,ork or shan^g In orratio- Derweer le agencies Table ac orooces the sys tema sugge, ec by [Fe Commission for sharing of in CiMati2.11

~~4.25.5 Consequence of violations~~

The Comm Es on oird that diiterentegulatorram e cilium icor sequen.:::: rer tis.-1 al av, 3nd regu ions enfoted b, them This O'eate3 retryne-ttothe 'pie of law and increase: uncetainty zoo!, IDlat Ona I heCo-1612a on recor moms 0 at

2 The pia tin annaq annce archte red De related by an 3 Sind drdcatcnshed ed m consenuence and placor and .02/law of he lolator The Ccmmissio'l recomrrends the trene.e, a violation is retred regulator' —_st determine of the fpllooth-g zonditiois ed to ne "{iOnv.at r=.(ffit e memrim.rn.nttc commt tic 4olatior 2 lhc viola Fan c of manta d&J pOICela aor able peson& car ind. nut 11-22 lora ca 3 The o al an nada a reta soda in stannar Ans a recnnica andare

~~cause e. t e ion Pe teg The h.trnmiss o t recommends t atdepeno ngp n 3e n i ncreas -g order Calor rust app'y t efolloht ctr'ssouences I~~

~~2 issue pub t Ince~~

~~t Requi re , CT ec ihe action TN) i^asic to the nlati3p~~

~~4 ihipothc 7), etary push. 3 s Stsperd the zerrnishoi To ctt. hodcertain alhaChOl~~

~~7 e moat proc&hlings n nwriatc chats~~

~~Imposition of monetary penalties~~

- The Com - Gs on hothdthht prese lthYsTem sihetth'inhTahuthht irr :son lneams has a critiss 'lath - it dch5 not unt of penalties ^oh can be ',pose° or any idat -ade through the , olatio- This ensure hht clator T2vs a ne e.her than the gh r CO'11111htlig because IT ih noossible to sreciTT - he bene it a v o aro: wi I ga ^ by P s loeter than he he -c gai T ed offelta Ther nalLirth so hleTim theviclator hrhJghviolation ThisleaJsto esituawhn tthereeven hovislatoriscaught

er oh and required to hay thel -e no or she may gull mesa monetank to Th: Comm hsion notes ths r t e et et CT sehalr es s' ^ Ltd bps - e les dete'w. h hste -tia o gam ism " it 'uture olatihn t 2. ^d signal cescr regulatec entities Tht tit ott applied 1- ' he case OT celahhon o labor Deoutweighedty the Denallytthich at all violatsrs of any law are neh.. o f thc violatio - This prilciple also Dchnov, edges th a m,TT o' e of he Is- cetectee Theretcre to act dete 'rerce the penally should De The amou St pensitT, should a ' s° be ahtoende t t Q - gwr-tate the violatihn hr - due Th T egli .:Meth: the a.: o- was ce iberatTE, done cr duo to rec (less behaviour 0

~~gence .0 ' he person~~

~~pinci syh'en- o imooting inrck ' peha tiessho :be guided th~~

~~tles~~

~~= I peralr, sistem shouldresuin= be viol 3r: part ihit upih hl The 'legitimate gan mad~~

~~o: s , L'aon t t c. h ortc pena Tyco lead whiaTorttouid ry.To compensate en, al chtt idenThTbi Li-isof le idetiOn5~~

~~4 nifF e'n t th.re nered rtc, within.= LI: e.;ula i a 'slur al ttertenAlth 2fte on~~

~~duo so5 D to Consolzated Fund C.f India~~

on rite abon TT 120.1 ctO enact irrpose a s Flee s ro cletrly lherh lab e leeal and pent ha ISE' p 02J 1.11.)H12 In.-0MP .1. !E. OrirOrrifinanc MLIVit `S ruse 6 -IIsystems0 ToT etary 'of leltie5 Mist he 2gdia edt. e8Tintithtat consider then'aeh

~~' he The doh' ne unthst ehliChMert regulator to ehster all the prat~~

~~tholator madefrom The vista!' on. Unjust enrichme- should be recovered, add tier to po the ene apsliediO 1W 1013bet1 Sr cl egt.r titionso Thiseeand s t ohl-i he,~~

~~dbuTed DMongs persons we h adhe 'sly affected o t u T of The vio~~

~~ton Punitive damages (Tea e a deTerrench Isr Itt e ol:tors tam Thl know that in the~~

~~even - Tha- thet ore uccest- tlh, prosecute& e hen; ytheymIllaCeLl~~

~~The oral Ts " he they mahe It rhohires the rehulatc To hxhress -pose Ines which are~~

~~tugher Than the Lcnefit game: o It t eviolation Mit usua cairied out bh d~~

~~rig Dena ties o The Dmount o - the eio'a o Tho ChThrissien TOL h.d~~

~~' hat this prim:pie has alleady been p ov ded snore I t aian I t h s.I=Tihnh and sl'oh De~~

~~extended tot -T. I normal sestsr ?.5 a whole~~

~~T- plhe it summarises ne c.cmmendatios of cop rnm ss e t. fo c 'eating Icral~~

~~hr. ern gs em ^.g Dena tf Table of Recommendations 4.71 Rea..iirerren. -or proplional penalties~~

~~• Theree...atormu.trr ,ear.hr porrvesomr'arehvtl..P....:atc~~

~~▪ :he feyt. SOs +UV csnmeimrs an> disc ..summems 2miamnsir leycanJed=cuadiriLci Ki ▪ e -ust ILyula,311,1..d orc-Lsses IdunE. St this CI 51.1M9ss5~~

~~Table of Recommendations 4.12Ccmpourding &offences~~

Compounding of offences I he Corn fission believes thachesys em ar compounc igofie-ces is important cr tl ng jusic burd,..- and Errressing auons ich are. ommnnLe Ira :01 5mtc- hesye-- of conro.ndincodence recurea standa dised ruc s ure across al regulatys s rot present as of dre -he recommeg Jazions or e

~~4.3 Administrative law and role of tribunals~~

L leirsurxrui: 'yard e.YoTe-ne- po...ers reE..ilatoreed o assess).vh= her or no ne.g. la es eities hove adecua ely complied the pro. !sip 91s of financ al lav,s and in case of any detected breach, tie; have the power C impose c....ropriat.? penalties These ..ido rengi .‘ ettca WopowOSy ven C r.4],ulatprs necessar y neec to be Lalanmd wi h princ. sys112.75 govcmingthez.pphcation of administrative lay, There fc'e t-e Cornmiss on recommeldsthatthe exercise of cJ3S ladmin strative ,ons egu amrs needs o becsmeo outssit n the bot lidco a sound legal imme .(vcr hp trISSMS he ssparstmn of admin str: five 13W powers from other powers a the egulator In addi Ion,[here also ne. C5to bee MGMh -I SM to renew the actions taken by rec exemse oo t-elrquosffHHdicial unctions Sive- tre spezio bed cr.racter art nanc al markets and toe compl cated name of issues involved, the Commission rink t-at mere is a s'rong casefc ha..ng a codicacez dppol F.r.vibunal I hc-Ccmrnissr- there c rsaIkcssp0cipc rx.n.nmenc:'ion r respect of the p o z2sse..godern -igtheEe wotr2a. Atnn.,rowelci.A,-no9s.r.r9soow ouvegula.Drykrctic.n MO S29 satior

~~dedaed manom sects a-se ate t burai~~

~~4.3.1. Administrative law functions of the regulator A:the levetorthe iegulatpr's t...o.ari,atteastone exezutive rembershculd be cesigna.es~~

~~37 ,63-~~

~~Table of Recommendations4.13 Rtcuirema.ra adrorastratift 24, officers~~

~~Table of Recerflmenclations4A4Judinal review vexecaWeactisns~~

~~? Ereqm nO•nar coingkanc■tcprocAlAr-should 22 ,2quired~~

~~Norm Table of ReCommendations4.15P ocedurefsr adrn ratiff. 8V:fa -~~

~~2 2 2 ■122, IA 222-r Al ir.11,12I' m 2222222 p wiry21 1 21 1.22 (Awl 22222 OA as; AAL 22 1202 tAdAr n~~

~~. suff M.< and the n”terial on 2 %.[miri, lotp.■S ,nc lc pidu.(212prop22. 2 2 2 non al.,~~

~~■ 3 I 10 (PCI■ated entity muSi. be ..110." - reipond behrP ”I,n nken~~

saal admmisl rative rienber ander the merntef he regulator will ms -Itain ac as, administra- .e law od'cers ---Tae administrative la a rneaffsar a. I be responsiol.= oversighf ae neffierafig ac mrustra [Ma law sal corn :onsesuent%. such Tien ervii I not ake ac Iva pat exact ire func °ate Tae regulalor a ad -of invo'ved in any irvesfigatic- InApeCtIOA cAsirrd ar other anchors Lifetr a ad- staalive Is:. membrac the adminiaalf.ve Lay officara ral. also -of roe -volaec invastiof FrOAccdingS This 22 1.112 nowa. er he acadeveo v. -11.. creating a naval sf acpara on fa- i- the regulator' - administra lav cers d Le &awnfro-a fa eencral pco oyees a W.: rtfbalafc. bur as Icag LICa pefsons are involvoi injuc furationsthey Naafi not bean faeeT5a.l. 4 3)

~~4.3.2 Procedure for administrative Lap functio '15~~

121A AdMIAIStr:ti e '22r fun22 in ollne regulator -re al bat eveIs The lrstleveladfucr otno will be dona raraLfe law offics lo ac Lhe agenca o the rog lafo bc. II naf be rya n execufif e furaa ens exercisirg lee fundo-s sf "al de aw off C Elf af. 212MI112 the dat2 31C evide-ce cleared by the regu 'ator s execAve Jeers anc assesstheapproP iefeiessc) the af aauf deo de s (sea

AppealsI orn thearccr5o theadminiscata.: la" cal cers willgoLc1 e ad ml n trativf) 15trat.ntes ofhe board - s poesa II ea as 2 aeia -mnce rea ofho ari a'- n Law o'ra s anc a so 'educe he. r ambe of appeals lo the -.ribc-al by . ceding out fawedoidvrs.Table4J5timmaBes tie rzr strnvelaw ra afed orcaosscsol the regulab

~~Table of RPCOmmendations4.16 :Poe hnfudcial c...pawolre.gulatoN ,ction‘~~

~~sectorti atm! c.,,e1 dium.dnodi rep. a OM )■=rdnelpgumonf med by lout aal -F3.11 toz~~

TneCommissior isolthe^.2.1-oun thdwhile thccntireCodefor.,m1Procedre,19:Da !CPO ne.r. nor be c T. the adr nistrati officers a'd menbe.: he draft Core pro. ides the basic rubric of the 0...-1111the Judicia dete m anon aud aDpea Th gltlrllbP -he e.,pcsbaRy o 'he hoz d ofine egulator ciee e appwcp 299 sibs✓ arfr legketi0n to es-at le proceoures to befo lawed lo the dischargerr admin slratve law ante. ons b., re regulator.

Yid3 JUd ielal review and appellate tribunals Thet es Commissolersgnise haanoaken bvep.ulaLo scanlmponSigifcadpenyl and o' regpa ec antes -he=ror= (rile nr la roquir"sthat a clearjudi oal Droce_s -_ ailabempersons veoseek to ..)-11engc regulaLo /-‘ctio-s r-eneede sr a mode n inanc sygem rep me =s r0 vend E system yvhreappea sagainst regulatory rice so de to or au.honty mthin the regu o otFe maw -o P speuat cs..- The appellate framework envisaged by -he Css n ot in rah. e416

~~4.3.4. Structure of the appellate tribunal regards t-e structure and Linctioning O-Lhe 339.3 the Commission Finds chat there is neec 'sr:lead; de-2 ;a mg and :once tra argon tvulmperiznil_ctlonr.~~

Jud rctr2ns, e triurF1 93331 ecuirepersonswiti qJa ilica 191913 rxpG ieice af. znE (malice ass deseroc= of dcawlents evideicc arccongv.nttcn susmissiDrs Tanq.le rrlates for hecr ngs and drgurnc,Is heJudicialrunzt onsor tietnbunalrquireg.,xpfriSe vanct.s he dsc lawanc n ranee In orterth SE. 15tY he er.Jirements siseparation., itreCo-. s'itul. on he( o nmiss on recormerds ha therlbuial must remain idp..tha cur tic of JJOa. of cersiste-,v, hthe p.esentArpcture nine a Tack 4.17 sL. -unduse., lerecommendE onsal theCommi.son ie a ro fu-ciens of appellate

43.5. Functioning of the tribunal's registry its present ,,stemc. of Naringur er at costs aid tribunals of-en involve mandating e :IiefbEdal 091-(3e of the .-cur e=enior-rnost. admrbt at on of re Trib_matorcoJrt s zer nter SIP the rererg cost appe Isle fpuctions caJsrg l obvetat emo-t drr - ,crat = matters In some zases,thisc-al.enge has been pddressec beappcir lugs separa...e War 2., the court en lbu nal. The Co--ism-I recommence the the app elate tribunal 5:lould be supported by 39 efficient regis-sy v./richME se headed by a regest or having spezia: sed managemelt

~~39 Table of Recommendation x 4.17 Jyc cm, strudUre 0 ,ribUnS.1~~

~~Table of Recommendations4.18 Re.QS of procy.f re for appell;:e inbrat -rs -he 0ppel nto h • should nemle a onticn le slanda dining 0 0S-~~

~~n -0 ingnif 000.0-nen n~~

~~E. Ent% nlator ofthepenat00~~

lurctio'so -e 5knnS .0.00 .0 Ib porn slelcrr. --e infrEstrucrure end Cnire inde0en appelIDYE Itu-at Toens.yreth-- theepzraLe eg stry Goes nct - Jenne 0 the Ynbu al, the -Er, sva s, ouId unser 1-`e supe ym o Pe chic jue afhcer of the aope late triby114 ssion resomr ends I-he follow-gore Ysyans re - ,rg the rogist-y of ^y arir, laletr15,11-ial CO er sy.r 1 i¢its effcrnt lunc ,00 L,Ytals yr° -th,-E e drat Code rezyl Ps tie ap5e1012 0/12..inal. Inratlthe den reEulaloes on orecue and pYbhs, them as t3Induceolan arrongrfinancIlls

~~bnal 1.,e1~~

~~0111 us rg Infamy.Yon tee! no ogy tegiaLE 7 eitirGH:ic.ial une lois in 0 nr ~eeebunal.~~

~~encrer nlibencyn ulaci n.cl`the. bin! n1 aid g eanertrarsaarnrcn 0 the pe rorn arne ,510n1 0 di: .h bun) linorrf teCinolugn ShD1019 7:1.17.04 to ezuce re.nre-roits fix 0.010~~

10n 4ficiency 0 tle. rbnind p •000010ren le -10 he col I ui. • :6'S:176727 Co ^ /PPO t - mcrotc en d meznured -le Era I Gude 00 I hclz.achn0.02 this b, 00001.0.10g {ME the rbnil raquiements -170.4. I e procnc iC lot :eta rDrii2PCC

~~4.4. Conclusion~~

ThefuncionirgorregwaLo 2.,;enciesisa:rilicE.Ico-nponen o 2,n0 RegJlat0., y G;re remarkabli- neatnrir.g. 2 CO-0 r or or eg",I, on raking powo- that is delegatedby -yrliament cyxeyuti funa,o'L and ciya:i yudival funcno-s In adCinion 0101: 2 e sonrd i=asons for ourrg sigr pp,e Leland Srerai 0 181 idepe-,thym_e in regulatory agencies 1-1n dery •-ybta,-1 sound c.ul-yomcs he Comm .5. on hasa opt Pd metieJlous care - c ea I% erabllsring um:3n! " ab'ecdves,amcessesgaverrnglag- slati and cycyutive fun.l.u"s bri -ging eleme-it of so )2 align slayners pe legrningguas- nth. al unct on: gnd egggegshingar effec degpecia gesragisr to *.pgrant VC Algal review o'regula ens and orders. The 32414 pLph, agin 4.5112. ien da IengenfesLa blishinga regL story agency cceg rot vary from one agency hg the next 14.4104 .re Cgmrgiss or propose, a single a id co-sig.ent ra ewoyarhar¢ applied msl reguLatg. yggongies

~~41 -47°~~

~~Consumer protection~~

~~Si.. Strategic picture~~

Ape Ifunctioning liancialsys em s culc ado., ins Cudla householdsa - J erserp lass to etiment y allocate and rapasethe cesouce. and p cleat thernsoldesiro- riskchro- ugh [re use of 'man: a products a-c services Vas involves[omdlex iceractiors oe mean cons. mers a -d Inertial sersca arovide s At a act lsvel cese in C.actions re au ine adpsort ol Ina to define anal Patea acecy r r!ts anc ac's enforce cunt Olson MC'S HoNever the comptem , of financial rarka q a - d the ex ste-CP Or nor' ea ao lin, in me lc nn o siormatis - asymicsines na fret esters-Sties anc dita ences it the barge n ing sowers of consus ers anc arose pcsders crea te tre -eed fore hIghe'Stridard croreaca fMinannalmnsucera the need Tor s sac consumers Lo be I-Fatedrain, makes it appropriate o adoot a more inticsise approach to f sascial rogplat on when compared pill most other fields CprrnIty tne stratea noon lina -ce loaused on the coctrine of co,eor emoly iet Ye buyer e Bey0-0 protection from read and provisions to ensu e o s zonsurncs a -e gene a y le to ^eir ovr aevices .Per erons ve sealysrs a -d oebate on Lass qdest Gear t"e 'arm sap- believes that to the excent that cc-sun-era of "Dacia socisc, are more pul era_ e than consumers of oroinary gsods acid service, cher standaids prstectior e-suraa b , spec al.:forts o he Sta-e ac. justiled eabi o song Jac 5 cheats a so cr gap in Indian inancial rcgdIssio- ,alcca necls I se addressed as such se Co-rniscor -ecommoncs the adoscoops consolioatas non sector-spook coas.r-cr pc-ea on ramewo s for he rs dean c ssatora tsa Nilems.cacr and recure pcu,ators to puspescnserprces1- oe for ce nsncial activities tgplatec os hen ^ tn co text toe draP Code app ores the p ObleMS consuco srolasdicr on LSO 10111.S revena qi and Cure P eveet on required rsgplaaoe mapag and e-fa cement across he en ire I sarcial system from the viesapo o co-sumer inwrors Po example looking at questions o cmunca cc and con! cts -te est Miens sales age- se Is a iinnzial procuct to s ho_sshalc sad ge paica reabtheoroducerortyzIinasus.productcsthereapmt- wi[bonOk6alTrerosfl Idas, do acessIvecat-cature ,herec e arcade actin tae boat iterest of the cons JMOP Begulaorsshould be ohl ged to g app e qi,est axis such as these . 6 g-

ee camparents an enumer er protection pa Lot the drar Code -as ta - The conaa - ■ars in the ated set of right= and protertisns far aonsurars an rameraled sa al oca •hat guide ■hataCaershrulc reused andeawhal Fainds t-e regulator ana prinaip es acumstances The oetails of cc sumer pre ectisn aculd olcaurse lie in aa susordi natedlegis alionta bedraed pal an:mi.:eau airaa `Mather° nat. lo example Icada ..Ian struaLurer ahoulc be °saner sa elacaL on :hat o_ tl and other cc- c[eo roma -ars. use ts aa.nonly de.,elop need I, be addressed by r gailalr The regul to ea la relleci. aancial nnovarion sabord aar,e legislation wniah ayi[adapt over a eahno og cal c !rage, ard the aaslaing laare al he Inthan ecorica^a Alongside thi supervisory roes to easure iegulatio---isa 1g mandate egalator aysu'd arc aampliance with --o law rture has been de ined r recto, w In I-co so 'al- the I rencial replatory Sr d to incon multiple126sta] often a-01+de agencleacoae mar:. Jur sec climes peen lax at e[ and regulatararbkrage laegJlaars have so- sisten' the incascry Trese valoprig era aad partectia's Oa o notions of lasilitaling groat- in a avoulJ coaer aroblems ...Qui° ha reduced by -a hn‘a sina'r pr ^c es uasec aa, aa - ing prin.:1p as the craire anancial system 'he Cor miss oa be' eves tnat ar crerara oryl,ex AIL% consistent treatment Di ao-sume-a baseC body ol aw woulo a oa aaaa 1- ndold mate', call asoecsol their eagage-lera with the naacial system a Morebleram; algystrn oe the Commisaion proposea tha pea ion of a un Tur- ag ro-- n eventi-- hod f -a^c a' rethess agenaa The redress geacy exoetted Lc. have rant enc.: - armit eryd do.a whe e ccrisa-ers of al trancia products :ell be able to s cannear, these ran e da into a ze-- complaints laden, tec-nolcga will Se tsar t-

cealonla th redressawhm, nom.soced an: lair handing c ■casos Consume"- ■ aveto co.al with muft when -re, haveg c:vanze in hrancml 2c pie age x. es aL onv.aeretner ^L Tacco-aolaints brough re ore (hereorass ageao mRshec lic nglourd arif m_ss.hggesaleas sr aaroverien - lemscrconsJnerprotecho- phe

cal lake bette rraulatianson a saaLe-atir basis anal oe sed ne regulator to - arivaLe aancial V.rrrs India needs a aapaala inanara, system %NO oacame a cal-leNon(' e !sr Howaaer --emergence of La s inanrial s,alcr shauld luenaa .1-1 the e regulmms to take uraa :lever financial f ms who ac- E. a andue

~~Table of Recommendations 5.1 Famework on colsJmer p orenon~~

~~Preventive tools~~

~~tenoilS~~

~~2 retIve~~

~~a 0~~

~~Table of Recommendations 5.2 Ales 'ling oi 'consur r' and retailcons me(~~

~~reg.la Of mayspo Ins ilerenonels ferert nee: les el sossoalpoductsanc 51.NICeS~~

~~aduantge or customs i-e reCnriL Isidro d lawsl India ax Jule able W sus - a prospect h. such,the Cominissio be,ieves thai It s e sential o pace the uncbon of~~

~~consyncr rrotezi- on attrerean o max a regi..(at or ISee TE:3'e 51)~~

~~5.2. Scope of the law~~

In some u siSd 2 IC 2, the p otecticns uncer rinanc al a:6 aro ,,ailaoletin y to con turners who are rdividuals or o.k.ehs ens orten ce when h," use financial ,er v cesfor DersonE house.rle purp,:seq This -.E. ps f - tingttecoveregeoftheIawn

~~r them-sty. neraplecategone= of us ^.;, ,,d avow Igregulato ^, rite -vent On in. en~~

~~kris word.. ing sophisticated users The Comm ssiin consdetcd this pastor but found~~

~~than , rose -tsft. cle‘elop -ien of „hehdian ,in,vc 21s2ctoranc the sop - st ca~~

~~of eonsJmers adcp.ing a limitng cef could102c unduccxclub ons It~~

~~'he eforeopLed c, s Y e IC: ucnvC3Pb"... ner,Ana inzluce - any PC rson who zral a lin, :a proc„,ct sr se-vice .AiLhoul.r.ega d b thc, pt. legs- lst:tus or t -,e purpose o use~~

~~The tali Code empowers the -egu ac-r o nassifi r.ns Jrrie's into dierent sate-~~

gones sasec on 112 ev2 s e sophistication,and ss,e,I,Dordindted leg a - ions suited No ndeJ of ,..art cJle CE egor es In addiliser to ol/ nglh istszretio - to t ^ e eeula or the Commission ewoed hat ce EW itself shoulc contain additional salcgoands for co -Isumers whoare icenti ' Le rig m.S ..,.. i nerable and sJ5ceptib el] souse This

~~caLegorvolDersms erredLc asrnto wi c !Jae sce dualssne sms lane medium cicrp ri,cs ,vh ch are identified as elig ole enterriscs~~

~~Ho.. .c./..) orcer to exclude very- gh ne worth indelcuals anc enterprises under tdsing large Value Waned. LIC.115 from its ambit be¢sgory Or e al !bre!. 'Ors ell be~~

~~l irniLed Lc persons pro acqure ces ccns iQration 'hat's be owa spe: f ed -12-1( s 7)~~

~~5.3. Objectives and principles~~

The obinivbs of cc -surner srotec are o guard Consume! interCCIS ant to promote public awareness see Tatle 53) While purse- 'lc these objcci,ees he ragu atm v,i1 be cmpov ed to mire regulrtionsto de ermine me manner anc ntent to v hici the cm

~~-ect ons uncerthe Iawwh ecely to Ihn t necs theerentrinancel erodue sans see. ces~~

~~Table of Recommendations 5.3 Objectives .10 serf scrdER PROTECT off~~

~~Table of Recommendations 5.4 Pt ficioies Lo 6ul = tinegulatcr:~~

~~Table of Recommendattons 5.5 Pro octions avallaslets consurcierS~~

~~Lff Efascr. of ccriersicr .11cm-cures~~

~~L Trotorticc ,cirstirca I on, ttecns~~

~~= Reg:re-cm srfLudisLicfrucf nd~~

The regula on:. I also be Lib e to inpase a range of recrh emery c^ incccial serf, ce providers spEnni g om disdOsure abithy and cfd.c.ce requiremenCs 'LLL,ulaf cc c inccnLcce stir:circa cnd mere intrL Side pmers cuch as recomr enclifcg — cdif calisns in the clesiEn c- ticaccia procTuc 'v] cereces The Commiss on believes Mai regTlatery Tol,e shculd be ssed c.' are the arc ost requiredC apps a least disLutiors'y mcnne As such guiding crinTic. es toinform rho choice anC appLafion 0 Doe s should occocipany thcgran o broac ran-0 O cocuers These pr ccipLes LA. require le sec recta pa. specia. atteston to dryersib. co-sume proLies fccl die on as c he kind c' cks cifferect s,ce proc .1c1, at the intecs poce 1-o consumes curter the p clothe of Di-op.:it ocality suggestsc- al any oblicat on Tosec on A inanc al Serf. ice pro cde should be zchs,ctent with the hesefits1--al- arc Lapectec 1-o arise rom imposing the CIL gallon apid exponsioc cl inen.Tal access is major policy goal 0 the Go !err merit Thi, rec Tires s grunt leaps in inno‘T ohs in financial products anc processes and bus caLs msdeLL lhese inova be !!3 1-or=d b‘ two elc — ents higher I-„els of compaL 'on a id anappropillt ogulatergc 1— ale -atsupper's end enables inno --antes the princip esdnal. arc b-i -gs.ated ce disc. Code to guide f '8 ref,u12 ors oc Fin. subject a consumer- 13.0,c licn

~~5.4. Protections for alt consumers~~

~~To be able -ococIcently Ds Cicipc e in the f ranTic ma, 4ets alt.:ohs!, Ters should be cc-ovided Terta n basic p c ecticnc Icodciticn a wide-settTi °tee icTis necc -o be~~

~~`114., SECrolz LEONL`,-Pfr proms COMMIse:,~~

~~Table of Recommendations 5.6 Jrl'el cent-I:tette Me~~

~~• itatehh. -wren nrcti..-t leVinle-el-teitests of It. et.. ethhoder • -ht.the LSIMSOf nand.] -net -the le the price or~~

~~Table of Recommendations 5.7 Protecrior Sr personal Information~~

~~a la ilaOle only to re ai ccrshrers h12 Corh-nite.). 5 thit.e"..lt tte25 of pro:echo-him- all ronnumorr ord h17.0 ad^ coat pmt Sum^rs (W. -ahle5 5t~~

Sons rersahrulc bearshr :thrum, isteractimlhotthe I cresol la nnanc alscrox pre thee ht. ll 7:carried 01.C11500c Lithaed is w !Mk. leSt. rerkel Vactices The lova Dia genes exert-dlr.'. 1...tier • til ye dt-peedirt; en the eeriest pi-nitre rolleh edm the hie or & enc.; the consmos r torolmtEr rrd moor e terve ace he naturs ol rsk torsIved in the

Dre °rine moss istrebargamms ponorolco isomers anc trwn( al leenheiat es consureeN are Okhn Ihrhed accarot unreasoraole cot octual rr that ar. net in their best e est: Mt pressor this e riral cede dhchres ris tr 'neecia cc eracs ter have not

Accesomersdeeihon /the he ernetteenurmeelirenhirlcoltr-ct.rthertanehr .toch to thote se any r gh s unite. 3 contra S'IOU d be 'Ikon r q.1 fol YIIIrOf ed en■n-n 'me or son unit e inks-non Tried *Code th2rdir orrctoms ha ZOI)SUM=1 ons nrarr .ended bets games o rardssis La/ nkrertang the 0-12Umerrs transactional brc e slecues

a) SI sleasmgcondust Koominglop orldingconsorerr ritnrelse Mormattolorono ma tor hat lacer a:shwas prided n deC2P inormarme rots radur-rscorract rot evident an: mom ram misaparcneroon or the par of these! S-F'r: WI! also he - rho

~~fbl peal amLW Mtn o roe mon iAuonce o inllserm a cershrters haishet t one! dec si es~~

~~nos triormar on elating ro erTh JON' (SD eperse-ce engstotha perces and shehld Sepro-heteel hem ueautl othed rise - ren.al ec ece prevecrs will te .lere be 25-mined f ern coll.c ing~~

~~lo loseor ens essl. perm ten uncerteedrahCoo ! mp iourthei Imo - q 11 ed Forehosurposesol i r se sonal infer surrms to be eh n ippeonesthei !he draft .odeplsomosmiessmeguerd for Ie~~

~~sr:Sane-Ss-le quells, of Financial r eors imam and hemp a Informatior pc mmetry bed fo~~

~~rersumem wine an tn. liormation tea. s them to mope = °bhp ion on !enema! p s reqpired to be madc sloe. Th e re LCes diseloo ne rele.entk them to a ar n e~~

~~remlator -34: di rig mosmoes c m I P .M empovie 1143 rev pimp th tem solecism the 40 he mmme n him Moloch ee Lions of irtorma n secured10 Z1SC C4 enei o rg~~

~~6. Red ens occononmus~~

~~c ome! awls h sr et ei ens al COP I heCon roses env:Apes., mac s er cornea& f sr agency (ler r ane :Ashen . the lend ch the c ed 416 pl he h sec !Ice p cend-~~

~~y. ethallIST 10 eziren complaints ori 114343 313C 1 be plesiderb t r place mid-Ice-me 1 Th. to sosmedres, 413 so se osIgeo op OTC censure e coesumere c/ mil 2 -e915 by acing a r may e ementh see ppm e~~

~~o ;nevem- eesessmen Ir cmtale ea es the re. filetol rm. a so envisage an elmtionp~~

~~temere ce(MOYIOC .ohn g ice rnerc s reec1211Srland bolos= toes pia nen.= orinstend on oeUid ar ncy The stecs -.pomp bltrell:f prchm thc commis t goes to emdmes.ge~~

~~exe crole StICS3lareepecncr~~

~~5.5. Additional protections for retail consumers~~

~~O at availableto -1Ic log reefs - no prates lions shoul TheCorr - es on hel eves that~~

~~cntS el-.)e0-sur ersgr P rally nes rand e ava Cbbil con -r^ ers aban tve Pmteet~~

~~edF and exPerie-mo of he generals!, 12en cmsfs pf pro' ec s o-s are re-dpel du=~~

~~retail coon mere~~

~~S ' men .1 I fai.isclosur- o Tams to Men sums or 1-1 Le !ors& t rappal produe~~

~~342435nrrorgase le 2 ti 010141 Sul abilitvc`se'S^G^t he -re"c s:Pnegno'd Wrier: recoil .ar hi' Prom u.n by 3443 r., 103 3111/13e3b31 4110 ado Sea a he d oh c ede Pr:MA'S~~

~~lore mAnzlizcormend 01 11 labc) Eh: r -eds a r rr zr = o Kos& le -nu erbe~~

~~de 30441.114411 534 rebid4 AJ~~

~~ice of - reran mod .orisurre prompt or c ro pl go tee isms m O cm of the chs !vans in emu e !~~

~~ve 414141 T343 1 M enne ;head me scners.b0Ut rep eon mem emme nature, Wee an: i mon he rota I (simmer 4,3 rpg41314-1313 clieStion spec be n4 p~~

~~4b Table of Recommendatons 5.2 Suitability assess eY yrocc.ys~~

~~sImeke Maar rattail 3. (card rmnplere [el- ant Mama errant the corsurare remora!:~~

~~3 a, el firmswamped- roam Ia loam al product melee Ile the or !sr (meaner dour sdreole s~~

~~4 !he Rome mastspear, or I ramie oroducta sc aus am( -paha may add to Mall ronsumem or a cly of !Mal donsamersoalmem oi a deem ors boon ame 013 em ea rah I re arraesment sac Id oe~~

~~a`Se".th^`,1)11.4111 VI rho lis_no productor maim rememrpr loma~~

~~samara e 0 bre el 3 pOrdi Ic I to re emnied by ai ad. 40r 0 a pad calar nand a pvucior~~

~~5.6. Functions and powers of the regulator~~

r ho CD-- Seer. recomrends the era y a' a singe consumer protee ion frame", k nnm to pally o het naYnYlYty'crn Tbc consurerpttection ramevy; -ay be -np erne-1[QC by of rn.:re reAulabyry Japers o- I Ye ..iev,soflawnakers aoout financial reg. story arzhitecty e While he hr -cial regutatcry arcr ecrire may onee IL is expected thr corsurer pro ec ytyuld rot The genryiat Fynaions.2 a reguaforindode making regulafiooto car-voJtr-esur- posYs .;issuing guidance ty iinoncial service Dray ders syrivisiny Lnycon.eyct )1. inensial service sisocersto ens!, y. com ia -cc wit- Th..21a*, and uumgappropc am Yr mc-rent acYcYs dealer„ h an. ynlario ty The regulglprwic also be responsible ische eyiste--c of nn:-Icial eness sro grammes ir arder myyt Peoblecfi eolpro-oting syblis 2,varYness n Yrs y I involvespreadingowarenessaboutthe benefi sof finarciY' plarlmg pry- testiors ayailable Is ysns.yrers ancl2aW,esaYJIynctiorystl Yansial pYruasyYdsey gaaxs nay also enooYa'oRstyylsh a sepr-e-e linyns al a taro ness body :o oLrt yy this rJrc ion In exe oye o`3 sype try! Jr ons Ye regulator WiH need to pat In place ap yr`orkteanangeme-tsfor seeking relevant cwr ationatmlnaroalse vice pro.. ders, so-p1C.Ore ecaaing race emeits, conducli g inspecting prer ises and hols,ng moy inyslyyr- t-e orfizers al fina-c sryiee provicors lithe -egulats, Its reasonable grourck tosuspect a violation cf Ile law, it TIE> Opropr Me en OMB Meet acmns In ascitisn Is :Ye genre ynYlyyny supery yon and eYloicomai Jie clia- Code v. II zorywn the MHO:. -gspecilly yYov. yicny

pre, isnyer.isd,yyl ad re law randate ac uai '21e.11.0 To id er. 4 I id I re dial Cadc ad I maw ragiSt ar Or Ma [Mammal: Mao dem with censer-ads era-Meet Oleral p 04M41 M a 1113'1[121 p °duct or %loco This y id yze 116Uwale. ono coal a 34 ccaserners tiorc4.acn,ayliyanc..isYruPpr.rerso @Sem, lomeeSerreareemM !Meal Malaa merrae ssteethe rspist at on of such ogress's The rbgslator yi I =secs,her intro:hake= Isesany :staid corelder appliceble to I eo

tip0 eaci Accyrt ridy the dra I Crie s does not require =eery enaaciai pre:suet to TYPeershed hystie %get, 0bile r: 0royide sly Irbrorl Despiser to cersyencre subect Pinered serho oreende Ail to follerhyda ed arid ese prods s Tits rill mew r to' rid 10 or [emigre reiggai one dispest3 0 product 3 yr p °pose, to bc lataches the 619: of lagurahon ressited b on fin The peer ied ieltrenaticn reel the r lark t A froacia site Ce p es obi mill be re-ti

reps ate may spelt addl.ore! and Te anc equirec nykc stricenatc [egg:tier s reit aaye Os power to OlOrs informal. 03 abtx prottre au mid thuso non b pe lye bu greed se liS IsUrf led age 'de erg Ofteat pe

~~dto be harreft 0 ConsumersMc r hay beei ntrothcce naesal p od~~

~~cell'e in2 sahib] ar traps el Ynd condition. di parties yr erre al sentracts L19 prpcess~~

~~us-eyeyease )121.12 Faith ps - nal c al eeri ce prodders egy spelt regulnes rteryenhoas er ert 09 that 2/999 mug rberelpre bc arecirpellf D199 a stateren eyelid deg Lie Otte~~

~~92219 IDUld to be ined29.13 s "NIS 9r2L-92Clitie r ericht or ty Tie repeal- reeeieernents of the ITV di-CebneAl ip process~~

~~5.7. Advisory council on consumer protection~~

and cottritelle to riesrdS the regulators consumer protection ciaiyees In oraer to men or ed 'serge.— [non eoriSumeeare esithe eOrtinitseien recormseeds he treaties o iestio, eeTabie 59 The ee ISOly CO2 9211 a 29. eStonsialt. IC e Mak eptcpreserlyticins deli erode0 Attlee cur, lents° 12209911102d32299 9192Ciegu ets e Pclit e so: p.,..eices

ri reuyrt 3 Crb reports stalls L9 29 on a I dm reitelatiens ;TT shed by thy tepelVDr eprri received by it The edit 2 or mudt take intd eatnt art, eeresentahens from the advisory yeiweicil and provide a written resaDnse in cases, visere be regulate

~~5.8. Financial redress agency~~

et obrbegy ehresecoMplainte dheConwr seiarreeamme idSthecTst end ne be edie onabc adjudic0 On ThP PJ °Seeger's. -I retail censtrie &through e p — iv I ruder eit as 6 2 2 1112C grie arise receetS ryetem oi ell [inert al see ces lo ers, e ecerrelete arades ond avoie any :erg des di intetest eye redress arensh is II runct en in depencent , gem the regulators . -ie exist Thedinanc a ric 'est re-he- Ten hroposcr 0, tbecor mist on 0 r^p ace ing linancial scyled speak or Dahsny 5/Sterna dtcs sh he bankidg ore auosman y ns-

~~Tableof Recommendationsse9 Aompes ce, sl the ac isory.ouncitor consur (Aelion~~

~~2 Ineapanan I odananbersal WO .0 nril anon ads.~~

~~and~~

~~Table of Recommendations 5.10 Composition of the 'AMASS awe: cgs board~~

he meure ceo bd-.ar although ALAI cansemners wil co.rule to have the oat on tc app oach other ,AJIcsle lyres sue eae the mrsurer mots o abliereJ under the Aonsumer :Mocecrion Acc '986 and regular ccu Al the Ature t MIA GOV'eralTIAM is of the viem that the redreseagenzy has acquires steff ciGr mele and expertise to be az eta efficient; addeessa. I complainLs f on'etailccnsume5, it Aill Itee he po,,,ertoeee uce ,hedpsl cab [qv.: hea— sr erPro'EctionAzt 1986 M,eta21 riSeimerscowered bythe (mimes agency.

In any ease Ae a rem zoneurer opte ors remedy bars etie redress age-A, it AUL not be peirnitmet rbtiwee fresh peocnedinss sebreanothe tom s Aul aneouelA -after a nnal oeccr ies been rseues by the -Jre55 egercy Sin lady act on - Mate d Jor ese ara D h i lee an actio- befe,e -he rodress dge-cy II be managed Ay Ise of c rectors ,seeThple 5 io lo ehe ecmpos on of ,he Azad, f he age-c; will se fund.ed throegh a Aornb iirior of ol Iccalle,from t -e antral Comer nu standard fees payab by I' mAcial service proeice e and a eor slain based fee that Ail se :elle: ea as deg ay nen a somptarit s brought against a inoncial semce pro idcr A' cfrective speJte reso!ution oody needs to be oes gned a a manner that ee sires access Can yen en eicrenc, end sOaandy remec is i needs to edaress lido kinds o fficult es e ce-ano where genuine consemm is not at e to oLain rethes zed ono AaAme ple cases are f ,epins a manual firr ae 3 strategy of harass — Ant or Commission een,Aages flee redress cooing to functiont han as a technolozcs lv modern organise icr that I carry cur video -coring; digitz mg sr documents, [aleph.: e eegistrac cf co nplaints maintena-ce of anigh ore it/ elec on c catabase 'end on me tracreing corpe eeat or payments. To eesuree that tec processes designed sy the reel,Ass agency are - I -e e,. I mscad eequiremenrs the draft Coce ex Piessle. eegie res redrese agency Sur r s,etems p,ocessps Leo. nology and nfras rad diet enable nacer ydischergeltq AmcLions The &sr :ode .31=3 err dada/ars:he egeilt.toeste a-ripped:An/ ce edel req. eTentso elhe redress acer cy h nneaSinlanle la gn s an mateere=uch aS talc Azet co pates fOr LroceedinEe for: c compliame cc, for neeec f aeo eime pe lods for .eter, of Me redrese p ocess The redress agency Ail be ecro.enteLle ED.- meeting thesetargets AA- a recAre men to exp Pin rdi et.° COS] Taene infaS des la compe rec Ass agen ey st, tCeearCS !adamant nn fluency s prcnesnas arc",action d The crc Code allows t red mss agency the d iscret on to o pe e of ICA: _ywhere In hAeauetry. The .e_ommissio- leverAAihatthemdressagencyw I es=, thib [—Nei I052'

~~Table of Recommendations 5.11Cutlre of the redress agency's r-ocerdrigs~~

~~aserry~~

~~Inds~~

~~theory trprotwir. eo IS the uorF rcourt~~

front-end ofees oLchout 'a couriry :There re ail cels,rers ol2 finonrOi oroc,c.: anc serriteg i9..e able to sJori ttheir comp; L.D Iroccrl Lechrolog. would then he sod ro zonnec theseFront ends mart centradsed mee et on arc ad JdicE.tionsys

a The redressETe-cy endea cur to arm et or% ar c2b1c. settlern of M1 mei et on peocess n rAqesw Bea snr ement -cy a.hievec.thecon) rermd, zhccs.. rithcl-ao■i-^eCpmolaint ror th2r:cressage , I e 03rIeS • ig■A` itw I be relentd or niraucn The El.:Judicator • net^e c ^ End pass a f ( the:or 31E; 'maker takinein o accounC onsnadeunde s. the sro, of hedralCoaecr ccisurnerp osam are rsguia.

An orJer -acz ,he7djudi:E.3-rnaypod Jetoramm2N vamoen5IDOn lathe regulDrc!.. or ise4nyothe retailconsume- sJejecttolimib ■-arbillbesr that isdissarisfied • ection.that'n2errudicar/corsid.,s lust 3nt asprop re 4pe pa ls a elorr the FSAL and rah the -cod cz orderD `a‘e 'The ng ming En ap - veals rcm FSPI I Ile befcre VeSt.verneCsun The Csmrnissio- SPOSsi-ong complemr-ai e e role: (Jule repress agen:; zurEnggrie%anresisrd the egulators verr cell. e Corns nLs rece s rr cc -sumer protec D Ihe redress age-cy shec a' arca= " -ere r o oble- atec legis bon are prcrnment anc ml suggestreaslo impreqement susordi- lattons I once the draitCede5r7"kSIS ensure a feo01. oopthoJgh agency "Ill LSE ■Le FLING Dade IlfOrMal0" on ocn plaints with Me regulaZors on an ■ ongoing oasi arc -he reg. us will anolyse -e orrn: recP eed orn the reares. -gencranc L. lee it o‘ irnpmrd reg,lat on i-ak -g ;or systemic! irc‘,e--ent. Speak: y rhe nforme 0" technology s,Stems [Fon rec es ;ncy niuSt ateF ;healcatabasaboul- all aspect of al comp aints Mar are, LA voth s .tabPsemusrocR -a ysrc -rc;r to shed on --a z.r...a..1 ere [he e are diffiz,lt p= Er-4 occr. nto brie egu atr n and sJpe .ric^ The ecearch rrogram • JdieSthl,i3122.25e -ho_. d oe a inr eftor ,feen -e rcdre=sogenci regu atom academe ,cho an with elczse catasrcs and csemr, into be puhtcdomain . Over here hould by a %NUEfeedback Icor) wtare the tlot zp.r.ts of grievance that • e identirrd lead o modif cations c ,egule arc suservisicn -77-

Several arovSlons of the c aft Code, saes !calla those lets' -g to the crest on and aye ation os (ha rectess agency, rec. e co-csissato- and co apeiati.n between m.a regulators. In the e est cat the regthatars are tnals'a to wive at a consensus en s,c^ nattety mllbin a. reasonable pe od t`ematterwlllbeaodressed Jhamgn the FSLIC

~~5.9. Competition law and policy~~

rst Comm asion recogn seslas also hatIthyssr refit on area-cal markets fa' easun g the best -"crests of consurneis tile oemes canspatrion alone r 'I not pro tee chi n-crests ol canstn-ers grayter corpetil on - Lande- sath a so,ss. ard ell ti-r.tio sing sonstmer pnatest on fame aOrk in finned b ed y a powerful oat to enhance sossurnar :vets e -ha co is sie Isading nos sacttrat atthorty esaonsible for comae tit on pd. cy ISSUES n -been 'as sae bppingiclajlNO, stts many indapesdeat regulals. s ischa ged tar' thedut, lostari-g greeercorr rat oni- all a seasolthe economy,

~~-rhea. Ti155 o- ecornrendsz aroctured mech. tralarintsrasUon.nc co optra Lkn between the cs and inascial seatlatars in the follow .; wa d~~

The :0 should res ew d al egtlatsis isSuee by die its npu or Isepo erliblcarnee it en rprelisatiors rand its egtlatorr consider I e reTre en ntic - made a" eel before inalisine ihe regela ions Nei disagrees V.11 I: :CIS

attnceser an ongoing Da ■ l: e s'=ta minas tat e ceat accty mar la Und1-13yis rtnestal to ^Once non in a inane al ere ker, rhe CC mustside it a repon on the set e to slec regbletor The IC corsAN. JILI espor. o [hereport lithe cdulaiorend them d segreac bleideu 'se :Tann Oe taken theca it I picshcpeph beat den ihed hs rbe

~~its makes re er eetoteregulniorif initiates Ansi procecdindc insplvirga Heppe~~

~~aareed penes s !shares lithe egtia Drbehe esthatyr as lasts...sr bathe cc mayinterfe P spin shc egblafors obiec ides the regulator may hose to nonninnie prenorivetinp ',ember~~

~~Tee renelatormdsz (-Pert 10 tleCCI abeiciary ;Tuba of fi eileielaerneeeresselers That eppears taste! bs aasslaser aseCompetitiosays 2002 be acapietprian prozoeSines bias be initiated~~

~~rise drat Code stures tlo ZCI and the rag.la to to erbe u Marlene( indum of once slier drip fo establise I e prosetursy ts yperyuos boss's!, Item ymcs n ba Vets inc t I me otny~~

There s also re seed for oraanisec !stern between rho cc and the sasouttio- corporat on in the es taxt vc - ary rna e and acquisitions Tte mechanisms co addrosstheat ikela. effects °Hie resoiu'ian cOs3OratiCri S natiOrS CY naMpeL then In se releaant Tws kat is ads essad - the drai- apse unser the part on resolution or finarcial sers ce psaticcrs -78-

~~Micro-prudential regulation~~

M c Pprucenudi reguratron rears to the agaratian lhatgovernssaleta ard soundnossor certaIn Pea -oar use age pro ides The ratan :r shape and ex erg of micro prudeurial raga at an are pr -larder rum r ates by consumer p otec io ecur cerns Ada dualist, the ccsaibiliry sr arge nu ^ begs of Purim service provides larang at tree tame time or a peuemicall, impala a tfindrual ins s ign ailing car th Se concrrns shot t he s and ita and rcsilience a t Lir e I andalsys un ah E rtio e Sot nc micrc•p orient al tpulaticie thee! plais role r 'Tabg sysrerr c r sk as reve I

~~6.1. Rationale for micro-prudential regulation~~

~~einaneul service pup ders aye a vadr es inteurer lute audit liCtricVer rreir hnr trial h th is not :implies matter alp ivate ca lor a varlet, of reasons~~

~~nClde s pars lance rruhemsenseto, a gueruras o mai ,organua rola managed nay shrug tor tote tug= prof& if time ctor h' 1 use era Chrrayi r colltpser In Phil ettlar h rot pro r Med her tees ere Prthub.~~

~~licgerhd ricerhs alsetr cirri-tux-1ra icr sirorturesatd gotertance ai uirs lirn.~~

certire I{R5 rakrs bunauguseraucee cespur rat ;aver, at arge ri pcssilal crouch /us rues irs ters rrorsihar.rd n ana, 01- arra hrrntive r crease 1.1.11nopregristuraxuaaers ne uur nesam erra r aacessee ripen. rd tit ffraec raise a ceergeded Parke crag, ile hnderS 00J -re as the procen 3y ;third tOrnled eprmarsconsumers identily pus avorc hes Mg Jitaftrp ably risky inant service pov tlers can vs, k o preVeni aOraerinarit. al I reas trorr legingtreir iisks tti e sucr 315:10118 is somen hat cons-_ lei bate fullcruing

avaapails to guest nersr anc ha ea en, Nur Ire ta urea o the aai ihr thrPOSt consume su WCreSS.nd reart to wr..=c mbrnla ion ‘ 6 1112'1PHE s gel Ile svgrEL el rmanos curirnert or the ungesur stocks an: bonds rtury court-nap are nor re uusiree ro daces= and aa reh Hop-natio," This isparticularly An rarer.' h -11SCIhIS rab2dcorsurirts /bat tousenoIrt NO nor or irttolrer r rrrirrect ons rla sire thrt rro d arorr Iarse Inancial htrrs ner spa

~~tr Table of Recommendations 6.1 Obecives~~

mtitationataa nalfe b2 sEICC SnsGt bsa20 nnlIganCts Tao p obbleu is most plOTI`elt coma mem The nave opaq,c =Jana =heats socailaco=tolnlorma.ouo adman Is laighe== ng until fs ifcto informahonas, Ira dales depcato Iraa nottood, a Da mu manta lahe harms and ape hark uns toa late :dude eia dams .

~~tha fault, ;ft= fidancia se am promer in the far g rat if Co o dil0=to^ podiums femariers tri lova all_ rne t roach ons could :he-labiatom ',the=~~

~~s thaue mandarinn1 Inc a, ba ad pro= lafte meal anhms emerding Itm. to he E7 nIt =nos co=== tlat a I aarfer parac pa9ta beneht 'am ThtSG p IfUC .00d pro:lams yea e~~

'tat ahOff :Quaff ef to Murder Qum- froncial salad: pi-afters usuah cuff siarthcan o inensi.mined ndthOnrCISabli VIC'erfo cc:Dr ern?: Icdor=on f rcoas=r e s role in ens ring safeh. and soundness ) da in portal- ket dISC p e does pia% ciau lhis iracechacy cl self nany f nancial seaade prmice s but it Is often no. c- -ciai sera ce regular o and -arker aisho rt. beco nes par mulada problamatia to I a -c. saraice pravida sof system c moviccis maRla CE 16 n kr ds of oaagations a-dtina

lul femain obligasans ar- intik eently mom dil cud The Comm ocian noe= MY- ems that -eke spec ien than cmer clpligations Debt rasadruent ofligat c -s e hererdlymom difacult to fu tha - grions lameded daymenrs SDEC fledlures - agentudon to equ'aeo mosci firm prc`itablity naurarfectaigations dna arc co sand arch requireoaament regarolcss oh-alma cal haalth althea omm ernal e a- ing nsmf don ;a^ pose p oh lams (Ulfilment pis =ideas Trva Commissian also ISMS'h2f mcerain kiaraof nano, In sonUrc funahrom If ',and a= re ara adamse q' guidons ereof IILL er= whose sauin gd the cp-sequarraes for consa-- deposits. cae to a bank ta hire

stcm and the larforerancm, may` ead a-seld afrectad faals,thf ealtire a-uncial s2 sell-mgulatica This :Umbria= on or hars- ca-seauencfam a um moblera anutheat If =j1T12 keISIC ensarasaretyand =or Mess and n cheatu dimiy& i organismaldrotmd sea u nog the SD (AY ingcertain obliga= ona,crefaes a ,aseror reEUlatio- and soandaeasof cetfain h narc al aeruica :roamers Issu ng Frfee nancialsen. ce p caldera uMerher those laking ha- a d l noasenolda o tha Ina -cial Sy stem =a s o' other.. se or- aartopa ion a ante co- n flies tha prtlf put on o inevaLf fha pusstl Wart f an t. rush nano:. This in mu households r aleftnanc al system Taeff cnallenges rho Rate fr c pruaenl al reh ha Lion The State ^cads fa estfa regulatsa. =mu suffer =Isar, Tecianismsmal fer=ne in the behar oar °im-, and improve ,aer safety and soundness ThoseMB( anis as if dastgnad anO !malehit ^Teo --0Jgh note inmate proaart a ould a ton buhalf of consumers dno facet= o redufe of mismap ude, ED/1.3110S as enurc the ofoLf of arn- fa hre east Mod in thus afr Cada are enurnerf ed TcDie couisfeas needs to be intermf Led ir =arm= of ale consead cr aea The anfasuao et y ud irsetf II it is ell cterd to la the regulated p rsons fail or ua of lailhra mahar Van P --e pro ec el the ragulato ahs, 3 come insoi.ef .th ooliya on= to cansumers ▪

at tn,t haaher Fo axnanple co-shmors curds a e lest in e bankruptcy remche ve c e should be possib et the regulated person vivo, hpnilcahtly atectiag the mtereaLsol consumers I- hosLock ma-ket theshaaessoldea ingerranyements Pas made s haole a gulaty:en where aany Se(ht es - hahe ladeo ate no ac e se aohseque o ms lhe oucton c HT eapaior corporation thus atk epangesho glaos would vvw ladure For has emd.ells rapo hart l ha -a al ins chore solzty and soundness shave be re

~~6.2 A non-sector-specific micro-prudential framework~~

a Hero on do-ha eeclatien beta [ten been a sec or v Ise eoleern Some nosetries nave o ispecbclaws focua riga- issueea-cl ruments 'Ire ChaphatiVeSeaLOIS Form ample, MJ3estal Mgt al On I Ina IS 20normted Mr Ca Moo I ea s. Pal repo ors operably' dmie ea shhho's torough an and rele.ant hahve In mi303n eat OM is3M r !Minn racomrrencs non scal:rasp:arc rhea) rude-ual pro as ons a the draft voce,

~~I ere a underha pawn I- hair aura] co, ihod Lae> or- albuilV r Jame rumber Tr co, hoporriclaimo obi rept Monza-I soma m Meson: scoters Mc re specific ynes or se oddreeeeel and the .an~~

the Saoel II frorrovmds Mr Moss am roe Cornrow- Union a SD sem. ffIET ark for InsLrat= acfOloe nab eat ht h, which prpac pa 1, honst uptch' on 3 scolse *ore ideas res he Ina, p.1 ssstem es oes fa 11-r ctlbecome increasinph d cult to craw shah: spacmc Ines ol Finn al Trodhcts Tr: herhae,s2 ngo-cred ccomman set el nc ing Me it:plasm-1 tho ent re nancio syste he p m rinse Me potential for mgJdtrr

o Once stsplems el Comma on 001.1.1. 510 ilsdrasacch end Pcmactwor n tee Inanoa. pep arr. Meets _C. ems sosi rioS ei 0 t Wld rompP Pd axaw e g 1rins a s rang atzaatve chhoe rep ng= The me of a sins! '2 so ofp ahapstentphcalied ahras

shatar spank egulatursalminisLarrgarrarentg Isof ovisicnsc pate he hosscicyof rhea to Pa :yawn re a sedc egular; Immo r lox quietism in LTD interad. n rep= ra he woo I el the or Tho presence el moo seas snoeiric P

~~ST _gi-~~

~~Table of Recommendations G.2 S: )ie of micrs-rrucential regulatia~~

ce ron sot sr W2C ford (clone 03 coNzeeci. wgclatirs nte siret ng a code eh-air!, sublictieba cs 5 wi tarwarct ..ccIscs sidle af'05SSWICIS DLlinutoccur genera- i theme e coparatc laws tow I, rnsio. rotoned b. eoperaw ezulatois cow; e s n tra eeguiet on prosisions n the craft Aunified se, of non sec cosispEColo n cro prude- Lode will he i.. de: c a cons stesdramework 2c Oqj the financials s'em This WCW d !- g to the substantial mitiga on of regsla- turn, help sefficicet ocation sop ial tco. gaps or arb rage

~~6.3. Scope of micro-prudential regulation~~

Since inido orucemal regulation lc an expels e aria ir -.wive `arm of regulation the Csmmiss on c31151ders IMporanl to ensuee nn micro-podedia regwation aopliee -id:nal to the przblei- that only ...where it is wdiired.and ith incrus venessthir p Opp inascial services crmed as two-owl soug- to be adoressec pe sons providiog e cam on toe relesnI1o w service picooeic Rquire oermlb5 I from no rez aLor s ord. - drosetIIoe sub- nancial act -5. From this oar of ina-c ol seryice [widow dentvi i.rovisionsol he (,1Code °his si ;set ofmisrc lectec tc szo-e o n lo-cmudenti- 35 ea,:o re s per so ff v duderola le seiss'ated inansw' sersice prosides, raferred be determined by tho reguSeter 225CH on do lesis VP1 in tio aft Cote Tho Les's exient lo which o owdec n he orals Code ...id also guide Ose egulasor is deciding: ferent rer, ilatec persons isee Table 6 2, en cos piuccroso regulation shod: aoply f - ied besostem TheCorivnis on recommends:het f - roviderstee- in identification IIY irrpoitaniechoJEd sid,est to sniorodoide- al regulation Thos.-s oi systemica Is mperitant f narso al institutions lin be made by the sostedd 115k "a, uaereE. ceut en of cesienees instituticns., reside with he locor VEDC) o- respect's.: regulz ors JSJolly he oe 'gator!, inte dediaied and backec co the psociders bo ance sheet, &herethe nrcmGer canes ma cet riW nould os micro po dent Dly cgs a' ed with hien intens though oi always Fodxample ler a onoilter witn 0 y a rriall numoe. fren not attract gh intensity egula consumers, bala-ce sheet-base I blieat assesstha dedit coithioess of ion to e eX■en-hat FFC o individcal she- s arid linked ohoaissos. ohere the con that pees cer say se hg - Padesr eking - sh-uld bpically no 70 TiC o pr.dediallse scmors ale expEstad to sold -c k

~~Etilolmiol los= bsoir.tly~~

~~5 V.0.11.0rirgar=`"?^"'s71~~

~~bas sof tornprehensido crib ySISOI crlipbt o's made, alive leve6ofaccorintabit ty to mare's and ins itu wrgil he th~~

~~Certain hnoncib' serr ice drovice-s grencr kelytt ttme unser - erg cruden ial gp~~

dpbs nect Itrec lab a snail nurnrdr gigs. coil, larye value inr este c such as hedge fr -renture capita, cnds pr .2tc petit/ brids map -or be sdbirct rt act c p.udetbal repu accr wiles= mg. bre s,stemica ITporta, Thodgh ap-cmg, caused ry fal ffthes- rundsmaynbppid can infoccrvidr aprmn rdsdnd to Drd tarirg (adures are I kblytc be lop gi es heti 211rumbe-0 gfroarthrelr obescch Pirate.] brgb scab c-pai ar _pep-nub lc:alleys srch as riudtIsd res ipargenelts mcvnct

~~srceinany tithes: may boaccest cbr-gribcp Peposts~~

~~6.4. Powers of micro-prudential regulation~~

mcop uocncial --egu al on Fibs evo .gd itprirly rtcent deca na ry acresttd Iiamevro Ids age drde, gcrir sipri Ka - cht c.er 512 period ard cord `Je Lc) etokb T'.eC Ludt a tet o pn Olea-basei [ ro‘ pois to al ory regulat on It ad ay o piping cirtd -rstantes and 8-gibing scholarry anc polity con ten: !son cctimcls -ucturet or rPg dabgt The torararssign has rev eged Lte rbnge or micro prusenbal cowers user in algnp with aroma bn, inlernahonz comparatcr, pnd stggests a firctio^-2 cattgar SD btr as suggestec ...CON ;see Table 63, -be Cr I 1715S101 ezornme-ds that the pre° se ardpo gers used and that the m dIng- o .liev, oval e o'er on. The regulator would orb allow entry cc lose financial stn.. se prow:lc/5 that are likeb to be arbdtptb managed the regualcr (you d a do work to ensure that rcgura ed pert tris bonL ^ue to Sc pro-Pcnt go-rented c c.: managed Rpgala ec setspt a wood be regb arcg n terms of ricit rick taki-g and risk avoiding pc-Ogres 35 ?toll as the loss db- do b bersthcy pi, 1 n slate rho egulatorcould clsoimpoce regt derdentstoe r-gdrs cutinessccnc nub, and fa u e mangbenent thtceperdors Regulated cartons Prob. d bem ant supervises to cnsdre tomolia Pe and to respord to is saes specilc to bnc repulaLed porson taken op-Lhe- thesecon dcnents eateL c Latisand frgrncPort of to Commissicn's approach to micro p dcentibl reguls on

~~Regulation of entry~~

Tleoeadorolmcr prucertu lyrtguloteb person; ghouls croteed Ihe b:sisolcon Mot s consistent wish the rr cm-prude' ial fanowork (see Milt E. 41 so that on da y c de self an i tsb utioc has brow prohabil y or It lure Rut tdere ba r sk of eicessi e tc- s ICLIOAt Cr entry that mac i t-gode rt- cebtion znd inn° gritn

~~59 3-~~

~~6.4 Regulation cl entry Table et ReCDTIIIPTIdatiOlIS~~

new procucts or services, 3 3c new firms cc be creates ex sting firms tan eu3c3 --Lent 3.111 be :oripeLitive and p busineys models ee - rne oPout the 23.3 c. P e bgaI f ameof.ffp c 3 ir:Jit of Lbese ob ect Les orezerp3 t ouzzly: ay-unlit -1 3 burners, and - persos o deal voth IL3anciel co- s3c. Lld 33.-Ir re iaele and co3 eeterr -ot boron aeptl -P. eor 1 .33.3 of ems' ng ebulation3s3 a paheular area sheule new bus ess models ed a balanced app oach hich 15 enshr - The Pomn- ission, there 33.. rePormends a tn2 draft Code 3anciai ser perao- 3.h33eek3 Le carry sui- ap vice fort` e Pry' time will nape To se ao 'barbed by the regulaLer This will p ovide pi, to a new nroducL. or serT ce zpnchee sy existing na3cial Ter, hoes 311 -Lev. oduc lsca3 do the person s ho ised launehed pi) ngth use ptcess Sensed inancia 323.3c3 de's need no seek 2 Exp.-1033 P3orese-LaT 3 .3131- neipa has been giTe- auThonsatio- as a 3-hor sabo- for the services for Their ep esenLatiLe 331.3carryinpout rip activity o n reze csos (hose per le-gasT-e .- II have The Popp c- behalf of the p' Tic pal Through reGols oa.. the EguiaLor agencies tae go ern poner to eTer3b frc- PPe sot hon saffron p ocesy rent The nte^t hp e s Lp.e.empinrity these egenzieslhaL ha.e3 yniouecharay - 3-d does no- ter sy:h a E3ILO Tr sr.:Her re, Id ono. Pe Jsen as an except ce -cy exe-no from The author' mean ratoth3. regulations 3 3ot ..Lcp'L. Le an pge sa 13n p oc.ess ar n3T anc pLezey: o obTaining auth^r sation or P- 3 AutT. obscb33 protcs The 3- ic be eens al se :ices i% an, ceoenJing Lpe type of aTAPT y e proposed ca. lee clot care.prePensibea.3.honsat on processn 113)3 . o pe sons whowant to L.3n3 oLL regulate:a octof resew Poll are o ce mem prep( 'Than; regulated ,. - bhs asPer emleT doed Theneeo pipmoteionoLa. fon fn the -di inanbialsyser - [titrogthatec -e pfof ivitg~ osliffep off poncation prooesp )111 se °poll:pp: flere,t has tFe exibil.Ly op poor iv flip' the out o iyati^n requiro-ent may be satisfied fl- app.- an 33tomabc prof Ps on-reguleLed the author sabon in eft -er cese ovheoPer an adi 11.3 is regulated 0- - groundstra l process v. II notaffoo repulator La reluseat. horisatici oboe pApropriPle regulations Po gooeffn [P e pro 'he roguIpPor does rot la Pe

6.422 Regulation of risk-taking prescrbe vypen in 3rich tLe reg caLegery poveTS`P.I' ponpoofer the regulator . 6.33 Regulator may ulaled peopo's aped.: or re.dpce L'e risks they take (Pee Mob. sio estsrhelunds the. oTTn 33373a -3 .31pope restetio-son hcp theregulated perso- rep: otionson claims:hat :hope& zho porsumers In so. e Leses.thep 31se !MODS/. may be p aced from the 3:gels-Rd person: over bupiness oe Tonsume 5 'rids Rege law r mey plso Tecuire acre ence to ccopp ) Pus noss proccssos:hrt rodoce nsks to the

~~Table of Recommendations 6.5 (1.2.€u :Mon 0- risk-tedng replan', millm,o1 thPfollevenEr.RI(0111PrliE. reaixT3rmk.~~

~~PfLg nos docEdsostid,~~

~~3 il+ptil ti g LI/ -onaiernonl~~

~~Table of Recommendations 6.6 Regu,ation of loss atsC dtion~~

~~Dot ri-ocogo ucarq.i -a...d.-- iddLaiddabsarard _crio~~

~~eplated persons The draft Code a so empowers Ire egulator to impose licuidicv re odirem o on the regulated ier son..~~

Regulation of loss absorption These sewers allow tl- e reg_ a o to eetis IM1e regula ed parsers to keep capital re. t-du cesandlorpurr'asoirthu ancefrom red-lur ondorperatian le dosoOdng osses Cap- al rddc cPsacts.burle sthatare rordod 'indJnexcected ossedd-is ng from ulcer 1.80^ m rd,in,estmen scru-dcr o 113bilitids In co-ventio-d' hink eqw y Laditai is though p ay Nis olc Loss abscrpt on uredonsczo be pro,,iaed .d %.arie'do nst men s ot limitec to ecui ycap tal Differ eni- instruments hass . ffrent ass absomLicd -270 Ed er.e eapazdies d■adal.o vary NO Lontirgerdzdp al hasceldi Nefeatured bui can pecomeequityike loss abscibercdddenc ngoncer-air conditor: If' ere are -strumen,rhoLrequ edeepEnd liquid markets, &dog Limes of or's his loss dbsdrpticn cad2c .5e -day oo conscr The reg.-IT..1- w nee: to th id< aodu 1055. EDS.:DUO C.30/111,a5 rross different t +les omen sJret -attherd are adequate bufers d dcc form:I-mai Ines aswel as -orb dies o'crisr Isec Thole 6 5) Amer ism of lass ab.crptic^ built in trds fra diewordrecomme-ded ay ce domr-dssion id the esolutd.n rnechal sm whin prayer 0, does not exist in I dia. cer.ain hnanrdal service provides Ind regulator shoo d randald odrchase ondsurance io— resolution corpontion a. 3 p e conditdm for under akinF the dd.. LIC5 the; pro 13SE to unser ake :or oxdmpld,fo-bandng sdo ce s the degulatc -mad,rposs a condo- on of gettrg the deddsd, rd-thed .oto a — de'ermd:d by he resolution ocrporndn

6.4.4 Regulation of governance, management and internal controls ✓-E52 irstru —ents 2Tr 2.0V e rc c regus or cc .3 =scribe sra-Idar I. for gooc go‘eroadze Sirce the regulator shares the respcnsmiliry for -chiey 9g mica pri.der . objects vfth the 008 Ja-d management o'the regulated deddri, it i) important these pei Dons are pd.ident1•5 go eines: and ma;idded(seeTable6d, 85' 0 00 0

~~ce manage^ent and internal Table of Recommendations 6.7 Pogt ation of Ea. erne-~~

~~6 Rot nniotonnt og.vid aporn.-pre ,00m.,~~

~~Table of Recommendations 6.8 Monitanng tic sin Dor osian~~

~~mesuga polp.o too wed~~

~~6 4 5. Monitoring and supervision of regulated persons~~

These rstru entscao be used to ron ove rot toing an supentsion c egulators an -; Pp marto ortoipants rs ppm well as, tv ma,ket ptnticipe- Tho role of monto- an app opnh piex oceSi rropi nonrg tans oppli.o.s.oDd nature the temrtinsion D'nposes fac ato monitoring onerke parl c aa bt. Disc emnoovort regu alarsto f mcr ,o ing and supeo pnryluoctipris Do 'noir pan innolvp disclos, Mentor rg sod pianos on can Oke moot Prms Ponog orponuo ttateorerits and o nerrepor Regulp ed pe puns mot also bo equ recitooto pin, no,- ain sclosno cur eot neeoprating from an pop/0prd crec rat ng ageocn ,see Taira68, PloreL ian onernpula regtlated tersonntos aro, -rep- thereon atorn'p c . or NPR=hD_Idbea requi ernerr- re I-he oc.gulabrpto co onerato to eosuro optimal pt. unerpotoP .2 s ogle regulatnc pa-vision °his rravente

~~6.5. Principles to guide the use of powers~~

-nosen Posts oo econoonn Micro•pon gulettoo like all fo moor regula ion in es a depoec objective e imposing rio sms est - guico the use of oossiLleg d'smr pion As sip& t dart code &on:totes arinciplan toal totverp ins-end loth a simple g ?tee table6 9, mple egulationsthat lop oPtcessiontio DIS771110-5.7MItake Iri-usforrn For en, p &nuns ra oor hen undg %/mg ctioos coulc regulatorp a'n rage be ....oeo payofts potnneen rings' a ot nonplus prpcne info colerent DroPpers thaL achiepe rnotarcspho ol tgilalecto 5 ar ways teprnpomonoCe PRINCIPLE -I PonJOr190:01 ronnsed on regt'cred PeCir'S should

~~62 -- 86-~~

~~Table of Recommendations 6.9 Principles oc micro E:rdoential e~~

~~t„ o faciaz np 'C m outi NI II 111. „NE rndricidt proda-t—nd la z~~

~~The =Acint- acco irt t 91909S 0155051015,39 CIS 319Ch 111 lICIUde 5 5.9~~

~~13 Thene53 tom se .h.po -az ei cvol.repu tgriar and~~

~~J.Jon,i, t,,orem Th.■ F =rep ated persons~~

~~■the no :we scale and complesr of the nsks In the pgularec samty tong corned~~

ThsoM[ilr:q me; that ref, a ory -`s urrents ore Jseel in a manlier that is risk sensiti ;v. intersitv of lationnho Id to propo hina' to r t ldhy•-,h2 ogLI3toc persor. Fo examp'e, compax^no Lanks mth 'le same be ances-eet size One of -he- investra only Ir Iwr risk ass=ts ile the other is - vesting F high risk asets Ares ulatry appr^ar ,t -o ck J: irQc,2 micro-cudentiol .-e quirementsci these t.vo regula ed se-so-s becausethev -ave diff2rer, Levels& r sl s their safer; an° scu-dness the factors listec 9 Table 52 t anslate the rar,et failure: p °tiding th, rationale for micro-pruortial regulation into tangible tests Tiese atsom cecidethe excent to ch such regulation areto be app !Ed Regulac-on oughto

~~PRINCIPLE 2. rzegvlcry coprooch needs to takEgitO ,CCOL^trhe ,8.35:bnity0firnpleMen oned persona ondsupeMVOn byte Regulator~~

The Commisson rotes that the pgJlator, asproEc- should be modulated In light of questions o:feasib lity for- .-egulMec ;JIM es and toe cc paCity or regulators to super, so For example conside- tairers to a2.5019 losses Risk weigh:ed cap tax basec on :II te Rat models is potentially most sensme to tskshotgh alsothe -nostspaque from the perspectPr lrer‘uletorys Jper yr, on Sr lc. Ike y loasi ric< sers-cive though easiest for regu azors to monitor s'd er'srze Wnlle a...vs should beccnstruces for regAs:ory csnvenienc--: The po:s b..ity of frustratis - D:r3gJlat.,:y objective: s'ould be kept is mind. Aiternat vely,considemstitutione,Capabi ity, -g questions of ,eg.ilateo per scns manipulating regur.s:o:y frarre.wiks to the advafitage regLiatec person using the. right internal mocels, and having access to sJficier: cata d anieve fairly ris4 sensitEvecap :al bee 5 Corversedy ee.i.ated peso ,.sinpoo 7odelSori data oudtail to do so Op city Ong) Jla on thour pgJlatio- -

ed rcrr the pe ..annot be designed mith !Erne kxamples in mind itegniatOnt .12. - -c sd-ef amed JY dkective of mklig- inmitutio-s do Ilc led[o over rdhultal on lust as - onk the monk ben gn nstimtions m hcicoule lend ts .der reg. a o developlag robust IReulators rd I 2.1 30 need to take Im-o accoudt hd moods, gi ten data skffikiedc, stra ^ 5 Faultd mode is a aoksh,le consequence rom qud opacue marketk As skcn the aft Cnde au her kes of noor dd. a. Mad' the rdgu ato o cand der ahernd me pa limeys a -dim impose o,eral VI kis( weighked mpikal red,mre-en 5 ask rdg, skosto confront the The midro pruder mon sidds [hod 2- CDde -rddeolfs 2 - d makewisedems onsahmutthe op: Tai re;ulalton th5 reancrablyledsi L fo- -g atec pdrsonstd. implement and Mr the necu dIOMO Ti5n to an: kuper ise Otnrthe yes k accumulation cidatasets and asadem m research Igmfem.-sackDOM/1

~~nation hese am s mklgi.d a deal kin mmluhon of ne arropr ate t ohs~~

Iddduhnrcrs anjeddven under rldmdk; In the hriandial system them are navy. Admdcf achid, hg these objective prod- e5 looking dark ci lerent an be cond rukted ahac essentially fulhi the same luncuar hdeonlydifferetmcmokld both= d,a, thk.seproductslook,andthdspec zdntraCtsthen compnse o Fs ar exdrnpld,consnim the numke o ./..3 ,5 of taking 'ettn ed position in dres compa kes in the index nividich Of Me sameLin:non I Su each stock ndmiidalyenrram,n In Meeks, moth na,kec ankm rm t 3 Cotong amm.rerontrm or '11= ntle5 tlEtrEt

~~or .1m nmexarc pa. k 5 en dmm9k)d zondact cddide he bowl e 5 GC IC3335C1531133 tratPdenir modemsor theitte5 7 C.512i gOd=r-rdk Courter mck cdisanksno t~~

mrdslimed t55Selthe indet e ra ddrr um contract LI m d.d nJ✓ n c reek Since theho e knot o kli, em, v, tent naC5 ^I tit idecham ttou d add the same e mg!, ated ne so- 521 ators -end nsttreathisnner5e arrnyof pcssit - !tiepin sensed alorm -dithe s o_ld they Idm -c ts these rt mit" ties Thache ce vanomd c a certain mentnnISMIchlk i functmn -an Cepend Or fa:kors su:F as ciferen-ds inancial systems co-kkrdints mposed by ilSkIIMIOndi tan teChnnligt Cal 5orstra nts annus Types cf Mansaction Dm 35c 50 On 35 InS ItUtIC5 5tOttn be 5nifLOChnOSPttn Cent pn551tInMeCtian151Thn den allthe la ta it chscsesto ncrtide Eoweker me, -dealthy inancid lePlintOrt St 51Ct555 Icrerces midrn-prunen- al regula o- slmh, d nOtraVOIOS35 one& these -mhd - drrinnve arothe If the rag', ord tako a fun:tonal 1.21SpeCtl,C tO acCahsYtlEntnn 5 lar mks mitt.' manner, it douId hem reduce regulator comimenchns amms Product a -c netS Th k pinelpie likkld to lead ind elf ent regulator' [At t_Se E. 131/3 In in d Innart encot 5genompetit ..911entre ty isalso 55n5ssar3bectuse a5 tynttnne50[383 add op 'prim- Med cc eansupe ndrrndi re Lu ns Lecome d Hit ul re rind regulars. d a Li rage cot. be „doh o deSkdd Ine' edySIell Cat I 31 nti r ow tomarcdkectors wtr expend dr egdIstions am. I- dean often Inv, I inaktpkoonate rikMahing

~~tedeidd rdnsJdred,d geddro: dr": INPIC OIP .opccted to res 'cm re rrur ob.o,g On~~

The i ncentives of regJ eters usuat y asvmmu c fa./o of CdCebd ca.tiod, regulators may no' got much credi -nainta ninE the sdlety znd ;ot.dd, ess. but are likely.° DE sAjectec to muchcritrrisrir the ',mbar sr all.rose-ossaneecepzab etevel Cc -deque-tly, regulators r-a. tend cc be too .cautioJs and r-Duse excessde(cs s on eguo ( c persons ans. [rid nco-o-iy

~~• LE 5. mc, opsrfub D(15/0 c^-oci-Mor- acreL5 inno at oq and -mm ig the add effectsPcso egIVOt(/ r competaior dccess ado d^ovat~~

Cccr deb don Ic Ynanr2l markets is lideb, to nave a s gni loan positive impact on 2135VIr Compec trod and inneva ion cEen hand in nand, di Cra compern cn :Rates the rcenc or imoiatio^ 7 ,d h .011'^ I per! sr dkely td influence ..he efi • cy firencial inicrrnec ;Lod drid'he qua it.? al inc ceach pdx..icts Cetz insc Jme micro druJenli egulaticr liceris dg. 'nay riye ▪ ert1-55ct on ccmpetil lino.. ion and access n the sy5 e- As a - aEmdde d posse td Tso ru es ci e L v.as hat e o d dowr envy. adogeter for ,,ears on end . Going JerOld cn ry barrier= nstruriets such ad c.sitai req.drements. 1 not pi-we ly used could impedeinnovation 2151555E55

The Conn- ss on believesthat eempotition and gh qualty nlcop-ucenhal -egu istion,ango hand hand Indeed, IdeComrn sd on s reec -.go( rdderchof ^ternatronal co-tex'; dees t-ac-igh qTalitysupeddsio- In bank -g e- Ya^ee= 'dad y and ¢m: ° t ion T e Comndsicn emphdsised they of both dr. s a high CC -r1.5551t131 and high qua. ity micro-Trude-I al egu 2510- A sour.: adrrdacd LC -egi. a' on di, dupe,' s %.15 ar 5teg al par or prsccmpd- tivc sta-nce, etdgh which there is no adverse ndae" on compet ion The :cm mist also asser ;Pat SdTety and sour indss can be Pursued Inader t- al minimises arida on access insvddan and compe "o ear' did hYpotheti Cr SIrLiaLIC 55C051 C be m2d'ed where simple Id, erage sar e r based systerid cap taladdqudcy achieve si ^ idr rest ta-ory results though hating thfferenc al impact • - anon and .ompe t on -he Commies on ecomnends Ida' modems c, stability end irnyd.tcn acceds, ndovation enc ccmpd Q. be ccrside ea In :added-,

~~eedto ensure '3' Galan: are Gorr ed Jul In 0 moan Cr mar leost oar imenral comr.e. ;dynes, IQ 1 monad , system~~

rho dommiss on coes nal. lake position c - financdTgl.cadlisac.on ad such. Tne syscom p o ices the pachd.dys throut yvich drdidn capitE.Igdc: infused In the ecc -ory -Fre Cdmmissic - sii-dly ol'sThar if dal ey makersco-t - Jet° C:let co fo-e gn capital foradsstagSlr mcd. d.g the cede opm-n. and ins -eirg n:cds of "le econrdm... micro prt ddrdia ,egulation s be assessed in part by had, such regulation affects the ab.i ity of memo int I to attract such capit a. Regu a oils( n o -argsalevand..ounoreds lestduLions... odld he p did at f de -c at casitai. because inves ors are averse to losing capdal dd.= tc instability In financial syste-r ant if -mem p dderial. dgulatipn eve =reached, then M3 can negativdd, af ect the recrecur on capi tal There issomenv dr Hz.= clobalLdrik5t1755 er !err urces aday tom markets highly restrictive 'inardia egt,iTad rho Commissio- also notes chat the viability of an onshore inEncial sysrem s an -DOrL.1155 measure of inte naLidnal cdmpetitueness C9rulues regulation car load to inancial in.eimddi Thor ndoldng Inc mom ofrhore The Commission recom did dd balancing con g ce' lend hand rules prevent -g the . se

G5 ketD the la es. cast pszdLc s anc senices Off StiCre :wing JeS y SOF ma, ▪ 019 Miele eonnsmic. stab! y sacrificed to in • syersely 5 regu aLory ra-e -o nd 3199 creasecompe ,tisene.ss eouads orsblemalic ros sosArcts ess c / reg,,otory PINCIPLE 7. need tofL lose s. ac count tse 'on; .deep ,ilus ate how micc prudent' , segulsi on car ce used n Numerous exunp es sQs rnE.siner hal reducesfaill.se 3.er a sso Deno., sse Lhosghssth mush .scsse co nple -egulations that albs. cos,version s' gsercesa.a onger period cl' 'or es sl diffrentiall ,ra-ec ses Jima: pool cl qui( , CSC ly ra ssse . into liqL Ira — ▪ instts an, Lome or them highly rated] 9 55 eduze the LoLal 22.3 Lal obligations ain sgery asd scum: css Son o 'mating 'nes: Hiet9 IP, e SO 5€9. nog t a aligsslent ol uses ,equirerent rsgulation soL soncscted sropeely wit saus chosks and balascos, ma enc.otrae creation al c- buffers at -Re level and ^1.-e- mks that may ha.econsepserssas yes s later cerliDDSEo sg beyond the regulatory cycle inwhirl thc egslalion was so fled

can amp rse business Micro p g Ics :En oftenbe wo oci123I snot I an .d.o- • ulatcr constraints rls) site% c I oelore .he asnk CV law dcos ss manual insutu reb v Cepenairg en Lions ragart ousting minimum ca oi a, ecu Melt a.ex.remelvcossi ) arels:E.d theex enab 's its sonthe innum ritso fmicro o- .ides regulatio

Trrev,o kplopcsce sy he Commission ■99 99 -aryl mcno' oimiuo p Loe 99.9.919Ink ng atcy regsis-i'r St.. think °bpi,' one I sarclal a era 9.9ferni: isk nas been placed separa ely ^ micro prscen, al regulation pre- 909:9 e rills !nu isely besa se rricm-prsdes,u, regsl3mon ray,. re; a different 91:9 ll their rules are sle rens misrs prudential regulators to be a:areal Fie extent o "No p'ens.menor pro eye ical and o= ■clk.alte ^Pt s'rhan s sf eg PRINCIPLE 9 me sequrremonr 'I act-arsons o^r .orit ond r U12 0 FallS „,,ored or,005 -,u .share the re..r.,-cbrIrty or ensurso d soundness te

nainrdin szfers and Tho_gb s-c ain object', € r cro pri.desitl? tIgUI.39 0 IS 99. ssunoness for reg.. ?sod pesscns, The rstulator Knoltse ono J timat99 lesDonsible the safe anc so.sndriess al -re regula ed oersoss Mal responsib its siould stay w h the ba.7 arc srsragementof the regulatec (.2 ssn "nee a fmancialser Ise presider s sconsum rs irrsestor= and othe stake holders censned roan o rudential cgu atio- 1H y lo the sde.,/ a -c should c. Perzei e 19E99=91 es o absaksd l3n I-orRU[1, soundnessolL`SUIll5tILUtIDsi o ,isosik,anadd osia,st of m=ssibesthatds sot c.regsotor replace Lhe eflorLscl I.said ssl sissiagemsr'slthe regula ea ssrson be essonsil-le should as. oulf Esseworks lse boarc and management iriplerIcSitlsg Ir@1itor sio.se pnrc pies enshrined - th. draft SodE, the :or mis,ion ai5o ommenrIsssal r ClOsp'0.2riLIEI CO112[1011r rdLIClsd 5L.Cs a 91.9911.9 there 9 AVal> StrUC 9-9.1 StrUC.Ijrao nooo "espor 'RS ula[0, CP94909 9919 9999999999 -iors hut may rules pass^ approach mos/ b ing clarity and celainiv or regulated IT: ts nst havelsiOLICsit 11 -ni■th i llyo he regulats ts see riskscr cing ,rzr, easthey about =Jr ILMC 4150 il inst cotian e cc sno a Nay gs-ne rul:= ne regula or msy sat Feeble a ..cdthe problems 2. all 99g..1990r5I 91l I9.1:at tObig)C.Jr it being ose d ds.91 99 GI the a-c.v3,k Iss. 5 9 pLII n ple_e

G G otre hand Dr cicles Laec FID e ( SC °nary a preecn may reduce cerrair :rtheregu,Med Institut ors D .iet`ercplato preeerf ex 3ility o purs,ethe nicm p 8101)y:[ ye A balance nLg.Ists bob rick be' .ee :heSE tWO possib Ries Wm et -ere s —era n -song Dr manly - 5 rucru,=:a appra=cm o regulat on t'e -a rum or mizro OrUd2ritlai ale sJel mot he royJla or s-ct'l not ■et overly de pe-Je- t on a st rurec fromewok end soculc ftthes and shothd ha de capab Imes -o scope ,nc mani'ortrenskc being and it-oughe,k,D ones, respo1d bo these r,<5 o acc s mg!, res 2 misojaloe zrc Jung-nem.

~~Resolution~~

~~7.1. The problem~~

The tz lure of large or vd . e financial irms rddn he highly c sruptinc for douse-talcs that thy echan ersofl faiiirg ihm ens or ti cPC010Mb hC.0 ThISmig t nave been Icss impo Innt2sbAnibegobbhentheInc an rinancialsisLer wascn -instedbyinsust /0 irrt licinfnannial suppol From the tab payer td India has nereastritly opene, u s entry ir o hnande and several I- ge pr tdtc f sandal I rms have arses ' becomes in-port-int to :rebate mechatt sms to :ICJ Neieli it; fdrrs Sound m cro pruden ial eguld btill,dreducede probarplit, of fir,- failure hoe e tnz ingd'I e iure is other eadithensr des' etle had. rd of f narriht urns r

integral pd ht the rtgt nen:R prodessencd Lhe market Poonom Lb 'Haag thnssnobtth a land thus 'tree hp lehQu'ardLep tatty hob! then be elitist:el by banter h ms How eve s important ensuresmootf nnntioning of the nnnbomy atid DVOIC 7is-upti ltrn tat ure Thisrequires a bn2ciatibet, rdsolutip mechan brn resolblioncorporntion ouic atch all ndneis intrd that ^d e mdoe inte he pi-amides o hart= olds nnb interne) Mr-tithe networ hatchet' rm isrea nets (burnt net neg:. tbouniforcetheclosure o dale - Ithe obartp. at firm and protect broil csnditmens eic ter o ansfen ingthenn to dsnlyent Pan or biota/ ng Indin fts an examhie in Inc e cit stcmdrs of a failed oank at guaranteed the first Rs Iddl of their deposits as depos insurance dhpnesen India hasa deposit is not a ndsoludo coTorat en it den s only 'd ;tanks, ddd is o ernose enaL e to pla, a role ir he lard f a firdneialf m This is a sertodsgdto in Lhe Indian PnanClal-S}S tern no, dt1 orst. cal purpsses pttesent en bncernmo-- sf by a a ge pr /2 C fl-a -C rir no.F ble Lacking "D ma reschtic on porat on in India dne p oblems of Id ing omen niDitelat mist ;al lbe placed upon dunnome's tax payers o ndtheshareholberd pubh,beCIO1 inancie rt ms This sen unfair arranFerrent EntaL shit g a sophist GE ed reso htion co P tonstoveesser to to s rong ne seorsdsto the posts :the art tire of a large linanc alum ano its corthecuences fort nelnd an economy D.-axing on nternetohal Les prac tees the Zorrmission decor mends a Li n. e. d rPsolunion corpo at on hat will ded blur a - ar o rindncia Ibtrnsshch as barks ants insurance companies ' I no di sea LE" k dopos t insurance corporatio^ The corporancr mil:on-ern itself , nth a r 'oath mbs ha'makee nignh intense promises o eonsumb sues as hanntn, been coni ',trues. defined benchphris on Lind= ano

~~—no~~

~~stems The terszrE on ss II also "a erespo-sibil yforthe aces sesolu ion ment tt the, has!. -o discs 'Kr consume imp The oefiningfestme of :se sssolution :or o asion 1/211.1. he its speed~~

~~7.2. An effective resolution framework~~

~~ant J5is sit le Commistion in des gning an erect' rsssolus or srame ark ref ecisac acombination of insiasuss-esserin rraragna fa sig tinarsis rrr 2 the tri erg qglcbal ts,,tis lot T !tea to tanks en:~~

rcurisast osur theses Pasco Tabl, 7 euu c ates orgs- se' ons suuci.urc o the rsso,..tior es poratios In nking at*, the design es_ composition of Ihe Los- a ca the tesetutisr .torpora the Corsr%ss or t elieves tie% formal( so -normal! tn st ng and times,. co be-me- the resolution corporation and the misro prudential regulators sas ordina s.elp achis%e orsssr y anc lesst cis sp.ire resr An rat.resolutittn I arnc also rPC.I.■rs:apropria earranEei-en sfo crass a" — co ordinate.: ss- borde esolut cn peratc ssri s, global Jewry crass- b.% the I o-e and hsst so inlnes authorities sculd creatsfurisulscs c estscicoistrrer, of reset srsuch institu 0, s in a nannett-tt Asult protect iiLs a onal poliss to zndprenttteritoltacor agiot iheratior% areuscerloas rumsi?de.swan optimal asorthsch °cross Ls cer resslusion ndia panics: - -93

~~Table of Recommendations 7.1 '0) I anisation sr m 0.4 114 reso ution corpo on 044 me 41441, tion ittil -41r~~

~~44 4 elc. ,Loele idFle thane e ovureJGDIIE inns 15 dIStua..111-rOblf. e~~

~~^OmilLe con=i't~~

~~Table of Recommendatio ■thiP SCE~~

eregine, el :hal Dr angemen4 -rose border esol ition DP‘etopmos ts this raged rria) require &Tie ..lrenLs o111.2 2:4 the fu ure sues as o Squire the rase Aion ssrpors ion 4 cc ors na sterparts i s 4 iorjur schc.ions egarc the Corm ss on recommends L-at .1.4 yea 51--m no.... a commitim. be set up to reifies. heemer8 sonsessus t s ie'd s.igges ame-dr-cn s i s the legd1 fidmemot on esolupoi 2444 y

~~7.3. Objectives of the resolution corporation~~

Qes gning a .ellec'iss csolu ion we; anisr c ari y of ,,Licctives in perform nE ressiAion tabie - o4lires Poablece4esotlferesoJtion corszratisn that mist guide its L octior The isers44-4 size of s.sposc takry4nst ts onsandulsorns ,:esceo nancial eon- eral-esrave irersascs Lhe tot ^4441.4...411[04— iirm la]urn To address his ssnsan regulatory regimes 1•144 tr ee to reJef s scope of resolution Intrraric- s ily replato4 are c4; mc. Lo srcaden themandato rcso an au 44 ties to in. cluceany 3111 ne tic 4; oarxs solchns ssmpiries -or bandir ansial co co at ons a - J inancial 41s4. n uctuse such as payrc4, 5:Werner an; c (-wing s,s ems The Cade drafted sy the Commis4o- en. sges s sew uticn CirDcrz- an of .sm._

~~J1 c ent rces ifinarcia gani5at Cmmmenmateiv zoracr on musthave , -, r the apic ,ms orderly liqumation mr a a-o 6..ectir (a am. mus, name the iegzimome~~

ency II must The resslt: or crpora on reirremuste—ancef -oncialmarke -g calculatec ris,s Irsteac, it -mL restr mrke' ticioant, iom innovatmn e rac itz etre ehoent pri.mg and allocation cinsk and Me r Qrralisztian or the 9wR hesupported and erManced in the 'al cw ing costs offirm rm 'a i l larket 1

~~I ab ao of: pea obatitvo'falluraarl and the, rr pose Lpan resDIJ !Or ahich rallacts a asirbinabob~~

~~ippin:as a be in a marre 2 Allozotion o losres to nib oarars and unsecured:az um poredo~~

-m zenmes ara,nd M1 vm emmon An imkoman f -e resoluho- frammk kl ry fa d L. th. monsurT ersin [mope imn te nat by srh cg.ilatma en and to w'io ,m,^ c alma aCCording tha eixib bete r ased obligaboa2 exit. orebi gaben5the PrgU star, in as -- determin Fbe natpra scale c corm km ntom"side alio- the fa lowing fa: ubation h resclubcn Garb-arr.^ mus t-, tors. the nature and extent mf demirent that May Le causec sommiers ca,eof coverea scm ce prouder, nco Ilment of obligatiMnSowed to them CS on recingMc ne 2 t^m ml fcomsumers a..cess and o ocess info sormy and kbUndnesSalthe bpsveied uze ider.end ;vein ereit rficul- mc at ray arise fmfancal servie pm leers in ra ding th seobli~Jans. ma)s be 3rDteci-ed p‘, The ob igatiris !hat smsre nig- pn M1a5o.e -mtors mus be ere red to as co..emc obligati-3ns- the rmgmluvo-lcorothatinn 5,c- fling: Ian b II fhe °clef sl resolumon omsorationv. Dem motec,ccris meNsfrmovered Wiens pa 0 a reasonable ir Ir therm is ns mmtlmoon Manley.° k the 53, al —eat adill be p esLurec to capita Ise l^sses im taxi ayer This is eSpeCiath tressed ims le Ming o highfiscal osts lc in the ca al alFb Whoa dilbse colabi - ea c anonvil :tab it. and the heath o Pankruplav ne real ezonum , The Mier ern-upe Mb-Payer lun led bait.tco....1d De g hasloa dowevir asglosa expener(ein thedbarrpash tialcr ark2 -2t2palityhus a spicy pro0^ec ngs may not 5e;cesua et° pre...eml -anmal instepilit) specialised res^ _bon regabe muS after a .24Die alt. - a'ive'D politiz mansequencec of ax esulti b- mmuptc. ^rszeemmes or the f sz p>yer-Linded pa ImuLs trapiclarde,rlv The o roalexpenences mmcial hrimmthot eipinh fe)ljre azt on mo4s smoothly while demved actin- o subsWtid ass _m Ng exc h b.. Ming :spa qael He Pe bleat. ectiveof brectingpuhlizfirdaissa ,anymoim.wit bilitytra m.m tsrs :layered Flan -nkes an er y assesmcnLaDoJt aim ma is approaching failure mho rider dk,s intervcriLir -S cz Iv I his aequass2 soph st (Alec mal regu at 0-, r sk asses'entsvmern one ot horks ccrtne-ship timiz of rude- out ur asaselb aaahes an rdepe rientdecm

7.41. Interaction between agencies n. Thevsh: e? Micro p -eculetion s clowl linked m Lhe iesalution I mommcn..b ect re Mat s o Inman secos s customers M ins -m a' 2s2, Par pt age qs- a - d the tas payer en3na I oel the, sk of railure of a f anaralins; !Alan bo aeve- here are roesitar serheer he 9:3r5JE3 we el micro aruaential and ress aeon .13110/1t ( 3 interns al tirreug ano rtens ty o Utelfle 1031 As og as a firm is hear y 'he reso t. Fun Bath° rho-id does not in.e var. c sad inetead relies c - infoquetio- from the micro orudente reealator bes. it condirts periodic e firs . A3 the imbue ta of ailiee hcreases the degree o'supecaelon be Lee resowr. on co pora: on will nerease At each .E.g f pee e fret ty, t ere 3ill au regale ,nte- action bet iu n he mic Jeler al egulators anc the -esolutie- :orporstion M aro art den eel re.uta ore arc the paolution m aorsbon have a eva Jefinec pootocc cm setaled el he thee Code ro to nt ..o cove' kg Risk Ob ass nal t at comed ecrvica pro Our. r .hith ta, coeercu (=1" ILL 31-0/123 at aibcrei t stapes °rrue to tie

~~3 Idel earerong egulamb uses the r aasessnear quen ifcat on and am oen he encro aisearer~~

The task of reeo oge 'ailing catered Ser..' ee prc.. dere sc Involves interaction with M1 e core set ion 'eealator, Ore eca-roni, usec cot G.{ reso ut on wolves se line Lee fir Ito a red hyfi m 1 them a ll c bus nabs cr se lo g or me gi g or he abaci, on - nupetit,o- must beaerucered -he reao ID" :or ratio- ems' co-au I the cei on to kele &reefs of s 30133 3 an the s ate ot..c-petitin in the 'market n addition the 1.0e 0Drpcea on nuet prepareareport tie a l ing the efeer - the its procosed ac ion likela la cs -put Iron tn he elevant -terke Themeraction s ould leeske she ineorarb e.eutinforratienand bate at edispoealoft the ecolto- corporeticr n imes ert3is con erns of irercial glebe y -Ey but ee gh Gorse"' on :on ems A enalyes of glubal exper ence shoe/star post cris na icnal camper

bon authouties rero.arise 'hat farbeg - meeetsaticns are toe e^g hy, as f me el 0 tress ma y de el- 10121S reurdo., and cauve ineic en Iceuaatioas D a:ed....re: need to be amended to facilitate speec, ciergra lading f me In auch ar evenc 'he °pig& or to eensalt c cci ard rea Trine Lac 'cop of eo-npetitio- glue oececmp ed The eaoluuce ruporation '3135I aptroari rep. in tri. circumeta -ces FIr5 1, !here s a diffrence or oc. - on L e resolution corpora:ion a 'Id the ed ^bel regulater eithe'entibe me ▪ ) supmea t 'he FSD3 V 1 d' M153 ress nem Jia pate S6.onc yr if he reso Jtion corporriun be 'ries [-ant may Le rego red to Ikea[ tia e againsta sem it must nacos= rileinfoirn the esue o aemeacures that p opose3tc aKe thus and seaa pernessio- - Dr rak eg. anysuch ne..sa -es TeeComm as on is of re , mee, 'bar ac'iona oy the re:v.. a ion corps sten :agar 1st 35 e are Irk. y us 113..c systemic impuca: ons The ree enti y tee nee, rinancial a chiteccure desig-ec ay the Commis sloe with a 3 ex DI -e entire. :es em -e FSDC Therefore an actions aga at a err must eat,. sculybc v.i n the krionlecbe dad Pe'-iesiun Ditht 13SDL to preernscan) Lyeseen aystemK consee leer ees fro-loot. trring stn

~~rabl_Tg estate.:t .esdee frarneworl< of ao ordi -eteo aeon with other age-cies,~~

~~7.5. Powers of the resolution corporation~~

Tea iome- ss on belie eas t -s: the resolution carusratioi to be equipood with yv do. powe's to carry out its fun:trona lo cy out its superv-sary reviems.the iesolut corporate[ needs to haa , a specialuec staff a( examiners -hese examiners will au - duet regu exam inaeonol covered wr ce olovide s w he lithecoveredservice proviser seows unto eou , ahlo trends in cs risk erof le tile resolut-or radar:roilcan :311 for see cis' exarninat ons 3 measure ol enaa ued super...sloe Table of Recommendations 7.3 I^ecton with other agencies

~~2 :me nnconnnn ni~~

the micro-prudential. reguiaLo sno the resolo- proactoe aod Nin'eue tion - &co erethoovicero.odorsano'o Thoncorcorat co oL..o.L. key to e-cure o [et? resolut c 15 !meCommission env,sages a Navel' losses Lo oe osurarce Ione! Toopera!' coalo-o ,-1. Denies or !rite nen or! mensuren cmpn noun(' ne antion" inct nom! ng: 'Oa -nov.0-4o- in- corponaniar to re LEnen Hole micro nnUcer al regni12. onand the reso to se undo- As a iNt s'ep e heald.h of -".e oo....eroc ser., aer sr.o.re the frarc stages.: oeasuros o ard identif.eatio of ncerequire: oetorroirat on of cat - - .-1 no the direction and oi Con !dor of co% erec co p.-oviceN o.ae po.dento, role o '`ese r =I.. moasoros On- -e stage are oleo el Ito m I seek to aCornns t`e rorcorns of Firms thro lotor and 7.-c es,11. ion corpc at o' thoosupe iso oand rep_ ,e[o^ To.is - o e Comm! sio- tick ..es triEo he 'send ts god

~~nn2d nen innprey de shnemni common~~

~~DIE 7 L 9J1- nes thr. Commissions recr mm...ndations~~

~~751. Powers of the resolution corporation as receiver C.ve aetion" oceogned to identih, the risi~~

7.6. Resolution tools oalm ist be ded by 1--e The clots and sequencing of -e 1.1+2 of cost.to the so.tem o'opoolonal protect on 'active of mini olisi-g doc-t and fi an sing co-taBion cover:mat zod ecs SOD' steatec desosite s :no untemnrs and - risk TFe objectives shoo d beotoro sod asthe resolutun norponatin !Jae mnes cc he app ei nn case f re=olutic^ can :Innen y se ce,ogonscd d,te e.e. shonstha Tae

~~Table of Recommendations 7.4 Ermination a -d tor- GIcorrective ant on~~

~~the I-sallow( totietotasto Ito~~

~~conehotroeu as oqi)1110' sotrenocia ober els~~

~~relater to heti a~~

I haletc soothe test tattoo Thu nostn matelot teased tot of resolution re alses =colt all or pert of I le oho ness a COVC/2C sertice pro 9delIC hable commercial purchaser :no no is tonui ocrass it en( tees root oaths SCNC. S and I ICUI5 min (1,1 .eolLI ion cost in thennerose thistonl rcs on cc ora ion t'l flare tat hDrell:h diligence is foltonen n n5. bold gi trig accurateHernd on TeTlIrlIS ngt1 e lortercloce9tia,pu chase strd:xplo g

2 encoeinahtudon :nod: cashs !trot no' no possible tc t tin 'outer or a failing co o Eki 5ER, CO pro./ icc- s id cases hoc retaliator co pore too can eataalish ol o t000ne: soh chorvmticige Irmo leg bets ear no hours. of she, et tosieut on sod shisealalec sra an*. to a tl parth he ITur age -Ifrt Of br deo meth!. I Go vat Tr so seat° asset Oho en solo tor which wi I eithatooteir eithe he es I coldest:et o ace! bine tooo he too

Table '6 dn Ines the three resold cc tools and the coin tions lo thou use honCommissidn renommcnsethmtheplocess :end), ng a coteredser cc ponder. inciudinp tie choice o :leo) ti on too should r ot depro on th: norersh dactorc o' the :nonce telavider This will read! - :wpm - p nett''alit/ te in the approach of Un- corporatior 'n this remenicrd the tree rent o r udlic and wry:: e iirm ant domestic 'tESOLUTION

~~1- Orias roceiver Table of Recommendations? 5 PoNersof the rzsolution ,crpor2~~

~~!Asti-..1.11A ch- lem`i of der II .pre-T1C6fr-cti.,ar~~

~~ress I: on Table of Recommendations 7 6 liP■I rEsOlution DC. THA all Ca T.( osolSiOn en ihies 110 re=0 voo.c t~~

~~tpmramyi iA a im ;Cr A^,lastre.nn.ar ■.-1.1tIcn T.~~

ire — he viekkipsin 5JD5id ary a TrAeiEn Will iclei,Lizai ell!: C- State 3a-k Nee: .I 1;s6, tat tete£ enactedOS Toot:. e India As 3:5 e-d the' fel-sorance Coru:ratisn -dal- —usians tat , ary sr exclud= the ap spec !cal iris:F.0.2 -s These lay/soy a thr instruirated under le m . plica[ y ciEereral co porem ird Tinancie la Bank C. India Iron A For ins ay.., he ctete 6ar +.31 hue Act.1955E xe-np's NeS

~~DN 9~~

applicninitt) of laws emin itgetinding up o companies and p codes cr its ligitide on an y by an ar of me Snernmetc 'Nese BINNSIONS R nee unfair competition as ornaLe. a prce ert notion al sole y in e m d lin-sit-nes anc 21 inxpecteice that t I be r stlatee rom the le eel set `lints The Commicsinn recast' -ends tha sitch ovisiorb benmenced r mec ate !, sotnat tie resolucen corpora ten CP e-gage sr- der y iann cast disrupt reso mon of ad cotieind service prodicers n 5CCONiance its objccri inner 'soged Table 71 a n slew' tni.tiardS enaniting the effeeieness nf I e resolttio- ramewo, G e Commis o- also rocussed on the regulato irame nerk D CO 20.91232NR soeietint. t-a' carry o Li:eking attmties In me curr mt arinnement such cseeetatre oarite 5'n gBINned ti ante eg stations and 2. eSutjeCt ID a dtat regula'or, l'amnite -k by the RBI -his the Pegistrae ol:o opt. Mite Societies crt-uSts'et in wt. chthc bar teare Iona ec -hit has gentcd dlrrmlces in the regulate o r co ()trek.? honks.. These have b s t emplet o be atcressel through mn orannt ms o nderS andinge-tered into beseen re RBI arid St: e tinernmeen Some Stc es an d leo^ ntones ieamn tie ict Cs .4 prat veSocieties 6ic enno:eeng the Pei to arde, the Reg 15'r:reCo cperati Soc et the Srztecr Leone Tereory tie pied up a ion-ope atiee bs -lt or Is stinersede is co- .miteecfmanngernent and requi the Peg at ar not tc take ante. ion -egn Ong w inting up amegenation or econstee on of a cc operation tainlotehci, onceeniettir eiting from 'hi. RN aleRD/Bred under the DopcsIt Inger arseSchnee These totopee ie. banks are oesigneed as elig hie eceneie ve bnnks for 'lit purpose ceposit seannic r se- the RILILD 222 96 iris has reneted ari tneitenlit amewicrx -crescme o opeita tive bieksnreelig ble tt, eat thn deposit ristr arrn scheme by the tent itt !le ornci °tiers o eat part oi this arrnnigemeni The Commission is of Lon tieie at woe ^ 6opeaMe sooetre. engage in the _esi rens st pro iiingfirnrciaiser thin, noc fits bc rogt atedardnupervined by mono; re‘utators in a mar El that in c.tmmenstrtte aid' the after business and he de I:ken bythem %ie r sscoo rneted n :n orderly mane- to caee teas. dis rtpt on otFe consume's andthetinarc sysiom ope csoner ratertc tin neenn of small hotselipids the Corei ssion of tre Ina Es eie event of a deter 022 ICIL in De 'LIN profile the, isna. c be sun es! to the prompt eetition Irene cr, eiti, sage by the Corr eission This tan be an eired un ticr etc e ist of teCons to on whin at .a Lto or more Stite Legislatures 'o nasa onto tition accepting lee autheiteethe Parliament to ma Le 2 222 202 L heSN END anN mBa- E) 212 tattle eisedceg tithe= theCE.2.2eit to egis- late Using M1leprcoson.Stascove' mnentsco d 'pass r noluticnsto exteri mepc her Ls meelaitis Or Lie erul'ilot,s stems an ant resoluten picot.. iterative son ebec car drg on uncialse. ices the Pnrliarnont Tne Commission Lnere cc -ekes the lelloeib tees- nedaticns vie- respe.' to co operative scut: es

rying on loess-K.)1a be sub N losiritur egula cry aNd2uper2sa frarrmucrLDT lona eon as [the motes a rtinge anti/mot CoLerimel LSshould 22BPCI tie Bun& ot lie Pa iaTen 012gislaIr rialL222 221at nB lc Nourc reso u2102 cr oDe ct 22 secvu 22 canNirgol riranc al 2 22212N Fre t The re,ulator impose robrrctionscr rer n2. a of Ineicial se esti CO operate soenues Sten nhceeCterrrrei 22 I aLe LIN 32 eptez de autqc arti eParlerientte leg/2 Ne DB tl rkt labor of co ope 3 12 ,2 Thee eistoc icns d 91 that 2N-DpeNtIN soneceS such sLa es222,12 not bcco.cree uNe thoLesc 212 frarn222crk Dr cseB22 oN he Table of Recommendations 7.7 Funding of resolution and Insurance coverage

7.7. Fund for compensation and resolution =Commiss o en cince eszvoecf esalubon run=beyindba Iks el:ode(' ranedry., ..9hich /Orions premc recebbr !Torn covered sages eecPa on cc a csthutibr .9- The zsiered scr‘ ,ce service prey LETS N II be zrelitec The pre-ic, le se cellecteti fro c al po,ibuc ELS cn icaged in the rbmpt MOVIdele. Vebel0 be proporbo a t- Weir fine - Corn:Clue ze ler frame...0 oTorabon can ermitate the poi br ainsp=cif oicr.b-sor ces the escb -s tee -esalu ion co isyo insurance is ued L. the resbliJob bc soPi- oe exa Dorebion 1.011! be 1100N/Cled” te mi ate :be police. if be rove el seb ice orovicer ■ered sere ice promcer is engaged in to pay he P err a for a L,secee pe DT h the co unsay Jrbouric prac ices in mndumngth tbsincs recarr -endethe_snolbroceedsJithe In Lee canten resch bon eCDMMINS &ovesolution relat=d expenses ineludinadmir isbatirecenseses b resolebontb - ( ,tosoecoied on umers This edbces ne bu de- bn as fortee paeneet pf corpensal- viee p OVIdelat., make separate zoctributiccg or dirre ent purposes . eaverbdse- he C;mmission recoge see the faet tha the rbso ution co pcsaLise may eqb e Llsntic)s Limes o bx be-la I c al monetary r.=eisrance una,le to mce esolutice corp.: at c. distress the Ile2 (ets s ice eYseotional crbunsranecs -erm kr a spec would be ates ...bd to avail a In e Of cred t or the Central Geeere tbe inecf crcdit period T-cCe-tr,,Governrre-tyil drceimnba -c bylaw theta credit sought by ree b-ty extb-sicn .-erivoal or incr:aee crec under -c ine panted b‘ a Jailed report statin reassns cr atubo- corsoratioc st be a-cc- add liocc 7orowing and inb=nced uses irbranzeco‘ 'ab e 77 summarises e Cr^^ age an: sch=^e Or funding rcso Jlion Nat ebbe b=cr-teddrc r the draft Ccde

~~-101---~~

~~Table of Recommendabons 7.8 winding- pro: edinks~~

~~3 ske risk- u or cooksuol o sis theCksh or k th, 1.-.11>fiC.i.. [he resolutcnLar3ciatipr u sea~~

~~7.8. Consequences of resalutcon~~

~~A resoluson aeon by the resolution ccioaras Ds may iramere of ovurg rghts abhtltiCOS In cor (acts 2 csam,in knageke Ole olthe or eve, eSUll ig n re0a olor.in kluc k~~

To prksike for compersokon the -escluils o scrap a' on rn Jk- be emossoeres lc carry okt kroceseinos were persor s or instout ons to be co-DellSated c e -drW$tl and asks dsd also@ ary comrossatior . Co- oer sailor p-sceedineswou d cover:e lo:lo "ing DIOCEaS I lotior cf FE pusoN,rin,i sc bythekktionso An coop() ziolvskoretc

~~2 EGLat on oftheaookn skropenszt co to beck nedo, to each person or is Linn tlns~~

~~3 Soirner kc~~

As a Isks recourse the 3..» , )011d: 'C'eVd1,50111 ng de rants mnleappea, o ap pe late "ribsnal, brykod whcs themmpenY on pioss"dings osok'd oo one :0 - eltk.d0 Appe;ls d -se -ostoctec to r ssk-liss sg vheoer dui psocesssysslo Ickvec In he ?ors d of compensaticr An &fie ent csok mkria, ism Is one sr co sures that mote covered sesock pro. dea toe ha ,E 70(0-12 unable ore wound up This ensures that detkookkkon of The roars z heal h of a c..;....r2d service orossicr cocs not efec ocher covered son/ se pickax's in anCel systkm kinse r "esolthisn corporation closely kositors tIE slabililk of a covered ssrsise piok der aos %storks .caarcs hr -ging he instsut on so less solos!' financial sta e s ksst suised to de err new-lenaseise kerkize OlOVICelshOJId DC liguidaleo Asssch J ore reschs'ion corporetios deter's) los thz cosered occ prokicer ras ;Iles, the sovernd service pioside v.-Cd oroceec oliquiras on The Commission has cee ded .1J■darlD1 of a covered sery ce oros der k oed ]ap tha Hov eve ,th,s lass ous, slrpu a e tha the 'OSOILLIOn corporation vou'd be appoin cc rss the osficia I qUidDLC D 'he firm As rs e tionec earl or, the e zre zee.ain aws gor eroingpub ,csoc:or iranc instiLutkons hat contain Pe ikions oh ch psokls rostrict se rows- s, the resolution csokoras on to 32L es Ito officio gull:11.os .1 blase institstns Tse Corskission Roth-nine-as 'hot Sri ploy s ons of osistirg I:NS LP pricrdsd imme C12 =IV° efies o his p o'er kf the resolution :asp° at on Table Sf3Ses pos Lon of se -am niss,on regroag hot ior proceed ngs

~~102-~~

~~Capital controls~~

capital cc -trots are 'estrrlios on Ca maytme-,I of czr tat across borders The design r cant ...:Is Ary .:ouritry to caw callg espial canms include a range of measure -on reerwe reqJiieme- s limns, Ire-sing requ en:ants and srirtiw hang 'onirols ma, be imposed economy wise or may apply only to specifi sectors. In addition, restrictions may app y to all kinds of flows or may dilerentiate or type or ou,a: of rlc.ws Incias owner accourt rully I orelisal ire Car-- ss 0- -as wo leW on e trer tam e or the Dtc,enzing of :apital accor beroliw. Thew) are onsw 'och should be made by oslicy makers n I a. t lid focus or the .Lommissio- has been o-1

~~8.1. Objectives of capital controls~~

While some masons :aye uowel caral controls as pea of Net porky response m sod. infloa.s the iternatic -ial Fund rezor —enes "Wa:cap,:alcan'isls be —plemenzed oily o- a ternporarj ews s w-Qn Dthe- macroeconomic pol.cy responses hays been exhau:ted The Commis on notes That empilical stun^spier.: mixed e d den:eonthe effectiveness of con-1.0.5 k a;:dressing macroeconomic imbalances and systemic risk. ire Commission also acknowledges that. n the ownJOdlan con- :GXI a cistiwtiun must be made between strategic and tactical cap ta:convols while the former nvolves Defining D :red Die framewor.< of L es of we carne which car be used by foreign wiestors de:IdO their investment strategy the latte- .‘ould be 5,11 at on spcwfw dlIpc sod et:len parbcu:arcircurrstar ces -Ise and wichirawr wren t'eY abate con t, this. Commis g.ion cw.wwm.r.ds that capita: cant-ols be avail- atle for dol.cy purp(4.*5 as a: -.emporary measure dun-gra:roe:01one crises Evel n otntins which have 2:1 e..ec account co-yea:silky the legal f owdes for thr impos o'co-wals p eventing foreign owners- p Ger:am nat orm: asses for reasons of national secmity. The Commission recommends that the Indian contact too the law should eswiet 'opeign ow: crship of naticwo. se:s Accordingly Ow? draft Oods.p o.idcw fo- the JUI5Jii of :his objedive vdth cla ity Jnie-:s and objecives TPcapplicaticoolcap b islentwiNNeprindpleolcor rwe neuwa :ty Cent cls should only no imposed al I: o enzrylo.c1 0nce cntryl:wr:1 e l 03-

Merit fore gn entities e rcceiremmes are f led. Lem stould be fu I remione symmeermehee mrnparec Mee! remdent ex ties For -stance -et eotth cepitm ad 2e difr-2 cnt ter a ^reign d titymher equagnermem. irtemment rem net Cif SIMUld )11 ments Ictha compared resid r tent ‘, relorr sim dr funct one ctinvest

~~8.2. Current framework~~

e existing approach to cep The to eigr Exchange Manage-ere Act 1999 codifies t- sectiont redo pital .ecesun- tai controls It diMerCt LIMPS .2,eer cJrrent nortto - th eel for erre- tanzactions TheCm-teal Mmernmem makes re es in consuttatioe -ere makes account ansectiens and the 123I conailta n m Centre Gomm etcount marsee axe This approachhas led to a corn regulations i n relst ot to matt- J Ex web of rulese'd -egula.Drson cap elccrercIssie eat acroselahs It tem also led to arc manslatice of collet mmo ns absent:. Mr a Jet t ced mensistem teMPAO k rto Ise In study -g the cement rtmemerk, heComm ss ci notes Lisette de imenocs can be broadly Se:la-mired into two cetego ies

~~tecol. -me= rtemtehmIcse extec thermetle lees eel 2 Ellf .1222ence mese Fe Joe to absemete p oce2ssac JJ222101. ofic22 and as~~

~~9.2.1. Difficulties of multiplicity~~

~~2.r.S222 also ems mmec itleple emit eg 2tieg ipler 22Ret Da2tic prag 220.2- a gtr s-ad eras et deme sum s me emet tumei Sr ettristruincem .2.212(1 by both12I■I 322Lrlistc_cot~~

~~■ lea■fe Mem PPM: tir Lyer encr21;22er r en '221112312, 21-11322,2 hous.3211(~~

~~2222rIPpp -ornign r ct rem n 22“2-111 te count v.2n er22eb2ec2ebasisror hose~~

~~nerce c..re1122-ist yho252122D.,patrre ILO InJu3 ncl'olif 23 id Pm..-rpt on .1121 s es2on3ib~~

3 MultEpleInvestmentuehicleS anclunequaltr¢atment anous21-1/ i223st2 entveh des 2.2 'eon cr2tedinli1:13 fcatiztc c2pitali2flo.22 met remscrect Oh mclede tee Fo eist inttitteeml nvesto us His:creme en ereCao mi neestom M cis axe Me QM tied

~~te. polk.,C2rsderatiel2 Ir ;dolt ono the wiite 3 ...220-1-2 non 22 dent rdersand pers:r3~~

~~Add! i2ral ti=r2(salsD2 aloe. 42 2rt aMoreig intemet Sem rot treated er par mix Wei lidesto~~

8 2 e Difficulties of absence medi9ewtesorabsence tr. !he tele el cap comes m c creak!, ocessir ati2r to 2.22.1 3' .2[21 01 d^2oido( 2122. icconst't,t .2-2 In acd or VI 2roro rce-r,3n 2d OregLI3licis 3 e ° aceompan acme emlict ems purpose making! d Ilix. to stoke he ders 2Deduce reg2 ar2rs

~~Larne COSTeCt~~

~~2 Absence ofjudicielreviewt Cu'ore. feet 0121,25o any logula leis ductal e cent 3 or torso [elicit onssusicatos dr cr,autsontason sisttsd b 1e se-swiss-a _set ea~~

~~ttcpTitation sffizerscas begin trig its rlyhiseri Nicest cl a camps in Ton al 32thorisetepe~~

grar an appro by tsc sit or Ise roseign r men!. trsmo ler antrd is conspicuous Sr its sbasnal -sees I, the RBI regul3tici olupital /et eat seen sce- pu els as sr astermese re > Pcics. tens tie discretion of csnt a tar ard not a reg.' y act on scrth, o legal cpscals Appctis son dssis ossor9eC al Di es o (Apptatti I sista r tuna! crated Is; IWCell Uoico.ein-rint .■.pers3r agric, ts &sic or :rho elthe appellate t tunal cies ea ay tseCestraiGC-TirM21`trir'il can scpecl to he app oprche "teem

3 Absence of clear and consistent drafting. Ca sal tostro s resulaticts L rent! T lated areasst gusts aid insonsittert &tics increases he trensac 1.n:oatsIQ II Gators Ala sits, tete :I cosvertbiltart - an ad lot Shull er See reverters comet 1-1'b userlap acers IMPS cont sit sonstrres exi,tcnt r les tor dice ert ca egDn'S of la.0 Cared DrebleT=z,r2platcry nit age cnd sck of alsparescs mese cc, sesta is Costs inc case thc cos ofcssi aced b ovian rccip ents rs scut. saTital

~~83. Proposed framework~~

'did s hasanc,kri a. sin deco ' Uncer hts drs t Codet tistsrs sa litstrel sed reg -se c.sete fore gc esehchge or the putsoses o eul en aseount transactions ea , he freely tinter- the cohntryo laren ouro to e sour ry. Tsis El be subject osts ta tax ard rn.crieylandeeint cc !sloths icns as (strict spptcTsle The =pita sent els Framework in Indic sctst acdreCs the dif ieJlties in 'he p!esert erne tssrs and sett o ratistriat St ad ur ty rule making The desig of 'Fs: draft Cote cn capita :sr rols focuses es aceoustatility csd legal prossss are leasestse questions of cc littescinand t - -get capitol richos ni therslisst -n po iss makers is telt lure int so rnisscp, [clout. ed at length sr II n proposed I a nstsstrk on sap's con trcls ST OM% L td tosit tri tcritro son stip al How, istIJJ.ssed on pct tisc cossiceratio s Tx: e rule nak rig el cssite csr rots must vest tstith he Cen ral GeternMent Emrower itse regulator to ams regul ons cs cap tz con- ralseseatesdifrisul ies in - irculating theohjechsestsatchouldgtidsttlesegtlatc trctstirg regtIstions cr ssT trols Apo, er ,e1/2 cas ogtte the regichatcren taszec egu a t on making posers css it directly Weise vitt peT tipants chsCortsmis siont rosseserrescmmendsa -ixec osmulatisn The rulesgoverning cap dieontsolsDn iscard I ostsare csitseetentotsflocs e resat/ men slue pr ric emcust shot s De Ira tied es t etts stral -eni csnst tation sts Inthe RBI The regu c loss gcverr ints se Asti critrols on cc sts,c flocs scat J be tarried 3y Lhe gel 11 ccrsultatton ssits theCestrclCsoserrs ent Is Jle ial5rbo Jas i,• Cl Lse picpcssa Hs -hie/Toth cn ccpitalscr trols

8.3.1. Rules and regulations on capital controls -he rulesun instaid Rows still be made by the Central Cstemrent end the tui wit make e9,/ ris cultvard locs Pe rule making Sec regulatios stating vo be a cos atise srosess hectseenle Central coyest -snit and Icy sal The ronstItstices %hi! DS &se -enter and m ay also be guides Dy ah ono settriiy -nsidert isns Table 8 !serails tce Jle see t 'gcams Mar ng processr t.Chd 17 the coinrlitSic s As is the ease today tile inter: ght o resse sg and super sico pocert over inter nest as es in ctiLat tts t rcls he 2L h011Sed d2die S l be placed with the C3tllwrncboe cap cal account :cc test b I L., is no schtever lc the Esse cur ectlY the Financial I- ell genee Jnit could save a rate ronitcring isese Issts hurhossc of sdc'ess ng -one tstauscen sg and related maters

~~di Table of Recommendations Si C5ettives~~

~~lebooffik k Ild oasaafaseaufnic~~

~~drs7cti.onsanewhougia En 3 foot iegai oleak-sfakial keret!. este apiral 2.[CUIILL -aP7roval•=~~

~~or r1,,,oa oak)~~

~~8 3 2 Single investment vehicle~~

the Cor-Is on believes tha r-ere rkst he an unified Qn iraceaoMb address en qual treat ^f nt eign infesto -k s racemi-endatior isnot -aka the JKSInha Re nrt also rezernmended the el-offalof artifoie and MJ tip ccla.ficatior cf foreigr ,eafors In atm ag hose faro- re-cat ons reoulatois eatocen acditioka '.investor :lass ofoF1hr-0 It ubsumina exist!' ginveslorzl.i,ses This nas eknocaosar ly ncreased aomplox revflktion The -Ommrksioa there ora racommeadsoornto kg regulation • investrenteakir csand fa !J.sofas sikgie unif ea framework 1:QFIregioe Aiv rico✓esidentsf oule be elig =le t ecora a QF C■COIC rree Sth2CJ■()MET dUe • e nor-s pr-o,noed .he antral Co fa -rent ating a sina e k,eator class cr orog inyestoe".5atoutc offer a door isteam t regime., akd ao_ld coksoleratea recuce u cerainri comptiakce costs and the ire token o make -ves -ants of out in any libay al erra the domes iz ayearnaot erne.. ork at the ka kke this fa° id eksure that na! a omolick efith -hetroryoff io= ona asacciacec it Lhe

~~8 3 3 Legal process~~

_egal pmcoss broadly refe te processes :off-oleo retsa is through whiah lao is 'rade :old applied Legal process oci tales o mop es of transorency ako scaountak ity farkoss apolifaf o- equality ha1or2ake lakvand partiCoation deo ono, making fr-e Commission Jicroses the ca:peninF of legal process guorantees In the countro s oarneoork or capital aok-frols Lag at 7"ICIC-Uels of policy formulation rule mange rak, a- on nakirganclo,amenlation . With ru e 'rep. la ion raking the koponsiLilitiea are sob oetfikek the Centrall Go: corneet e deeu. orate at.o-s issued tvaBi (for suthoendflov,si t-ouseal regulation kialang D ocessc= alio thedranCsceshotld be appl ed Formica od oefffeCec -al Govorn -enr tka .enventional iegulat ok akine picacessCEit be appiieo tho control Government is not a iegu atrok agency Thal Commission recc -mends that e et- east at is similar of most PSOEC sshould on .'111Sed

Tfle 2ra-I o approvals o eke k u !qua pi-able-5 At the imole fienLion leve , de s of asproyak ant mg shot o meal- be don.: fat m-sparen., a d must provide • keasonin3 I or no-ance eg st atioas meat -ot be LECTIled t2 -ee broad pot ck objealives onk oloodec sicks mestnct be irrolornekto; an ad kof maane or beta- o ad a do iceol particirY-o hot Co. einmenk and th ell be ooliged to 6

~~Table of Recommendations 8.2 Rue anc re ulauo9 making races;~~

~~JUL.:AIL. lows lis be, row- lirsl.E. ■sJILLIIe.,,ntrdlCo■L [own!. end ies,se ieEu dtior nie ■i pra.ev.~~

~~Thoen). 13enc, rules =as crx.ul lion., I roma! LII thIM ns are roqu ed as not P are • Deble bath Eh= Houses& tne Parliamen~~

~~I 0 ithreak 0 k (.31 (11 '~~

~~Pr,r UM' n r nc al i-riergenc.. rl CmVi Mon .11n1 ir~~

~~Table of Recommendations 8.3e oil 41,4p~~

~~• al GcAcrnme I amid ullairDouncl:v- and L1_4 in ■Iati‘n la vAL-urd flows harcthe 3-IWO!" it toy .r1 zop Dva s or dISDOSO all .pplic.tiors h■[711L.)1 :a ma be.rc proc decr 2-1 thl[~~

~~al.11)JETEEI) .19 hi sp?nec~~

~~ikdCC d nenn.n opr 1[40n Me Ninc131.5( I npe On' (/ I e' C'eo (I^ !)5t r1"`,Cd ^ I el e Or~~

~~the 'rntra ro gm- t nc inr m.y tiOP5Or (elect c■)nsic. ors~~

~~I 0,, ersh]pol: inl ,r■En infe ? 0....-.thrpofr I Irchnr g +thy Inrolgr me MIS Cori 31 a ov.r.eisli ol,s, 'sir lc pup ivneris real peaCel I r",.+RtenC CFI( a~~

~~11.71Y[IM't anon rts den are c-go.Drnmer I= a thr mar, upm9 loreigl re ationsoll or~~

pavide decisio-s mthr specific a .1c1 reasolable time hrots Hove toe Genus' GT! e nmentald asi ^aydeny appmw_ISCr impose cond -.1c44wherethere are -ational se curity:o.4.iberations Troe83 estabtishes the Commiss on's rezommendec fraMe,A rk regadingthe grant meof app ovals:hat e— bedded 4 the oral: Cace

~~8.3.4. Review~~

he clecisisns o the 44. 4d1 Gave n an erz9 lo Lier 4 eni.or athrer ir he Ce-ral.Cmerr ^e4:4111 hear the MAL014 rP.D.in4 L4 cc 1411. o approves or ripos dor. of unnecessary conditions by the Centre &Tier MEM.Appeals fmm c dersolsucn s 444. 44,42rs viuls lie otheappellatetrisd.-41 The ..,dministrit

~~-107-~~

~~Table of Recommendations 5.5 Report vg codScpmSion~~

• merver DI t-e R;1 hear 1--e r.r alto s real- o CO-12. of a7.0 oval= o • .inneceS.="dcorc Jonst... RBI...... ppn.als from aide = 3Is nadminis..rarve law me- 22r 44111i443 the apoe late i2Lib) C7544 - violations of L e )0 on cap al vols under Or. c.-aft Coderoyal an. rules or reg.; wns capft=l cant ols or cerc Lionb =ubj c anted eioJ d 3:sub re ie adminis ative law off cer -e RBI AppG.e. s mem I. oe. orcers o eadrIr strati..elay.. officer I lie to -e ad-mina Ne Ian, ber of theRBI AOre01.5 from he or:us of such sc -in =Lcc ..e me-D.Dr ..v Ilie to the

in:ude irst 3nc eco'd levels of adminis appeals Ps well Drovis,on For 4V:214444 reree,.... -The central Go‘crrirr ent, the RBI .7. 4 4 appellate '-'11 Notilc o pro.. id: Qa,:med dais ons involving er pretatiors of a:, Seca decisions )...aL also se wri,ished Appea -.from -e appt'lre ibunalwsulo jirezt y to th..) qup ere Ca.- )ac= the Ilight0J4IS lhougt a it lE.diction Figh Cour's -ot be orecluce..1 Table 8 4 Ltli-es the rec.:gun" ea' ons of We - scion Writ are en'seddel In Jfeir Code

Reportingsupervision and enforcement hnsJringsompliarze pro _ionse^:zpitalc-n o s n ^edraft...cce flas regJla t o-s ee a' on 'othe :apita ..ontoa6plat c the re2.1 in the drat Code J i -c rescrtir ,(3 eign exchs -ge'rnrIsa comp i -ce co-helaw r egJlatiors Uncercirn lionsca cap a accoJnt convert 1-.==r )ctions be pl_ccd wit- the Central Goterrime- The R3 aJthorisec dealers ‘...uu. an p de's) fc -In surposeo er-sJnigcompl ance mr- the lam. r.11- and ,.=EJlatioir Ce, am I.oereisor., ac would b- ega-ed o Ase sJtho ised ce=lers mho )1111 re 'len' cisc.-eisn on lx basis o ce ain gubding kr "2 Des !see Thole .5 5 gene al • horcs.c Bealeis %roll be sh=ird 4211 Rei throug- 444( I oni v. II b, .m to qh31.9

~~8 3 6 Guidance and compounding I he trartpEre- and easily aCessiole iramev.ork 'sr g, drice and zomp..uidlis pro- %dal in the d aft. Code ex-enlc tu Ltecpral con o r2 -ewo rho. Rel log—~~

~~Table of Recommendations 8.6 ...o—poJn..ing and def ce~~

~~provice guidance and compo.md rn.r[ers in relatic - 7o opal cor:rols under be draft Code sle a.boutines the recor D'Lhe Commission on guidance and cam Sauric in a~~

~~ISSION — — --~~

~~I Li Systernk isk~~

~~9.1. The problem of systemic risk~~

lne reld sr line :pi egAz on nns traa tion:Ine fou.sec onconnrnerp ornction mi:ro crLdennni tegulaL :nanJ rensluLt,n the nole fidancisl Ins highkghted remic isk as anonner impar ant thne-sinn f nnrcial rogulatory governance nub:e luently gsvenments and anmn,er: noridnine M1ZVeowscec regulatory nvategint to a (cm cht ste mi. crses arc nCC -ecss oLhe echeqLer ^n:elysoc eLy resonnthezr-esA that d- O SySLO IC llSk s"er 5[01 arse in de urclinrungolt-e inancia system, ;Le tc c,ely intetnot tnctediens to oilier Da, s nItrenconotly lean ng advere 07(A IXiII n cc en tamy -.Inn.yeroJt Syntn- c rink aven,grt reLL...ntes a )intngrai.gd and co- rrnhensino new of 'he eThre f nano,: synter- campwissn conventinna cie,regu aLlon lea is on.ardnann nsnigconnt mers financia'produc onannal rns nn !ann. matko : ned.. Cne The Cimmission reco rumen& fie P.1F-FSB B15 drInnian :I sysLomt: nsk

corsegdon'es lc, the rem scormw The primary tegui2tot, mannateal regulators and ,aecnciedol nes thairperspechae ann or-ac on accestn =o an indinid n ' snare/ reguInto- iiknly to nt:us ts FAZE CI have a tittnpointnnt he CJE'S !ors or na. sec or lone and ns. or hen .,ernIllinntnial iy:terr orireco pl_,e resolut on corn-Ettnn to look at nms re - the narroov d:rspeal 0 . Or 1 indit dunlr kwou d :cies° ved wh ann distress a n d pc :pea ye - forms its apptacn 'M1 l sysiem. S”'ernic k .lg4sis, h. _nnttat ncurn pThent vc Gianni %tide cerspecin non thenmpaa : the tilde of an intlw dual ir. secbr ThEav !ysis ofInc .nowni;sion nicatdirgsys emir reflects comk Ira on or I ma, “n:nnennt nat SC 0 ....n.crn ■ttnnn )1nornnArcs

~~a nore exter - s,stemic c isns are lin rtanifesin a- o n the core tasks al f nancts regu aL on- consumnr protec on r cro prtdential reguiaL on and retolut on 110~~

~~Table of Recommenclabons 9.1 cb,Wwes~~

~~fisk and inutptor< 11.1ory ? 6, las ch as or miun prugen / Imp c.o.c-Orlir.liOn ceNte redo r Sis - ovbrulgirt J ,orse spEcVves resoluocnoroc Are dad OthN~~

+is-5 heLicar :nsdl. s scvs 05 the ,otJre 2 e.r anc "1/ cc- Of ses the Pat ngin ificnolcapacit, ro D andmgal.ne r-eni.so`,I he 5 Jeri resew o prucential egurat add ...sstne pr.th e-nq al consume' rci-cetior,

II1-enti-ed implkrenLall3n dams in in despiteJ.p- -he Commission otet -Ls are n design rd crro 5 el oncral on in AA:Ling1'$ itottor,slar angemo , egulatOn ,- sc,-,urne 0' micro srudenti_ enteble onm11‘. ever if exta e s star" c beS may -at o evented rss r■ es work -ec oc - reco R4 erb o-sorconcern neec to o=. 0e.,P ape,. 1)5 oversignt. 7.s a foJrth ohlar urgPnt 1 J thonsur -1 he reld ST em f 'cc

92. Objectives and principles -,esc 2 eas, a is a sz clear ease 'or estapir long ins Liana, csoarly n r :recce c Unless,siemie -e e- Jnc al- on o irs impler import,,- to ter=.: fic ' 0 concre-c of firt ion demarcated c 8- cgulatisn is en ioned as a e. se sot sternic rig.< lay could eas devoe,e Inc a sr.i. specil ed ty 'he clr- Coca si wies bazr,l cing the eguelv.,oeci`ic aArtplliEDOV rs and itere ceula s= danze r sk evriopment d effICIerry el a iidin; oc.entcal Id emr: risk "E Corr r ssQn hr.: taken Laret precisely arlicurntethe ctratre,5, contro o reD,ulatory powe c-P -cl=mpl-asis sight seek g ro d „my drP-sn -^issr.n s reccrim ons alsr em Lory agen_y cr o oinzdo- The Co cr-re,rula --at the oporahon phasise b 02C J "CIOICS OT regulatory govem? -ce 5, as ro guidei by an appr,,,riat.,serol.hecWa -c nn agcricy c ,areed wi,hs_.c^fundi...ns s'alprices sko.,ersig-t e ye c a:es -he es e,t1\95 of sys e , ce lurctioninc or FIE agency sew Tablese. res ,- dos -..ern rated tz -ecru-andse ,esss..terli. risk co

9.3. InstItutienal arrangement ving,,carrit e, -ns resulted In The m^nirrIng GT cyraemi: dsk oss the /.1- n ,Iv.orkcfc [hi(' purr -se fc era -n)le rh„Utt soun',1-= adopt gdIffellOc. -,c1,,aldram n the E2'4 Engla[ c flat as envisagec a r ranc al Po cy Cormnir,ez, locat_d - :o^; nit'ec The US has °stab r er ogous Lc MOrEt2 ) [unctions in a 1.7.- DrISH Sub ,it (DOI Ccunal cn I shed =MA.), , c'dy ea,le reoreDenta-,,cs a nlc1, ,he headsciraio..s regulaor, agenuesa e 1 I 1

~~Table of Recommendations 992 I'htci9199~~

~~wst-xria,9 99,9 99. r9. 19,99 99.99 .999 91919 ie ,ubiect o tn.& eat 91,1. 9.-/999 •9~~

~~European V-lon 939 es'ablis•ed a European S9ster9 c Risk !Soak] 99n9 ig cl ccnt al Lank 99pr;9ent919 9s nom member s ates as oell as European 6919n Cnencial iagula-~~

The regulat9 y 9I9 °Jure envisaged by the Corrmis9io- consists cl a ,esolu ion corporEticr tas,ed h managing lhm - cl reg,la ed entit es while rehulat's w ill pursue cora. - er protection and micro prudential egJlaucr ..91919 n cenam se_19 s ▪ ..he r an,m19991.9 N-' o ese agenc es v.. be dole to co Lho Imam ia sy9 to r whole on 3 sonstart ba9 s Hence t, e Coromissior L that mon on -g ,- dadsr9s9ingals9,terriC9sk:oncern9 s bes'execu Led bv9 co nodal. eE9latorvsgen cvas obich slow it comsinethe expertise of he 9199,(9ncies involved in egu ralDn consJrcer srarec on 99,A-ion Tn9 i202 C of toe A 11 i -c1Jce the 91,- ister Fina -cc, Cen 99vcrir- 9 139 in9 9hairpe-,D- a -d ....Quid Deserved scan exeait seCCIMMI2 ERSor a !sing the headsof the regi, ators and agencies of the 99ancial sector Comm 9s or 399 envisages a sc.:re a ,a to assis t^9 execu o 2 BORIVillsaRe (oh adrir 'strati Tatre'q Excep circJrstances dispJte 93solu: on ono impla ent9tio9 of sys 9dide -casuresr the 910nago9a, aid a(11111211aL dL F nsiblllles of r9e zcuncrl vosi, d res 9919 exe9 ve r ‘99e ethe execu e.9D-999 nee is 9- 9b1- consens9son a prepcsec decis or Ira: on o- t -ecoincil he War; 91 SID 3 resolue t'e issue. hJ.TDC atiogo99.19n119-cL ring of L, e age c9 in Ln. consul aL pro,esses el -e Comr ssion t9 RBI or r9sse9 9iev9 9st shsulO carcec 11 VP overall ,sterr c risk oversig- frict o9 This ,ie9. 999 oe Dated oxt )siv911 9 bin -le meetings sr t -e Commission how9v9r I:ere v ore sev9 al co9strar s pr9., ig this in,titu .921a, angement n theartbitecture oro99sc9 by -9c Corimi,919n e Rai woulc perform co-sumer 9ro ecion sc micro-Trident al reg- I, rion y the 22212. rg asd pay-ents hi: mpli(I J-et vie RBI WOUIC be ableto ge-erate KnoMeoge r the s-tonalpne- rrom rievie9os ntD, The safe v and sounc -99, 91. su ,99c 31 iimsa^o heprctect of emrs rolat once these firms This is clist,99t rom he lature Inforraricn and access that would D.B required from 199 enu anal 9,e9 elm foi purpusec acdressings9s19n9c r The Comm ssisn rotes cral itsrremmendaton Is 'r rteeping titratof he IRDglid r9-, Raian epol(t'c 6) 9.,Hi9h led -9 -c estso i9hnoe-, of he Fin9 -cial sta9, Jbnnf 00- %e opment raun,li.9sDc) o, 192 Mini9 of Finance The proposals of the Commissi on DIM aC place Lhe FSDC an a sound eg9 boun, sharr d9 ining its po9o9s aldra9king Il Loth a_hievrg objectives k rela: cn o monibdn€and adc ess 9g s9s.em c risk con

Another key dec s o- of toe Com 5292 2 -VolveJ the question of whether to strip Lure the -ECG as a 9 _t 'c body 2S a Jnit 9 th the"inistr, .)T I dr co I-ea -31991s neCommics on e-lphas:es the ormerfo t99 reasons. First he FSDCW31,9i -eguire cperatio^a anc financial auto or9, in order to build a tec'onic: v soph,styaird stal o

~~91 1 2- ► sysTErcic Rise~~

~~Table of Recommendations 9.3 Es-Lalishmento7th'cigs-cy~~

~~11.0 I oPPI iic..stotnanbE.dr~~

~~son-1 T._~~

~~Table of Recommendations 9 LIThe.systernizr sk -egulatrnn prosess.~~

uncertake" nonms Dyers ghc Saco-id 'They --e =socs adtion, sigh- nth e sely afec" financial ms e M1 gr na-C as a sta....1 0^ tedy a:noun:a:di i v. lui 11 the re.Cu 'ernentsof rer If god'ernarc. The FscC nil have a compact e-nbersbip of e persons. I-d3 fa: tat efficient discussions and decision making Thel-S,ev. be reaced Chie Execni :who will laud a high qualit. time DT. nds r -al scaf 'McCommis:en drecomrenc..tinns are listed In abla93

~~PA. The five elements of the systemic risk reputation process~~

9.‘temrd r sk regu sr on s a nveeemen. process as shown in abh 94 The f rst e rnectis 3 dammdncLCpaac research ,unct.o- t -do ve, ons-ncti-g a measurer-QM rn which the =sec can s¢Iy tha e- re I Jals The znaIs=is of sestein n'd.,da a co leeLec ,y "Iva -so: on an ongoing missy...IIgene cc-ea for en ccss on I vne -neco 'ne sus of .ne FStr. end°. ecerna- ee and oord impte-ented hn 'he respeztke d.dj. n' es oniele €2.s sy:CG. r sk conze n e been lee ed The =',DC nil a do Le empon= to elect wore-louse ard dissei- n--eall'in.enzialsetto.-n; a througF a 5VS"Grit cedP cibFse pip ele-ent hat or d sing Sydt.en mde dE abode to de wry s ds including nerates Thede th.si be plazed .inde enhanced 5.irenosion b"rke respective regula and tee res.° arpo-atic- The FSLIC EEE I als3 be d in-un ro c scussmn aLcid nhat thid ccinidoen.ision v ill conctitute to ensure cc-er erce in pe-spe-ti "es across the f sys'er- The-cid elemcnL isthat o ak rg diedecif WI ow ci.es)...tc.--1 wide measure: on -e fnadicial system- The imrle-cnt - on 're system Nioe red=ure cdosen r dscc Ide donr.bythe regulatory egens n."Ce-rc with their puma y legis a de -nanCa-e 7-Esc measure- CP- "iclude cap sl bufers rcat r cystemis 21", for ex.s.-019 b.? Du Winc up cap I - acioss the ina-f al system - good times dcd crduivik c' "IL at capital nne- de s)=1=-. n d r slr-as coin e.s /Wing else ir -e

~~El2 ▪ /13-~~

f d of semiit is esentia that systc,n-w de measureb ere imp er eo on FE ccaleof the mons $`75 Ci Lige part ol 1,e firvz [al system cxamale, re srg capita re:Jac r-c s for banking sector aloe me, ead to e.n i -creasei, systemic risk re a tri.E, to ban< FFIF'Stita2S, OF File non-tenting sect hich may cc eat the cur oose of miDoi,-g ht. syste - vi de ireasdre For r. sys em aide measure such as aJal -ecuutmelta to rrat er on Lhe &Laic sl the entire 5narcal syster- the or - Jlalior and ope,ation orsucM1 -neasu es yfauld rave,o take place in a co-o¢ -2 ed ash on The our h clement recJires sr.) otian or-regulatory c'ebN nation amongst M12 member of the SDC Efiectwe co °Oak la(' across a wise range of policya'eas s a key element of design ag an e:PoPriate hsti:t.. to-a lrarnersik to -onito sys ern': 1sc tines co-ard na on is an inherent per, of Cie FSDC s No .-h.the :21c, mance of this nJiiction ma, not bc ble d a st3n,: one process sepa ate '2 -g 312goals N the SO-WOU[d facilits -g:o Jrdi'dL101.`/P cM1 v.ill aim to ,ed Jo2. nult or; u -ce thus o ornotirgthec,er511cohere-ceof rhe tra -cialsys,e'r mall) f fth element in ...Ayes assisti -g the Centra Government alit - cris mar agrnel, In Ihr ent &at aFy sysLdrr c OCCUl ve craft CoJe priPsisesz. Tore format anJ cohesive pprroacM1 to crisis Tion4;ement The of =mance, Celli-I-al Ocienmen lead I cosisma -ege-entruna on vAth assic.-ce ro- the F$DC. he ES7F V.Ilt also pros -1.2z5.a SF/ Co= rr sers Mlle agencies in treir efforts tc the .cnsis

~~9.5 Constructing and analysing a system-wide database~~

Tine process of s)stemic risk avers gut begin h the gethering o -Iforrni.luifcm all sectors oi,he rnancial system cct ating the same and analys ^g from -12 viewpoint of der IN g ysLei -Mireends which rra, pa arec5 of con, er - This equires Le regulatp y ag^ cy orr latio-,thrsug- which the date g; he ^g asv,e1,5sdiscJssi.:n leass'cHtorrnddem on ma,ing TM1e Com t,cc -ofnolaani- I.ddaabaselI cd doL-,b2se,loc -ded a he s,cwnic II ld all data renting to Ihe ent pfinanc al

rm The soc will se an. J - fortiecttIIruction of a scp- istrated dataszse lead -g to the assimila' or a d trang gsion o system de inanci data (Tab 29 51 do...abase All se, e tc 8550 the rspr co^CLICg research-ion Dvsternic r a -d s,,stem v.. de trends anc aciluate d3“,gsuaeDOL DO icy alternatifca bei6een the nem se,s of M1c rscc ILwuinotl y Doper to cirectiors'o rinEno al regulitpr) age-cies ,khicn would eo erred only sy heir .0 0 2 t I VC leg's anon The rtmmrd rer,Lireme-its will l e stprila,ecby -M1.? vr, rcgulz ory agencr relation[ respec finanaal me la~rwil. be reqJirec to rsuce the dot , or.:y through the PSDC 5 da abas2 • regulatory dee c es vd have aneous ,nd ^ontinLOJa oCcess tedaa of nanc iEd en' leswhir- hirh they e.2_late Once this dam Is in place. trio rna!naired tegua ly e rsoc candJct cre' with all reg. a'or) in

Filinp by inanc,T firms Itrus Fe nated noweee- Tat regJlatorse -d agerciesll IOCCRECI datathat recuire until hiT FDIC isLily aid-) coria. n publi_domair data Iron neecoro-Pd arge as< )arsprialie OnceCamualsopeatenallsedeechraaids ed ante:, llonlvs,ornitpi I wade op. daiatbrcughthedatabase Fcer,e iregu'arogagenr,rvJdloniyaeallvr ,edroe¢ew thedata isadthinged cocallezt mtheenii es -ha inegulates to a dude:hat:here ia nr widespread access by al' rei, 4'97agencies I, a regulated eatitfs da a This accel". vu he eovonad'-emoranea oa,ceolare ng that the melt beis I enter ado ad^

~~Table of Recommendations 9.5 - nancial Cat; limiaLerrio^t ten-re~~

~~P51(i-P4 ,-■pEpatr mad dieTra~~

~~anr --ousnCur c~~

To preserve csicordiceiltia it> 9.9 FSaCS use o the data in aspic ..all be gc Tiirdaab9.iedafi Code Ins ern. sagTo that daere he ac.crsrauireJ 'c obtain afar mation mm u- eigalateo f rancid entities be TS Lid do S3 however requests -r data by tne Pisa- must recess-II. )ai - consonance 40 onjecr ve There w I be legal pro(edu es rodnded odn.plesordde prscdds add regulatory govarrancechat a II guide the regaest for such co a by the fart Itis aaaed thatano-ym d'al2 frOPPI-e c I Thich conaTveneconli den ialit oidariczi 'D-cralso s-er law) mai, tom a_ a‘ailablefer accesato resaath es aTc -embers of We paold to as er (rc &ads and research elating to the fi -enc 3 system The Pr 'lc d rebreserTNa irT azcraticac - info-r tion an a ina system (alp ntha - hid datc in ha d acCd dui.L 'a research programme -d the yob ems of radinitrnpg ant r:--r gadfly rickc tairo_gh the dent icptian

~~a a filings ki I nanzial firms :rid p o note a more etc en: systa regt aLdry info ma on gathe ing `Ian, bPrid ids ace ram~~

IL6ovdant hat Meta Will DC CSPIDICOldidd. ThA diiigea hattbe paps doulc laced ITle trying tocondurt Pisreseerch prdaTarnrie Thepatte nsolgysterric Tki- Irdiaare like y to differ consisertly when compared iirithdleedpegericas mon an:ode:Icount es " Foch lc- Lc lieDC-abilnyclknoncledgeand i I or—ose settinas add' onally po icy and gzho Tndarstanding of aistemic esk s el: rely underce °pad to th-T, tar LEV' 3.211J-STavelop vase databases such asthe TS Tile FaDC WOJ d Tridcrtalci -.pc 14 elTars e-sur ng hanhe re march prograrama has adequate apehdittes and (Teets the desired e-c Pit resaarc-

~~mu_crineccedne;so;andsyatac risi~~

~~ciplen-i-os an& so~~

ernes reregneerenurinunl a we, e hide Inel niccswrn wriumUnocl Icamr Ar't enes rem else. bern ^T3 L Der gorous DICIAOGOlegle teat en rnneentetheollevele ann • Dent! ernmerenDrennenn-ehe lace-n.6 Dneren a neresnarED ein e ,ww essww rated

~~• Pr3....le rap d respcnse anal,ww. hen w en. ca s gnifican went. 3 Deve.00 w■stwnic risk Lt C carom 4 A2 se the Dien on t cctions of the rseC 5ID dr n the Yell of~~

• wr alyset tmal uses siste es for infJing ysen•c risk ma tare embedded in the p-awn law, and en son measiwes met merit cocs ler on in JW, 63MP-dr-el-lb FJ -w 5 Stuc., rho wpect -.2g.J aTor wo.icy on all financial tability and 7 Wommuni.cat. r )01' esccrch c mawet car iciper s L -c. c - a regu L' bac , Ascmmary a DE re5E.D. CD end, 535nID -12t °easel, issged bitheCornmi,sion

~~9.6. Identification of systemically important firms~~

The dicft Code in ebbe- to wilcrc LA'S( al regJlz ion ewwcaged byte Commiss ion moose: crudentic require (wits upon inaic a iwrs n accow cncew 'M1 -he °bre Nes a cl krincip es o tc regula.ar Scrre f nanucl I crn$ may present excectio13/ l5o rhe system lc,wirtwe nterwonnectedresscr ()fres° c tioc Same rnezlal Iawlscan generate wctemic nsrt Concerns when seen asa COOglomerate hough no cake^ Intl ndealv.. Sa-o Inanc al firms or zo-glorere es col. J besysierR cal yi-po tantever. rl cv make n-wromisectocansJmerwarc ere hicS 0 AS de rr cio arucleruti egccticn The .cscc I a L edalarro the FDMC t3 °LW] r lnlonna ion in cc Ion o the o.eragrinanuals em and name the rirmsans cong o-crates a- ale syccemiccIlyi- porionl. Th- procesc red to idwrifyw cw hew vu benelt lom e 9a icnal ctancc -ls, butwlt De!Dote; n nthar rc.c tics The acetchocVog hat be Lscd lowhis des g-a t on will te. nienSed it0 the pDsle: Domain gc nrct.gh a cotice anc cowrce-t pwcwss. and !mai be aparoved C DSO: • mart.do crywilt 'len beapplied the catabase with n he FSCC 0 genelate a ccerck ,s o cys em.colly dcrtar t yrs arc ocnglorre alcs tellen mll bereleased into The puolic cic..moin These irms will DE breech' )de, he ghtened supervision gc cro-prucential ,Loewisicn and the r.coltroc corsoranon The. strol.wgies for ne g- cnec.1 cuserwsio^ -a wit Le ,Dpliec micrc-crucleras al suiwwic on and by tie esolu won csrporatio- N I be Jiscussed at the so as o 'duce ecnsisterrw,.. ^ trealw en; ac oss anua Thisi-ferrne. on 4 .I also bercleasec ini-othe cub w&crair

~~35 wisTuaKiRisia~~

~~Table of Recommendations 9s Cesigrkwon as Sista- car., imporan- F c: I WIWI-lane~~

~~ei see el 1 na LIE51100e01 flea! ng ni-551ginien ge awe! d(c wiwai~~

~~a hiajlE wind, r.r wwiation and s rawww~~

Finn-512 irms can be adaersey siocted ny being design; ed systemically imaor- r and se ig called he tare upon o faze Mater reg„„Is or, sts -owds rd supery EDE,' Tow = eCorrmiswo- zr *at finaac al f nu: ,,aw opporti„nityta peal Wisccsignaton oens■Lhatthe -E0C5dec qcnscorport th 'paw. principle: o regulator, gave wa -ce The de:ass followed in this ie c rust-, tenze lo ow a care scorn. ed of 5 eps as deo es Table9 7

~~System-wide measures~~

7inartia wfw wors world.;ide aallyewW -g wieaau PS f( regu a oa, ahich rD pl, Ma system sc-E For ewalp e melswes -at wewo resolw ale orsb ems caaseo syster eytl lrrcluwWhe -c Bawer cap al 'aquiremenrs - acrose he financial swm - ir good 1105, and ce ,dersa This area also equiresco swinpted ^rweTera Lvart firocciartPaiwyage-c lee , or wawo e [skits requirements ar:wase.d In -e L3nkingsect.w ,lo-e but a ct in °the J5 Iwo( ananci: system DJE CES “/Ei. mow away from bz-ks, leading reg 1210rY 2 satr:ge

saras fo muwer :ye ca. Cr'D alas. alien tha are appl. cable to thE enthe i^ancia sye emr ID ge parts Hanel?. system. AL these lime, swte^ c risk % a bow, of prolession31 schalark a^d polio r:lative uaderce eased hrefow try) cyc EEE •Womr,i5Lacr oropoes'ayi-gthe egal loandationWor one -easure heccu capital buffer. TheFswo - qwnducr esearzh 3^cforr, dot- - ww-anism orthe mslemer, at o- afs (wart --(yr E2 capital Mersa chit at iwpD potetotheenti e inancialsyetem w large parts of le f larcwwwLort '1JS ore"-'ent zoicerrq of -e5uktory &bit dee C -cest nwanaw has been sr-wulai-ed thc rs cl• t, e -soc will will more - unison o ircrewe or decrease rap al requirewerla r counter wc wi It min Le late:. ha the inter .0 cliza cap ral.bafe- ie addi on to acn wzulators powe Dapeciry cscital equirew,entsurdar nirrc wuJe- al maa da e Var zus types of 5/ELEM measu es v,hizh wek resolw ernsthat arww. ec ely cw1 bature are zaso be rig debated 05(.5 55 se_to al. cam anal a -d leverace ra o real, rcr Ws In Lha CrTillgdrCECES as the g obE zDnserws sww, ,easu es as .Aett as the eXe'lleene5.5150Untile5 n the we of sach measureew II increase the Fsoz ma, need Lc ce elos and authorise ewer system vade measures When cal s seeaano arises he systewac stet be amenlad 00155 1 11 lapel -datic.ris of add licnal measures The Comm swc - recommendt-a- the Fenn S5CiJig gen2 Ce tie esplicab of c. cr cwt. ,• w wo I c I,na c Table of Recommendations 9.8 ...sun'. lical ral measures

~~Mal , 1 al \ Y1Fr- TT WI 'Owl°~~

~~Tiff or.fft=sTff Iliedrfft Code per a ning~~

~~Table of Recommendations 9 Asp.: so r i a TeTTITtary age ....co s.dirar on~~

T...5 d de' ff se new iff.e.sTres ff. Tee cn te, na. 1..) at be, prances were sp.° p o tn T .Trd ufflornin TT or c imffeyff that ff.CeTtia Govern -ent.rouic Tnceir-TT formal reffie ... off his isT.e ,Pa s

~~9.8. Inter-regulatory agency co-ordination~~

T he in, tut Dia Trrangcniffn. tr e so: brings oge he muttiple regul.tcry pe, spe: Tff,whicr are essent el to icicr rilving -ATTE' trenps mar con res. 'ffisys c risk The Comm TT on belie. Ts 'ha- the Tsoc T an Tuff ITTr romott co ord r ation ffs....suffar.on 2.> ffraff -ff meff sures the esratus - ff ent of lc wykirg grsups crass sLff fling in LITTTeT .si Tnaffff coffin or rents I To irffeT regulro comm ricaricr, re.olur on o' disJutes sod othersuer) mecnanisffs betwxer mernhe regulators I he Dowd of Ire ESOC ng regulT !Dry d Tputes amsrgst Tr. em- he's of e soc aid Leff rrerriT:rs Tod .t her rezffiE off? apenff es l'eciff rod The boa d or the FSDC " be Tfficfffferffcl To Ger.:I-nine WS cm- procedure.hr resolution of the T !spire in line the .) ricipte_o net .apesal J.5 ice The FS(ff. Will aly. vork tn rn... nTe...egurotors tff help in dertifyieT a'd ng r=gulatoff unTerta 'TT In crdo 'a reauffT. reg....etc uncertainty th..2. rsoc 'I promffre co-ffisto icy in mod pnIffples pre( CEO adorAdd iLs ne 'Toe -rev, a ors n Tie Treas TIrT. effifffrcerei T Tuff- effor anabie Tette reffTutiol of zonrlic een rhe Daliff T., of the m.. noers orsrote cchr.ffve off, sigTcor 'he inarff

The Commissio^ 1' !sties I pTas fl ate ff, action D the sot in T his ffTlff....d ot -term e with the 'unc.on. - g or primari r'ffUlalff ff. Ma -dre OT tre rffgutaroff T.- bre 9 ::urnmaii*s - he en Tis one -pproael to iiffer aro T, co ora o-

~~Crisrs management~~

~~Offsri e e off. efforts ac 3/ff d ff sys...e ff ic urge there IT a cossibil that To - enses Tla, ace.' menagern Tnt .effu resCNT ITI Or to CPT ration 02 :veer L Hoe~~

~~S7 -- I I g~~

~~iveis and aeeeareh es eeeelo understand anc rase ry Proh de and honchct Glare hi s the crieb e s 5, eis 0:the .7SDC ill the eller vie -es° ee ne rieee D,015 and r emb~~

cereal. - esoludon 15. DNCJSq and ast st n ne iiaachirrentation o ex, ec e nary methods 0 e r eiesisuce as SIF S INeowrea anC - gee ce and teken during re India= en eh Air o`alleehene rata. he id heee the abeete re menarmeni Ihe CenVal o ernmeet s FOr is er -a crisis man ra and hniseh edge at rsoc and per :erode eerDIVL heco Lep ir tne Ge i:L ion end ehhiem e, agemere ihel he ire oved b, the ere onseeftheeeeo euan eao ce halh the ill^ eery°, -esurees ich !here relcasenitheccunter fl and ist oa to iiscal -ekia g anv decisions in he eonsult with ne tee:before ✓ h he regiered ! raiders The hse assistance, a other ext acrcrary assistance IS f hare al service erenci hhuatises and e aetione01 the FOOL heese oisiares shisJ hemein-zedudes ntfy C.Jid be subpro a post erisis audii o asn eneuie Financial inclusion and market development

a he cmewc roreppeoci by the esTmics on, the pecc ic or reguiarorIL hers vioich meant to address norko - a ores mar impede eTicoen. foixec -,ng 41 the I reeicicr siioten cee are ce func• ons thee re preen' n re ex seep legpl ad reg u a oro ameovorc r`a cio net striali. regulatory in ure ane cerelore re-car - to be gde' co ed Specificelly thesepre ctio -s treolciie slays , ia, ericu eig mare equi ao e z ibrion f - 1491C .91:? viccJ a -0(o) a foolenag oeveloomeot or imp Gee- meot of ra, rtet infrestnec ure and rnarke OCeESPS in thio Eilarre• these °ropier: are discussed ir Lo rmcol tree:ea.:44.c co %ors to purs, eobJecoves °roe ipleceo pureeJoe 4 powers ;rid roc 'tut ong roles trash ce crshr, -eJ in the reedroft Cope

~~10.1. Objectives~~

Devi= opmenr concerns vet on inan r e micrkets broadly o `sports ra ai roc ..croo in ves here ca cao, seceors ircome oroccursationel categories are iihei be-en:12'1-c redietripunor clenance services ard m:rke development fostering -he men! o- impicosroeo. mprce restnxtcp or market process isee rabie is I F no icial Incis on ccenprices certe a interoen ions at imsocc costs o society as 44 ale an: y el o zdirs eceicular orsues or Cizens e zed well inovin in, tiat cee of this nature leer, de restric ions on French hi Georg recoire becks to aeon orencheo n mai areas ano henry sector tendirg to aroe sc more dely kcoe - in reeves n banking S moor ^ rat vos are tee - ether ...cer-ors as cie I

~~Table of Recommendations 0.1 Develo cieat unct on:~~

~~in,11.ELprocrs9 scf pc-ye 5991F9511c the niir,nu..~~

~~99 120-~~

learthe eeselopment recuires Blormatien Bettering ane ambers s crticn may be at finathe al sy stem inter rec flatory cc tot level of cne as or or on ree scale of rhe ti erd nation it Caren called for leark•thee elopmen, rat siso moth a sseabine sesources ttoo Ptrzs may be re restry tyre Mal has Balm Vold tharacLerithrbs sucr oft marks r end secnithen rn2 keL rthrattastr rebates o cosered from hormancial eery C2 pronse t Maine telonneort mth also robe' a thoroug- bndartheneing of casts and beret! mitre bainema iset crocesses in line ith intern? ona :es practices t noL thing regula es Or fregslators in Beccreing tFc Commission c Ler ouch [Boole co trite te eth atery oh ec Bo csdef elopme the prbsu t develosmen recemem-cs Mar t shththd ran ir o too To 2 ft no, ertatemszthessms ncessa or to modernise ma mosummon ss rebuth, shot d ,. kat irlrast ucnr_o market no on Co ict lo onactiros ri to d 3 the ssop or0115 tech ology

~~o thyorthetsurssca athmthth sotto cast: con nre marSers Belem! mare~~

prthes merrat °nth besro anoes abo to guise: ifs ouf &Mite of Bet eat the restores teat the rers2latoi ray un le- eCentn, 'note meal she, market 2eveletheranlb Cemint aster, 'tenor nencro th2. of epee ieth rina thal virct o dire t a specilm reg rt'or Lc easurelbe probisio- cable f ss of onsemers thee senne arid.. S or Lo a 2 consumer Jr spear ad I ?xis, revision r S2 nes i this egan nest be with a the ir E951.1reeHei. ira one aficedathe marts 2 services ith pemons elm ethrild orthnanly noir Bare tech 2:zest athess Thelecthirnistthrt scene: dgesthathheth nas Lesotho incurtec the inanCialsrt ttizt al the 22- Gthcs n Mplemenling Seth Witt Lions and e.nr beads - p ovide eens rermursc the cotter Grant g suet accsstt, he thane al see me praviders

~~10.2. Institutional architecture~~

L10- 01ese (mastitis-3f dey00pmento erase ead hneecrean Thecommiss0r believes thalusion create certain proolernt or public re[rs stol on As 21 Bonnie Cons r the !low of credit fetters that tabs lis igcres t fee :yr cultures aft a cmot a, inthcssinc arab three moth. mtortenBoumereal -Meer :sins thet Ictnis demo bt rin3nria

s thesscs cast -vat essn ether Mantic. sod also deposes s ten thyme:loam on ▪ mnaldesth lath ste ober the posts romposesom sosts sharel o Off 4 ..1..eanciso -C1A S TherefOle be Coy insect. mace maths on ssmair ears :osiers is throe ts. %reelected a

tern ,thotarrelr CM" cash e,unintso 1.Mben las nble pony to inolnlgoenacoonenco v. I me clef t t -ns namiturthrthoremon ars mob Mot I. othecleitg P o nonntoto I r s c tee ILTE)6{ 3f write ith mores -^ tar dith or p et lor the t derelcs nem byrecluo le re

~~er h the Inotion of prate t ng corsuntr, Inc ter es eitolconsk2 seporithe thin um" ton lib~~

~~tlllo eat Atesones of ear= nen sthefficen 10 -121-~~

~~Table of Recommendations 10.2 p emenl, Fig movet dehel2p—ent~~

~~dGir ros E,f~~

~~reun=ci In the(21 hatetch teal soe REVIILYLL uen,ure = wn an. sp•-11 than colse sp, in Ed ee v yc f linznE pl'fi^/1"P C.IdPI '0 n,cons,moi c,assLsa~~

~~itlkogl)..10 lb post rau, vex In r-.11 ne Jer;For Ind y the Cf dilfd~~

~~DU oedon~~

The Comrnieebe believes :"2: there is a danger of reachree sahoehere. outcomes ,vher goals, powers hne "accountability are not :lea ly dehned AcenrCingly, the torn reisslon recommences effor,eLe. MeadeUre the elascy give, ceeeloement r Mat. ,es and e ,e.huse rer ra he paths The cois on reh2mmends: 11111Y.hit5 dNelreril ihoud 7,2 pasod the v13106 12

~~Table of Recommendations 10.2 Impleriertirg nr a rGeiceveiciem~~

~~t GI Fee evade~~

~~e !kir! !IA-- to thc: goafr orqii Frog Gnd mere prude-hal ego a e, unchhichlu huvel vu Ter: ci yolnano0h I mg iviverivikehrp0iiing~~

~~Gedirth odd e Lerend hewer tiAlitiGa~~

~~steedGeduld doh)~~

~~Th0 COMMehri li vee r Ge trove 's L.. Iger s reaming Sdboeti rral oh comes~~

~~when goals, poieer, anras vunrdhilit0 "ire not -he ly 'Trifled d' Civiiiire Tiede the tern mission iecom— ends efforts he measure the eff cc ey o give - de e10 -Menti 'diet veed^ 0~~

~~era Ida e ternar Ge paths~~

~~The Co — ress on lecognm-nriv~~

~~i. lruarvas ror drivelveinvit shoe d b_ nv.. rthe rGeulelo~~

~~sp-cieci h se, e=se herb ;peered linanhateereve pro idee er to an, corsenerG or~~

~~v Gssevolconher h weer olsuchser ice, giurtbevath Y edi t° e re,re eGrd~~

~~t i les tco) h DenAce= persor = vou do endliki ch accer ,~~

~~recess cildevelepnienrshojd~~

~~regulate s sreeld be dela rhre0g1 (SC: T;s1r ' 02:~~

~~10.3. Principles that guide the use of measures~~

~~T -eCommissic - edgFests c este r el pi ec sles to guide Gheuse of meashres erne reg~~

~~dieGor end :her:anima -it in particular GrieCommissior believes that the law mds: p ro~~

~~vice +Or following hale Tiring 'grin:Tried:~~

~~I virlirrienc n!0; ad erSe :Mere 21 the abOy ne finer:do' sysrem to~~

~~.och:ete or. e ( i.uent cresectitilof 7esoarces. For a given i irprovemant iv firer cis~~

staring 'or on hr -omauh sensed a manha ih carps arocasnves,on nf htians urshalent roperescon drake renrc !sip nth for the shbJ, Ty r Vansantionno oeos,or C info 'mac deas ans hm. —sof devolaamennshauld be inn(' in such a manner that lead [pi- e least dish:Iron v incen-hes'or consumers

Pa I [no systemic osa reg,.'or on Instrurents slap. d be used in a manger least y Lc cave aetnmear evemer of op eati hes of [Pe mh n I Pancial rpgu Int sow s serme ors!, den ranenn 4 E113.'"12 thr c ey 051,ga:onocased on Mon(mi at c.c.s° rot con i}1.0Eweth b9^2i 'S expected o ram Ihe IP-DOS ►;3-

~~Monetary policy~~

In doe loog run, the parne determ ca of price stability n a cool -cry is the connuct of onetnn, policy / a ile price ftucc,th ona on a snoop of a law thontrs may be la enced 3 has cons dera s suc ES 3 mai -soon f 1 e these considerthians co nth. exslairisusithinao 131133 er nu!' ,earnolizons Advanced and eineoging economies have ach eqed prthe ac it, n, establithng Dpprooriai netr _banal ar a -gemea\S or -'0netori pallth PthostathIca e 3 ies thelegoa' ,sawn da -itpa ir India v,nrre 'own thrthha oozy s ,a !se oon ith stab ty is also associathd Alin rnathneconath c yabilthaithe When an ethrom iso etheathg lbo- 'andsth rise and a central ;oak raffocusca on pi ize s.abi ghteth monethry oth Similar e feths iioalc be loan° Ina dthar arn will- a o n - flthoo and atone ao, pasiog Throogh -his a central Da- k thes caith-the staoil stabilise the eiCsnomy In he layOs thany cou - nes eoper encied stoallo ion acotho r ithL101 iow GOP goo, a a J n gh &ion a e lo a ath ae eaten these problems were rthatad to th cooducthr month—cp.:key Fia rntheiaLei97 ison ,varss Me shifthoa mole alethoascc nthrethra cy 210 c , e that c mo crie ht oniarcs p icey nil pp has relpea pryia mocrothanc c outcores, in The Commis:is - nclieves'har the :a o rtal oaria mus be giver a (want vela on acie objeotive he Cara al Gthern new Oth MOnet2 y function Nhe ea 'he :thmm,ss on recoa h3ithO e s erdadcri sensus inter, a anal scedeor the need or a :eyrie oa k to haaa cloy the o - pthethath y afte, much diaaussiors ceothed to not spryly suah a recuirement in he drar Code l asteac the objective rarthe cent al beak muat parsathaithild De bya Central Coaerarreth and col, d othenballa :hang(' ove theyear a the nature, the Go ernment el that theanproar 313 goat mooeta policy ,vas a fixei eacna lot oc, Ica ins CSio then it woo a be aoOtcspecy they) goals The nroolen=or thiepencence ono aecoun s a nity ethoique f t rhello .1 re-eta y pol,ra I - t h e y-Peep so -erproi-ethicn c,o pradera a' regal'. (mans reaa Yon incepen.erce and acrourtao y ale thcuired in orde to edacia the exteth ich du: ancia, firms roc ethcramenlyth ons tar ag pressure on finer re6Watora In cc treat, in the woo ci monetary pith" ao -rgagcnient h tad ` o anoia' f Thccoective sr:arkie. ielothhe eco a - utithed a Lhe tht amerta E at ihe evel tha econo-y, Monethi, poll:, does not pouffe conthictino specoo so f, lame ci Orms a d velar; othars at air one theca:1,a I m

~~- jai,~~

~~pbEcy Table of RecomiTerldatiOnS711 Oblecte of mona~~

Lb deosibn tne 57n77. Line Mere lsa st ogg case For ridGDEnienGe in mv vino. this omesundbr press....em Gut rates, in e oer 00 ndepenJenc., b If e. centralb anrt I alce- clec Thr lack of -0 biz.< off incrbaseJ misty - precedwg e.bcbors Ilbs Tends ver.bb:( d fe ness e eGbans sn I It d evnanced mGcroebonDmicTivb bat ens hieving rdvp.b.. device vf a venlbs,banv,esuires 20,b0pnaLvirsLitutovial desig- 'Lich an ar 31 monear -73717 s I insburne'vb C3E laey eie 3331. is a NIPC 77a7a co yields improved decivions b, boo mg the it inkmg. and aval..b.s. of aba ngeme- an a centre. banb cr be reduveg...hv egient le Ghicn the Geed memse,s. n adcitivn of bnance as 7 pressureco Gut (ales accommoba nche Eo ernment veer

en( ems Do 3'd elecvora - the MPG This v cud - snbuid ha. e c bst ng me bber 1 cois.die abovs f or^ rnb. conduct of monetan bblic` na....e bie sac geb Form o' ndaGende-ce nm-ng rig ocvobv'al db.), aloGgsiaG vrryhenisr- Stre^g,112- rcnsuca..eb. strsvg =ccour — bisvi rv. cnhanceG -depbndenve a coretheme of Inc Co

111 Objective of monetary policy conk beirec ccribultb• on vvi..h !fib heal of the celtr-, , lie C. Gar. Go emmeb the pledorrinant oojvcbve .01 as Clbairoerson in this chapte ), "obi° d.Gte ^vb. er abothersbcondaryobjerbvev ovb...Groue.- eferbal p G lent, v...hicb verb PO by as the ocicctivest ould '3E articulared in a Sra err- bac' °Lief' ,e wovio Le b cbainbas e the public coney. %Quid ce vased o f F Ind bov d .be bursurd rribbcz arebt becondarb abbe bes abuld VIOLI C —ed.bri tern ob — Gant cbjev bhe,e vs succesful d bibery of The preco - sbcbtartiai would also luarrotativel, de 'inb what co.is" L.'e gets 1TheSvateme — Life aohie. ing „hese objeeti. Br, GrvG year= it s exbactec :hat the sbo emert v•si...1c be ssued F.,e the S.21- thus bbinb, sto vz. would be modified ()Go ocabviona sbarce o tvg Sta-eme- mene-ar. oohvy s rabeg.,

~~11.2 Powers of the central bank ce lende onetey po.:cy frcuons avo D ay it r In order Lb pbb~~

bhe centra' would be the sole agency :ss00GCbofLe9a' render 2"13ri cr thcr sed Lc issue cur env; unds Gr faCilitaae smoct irver ba- zrb-sfe- l' btrbvb ro Scnks- n aide if begs neec acommon banks'. rake ovy — ents and to race velundsor .rvbrbenv

~~[4 la~~

To ac Icalesmooheperton cl slirct on or L2n,s an ar a -gen-en neczs to be n ,I2ce tc transie, money irnm one I, -lc to another To Id! unc ion, he central hark nould ec. a,cistsdivi ofspedned reserves o cornmerrialbank as their ager 3. Acotire is rnPqo c-rment As a anker to beGover menr- the central would oviform L e samel,nctisns for thee.; ernmen as a crr merual barK per lorrsloritscustme s itOuid dintain accounts of theGoaernmena reie eed7,- peas bon and rna re ad,,.nce= Lc. tie aver imeir. Provice loreign exo-ar ge e sources t tor r paying cr sal debt or purchas ng foreigi goods or tangono payments ThiL, ho id not icludodeotmanagemont for the Can t a Save ii-en whi,1 d be Jndertaken bythe debt rranagenct <.gur Cy

cus odi29 of he ,ountrys foreign exzha-ge,reserves, would be responsible rndrid6 n.2.5' ser.. es he basic parareteis o h2. cc, , al tanks policies or rore gn exchs -ge -eseives managem ldb elety, liqu do, ans returns 5. Porlers tomplageJtsboi:.1ce5heet The cenuatbanoNou d havethe por,eno un- dcrirqoaast operations. onshore and cilshorc 0 -anaginji.s bala -ce shee This may ioude, outwo.a noDe limited to bw,irgald selfngofsecusties, lo'- efgncvmnc,es gzlc and other precious metals

~~11.3. The monetary policy process~~

~~C-come Central Gc,err -lent aschoy. ronetavpo i the mor “ary Ool'or Incess would mmpRm hap el=rne-'s i. oeisurrnerta-eseach 1.Ardators~~

3 °par-arid arida 1. re ililiaitary - more 3 .5 t :Tans:ion aid 5 Accardadilia inE•ch?risTs ce-trpl bank would ec at-IE(h an internal crgo-Ii‘ ion strum.re to oor f N' step-the earandi Meat!, email and esc -omic research for datkys that must gu nc -etz-v salry. The Lo. msslpn recorr cru s the eaiad115- -lei. clan even-1,0 MOO torn. wade i-eel on a neu. (\I dvotetovotedeteirnine the sours( moretay poky 0 ce t-e has de erm -es the poi c/ Fe 01 'he central ham..houll establish an 3,e,ating prosecurell-sJg '.“hi.sh -he Operating rarget 32d d be achieved . Mon=r=ripolr, iniluencestheecoronyt,o the -isnetaq Dolizyt-arsmission - he ar dyol.channdis t-rough Khin rcreran. ;oh,' instruments influence households

rinall, he e a e accsul rcch.znismth ougn hh,chPe central bank wci, d be he d accourrable delivering oni-ne ocieu destiat e bee eslahlished fort when ml o-elr Aveele tints el, Ilk= sritral Lark wo, d be able o de p.e, ho goals estab shed for do- Code has focused on Elm second z °a the insTmmens of rroie-aly ply )

~~v.. I he in orsu tat vrilvi 13113 (3113 rp33.0i) 3 3`13.e31-3 gal nernOers~~

~~meetirl,~~

~~e..36.1c be rep. rel. cm eased 3505-3 -stotemun e3pirdrs ere3sorSt3 d133:`33~~

~~15.4. The monetary policy committee~~

J determine the policy The CDm- Ds cn ncomr-encs re preabor :4 3 13113( .333 vIC13 toreot rose, n. additior to the On: oroson arc o-e executive of the toare, ne Mb_ boold have five cafe Tel members Of the:. h e, boo cub oe Appointed op emainioz o'ee the Centn Peper- -Dent in :or po etibn with Pe° „orpeison woulcbo appo n'ed PO[Cb D`, tho ,alGover- e r -he5E Tiertibe'SMU.St not ieem ployoes of the bovornmen. 11‘ ce^tra F- Di De inoolved io Joh cal activit, They may be per^ J lJ ot^e office, or os OrC mg (bell enipPe ab moc members blctr-- soigne con lobo interest In o curo a.cid pont ct br inte,est,exte -embeo sPou d ,a) be esbi.tee roil carton actipitiesorarbotio-s so ;Ise the,bitp Dank -'hese row ocluce rep c Farboo irboheme- financ al bOLIPLO ons, ens Po hove all ed Orr croal Pte bpi= that nay Them unfair cP,Inloge due to accoPs ID privileged matiob oPt- n-d In their Dagecyas 31:31^bers C.re a =c emhee Oth[31. 3.311 ar-at on 2DOU3 inc d..11finamal tbal is elate: o' . super:I:or, mo_ess The ro, rrihersopou d int.ra tooth [Po rose departme-t on c ongoing hDos bhop,o. d p cpole the members o tp a oomph), informatio^ Paso required vote o mooecar, Po decisio's This rp'Sement, which oo, been adaptor in the moneary po Ito p ocess wort vhde.hpP, an, s rengths '03113 oating.trupture pcholed with the eleaseo, the oh po record sod 333 onale s aPerrent Insures that each member poa ises the questio-s onc s rhasathi5/berownludgerreng and enures bath dor nishes' e exLontto ohoh an inc coo can dominate !he PO Tleamc thonerao, policy ,ace, e e3 ge in „crrrs o e cange o, pc cal inter,orencb 0o:ballad tbe period p ler o e o linos -he 5C cal loodo,s or ma, often ry Greb sure the head of hOCCriOch Dank apkinglo rronebo.O0 loy by oleo no LhederiPiDn c earlo Ire handP -Ithee PC mere P0000 peoon -a can be pressoro( 4.rep eseni-othe t 'iefent al Go,brn,ner o participate - v Po rn-o ings Lot voulc

The s'eff Af +ha crArif ral baruerOiLti ebeadaIthe central. be,kans cus :anibc4v -teres doting rdepende tly Adc hAv.Ag rulAipte -ie-sers fro- one organ satior rises Ge:..Assibi ty cl grouptlnk These cc -ce ns are add reseed by 5e.) -gte external -ember:cc the ',Az Alowederr, ultimately it istle hes: crt-ecent-al Da -- who must he -eldresponnole for de wering on t-e poietan so icycbjectives. The acco..nt5Aili y mechanisms descrbed ahead) Ae't Id A t mAtely res. WIV ti e head of the cent aba ck Hence, u c m.me head of the central

by a lAtiAr IA Ceic CAA,Arrimr- :Mich hr reirAgAr into p dere ,xptain hAisi °fools I.11 HP^ isAAAA,-Lionall, in.Arrei its assessmen hus iustilyirg an Axcrp 1..r A byAassing of the AD° Under non et AAA-Rion= monetary Doll:, can genera ly be conducted using only one instrumert -e control cf the sion rerm pcicy e Occas then may Bea .2P7 tt` ocherWRY!, suCh as c, antit e easi-g, or, troding DA t-e nar

~~11.5. Accountability~~

oncsicet-ode r the - onAtAry ot cdides cr the central tonk -le State mentoCreCent2 WnernmentabzcypblisbestheobjKl eof monetary scicrAouls c:'lydonewr_onstituLs a suAstA et DO eve -one an, poky cbjec LIVOS If c- xp he rAASO lo- etEfo J es, Lb.! pasose a przgramme of action d-mvris hch his AroAramrc acdress.: ho voo The. have ^incered achie.,erent t target ■Ai 11.1 z re hsr zo- cve- Kniol- the mAc exper_ s MA target to be ac-ie0A A fuithe cAeck elv saged in the form alp eserve powe' granted tp Ccr rn■erni.r-e-t o issue rec Lo the central Dark on ssues of 7012 ary pcl cY unuer terkl I oasCMCes c -zum5ta -,:es Glven he Houses nacre o this psmer anyirection ur. ter lAliAnusL aptro.A., by bill, Houses maybe of Parl a-ent and con be n fete only for? reri of Hun Ants= SAALI o (2A on ce issued in coAsultat on NItltle Aead Ar the cenr al Lank

~~11.6. Institutional structure~~

riGi Board of the central bank if c board olshe^.e'L2I bank rseo the AnAtio...inc,of (al monetary rollry'd @I spruce taland consumer ArotA^tic .-IfUrICIIC: Aror banking andc) micro pruden Cal and consumer AnAliarb for Aa,r cnA: Ale CAA' 375pn and the board AoAld ultimately tie respmzble for y -Alarming ne orgaiisacion so as to ver on bohccG lofino I ttheaa ahonal an d ^stun-Aalaagm.AulA 24 ththe to=. 7

~~- +,ertfol l.mn, II Inalf id( Or.' 0,1^0tb00^<1 '01>"Ine/'" ncor's'' -~~

~~Table of Recommendations i.e Board or fe centra.~~

~~mu Mare~~

~~Table of Recommendations 11.4 Functioning 2, the obviboa, :ounad; cr consb —rr p otec an and Tobro pruob^Lial Tea'abon bankirb and payman d~~

~~aaxinaa,ec —omrn,-aa on, (313 m The mem mu 3 3= 3,3,3 b I t3 rim DC JO chemma Mrx bblom3neberbm mc 33 pubm )m13 illt-SKILE3 In 113 3 Lad! aboaiabti noaral y bn-.= bonosao ramp:ay batb,i1~~

ever 'hal sh toe exb.rb which Nn os-ecbvea- Monet y oolicy (as form u's'ed Dy Tne Centre Coverameara are being r.cb,e.b-d rhe s:ruature of the board, procased by the C3mMissio- ebbC:StheSe cergo functions, and is shown in IMble t3

b.2. Advisory councils for banking abd payniarrs The pra. sicb5o agulatcrygcberna ce intha( raftCodeenvib )nbc o;....-eCornrniabcn valves a bail at uctured 'egnlabo, Makingloc pes- When to paocea- lc compleste each aopcsec cEbiationolid contain d aladon the aasbera zest oer at babesia. Lia comments received f the public a -c subtle iiWe raacr.se to each af them S Ja..h Mormatio- bmule be placed roforetheecoaorvouncilsa,dlhey rvone IS331.1P starernarb ltainrg th 0.) MC' on d afi rtgulatiors In dditao - the two ad visory zaune would put sh a ieoort each yes hig- abhhrg ceaelo s said areas of :once n th p clirefieds The unblian -g of ne !sorb courc or bank lig sal: pa5ric- s Summa seo tale

~~11.7. Temporary Liquidity Assistance~~

The central 02 -11a would °prate mechanisms throug- Which tquitlily assistance's Dm Lentially evaibible to linabzial sea%) ce provicers agabrai. adequate collace,a; to tide over :empo ary diMshortegeS OMEChniCa cayMer: prONerns !tab [temper smooth aTicboninEollhebnancialsas:ern This ..voaid adistincticaibetneen stanc--gla boic- orientbd bards resolaang prob erns n paymbr =systems an: raper gency lending a5b5tanbe which are someahab lenger tebank-rn These process:ea wok. d r

:les I hb cenbTa ban+. wo _Id !ssue legulabors celar bane rules o'ccIlatetal :and the overal rubs governThg the ending since:his fz,cday i^:ended to provideshs: iquicby sappCr7 to nnancial se. ibb Dmodem 3nd not meant to be .sdas a resInabrnent To :anding cay-7o daa °bob oris, he prix s-ruc-Jre shcL d best- char the bnrtor Inge,liry wau d pee er to l r k regular funding from Be r aNe- Me identity o= 1.1 e bons wing en o, would be raves ec to Se pubic cri alter err okr atE ;g. We total amount ler ough thi y 5hould be pan L e dad,. le: requirerricr t30

~~Public debt management~~

~~12.1. An independent public debt management agency~~

V Indlamtlaysome fun:tip-sof put E. dem menaeeme- aie d%, Geo betheen neCen al Govcriment ails he Hbl Tien r.Inagestriemarkectorrov,i grogra —nearCen t al and S'ate GOYeill len': 7xL2crial debt is managed direcly cv the Cenoa.GoCern- ert a son= tuna ons mat are crucial ro mar -g pub :IC Ceitsre not carried catpare-oFor instRnce rho agen, Lakes cas, and nve5tment )3gere-t andlnfoima on relab Inger!' anc ot^e e...s.^,at co-so 'dated Most im pot-tly thnr.-.K pizture c c hat 'loser Ye :antral CovernrP-I. ch impedes infer-led decision rakinyeg,..-ninF botM1 domestiz and to egn orro

:011.31/g- JIACA ^C3deS C.Ith2.1- ^a,beu )roscsedinoroerroadd-csath < prpt lern ha= bee- d 52.enelisec ^a vges ne habil] E5 of the Central Gov crnment ins nolis c mannr dam nc easingh., oth.aineJ horn 0 IV2 eleroe.-2 uding denes iz and creign drit ties VC'. these conditions the management ernmem- lab lit es cs -, r ovv in al zomplex v..ays that r.o JIti °rib, De taLded by a special. sad irene, A nunLer of repc,t.5 cc3lirg aitM1 the ssue c reform o pub c cebt )2. -zgene

h ghlghtet. M11.3 gap Ir. than inancialsccbsrreLulatior,aid have argi. ed for thaCreaL on u an independent pubic deb ridnegerrient stice The Comm ss o-1 e bel eve: that Mare aresuer ins itur anal bc nOits n aro aing con! The :ommission has cons J? ed t`evieos c the PSI 1^ -his regard The RBI beliaies ashr..c, pubuc poliz e Dorn n =Airing grey, - prices ability am.. financial strnility ordinat on betvcon monyiry pole/ f acr..1r,licyan I ,o.,ereign debt riE.n aeemen, s rical n the Co—rission orrru the manageme-t of public debt not be z.7. riff.. out n isolaticn of an under:Landing betheen mo-etary a - d I5Cc r-is s addresscc thrsuF the gc, 91 -arte rancenc thatthe Comm s o- r-l.cornmends la, tepuc. Glee!' nznagene - Dge HM1eretieRsiznd teCeir al haves p wr.10 ce n aeercvs.....elibers on5 (see -asle Cramng the consensus sr expd I (.0 rmatees o the asL %.^ars the Con — lb s recorn, encs rzst c as.< ng us el ar inceper do r' public deb ranar rn..e-tage-cy In n , r•:gard Lhe RE! has put Forth rly..4ev.. that the expei conm Lees L-al nave ecomme-dei an insepe-ceni public cab: management agency have made

~~131-~~

escalconsolica ion en essent: Land!' cc' fo creating sec-, an agency Hot.° fe- Commissic is of the viea -al suct a p e zDndit no' stared 35 a regu s in most or ve export commit's,- epoe.e mac h e recommeeded an indesee'dent Debi.DEFT c debt management agency with h-eP:voRT cE

r-eC-mq ission be e“,i. at ..he main bene Ito an edere, oen- pub iedcbrrnan agem...T data eellbase some through theinceg aben kuLl. cdebt mane.g.enent ferstions, - tl ve-isue (2,-asases anJ inror-ation whi ee rent& epe a' unify rg -e public d V -a IsAereeni o- and ell e I lk L wit, the caeh the merit ranagerrenlIenctio-: -ere oe impro..eliformat c- anol.eis a^d ce is on r-ak 13, h specia ere human resew -s its dispoe,l e s. clic det agemer' :an comnbe e o moreellec e - marke (suiting _ost erf cent menagemen- of C. e vemmen. Do rovviqs speziaWel un ied anc ede oenderr a ge'ow !have sig- paes. ac,antge ems ine, stru.tn ola racrwe.e. ,.d• urco-or-ina oi Co...erne-en- ot. -gprogramm.epreadacroesear oue ageecies The -o -ission.e .oews on pus c debt meragement and r veationof of p J.) de-ei. --anace- ent age-c., des. significE^ f or the del bere on, the V..ork ng 3roup on 'uele Debt Maragzrevent eeeArrex19

~~12.2. Structure of the public debt management agency~~

The govevaece and operetans or Lhe public debt naragement agency would he han. died th pets two-tiered errenge-e-t At them. 'here woe d He a - a bisory council comprisin5o ever s inr°anee,law, :end public deaf managcm-nr -headvisory coun citmua athiseanc issue n or any --otter re e[ea to theopen:es and furcbo Jf the push.: debt reanagemenr age-ey Mato referred e by -le age-G. el 'heCenral Covernme-t M..15t also advise and provide - o- on the leancinE plans sub - i.e.') le, pub is debt menageme- 2gencv al Cove nment as well ze.

°thee ly o e, ee. and ratiiv r M1oirowing pog angle for the L. rom ng months The acesoe, council musr issue its opinion b. e.a 'of a eensens,s eecision enforc there co-o nation .ethear ▪ a consensus rec irerreni- is o,ay of e-suringrering hal- he members e counc Ideall> the nal of he counzil r-,st 3.3 obliged ro crekconsensJsl om r-P-nbers / heinc co-ze-ses s Dassitie wouls re sortto -g ecaures E.u.:h a ecenar c oDini-nsef inde.rival dissent ngmembgis shoe d ce documented anc plac-c on rcesrd -he Jnaioning of -e adosory eee c ries: s-a-dzed go. cr-ansep -ac icesaelegz d.e.epointme-ce. e ire meeting procedure Lens.e and corcitionsof anpcar.-.e en ree gnabon anc emplc rent A, us euggests the a.D. sso, cool we el he. e execebee control over the day to dayu m (-mord o -e peelice ebt mansgemere agenc. he Jpereseien o rleo o cer sa y opal-shonea e me. etc m-nn% sule yest in the hands o -anege men =retry- ee ith n pH': deb n-a-agemeni eg.2ne.' c (omposi(ion o cc, management cornniree: cul e lar Lc patol corci exzept ^aux esor, ..eur ellmembers...owe besenior to -oseolche dna( e^tnicomri re This managemenl- cemmittx -ustexet segenera super - encerizeover ens ma- ,ge e aJmir al- on and Hu -ess cf dc ree neeet aency in:re es roc/duT=10 Owed by the csmmittee muscolic snob stand: d geed ce pac 1:25 The ;Deer ree tec cl exec. ,ce ef the Jear n-anage-ent agency shoulc he open ard transpae lc end me.e..ne.L co^ nine/ rnee - ore req.eor y than -c acv sory coencil - c 55 5e speed ei let 0 S eh a lec de]iy dflairs

~~ILI of ,ne push: debt maraeemont uguncy i and Toole 22 es:ablisr :he essoutial e. ucture of the pub ic debt rrumr,gement agency.~~

~~Tablets( Recommendations 12.1 As independent dot. management agency~~

~~I Thep L ,cour,n,g oleo Ig-nou eu deo u,an ao.isary cur.dar.11L1h/e -In`rnen coo- a it IP 2 Tho o op,obon orhe ac yonono -anareoent oovioloo Mit L broadly voh room~~

~~merdo oos ol moon- StDi'd ono woolly! orto ou1,1 MA non geoon ouncyothod, oe ■on~~

~~pet ooloor m rorent agenoy Is alMil Itoc and Lo,nc~~

The pub IC debt ouanagemeut Egeo:), shoule be a lean organiso ion with United s al un Is Ala ger numser o:errp ovees may be -mm Juane-Dog to handle.and mao, -Re 11 e o gonisa-ions :enormance °-€ public deb mo-ogco cult agency must Slop 'eve the uo-uor o oortot &aft oth soecia', aid ,o1 out-e soiereign to rid mar ke Therelcoe be soo-uLion e===uuodsaluuisrructures must health ot-eccut of ne age-c, iLself ol loo-coru responsibilities s Quid be outso.oced co dpyrooneLeshoal sery GB p cu ders a -d e exve floe functions p thin --e agency be Ilmtted e'd ccused on the roa JatecathoOlg3i1NatOn

~~Table of Recommendations 12.2 1e composition of toe advisory council and ma - agemenLoommittee~~

~~on,olo and~~

~~Oil -133-~~

~~gisugoggr~~

~~Table of Recommendations 12.3 Ope-grgonP isigg agency ro e h dggende- op jectives~~

~~h nal gpaortgaggo pia i6nt-E.: Mrs to Ili - 2-,an'«urd~~

~~Table of Recommendations 12.40djecti% es the pitic debt ranage ent agency~~

~~12.3. Objectives and functions of the public dent management agency~~

--ao _2 ouCNemje2yesv.' bePUbh:debtmtagemt^age^ry IJs imporan- o recognise th= to-log betp,egn :ha shor te rn 2 -3 r-e lorg errn A g debt - ,ge, can a gay= obtain gs -iort run 01[214 recticgi egzgicgs Agich aggea ro Leexpedig- gnmmethateg cid g (-mate: bass saint; gut ic.egar gscould ge' damgginginthe onE un the; educe the onl cence rnag(et paw:pants ggree the opgecr o the public de: rth'ggemen agegg r gst be Jgarly gel 'led in g-e sr:- Code as ungerzging thogg Ktionsv,hich mini-' ths -ostc bo tgirg oamen saggrn ngent --c long run Th s shou d rule gut an rad& shcit Led 'a ticg action sgch g--gt3grg gsr larne yagairg mergot ragicipantg erp Ling reglak or gints faced by market par rergs cod So on roe Key Igigtions r.1 he pub c celpl rangge^( agercy gull: be to ugderff/c publ c degt rd cash manog( ng' grille Cent al Soyernmg- In ?CC gign Log ese -e ,anaus forgg ons c the pggliz deal nonagomenc agency incline he mggagemeri contingent rat des reggargh gnd in crma gl fos... !god lggd eficiegt maggetfg Co“ r glegISeCJIltle: Thg5g a'e ■UM11121- Sed111TE3le 12'.

12.3 1 Public debt management be agglicogb magagene- -gency shoulc g Cu IlrgEgoyeinrnen on rhessm g.tign edgiest innumen s -c ,ding the pcgar olOid mn,sti 'gm 3 deb- ru -Lefts gggle a rhcrough cgLL s...stemgpIIanal g. given gnt I %cal gcegs ol

PUBLIC DL -- ►34- s:ate Sc.. of- ents the pub cdebtra,egem - agenc fhaid ordinatet^eCeitral Coveraf elborrowing cale-idar Iffi- the for figs of Stale ocvvimf ,3 -o ensue trr,theauctnns cf -ew issues ropnat yspaced T. eop:a[ersof the pub laden manage le- tage shau dolo kerf in m9d ye: or pe freef ens the ul 1m:re oLdeclive fpualic ent managa ant Le., to meet tne inancia als of ThoCenc al Go e nrnont r an eft e-, mf --cr over he long un Hs:, e'erryacc,ision v, I fesc ff e C::[al Gov r- -faro- Snce the Ce-tral er totsas made d.fis5ons o the key dues ons cs rer ' NO 151 De executed by me puttOver Ottt . m ecnz gerent agencf he pftlif cep.' ragemen agency s focusm ay Lc shift towards o diy cemf nd fc- Goff:ire' t paoe t ma) consider a ange 31 ernaLRe. srh as qs. ng inf on rJuxed t. ids or issfiing foreigr cur rency eatslc .lish rfecfa .f sms that ne aJdrelfrarkef loner regarding in excnr. gr c -Id credit fisf so asto minimise1h mere :psi- pais bytie Gen- rra Covernme-fr t- elo-g rt. static odayexternaldebt in,luJ2s loans eceived am forc g- Govern- - an_ mul ifarefal tisns hd freig rrency g of trio Central 3c, er — en okes thr:ugh -u tilftera 5 .4 dal: al age-cies There is no direcf fr off from iter rnal cf rad, ers flu SLalf,Covernme-ts cannot direct :sr off rpm abroad d have o froJgh t al overnme^t as he sovereign Is borne 5, the of Cons derrg nes 'fol- nal and external. dent shoJld • I finder nescope fl-he Hie debtsnagemenL agf ff here e easitle the DA. rnanag meit agcrcy 5:10 11d establish -or fdrio.s c: egories of ,isk am °fora (s. it IT at also see o ]nurf. against t-ese is f.z hcf,rif t portfo is Its cult ais- le.elop a f ameffs k -firs ident fy hest n h- pc .fc o mere elicier I s.ff ha,thoseasspc aced hputl debt management of err-ions re man: irg :on inEent b if es -pact c s ,erefgn c ftil Ines issued cies ard glosflfrf come tic business cycle rOfs It sif.uld als-fcc ▪ cre-dc ing age- ordinateNIL- the f al and -onfetarf po fa? f fr: ens ar act' erg

~~12 3 2 Cash management~~

- hd on( al( overnrcn has b.- .011-1St' 11.i noir ng la gefiscst de lac s.,erthevcar In this 511.par on rash surpluses no:a ft lc very slog sendsof tc..Je. to ramps,: f rnisnatcles befheen receipts an, exp.= „ es vdthin a gif e-1 hnfrtial year Hoff for hr fuslicdebr managfment agency sioud be faked thP'unf" n of managing a -d es.ing surplus cash the Lent al Co.erf ment efheneoer such a si JP1I P an. os_In futuie I Nye Ralso2 -eed,orf ff managemeito :SS"' falanrcf rossva iousce r.aftmenL s'd r fief el he ref al tieVerellent 05510C111,1 P large pa -to the uros reccivfo py frevar out- Jep-frimf nts a-d minis es of hf Central 30VeITIMent are he d • scums. ash This esults motif efit cash MD iffgene,f or the Ce^f ra GOVeITIMUIL as a ,fiff e This is because I-- c Cfn-al Go erment Pi gh ref „dred to borroff in -le MX11(0(1114 Jeficitsitus ion e er' vvhilesomeo 6MI1115h- es ishalf Drit2surol, s balarceb I he Caa5 balance posit ial Cseernmer alffs closely linked to he talanfof o SfateCo, sincothe la terte-9paranlf flan, s rplusesm htheCe'r 15131GOVel1158151t I he Inf °nal ,a,tofs f at con' Jule Lo unir ended liquidit, crffnf from time .3 !MC car bo o ded ir be te,management practice are in- rod.ffec by both f eftralans S ate Gov? -menb in ha rf y v.ith t-eir c sebt age-ler rff flifes

115 Therefore the publicdes mar :semen- aganc, 31. ould alsc o3 ca33 manage ment. ovilti a pert War foscs an 3 rna 3 co ri3o3ents- cech loieca3 ng and cash eAperdi sal.anci-g Cas- crecas-i-g in33Iv3s sart.cipatingactke 3 in the lc ecasting ann3310- hall early loresasts and;he shcr- I-erm ront-dv lo 13 week o e 33. daily inter-al foresasts also rle2cS inter2: 3,g breca3 ts Ca &Dip's and pav-nr 3 fith ether in1.3 ration on :am Pc33.3 notably !hose renerated .33 inancing det sions bond is3Ja -ce and se vcrig anc by the cash ma -

Ca-h Wien: 33 nvol.es:a Drc natirg the -atahngorday cayexr enues T313 insUdes na mac ng a regular .31-13 el c aammuni33-icn 4 -h the Central Cover- -ents canker e as` estirrte or d of ca3 balances It also reqwes imp!: meriting a emit from the Yinis-r, Faience -ega -di 3 nanag dl ) odl.arces ccr rain sit Jacons,thi3 might also rrt We management o Dercareat o- Vruccu al. ca3h 331

The pub a 33t- ma -age-nd ageicyshauk also maintain - Dr3L2Se ;Or e cess to te Lata3ea creatod sy --€ inistr3 FranCr loth , pi, pose; of thr DCILIE mental e-d 'The I c.idity requirementsof ./an,u3 deLatme- and m ies Ihe Cencal Co 3er3er arecasL.o

~~Contingent liabilities~~

Cantrge- liabilities may De either eX0i1C1 o it and inn ce .s3ued by eithe the Centrni erS'ate 3c e-nmelts Thereare 31333= inte Carinea10-5 Sel3een contingent113 3litie3 and del Ksdance Thervo 1golg.ar3- 335333 have R substarC1 imRC on the ns3 a3sessmerr of tt Fublic debt st-tchoe. -I the Cent-al Ga..( rr nent The Cam mission soft ...... that t-e putt debt ransgemerCd3033. caragead3 333 cute anc exchciL3o- rge- habil': e3 nus wate -3eaot it 3 risk& ant -gem- r3 and advisee the31:3333 3o criment an ch3-3irg pp "plate Saes. In adc ion t-c Godernmen s 'se rec. -cd 33.0.3 End o3bli3 deaf manage -3nt agenc. s athice be ore i3suing any resh gua 3ncer,,ince this has impli.ations le idle overa stabilibol the public ceb- p alto Tie rea se on of cc -Cingent I a h 'ties1333u, e cyc ica adcs t3 thr fina -cia purdenal -eCe3tralGo..e-nm.33.-.c.pecia]lyat :time ;Then itisir ris:,n3atio- Gi.er this cl epupliceeb managernertagencyshpu'D iserreCei al CD ,e nmentDri rnak in;p ion3 ID Cantinger linesw - Lilate ano riu3 .1.3.Ler3 agreemec.sac. =stab:di31r larcredit I nes 4 - MVP nation- ag.-cies The nanagem3nt o car-Cagey abhtie3 C)Dria ISed IL 're lan that invol, es dertakincthr 3c3assessalen3o c c-ts Th_re ore .3e 233.bc debt --anazoracrnageno... should be 2 ls3ed to cant-a3t 0.f Dalt cr in e- iretv Lle men3333 ent of car rgeat habi. ities co oJtsid3 age-ices if so choose3

13.34.Research and information rhd 33311. des ertim hat thocture a Dr Cer al.Governmont Thcinc J33 333 Jug Mar3e-a0 e eel), Dus alt: cOnracrualla olpdEica:ccurts (such as srali savings 3333 cert. -d .3c3 vs and any otrer - erral liasi dies Chile hese 113 dilit 33 3re WC of mtlie acsour a -d not a p rto Itled r'33, they lue ce the cost o rc eel,- and Froolie direst srcp[C¢ Ileac er-rner5 . d. is alDC .S(41)1 for the p iz debt management agency c --aintan a co -srehen sive caLaba3e s.F 5tate .333=-nr3nt ce3t, JJin orrnaLC 3.3 dair.d Fu

~~I 6~~

~~Table of Recommendations12.5Functisms s:1 public cebt Pianagement agem.y~~

~~akss holdeis~~

~~arl di)k 31)1. LI.~~

~~C■15 11-11- inp ■en( p11)1 debt mallogemen aeer Ey rn.allake stepsis ros era IgLIC~~

~~■ran T. ay~~

~~atiDn ol an anr iv repo ss~~

SLIIES ) lel C 2:22LritS o Sates, CD-Itnyenci o'States and any additiona en. dldii npliat gua ar Lees Dnd contirv.nt lob Ries notccdered - tdese accounts. The publiddcbt ,nenageme^ age cy mud- he efo-e, dry: 03, diarntain ano n-a - agt. rib ,131.1011system,disser ne e patipn andds a I mur-e ease co — dredP IP`q2C iand.e.e cata d aci loste azaderic edearch LPP p.Jbl c dcdrap- aedanc Feral. ccIld ine and disserina ingdd pdold debt management agency must identiry gapdir ex Etrg sources c. dd'a ant orkwith public aid andate insPtutiodd to rIL hem Aide c nedesdr, and ele,,a^ it rust syr if C3L3 or ridrke partici pan The pusliddest rna -aged,enta7. cy r ds also ,-eguladycollect and disnddi rd'd Gala dnd -to cn , pork rnancc and operations

113.5.S. Fostering the market for Government securities ering a liqud end Rican, mate to Gc,ement dL(driLied should be an inter at on al the purl ,ebt mails,ge—eltagcn , den dporcarce of p welt functidr ar yet n cal-Rindcut r 'der, Uretions of dent and rash management is becorasoil 'de Riede 'Ipdi ant ad the ror Co eemmd- secJiitits has nd as yet suosta-tialld dove, aped in Inc la Tne function of developing the do,..e nTer, de:dr hL5 marke should not oe ca -137-

~~Table of Recommendations 125 Stooe o re puttc debt ins -awn:it agency~~

~~hl Oarclalregu at o Thefunttiont oleo zum= protection and micro ptthe nor lett vith the Jut) is debt ref' Jlt 1SP tie Gcvernrent tett r t es rns~~

Gaverne-t se:Jdtits the oLtlic ceht manage-ent agency -.r.,J1J impo tat( crlegal rid instilutiotal orm theta e -ecesstritc ache.e its tb,echuPt VDIGong beys-d '11% pL 011C debt management agency must - continuous e=or mea&Jr efficie-c ainc. d o 31`C asi-g how hEse can be muro,ed s^

ongru :s underoke initiatites con-inut oaten accessan, end- he ma ax for bsncs its,ec b., the India, er--ent in terms cl investom anc (i -anc al incermtdianes,s o_ld yielc improved marlcl 'Crtiency and riquit

~~12.4. Scope~~

'moos gthe o the publ C tett1-ep.agenc; on Str, E Gt,ernn-rts ^ot pass .3172 e ma-age-nen' o Slat- debt s E 5 atesub.:a ner 1.)e Constitu on rte pLblie beat mstageme- awney mus be 'Cenhots ovprnm=nl nett, oLl gatot o nstiage only Len' al Gtve -men: cebt Ftst bow,hci, Tanaka tutu eons

&hi pod° is this invc teD mair Pining a co-] .thetSiVe ahase c tient sett anc tr orth at tie CP" ral Gcve nrriclIN o.dirg Enda/ Lri 5 ate ,ctternments market borro.e. However at E are stage -e publi, an.mge tient acemtv ma orovide the option to Ite S'at r managing the JAI c cies ;see table 261 sAlect to the e ecternmetrt vteiint -to agreemenrs t.th the L o. !his eftect s will not oblige Sire Gate t- tni.s dea v ith puo oat) r tt ageneni- agetc..... sSlateGo% ernmet C 23 JC aHett■enal mit sir &agreements with an f en:b. offering suc- ..e,ices For managing 'heir pub c debt kdc tione y the ._omn bs on recommend:- tlitt Lhe punt deb' mE egement aEcnc. shoJld beempov.- ereo Ia.:Here hricalassis ante -c ateGorerrmet si-oseuki-tet n tebt manage ment offices

~~138~~

~~Foundations of contracts and property~~

~~13.1. The interaction of financial laws with other laws~~

=manual a es do -of opcso a re ow tam they irrersc with other laws roma aus Icys CarnMissian recog Tses that wornao ng the wactrons ol the 'inertia i sae Cr :NS end regulatioaa wit ataer ar ea al Ina is of great s gni igance In 'Ts :hap e sara Canaan-Wan neldirtnen Ina oaring ssues o in era:. on of financial la s and Weir ogre a ion ne 'Financial ma. ears.

SOT: e>.amptim o ey ars We kon reiprrople inareancc legal certainty engem/stew regarene gciccrn wet cis awoke Inc (rowan or DUbl cls rradcrd scums Paths con ce awohe eau encre stance need be ed Is a salmi arras slowed searmes can srast /Lib warn-roar CST-I° a cWSr inirestructurn institswons. owns al Ta acts ord neraces cparate or saeco set aims in] tie re I Ins ascluagas clear as houses ancestor es trade ream:ones =lc acacia sgarearn on !rasa last ut co and sne action= a-oncost1st con ere egg anl ng awe rasa' consuroarprctccticn wow p ode re !cyclotron S./get!! I SI- and .3.-rpeDuticr :sky 1113: door a Trice= lea ye al ne inheei Janne 11SL Loans los in the prodscacn of nformat the has a anti c nconsnt awe : TS csIrr rcy erhanang measures and blownw

3 Special previsions far Infrastnicture Instrtutinan Financial Ira Marino LIMO-15a so maw: certain lerels el p action Tow aro operaocr, of normal I gal panes Sipiewas a of laws I lor coder worse season) w nig F.1( cICFCI a ill fIct2C LC theCC unuolthe traisact ons

slee irg I a sawn rorbc! Warn visas pane:want gocn bark apt n Public wage and trade al sneatains: I suingslsearrues us she araer :Awn rage! es linanco lay gaannierlAwsor s de thafronzia se:wraith nesse' tc he secu Wes a a, low ISS.l.2d The ob censer Ithacaregain ernsgoatorgan arc eon nnanc el firms sclso ellS)(0113t °blip tiOr, ICOrPDrOicd II s:.urueserco ei bat wn a War It ensInnern1110 h12110al NCB harecrawatada information eboTt thcsc n Trawea MN OS .thiCh I a re ISSUCi tin secun les In we is arms:CO.1;1.2052EO ItIllyentMer IS -WWI` WC] Wes Issuespertaining to thernarket abuser wancial n warns Operate sexed on the r forma wr generaracba I ei saws al seed won end toe inlegrre al transactions end morrration of Mon Wow a Inst.Mons Th s sires sne e tog Islonacconswh cF anzerrrine We rwagrs, ang n ass o nano ol war twice 139

~~As ropy op ost St within the standard system Os consume prOsostms and prudes cal rests aton the Corr- Mien - as decided to ensctdate its ecommencatiorS~~

~~sespom to ThemiSsues in this Mapter.~~

~~13.2. Principles retaking to certain contracts~~

~~hese certain doe foot le sector holuires snoods:5 iOn at gene oincroles of laws T~~

~~Posrancelt rig wherem ton !shot iociplemossm rood merequiret obt lepis atedto two~~

~~2 Se it es Isms srhe e logs on oaf's.," sal cos mo sob: ma mos a e thsT to 'Se pm er ed~~

~~21. Insurance~~

Insurame Principles are governed various orinsiples of (OS? laws ong with St4Ure The Corr"- :S on examired these positions as a part or its comp ohs- Tose review 2' t - sta sfmanmal Isys The Commission recomonSISgislative fit:Oriels in the so lots ^somas to ensurn the srmatT funs:toning of inst. anro contracts

~~Luane sestm timers% ssotract: rodarwe totdtfooc ans Isgsl, Ian~~

cedars] so os .11 Tatcral factseagnar rissnoto arcsosal r mIT101to the insurers obligehoo Ms loss e: col-solar ondcr maConn soon rr cweolt Jar the las TISt re: Ira ilse rand ▪ ffirlp o &von c chtl:scall r atom! ac to Isc Immo

Tads mho :Mr rams: nsuroscocontrac I tors :forth ail rt.-sesta: p emote enfe cin5tTr ssr to im Coon:sic- recorre xls Ism Pornar, la, Mould no repo car namable rtossmcsi 2L eriomotoar %presto con trac thous, rsgu as: mad 13 r the Aso th to mosireas I:stasis otormt lc .stmt or ra room cost arts rre sat est lamps

noure ra, Mare sr ms goss. it ndst 'rig:warmer is Izt moo trda:1 o ir Om limns of toe poi rts os dm or dm puts c rtme, Tit c r moshor racctoo arms Ohs ne op, alm 51 Os Tare to pow: to specify I e ram of pup:toed as grrmnts and rhstristes namorentscf nsurarca ries roost osomssforld not hnethE ri stret o to el asa

5 Cs rensly ar insurara po fort ons PI- oh le ss".+1,Et to:pc oho dm upon sae lapse ots a polio, pc loaner ro its sorm to be 5 re nolstha [moors:hos dse romsto - epo orists shoo nomon zch4lapsesle✓ rizn amino tor premium Psi wolf s louts inee fthecoucvenesae 'apse in si

~~costrnef co case taw Ile cc-rmission ma err sork t sot zoo los ma brognon to dear~~

~~Thole 3Iohersa br ef surr wary° thommeiso rotor: hen saLmos ol sheCommisson perta 'rgG the orrripl s pnmmmse oho' as s~~

~~177~~

~~-140 PO'INDATIC4 -~~

~~Table of Recommendations 13.11-surance co-~~

~~nce~~

~~Table of Recommendations 13.2 DelnFgsecuriCes~~

~~1 3 2 2 Securities~~

Get:T-1gwhalconsl4iessecun esros seene -hz Lenge -imAn). ons -iecom mission !cure that the rest sepends o - the free eenslerabilq nl Lhe rist ume-.t hhi-- le;rs, it 1.= -rear on c markets. Table15 2 pro des the recomm:idatiors tre Corn mcaiunrci, rung scc_intiescorn Jul, es rac s a-e transacions whe e par: e oGree. hal ene eoLnerasu )deterr nee sy theou comeolanunccrly sacs ar asset -r ce est rate currenzy excl-arr e 3 credit rat ng Such contrac s he p in rais and alloccric cap col a .yelle sh ling d 22 ngrisAs Deny& ve zontracts ray oeixch ilig( iPced or -on exc-ange traced he after being referred e. ey t.c. ,Laria2 discs cr non -andal-dbed Lire - omen there E.re ce-ain crmp ex n onfore den aL ve cont asts Sec goof the ndian Conisact r2nder I sing°, -g contracrs void Finarcis derivatives be relderedcarves une -dorze:312 beca..Je t provi,icr Excep on: to this iule have erore seen out th ouer L.J..cial legal provis ors Sect on 18Aofo the Seou ties Contrac',.;-cguldtionsjAct 955 and Chapter I I-D ofexamples -e Reserve Bnk it)34. -Itr_c_Iced by he RBI Amendment Ac- 2036 are of a- rsvis oils The Cc - - ssion s sr the die tho' for le,3E1 ta,nL, !Ile er Icrceabli inancial oen ell ex..api on LOlhe3ene el applice io- of sec- oinlay. -e 1^d an ib72 must be ,Ierlyspeciried in the law ins more genersi - ss on hesre.liev,edtheqJestiono requir -ecentralc earingc oicdorks ives Ae- francia sis 2008 there '05 bee- r-rark2d shin in :my. - of z c-c cenva fer-ading cl 1-?-e pcsi-trstr.4 - by: C 23 both 1-c rinon.an JIIIC trier tecStr.te u5) emo‘,:c o regu arory 'rermaxork for o-c- ame_ radirg that enco, ages rzntral c earence The Corn si^r Pf-mmerds Ins the rag!, aLo °via haie s.-ficient discretion osJthorisesu.1" a pos-ie Ccmre Wr requi cJ 31SOre.le,edr^e ssJeD nhentonce ,,1 sLuri,osanco he-f nan- p-oducts t thzt the issues sr i -^entaPce should not create undue bu-dem on interrnedier es w -c sg....uritieson behalf c the c.:::.cascid Fo exa-npe property

~~sass:sassy~~

~~Table of Recommenclations 13 3 Be T. Dti vri lo rut de :or rac~~

disoutesoc. sea'Itlazshovc nor inEolvv thedepoo. vvyvhere a c.ecased persce had keot se:to :les Similar 13E1E8E: e found be o so. sts anc Euralcecontomq s heE requires -e IEEEEE tc C,eate a o eEr 'ate harlE Eur bra -c E'Eeioceli - as ang as'- -• Eansfer E.ca itiesto a nominee c [GEE appo execu-or liquidate TheCo missio,EtawsBa —ffitloesnotche.geanysubstantuepmmson in tr e imentan e laves of aiy person to I r-erelycar les r-e cotieso' lisansia inis spec lea ese.nt The cetJiled recommenda ions cl the CornrniEcian 3n sector es areso o-ma isea E.ole 133 .

~~13.3. Infrastructure Institutions~~

~~ThaCte 2 le cer al^ aeLiviVies associElc d eoth prvanied tioarcia tradiny.thic- are Enique .- -iddite en" fr-- the usua, dEtioties renderec by ark oshe fins c sers ce pmvlder in the financial manre r.~~

oilrastrE EEO Ars Evtio-sroTE E p'oduEtorthehis °roe. develoEr-e-itol e fnanci; sec or rnarrtets usc of tezhnoicgE 5-; sums lesiS c frian-i- sectoi ' -creasc -1-EE opes of inf vstrocoim El or deve !thin thv inanzialEecto -he Commis s'onrvE ehecl're Qoutremv- de olio- es nlostrEEturel -lo 1E, 'ffisandlis ed the fell DV. sig asis Ups is rise inarssislbr'st ^g Suts r a:at leSE ns EEEEEE'orec( i'cynlLlec, eAft!! th 52 mechar Ern to vnErrva 'se .seen a ran- Snd 2 be se loan, tywne- ne payer clischarresc'e parnentosliga cm-Oo roebeneficiary flows a" payments nexc-angE or goass- Jseroces economu 2 Exchan993 Exchanges d e srprosas( - crea hste El sv a umber& pa o pbaso t2 de seeJris es .3 -ossgthnsel E ie e. ad ingEor reEs pre ,: - anoEe ens!, e dec1.2rati. nr info natle Mv ore. o`transEc hcos o cu- of rEvErro-Ery orig. 3 E.Econs ttu seffetlet . ee t;-; ^e rsa csila on of the ohl gv- al counts = parties tc -ake de %/Er EE or make payments the Ee'lle -ent cafe 'V= En: transcerolseruntics 1de eRE - exchEng: th I anser offiEncs(pEEme-t, o'de' to sett,e the oblp6cnss referred to as ceEtle--ent Or cc delivery a E c carne' :am[L i es hese erne I so E'c'Ev, EE'tcs"rr-ce Secur e kepi. - pbEsi-E. or ralon2 oev Secun 'es uoir v are maintained -c re.0 e the ^osts and rIsVsassocired with the va,EEcto d trans eE of secorities _-. Looter °cot, defov Ir nEc9a92.mont c L eels - er p2 y to a finsoci2 Lonna! ray default sr Ss promise 3-c neres 'ne e'tire try on is "Inimised -pcsnr v rvn rE Counts, >2 ,cs=( % s ccP sew as buyer So he seller s sd a se ei to he buEzr n thy Pu 000e sedernenE,

~~CHIAN Al 'Urn PL.( I lyr ''F ,PEtscrF 111,51^^ I 42--~~

6 StroQe clfr rsccreor mere The est Thermal rims has hinel ghled the ietercon nested -Aux of finance When a finance ma Let player lads the ur — et cb ira Pone Is other PitleS may spread rise remiss t e rine -cis!. it Is cL pees hie to mr d al Penne. hens to an excesn e tree repon ones for OTC trans acre r. have racorre mpo ant inl an rt ee ryslert to monitor rises ern g nonmai mes and 'morn, imement OAS r Imes al ,mergeney The Corr Gs on re ornmerds MT- the Coehmenent he p rended wit the power ts adc morxenniree IS elle Int o Intrssurn e net nen s

~~13.4. Regulatory issues of Infrastructure Institutions~~

~~he inrernission teens that The mg. almr ()lin er/structure Instituticrs requireethe rag date to ado rem, the owing:71x prennn issees about thei fur ctioning~~

,ILLIM r2gLIn on nst rut or n err alro nen llre tereme at re OCI.CIIS uhrg _mereo corm weer pr Tapirs o'crisLner protection. 3 inlirehurve rem !tore dr- ,Thal ,Thmence Irimeenerr es Mee careen DINT lancia ser

~~!Mire ruccurc irsl turore sometmer ertry coneiderairle merger uel.nree as the ern M. ire trastrm ure s-r ICES14d I IA~~

elar€eremnaryr The ▪ Corte n r emu onsta ] mese 2d1=Inlor na ihnerhm Rwadne releaxeand netrut ✓ Corte n tree, v u e Imo ut sh^ I d Me gni to r rek relentalms. and er ler athirst rtemndituu t ieneuren Pg 14 on theme tater forme rureo,e The COMMIS3 on rrsorn. ends lhat nfran ecture ,^stitunons he ehligpdm pursue treee six olteeLnes a ongsiderhe reeelathrs Rant 'Mors — eSt aa.e creSght over this e making process and ensure that rules a e -rade by InfrestruTure Ineritut one Ms: Arcemcnsonent with tresooee s6 ohlehr vino renulators

Prudential' regulation The nen^ dl cro p .identia Ire. mendatrs Ne 2gulato to mon Thrthe promises rirde by 1'nm-col inns sexurities sector. The I - rast deb./re Ir shhe io es make impor an p oinnestothecansemers kethelivr. .5.sexur. r es at an agreec pece.heepinr retch; of criThrship re islchrirg money tort -Tedales c nee-Martel ern/Pies and err nor Tx ingn claims Tre lath e o keep erne cruses nave reperchssiers upon en turners e um- nrial system at brge I ence regels ore mus enrolee prude:hal regu ario- requirements xpen re,t x irISLIEJtICY'S

Consumer protection law rex elnl a, rurture I h Snayltenselves nordye:tie !Jeri. in ns Jiners nal. service providers usea ly art as - armee e ice bent een such institur one and rera rrnsumers This require.. thai rene tercis ersure Net e mns apple he p i P.Thol. erne me protection lam --ere,- roplesmill operate in a numbcr of ats p ate:Mee intems xi the consu Ter II mill [...mire tee marke ece ge s emberded nate m es created he irfraseruct, elese tiClb to bele coesurners remresccurmesadvisors berml8e perm orratercrs P(tElt itvt011.2 120dSOTI-P rem mersuner hod 3 lc. I egt, gsc tersolseetn taste provide cl qtav orrattoneLg t I escar i-s bot s and the plc= and conthhenh y hese-vitt ra retgicorhuhrer

~~Systemic risk~~

-frostrugure -stitutions are ushr11, hysterics 're 'art financg est thtionh -he aithre hes r Eta ,e consequence or the entire h-anciat system due to 'he ccnnggit oh se VICE: 7.1e) p cvide betosen li-arc al service evv deg The 'tics ^ ace tv lef atruz re Rig Arens -tusithcs pcgue high cvelso safe g and reghlgt- smus mon torquer' itstitUtIolls rc-n sberSpeztire

~~Monopoly abuse~~

Cantractingl-ggIcchen place or miNnnisgh -oh the - ervcn:o- of these !Waal ctuie stru ion, ge economic surpass cl such -StIV (II( may be .35S1 Id( LOWY: prts The fi st MIat ofcedtheeg cost in seetcochng --e sea ca sets' counterpart, co.: dowa t going o en exchange Stalchrdisation ht processes essett allot the use elect oc C5 nschungestrao cg seglement,3-C. hat, te-ts Thema ketpoge- that Int astrurturelnslituco-s e- arc th -enarletc abuse 1.5 may arse !• atteig like refusing Is gtaecurit es oreee, ggg gess .° genre:them cr p r ven ing acces= on ceutrai terms gthgce the regt egg hcs to monitor thecerms on th hizh the Ingastrghttge Institu on hprates An essential ehhment of Pis sis the eguiragent tcatg Ingastructhrelnseggionstoperatee- pg.( oterminedrh es P.- c- e gtoppro ed tee regulators° thg- thcre s co arbitra ytreatment of egy parcy chcact.lgtheserdi:es

~~Information as a public good~~

inghrmatic p a ea ay I rectructura legit Thom, as gde rhm fications the market ecogo, Therices OT ettg.irittet- er scJ at, the th, set ecc omy ah; vital input for -cc lartgons about C5CU'n' IMZE Oci lance In it:ell-he:v. Inshitutio-s reale ac re gated to helease Foch thhlily -kerma-ion that will 5 'pert ch applca

~~Market abusesupervision~~

alocmat prciuced byinl aht hcturelnst ..tien 5 ral!otl- chin Lioi volthefira - °a system 'salsa art inpu mite decision r ak gat roscCam-orny `Inert-1g -hot -.elan is hitteregg tt reducesthe ghgrg of lee 'ion raking achoss ecohorgh goes ho are not cirec parlic igart, in the wane al m: kets -enc r(gL. rs and lei agructuregghtutioch must trde-ake ingatives that ecs tire the irgegr y oftto he inletgaton Trig egg es bloccing ket :thus- Fur cgr Int hetiecturel 51.111.11 onhareat het o- t -holsupe ggo- o- 'new ht, rrg of mo kat < thh.- while the p me resaons ere- one rent agains market able hes - regu a ors the I gni:line hasrts we hh ng gahkets and conduc ng the y gage,c1 n ict aggat co le g th Infra ructure I-5 ins In tat -ode environmert deb rtigh-speed :amp, &gal troll te and -rnhleh gad ig s hateges astrucgre I- h Lung, a ere 15CMIled LO suite sopa 5 gated huserhiscc. stair of -,J thOL lb 1CL :oh / essemt ed gahernmetga age-cies P ogget de g cpme-tr .ctgie logituticnswill 0E211 lead to in^ovat new products being hehelopec arc till, is des att sue- -stith TI l5o be h-cu EA. to bu .d theem gerthumg huptgicoichapagthth.ccerstendand cetect [abuse in re cc ingbi tonsoltransacttors n fag: oacgd infer -at th-Te hnolog, gth rn, it etc gulton, ▪

~~Taa~~

~~Table of Recommendatons13.41.3 )05 tones~~

~~Recto ,i+gthu ,e-I cn-sur-.1 and he cus.clyor depea tor 4 'rOrl 0'0 3ric record'~~

atr alle2 this elc c_ns3 s or re.J ars. Ircus -g on toe goal o market integrity anc ensJ ing -0 nr a5Irtic are nstitut ois a e per orrning the r runstiors in this regard ac equatelr, requrernsys pa in. erne1-rasrructselnstitutisns would hav3stherse '331 rsatio^s o the costs 3 set' nc up new In rs,,rurture Insti utians ssd he cost: irc.rec I, users olsur )instilunons Fence thedr33 COce envisaaes= r3r CM conenested ay se PegJlater every Ire ,sars LI a 333-inss be.ence hat sas beer o3trin3d perereer r regulr or; ab res and co-Thetitire dynamics

~~13.5. Special provisions for Infrastructure Institutions~~

require specrs'proteztron in selawstoenvretraosactio-acto be ral This require5csrtam r'assos -3.c. i ,tions ^ have certain pr oleges law svailarle / vete sa r es The CaMMISS o- founc t.33 the 5 should be "3ven to 5 ch I Jr oirr .-33? regulated r a&Se privileges are appl ca3le 3 the sreasof sareasdeccimer

~~3 Cleo' r e~~

~~13.s_1. Deposrterres Secu itre:3re intsng sle propery only p oo of hepropenys the cont (whror is -hiss sates unicusc o ngos in relation to es ablis3 ingosneiship~~

~~ofoff grriSE3.1 rties because Tral s,orchcrc 3ps, of f ssol du( s hrssrores emwmlurrr can beca fuss.:~~

crane to srrircuonc oss, and 3 rAnd2rn nranzia sysorms opera-33n datrorrrsyrterng se depcsaory ystem ror securities has been En err cier1 so..c- tc the oroblens e.5.315esz -dthpirule. ran1.13 selsouithe det3i.lec ecomrscndations 3ithe Com miss on, - reirrion 13 deposits-les

Finality of settlements -5. I tide of .3 .1c.. r3sJlt -w1T,be obliya song ths 132rrsers 11 an or g23ised insncia: t t PSC aro nctted rc reu r in co isclidaie.....).11griors Df each br I tO he CCP 1hesetrlenertssarr rredar narst Ire ra asaedinstanr claim b rairy ores -or !nit ring iqu da or/ or a rernher sur (1)013 osed srs em .3e Jading. In other cs legal se taint. of rarssc o35 o sed frrencialtrading is ac- eyed only sy making the ger-err0311E3[1pm bankrug Jposy =rote to re membe sof theorganicedi dzl sys em Table 135 sst out the rector nesdatron of the Commission protect se ',laments cr. exchanges

~~Table of Recommendations 13.5 sie al .y of seeeern n s~~

~~Table of Recommendations 13.6 ty c -senses- ons~~

~~ihensmsnesiun .....onneends~~

~~1)2 f. asa2.1.(1cmont al !AIL adc2.r.f ird Du~~

~~s re, leesinu 12 25arisrg 2 I of 2ati.r.ontsyste- anc~~

~~13 n 3 Finality of fir an cial transactions~~

-l .Commision riosedthsuerstuer 01SO" an le reetrucLu selesLLu e snotbeessilo undone. In risr ing and seetlins ses e^s if nsidual tar seet on _ndone, ce pendant I assast ons also o undone T5, e nouls trees uesenaints for all usreoi s nsing such insnutione Fro mums so.ld a so ans.. Cs esseaegce were brides armee:need at ore poineof te-e tut se exchaeg reseuritiesaisc. none> saocees aa later noire- time If a pe st rennes CD Ups( e trace ergoes F22 Jesup after matins a Slade tinmbarurs comple ing it is of a ansactsar the exshanne monlase darn ne c Ise on other ranstei oss esenommseinnisoftee, smells transostiousonan Infra t ucurelnstitution elso firol. and rus undone usser an ['scums-an:co Peesen reedstions of the Commis- sion le science a sransastions ?refoven Tatle 13

~~13.6. Public issue and trade of securities~~

~~The Cors-issios Spoon thattha outs: issue sec eradeof senunlies save snree or porsant~~

~~-se p, I cos eels. i-0112 bed121 11112.122.2 [hat atecitH Uornanor abautshu nsus se: teesecuer sae dub u or aeon rueLs bas sl'othepl. 12 '21 ak.e. Mons-Leen~~

uegrn AU-2 'Ah ch ensures Ott ,2•H SCOr noun .1 pmeasers at spee Ss class 01 son r le he sane .es Cr ern set illeseuteons. ireester of sniuses from El' 22" 3 Thc rade 2.15202120=.2 roodi e that he PAC, 222) rm;. the adin; 0 ciflo-srr escunnes a 2 nyrinoi under tang prim; es sereshoule eons 3311-ading Le.cult 2S se are reeurus

~~ne i. Public issue of securities~~

~~An menu:orated or unincorporated crater may nool capital from 3 2 investor sass by is suing scour 7222 co ng so teen e or sho ats y es Ihn enlityS masage~~

~~1,5 I b6 ° 155INDATIG~~

~~Table of Recommendabons1.3.1M.,.ir a` ciscCu !tie~~

~~zude:51.55151.5 5555 155 thetrodlogof 9)55 (0555555555 Id under5e555 .15r napiesc 5555515¢5151.551di 5555.5~~

ment, which is in he disclosuresmade b./ the erititi &V./5 I 35 a'S paren5y 0105 .405555 nano: p .Rsseq elaw rnus.cri:the InaLvThenc..r an:entity is icir geepaalr oma ra I; large cool it is properld reraged --d msnitored ltucher entit. nat negedzrtl lorpr, irgertip Jlo.g po.q.)ns Fa> .he such enutieq to commit raud T- s in turn may det- nentall” rlyi inyQs or ccif e.to and 'he smooth 111'55 oning of marke-s according 3? the C.smmisio r&o cm is that f

~~4 h.2. o J he ind2pendent the et: sine...neat bsuer TheCommission bel eves la.- alot,gstic .-.sin- ocses is.erso SECU Jtie: -rust be ied - maLuIe d sy subordinate egktation eg....atic -s~~

~~1382.2 Trading of securities~~

-he COrMiSa no es hnile e..ichtyoe of sec! ritiC.a mayha-ye sprcific leyollmues fated crant....., 5rg5ii5ei trading of ses.int es a:es :nil: concersaboutIr- :egnty.TheCommisionrecor: end th:t thcic...vtok.25 a unified approach to regulate the srodinc..J1 sect lit es T5is exchanges broner., o'earing hcuscs an, -zy -lencs” rns I - riuld required gene aliseJdeinitior al T-e Comrr Found that there is no i cad on or SC: Jr -les Therefore it reco-rerds .hat he Centro 535e-Melt ShOJIC 11'5055 5 55 5155 u 111155 based on theunderstand og of ha. linen:lel sector Tablet.; gives a ceL-11-J:urrirn s ot ecommeicaions c the Com ss,an serainingdisclosure go.,Grnanze crs to be applied to ssuers of inUcs

~~557 -14 1-~~

~~Table of Recommendations 13.S I S ing0152021 laS~~

~~refinish- ists an ins Crs Janet. EnSihnianns do nal 'Iran~~

~~hisinthnianharseshrsile Lo`r'le 57 =el 1111. se.cu besa s slice and~~

~~channearen his senthe shun! es: e~~

~~Ech4rges slay a central role in -e organised trading al sec:rine: Table e 8 pro exchanges vides thc: recom.,-.endatto-s of tha Con^ 122sec:tin:he 2 nr. Orin of in the courseourseofllng and trading.~~

~~13.7. Market abuse~~

~~Te Comrni-Aion nosec unr.o'ly JPcsci sea itle5 rarke 24uimsln ari o the WM-Malian prodUS2Ch ke's o mess o the Ferms in trading In~~

~~Sollowmgcasgones i market Manipulation Org.. Ines rancia 161; s odiises a s !Can o~~

~~irad agsalur lin, s 0 ins ,issels and rins mash =cane is chi sisisns ss reirnenhsrcescli -I Lie saran ihs Any art ea inh iynara an a Lanai raohni catina ia~~

las integ its al ialorrration lInni is the rnrirehL isshlator ei her si I < sven or thrhuEh this irinacuLcc..re irstimton riLsttebfan: rvrc5m5Lpfl/sici o amid pzia attenct. Tarkel pa sicioaris to renCesnifi al snlininnl :aces escis or [or-lover 2 Insider trecling. Concerns ase based re r on phila somab on thot is 3.21 cd crie .petial. Mtn crshIC:5 end iSCetize ed an r adsarnaze insuch rna

~~The :nrrin 29 prO30Sea ra nelainigoi srr ngthesecolcer .snnulc beclubbec together kndei s general egal p rciple o knton se MarKet abLsn -.2 - secs iei into~~

~~2 abi sh LUcr t es and~~

~~Table of Recommendations i 3.9 .y pet of ma-,et abuse Table of Recommendations 13.10 Val (et DDJ:•~~

Th Commission reconme-ds tie iaw E.:ye nirg maNEE zbuse ccver the no , umvanims -entio-lecm ga. Ma +e spJse 1M:so 11-)enaltiesas asa major Jrisdicr.isns crcssthz bec Id -he recom ,endatio-Go tho urns: sr relEr onto aretabueb E.-ecDpLur.ci )Tab 131a Financial regulatory architecture

i.;)1, I t- the r nancial regulatsr.Drchirecture or -he civisio ieo■tha work< linanz al regu ation a.yoss s- set of regulatory a:E. los Ir the inte natio 21expenence. [`ere are three nan.ho ce3Clat e la 11 As nglerinancial regulator a win peaks mode

~~PI! tree e agency focuses on co-sumer DitiLabO'i arc the or MI.VJ prJden regt aro- and a fragmented aspic:ft where here are mulLiple azenac~~

~~14.1. Financial regulatory architecture as a distinct feature of financial law~~

Many altera ve st inures can be oleJ for the (inane al regulatory archizecti, Ryliamt.ni -„si oval nte altArnauve bloc, Cagamsthougiwhlch a su .2sle geo,p of s atu.or> 2.ge-cies cnded Inc, with thtlaVJ ThESEOELISIDI1S:CL d conzeivaaL chr.nge thc.“...ars At res,,n, ndinr Isry lc; ps ughemrneJOns between a Da ticuta - agency (e SFPII 1.1d rho runctio-. Jut t performs e g seorities regulation), I 'le droll Code Jon= at pay ce.srsuc, -itegratior rims!, +hat korn treout,et, and over g decaces decisions. cci.t Ir?-nev.orkgoveriing finance sa p ozeeo eparate% rpm de-is ot t-e financialregulatory architec CharpD in the work oct on al aEenzie.,),,o IL no' requiro barges to the urde yi-g !self This will lchc grclat•-i legal certainty while lBc itac -g r:t anatc-oices ab.,th.hr ory tecture -nor val-ed c..nsiderdrns Nblicadmin strauon and p.ibiic economics

~~Table of Recommenclations14.1.8 -e-name structures~~

▪

~~Igo "~~

~~14.2 Problems of the present arrangements~~

\ I "resent ndia has a legacy -aisiel reguln cry: eeture --c °resew- wort. me years \ - seq_enee of pecei)e.2 ce:isi.ns reponainr re In' p"sure, f \Dm me tot -1(1 The present arrangement has gaps 14 r E..lawns c-arge - such as d verge ninds o nzischemesthat \ Fee .hich e not reg. a es by any of th"exis ing agenc es t s -ontains er "pt. ., here cor pe'ween root - laturs has consumed the en="b of top ecor one po c mPk..r= and held ha k marke. developr 0,er the \ cars,these r.c.o rx2erLE-ted cghtecplace — ol.aica12 -df nan. Franual frns ha ness to a.tiries nto e -ta4e c aps se as to old reg.. s ion \ hen Lhere are ^ve aDs ìnanô f" rms.:. II unde lorum-shopoing ..vherethe 'nest e regulator is. h son, and po tr,\.th"ir actig as belg to that favoured \ rad ctio An app oach of mt Itipleseco al regulators thr crstruct -c_ces econor re inefficie-c: kreent nallyac.i.i.iesthoLiatur ourther onefinancialTirr are forcib y spread across mul iplef aûal rme Jr o suit \.è cc - o...5 of thei.dian I is \ cal Ngula a". architec.. e Planted r=gied arzhilectreshoJd tc conc c E ro gTc ater eco-cmies of szE)E and \ -ope h.: \ ne al system In cditis -, cn f\.= acl- w 01 inanealf rt- aresplit acros.ma->entr. c hasavers gh- oradificrert \ use soi,nosinglesupOivisorhasa Joureofr-erisQihatarepreser.- rocoentriono I naccolerm crush reser or le lecmenta iono ancialregUat on leaos to \ reduced J-derst nd risk \ nen a egulator fott ses o^ ones.ectch. cer ain p ocle-s DJbhc arm^ s I. alto!) tend to \ rise Ass sted :y \ by ngo inancial as to the regul,tor• ds zo share 3spi ationn or of tè rev...redes rms sun as low r ^mpe preve- .s (ri.On oVer se high profitabili-; a^c high g o..tr These objecr often:onflIC: - theccr...,onsmie goal5 of I Pile -egulacon...e^ as eonsdmer pro- t_c Peri a'd ft re \ olut Pollee nE esediflieut the present Indian inanDal rr 0", aid-Kest.. e over the ?E...." peen uni Pr,a11^ -ntiosed by a Ie.:: rc.-m 'Be reports ThoCornr \ an has ..p co-the lecomeendatice. efo -- of -larc reEJ 2 c^, archilez-, e l DR' cse exper co-nrirzL epers 01.0 arguments sr-scnLed by ea.- ol

~~14.3. Considerations that guide ahem eve architecture choices~~

In orde eo analyse alerrat ve proposals in f 4rcillecture the Corn piss es:abl shed the iorvmgatlncipem Accountability: Acountab s besl. aohi:\yed ...hen an agency has a clear pose The trad Endian Ilia a regulate!. has powers over a senor out lac": specific objecuvos and accor \ mec'anis-r."5, satisfaco y Conflicts of interest In pa:Ti ular dimc: collets of cerest Erc harmlu . 3r• countasility ane miter avcoded Acorn Sete pictureof firms: A. hancial regulatarprOuleel.,i,tha:enables a cam

~~pat -.-eytE.ke 5 cesiratic-~~

~~)5)~~

~~Table of Recommendations 14.2 lioarcial memo awry end =aged St? -e COMEEIss on~~

Avoiding sectoralregulators: ...r% he- a "nrcial regulztonnorcolzsectar there a possibility of an alignmert zor ing sbout bete.een the goals of th25.2CI011:g ONft prolta0i1C and the goas Dice mgv d:cr. I hP letHiet:Ithen '7,rldg 10 zed.seaLn pally c?ecionc -hat are :ensue' cl for the g ow:h of Is sector vih:cn right be at -.he cost o' overall COEEUMEE srcesuri SUCh problems are ea- like y marise when % (:gulato'y agenryrm Et least many es of Economies of scale in Government agencies: In rtia IFere is a p5Jcityof :a e-: and donair expert :el:. Goverment and cons: 1)7.I -1g a [urge nJmbcr of agencies is re chicly3CimRlromt f "erweci.ve Irs eitc.ent:o placefunctions :ha: recJire correlated a silg.e agetv Transition 'SHIPS' it IS ret.li IS envision a ful in:o a se:of sma and i - slemencable reasJres

~~14.4. A financial regulatory architecture suited for Indian conditions~~

The Cormis.ion p °poses -I e -1g structue featir -gse%.enacencie Poecyut Thelil mul: os and imp ementsmplcAry policy anc.anfn e: p:oteGlom acct cr, prLJPntial pisvions of the draft :ode in the fielcs cl b nkrgand sayment systems tgenc #2 lb= = .nr es ecsnsir-ler 3rptection aid micro prudent al pro. SID'S of the drab- Code across he financial sec of otW Nan In ba-king and oay

At( n.} n3 A irsclutioneOrplaL C11 which lmplerrenlsthe provSlons o- iesolimon of finanzia firms in the drEltCode haawor p-a!: avi-,,L all financial egL eery agencies. Ag cyis.T'e He. ch zddresb:s....4. ns ^eronpNh¢oss the er-me figan ( e cystorr .)rsyslAmic risk oversight Pgenv,'re'. The ,r- r1k c independent public debt me -agement agenc5 Tic at. r surn-5,ises she changes in he innticil 'egulaLc a,cutecr.ire that be sropo ed -hese cir.nges willattfrthP InMan Inanoal landscape from eight inaccz reg.iator, onven el5V

Thlb [ rispoA features seve- igerc es a.T. -en:: -ot. a 333 led !Ina .3121 regulaLsr e ocosal .atves a modes' 3et or 31 alges Tehrh renders implemer The co- tinTe toex.3.1. 'Though - rn3T,Ied lune on3 3 The ex sti-g sus WC 117J., anT P- .kilmomereed Into a new u 3 s-c c stisgsdswd OE 3L1b31.1nleT 111■0 TIP TETT / Tn-exi3 ng 3,^3.3 v.. I b....T.:Turned rothe SE.PITTOP 3Srati^ril

~~6. A nes. 33.13.3T0'33. created:3ns 7 The exist Ts. SDC JC-01Tie 3.11141Pdged KatTiory agen3y with madined Sdn: bons~~

raft Indian Financial Code "Pe Cpmrpissisr has Traded a seise dated ndian Troncial Coce which embeds thc cnation of her 3 .3.el agenc 33 arc is-eir rosoossib es and fs -cnors The draft Cede consists of IF e ..i.loc3ng fifteen Tait: rrol sNasidolisTions 2 Es...abIT-TresTnnanc rmya9yagenor, 3 133.3312133.F.ferssrs' cors3mer3rDis3 i3n 5 3 usertsireguattos .3 cost 3-t3. tssrg ors TiN-11Dir 7 ReSOIA on -"Irian/13i ore,. ce s

~~lcpner 10 Resier/e Unnk India~~

~~13 in.c33,;3333s.enforc2r321 (.3L ars -ad olds ces FLrin 095 1-3.33r3333 dLtESTS1Tritnina~~

~~The 33r 011eSt3nkhrTe- D firdn o'} ate . age Tics pro3idesfor creatisn~~

~~a'so p-ovds3 fcr the allrcation eguiTso r sppnsib pies petpo p the ihO TT.~~

In 333.3cf R3! the Commission recosurores t^e nuan t3e.exi3-ingarranrs merit with eel asthe coo 'try s monTi-ary Outheiled -.le draft 33.13 hoseve revisi 3c nruons and Towers of REI and sets out the rne.--3r whic- ^ust Le opeated povcried This incTddes pro s onsfer h.3c of 33 telPi..3-d POO of the:ism m e,- co-nEctisn with -3e disch, sT. of 133 s monet: Po runcl 0S Similarly in

~~The pmair provisions of 3-c. dm ft Code lay coven the pc) 3 3 -d functions of hose Et IJICry bodies d -d The principles a 'c processes to gc h ESE MiSe~~

In The 3ra:6S of achie3ing the limoCa1 regula:o-d ant trNure proposed be the COinrniSSID/' sral amerdmencs one ropeals are also reauvad to ho made to the con rent fr.3.-r a secs. i505 crTat. the es sting regulats s and layd own their powers and functior3

~~14.4.2- Functions of the proposed agencies el53 -~~

It o oDowed et ae s I perc it -mans: me-ea) polic r eeu a on an I s ipe....isisn or basing in en sit g proposAd sul p ohc lir pre siars 2-2 the p 3S3Sed. micro orud. SS:S./- 5101S and regulation .1,1( sLoervislen ci paymer systems

fie arse nod financial am-orityvy II -p eme-Lthczonsume pro Sorts ar' - cro Jrudea al p ovisicis for the ent re !Iran: al ter apartlam from bang ng E.-1c payments. 1-1, would yield ri>, of coon 'Ties o

TFeJll'ication of regu a.: an and Der !mans al fir-ssuc- as mu:. 21'uncs insuine s'd a diverse rtay of bons that arh -of banks or payne.... systems woad y eld consistett treatmGr: consumer woineen and T.CIO prudential regulation acts: :.l of them .

The pent SST will he subsurec in -s..T will hear appeals ag grits regiat y fundio is the Jnif ed iranc noi decisisns cltf e IRA zgainsz Ccr ral nrnoit. :or trD fun.: ions genen6T the ...... x of t e -sor a ul the Res atu Cal DC atilD"

~~The veser Le J.:3: o into Cho ReS0 ut on Co pc soon , Co-peratiDn whit- will hork:cr.:bsthe financial ystcr .~~

Thera s a newagenywhiohw II -avel-s DS SiseaL2d r ;lemon rig this i air a regulator,. SICS az .re 1 lose.. set Jp z nationwide ma- eninery o become a one slop shop where consumers ca Co plaints aga nst al rns

~~A' rdependenc public debt management agsricy, envisiCned~~

~~Finally, tiecu'sargFsccvnllbeccmea staaito yi..gencyand 'a..x woo ified~~

The Com-, ss.on 7...heves :hat s prapcsed financial e-gL arciitec.Jie is Todest step a Irc.,; prac. embecs ilicro.unc:!s and %ill incoming years a horizon o: five to te., years .2.e.e.r the draft Inge Somas Unto effect, v...auld acvocale a fresh look at these c.Jestio-s with two possible sm.lufons one possibility .5 Theconsta.conn`ez Znlejnithedhrandalreguhryegony,w'dtwoulc zombi-lean The actRities of fte proposed uiwaot also thewoY on paymentsa:d banking Another ".)ssibil-ty is to sh.k..o a two agony...A JCILHe with one _o.-sum Et PIS/SSTS on Agency

~~ITS -15P~~

- er. ire fina Aiich e ^rcest-e propsed co sumer prot:crion prcosions nos: h 335tPrIland a second P-vde-nal RegL,atio +get, ue-fc,oesthe mc a pruceritul ic-ac oss heent stem In eiLhe,o- hese pa hs 113.1.10111d lccaon

Mesa'e geed the 'in:anc al -e,,,ulatcry 37311i3CLU e we CprRe ^ ently adme ed given the oi empia:inE EepE petheen gs Mat de based e` a ne lunc- ons ad .11.e dEenzies enl, ce la.ns Ove , Lhe; ea practk.ala,sessrzntolv..-e...orksandwhk. aces 11.0L0.0 ktheCoyernrnarlanc Parl. rnent cs - 33/01 e .he reg.' ory arc- ezi-ure ,c as to 53 'e best pess :E elforceme-, of 3table se o'

~~136 _ 56-~~

~~Transititrn issues~~

OrisothrepOterote ems o lot Mos mei oI se lumen rirdIC a Cads reimm root the exsdng setup to the Memento-le p goosed be she Commission .!ill require ansing and co o dire ion I eso mancgedotell regulatom coceita city corld introduce ConSiderUb del dieet in the 5L SLe n e CterimiSSios reCOu e ds rr the Cep m GC L 2111111.911snould consiCerestaMishde no a focused pec,eo team %set^ the Minister oi 'indeed m faeilitatethe eve 2 I LeanS I rn or s del De OrOviec0 adeldate stak and resources ena ale edeztke dissha ge of its frost ons The Commissior s ig gestS tnc teCkS 0 the Votect ter rcoule. Lk W. reek and roe emen sr corrall lc, etrancolcs rottener. legattrados ode • mem me step oedromugh moor t . .pose .

PillTeit iodise g e orrneor Medi exisergeeptlamooml bephasez °mond tree-nogg/ the :rat Cote comingI itr. -siert k • !dented Menus's be items/ease ler transit or p meet M.- septa-re) ert ties sum at ere

To entices Matthe tro mmoon marketer in se —My ant organ sed manner he project team mese devote signs irest etcrts [awards lay reg the gocundmo sr the acteal rm ' on ant opeistion of sec, or noddle° sgendes In this cortex , the CPLIIMILI lf step acts:e Oilp1n. work rook project plant ixe p °Met ea n o eat examine pc.'Lliig b t k or

Mattel et one el tat has peon :tared decor Pa lament e Introdocingsome eternenrednto existing practice. The Con orison Ito the /ler that otr et or reccornmettons mokelark It le held C= markt* greerneree bu Id open or for matte rs song epelook pito eessrl mediae, dleerefore re the wool upset* the Con armor e (omit it dal am sr mkt 'sleet rotors! re can te Tpleoceted by the eXI6Lisid rePs testers Vold inTiLIAL2 cryor. emodo leterlaMeSelread} r e outhcceotem oral regularcos CCLI kocruhatall OLUICCCTIITTLSILLL redmusthe rub sl eu can be on FOIL,: Ain oesote erect Suet steps tilt sem col ease Mr osmium ercmsr set 3'30 all:). theregulators mon sloe tomg.:rt.11e el Mokpo-roses 3 Preparattor tor creation odos t: agecies. t r Pa, LEI Is reps as] rsor there pod Weds omorrent role forth=elcoken of roc-nano metrology sextons ire tem opmertcl these cyS ems cal Commence et rad of tree The sesurd 'trekker s Mos al foe Immo- tot ce ros oe to-look:mere es The :meld tem solo [Irmo odes-imp/ark

~~ILL - I51'~~

goggiegen leco-nrende On tee ere oral ode -2 en preree etore StES.fee be aeen rs oe RAC te tee - ea Leo an -Inter mg: c dreneeCou, gel-est eel-vel a Tee IPNI [-glare to be gigged tegfca-e thet. The lo Iov.lg are the •ecomme-retions of the C0-'1153101 83 30'8 th8 cmen- TT ion ofeach of:heagency-aetake place I UFA lal on acceptance: A-1- erim Boa m. wmostaFly pogere eheT d be set Jo us

e crtheevental seri- -g upo the JI • tJahet acc•c. dinadon comr nee gTI.I beset up gergeen T regulators at "II gesTLet med ueg TeE2 Loard ib On passage of draft Code: The Board :Jibe appoi G Rs he ol- e de thelaw All r ramie Tecro eg sotherth-- Relsho IT-TerJET All thesubsurne e /I' ggeBo (C-esc:zr deominue to Lig: on Emolg.eee , ell be tonsie re^ The bey cense. ar og en neg regulat one fx sdingregu atio e. ga-gitic newregulationsorer t me LaW +2 years: Regulations existing be cre Nnpassageolthe c 2700Ce el! 3082. 3. this I- me the 83rd rn.st here -eelaeed m eenthe ubsicleane legie le ler and coneelicated all subsumedace es 2. PSI of On acceptance: The psiBeard g egs-ing ,ege one and prepare roe e eteis tans TrisTice of lie eer TheDeadstr-akrng epsto ehiftgut unctionee 112 eerng are glantheeetabbThm-nt of inemec rce,s is) On passage of draft Celle. The :card full need to eT eco-si- e ea reflect -g the provisions rogue law The Boa c %%TR Deg n Toes tat cn or new ePula s Existing- regulatic-5 tra-sition es -eve egTlatioge time egreg and It P8 lelit come in-o exTeenree Law e 2 years: Fel Jlet12.83 errs(. sting o e the gaesagg o aft Code got -gge By toe ime -he Board meet are eplacec th. esubsicg igat on Resolution Corporation ,e,( On acceptance:An ineeemBogrd gigue, pogergsnaulc se sc t up e.s rge-Iexrcutiveo ce hie Bca-d gine gluate exis eg rules s- d or vent seti- p o elle Re.ge Corpora( o- ',L. On passage of draft code: I hr Beare gell DE app.:all oa geofficie boars e -der the law 131-88 cease To eels and ii-Tceb ige one I be sobs nee T lee Resolution Te pee.; h f rules a e DUI D -(0 ErS13332ES v f setrans-egg( re‘eited The B I fill begi - :one!, etio- on neg. lee Illet 0" 3 Dish eireguloticns w ene. o ro the rem re; lens over tr-e Id Lavo+2 years: By Nis Im4NeResolullan COrpoa:ionwlll be lu' yfunu onDI

~~g an _xecuwe ord=- T g Board wit eat! ate ex 5 ng e. and prepare or~~

~~Sp On passage of draft code The5071C rp'lbc apes Rea 23 -eoncial beard g-der -he lag Eris Truk-one or mg.:nen willtra -sTion °neve c--n overfirng~~

~~Ile • _ 5-8~~

~~Law 1- 2 years: Be - is Goe, the EPA 6,1 be fully functionala -1d ..he new set of rules veil. be h place 0---ibt dsrimi Pillcerse o exist and all pending:ases~~

5. FSAT a, On acceptance: Prepare sr or expanding or physical yic f inlrostruc3e, 2 id benches. ng -e.4. procedural IBwssbwl begin. (di On passage of draft Code: Sat n be subsumed!". o ISAT. The letter- - ad 1 II r ange NPP/prccecJrat1=..s will be passed on:. race into efrezt It. FSDC

12 on acceptance The process of cresting tn- ppnri& system database bc1],in rP,t Jlationsspecif,i-gt-etcch - icalspeciyati^ns aswall estrequene,.. J upgrsdingcapso lives:A be mare crimGarda rdSub-Conm flee wit, begin the process a p ace ing for ere creThPP of rcsoarch, analyss a -d prow c - (Pi On passage oldraft Cede c enlee8lerKersastaturorie-- anco.-ripeoent?.Ithecsatlngreseach a c cr.ncinue y bJI[C ng Law +2 years: rcpc wlu become operations' 7 PDMA fa; On acceptance. An interim Board p. [lout any powers, .could beset sus- ^p, an executive_ often s Boarc oil. pmt ‘P-e forthe eventuals Ling us or

(bi On passage of draft Code: POMP Will ^..Aie P L.cm:trice35es atu ory ec- tyw irpEeme- t:illunztios exp.ppi cash rranagement.contmgenttaell- ibesandservlsstoothers. Icl Law +2 years: >ors wd ,econe use-aft:mai The craft ndipn Financial Code is expectec n replace a r„ -rber of exiPing egis ions and necessitate amendmonts n:sr other sucp legislac ons The eg slabons • cad to Jdreptaced will have to he repealed. Man., isspiPs addressed by crovisions o 'hese Icgip d rectliaddressed r the draft Code dibell, anrc ples baed :o.- some Why ,Lbordinate legislation s expected to leeeeC, but the aftftLode ,ode realdeeth2 gen po..vcr o -e regulBtor t-e co r.spondir p,r„,r ncip es to gu de the regulato s In th sshid km-- a argelv es ap-,en logp, 1)--- rneP,crk to D orirciples baeo one onn:ploP IT ra drat Coda e expected to avmae regumors ith the independence ro , epond to orob ems will in 'hPh ParLial system us -gd It their in v-e dram Coce The sse of th.ye p3 er: is 1-o be guided 2., pn -cippes L-c errod.,a mc. re-nent ID be-ehr c, a ,egu,anpr toou oh "P.co.›Is a'd gener:' pequir;rrcit ,r cc -au te ions ano researc- eerippe nstrurrer-ssuc,astre 5 a L.. top/ iSL fcr c:Iks a-c irregment restric for arcecompan es a e not n rect'yensin ,,o he crr :pde, but t-e araft:oceemppuers thc ru)gu!al-or: -0 make pgi, y or pun ,epuire- els, guided oy a set or principles, Kludinp o-c equireq then to be risl boscd !ere rlso isues on pi, ck.hift to a lea approapP is rpeorprr pr ied which means Pia LcrLain pro.pdons in the existing ,egis a 10%31 carts o Lhe ppro -otfildco re.*ondingprous crs,P redrzfiCoda ,oruc LeCeeXP.0 ed o b2 -pddre..sec t- roug- suboro nate egi on 0, -cse issues the C-mmiss on has taker • considered ov. ro recomme-d -s.e to a difluier app oech Loryards rce,pla n. o4arro e, in -he nterestoicorpetit,,.eneutizt ty anc regulator.). clarity the Comrr • recorr. cods rpapaling egisla ons rat give spec,al status to sena na-cial 151

service pr.:dears Vat are 1Lnc:dna id d'a same as ad,ei financial serdca providers ere a:ec tadoug egulatordeutariyalica Such I -ancialservidv p d Ih. ed authoda-aLio- just ka other finand al se rdice 'arca: da's e 'Id will be sddiecded :o the sa did insurarde cornpanies in Incia en -e.gulator, f;mEddcik For .axamp e cedain ha ads E'r..7 oy a sratutory smdds.which shodld be p dh dd Idtory dd". dairisatio'a to be tese ausinesses, From exisDng legislation; affec: rig India's fin:la:dal syste- that are not to be e pea ec, ostr II aquae amand -le--a Some "ill have to 7: d sadantially arndridac and od-ars will requirdonly minor amendments Rllowlnt lsa'.1t of Idadas atior s herepealed: he Sacdnde: Contracd Pcgu adonl dr: 1956 2 The Securdiesand Exchaage Boardorlacia rdtd1992 3. 1 he :epos :odes Act 1396 d dlae 7.ablia Debt Act, d?ald 5 -141Gsver -ent Sec4rities AG 2006 6 The Rexene Bank al ladd 1912.4

8 The Sank nr41egulanD4 Act 1949 9 44e 1:1rwars Cor4ra 415 Fegulation)Ard 1952 _3a ng Comps - es idacd si dd;ansfe of Und :ad ags1 Act 1910 II Tne Dapasit lasuTanda ard :rec :Gudra dee Coms7dlior Ac: 921 12 Tha Fora g- Each 13 The dasva-ce Regulate..., and Develapa cdadddrharity de: 19:229 14 The 4.44-rent and Sate-ma-7 Systems de; 2a07 !do dzts estaphshing Ladies ce- parale involved in the f aarcid. seem: le g The S:ata aSnna of India Ac ;dE aid TheLi:Ednal. ance corzyationdat -9d6) — too

~~Summary of recommendations not embedded in the draft Code~~

~~I his chapter I sts toe etommendotio-s f on ttap-ors in this report rave not been transtated o o 'stoup In the dirt Code~~

~~16.1. Ownership neutrality and competition~~

TheCommis on el papet t regulator. frtneport pheregetternarcestundardsfor reg dated mutes will at depeoc on the fo-m of o ganist ot) of NO Han: al firm or its out -arship s untture TheCoq-mission hen e -ettommendothe repeal of allspec al legit Itnio-s IistedinTaolo 21 L- 'a't est?" 'shutout' c -if no -nal insotu itns or pp; laydoo- spetiric p ov sio sL potter- any aspectPeoperatio- o 'tuner otting of pub lcsecto mats at institutions -"le uncenalungspl al sushistatute. y itstput tosshottic bet-uns rer ed to reinero comp-o n es noon:crated tirder the cc -nponiesPet,10.56 and heir reg. ulo orytruatrrentshou d be Je- ical nu( toplitablc c al other Manna, companies nueCommissior recommentl-propor oupl regulation of [Arlan' untrooloctio itiesthaL arc ponsc ant roan:gets to, 3cpernmet egennts and Mt oh irosentlifa lout not toe soue ear narcial regu atto This innutos turd manage-ent setvizes oerec toe et to and Othel Statult4 pro ido or nsura -ce SerVICOS po: al hie -st ante end Int sicar L euar ousmallsa orotittots st tied Pv rho oavernment rouu es tette - na ion of he egolatiourn nJa Pt thent orogrzoisood to a if cat on of Buz en ituiptc 111,1L trisial per ices should be reguloted anc suipervisni in a uto po-icoa e rannei should a, pl. tqutl, opettatites ceatec tincer lotus madt ou Sta e 3c nmen s S -ce st 2.1 C 02:12:11 SOCl2Lias Falls Wit -rn ne legislative domain of St: e Cover ments under the Coottitol on o' cit. the nOnirr ss on moo-- n-oncs the 01 owing meast. 'toensurethat regplaLOrS Pat c adequat stn t. con r^1 toter lie reeolutio anc sopen non o mann:. co opera yes Art c'E 2:2 of t:e CC:stirAlen of Irdia S :Oven-121i SSIIQUId accotti it In euthcr tt 0: amylment :1:2 12t.c:n rr :kyr, relarig to me regulation age put or O'CC.O2enttiC

~~operative soceties belong ng:o Stattot I-me scoerrmo,.rnavo not 2 2c=ptUttore.auauthority ine Pa :latent ts ups ate 01 the reptiatizn of to-up:ono SOCIMPUS rung on fitatod sex vices —ibl~~

~~15.2, Parliamentary review of subordinate legislation~~

onde to sl-engthrn the svSlg^ of re6.166: whs. 6eompoy6e cc sy oaliamen ipsuesubs roma ec egisln on 1.6 recemmend.c -6 the sob° 662 elegi6 ions r by rep16665M1Duld be re 120CC 6. the nne parliarrl n66 C5mrmit.6 wb cM1 6 16,6 primary legislation byte I -aroalsroi

~~16.3. Recommendations of working Groups~~

The commission began by 6- in ..epth examin_tion cf se26266- - the hnanc al se- m Lb o..gM1 c establishmer of f6e wrs 0-ce this sector-level undemanding was .-. nand the nr -. sectoral draft at.E6.69,cons--4c c-116genem isirgtom he cso666 dation& p oduc-d Ly the 1.66cs The legal elezb of 6a nor sectoral 'an- Code M166 teen evaluated in terms of implications6r eacn o re;- rnpdm:noc6....1 eoicisoolizy6060nzb nen66, Th64.: ek.ots embed c- and contempo 06 4-0 II 04•0 eced They sod liJ10 tne alas' 661.%s6richron16.6 -5Dert CO- pr0ceA - 1--e014tOry of 1000-4 linarce Un66the in6p16,ba6danc non-sectorallega, lame666 acored oy the :_onnission,se..erato to prDvisuns orrerthy Ppp.e6 in the inr661‘.1sects -lawsenc -a 6366 d 666sed ...6,arc ^an, Me recorri6.6 c6ions sl 665 :M1. uld feature in the 6boro -nea 66s 2. lOns f- by M1e 6E112 ars flere6.6. ecommissic - ezor -end3 M12 6e respc..live at.6606.1d tak: o sccou -t c recom nenca an of he aesv 6mulaingsuL( cinaLed legisla o drafCod e.

~~9619' 194 39 and 9.0 Meth' rdpar 061. 6.CSE66,61rh= =sist,,,,ebsiLe~~

~~15.A. Cross-border resolution~~

.-n el$abe eszEut on frame666 inquires _pprop-ire 61 dr. gerhen16 far Cr005-00ider 6solution S ee 6any s.c.› oserate on a globe, level, an unce o dinalee approx". 16 neho^e M106 counne.5 a6M1: -es would c cal-Q.161461r reso...6n of such nytilutons in a flannel would promo ir, crests ..1.6-6,6ners and prevent nsk slat:0'66On De iberat crsare undenvey _m:ernaticral pot cy forums10 de vise en opt -al app oeci to cross bo-lc usc'flon India mmtr.ulp.etoemeying 26balarr- -gene- son c icrcer esolut6n The Ja....elconenb in - 5 Agard in the may urenui °amendments Is di.-- Code l t n sum as 6quire the 6661. on ecrpera ion 6..6666n6e 616 s 662 - other .6666 ons THCL.rnmission .-ezcmrrnes hat in fi 2 4 nr•-.1 om no6 a COM- 100 be se ,D e6 the e-6r6ng ersus r 6 16 d 21666 border r6oluLio, and to suEg66 arnendm.66 in the legal frams.66-1( on res6166^ _cc:66661y. Th-Com--16ion reccm -ends -at-he pros 6-66.esolving a corerecstivicenVide inducing 1-6.10 ceofa 6soluti^n 'to( should not deoen6 on the 6.6ers-up Jr. of these-. 0Gpc.ider r=set n'ov '05-13neutrality e rr.ach ohne cc, p rs fraMe6Ork 666 000.0 -entof 3JIII0 and -..66.1.7e,amneatc and a 6166 ned is ay of a b-eigr rm , I be iden663 Ion the ;66.666 of resoNao1116 -16A-

~~16.5. Systemic risk~~

reS5urnsv truth se.=.< rentiPtn C Sy; e - c )sk if hermanoalsyslem. Regardess orsn - Jeocrcen o the -saz in re alio re research r new ,sicm de ,-easu roi^rnicHr..nricnd. that ^e Central Government sho Jld undertake a f3r-ne rc fievv elolipn to of¢¢tuo 'ivP tr.

~~16.6. Transition issoes~~

-heCDmrrbsisnrecomme-ds -1:ttheCentro Co,ernmer shpulccorude establisgrg a focused srs,ect eirn nith,n he Ministry of Finance to manage the overall transition srocess In thevieoof theCom-Ns on 'he askolthe projeateam would rem

~~a Supine. Fre lee sin ine preceas r the aralksisand prncessingorthed ed rode Undertake l'3.311.E andcar-an br dirk. thcm Is 'CI) edpr kr the eniaCtivitiet of egula ark~~

~~vstaLi. hm0 rent turencrall yank I 2/. agancies~~

~~5 Der m narkemannunn radian eM1y d I Sandexsstngreguatons.All cc atria acetic re tin ,s~~

~~(dente or ime t.) arch() Icr wucd .le$tha (.retc elitotreat= 11P Ild~~

~~non:Iran nap ta g211StE7 or stamp dart requi eneras~~

~~Fla aka Conclusion~~

~~7inanoulu_. or c o/is irplemeiced syl cur line agencips..vo~~

~~181. Note of dissent by J. R. Varma~~

In rrn, vire, lin mitre! izatic rnJiiernerr iSection142)To yooding any hrannia serrice M1 M1 is der -ea nein broadly in Section 2/75 )crerl,es the isk OT egu a.orr crerreacr Many ac ones cared Cut by accour ont5 lan,ers actuaries, acdernics and other nro- onals:spartsf he rricr-is professior ccul.c at rac cw3tft isn mg!, rcmcnt cainsethese pctivitiescoula be:onst Jed as prcrisicn or e findnc dka rice y - ren DIS ha rebabiCP they own DOlK-C !Ks leg. aryand day tracers who Fp...finely place mit o de s sr a sack exchange cou c asa be deemed to require au nonzar on A, ex DS KIK° read -g o Sec on 2, 75rk) conic rec. re e ,en a rntsnerige born,o c.3nve 5 2 ar ,ienpIrrnin, f n.cbtairautho,namon AI this rreates scope lo need =sn narassmentc nrorent peep e nithout provi d ng a ry No-hevhile "Denefits c . .o o i pneu ffinn ra to o nyor 2 -a ro rls nf regu eaac v it es anc re s a - ex plicit Ln e oucIs e y hr iscar edor het canie° nnyingan aninofenron orbusnesnn- choesnoohewiseanssoteguate:a: 1E5 Kir- lay, o IK dr I, - nifirrinann'ion nexclud.n. orn the (Inn nf rag, Nr■actnities .111.Jer L.( law The c aft Indian -mance Code sec an iss3,)doenallorr re;. ztorsto exclucc s r / :cti.itien from the dear ion o I ,arc al nennine Hnricret this dons not solve the prob. Innor regulato bczrJsc nrliennn yen en rngt selves-ft nt,which Is ofici ,Innrrcc normoorly) Byrnrir a t ..nde -e UK em. the hs- o regu a es activities _Gel ler bn the goneinmer and not Inythe regJlatarirself rn, ;It nitro ZeLlrn rend re-ei uncle Sertion 141 s-cnild be restricted to narrower sAse of f nEncir.I nerrice proriclern

~~147 _ 5-~~

~~18.2. Note of dissent by K.J. Udesht~~

~~while I an in -graemelt egth th^ ecomme-dal- o-so the Report, I have ,:q.-.N.atisn the reornm:mdatiols elating to C20 al Co-eta The Comm ss on ,c,..ommends ths~~

~~Chaptrg 3)~~

ne Co ..ernme-it the Gave nment the t.r one') e powers 155Je eirecticns hp.rza O. her the rule•rnakirg,desb the C^ .: -i-e't hex b onalted 3J1 d'nere sz.disaE, eernent the d.bi,P.oLlt mike nill. ooPol....1 fa,:orcomp]f an )c minable lc the actions it minus be required o Lakr !Hale ligh o the Cov^rrunen's

In hild, the lopx reserves accretion Is in,✓a ably accoLint of a capital account s rplus and -ot due to a ensue-[ account curphs and helce t-e mpesition of re I'- Ward flwrs assumes impot-ce Inv‘a cl capital rams into India comprise Ron as also debt/portrolic equ ISL er -o'c - D.J. can undergo sharp d recto-al shifts 1 -ere is h desoread -once- among several centre L.dr.<., m Emerging Drket esabout -lezeced essures on moncyrnanage—entcJetothz ..7-ilingextrasrc nadly strong and voleêcros'oorde caaital ,lows IINe Rai has ns say t9g potty relating o these volatile he can would be r.on.trainec bake Tionet.r.> saucy measures botsCiro and d cud ac n Warne acnors J de: with t e consequences o such floes such measures may Lot Le e‘hat the Governme , r inth str> ,nd -e busriess csmmuu ryseek,edrIng.o overal l dicss@lazt on lithe sto -unceour able or the oerfo'ranceon its BalanseSheeL hats be enabled to decide on the G--g, c_antity snc auE., ty of inward.aS al lows so that it nras ires ▪ reubate itsfyer ionsF.1c sten To 5enaerrf hEt !mord rap alòws impact lisuid vco-ditio Sc--mes re.Les ,ary lo e Iss impose a ourJe- on ne bzrk ■,.1y.estrn thiCug- imposition of reserve require—ents and poen mai Ke sale, o sett ids Sue mess!. Es imp 555c or c 5nkirg 55ste^ anc m55 not be Inca m - erred rmpollry 05 Lea B.5th. Bnanda. riarkc55 and Cor erimeifs '5 esrort 5,mc 15.5 cns he- 'nu sting policy r^?ting to debt/ polio to equim [he Cc ernmenr t makes -ht I-ask c. the R3 a- Monetary "ult..rry 41d the Reg.] s 0 mucn m-re e eaalt lam therefore, not in agr5err en1 rre Comm rs on rezornmencar on 50 pl 5 c viepolicy d rte- âking raiz Ing Is all ir..,,ord zap d One° he -op of the Co irnissior. is

unse otisstatutsn p erogati dof -le Gen' al ,tirienE since the po hrs — 5 icatio 5 for th rracrdeconor.... em ployme- secur ty issues sc.ridl arm JOI Ca 20n5ideratiolse ThreCcvernmen5 5.55n cern5 eiol5ing eon policie5 net; fo be recognisel herelo e 55z5estor 55 Cammission -e= seen tho' n"hYGO einment —a. beertrus ed h 'a poliry—ak relaL nye 5ci consdlcs ior 5515 tre rrrPrig of -h I ingtharso ano (b` --e zeiria.. ento =Vc. » tie r.c c5rnei rg relafirro ellother ransa]ior5 slthe capital a count both inward rd cub,' d co-sukzticn th the koovernme-t and Lhe (ran-go The regulatun atingtheret --- 6 e

Since he ma -agemerr o zapit.31. flows excluding F7.1 rec. 'es to 02 wi h tie rid Ile lcreiEg exchange reserves manageme- unct or s %hit- Pe a3Llc is e that tho .ncppn cechenge rote rne- ..gsrer's ould remain w hte RBI . The h< ling ofthe forecn exch Jig.= crisis p e theraisation pthiocI199051a, a Lle erdling of c^e excna -ge r2 e policy an cyleso- ezb and f ow o lorex infls,vs cs sJchs largenents heie horrts. v.e I

~~ALEGIS NE~~

~~-167e~~

~~133. Note of dissent by P.J. Nayak~~

.c Co-russiont Resort strives to bre:A ground d ec.ions and ecnes as-ocul ar y ,e.5p.c- ofCoisumt. PrOtection andution,N oapprc acopled c- I disagree, being s..ipportiv Commiss _ns ons Asboth approazheaffer hogructurecr.c con( „isicx.s -1 the Reps. I (believe the r iiroortrce n(cessitsresthi Nate c sent

18 3-t- The Finance Ministry as a Financial Sector ReViatoi. I )elaqtr gerJthee‘olui or of :m I eg, a hon In^ a -aseen ,se-cies This 3 ',Farm elth he! :re pstiersto taL marke-s regulation fro-n r h.. Co a — —en. 0 a eEilDtor ed sup*auulLI, o the est,D'i rt.^e- olother eg.. a-ors or; :rnmodit Rin[ s hasrainocec th he increascgempowrment sithe egulatms R=1 end S-111, through seri.zd e amendments Acts sr Fors t cn the.. dra powers Th. 5 dir.flt onal h-a, hz eripc,,,ernPrit regu!aro s ed outsiseol Goycrn en( has brou.3 :expel- se into inancis reg. atrn a row gcne acceted that :kr th.C.:Vernmenh... (I rngUlatenirec' as ire ilo the prirdry erkerhrDt.gh MC Controller thLane al Iss,es rthS5Condar,cap a arket -hrougn the stoc. division of the Finance =try, zonseci v.c.es were sometimes unforra lean'e oital issue_ .d.ere continunlk gros,1% prred rnE , p-acL thefun brokrage irm.he e con mc. ^: ace e Cammi550i no,,, res and p:rtl reverscsthis d ions moy,ement .n1( is ...nth assrehri,ioi that one must ✓low the very statL 0^, poNers reLoi I mended o b. noved the '4cha;1_ atDrs (pr mar6 Pill to the Finan:e C'inistry to

a statutcr... FEDI:, relattar lg .-ed t i.ze Minis er T-e o- ross.or -as ?LOT merried haldirect sm. o'. ionorsLevestec ent - matteNof - c sal Control= anc DeVelsr, re. The sta. mo --e-t of the.cor - passes Irter =..egJlatc.r., Co Sre Ira 1,-IiCn a^c No' lour ciF a^c. NI Ti s wisfer of powers zsli ectivel).‘n i= JI2S a p o surd s 1 - th- ‘xer-iseof reg ulator; DOBaway from /dr ran',IRBI to the F -anze Mum.' . Finance Mir in thereby becomes a new coronary regulator To es anFethe architecture t er sLitutici-bu Idinc Aft erm,s.ulating eris ing rza n rag, ato s., ork g indepen-le-riy Or. enr appears! There s convinzin c‘ice-ce wh. ccrif rm.regis Dr: DgencJes cer performed 311 atc.D.L 1 'erYdistancef Covernm - ceed d argue t'at his distarce esirsole and 'ts -elpe brrig le -d a tluck.at. -? lc (I rdAper dence The concept of astatutory -sc.: 210 thef..-cisna,ught to be wred it, are sin sle pro./ sions and rill p the abiiy to steer the financialSE2tor [BMUS" some is thatthe :1131(flalla-lp 01 1-50' Is with the '=ina-ce JR I B ,Nuld lead to gave nrne-: creep into ihr, ni.ro al o otne gl:r At pre,ent without 5 d ha creep is dirk a" uneasy csmpromise „Co MISS!. II "las recommender Table 931 Wit an Ex.ea. Committee of BC:12c 2.uc,:f FSDC co-s lute; e- ....ill chaired 3 -.E. regulator forbanking arid payments irc.ad vemo min ris -aceria and eLl 2 cc.r ol A II releit ons o 1-e d :Committee iundble re;ch a zon.er.*s lixelythaLth.s ..hoJld constitu ean zdequat.=. 0...Ter st ()femme creei upe ty v,ayof zoml- ..2s of :floe-- co-crdins an -e ma -agemen sisys'em.c

ISO arc rep. a .p.v rdesendeice Aould Da Is -aye t-eGo,emor RB las the senor or he cro p Jaer,o1 egulatoN. ca 'toe eeCC vLth Finance M - stry officials also be- r..pr..2se- ted boarc lhe Clmrr ensr.p of -sec istherefore: ticai any cese rnissio 2.ropos - „Hu.. o ctic hal regulat,...rs, dinatio .1 zsmes=a..,dhr and trecasefoi the F Min str, exercising FS der.A eeakers Thecommiss.ons rec.: --..endatiorii.:.hapter8 t ansfernnEfrom es tothecen tral -ent rule making p:we'so.-1 capitplaccounttransact 0-2 arcrlowsflo ha, .even Me e alar- In] izations Regulations luencmg the cJa- and struc t.m.e 31 (If eXte nr.1 llatl ides, [Fe nunagenent of the balance or payme-ts, and the conduct Jr rri net- . oolscv h°..,e.n close anc int care srergy :or he DriMISEIOri ecsm.-end regulits v scit er wherein capita, contras Cyulorion 1., wfth the Gover ment, c -etary Dcl cy ^...m iu_tee R31 a 'ha balc -ce o' pvr-nents wedged Deb...Gen conduc urroretarypo cy and the impaccolcapitE mrrrols .egJlation I wet, proee da--aging,othe zondua ro-etry a-dcf luentmazroezonomi: ordleaLlon HMI VCrS CZDIti cl...°31/19r reeJlaboy..., h Rol t the el 0 `Orel, clory.:„ 192. FDI _overnir g %arc equity st m= ts as been ai...-ored by th.2 Otrunl Govcrr rr ent c a`gument that it co-b!...1 tutus en _djunci. o I. Just I Re cy et E. , thee KC) consult° 1 -^ beee Lee 7inan-e inistr, a r by i ano ha, iri...awo &wired the assent al Peen ruhre may -eye beer hi. ec by he Sco.e nrne-t At besrt- s be roue pc ti cool. be or-rdlise- dsdc..p.ife with .P.:Jlations on inward equiry and ty related Ircn. -nor bring .1 'hzron b, Cen ral CovP.-.me-.1. e...teralcept regula rd nal To no formal on fo...erning ex'ernal deb' policy away Re, be damaging b -he rain ca of macroemnonicbalmces.

~~183.2. Principles as the Basis of Financial Sector Law~~

ni sabocappmzh'adontinga ples basec .pproach owa fc.nvial gl f lefinancial sector IC'is necessary LeeheVer also put th 5 approach to to tes of pragmatism In the ndiar canter par Kularly a: mast financ.alsectr himert^ beer es as.=,c ales b -gsg :en:amt.:to finEnc alsec or par apantsw tre

.4- d s hxLal.R, o;therrforr r obcclabc ate nordertscner clJialityclsituatior: xhicr. co Jan,ein p acuseand,.....heretherearegaps .hese, par t c c:nts co...11c potentially explci these to their ad....an age when rulesM ed ON -as achievec ade.cJa e ^p rcns ven,:s d•sertarty financial sects part c 24 - s uncerstsaLinz ..hemer razts and Della./ our a lavrit, Princole based lav does not provide sum ce-a nty, burry focusing on mere genealisei pr no ^e'en uot ons not prc.w.ntl. contemplated out r ^ulr ar se in ftire . There Dretwo difficulties which a pri c ples-based approach cm, d creaLe The firs] .....2gnis.J toe Re[...XL IS: at pa licipa-'s are more eliant cot.ts n rterrrorinp,. the n a speciv :once..< ASthe COM- ssisn s Repor notes 'SeeChap ter 2.4'Ceemi to common law is the rote of odes. Y -en laws are written in terms° prim. pie:, Here ..oule De 'eF Imre disagreements ahoy the . erp eratior s Ales. These are resolved by wages who build up the Junsp ...dence that c es v..har principle means in the lig' of the continuous c ....7.11„. on ;IPonce end tochnogaryt Such en approacn .e1.1. v. -en court prscesses are speedy ard dec sio-s of cou -s are d spersed col. In he 1-.-1 an cont.ex',..P. en -olating backlog of cases. the ion 1.: more ...Lb cm- c --169

A second ty arises ascol, ri” of 'he co rciples ad tee s-thelrgisit 'lye la% in me Hof nap rucentra, reguliin (or instance. r. princip es are lisle: n Table e and 9 istitute prinJoles el adrninis ativeen( cconom:rarisra'oty Th. re g12-.. 7pol eab'e to the ertire n =mbodyh tiles aroposed in Section 141 orhe dr,F cal Code Igo legislative )asi,o a micro-orude,tia .a),/ for bank gijor ins-anc [ sic berestr tier rot-ese 1 ^r ^cioies bJrden reguirow law to cring greater spezifi: L y P-oectrb V -g nzrease. ycr substa - al y A mammo - supe.-zirLerure of egUi.C.33 IEW `33 3 s sit a op a sle-de, say. ollgsativ: 'ow Aside frim issuecl M1N Parlc.rc oldb ru:b1= with Nis 3:dance between legis ue and iegulatcry la , such s cEal ivrtre Impoms hlghc of s.ing vicla o o the pn-c es, ..incert: ray eg.1: c.ry II Pecs until Courts have ruled. IF s dcuole ..kl-rammy of uncerLai --y will be tlfvine^al to lino^ ia contract n?, ^ c Jding produ.J des gr and ales behav ,ec or 1 np.-cia sector co- racts gain in strengt- she 'rite prera. on of toil. ers s understood a. genetal consensus e ante hero e -he :ontract s eni-e,ed into, ra -Er' cz post site intorp eta: t ■courts may oe e that a p nc ples hayed s>ste^ wi I sc ,c into equIlLnum ,v.e, a pence or r-, rhe travails associal-ed with that until the- apsear d sprcpomciate Le -le bane,it r`oien_les b:s...d;p3roach awe

~~161 • • -~~

~~18.4, Note of dissent by Y.H. M3legarn~~

~~r gret e.r.inaWe to greHd eag) Hdd.f-11 Hicdocals in Jhe Repo r~~

~~Capital Controls~~

~~The .~~

~~r. inarri f H.H.H -H,Ir in the POP. F. Hrti of a sets b) ^oh resde-ts Irdia aim it o cs retHil ance- c~~

:ery little epatri3tio- toHes place and in the dyad term FD, flows are largely stz.ole On the abr hand, nor FHI inward Haws e.9., porttfolo -.vestment. extett nal Hon-net:131do-rowing, Nat deposits etc are essentially srort acre anc

> EHelroh I-]Iino arc lows pn r:Joi nerd. rosult In ouo,,ers lIcHH 4 I he Herod Cares (See :hapre 81) nat IF recommends hat capital cod oh. be Tole-netted only at a temporary basis Mire other macrotecrornic policy respsrses have been exht-istee dhilatbu is tru, in a more recent S afl Paper htsmodif I DDI+,-darn[ ^lade thdHltodir gstatements V liberalisstion gelera I. more bererciat ans less dsryltcoJn Inns reaches certain e‘ets o tHreshod) of 'Ina Icialano nHcitutional

~~'kap( ar el inflow surges o oujows can create pz cy chol~~

Hri certain eir.HL-siantes tap tal flow mHrogemett meadres ca- useHil These tornmc-ts Ha d tH be vowed 'n me cottextd India s setsistent tu rent .Hc :our dtHiciL ich is I naritec la gely b) -et 'on FC rwarc (lov.s te Hepdt ncritions 1,cction I¢] Hai "in order to seHorm Is fronetary policy funztio sanH P al the ole as !endetol the Est resort teedHcertain poors"?.hicd incluse deHoHer dAc aset.slodia-d-c rdnage dfareigi exchange res2tHes There strong I fides. bet Aden tapital contro sane monetary policy cap altlow, natur-1 naffed monetar. aggregt es py increasing or &aces rig th2:1(cHtivc tiHr eysuppl,..andliqu cd ideecancm., He co, n th:1-d an ;or tex ..asitalconttols 'awe been actwely..sec asr adc roneta policytocl lo do tit s efectdel., S necessary thHt all Re.capita Iced other than FDI Inward floHs shoulc Le --onitord and tontmllet_ by FHrthe, he IFIF has po nted out rap d cap al ddis tpie :an ces ab he dchange Hnd tres e y For hlb !PO DiDD cap [al -ohtros need La be d. itrated b.? RBI ...hie, has tea resrons 'Hri angp ate trip-dgetne- 6 Thu resen rangerentiY-1. ar.while -e Centre', G..vorn -nede-errninestM1e.,31 Ir...." or FDI,IU31 inconsultalic vdtM1 the u al Jo, ernment makes .-Jlesnrelation to o he c3pi Moves 11 = 4rrangern,' -a.%..ork.qc. a -c ever the J K ms ,flork Gro.p has no' sugges ed changeIs Vis arronge-ent[F Cr the .reascr: erumerated trove r- s bas[c arp -geme 'lust be allo ,.c.d IS :on

~~15.4.2. Financial Regulatory Architecture~~

I. IheR=301P oposes 'SeeChau-a ..ithr he irinc. al reg.ilatur.i..nyeare =Jited or Indian conc tinusuM1suld consist of se...e- oll,ensies tr.Ch roi II induce • "Agerc 41 Ace- al :ank that does mon=tary policy a d e- cr.:es:ft_ (.0 1...rer protect On RIC C prucential p r isions of dr - Cede the liclds benking amuf paymerts' • Agen^ h2 u ullish enforces '-e. cr. -sumer DICIPC11311 and rucru yucen sions of the d at Code in at I -.enc.= othic ma' bark 222

--e p oposal there e tM1a- 213I RIB J12 2 cat] ate and A banks and r ay- 1-=nt suiurn and M1 nc Housini 21112:ceCo,-Jorile,(1-::sj mll be ce., Istec anc supervised 2 I belie...et. in it is esserhal that NBFCS zrd H'Csshuuld beseta:2d oy the care regularor as regulates the )arks le. eat M (II.lasons are as unccr 3 NRFCS a c c.rrently .•egula ed and supervised HFCS arecc-eneyrog 2 cd ancsJperuoed by Naticnal Housing Bark iN113 ti Hi s Fidiaryorzi. Jnderie National Bit s -gB?ik(Ame-C-ent B 1.'012 which a hErore S'anc ing COT -n:1.

~~re- ain PIH3 The trs =fa, of regir- oni,rc -siderednecessr. c.nce pan ‹s~~

r =Cs -3_5a Th mndv 4 F O a 1. )1=1 asset uze u.upeus 335 UCCI trots which represents ,oJgH..? 4 19¢ of th^ Olaissset s ze al s h^dllied C3111 mersial banks Ner.ss ..talsoeng2ged isLustririalt vayasbanks TM1e.a:easu..11 I-a -cocompanies rautru..turelinanze nuanie:. Inicra Ire co-,pa-,kas and in. cs-meit companies They uper rm.< inunce and e canc con .)=' sorb paflic - the retail uarit ,g Indiodual ollecme, the, are significant slayer, in the final syutenassM1o.% o. There are i234h NBRC: reg stared of which only 2:5 accept pub II cepcsi 0al asset: ciN2F2S aggregate o Rasp0 cc 1 015 CO: 213res 9icM1 !Pure se- s roJgh11-; thetotal aseb.uf a I schedu ed ciai bar a • 2-ere are 316 synaml.a.9 impc-ant Ns.F.s with as cots whrh uggiegare to 3usees 923,000 ..rmes representing ougM11v 11 3% of t^e tots assets E-11

~~■-M12 parezur B=CS ■VhiCh haverr.rTlussp.m.nuxcessolthes -oltesschedJled~~

c Sector Lank 5. As the Ripon points. LSee C-aptPr 15D dilhc liosare c eal-ed in addressing regJlation on a holistic basis ... en tie e s tM1e rise a rapidly gru...1-.f., sM1ado., sankings(s. or - est knohleckeable curnme-t-rors ua.. palm( ) t

~~124~~

one of b e.-aor causes o VE zoos Financial crisis was th.; aCt It e riccit inter- mediato, actm les nele zondu.tec byncn-canks outside rne regu aconimir.:- ment his h Lkul.b ry eib -rage requiremehts sr &. en pe mming s ;is:A dtiesznd sst esc !_orimoral. Lkst - Jsyrerrir of unifica Casam - 6 The concern ror'sh2Jov.. ban.< ^g has els.° resulted In a verve; cl international lanai vcs -d^r

▪ "L the NJ.ert: 1010 5:oJI Sun-- t-e G 20 leaders - g- ec the 'act t-es Base III is s rengtnen rg le regulation and super, sizn ofhadow Dank irg requesces -e Finrcia St: Hits.. Board IPS5) to -,ake recommenda- tic 13 in the r e • FSP Wen!. ied'Sratlowhanki g 3S -on bankscar vingon bank-I ke les scha i-atur trancormatio- ecit 3c,litation • FVcribeiCY-2 he -r isi.AFFrasoresc !Leathers milamsksanc unzt onssho,id 'c4.irery se I girr pr vtr min nise the r skc egula ovarbitrage

~~▪ maw, ccu- Lne rFCsare ,eg,lared by -egula.o's e g VIAS Sings s^re th= 7 4 -e:ba,..e m Slderationssuppeethevi2w that rvu3ancIf6aeengged cs /which:an betcr-ed shadow hank~~

• T^cya r 2IC , -di idu211; and co e: ively which :Fr pose a s..ncus nal Ringo to the alfeianr regulation o.zanks a Al he zcnsicer:ticns ner onec in the Repot supsorL the nscc. sr s 1- g e unified regulat sJpport s igleurified rzFJlatien DI7anrs NBFCS erc

• The Comm ssic--1 having eec ded that there Nou d he two micro prudery. a regulato s ..^:;:h a separate regulator Fo bank.ng must recogn Se hic=cs and HFC; synergy mai carixs :-.an Aith aztivit es regula:ed

~~• Co%equent'y rt a Impemuvo..'that NB-CS and nfs bo lea_ilated and super-~~

~~Annexes~~

~~19.1. Formation of he FSLRC~~

~~GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS RESOLUTION~~

~~No.18/1/2011-RE. New Delhi, the 24 March, 2011~~

'he te eca in its D icger 2.:10-11 lad interaoz announ-ed theSe-ling upC.1C Cinancial Sector Legislative Ce'crns Cc—mission IFSLRO•th a view to re 4ri ng and ecning up t-e finance) laws to bring ream in -re with airrent regLireire- s According), it "las been dee de Ito ronstute the F nancial Sector LegFSlaWe Re Ccnc (3mmissioncors. .)..b i) Chairman Listre N Crixn hra Pember o ndJCcsi Pant Pal ember }Sin yak iv) I lcutc 4 Mernbcr viiMember niwr Heiner Shr C Acnuthar ix) nbcr Convenc.. Joint Secretary Capital Markets) 3ecretary 'Cry C G Nair 2 The Terms of Reference of heCommis:Or A I be as oll.o.c.s I. Examining heerciitectureo he legis a.iveand regolc.o'c syaemgovercing the Ica India, Induct g Re, loc sir on including the - E.1Ac. the SEB1Act,tie IRDA Atocr.., C-ePFPD.a.-C FCVA,3CICAardFEWA e nthe finan-ial.S2e

~~b Rodiew of adnin stratu ,(3rsu JilogiSla ion, in...ILdirg nLcmal SICJC....i es anc enrrnal 5tructu clepartnects and minis ces of go,en —,en-1 if~~

~~c Pen o iniie p of dIiisellorhnrrcupied by ...inc..= ea. Wars~~

c Pedenv of ssuesnin loco Baca careallol ega 3 ors F the rra+e Pe nen. ohs man.° In whinl,n_nordinatd logs s irate° an: irri rider entcd g Rev ewaleagisilila -liters in Q.- office in regal5tor,nutnorn eand snuen inct.., tenure corn r. and moans aoninE and felt ninr. essons earnt by each antnorn 6 Exammea cr -ibirnd appellaa orersier nver isnuesecrternin‘une s of I -ancir rector I. Lea vie If lng station snould mand sla emeat v prir ples of leg slatine 1 - cm. behind :verypi eceo auhordaa3 ceahlatior n o d t- maketheFA pos ntent c e legislation -rr anc tra apace -.Me la h a -c

II Eharri^e oubl recta& for draft s..sordinate legis at on rkodlc be rape men:ntory with exception for er ergercv measure IV Era neprescrio ion of pnremetrs orinroc nc eme gar ay powerswher rea atory anon ray vie eke- on an er parr basis

other regulator, regr-es:'bin that -anciel sector. VI Exarni-e the miss s-DPrdnriate Irina-so overzlglrtoverregdiaorsand the edtsnomy frog- gonemm.nt /I Examine the raced for re-statement of the lave and - mediate repea clam our-dated legis a o- on the basis of pdc c al decisions anc )olicn sh th- asttno decades of the inencia sector pc-A I neralsa- or I E.onination c 5■LE-C cats prico, o rro-ectior c:ns. 'ler& fins-rrF n.nvices ir :he Inc an rrarke Eyhronation c-legalaths - relating-a re role sr inlo tenhologn tre deli% ery of Imam- al en...ines India, and the ee(...rn..e.n X Exar- nrion o a I rezommendationalrnad.. —lased ar od....e.parremmr- ✓eesset un by the go...ernmenL arc Lv -aviators and to — nlement m nrure ca - be ea; accepted n1 E ethcrnec6ategovommenesand legisa ea n a-surng a :mac ate— ate financial sehaces in'rah; he e ndia XII. Examination of an of-cr owner 3 • nissionwil. cc iLs own proceduro,. d may p[ dlane,edeE a id a

~~;n1. Ccpalan: Senrenary m Mr Government of Irnis --- *75--- 19.2. List of consultants, researchers and other officials who assisted the Commission~~

~~0,- Col gu an s I. ic..rno.:okhai Surdaresen 2 Bobby Pahl'. 3. ;:dishekhar Rao Resea ch tear'~~

~~Pot Ila FE. naik 3. of SJride Rem Sorivi Arnal Ku crni~~

~~E. 7. Bhavn_~~

~~KaushE.L.a Venkatais -)an rieQnz II =2tik Data 12 Radhika Faniey 13 5- Jblis Roy 14 rr ::arsheeia~~

~~Sumathi Chaidras ekar.m ash 13 wv~ Ma hur V. shwarya Kumar~~

~~.22 Karen .-nand 23 Ku — ar Ana -a~~

~~25 Se ha -Ian Ku —I:: 26 Shreeya KasM1 s~~

~~28 Ashis-ek Ca Oa~~

~~29 [ [ex CC? 30 trnbarigh tolo .an 31 z'oragAnDno~~

~~33 oeaa Da 34 Madhthi Pt. ndiL~~

~~159 •~~

~~3e Nee r.Singh 37 Sudarshan Bhp. terherjee 38 Ar. :ha 42-awal~~

~~40 Dr. 050nm-1Per a~~

~~42 ria 20nginathr cr r~~

~~2 Lday r 0.0singear 3. `. i0Nesr Bhapt 1024 Banonee~~

~~5 Ram Patton 7 R S TAgi~~

~~19.3. List of invitees for interaction uvitO FSLRC~~

~~S.No Name of Official/ Expert / Organisation~~

~~oV an 1 ICCI 3 ZR • Mentek S rgh wralla • Dr ShrnArArharya • DrSire' Aarl CanAd2 'at 0- of India .ndusr0 National Counril or A3plied Arsnornic Centre fr0 Po :cy ReserAr~~

~~ArICCC~~

is Dr. Percy 0115t0/ 10 Dr FragArm a A Ia rSDA rnm tee is Forwardo MarkAsCernmission I ?9 Indian 3ankS Association Prof 'Arr.' ACharya Mr. CeeprA S rarekh 20 M oral SAr.00 Exchange or rdA Ltc ALUed CAnmodityi EA.Arrign irdia Lrdsh 22 23 SSE 00:ed

~~25 ,ch=eek G'ama 26r 0.gerriaI 2r Dr 001000h Arsairc~~

~~IGO External Agencces/Experts called on the Commission i. O., of Lencon ; Mini✓er fort nartlal Se,izes r.u. rata m Sqcren 3 In lo-us Bus nessCo~~

~~e -anziDISerwcesAuthe r./,w-Mr lecir Sants~~

~~!SS! 461 _nee ANNEXES~~

~~19.4. Issues for discussion with experts and stake-hoiders~~

General • S-rerg"-: theeriscings'atJtcr, I rnpworko I ie^e a' sectorroe, ulatic- and development e• Streng,l-bana ans sate cu-er'regola o crgo- sa- cnal=t-Jctures C:oab lity of the Inc 2" institutional ax`cmwc to adores:1.512S emergrg I om ▪ ser-ol de. elor- enIs g'o bay ea- AdecJae, of he co sume- roteclico and Itvewvr gqe :roc, menanisris -rn 333 1.2eded to ciJrrentftaM2o.0 5 ory arzhitecturalc-.angein ,( ,anced ,unsii Ly.nsPosi- ▪ Relevanceolregula- cr :1st° I-dia Vechanistiforrer-o./1-11 peuc ngco- 11,1=o neresi-sint.es, entrinanc aly 21E ■2 r s.he-sug esticns

Additional questions/Issues on the basis of domain expertise of zlic invitee r. 'Car regul, redre -c growing discn-hrcrertwM ia market alve rest • Soec 1=A.e Lot-e Jankingsecip ■Is pr "CID esased apprpeci P3A) still a roraard> I so Kit sosibteto mAnt a =as with I m cd rep_ ztory capab ■ts 'leg° e he trans isn phase incase of ad0DtinE a inst e- ecru a E2 -OK doe= and how far the mpe-it on Ad E,cc .-.5`.12C1222 relP FIE 0 4' u=.-o grie,ance st th r", Nhat a e soturiona linkage3a‘Pilable in the custmer,i-,estcr g evance r -echanbm -c ding CC"5222.2 Piste:tip-IAct) in pro -0 -zricrok r‘l .2J:tomer at:s II^ • I extent of r btltJtIOn a ised r crlo e ,,ee, the ..„0- JO" on Ccr. mis an: the secto2 egulatsrs9 mee-anims a e p Pre oropcbed to e--arce co-oper;tion anisrr' • -a 03 ThCe the p sion tithe fors pliticn Act in epe. t of merge 3 s a Financial sector regula.tory decisions baec on expe( cnt I -a -cia stabilHrea cons? • e expenenze e, respeetto imslener atior.trlCmsemerWmNeoe

'NE grievances ri ism thc linali:12 sector? • h.-- 2 -e zorstraints ,or elopinE a n, o -il c,mrnor ket fo- comm,o lies arc speadi :,;.eornrodit cenvc-Nes, --o_ghzu ,he co_ntrY p- dn... co ,ou vlsualisg, Or linkages bet ...ee^ so -modify der sti es m:,rxet and othe- merle al secto mr.ets ,-c o- IncleDcnde tl, in a co^p et: 5. inteTinted globalisrd I

~~1C2 ►79~~

~~19.5. Interactions h authorities overseas~~

~~Australia~~

~~I reasury - Mr Eon Snalen, Minis:er Mr Mike Ca; aghan,ExeCutNG Director Mr. Rob Nicoll. CEO, Debt Vs -lagEnen: Off ce~~

~~ALs alian =•=gu herirY !APRA .er °arm chocl Irlqury Me-cer anc lo- ral Chairman 31,-PRi.~~

~~= ^ancvl SEttor ■soyCoJncil (FSPr, l.1 Pa_lsinsted,Chairim. -~~

~~Reserve 3aim< of .43J- Via IP.BAI - M Glen' Si-eien,Govencr~~

~~Mr ;reg ri“,cra - Chairman.~~

~~Singapore~~

~~VOr etary Author t; o Singapore Mr .nevi NIETO", Managing Dtector and senor managemen: tear~~

~~United Kingdom the Treasu'y - Mr. Mark HDD3CI,Sirascia,Seceary hinF-cFal Se ice:Authority (FSA; Mr IIecr.or Santa, DEO Lyn con Nelso,, Director~~

~~Sarah 3 eedei &Mr Gregor; S evens -rens :ion -eam~~

~~=1^ancial Markets Law :ommitler~~

~~3ritisi ba - cea AS:Dela:1On (BBA) - Ms. Sal..y Sait: Deputy DEC~~

~~Prot Char es GOCa^an - LSE PO a",d Director of Financiale R lion Re :eaich =isgrar -e~~

~~Finsnco, Sector as: tioners Paned Chairman RLsselial lirIS~~

~~W: Debt Msnsger-ent Office 2abe Stheeman, CEO rd Mr..ymes Knight~~

~~Ir ter -absnal Cents Ic -non, Wes~~

~~City o:Londo - Ronne:able Stuart Fraser! Mark ',oleo! z-id Rep'cson:a veS from tins c a. markets ANNEXES~~

~~Canada~~

~~- -npartm=nt of F-arce Mr le-emtilt.rin Assist, reputy Mirnste~~

~~F mancial Consurne- Agetyol Mr 1„sus Vie-itc,Ccr-nrniss otter Canada ((IC Ms Lucie Te,e_o,Deputicorrimisioner~~

~~a Deposr rara ta Comer= o Ms cete ourr_e Prerct CDO~~

~~BDr(c Canada Mr. rn 1,1askl@r- Sr Dy. Co erncr~~

~~Chzesf Supenntentent or Mr ?oh kZelmer Asst. Supc :inancri istitutior= (0Scr~~

~~D-ta o Secun es Ccmrnission(OSCI~~

~~19.6. Working Group on insurance, retirement financing, and small. savings~~

~~19.6.1. Composition Composition:~~

~~Shri DH•end -a- Sarup - 1113.1-n-,sr, Shirt C.S.Rao - Senior Advise: Sim Tarim Baja; esed rtemser Sr n 2-__tenc a Chit3le Spa: a Irvitee~~

19.6.2. Terms of Reference: I. Insurance asp^c't tt insurance arc e-ommcryi p ces for legal f-a-ne...ork or the same Some specificisues ro oeexamined 'n this -egard a a I. Rev ewcistrib, on msdels :co polesp at tires Fahe -sus—ca. inductrt i Review the pser< grievanCe red .ssai mechanisms Ran a --anne- - whit.htpne al 2SDeCtSOf -surc ce,;n•rac s suzh as dealirg Pith mismatemenrs -.surt ,Ce fra.c as grimertt of policy and appo -Itment of nom -10..■s sho,ld adc -esed Pediewth=ccmc2t tioitat‘sguiroble to irr, en.2esee o-

11 :ear -e the -old ;1 regulato r purs, tric got of aeveopmec and -- r-annore. which tie sevelo,r-orr of roduccsi, tar o lsareas. inclucinr 1-„-a ano sac? DC. or micro ir-bL anze Dgrizutt -e -sur health Psor- on be ,peci ied -Itatt.s ant reo,u1

~~`Iry N C.A. SECTOR ,EGIS-), -.'t rujo, + 01, 11 \ s I -/ 91-~~

14 Examine ‘,thezh: o- Aot c be [motet as a puolic good -nc- can be shared Through aspicc, ate data ,capho_srganc data minng niastue ture. SJIDject to customer priccy and confide-]alit' reaL !rens- (d` Identify regu a ion a -c super./ s,on aspects of l rscance reg., nnc arc recomme-d a motel legs fame,ok fo- ne .ame this r c d revc.aptttecwcorsband cap=a.SWCure of insuranu co pant s. slthe ae.sgove ing ftestmentnermstorins Jrancecompanies -leregLIE. orscar SeerilpOWered oad,Jstrhe egulatory framews -1( wo ti me. pr der man Drinc plearycach vers..s presor pt on of in

(c, Rode/ale lega f "PWG elatingn re insuran-=arr sxaminr terh2nga= thatm gh- oe required to ovmote more robust participation sector . I, Gerew re SySte—IC isks la car ar Se rcm failure of insu,a^cell ms, c vie egsi rame.‘ork for deaing such slcs lal a: the apprcriate resolution mechanisms that need to be adopted to -told the lad) -eof 3ny nsur-nce kee'Dingin way. theirte ests cf pol 1^,,-olcie,,,, -dfin.ric s.r.rcur,,,,,...netIr thi,procc7,5,h01.11.C. cif !Er in 2 y Tanner or lileand npn life -sirancefirns (11 1?e,iewthedesign., d implerrenta hefrsloyees Stptelmira -ice.c ISLE. and examire be MAing oyers coverec by that 'eg a' on ,s opt for group medizal ins. axe offered by the priva.e insurance incustry 0) i■e et, Me rtulat - ariJ stn. c Slot onicc crs, tia,la - „hs spec& st:tusa _ire InsuranceCorpsrstion tr ricn- n v hcn life sJrance pt'lc es cie eo b. the Depar, Tent of Posts c's - Le brcug eguietsryams.ir odi,r Lo ens_ 2 t-e pro eztic,- of zolJmer providc a level slayi-gfielc (10 Redewthe tleolv.f regula oryoronigalior drd IrldUS rv-ssc,uoi ons inthe irsurarcescztorac thangLs cJI—Wm=.der.otreex sting,ega tgime (rn' Examine the ne:1-onism:at need W De put 1- place for rasp ution of cis pure; bere enmak, place s irs.g:s a in-ereane: in, nthisontex e 0411:h os re-5 d seglmt reg.,Ipters _ncer law , 106 slice d the powers tu. .tia1 how should -11: ,,upervison, runNen he Str-Ctl. aC, and V.12 sunime ctionse2 -, be taken 2 Pensions 121 roe present retireme- f a-,e4o k In Inc a eons sts of many comp° ncnts,',Lc- as brro NPV. 'en5 Or t.7.M (Nibs PJbliz.Proodent Fv-id p o ide fun° trusts and superar -..ac on t, s, and is regu rea n ver,, fragment manner Examine he manner in v,hic- these zompererts :an De t ought'. 'fun the o I rki-zidl suctir 59.5 and he rnc.a log oChie‘ ingc0-crtn ea cr g the dihemnt ccmponentsc the sysccm? 1b, Icentiry the consumer protezt on pmdential regu,at o- and systemic risk as pacts or pe-sisr regulation, h no JCes NE's, :PCO, prpoder fu-d truss and si..Deranrual- on rusts Ariexxis

exemrnee. never a aevelopme- Le, Re exe tee de ,elspenere rLee cfeeleDAand tal mandate is Psse-ties for ensu, ^g widespread ee-11o1pation 1 VC -taxi Npee exaegeL -Lc, red to Ps present e neS mere rPviep featuses lo promotp inrexes e of:on:urn, rsdhis Pohild ing the mandator, soPuivrepoirem. prescribed hnde- NPsp examining the lhasibilicy and des ability o pro, piing n &is antacid rethr^s 1. shibshr pers oves mon, norms for NPS E>F0, profiden .p -d MP Per ne lams go er^ Just, a - d supers — pa o- rusts e esom-end a mood. egal framework that ;;Res the requie pe see the -est Istors if Reviex. the existing :dmi^,stered st, rpst Lte -echanis- lot ov,ed sPrP and examinethe p °DIP^ !hat a accoLnt ux ended 11011 ies ird.gr Me Err ol.r>ePs Pe-sionpOwagw Se-erne

3. Smell Savings eeee e the existing Lepai ra des< gpv_rn pg smai vaungs scherp5 2. xc lfiry any chengee required Lc Leases it pi xe present cheXIOVernmen Isasbo thecoeratcr sm,11aringsschemc: ss ell as P.s epleP,o Examine he that ght ar se on this as:cunt and psether there ih capelo ngmp I esescLemeeLnle Leesarre reeu

~~I. amine the legal ro-epork ropuiree ,or -e rlation sl sr a savirgs die ritutio^ agents, including post pl i^cs and banks and ciiep tkeir inhcM~~

tgoJght with n the ;gulaoryaribft r.1.^ r up bank -g cursprat.sP ion s&. osnsicered a< co ions' sae e( Exa -me tic p — me 'es mebeounc De emeeecxe hetalimp cal ens of the same I I lder scc corsurnP Protection ssd prudentialregulatio- asppets sms savrgssche oes -reco Pume pm estion aspec .woule -c Jde reoepp -g the -heed For prP, entihemeasureQ e deal a issue:of 'enesse.echunine well @stile need Gran asomprialPg iePanse recces:alMed- 2' sm Isseeste be cons derec i^ honnec lommtr the p t cential ppsls ono Natoonal Small Sau-gs Fund v.ould irclhide caoitrl c pure Pents chpdity regplatisrs and xernes on governaneeexe internal conPos oul unotr uo should oe powers LIP used hop should the supowisosy Function k,%. 'ed,,in: Pi-at punitive &pins San be taper

~~19 6 3 Recommendations on insurance Development goals t The cedeloerceLoliesureice -Parke s shpuld noL be a regalamm cr.jcctue~~

~~evisLieulc sLer that Lie not ler Line re ecni petiLLee neutrality and fair cemp lilionShoL c be oasic pine eles it 01 ev. fed L~~

~~166 F 51 CCM ucis P-I ,L CR.15,0,11115, on n~~

7 Genera oe....eispme, - of narmis has to be dire guishec from spec5c mea,ure tr.a rad in betaken to achieve the financial inths 0o age-dc. The meoeTUti for ach,onnE financalInc..slon In c-ereldenceshouid bealigned with the dezis o t a he C....--- s,icn a y ke for pro io i..c on intoo ban

.5 HigNaml pMCipks'del-g to sound gcverlalce 2^d na'ia€ementof insurance hrmsneedtobeenshitnedlc.Oiclew theawshouldalsonandateselfassesmoni alsolvenry anc risk p of le sy Insure¢ The regulator sltau d then use 4 superyi c -dequicv 31C elective ess the -.e2. ....urcs ar.opted In the ins..r.: -.ce company. 7 Me la... should specmatn.vos'mcntsarembemadeaspertheprudentper- nciplea-dgoandatwe-Restment equiremencs ana restrictions shau d renege^ mom the primar "o extel .-lecessary, the regulator oulcbe effpo.hereo to ssecVy aporspnatc -, estrner'no.rnsthrpug- susordinate T. = 00 sub eci- th ce-ta. n restri.c.: cns to be speoried t r der the law Specifcally he reg._ II io bc?.b c to preszr he --e compo.A ion of the invcs rcrit part.olioar.hemir mum levels of investr enr fpany tiver c .t.gory of rivesr 5. "rirlkou shou,d not rs - sit n e camas -nes fro- investing overse,s In=to ers may:hooe to globall) riven ■thcir per 'Ll.o In accordance wJth the prude-it person pr ncip ea dr sk Oasethap al requirements rleregula or ma.. rove ...hcoso to set c.L.t rea,orip12 on:he ...urrenc, msmT bks ra may be held Dy an insuier. Consumer Protection 9 -rhc, a =hot Jge'ou he pr nur..ieo -on urrer p o e:hor th beobse pc1b. nsuan e se proode ancf aireyvor.

IC All incr. ith.a's Mit may pe ndi a I°Fonts sr e-plovees of ..orpo ate age.--s oked in the sale of b.-ok.1.-s .isers, banks and ins....-ance -=uran..eser ices to consumes ^nos- be reglse ed wilh The regulator This rogi, trz..' on p coesswill Le oascd o- cellar Dbjec e -riteria su...h as minimu^ s [ End seri- iza on requirer-entsM1ICM1 escribea by the regulalc resoonsib of inc v thespî fiec 'eq...iiremcntssho....d be efttothe. nssarceComPan P.speco f tsemploy a= as ;gents In c : se -ae r en d en t :dv =ors and lyoker's 4 -0 are iot ns Kith and pz -trular irsurtr the relev< .ser.ize p o De responsible lo Ne mgWar on of Ive-pi%eec II No minimum or maxint.m cap on commisi.ne re or fee shsuld be mentioned in -€ prima.-..eleEislotton -ê chould Gra:result.= ce-Livestr..c ures sr° c.ale o insura-ce=ervices keep v.- .iewc.r.surne nterests 12 In zase a polcy lacses cue 'a 'he nc..n payment v"ere should bf I to gator placed in_ire.- 7.c. issue a noh - tore the pid c..,^c de- Hoberrer these de need rot be spneif ed the. prima % law he k.r mar, law de. that the .-egulatormarr -e spec regulations or deal,igv,i n: ,assato- on ristra.-1._e onth ele rr o erring polic(holcers Is The scope 0 tr..e p anre smLuds- an system re,c5 to se exp5nlec tc a lo.. complain s againct nsurance in'ermeGianes o -er than Dgerts ccr the n surarce company f he insure be directly 'lads The ombud.rnan awards uld be mace e--rceable aga wit -he csmpla ant as wel ?.sthe.ger.ize sic% ider tub eats th.=rig-it -o aspea Delo ear spe insurance ialised appe aLe ((arum 14 The la... child spent> itio duty or pa tics cc - ,act o act in gocc faith It sro....ld aisc cur ncen.r.g P -d cons. at ences of frauc 15 The c.c.. potion a-d she !rig pf inr inrormar can de D insrers make better pting anc under... itinE snns It can a y-■-elo insJers c.o.-bat insta Ices i-suranc.: fraud Theo.. denable. the s-.anng of in..urae -formation 0)- specifcalei cooviding the dr.?. irotection enc. -o 4iden al v reauireme-it Dppl caJ e to 2 y person. inclJding the regulator, flat -olds Imo ma.- belorging ro rThers I6. mheeYr 61ion dius .dipovre the recu di, Lo azt - r-annor tha p.n.) rraccesst o d be do-€.1. 1 Lating.that p-D- mo ng irnovation e arets insurd ce ce,' o the kev nciolesm :le iwenby I r e for ienorm. e heath care sect ]Uo provide or t-e cedifiamen of ailmerzs procedure.= arc s byheal hoo. cers s.o..111.1-cl Drc nctinb better undr.v tirg by i-s.Jr,-ce ompanies by edu.ing the mop haze d problems In hesupo% Fre th caw servic...s i:ured persons Ls Motor inEurancr, Idj In orcer to m rir- ei ncarenien. c -a ro cosy, hed rsioJld pmvdehe cdentvli rm eErdtued 2 aInbioarop /olunar et - -noLtha.inc-- co -hrough ad.pdi- ion orczess - the series fail -o anNe?. ent thecornpc---t on s 0J1d be I co a specia ised io, The shouie iay o vn rninird(m nrncunt covereg'thar mug '-)c obtained L, owne T- s_re hair acciePnr c t rr a re assured of recew dg Cod nsrarisn of up to ge ins,r‘d amount I v. I also pm.. tl? nsure: mar: inry on -en potential iaoil Les In cder ach eve c.-eguta c 'or s pnlinue the vact ce c 1 -gt“C OrP ^ um for tìro party rn..brine ante po Icies. ANr.IESEs '85-

(3) Theme a' institutcolInsuronc,Sur,vo sy'dLoSs.ols.essorss-icu d beg ver sta.' .itory recogn ion as a pro essic -al body respons tie for dm' lisonsing, ano supervision of sun e,o,-san,lIcss,asrs,sors (b. mderm protect the in e s of zorsu-lers the egal re - ev.ork should al IQ:, them n epic. -, a surveyor n sJJRion lr-csuRayor rxwired to be?, polled by he ris. cr The insffer ...di be tcuired to corsider both repor s before raking a der heclair . 20 The law should e-ipc,,.er the egJlator I3 specify :he types cf permi■ec and osigr cnts or -sura-ice olicies The insure- will not hevethe discreli_r to efuseto &core an ,.:cs gn re-t Mal is,' a,,G. acco'dance with the egJlation Competition issues 21. The COI frame ,,crkgo,,er ,g usshould beat par mth the ,ans app,caole all other Ile ins.ranceco-iparies In pa -tic.ila them d ri.:sovereiEnguaran treorlhe °IL iest?.tus cf s-ould be :hanged ism z statJtor,,cor pc atio- toa Godernmentcorrprlygoveried .incerraidare zompary I3o, prow

2z There s a need fo encoraging crnpetition i^ the , e reKc. royaboceng the Is 'owing -casure (<, 0) away with t-e mand.rory requirement olgced upon gene a laLl aice compardesto reinsur2a o heir b.isiness Gp,nor- Ins.mraceCo,m- il lb, re-ove borders which prevernnaanInauranze companiesfrom long busk rice 1. -su, crs subcctonl,topr.Jde - ialtgulationrequi ements

IJ cmatoanm nnanrk- ccr ry fglob-Ire.-5...ralcefirrrs ne Loyaw the nc 31 rarsrEcce sermon mpehtion es cyscouic pla)rielec e ro e ersur ngt, e,vemmenl.s.r, resin not c ):■cn p field DQrACCn stare-owned and pMtte inss anc,-zompr Resolution and systemic relevance 24 The lour sho.id contain appicpriate resol,tion mechanisms, to dealwild fai ine insL ance Rtti. Inelctlicg pro./ _dons lo s ,pervisr - anc tre optcon of transfer--g re business o the railing ins- e x a so vent Insurer These 'nes a nisms should be Eopl C2D e to both life and non lifA suers Thine is nee[ create a compe-, a,isn scemea protect ackcyholdes f am The 'nab, ty sra - isu-er tomee its -ina'C oblge ion; a -d ;a minimise the U4- )a.: YPCSU" L.: the failure or insurance firms. The desig- of the pal cvhc compensation scheme should be decided Jncer the resoluticn frameo,o.-I( being cesgned by toe Comr Sh:Uld it ,C cgul. ors rsponiiilit,. to ssess the Syskeric npsrta-cec in d wcual insurance firms Addihcnal spry resolut cn taps neec to beemp oyeo n es sec c isuiancecomoan estmatarefsund o oesystem y i -portzr: Unregulated areas of insurance e V'0.-11-1ho ° OPLI,>r lo '3131- °J1, of 4'. ni'diCal beief facilities 313VIGed scl-em and obtain g health insurance cove-age °Lye:. 31,rit ranee co ir they areablecc Dbtains milar bene dtsatasimilar -cst `na c- cases ors onateamo mtel-r c total paiao e oESICthatrelotes othemedics be•-,e its oddec Jrde the szheme bo .s.,J as t e premium Ic obtaining the ance Dogs', _1 96 - AndULXE_

28 sg. a soda secur.cy scheme adrninig.erec b the governmest ESIC shod[ so: sesupjecsic :is the eThre gamut ssf insurance and regulaboss Faevesv lassishst, d allowIl-eisseeences..gula:o to ide'' .:ego's specific principles su.sh asiihszie relatingtessrsora,egc.erna-ce -vestmem rnanagemeni.andconsu-er

29. V Ease of gs/ernment spo-scred 5:FP-nes ths, ars adr-s^ Yrough anze ccse.per ths gererr. provisions insriarce laws svo.ld be appi cable er -.M1e13v/slips daily. the reR, ate to varythcapplicati pip v =ions is: as , particu 'y in respect o'',he pre saie obl.gssons -as ers 30 In :aSe ols:heme:w*ere tse insusarce co....rage is contems s,ed to De provided directly ay the goverrsnest and she schvnois -of !under_ ti- io igs .s.somoiste or SJb5Carit seal. tisssfer, t-e law will centisy zetin spec pro..15,sns such as 7.-ose relat. g to corporate governance in....esir-ent rnasagement and consume prsteosoll .`■ at would have to se cono ipd with go,er-ment bocyimpie rnenti-g Sipscheme In orde for thes:- csios.sions!io be effective y -plememed the law should rnancate any insurancc busisess canon out by the govern ment y..hth iseligiblefo regulatios ..-derinsuffince law ssoJldbecar ied out ough a separate sorpoatsentity at ifs Ins..insG scheies °pirated by ts= :Ai Post :cos) should he cor porassed arid brat: v...zhin tse v esv cl the insurance regulator to ensure fes; ve prudentialmanage-ern. orotectthe -7.ersslsolpoli.cysoidersand c =oleo level play ng held

19 6 4. Recommendations on retirement financing Scope of retirement financing regulation owe n egulatios ari s_per sion for 01 robzmeathnenang s,he-es 'pus ypesolten.io- Eric prosids-t unc schena6br not incluc nEtheunLiunfunded, ts-a-f -anced sche--es h as Clc Fe" donScie-esi sr th-scs i,hatareiargd y12.4 fi-anced I`=suetc flea^ matths rrisoJates -sr are psesentlyths ded he.v,ees ,sps,„ and EP-0 'nus be brought .inser one regulatory agescv 2 E-F0 cud only mange asd ol. cog ere re i-emesc hris eine schemes EPT serssould be pgulated n these -nemalrerliksanvothege re -eriLfinano -ger e^d teentirr ranged reg_1=-Isnssh-tile app yto it similar approach shsu c pet,s7n ovrasds PP 3 Scaler EXPITSI and exc ussd Jnds solid in.egale EMpOyeeS Provide-, Funs (issi o NPS The ter 1-restment she. d cos IL& ru -d choosesVoir e ate Wid el her cf the Hs The law s ill not make reseresce "..^."he of exe-st os or exclusion, shoLlo niiss-dsie ol exlsting rindsthat fbIluncer tsese categories to opt For e ther ruPS v tPia 4 The pirndr., objec o'zlirerent regJlsoonshauld petacored sari ke allures - the et emeF in-ncinis Se..eloprrent ths scoter o indu sion sha d -ot os -iosc2Les given ID the rcr r LhoJg- the regulato- ssoull e --e cLssomise the rie accordirg to the crs..file of the cc - sum s am the kind o -e product being afrer=c based on cosi. Lenefir Prude regJlaeon Prudential regulation 5 erurera -egulamen and st.servisi_ri o re riement fi-an: sg Ghsu d '154 based se.gulaior sSou ensure -at -.,e,..bialory and enforcement req...sre ments a e proper onal to I e being mitigatec -197-

E The law must p ozide or I ce-s rg of rctire-ent 5ntnce an-Ales ar d retirement mance uncs out khere ..hou c De -o licens of indidual plans The regulator -nay Drecriseconchticrs tobe fulfIled by ea.:- plant° belaunzhed sythelicensod addiL on o the 2.- ty: licensng each or the Justees of the enti y.snoJEc be sLerod vnm Lhe. regulator. r. Thelaysheud °etre p nziples saseccrit= fo.- avardrg I censes o rettremenr nnanCrg e-n es and tunes L✓ .ris he basis or cemo-stratn by the t ustees/p ome-ers -.at the, hae ne rewired legal, ralagenal and own ersh p structures, :spat it; (1-irnan technology and I nanciai) isk manage-lc-it sys e-s -ent policy, fironc,a1 s.renall and capita to -lanage t-e er nd • d/or fur The croces o aharding ce-bes be transparent and c.)p AP'S' r gi.P^adetailPd esponse in a reasonableamoun- ime r”e egJlator slisdd 21:0 av-Ithe poweno mod due Drscess,a^d sue- deJsionsshoulc be eppealable in a sou B The lap, shoJIc ursvicet -at the'prude- person standud oe o lov.ec for me-rrraiagement b. rh.)e managing the rehren eriLfinoncingiJnds 5..ch as Den ,[or me an.-c c The egl. ators ausa have he powers to impose so-e brcad res ichons prz e risk ak ng b.). the tuncs These re SLW ons hex.r....ptions.a -c must n...... texethe formof the reg. a ois vescr oing 'Nes rranageme .d.si. megies or lie.:und 9 All nus e.virdd Lo seL d odively pirsue e.- - overal nvest-le- cy rho cho, d the regulaio-o define the • reps ements far the pc cy The la 6.■empc...... e eg..Iptor Lo se stardd dfor da a ion s et remen fina-ciirEasseta n a traisorent mar ner nformedlvp eva Ergstandards notr Cr parts o the come iranc al system or in other ,Jr.Aictio-s The regulatorre -13y if it so :hoos.ee de ega e --e tPs.. of se stancats to a sta - darc sesting bocy , ih. co tin Y 0 it' ro 'he s anc:, Fo cefined zon ladm nis ered interestra es si.ch as:R=a -d PPF w,egu arersshoilr avethepoverio rogulate supe Asetr cm for sourd in‘esr-ent managementp actices 12 -he a... mus empme, ^e regulator cc regulate si.per. the -anag:- nent systems DT etireme-tPrance and Tunds to e- ure the asecuacy of sys er-s aze Mese powers -ust co viz I the keyelen-e-ts gbe srerut egulat ons mugt be r ncip es nateJ, d Itit.) on supervision rather then ex ante ,les rid reg,lator siculc not ripose ary sne nsn rrarager-en model • enhtie.s . s-nel funds... h poor n house zapabiliN regula tar -anca e see...irgexter'2 suppo-i^ cevelsoirgsouno risk manageme pract zes is The regulators must be g ..en the p.o.her o impose sk LaseJ capit2...z. -d I qui.: rec...ements o-iretre9 ent france funds tcclewao d et e e pow, 1.. icEu a, e and supervise the key elerents of cc pa ate go,ernance of reti erent finarce en ties a lu-ds na risn based manna Consumer Protection lie should provide p.otr..tion to consumers nvr beinr misled or deceNcs. subject=d u - fair terms NCO" azt, sr JildJ1). penalised 0, the und Consumers shculc ha.eaz:e5stc reaonablemechal sm or gnedance redressal Carsumers shout° also be the gh- togeL .supro r Lake tre igh dee sion.D )d recei reasnaole.qual t> of se...ice

~~171~~

~~ANNESES~~

)ythe co- e. 2.225JM2 pmeci. on rep, a or must be .r....mo-tional Iv the 22( same.- and fro extent oh...1. the 2211sumer responhiL fcr .12.< ng dec si,hns about thhe plan on issues such as investme- 17 All inc hd,als dealing with re emer hc rust be regis erec reg ulzto -ust slip, ate as izant raining lech.rermwts o- !tie -thvidwia's ved In tie process °Flo Tgthe consumers decdeabcut retire ent financing 18.~ hructure of varicupt pe, of charges on retrer orir Tinancint schemesEfts* be rest a ec by :hc reg. ato 19 The regi. a or must be given ishgeers:o er.lure in er-o -cfr.oilitv po-tabilhLy and exit 2Ni-Ts ret-em:rt !wrong s ■ 20 The ,-ego ator mus:hee the power tc etllana y.sis hrd ac ce to se en b, he provide.- o the consume regara -g -,e asset allocation dezitio- --e regtla-or must also -a.= pawe o rth.-wi-end wo( tic:dons o st-emes ard proceSYSS to ESISJIE eonsurerh e g ensuiabi: solutions Failure of retirement finance funds 21. The law 5.1-0Jid pmVldeittn chziertra:-:11. e -,mecSa lo funds offer. -gee linec belief hetirema-tr !hr.: -g plans T1- s‘hw. J be rode ed,'w t-ereso uucn °raze:5 for tanking T- J i-sursoce with morg tirrwMI the h-dh imoro e posi' o- Thhr elhg 79:ncy ressDns 'or t-e resolutic function . 21 The -ould be a proc.ss. o move the .onst me's func5ore defined ton tr run: anower smoothly I the retirerent ance entith sponsoring the def -es cobutic - luTd 2022 beliklUp as The agent% respens Lle to resclu ion shoulc hahr tfCeSit3 CO-WDhPDSNC -for ratio about ptiremcni 'we're entitiezpowers one funcs The shettd have and cats o c.dito reports and the to ask for info -ato- or any fu c and :onduc on-s in estiFatisn of a lt- d 24 The resot.it on pr.cces...hot d s art w a t !drive triEge 15 The resolution prctess o.1:1 g (.; the rune -o improve fi narual 32S1t1D1 I the fund ails to ao:. Lt e piocess shotio Focus on va-sfer the asset -0 another fund, o under the wamt.rnent of a-other le id Liquids on of fuic should Te the ast coon n the 12SCILII on - oress hhdiel rase ion orocesD gwis,t-,e um: o piehe-Itec From hollea -gcp-tribur.ons 26 Estzslish ng a retreme itfinanteprotec on . d ghiaran:ee payo, ts ro- all dabbed benefit h.the-es mg peco-sidered -h- rune could also 0 avid= sownQ gua antees r.h crL :or:lb-ions-11c ^t. to he o em 1-cdgc cchla r

Ilt-e etrementlnanceD CtertiOn locus &SIC] !shed shiuld r arge Daser I_ y eo the particiratinAl, es parizipation s-ould bema-damn iormres fib fwvig de -cc bcrelr o ans amt tht tuna c.T.te be ma-aged t cgency -a is respons arreso hitisn lei lunc: special toptcs ins.rance cor-Daniw that have p oven cap in _fie irg insur -cr Should 22 a lowed o cotse Dusinc.w.1 ',suing annumes 29 C-Mpared pen; on funds, io 21S2ranCe nrrn, issuing ss (-s Lhrwe ghouls oc greaterlexib lityL VODIO regJlatorinlo., 7.0SUpd2,222SIIICI C25 0 212VesSnOst clOsSeS isiSSSIO2 d Lc al the tegUlatiOngo; life cwrpan es 30 -le reE.. at-rs 5ho d hcrt% 'a enswe that -.-:nwrriffWaS2 Opt 2-2[ ars. laa '12.n Oefision by mandating artial. 311DLII- DE 1011.nd pro ahtwe suz.por to Conhuwe-s to take 'we right ...Qt. sor ONPPPIO.

Resp OOP or i -suran e frets suing aunties srcu d be considered along the mes of resctot13" of any life insurancefir-1 Ti: s S5Je has been discussed In detail n -Eports ci- Dte on nsury ice irrnv 99 Just as t-c 131 \Jr&shouldoulll leoga. L un que aver in the laLL anc ^A )onev ;null he regulated at par v. th their espech e catrro its. 33 The 13.4. should 3CPPICP ecge tre unique status of tics as a governr ev intervr o adc'ess marke fa lure: c er L em'll fnancing n,rket and the me= ke o r b c cIMPS (=oil .$ If r. ps e

c. The2+r snoid ve rzsula-cr the powers to regulate 'nfrEsructure 'or revue men!. HancivE sector Soctiors fry., PFRPP 31c^ or of infrastrucure for ptirerent f -s-cingca - se consisered 'or draftr.gthesz.p-odsions in Icgislatio't. These sectio-s pod for legulaLicv and super,: s on of in'rast.ructv'e services sshas record krvping

commend ati011S on small savings Legalframework There lsa need o consvIv an( !ea ^ se the la As on small sar vigs Accors inglv GSB and PP• Act should be replaced wth e co-lsolida-eJ lawthat d r er al a contsin p elat -g o ma ler of colleztior and Imes ment oh IL Jo.o.,isJrner olveccon.liri°variCA Adressa and t..;- he extent relc.an 11414er 121 re on structure and regulatory framework lure ons related to the °per?. icn and management o small gs should se serormec inderende errdty haulcl-L broughtwithin :he Irm tee mphn of tr=rinancial regulator -1c,vever pmderrial regurE on of re proposec sirndos bs,arN -gs ant d eyt nd to chongin t ie nanne whh co :he fulds ativr d S Hall ings PLI=0 z e Invested srce tha- crstituLes iscal ipsision 3. Toacd'esvconv.2rns -hol vorpore valion o leschenev,oulcleadtolcsso puolic confide-Ice v-ould beenvvredtha Jponthetrarzletla nanageme tor smal saving,. o<- Inc pen( en' L E lavv e fectmg svizh transfe shoJIc explicitly clanr; vat theseschemes are gvaranteed by he Govtrnme Consumer protection 4 Requis techJnges maybe mad: in la vvro‘ :rung smal sa engsto inc vide p As or son rhiest.,r protac c^penvation and grevaice edressa r r - ins° operMicra risks ounL v!aeeric zelaults and p °tea thec are teresrs of iro,est.Y: Or, la should lay Goan c-e frarre,vork for the licensing ircadc-s 2 nin. of :agervs

~~19 6 5 List of Acts to be reviewed Insv ranceAC 938 InsvranceRcbu =tory Ocvz.opmcnt.uLhv,iLy q9~~

~~110~~

~~AN4Exs~~

~~3. Insuance Lav3Amendme-.LBill 2008~~

5. 82.91nsuran'eCorpOra ion T.- eitimenti 51 2009 GcnTal.18.28 ance 3usin828 iN9Lional .9tion Ac- W1 7 Marino is.rarceAct 1963 8 MDo TTriclesAct 982 9 The 98 882ies AT. 2006 10 Employ9C, State Insurree Ac 942. 11 C.22npanie2 982.1956 imo united erten 12 Incian Tont-TTAT. ST2 8 dTede- extenr. 3 The Penton F8nd Regula Try 82d D9991828 89888 Tor , II 2011 .8181.2,20Y 14. ° rovidonc Funcs and Miscella89. 88 Pov sions Act. 1952 28 ro idemFL dScheme1952,FnplOyces 99nicn Scheme 1988 Emp ayee2 MT^ sit Lin8edl -suran.e.Sche-19. 9281 Is n,orneTax ad. 1961 To 89 8818 nt 2818.92 18 8..ogrcacavvgsa and 8822-on- nus on tu9d-) 15 P8 22:9-89idenL Fund Act 9E8 IL Coeemrnent SavingTankAct 1873 18 Government 8avin2s 8T-81828..2es Act,i9T.

~~19.7. Working Group on payments~~

~~19.7.1. Composition~~

~~81281922- shr Ra9ji:Tinaica( 8.1e-rber shr Liam kayak Shn 812828 cJdar S28 AP Singh Shin )1DT229k S~~

~~19 7 2 Terms of reference~~

I. To identi229.8rat a e 82 8,2 en c riskst^ -8 inT9 A 28288m ancts the reale ..2n nvf om paymer 8,28.8-ns Pay^en's,Ter2,8 an 2822288mi:2212 nporten (TT y bc.82929 shocks czn ginate thin Te.. 898 ig 88.erat o^a risks 28 829. b22,8889 the, can 88882 828 2-els for prsrag • 2 2.2horrts originatine outsid8L rir operatiom through 288. 2 and hquisity rn: rc.ct. na? sta -dric of t'e pot)" rya cued Ia fa r18. and ape alicriTr T9 n pa, -ent systems is 2 h99 quired ED that cr ter icentiTrig /818 ^221 importa - paTren parti.ipanLS a2d2 s e n1221188 noort22.28ymert,S) c ern_ can be lo Tu are.1 -ina82.8882ssess 29889i-Tr th9 e are iTsts I 821 ans 22 8889 encoure.288g8nrrocm 81J 9829:Tian In pa 02.91.8 12.8.91sysie —s))/ ei

~~tMly,myamnnev,hetertereshod( h^a sE•pa ate leg: Tor Tire-288nd s292. value sawr-ent systers 8.8nparec to 22 .8899-2.TilYT9 82182 22 oa8Tents...52.9-n2~~

~~L74 -~~

2 Ass ocks con b.:read t-ough Day -ant s-tems to other participants anr lead trie oar krui..o., toexam n,`,-edesgnof ur ,formans quck crocescrorhanclirg 11)me. inth /el ban'mufu y. 4. To revie: whetherincepencentpayncrfts ensshodldbee-courageo rotlin1ec o sa;ment 353e p2. - r= eh, minirni,iny mars- nazarc h ough =1'1 cts D ..ers and en-owagino infusion at a 1E:ter pas ills ,p,oJI.c 1- Jm requie re.12,,,, crone cr r.,

~~19 7 3 Recommendations~~

The Feemer,6 19g1,1stor:hould. pe [set =gist at snot p.symentsys em providers, -c using th °ugh onrre rodalke s 2 ThePaynen sReplatnhooc permitexitiqgno- Dayme-t businessestc extenc the - business moJPIs zoier pay-ent. t order that customer co‘ragecoJls threbvexpa -d 3. rfrpov.er the payments 9g..latcr o ry..accesstor rast uctu eservices open and free of rest icr oracti •-== 4. in cider °foster irarc z inclLsnithinpayrien s the Parients Rogulators-lo- Lid encourage hecon:act hat ce sin AS egs. ies of small slue paymentsccud dispense Inc 11-owYcur C..stor er , sec requl ernalts for the entity making pay me- s F.mthe 1--ecztegoriesa,=rh pairren sshoulc oeclearly 'dented. 5 The Payments 13FLJ1F10 should permit and r-aeedenmuage.electrcnicmc ab- thetL a'1111 s.JbstituLe for part) oased AFF TUFF UAL cati,n. e Regulation - cur , a lewe playing iz.ld wiP,n t-e parents industry De twecn he pub 1(.. sector and the oriPate sector, and between bar.< and non bank Fla ers 1.v.o.J1c. r cod to AT flou'r

~~7 Rhsulation should encourage -cependeht Dahrren.syst-m p ovutts which are linked to payment partici Darts,thr..-eb.? - nising mad hazard throue- con fir:tat ,-tc'es.~~

tnisise fat hhanginCe( ho ogh canned bh.hrhh.sh Bring n clevanterport se - o the regulatory bad' ordh' IS improhe the reg. otnn ens supervis on of this n dhs,ry Rest cthrep esen hamx M1 heio the Boa J forPegulat on and oerh ion of oayrnerh 21C Se tlhment Sy5he TIS 0 he Governor Chairma-i and eDe3Jty Governor :ha geolPayi-ents Regulator ..hc.uls need he o eh to sponsored uhris _Don of h Pay 9. oe Pay mcntsCorc a bocy..0 ch. xculd chhhn a Ve -1 and uSers payme t sys emh Regulatio-- he. J selS51r1 t-ePoymbrth :(..eg which would dc ine the rsle lc he advishm he Dayme- regulator on Indus p. htancardh a -d ot-er rel.:led matte s. It would DC '3yMelit5 Council on r-ancaLo y or tne hehmehts regulator onhul ;oh, such matters it IeglslaNe lo 411 heyTent system picnic would 33 • ••33.? ^ed by D-2 CD-srte- famewn k il s‘shem of oropo thohate hegulatich. ...fouls 3- nelaful,showing hascent b .1 hebse.s ts.edh.ptter. nolcgy holutions '33:331/31j3elegUlat313 ntervencior - eourinr wscemich. nrchran■ous chsAs to ,ubmit tos ranger regulatory ohe hight s 12 It i.impol-antto infuses Lcrisp2rent 2.-c c of Eat, nto 'atch,edec Legis 133 needs prchide for a quick aosea s arobecs houall, fablob e b dis p an h especia'h whe- hch them is [he hc hhrthe all appella.e Dow): phhsen hvehtedi - - inner ^lance - hhhild be ans e o tneappel

h 13 A I regula ions mace h> RB pay -ulc -eedtc.t horsisLentv.. Nt . ciples lis =J2.3CVe hsco- me: 1- RE30M^elidathrS I 3303'3 v.hish wo, d be incorsorhtbd into e cnhb ment on .Da nth Re guiadons could thereby be rhallenEes TNcappeatebocvOnEo=ds olh ih ong prated ion for peym hyhte- pont:, ard oche, .custor -crs palerne-.systems ■hpu c te be h9co-psra(ed in the -ew legislation The con stitut on 0' bepg ate Customer Protect 0" Agem.33 to ensure:his booked bh recure errcrceme--.chcontrhohs by payment shste- providers. fa' 3113433th s Custornor rotes! c -uk. no longer be the prime. respons. silith of

~~15 inreduce a uniform and efm prorrs handling bank it h within the say- merh s hecto, with revb yr payables of a .] vmh.r sysrer D OV der having pric y III the context of sank uptc.~~

~~19.8, Working Group on secu ritie~~

~~19.9 1. Composition~~

~~hladhu K nnen ler Shn Ncrai Samt - shn hoyes- uebte Shri Sa Norhhan Prof G Sanaderan embe -193 -~~

10 8 Terms of Refa ence The 44 Otsc,_rities Iwo e - andirenstns-loeprLec nan^ra wading -Met. m, cf -elerenzes-all be as ollov.s 1344180tile st ng leg;inemeaoth ncluc -1g SCIR10. SEEIACt 48884 tarieS legs lat 0 -, RBI ArIPIldME11 MC of 2005 e t: 2 Reviee, expert zcmnlit-=e reco,-me-d2.- o^s and iderrity he egald-a -geswn.sh would implerent exist,^g ecornrendatisns fiz-itrm arc harmonisat o- of h:leLal and regulatcrytreatment of all Jnder y inganc all Jaded 310CUZtS Aculd .het eat ox a -d exclmnge-t aded de Iva lives in a unif iec amehark? low s-ou d the word 'secunt.) be de 14eC, in away tnPtaccommoeF ese lc -ens cnssIna oseclinanrialtracinE tissuppo-slu ture innovaucns- wba-shoudbedsneatwrcommoditystottradrg..herdeliveyisdorelhmugh demEte al sec warehouse receipts? This may recJire exam rung the Warehouse Development anc PegJlationAz 4 Srmedcleanngcoryaatlens/cladn6tousesbefrecasaoartofmico4n>=en- tlal age at on o sys e- cstabllttyr Are they sysemlady imporant corn oonents of de payments watern" S. What are the a'yue leatu ras of zo,,ume pttec,isn n ;ea,. 145 rre 39 E. What e e theun aaefeaturesoonico prudentalre2lauenancsysremlc stabil g fa sari tics marxr T. M.. coes le ,. bre othe, 'han the nain paths of consumer tect o- o Jde t el r-gulat on anc s,s.emin r WhatAsee s o F nan.hdl Ccnr aol-s reiui c legisIE.to,ez and abo etl-eeth ee pillars>

(al en creAat ty 01 d r vahve _riLreci= n ore. eir laity to con razts lb En orse:Dil y of rotting, ✓ps: -rc,r1;in nt; e -c..-1.,seouc of P054 ons by the zlea corperar on especia y In Ye eve -t banknn cy of market pa tic pants. (.7.` ha krui. (y enelpnoti of collateral In dofuatrvc marg -inq and other contexts Secun Rat on esoealycl fu ,recas- flows ICI InLer onkage af °cps p paprents'...Ste-lani theirab'iiyresettic in rem r: sank ms -e... _eral prsteor cf exclenr 2= ono clear ,gccrporatio's respec, Dia& ons aken syrem a:e, a pan c Dan oesslution of Dearing corporations snc other h.emicall.r lnporantaevwT

suborc nate leg slat's, on issues o o erahlp, goer-arce and compensa ion pricy bgcnti.ol .)( tun.. rv.deer= 9. How shoLld the sues of inside tras rganc fraud be cealt w'h in a general vv:y wrich applies to all sac! los' e. ThL field oleo so-atego er-anze scomplex men:ix/otos -npanyla....Rndsecu nt es law What ifh anytiing sho. dsecu itIES .cw be doing' II In the had o Jnc management to reviev. hes -ucture: Jett by rir,a, Lir= pr IL anc ^e th=reed for undarentally c ffe ent ap proach.ts

~~177~~

19 8 3 Recornmendat ons Inc °pia frarework isr.s=c rities -ogn se no pJoliz gcer naturec` inan -cy as markets ‘nd establish '-e incip,es of market irteg anc transpare key regula-oNobject ,e, 2 The de, - dog eof secur siould be '-eutr and shsulc Le oad enough c al iflovatisr it lo cc,er srrurner s [ha' e c.rgees. ircm the ocess c(friar, eilroose cimar6 r-6.511^0 Lce a wide ranSec I unlis,ed Ir“ able ins--Jmesas or - a ker abuse m but mug( have troad ever ptmrc for-e pt,rp-se of regb- lion requirementse as explaired Rocom--end‘t pns ala B. 3. The regisration requirement !lust be entiL, Putral and should nc therefore be -osltled m companiCE L ere lead top e eentred butionsf s ores by Flee - ?pal rec sie,tof ".^ares inthrecr y an ofiermav be nodets a la ge nur-ber cf persons 5. There Is next for an aggregabo^ iequ ement vi ie eby offers of :I e same class of securir es by the same ssue' ever a pe-i:d o say twelve monl--: are aggregates. Concomitant y.thenumber o vv ma% necd to :e -creased to 00D 50 6 ,t snecsar, toexe-z, cfrer o quolided in,tuliena ii‘estcry ,,,ho do not re. Cs MIL" prs'ectio, as re ail in.,,,stois o The -e Is x need. „o imFcse a regisIcat equiremPnt thethe:oml nu- DE Or hC[CerS of t-e secun ies eXZEVLS a t-rehcic 500 or 10501 a, en thoug- a :Fa -amber of nvcsto e apyozehed n z -y Liven yea, S.. 'CU desirable to ^12),e c funding exsnicii^^ for Issuds that are smaL to the aggregate oven II- the, Lap a large im -ibcr liNeators 9 The sat mur,L exp auvstalc h giant of the regis'-atc.. 6 ersu,e e disc °sure ant ha, -1: re 'is-raticn ea, ne-t isnot o ',- used 6:6 crm Diner based regu a ion o' 1,112 ofers

o. sn nod , cenvativesfn shc, d be rg,_14red - 1'9+ .Nay as c m= akng ;Me EX'Lee ge-u -e commercial tie -sacFong COMMCI es II The 6 -liga 13115 CO -h-AL adequate cisl LA, e6 pr6specl quage-1 y rpscr-ts and maLenalevent disc osu m,st be laid n in stall, e anc race applicable Ic all listed regarc es.; of the 'legal form Trie regarding the co - c and ormatoftne=,e discic, co, can Le leftto aelci °WI legislaho-i 12 There mat be a sta-Jtcry pmusien illowng re egulate1=`, pose co strata goverrancc obligation., on listed entities in re ati„n min ^.." proport on of ndependent direct -rs in he Board c.) Cirec o s ,c1 similp na -ce orger)ar, ts ke%, comrnitteelbi firc -c,11,terac, reouire-; its of mercers of keY cor mitt 'tees of the board he es d ble.Yacfukeo‘er ree,u1- in6mus. b ninspate. pabculao Theregulalic-sshodld er all acquisitions of 2,abcf ^e .otirg rights:: zsc,e=ingacqi, siticris 3., control -g:h:-.-ehc,l(lers

e )1EhaStp ce said b; the acquir= s2",drheuridis-„rped maket price by means de - open offer. (el t-.elcrE ter n goa is sierelo c reS -eofiimW. poen o e•-s laing int- accou-tthede,elcr -nr2ntof takeco,e inr,crgendothecle antfactors ,he thJIaLcr may soezi(, a owcr ,,ize cl Lheosen offei T-e ragu at,r(c)ino_ld oe e,Drt eve- (221:JUSL yink c zeortheopen c`fe-

~~I'S _lq6-~~

~~, d The Boa dal trier gaccrno, ys-ould be resrictedlorialiera ingmerrie aaSerS rcrarg mater al rowinhs,issuingneeeshors buy igbacksha es~~

~~eepxc with the appaval resh; elLIdcrs oisrec al resoluton during he penden., clan ape" offer.~~

~~:el The regu,a or should impose app, owiate discazure recuirements on the a:.~~

~~ci,Jirer• to aloesI. E. shard's demo! ge target compar y to make an nformed ceCision~~

~~q. Legs :et-Lair:y0r erorrabili1/4 )1 Je, No' ye transad ons rust be evcred for a, o.:1< -1,;e traced derivatives OTC drivat Lronsar on between soph :t~~

~~Ca eJ counter pam-es ,,irout ee once to where- and whore they are rep latES~~

~~Theiegutat-r s. , “)uld be ecbylammbalarcethem,r paingoo,rctiveso~~

~~safer, and ef, ency rreLLicn o for pror t F na -c al Marke -Itermediarys IFmis■~~

~~ho.,, ta-bie ed -us salance - g- Lig cor pet, we IancscaFeanc tec hnol-gicP~~

~~E‘ery clear house should teFple co le in central bank -12.nc Thery, shrod be r se erenr cer noneyfor ystemica y imporant crai ng houses.naunsceasowhist sio.id se s Dula red pri rlary egislation~~

~~I? Clearing corporations cr stock cx:-ange= shr.uld be b oug- within he scope c f~~

~~the vay-ent/Act ,trocito ensLre Ina% °Het anc settlerertai.,V, Ago, he~~

~~c[oarr,ei.co,icrat ()mt.; apprspriate we co late al or insolvent members to.,,a'-d their se tier enr and ochor .0bnccepns.~~

~~IS Thecelnitic^, ,-linsple,ri roc d seinco ps.rectors tiestaLtee shst d coder y casesall where the trac ,rach e fidL c duty or other re1:1 tionh of trL5,1~~

~~D The delnition olothcr rar~~

~~use& secep IV2 devices must al:c be part of tie strL e~~

~~In orser to br ngcpns en:d ties:307d activities conduces oy racket irter~~

~~mn activity based approach ShaliC be oil^ ....er tx Inc maret in.er med ar es in p imary sectririr aysl itrc -~~

~~21 A broad se; of ac 'roues A - Filar c -Id-a to be regulated tyro sect 'ties rcEJ or cr sr not such sr :dies are D'I-lay 0' 'ciliary functiors of the co- cernec enury must be spc.ified~~

1> inardedoensure tharhe ecurines marge r•egulatar,Lequatel;erlorestne pis vis on in re a ior ich,c' of marke inteimedianes the ^r legs lation nrelatia toscountiesm: ,etshoJld aydohn the b odd prinsrlesolcsce

of conduct of -„ ket int( r edi .›pec 1c:11ycoded ,nghigl standarc ce equdue diligenceto diclo,ui:cot of fecs prompt c sbursal of payrents, y and ad disclosures identia of client nlormat,oi, a cilance a -d renege

~~-nem olconllicts of ir) st sour d sorpoore gove ra -,cea -c compla! arc(~~

~~H. Reg, Sr on regJrc go,..ernar te:tructurc o rurdsrould be reut to tie legal structure aroptcs by the func Regulations s )oulr n^ spec rally proscribe -c legs!. strucrt. thef,nt~~

~~24 To 2.: mc elex sl.c and modern log..:1fr;rrs of Dren,s,3t on sui aDie amerd mcirs ray ("( red in t:32.1-, cn and o -Br laws~~

~~25 The pr rary 3 atute must cor b oad prowicio s, on the gom,, nG -,....2.;(mutuD' funcs ncluo ig the Los c snruple o u- -older asorsia for major decis ons~~

~~exit corot.nitv in lie ort ch p or, lig!. reme-'s regamine offer cocuments~~

~~and perrdic disclosures requirements regal:. Ag custodian and au, tors Details reFerJ bc ell to dela/red egiss ion e191 '~~

~~ANNEXES~~

c- 26 The r'masy scaLuAe -us: also [aiy doWlit'E arose p insip es sf estmentrestd eras, sorros. g earls ons io-s includingincl matters rte dive since!. o2 require- of liq. di A s dnde lAi g ddeAbments Detai's -ese can be erAto dele gated legslason .

~~19.9. Debt Management Office~~

~~1991.1. COmposition Jr.Al GovirceDso Shri D - endreSwamp Member Hassg2sabapathy KupDASSC 1~~

on Debt Management Office 19.9.2. Terms of Reference of the' orking Group l Cr ea y eAsluate the case for separation of ParrAA son the 22i In this D2ntext focus on t c sonfliAts erest bes.Aeen -cc DAC, mos eery 20112A su002. sss and regulroc. obje:t des am: the deb manage Dent ob EASLD'eq of nimising the bocradd. 22 esst and r Je e op-Lont of a CoAernment bon I nasse. TDisDralys s -na. AADar-es out - -e fight P. new deAs. opmer 2 Determine to setupthe rsDA Diller the COD— csion egal architecture keep

3 Specify the rsq.iirec c noriA snD ahases This r .1,ires consobarinolg all - criss ion onasse s2ro lisb Dies- png.duhcontinger- 43114494 irEt a dertialisesasAabase 4. Spec greater detail the rsonsolidati cr of the f1/444415 of several dispersed dest rancgomentseAa Iments with. e RBI and 'Airirctrso sina-ce into a single agencd 5 Issues related to placing the z-d 1( AAragercnt UDCL 00 C.Ague fa) Spetifytho cash ciasa;Acrnent i ..ci0na -1the P044 221 study - erne orDA best prances An hos, ADAMS ens the ileSSUly cooperate ee `9SenanaTu-or Daft es. dv1-12- o ces 4E cosh 44444egEME.-"Jncticr in the Mole. 6 Sub natina debtAs sngas s atDs inset &A °theCent al Gosernmers cce sfe es are eouires to seek the Arun ssio- le Cenlra CosernITIESA4J erne 4 T-e raAd of ass s once c-ac PDA14 may er to t-ese suH-rational govern. -Dents in rrs -aginD-Asir Des: seedst, DC xalored 7 Pr-. es. Ae 2208 report and drd- e2 abl➢sAinD Nage-al -n-445141y Manage- mec AgencyyChan-4S by lehangir.sra ram ho above perspezDs.s 8 Dt er matter tho .. ars -g group mymnr

19 9.3. Recommendations - ceco-mendiNS: - - avderplldrmncngenr liasibciess lould 1,..AmAn ages ans executed Hy thDPDHA The At vs dh RAO e✓a uare ne potential riArt of these cost ngent habil es and advise e Co se Amen on chat ging app -opiate Arcs In addition. The 22vcrnment shci d to rrascronli equiiec ts seekadvice cl vo Acidic before issuinEa resh guar:-tees Anise hiA has implicationsfer thA.. seraC stability of the des. portiallo

2 The Pona should adopts holislic :oprcech het a-compasses he elire hub it/ structure ci he Cent a Goverment irtaci g no' just marketable deb but also contructJu, kupil les om s Is ch as small savings. prow dent funs receipts) a du u utua luternal asilities 3. fre u4. Peileyes that imposing t^e mues of Thu =emu. on State Governments mig-t no uo advisable Ice L152 ma-agem nt of state s a ;air subject R resommends hat stone present Junzt re, Cc Puma shoed be a Central Go/ e n agencyob gaedto nuzgn a ertutr Cover50C dui. Tnu PDWA s or elo undertake uc o elate to "ate Go er -er - deb whim aue mpl c mu forme cern-al 4over-ren zdebt DoRI0110 This u.p ves man tainirg a comp-ehensivedaabuPofSattGC emmentdes ard coord meting he Ce--ra ■Gou.emmen s borrowing cu enoar u.th State Gcve market sur my, ig= 41.; ucw at a later s Ege COMA na p ouice the option to —estal-es of mar ging eirdubb t. 4 in 'egarc Lc ex u-a deb demo is in [Ivo of inLegra..ed approacu and rec omme-cs Luc. rpm ruur ag44 me ex ernal sebt for the Central Governmenl TN_ 3 believes that t-e zurren seup o external sorro.ungs through externs

iFieb theex -simarket his:Ku oenur LIRBOBRBTIIRSCS proan ngi^ eirstionul r arke's crdertausis he ROMA 225105MIngthla Newo -eccmmends that theAid Accoun s an ALICItS c.Jr ent ,n derthuieparlinentclusonomicuffairsise4) inistr of FirusureshoAc omergec witu the uo44onse It 2.-MBS C ion 5. The Ccnbal oSie nmeut hus :leen zonsstertl ning 415:al de la D er -he years In this situation cash s.-oluses cc no a iue except for very De iscs due o -emporary misrairnes. petween Au and cnueldiu res 4ith u a gu4n finu-cia year Ho .o ecr :44.Auhauld be asue witn hefunctiur of maraging 0 -1 inve:tin; surp J., :ash of the GS ,erment 4h n.u ,er 4,ch a 544ation arses In fe [we 'Un Cesiruc:Jre of the proposed PDICA the o after -inuideru g various options recommends•ulingitupasasatJLrymryo ation repesentstio- om bot !h. r tl Gov, nrnen s'd the RBI. R.uhe he roscseJ ['CAA shou J unison toth incependentgoalsnric ob(.14.254hileb inua:count2u etotheCent al ern neat for 'luau onss -d results T-ereshou d be a menu!, sm fo4zunutant con sulta. on arc coordivat on Auth paththeNH-15'r) if FICall(a d

7. The 4c reconme-dsa Iwo coed amine- it for the ope otious Emu range meut of -heRCMP It envisions z :err cal res. 'unship betweer the Poll.). Advisory 5oarc ono the 3oard o .sragementwith the lane, seexing opir ion of he former in mattes of strategy snr Doh, d o Ma -agement s' ould have a effe ct rd co-sioar any opinions on reccrn cnuat crs lace 35 the 7.c. 1....??duisory Board hroJg a cocJmented voting occss The I,' us Lhu Pu icy 4c% isory Doarc should bet< p ovideopi- onsunu y atunt may serefe- er to it syeituer-he Boa d Planatemer th^ Go ,omme- n ddition -be Policy Ad Isurf RCBIG may 5C make recor -iercaC ons MOW n an, aCLIVILICS:r tho Caa55 ILHrds rele.an 8 The 4c is if Me non's - a truuis.k.renzish.s. d DE alabeddea into t-eorganisa tic.nuls rUCLUIR and t-e orozeecirgsard otherrelateddocumen■solt umeetin.us including disuent tea in on, 5 De Tad 5 atutcr ly puol Gard Se open o he pi- :diction of the R ghr to Info mac or IR iuu )1d on le siaIn c u the acrivir eu of PURRS in ....414.,suo. nes the AG recommends la- the c au POHL. shoulo bates' on BIER ng ■approurate y '3 s affl a-d uhould RH BUR' 5 majo'. itycli's non core act ribs.

~~181~~

~~ANNEXES~~

~~19.10. Working Group on banking~~

~~19.10.1. composton~~

~~5rn' K.J.Jce.,i sun= m 3nri H. Mal=gam Shri Janny e,o na a ben shn Ac a Fu Ms Na Lal K dr ai shin Fat1st Lal' St] Herr Ve dhan Fla be, G Bhise Moque'~~

~~19 10 2. Terms of Reference~~

Thew° ging roup on bar kine wcM0a av endeuorchacceptd2so.vsfor Ihe ,,able a, de oose of End -g or investrena of ceposits money [.01. they-oho epa ^,and 41,14451se I be Terms of Refe ercecf eWarkinF,GicUFFFal ,e as folic I. Ts e (levy the legal irarewOkcrthe1nccaHmrs that are engaged in bank r'g ascommerFial banks pi)14554531b305 COCOET555592 5 4555 and itFsul- sidi- nes and Reoora San.RB)O in ndi. 2. Unif CaL 015-d harmon se-ion of :e and re2.18or/treat— ent3lItleSee" I tics 3 To de-Tfy legal mechanisms or o51-iFirg catmeri- regardless of o.‘Fer. ship and le ional n on que.F ons of Fomsetitic- aollry merges, take avers, and gover-ance 4 f did c creditor. nrs and debt Facc‘ery should ideally be a feature st cam pay law ddbge era Jet. hnuien. po cy ma Fen. ra‘e emparFed on mot a Lives S4Cri as The Sezunt :ation and st .c' on a` Financial Assets a.1 En fo,cemert !Ft Secur 5551e5L (SARFA555 5515" is the aperopr ate balance Vat Comm sscn should aJoi 5. To 'e.iewerpertcommiti-eerecrmmer ds ors den F., the eFal.hangesv..- icr imS emeni..xis ing 455 5 54/oh r`e lega rar eho -iiour lic- :IF' . regulatory agow. would wri ,Fpordi^a ,egysIF.t on on issJe,of Fier:- Eo...nanne a -d corsensatio^ o

~~T. Acopssi g consFrer orate.: ion Foga syon. sys emit-, risk anc p ude mai egu~~

~~19 10.:; Recommendations~~

I The NG reco-Fmendstat t-e definitionol oank.i -gmust oevided bythe Pr nciple that all deposit -rd-g activities (Me e NO rt.!: c places deposiLs with any entity, which are redeemable at 54,' with assurec rates or rer..rn1 Fir_ be considerec as banking Co seque-Fly=n- 11.2s undertaF -a such acliviLies must ob!ain a nariF case ac/F r Fe subleco7.::egulaoyp 414.5ithen

2 n:hedefn7 on of MF -.< (Ig'iteWGrFamrendsthatanyertityt-Eaccep.s oe oosit: Fe, access .o clean -g and Ic Pe R4 repo window G e ba%k The primary zaiFitycia bankl5tCareept deposits .F -FFF rnayacce.o.s deposits itw. !hac. 2ccessto dearing and discount winscxpleFi

~~162~~

~~ANItLxES~~

a On h.:. SSI.Je of co op'ati ..eswhich co 'est moriRs rsmn-rrl.ersisharehRoders this RJR 'eccrrirrEno: that any co speratre society ascRp deposits exceed ig e spec led ./Due must c vvitnin the iegulatory pi:, oche Dar kirg egulato Cs Rperatieesa - Nsare ct rRuieLRR under P3 -Vof the Banking RegUlal on Pc 1949 (BR As bRt many provisions r the BR pct are no- apRlicab R to them. Th s'o`oG feCC ond.M1asuc. exclusions be removed. CroRRat vR becks -lust be treated at pa with honking so-Janie: also endorses [Re policy rec orni-cn( tons o' the Halegam Report ^n Urban Co opera Re Basks i.201 To deal RIR ter an proDle - of dual csnr o r-e CornrniLtRe. reconmenns the creation of e rcv.. o gan sation stwci...e UrRan Cooperz." ve Banks (Jcss) consisting of a aparc of -a-agerrer in addition board of di -ER[0s T-ebsars of dim: elected a:cortnce with the provis ors of 'hRRRspeRt1002 ve Sta..e Co SOCK ies Acts or the I ulti St2 e Co-oporaifte A.t and Raul: De reRi.IIRtR.ciaRa so-trc ied by the Reg strR, opera:we Societies The poarc of directors would estapli:h a board o ageme-t ich shal be en-lusted by the responsib itr fort econtrolanc direc on of thearlairs tre Bar kossisted by CEC s-a have -he lAskrn.th,1 'Jr the maRagemert of he B2 - k Rei Rau J pa.Rersts :antic I and reLuIRIc then.. 13111-g Dille Bank Rnd ci s boars Tiaragement ano e RhieltAeRutive SFr cer (R:o, n exactly he same way centro ,Rnc i.?tulates the iJrc..o- ing RI '6 BoRRI Rod the Ch cf [Recut ve ir he Ras. RI ommRrcial bank ) On the issue of :Crirril:SeLccytingcesosi s the irtmbers of t-e'R.; deliberated at e Rrh Itodsppini-edo.it to the.RG Ratthe Rai had in its preseRtatio- se ere the CRmmiscion sub Rifted r-a ROnl; bans, starlit( vcc atio-s.co-ipanies and co.RpRrative.RoRieties egJlated the RBI •hou J alloRec to accept !deposits iron public ARilesome r-emLcrs ..rereol opinipn tRa he ssueolcompanics acceRLingderos R befondthe othermer JerseRpressed oe or ion that deposit -ax -g ac shRulc oe re:tn.:red only to ranks On t c question s issJe fails R -hi the ambito this R.R he members (kith- crates -at the Reser BR Thor Inc a Act 1931 (Rem Ac already proilb s parne- ship f rmsfrcmacceptirgnepcs s Hei-cesomeme-thersoltneRsreRJrnmencec exce- ding s prombit on to co poia Rccesting deposits as 'Refl. reiR.JireR amenR -RScctions8R olthecompE- iesAct Ry6 ihe FroposeoCorrcaniesBikol isa step in It IROIRcticr It aces res rictiols^r Lhe cceptRnceof deposits L compar es I lays doom -ep-RcecRre for accepcanRe dRioRits -lembers slascolcRmpR les c!...c banxs an.: no^ pRikinR1 nancial compar es am allo..RRd to accept deposits to- pub c

I Rei. seto operate as] and R Iran vothin the regRlaton, -e bank. ktg regulator The clasR of \ BFCS'hRt dc., R. accept deposits from pLiblic N2 RN be regulated bytre -g reg_. abr. ThiRo.RE.-IsocoRR derec d.JR:R cc theicconmendationsolvickers"IR-crt (2) R. and on e issue of nrg fentsg (a) T- s we ecoemses TN: siglif cant T e played by NeFos In providing Finance. However Ail .....R.R.I.,sy=temizrisko..,ersigh. thisys IR(Rgnisesthatc edit I - kages be-..,Ren bankiig aid -on Jankf narLeshoRld PR sRLie.t Rpp o- p RIR rRolalin osesight fo the ..iehpoints pf oath r cm-prud• -eg el at on and system sk rRgu ation Once trarsi ion o he Financial Holdine, Company (Fr- structure, as col 'arec ve recomme^dation of this WC is ay. w.ed subsidiaries cr ba- s on,y co Ruch ac itieso.hish Rank hcrrisok.s can unRerae

~~183 AktiEuts~~

lc) Theremustbeing enzing °thanks ,is-a ws,other -o)-barkenii les FUrher tank'smust not le-cm lrrermechkes c` ore no re5„), ed ;iranzial sec cr regulator I-oAede, ape on o certain I rancial insti „Apr asuch -- as -utual fundsght equireari:ss ,o short term fund ^g Suchshort e funding mist Le - s ringeni prucentiol regulat 7 T.31 recommerds Na-lawsth, relacing ts b: ng shoule ch...-ership 15'3.11s provides levelpia!, -g Het( ,or Dank: Ass necessaryconsequence th s cm-mends corpo331- sationc 5 I 31tLI .33 Sector Banks (-s3s1 licaseof -eign banks laving b-onrhe ,- dia hiswc r^commencs thata sus :1°r i;-._es isrci - banks so', c Nholly OwnedSupsidian. ,os)i, Ind a Trans. will -re O2 accresec ay ST.& nr nt cl,nd :Di; sc that they dc -Os in^u- raxa on from ca Alai gains or s amp dut. ....len the, c^nver from branch

ne ash oe so -e -estr rr o- :epos ts< -g co oseratuesoc,eties and that such activity.= under me reoq. latory purview of the The deliberation was on ,,,êttlerthr e,c.icns-p,uld be basedon number or members or on hevalJA of deposits .,Vhile.nme mar 3=4=, ex: essed the'..deo restrict on shrtUt td be based on nu ^ ',era rternberi e a co oxrativesocit, accepting depositsfrom more ên so membe.s should tal within oes esgulatory. amb „of I)=Rai the so y weig-ed r..,..)urchalue of depoits I ,aly COrClUded reco ^nercing that an> cc .73,=rative zreoitsocietyaccepting deposits exceecing a speci mus le cwfte proms on of 'he ,elevair leg Isla' on to me MS -at thro sioulc exenipcior roi the jur:scic ion of h e ccin !rider tnP Comsetiti- Iv I, 2:c2 mire-. Ina-, Acri mergers of I-mk- -he 33: hottvever m33,333.P c ber,,ween Jniaris -c assistedme-ge s volor ary -erptrq Le at. jolt to Lh.:. reop,, and apc ^; the camy tit 0- regttlato On= of the ,cey rPco-nrnent.tion) -%A Comm ss on i= rne es abli=h- ment of a resoluticr cr,raticn to. igure rorot Drdet esoi, Lie oeak finanzial nsiitutors On- o --etoolsof cco mon cool■ o: gate cr rerger nrc.T a irn or- 3 cr aDprop e Mechanisms due eee th = Ittarnev,or4 !xi 333 reco=tme 13 that all asst.-it I mergers trivo vine sale of ail g to 5 èel 3. Isar vrill be ne under 'lc cl- e rase Jtionccrsors o^ this :us recornmerdsco pars :ran c I ss.psid aries zorre spondirignewba -kswein meantnEol 3e Bank Nat- oialistation ond arta= ay comeling thert ccmpa Ties unde r-Onsci ef.ci This %Nei, d e,e1 le p ay ngield will sc Wionalbe he mer,dean is gams' on provis o-s ,rtigirtg hen with a single Jne.; Ira -E,Ncrk BR Ac In additwn „hi5 al=o e-dorses the approachat co opercive Danl.= accest.ng D.J1,1c dep.:sits -ustab ain L43.3Ecense trim e egulator 12 033 rirtrst p 13 barksmust Le dtsperw I -h,.; r:connend, -21V-a cur rnt ra- s tion f a,yri this rep c be -aintair -c 13 Park 1,,uper n-ust ha e Somers t„, « vehensNe y lock ittman resou ce poll:yd.° -en s 'beanr.< rid reCurrndtic chta-gestto the extent such po cies singe uvri excessive mist1.‘KI‘g !Du -ori:ss The Board to receir ,Boct eho ders o bank, have the pc,,,e ta eta -;.rk pa.monts arts op -ia-E,gement - the ?, cial end olcurti g excesi% e i“tak ,r.vrice m -,74.c.rr en

~~tsti~~

14. REgL OR !COE a .—rnpens.:. ion solicy and at um e and its impact upon ircertRes and the ab E - kto Der-fo rm adequate ns.. manage-n[ The foc D..I.1 be upon MenCeltile imp la of ne compensa structi, c T ere 1: .; case or ru es that rec.. eampnsation .0 to spreao longer horizon, With pnpv s ans for claw bac,. o pay nc.'.1.s In n cases Whðet sorno ra- elborsas The eg land regulatory rameht k for csoensatisr should g ve the coo and shothol era the to Dual- pass to...arcs mo re rational compe sat on strusi.L.res,gue the oeep links betweei the p roDle--s o risk maragemen -perationa'cont PSBS, rid the laysof 2:— pr action s I- TIE no on of nt and vop for board.c.- banks n eds o be re.. TheWG recommend, emvir g I e rLn r. directors on Boarcs 3 banks also bei -g dire-tors o a -e ente rises -o.rvor r Managiny Dir=cro r mould not be ..ec to occuaya soard pcs on i group eon- Jan! ster les IS Fu --.2. uus nr-ends that .5ectioi 2o11).b.i of he BR Ad, which p an e sm.:tic -son I.;ns and .1.J anc.s by tne BED must be confried o only loans ano ad ancs meJe .0 pr ,ate ed :0M2.211ES or elitICIPS iehel? the di QUO! ha subste ntr 1-...rthes.Jrposeo-thbrecomme dat o- hecnt trs. inwirch r,lecirecoris ..erred to be s..osta - ly intere=tec r- )ein sin ever used for rclated p3rtv rr. -sactio-sunde rre Compan &Act anc accour - stn. carts rel...... -mendation Droadl. in lire Aitl the recorr ^ pru..2 icws c the Corr n Secor -sessmentl.CFSA (20 9) Refer-ink [re de in - tio- of substa al ir L " in'. Cron she of the BR zt,thec=sAwaof the. c that "this Ewan !Atka stipule...on arths r IN, or zne paid us cap ta, oia company) hod Droved to be very. ,c A becaus o HIption and also owtn ins zeo.( ba ngco-osire It srel. hat Ee:LIE ELliall J:CE r]g of Rs clak 551100 c sererio..eda.-dan asprocr ce pace-toltheppib up capital bo st ..ulateo" 1-len_ethedelnrlpn of substantral ntornsl ne 1.toberevsed upwards re=ppet rz.az he top. must be gwengreacerpo ..er= to r ormnat.9 mencers of tie aDpainurentcommitcer an( I -iecompensation committeeof he coo Ids Or. govor naccar angeme-ts the v...G resommenictr. L ormm,e of aw must it lc 1 ...ed J. tAnks irresoscr ue of c.....nership r 3 r lodes: (al Serrat ng the position ai ran anc managingdiree or nea,e ol=sas as

lbl :EDS 0 PSBS MUST play The same role as any 0 -c BOO N th the ameStIDL icItIons as cryother type or can, (0` Ful JI f tnthe lutirg , SEB S Co exe g Igo. case isTed 9. Rmv.S recommends that the current mode of opere ions of banks Jncer Ben< St..3sic Jo. Mode ,a r.inadecuateanc tee d be a sh towards the mocel az preferred cr seaor rc Tr: FHC mood the kssp linover ID he Jai-1k ro7 sther ertities - tiegrouphave Suosys ar cc of I anks should or buJness that co Id been dare purely ofit the br'l. If insu rance can-.ot oe done bye sank It rioutd not be cone by the s.bsidiartol 2 Hrik 21 Fur ^ er, cap tatol barnsshouldn . `10 r.o takearorisen apart rpm bank ing risks and mechanis- s must be Dunn 320E th ough which. eso,irce> I orn the

~~09,03 el~~

~~ANNEXES~~

~~baikdoe,nct flow sp into the -scar to sister subs cssnes in Imes cc is,s,cr oth. ens se Th s is cons stent mt- -e ringfe -c oppioach where picro-prucential~~

reg. is 13r J resolut I y -nredoan's .. ."hish are engaged in a svell eared bus -sss sl °prisms., ,psipi CdepSills thecae redeemable at pa 'r assured rLes o ret. no er ccmplexiL es of inansialst uctus. easisal 22 .so as' c..) 'his trassi he coi rnus DrOm d 2 onetime exerptiosi gains ands amp di. 12 wren such sonv=_'aon saps ess 23 ?...1 re.x.c othest.sztureo thenoincoman,ld g p teh sercg. S.1 stry Report r2r ssal=s that i-se holding n ,ana mus aaa the tusineas strategy Ola umfied rancial ccsglome.ate I - addition this as e dosses the .012 recossnenclar izns . sosLaineJ in the Pe cos Ns4Y Rev:sr 120:71 P.` ch =Sszess'iat Isis hold sg sampan' istst be eq ...ed to comply anis mth h=Co-paniss Act excls sge lis.ing re quire-ents and shousi .s.= 5,3 estarss. o ss s er r[skcsersig, :A.theaopross -

,4 Consicer sse ISSUES anc Ds in I cu ent legal frarrevso drawrg Ls c,essmm= datic ssarst-mda d-settinr sd es and in-sms 13-al 3.2St pralises sirsovs recom nencs s s.s.ss StICSIEJ o- carpo Al on be set up -h<- ).1 deal an array or inancisl r _Ming sdnksald insdra-ce sompames The mescase of Ins ccroor_tion muss nol J.st ceps.,1 irsuisrecto -coce It m .1s:concern itsellss .1 all loans al sirs .shich mak- s. en:2 prsmises -sumers, sses 22 banks ssJrancesornsosics defined bens. pQ Isionfu".3S.and payment syszerns key lea iireolthe reo... on poration -ustLeILSDA sper3tion It mus- J1so elsxt .81;51222 vise firms ens nLervenets rasplis them :skis as snow sign: of firancral b. e er -he leg. ramevrork must se so designed o enablee se resolun^r. :sr:Ayr sn choose SeLsosen any tools ['rough ...sish the inlerssts c conssi-ers are prstest .r in: Jding sales assistec sales anc rns g

tS Prudesitisl reguoa ion s Jbeohrershii. ne,t al Thes:opeolregulation s -osld e agnssic to the a...marshy: sJetre c seoanks d quals of capital shouls Ise sc -ore pars o regular on cf banes Fr.cen. al regulation s.o.ld cover sss r c -,tenon ecness me context s a. the isIdirg sampan.. moJei Aeoouars anave. oneo`thecore -2..dates pf p dertial egulatio.s fs It limit the negative -roma ties ens's': out col the failure o aswter impcista s f an Th s sl ruaes 21 ess as on should be GES gnedt, dcalwio such I ndsoi 28 hthe srsuped reg_lator, ar sitectures-ejunsc Dion, app o. al and enforcs.-ent processor n_Eylatorslsimptnantand needs 9sedearlydaaneC is t-e prucent al eRislati.r. 29 More 1, a need fore comprehensive wen consumer pro =no- a - d a led1112231 or IT focussed on ir?nsial sessices AHC11.1.1.1 across d le er ses ors s.cs as 22 sing insurance ans sessi es ma Vet 30 In sedition ssecific coisume °rec.on ssus !Ilse) arise in case o, e ectrcnis,nr ban singsni lending --c slants 2nd 112s litios.s DOrtif.Sfs'S e -g -so =. net harsins,:ectec trarsasLIOn is not Elea pro.iced by Issys nst unau hcr °drams ansfei Is ado on sJilits of leressrs o wards Ss rc ssloss e and ca. borrcssers Is not gc....smes by legislation sat

~~to 1 en by Co--- 5210-~~

~~ANNEXES 0~~

3 The 4.3 recommends he none toevaras FHC model as with asp op Ito count -Find eport dg(trida(cs p ic(nlif catioloIsste-, c riskb(ilo up in vge financial conglomerate s. aoproora e accounting and epor ^g stands is rhe move towards the s-ic mo:e I rep - idercificaticn ofyste-c sk bu d(2. ink get -a-cialcoagdom- era)e) 3 TEere? e coice ns 4,hich anse isoivency proceedings of ell'ILICS v,m(d are Stets callo-Do tar Ise - a= reg5rdthee.sendorsestherecommrn-a- onctcPsA op keep res^. ution of hese entities sepa,2 c-rrom nose rear ^Eta orli-,aryco-- ponies 33 This )(..s oncorsos the re(omme-dation(o C-5.9 hhi(h recognises (he seed lore regu, ory()g(n)y sulc concuc Der odic assessme-is of macro ezonomic ris(s

Bid C. 2011) and ecorr end( a )ep‘oti(n c , owrership Di JCBo I^ th)s ha: theban( ng bus ness (.)Alc of spare lel r;:m Lhece-oseral- society Thiswoo d ersurethatthe iegJlatp,),tieatrrent o the bar (ir(sarm 1 the co.ope a ves0Det. is at pa, tanks ()) ir ple-alsone- ) of ths recommeldation t-e sa -k ing arm of co operative 12a^ks m (st ,e r ar e same pr ()lieges available

under 'he Secuntisat a -o Reconstrus ior of F nan( al Asse s and en 'arr(menLor Sec, 37 section 14 of 5APFAFSI ent 111.2 Limeperiod within ch par ons a e re (1). re.) loco ci(ddsce tyth(C e( 1-1))-(opolt?) Hag's' ate or C izt Wagis trares Since no time I es aie pr.)). il(ul tress pe o-.(ta(elo-,,ger han -equireo

~~to be Cboosed or' eddi unn)thro == a ry delays I )(te 9 c ■or gl Asset oec.ons iruc~~

~~tro ., ale Limi ted .1 b th coseo Pepreseltotl le o r Cons1 it, teo~~

~~oting the s g-ilicant delay ca_ei e^,or,■nzsezurity interestssJnoer Section 14 of Se.RRES, pet Jons the Borba). High :ovt has vescrite la (i(ne line el two~~

oness for ....oatIOore-o riled uncle- Sect's( ( of SAP-AESI This WC er(ormenc the' ha law d a Lime per oc (pech:ss 2 mcn hs withir ■-e Dt-Lric. Magst arc or (-le (h ei Metropolitan ;gistrate as the case nay be, shcc d dispose off Section petitio-s -hose No.( fail us meet the ime should be required o reportthenu-ser cas‘()).-e ethey took longer than the prescribed time li --

documents a e requires fa cknga pew or for onfora(g a (.((unLy. T s ()ads to unceraincy ^ proceci, e)( hdiffere-t courts recuiring different cocuments eac ing Is unnecessary delays. The Jab: Laws Amendmen Iamb addresses cols ▪

tsy p 3...iding a f4 sida.mrnents t be nlec Aith a Sestion 4 p•.; (lop J0dB- 5AQFA8EI la cur vie the poJosDli, the Dab: :sussAmer.drenl- 6111 he u~Yic tl dcres=inb. , s ssuc P is ecoranenos sarne I sto ▪ ents:ob pled with a Section 11 pe'rtisn 39. A pe-it on sr enforungez.Jsrity irere-t -d-Section“SaRFIES zan only ben9C Na Dist ct 'Aegis ra e Chief Mee-Dps an `1:.^,isLrale prer.nt day n is rat ./( o.er ices 'FL Depiry Cornmisio -er particular dis-rict also acts as a Distric Map& aLe Deput 2.ommissisn 3(' acmni,Vatre otcer resoons c e 'or overset g e..enue isn, such as collectisn reve- Je anc other subhcdues A.Ch cl trosclibn ilovistrateonth. other do:5 nst cxereiseexecutivea-diddicia frctio- 11. -e edministr; hes.dcf me:repot ta - cour: dia Since both DistriC and CruelMetropolitan `.'agisc tra.es are iiolvedrna.re in ad ministr< mean- tlOala than ac ualdavtc day lure-ions, the.-e. co-siderabiP delay in adc -cssin; petitions uncer Section .4 .7.. s‘RFAEsi Me Debt La 4s.-me Klment B 1 adclreses this issue by allz.vi g ■-eDis 1:P1.3g:trate o the Ch el MOH Mapstre e a a...i.honse. olcer sulxylirs'e o him ots4e DCLI2J1Slore.-Iforc sea.ric i-Ler. On this sue. ..hevi=6 o'tbis NG at ootp-,.sals. eD2D.L3V.5"..rn7 anent Bil1, 20 suffic en' to address the robleil If re Cis Maps( ore or the Chief Me-repel fa- 813815'0 e ...edit a ithortcpandotic= sut ,...-dinateto - axeacoons for enfor.: thr secu- ty inte'‘cr it rya. d -elp the 40 1' Ind ©if lairs give Dr:fere-LEIOC lep in the form ...:ltaseard statutory FJEE oder the claims oftecu.-Pd r or' lo-q rinE anc bankrupt( y. pro EP8C ngs re orli ..crleinrax prov.de el secure° c co Hors. Tax dues unde C ,■■0111S Art Mrs EXCISE laat 944 8-d service ax under the Finance (.L.c- 994 a es .thjec c a Mb 'e-de.-strd=r PC `a,c. onl. parl; addressed issue the rene,aheld p rior c sec.JrP(. reers Dyer crown heats and debts L.- de • ,er e pgis atio-s s..ch la hour sprrificall; picuded • vog fltdOlSES le r=. immencat L-( R2g01.11011 Paian Comm tree iid wh g: solvergs d 1.21011JP cy oceecirgs a mu e is,npo'Latto pr-tectun; io>eeclaimssuch rJue aages the- must U. IIMIt S3VS'Y av sr.:tee-ad AtertheCX]lr; :NHS period emi.lcy.ees i-ust also pin Ih=ra ■ks Jnsec...-ed Jeditc..-s 1.0` Thcgo2r unent sub tanti:.1 pcner5to roo.. ers. arrearsto itp-or u bankruo cy sho Idsle -el stpnd ahead JI seared credo ap otr ditorcn

ne same oroblerrs Jrtaflcdvllsva 1-..ige sacklag of insuficient ah ruc-re An effi.Limil. rilzunalsvae- h-s s [icier iesourzes ris disio.A1 and Fas tninec and competent. s If the objective anc purpose 0- sett ng ✓p DRTS are ID be gr.e.- efr lo, one za --ot. 1E-or- tlu inf ac J2 ure issues that

~~to acdress the Jes that aft!.-c: 05a5 in lna4 t ere isa need ID E thH overkac meegal ranewcrk under ao oart~~

~~a spad-d In it.. '.1a for pvvding a mee-ani - q2oiery of debt that a, 8E51 economical and quick ANNErEB ~aob~~

ol Efficiency of DRT: Sulfas y amend RDCBFI [0 place an obligation C the aP• rBpiy-ktar'-itit) C 211.31/ eetiBien ale effective ,Jncticnirg of -he system ▪ Training ofjuthcmland recovery officers: Sukablyarero ReD5Piand say BAE51 1-0 place a duty on t`eappropune ont -Or training If judi ial and re s 11, Uniform procedures; iLmcriOrOns-i to BB la.- the principle t-s un, D m pocedues ntmt I )y all DRIs (e, Comprehensive rules on procedures: Cealled procec,ffe he Civil 'rocedu e Code 1008 a-d rules of ev dence .-der the I dian de-ce Act 1872 are nec recuired lose b1Lawed. Kees ng this in mind tie Jlesof procedure lo DR- L - decRLDBFir namelythe Debt Reco%,ery Tribrial `fulPs 1993.'wore *.Ited ru es of urccec.-e we e mended to be igit to,ch by al omr ir liberty c the tr bunalslo deVsetheirownme=h odsand s a -da JC-9 151139, et 0-01SiStel an° Jeer rgapptachestae- bv.difie en- Du. -here is a -eed a se oitce np ehe 5uue ,1 no: detailed of rules of proceduree applicable tc hearings here CRT to ovease certainty cf oroceIre anc deguicance cc p act tione's i Quantitative measurements of performance: Amend RCDB- a^dEA17-7.:51 Cnsurc reportinz reqUIITT2-,ts by aperopnaLe auth or es for orepanng an - Sa rePr 1C C.,CrlueSrc_B vecl oLgh fit eesoesource al o catior, steps caken [swards eficie^ fun:I, on ng of the 1. ibural: stDtis 1:ai ..aienlaalyysis of case and aorPaad, time aken to dispose cases a - d reosanslo

(g. Funding and resourceallocabon: There's nee: tore - inkt-eLidinganc resource al oca ICII for 0111. in Ind a Tut,L'als do not 'unction Den I% if theyare no ere IL d.- dand do -othe q.soffuti resodtesat „he r c spo.al The recommendations ens Tor HO Independency Current y. resource allocation to: DIETS is cone through en,',nistly of F nrcr., tl-'ou;r the b,,dcerary proze.s secro regu a-ors in ino,a such as SZ3 and 1170.- have [seah icyhearse fees from regulat=d eciics b ,over the cos of Their runnon -g Indepe- dence urnTurding anc resource s Inlporlant or effect!ve u -c as it aloes re en: y spe-at onal letlhlllry. T ;-acomTCr- dauon i'icrcfo-etear-c.ns eccgr Eirgtheonnoplealindeper dent es 'ince altorsbcn . ii. Quantum of f ees. e s ment In empowering le DR--. Ic Caermi-e Ibe f'nc fees L.keep -gr, mind The o..e1211 casts fsr heiferfect,ve funs cloning The app !cants mho rye pClition= before eels are l nancial n- aitudomwhlol can 0-fc d m pay for speedy reco ey of Ions made ay them` Currently, only the Cen W I Government nas the power co. make regulat ons p escribing the fees. Snce tFe recorr nuidotion of ch ,A,c Into E a - more incepencenceto DR-rsfor allocating resourcas decid n?, the quantu-m ol 2.es slo be their pre-ogs ,,ee and is a necessary cu.- core -1 ,ur,h inarpercenr: (h, Adopting informaton technology lidiancorts haye been slo:. ad004 ing info mati,n I.:Enolcg.1 tre e has been .one imp cve-ents corn -ilea iDn c -, e nu c ds integrating the enure court prrss mto an tr.:ruc fo,rr, OwitisD ion or coup: pcord. and zomputeusstion of egistnes ,,,culd bene !era ANNEXES

hopc ng the huge backlog °Rapes As a- examptl4isrg tne regp oft- e Sppremp [Fort of a has ape- ppric icial reduc -g arrears pnd ac litatiPg docket -Panagemen1 For eiCIP`t LAICIIC A -g el CRs soap! ng infortratial ter,' (Fogy v‘opicl nen. OV4 411 Eouc on or page sacking and pp:A. lead to greats ahziertpp. AnePJ.SezpionSclsAPPF-silo allow sale Flr apse,p !rom o eAsset econsI rust o- CcmP-0.,FPPc`, to ano Fier 43 A^end Sect on 9 of SAACA:SI Lc 2 low Fe ssueo zonve bble dest by an APE --e praoosalscontedned n heDebtLaws-mF -e- 311(2oNallsv.sconvertirgonly a scFtio- of the der nto oPu p. It doepnFt P -econpers ono f I of .FhP debt

cam.el in o equity. o4 Aobfy amend SARFAAS to alio:, au secpreo Cedirors who are regulated enPfks -e pFroewof re Act 45 Arend SCCr 0512CFSAR35531 30555 el 33 433red aonrersoiRe1alonvviti prre pie: that -criaciaaors p.`rph v.., II inf-rnRE. C hec-o Geol. sNersto be used 46 `Pr stamp oFty laKs are pot PitImn Jhe Juroe:. o 1/2vps to be ratnalised either uPeer Commissior th n the scop of the AAR 0 Phip we, thus AC is of tFeop,- or% L-2tthe c PluFpbc on:motion 'I sLarnp .IJA, huisn. ndia. A posst ‘so - an :Quin be the levy of a.Isaclon [PS zs opposed to s arp dply. The pooe o lev !PaPsazt on tax lies gal"Ole Fr,ent anc 434134'1143 tax Jmilas to gsccsa -d servicestFx may be introdu -1LvaLsl Filing stamp dF y 47 The renararnendatin-s in this sari- a-e prim- eldnks ons anc stprclardiscuon or Phe pc-opesp of sec =a ion ant riPF ea F es sr :Fe pr P-arp. law. Reforms r thpsa areasIP/mei iPaJ c lorriirping anc greater itv in :he :Fo- cus; cc, se:Fri isaticr Some of CIA'S° 3150 :CC as a guide to -Fp enumeratec pov.- ersp La be erlec INF pcpFe-scl the egul.firr under Section120 SAI

5) Clanty on sale/tease of business. A W.), gh Sect op9IF of SARFAFAI auaros seP, -isationePe: ric ruction corpanies I p.c. I OF leape FAO NV 5113 3 433 ci he L3140Vor 313 spp:Pciscof [hip ocpPer s suojec- o Fa! guidelnr, hich ha' pP no bee- 13333C bp Re This AA', 33( 1314124dSt 303 -cePFe snrriPry leg

exe-Pise disc retioF Sy ro issuing guide nes oil pub5t-- p en( hLs ?tp Restructunng support finance: 82Fro, e-s debts turn -to Non re o -g,spets(NPASI on pcc.,,n1 o rhP IiParpP I Feot The goal of -es pp(' ring is to turn F rind 'I e p o ity of 5 cF horr-wers Typiza 3343 354 the pum-ase st the FPPc asset, LF. iPsungseFunP salFsn rece s o Qt.a if edInstituP or buFers (QiBS) 33CE are only al app2(.. o ceploy funds o -.ps-p.ctFre the loan accop't Lhe COITC Peplpvinc /tiros by P-e AA: 1554 ■ha defai inr o...er nol. r ed GIVel 3■43 33 4443 are in a bette pcsr on to riPsPrFc-F ea o revive lailinr -or- panp there may be ment E5 Ion ngPvcstp also ceploy Fnds int:the b wing cpmpan, C - the bap 5: the roposalsconta ned - .PrFP -P-sA-reidme- 2snopthich pa rr& convesion loan itoeca c(FlpFi-g funds into 74 borrowe ccm Pa rn( s-ould loned ap LI- Pp. edll Pc as an 111344 e 'or re eRC to esi- 5133 tore -he compp-F in a So sticx anne This h.; so the cpinion that tin= r'ngJ- rnannbe gUideoneS suL o Fde- regF ons, cn whei ARCS can dap cy 77 44, restructuring [ha bar One oanlpann a ang nthe W0475777 be io larrea rot°

1:1 Pledged shares and exempttons from the Takeover Code: When t et. dedteztritaying C a. been ECcU ec an.RE ,e eV-arcsFin d de rta used II, tr nre Die n0 stacutsiy proennns or ttvt taloncgt 'ochres al- Mg Jt t ut cm fohet t piacehrtheotiginal lender This eadstoccm- p1:3(1011$ and eXCe.SIV0 protecural lequtements Ft hher tth le banhs and f nancial irst ttlihns hate been exerpted f om theSe-tunics and Exchange Board of India Scbstanial AcoAsition of Shares and nakeov¢t negulat ons 20 1 1-athover Code), fo Pledged shares held py then similht exemptiont

ne:e nor °hen rr aCe applizasle ri ARCS 10 13100 refOrrilendS t ^a- subsPtu- - on of 00cs plEze Dictasr ginn londet and 'he exe-ptisn fro- tnenpoli cat utt s he Takeover Cott rust be allowed This mould however enquire apptotr ate amendments o sub °rota e legit &ion by 5:91 and Ministryci hompatyAftai h Covemmenf of India ; thti as applicable Id) Modificationof charger Companies nh( t mit gagettei assetsa enece ▪ trily.htuired to nt -late te Regis Brat Ccrrip tr1125 !ROC bassot n cased -solventviv ndl gup Hohever et 'inn tly cor-alt co-tpaties .no-ipaniet wto have rot corm ,ed 'NM in3cf annual/a:1,ms amsngotte things) are no allohed o cta g=t,rr lvtrict :barge teg :tart Lgrto recent notil- zatiansof the ' c °situation ;there if theatseLso Ltenorman compaty aia sectr sc'd ofd tansferred to ARCS the names o ARC0 Car not se substituted leading to t I tt ties in enforcement proceedinconnsolvenn anr mins it tit taws ins v., it cltte spit-wonthat trier cat on of charges anc exemptictrit (aPe Of 0900. acct.! me P PA C dormant companies must be alIcttne This ttot. d ho Etc' reqt eappittna °con inatio's ot the NC,

(C) Central Registry' The Central Go e 'nerd has Set JP a centre electron rnItit Hid i eftCtiv21 4%I to revent frnuos in loan rishs ving mu iple loans horn di 1(10,1 tnnks l te central egist s itaines byCettral Regittry plhontitisationttbset Ite:onAruction and Re ctntyl- e estorl - sia irthRst, tindn 500'0ES The regist a ion olch0rEe0op - bc done or ineatc seartt of hnreto,ds &t he registt ca - cone by Person onl te Th s' the op! lc- that the scope of tie reg stry rr,s be expanded to ^dude ercr orante over an, propelt and rot Just -thse- whichcg re e ct mortgaged to oar 4a financ at intt haions I- addition all ex st e itn sitt-rr hush hs land iegistry 2I1C I lings V1,11 9- egisra - cottnanes trust be lea - et :at- thecentra egistness that erctribrance totonlenrimmovoble stinthigibie) is recorded and an !z aired.2 ifed any artnn nhaiirnt.tithaich propeti

~~List of Acts governing the Indian banking sector~~

~~Banking Regular on Act, 1949~~

2. anking horpa ties (Accu siticn 2.-d -ir2"S''orthiartankirgt, Act 19'0 (a ppl ca tie to cc -Itsflat °naked r"9701 3 3a kinycnmpar es (.4cquisitior and Tr refer hf UncerLaking)Act.1383;applica ole to hanksnationalisedit 1980) 4. Companies Act, 1858 its a limited extent 5 Reserve Bank of India Act 1934 !fie; uitIct not --atter hirculatt,ano regi, aeons made theret -der

atte hew) ttho corn Jorytthtt Ihru.z,h antral 0 CU a 33 2.-Dleatecurp10.900 red Pat urlessa"0.0 001, II 0511PICrOtN11)2anCeSSKIJildir0 anC10. .1V00 la 0 nol be.31000frie an 0. ent0as"Jo0m01 arpc Ion s m010.00010 modJ0209110I 0arp , 6 Securitisarion and Rafe-till:bon01F rencial ASSetS and Ertr.C.nent of security

7. Recoveycl Debts lie to Ranks snd Financial inst.utiCnsAct 39.3 8 Forcign Exzhangcl...14nagement...d,!9.39 (+or lo :12.ncurrenc,th2;ingsl,guidel' -iles reg./at ens and maS:.Er circulars made thereunder Bank ng C.1-o.Arran .S.The7E. '2006 iHcta Aq but gove 'Is resolution of con sumer dispV.es) IC Fe.yrr ent and Settlement Sy5ternS Act, 20.07 11 Regio-iai?...ralBanksACL 197.E.I.for rural tanks) 12 CepDsiLInsrance and C edit 3...orantee Co sor.mon Act. ICE 13 3anki-ig Laws fAmendilie^:i Bt l, loll 14 S'..ate Co operative Societ.esACS (for ,each star?. pera.ive. Sec elies Act r.r.../ re. Stz.e ndia Act State Ban of India Banks; Act 1;5; a Competition Act, 2002

List of Committee Reports on Indian banking sector I. Narasi- 4n Commltte6 and II 2 Percy Mistry Crommitee 3 Raghuram Rajar Committee ■.■ 4 _ee'ac he repon: CmtioIlcanoa of 6a:l.inE1-1,3'.cy in India 5 Jrreli Report Review &the Bunking Regulation A-J. 6. 4. !Mos` Committee: Fronds and MalpracticeS .ri Barks 7. Adhys. hina Commi:ee- Cha-ges in Ni AC uric -amoAe

~~9 Bhide co nmittee Cocro beLy..e.e.conmetal bank and SFCs 10 James ral Committee Fun:honing of r'52;~~

12 5. 7ati4 Zommittee L se-sin!, of Neva 57 52 13. 11L Danttala Comrvm Reg °nal FL. al bam.< le T-1-gala‘a Committee ReEtruci-urirt :.1121732 15 SS Radian Commillee Trading in 172 55 Is S S Kohl RationaCommit IStre.-...g-t- in 57 752 17 5 a-alsilanCo tee 'Spot Ii3n of Br's: 1.3 5.N Committee Cri,i1( tr.cr SIDI! 2112107 57111117s 19 N Mid.gra Comm ree Caope ative socie■ 20 R2.12 "22 1312omrr tee Ch: giCc hAnking ao,s ano Dourc ng of cheque, • Ra 577725 10111M1LLee Comre ion 5710 • R Irspectioi system COank • rr 5BISC2Iss GI bank crL:rs • Pe^darka co -ami ee i=v. of hp m.cc metal 27Banc urien .... ore ative 32 772 ,ad o

~~19.11. Interactions by the Working Gro ps~~

~~W4 an Payments~~

~~▪ Reserve Barr< Ind a A Net anal Pavnint Corporation nolo ▪ Payal > VadE: ♦ dhE mute A A I ItLle WorA~~

WG on insurance. Pensions & Small savings A Gene al InsArceCorr A Life CsuranceCOUnciI A Lloyds • India - I -stitliA ^lInsurnep, SoNefors& I ASS AADA”OrS • Mir sty of LsbDL • Ins.Aarcr Reciaton, a A: Devetcp —ent A, horn;

~~WG on Securities~~

~~A Ascc at on of lnvesnnenr RaCmShc Alia~~

~~▪ AsAcciaL or A- Nation:I Exchanges `iembe s c Indis~~

~~• India - Clearing CopooLOn of India A 10_onaSroct :AthEnge of Inc d • NaLi—al Sec Jrit csCI-Ir -7, Co :Draw' _tc • NCASX • Ce- ra,Cepss tory Serve wile Ltd A The 2SSE Brokprq Fort n~~

~~IS 10 • P nduancnto Prestner -~~

~~Oland ASelthar Former Chloi:rlan Uetu OOP and Exchange Board of Indo 51-eptni ;gape C licantocapo Cher Pccrorlis1 Morgan Chas: C. Pp Opel Pick CA= and ~~~

~~Secretary~~

~~te Moves~~

IC Ka Pointer Momper occur 1 rS and Exonange Scald ni Ind 2 PactCrooke NADIA! ccAnscl or eds a ion High Go lriSSIon Now Delhi P erica 501110r GAD ctp A 1 Crectnnert Sp !alms oar !Durgin!. P ape Mf bourne Aust 3 !a Tech-I:lege 11 Hondo Hale i PAred/on or L15n1 Audi b Gni

~~NaChikat lacr Char~~

~~OP Cer Orczter Sudo. :put mentor ! canon p /topic GOI~~

~~• requite Sons R2S2erri ECC■97-1111 szo cP~~

~~P Sa gay Bellell dor do etc OiNegingr2ffi LSII3SSACPICOI IS `ago Snah COI mai Sachs gubrate Sa kar eardn !NALtoo relppnienPRe pt~~

~~Pounce Cc L -urte `Paean, t cc T gosh', accu P ter o 3= I E er ArouroP dabood goo Se C‘S cy To un Rd rrad.7.1 Prarepscr o1Areeptel Ern CAA Ounneto school A Orford Men rst roan Orford~~

~~2A vikrarnadoja canna riessor FPoCe(cor of Accon — icc pc,Ags cork Union-situ St° n School of 2us •~~

~~17‘ roW~~

~~19.13. Submissions to FSLRC~~

~~A. General Submissions~~

~~Rotolo~~

~~Ft ass ler 'messes edmasics unclaincd mor ens :Inv:sec s ccrrponics~~

~~rtearms :rename ay American Ccurs I cl Li n~~

~~6 PhD Moeller es Comm, seem I 6.17r HOE +r .-oaceissian basv on nleracsier~~

~~k 7 FIC`'~~

~~ler le cans &sane el commis. slop isan arras Ass:oaten k wri subm ssien cased or ir esaisocc~~

~~10 Mr CI areal La Sal 7 A I rmie Sahli H3 Amer~~

~~eta'. or el Ind 1C-ItralAc sec con. 00 CO" I thei pe~~

~~6„'Ike:10 Cm berasA C 71 Mr. PAM Aga~~

~~iheirreqUOSSIO e 7nie EC7A horn the TORO' OS Con 7105101~~

~~) COOS 11061 the Los Sabha seeking~~

~~ohs late eat ace ethapa cis 0' Darin teas Ars:nation lc- Cirparore~~

~~lTS Ithunato CS I On e nthd Co A red cared ceinum= p o EC Oenbearm r)~~

~~res~~

~~B. Feedback on Approach Paper~~

~~Author/Publication~~

~~3. Monlha Fijian—MINT 02112012 th`mla —MINT 0210.202 we~~

~~P. 9. f3rorlal— PD1102IIZ H~~

~~K.K. 544'44544(ED~~

~~Sam ra ION T~~

~~MINT 3nv2N dbucy—MIN 2e [.2 11 xr~~~

~~102 1 2~~

~~24 CLTS.14:ernational — datrd 02.112012 25 Mir'st44 clCorporDe 4444s — 0511 4014~~

~~EGISLATI A I Ls~~

~~Government of India~~

~~Report of the Financial Sector Legislative Reforms Commission~~

~~Volume Draft Law~~

~~March 2013 Indian Financial Code~~

~~ARRANGENIENT OF CLAUSES~~

~~CLAUSES~~

~~PARTI PRELIMINARY~~

~~CHAPTER I PRELIMINARY Short title, application and commencement.~~

~~CHAPTER 2 DEHNiTiosss Definitions.~~

~~PART II ESTABLISHMENT OF FINANCIAL REGULATORY AGENCIES~~

CHAPTER .3 ESTABLISsimyys OF SHE UNIFIED FINANCIAL AUTHORITY S. Esrablohmenr and incorporation of the Financial Autholity. G Composition of the Financial Authority Board. k Eligibility of members of Financial Authority Board. 6. Financial Authority Board. CHAPTER 4 ESTABLISMYSNT OF THE RESERVE BANK OF INDIA

~~Establishment of the Receive Bank.~~

~~Eligibility of members of she Reserve Bank Board. Reserve Bank Board. CHAPTER 5 ALLOCATION all DUTIES Allocation of duties between the Financial Authority and the 'lasers CLAUSES~~

CHAPTER 6 ESTABLISHMENT OF THD FINANCIAL REDRESS AGERGY 12. Establishment and incorporation of the Redress Agency. 13. Composition of the Redress Agency Board. 14. Eligibility of members of the Redress Agency Board. 15. Redress Agency CHAPTER 7 ESTABLISHMENT OF THE RESOLUTION CORPORATION

~~16. Establishment and incorporation of the Corporation. 17. Composition of the Corporation Board. 18. Eligibility of members of the Corporation Board.~~

~~CHAPTERS ESTABLISHMENT OF THE FINANCIAL STABILITY AND DEVELOPMENT COUNCI1~~

20. Establishment and incorporation of the Council. 21. Composition of the Council Oeard. 22. Executive Cormnitree of the Council. 23. Migibilay of Council Chief Executive. CHAPICR 9 ESTABLISHMENT OF THE PUBLIC DEBT MANAGEMENT AGENCY 24. Establishment and incorporation of the Debt ngenry. 25. Composition of tie Debt Agency Management Comminee. 26. Eligibility of members of Debt Agency Management Committee. 27. Debt Agency Management Committee. CHAPTER 10 ESTABLISHMENT OF THS FINANCIAL SECTOR APPELLATE TRIBUNAL 20. Establishment of the "Ribunal. 29. Composition of the Tribunal.

~~PART HI REGULATORY GOVERNANCE~~

CHAPTER 11 FINANCIAL AGENCIES 30. Selection of cocain members of the board of a Financial enCy 31. Executive members. 32. Nominee members. 33. Adm:nistradye law member. 34. Meetings of the board of a Financial Agency . 35. Decisions of the board of a Financial Agency. 36. Conduct of members of the board of a Financial Agency. 37. Validity of proceedings not affected. • ou — CLAUSES

38. Conditions of senice of members of the board of a Financial en 39. Resignation. 40. Grounds for removal of members 41. Process for removal of members. 42. Casual vacancies. 43. Review committee. 49. Administrative powers and assignment of functions. 45. Officers and employees of a Financial Agency-. 46. Administrative law officals. CHAFFER 12

Interpretation of this Chapter. Advisory councils to the board of a Financial Agency. Functions of the advisor,/ coundl. Bye-laws governing advisory councils. CHAPTER /3 REGULATIONS AND GUIDANCE St Power Dia Financial Agency no make regulations. 52. Process of making regulations. 53. Emergency regulation making. 54. Standard of analysis of costs and analysis of benefits. 55. Prospective application of regulations. 56. General guidance. 57. Special guidance. 58i Review by the Tribunal. 59- Review of regulations. 60. Bye-laws of Financial Agencies. 61. Process for making bye-laws in exigency. 62. Power of Central Government to make rules. 63. Process for making rules. 64. Regulations, bye-laws and rules to be laid before Parliament. 63. TOME Minn by Financial Agencies. 66. Co-ordination between Financial Agencies. CHAFFER 14 DISPOSAL OP APPLICATIONS 67. Applications generally. 68. Procedure for making applications. 69. Addidonat information. 70. Procedure for determination of applicadons 71. Procedure for cancellation of any approval. CHAPTER IS INFORMATION AND INSPECTION 72. Power to gather information. 73. Regular inspections. At8-

CLAUSES CHAFFER 16 FUNCTIONING OF THE FINANCIAL AGENCY 79. Minimum standard for pubPcation of information. 75. Allocation and use of resources by a Financial Agency. 76. Performance and efficiency of a Financial Agency. 77. Remms and reports. 78. Accounts and audit 79. Review- by external experts . 80. Grams and loans by General Government. 81. levy and collection of fees by a Financial Agency. 82. Confidentiality.

~~PART IV FINANCIAL CONSUMER PROTECTION~~

~~CHAPTER 17 OBJECTIVES AND PRINCIPLES~~

83. Objectives. 84. Principles of consumer protection. CHAPTER 18 PROTECTION or CONSUMERS 85. Requirement of professional diligence. 86. Unfair terms in financial contracts. 87. Non-negotiated contracts. 88. Terms that are unaffected. 89. Unfair conduct prohibited. 90. Misleading conduct. 91. Abusive conduct. CHAPTER 19 PROTECTION OF PERSONAL INFORMATION 92. Meaning of personal info:mato:5 93. Principles governing use of personal information. 94. Regoladons regarding personal information. CHAPTER 20 REQUIREMENT OF FAIR DISCLOSURE

~~95. initial disclosures. 96. Continuing disclosures. 97. Regulations regarding disclosure requirements. CHAPTER 21 REDRESS OF COMPLAINTS~~

~~98. Responsibility of financial service providers. 99. Regulations regarding redress of complaints. CLAUSES~~

CHAPTER 22 MUETABIL31Y OF ADVICE POE RETAIL CONSUMERS 100. Assessmenr of suitability. 101. Regulations regarding sugability of advice. 102. Dealing with conflict of interests. CHAPTER 23 OTHER POWERS AND FONCriONS Of THE REGULATOR 103. General functions of the Regulator. 104. Registration of individuals dealing with consumers. 105. File and use process for financial products. 106. Restrictions on financial contracts. 107. Responsibility of fin anciai service providers for financialrepresenta- dyes_ CHAPTER 24 REDRESS AGENCY 108. Funcdons of the Redress Agency- 109. Restricsions on the power to delegate. 110. Appointment of adjudicators. CHAFFER 25

Ill. Screening of complaints. 112. Mediation and settlement process. 113. Determination by adjudicator. 114. Appeal to the Tribunal. 115. Finality of orders 116. Offence. CHAPTER 26 REDRESS AGENCYS PROCEDURES 117. Regulations relating CO Redress Ageneys procedures. 118. Adjudicators vested with powers of civil court. 119. Use of ted-mology. CHAPTER 27

120. Costs. 121. Power CO Can for information. 122. Funding. 123. Sharing of information with the Regulators. 124. Performance of die Redress Agency. 125. Annual report of the Redress Agency. CIWTER 28

~~126. Duty to promote fmancial awareness. 127. Power to establish a financial awareness body. 128. Mechanisms to achieve and monitor financial awareness. CLAUSES~~

~~CHAPTER 29 ADVISORY COUNCIL ON CONSUMER thOTECTIoN~~

~~129. Establishment of advisory council on consumer protection. 130. Role of the Consumer Advisory Council.~~

~~CI-AVNER 30 INcEsACTION BETWEEN THE COMPETITION ComMISSIGISAND THE RthicicATOR~~

131. Consultation for draft repithons. 132. Report by the Competition Commission. 133. Response by Regulator. 134 Competition Commission's power to issue directions . 135. Reference by the Competition Commission. 136. Appointment of nongOong member. 137 Reference by the Regulator. 138. Memoranduni. of undervtanding.

~~CHAPTER. 31 EFFECT ON OTHER LAWS~~

~~Power to exclude pliCation of the Consumer Protection Act, 1986.~~

~~PART V PRUDENTIAL REGULATION~~

~~CHAPTER 32 OrvECTIvES AND cislirviPLES~~

~~140. Objectives. 141. Principles of prudential regulation.~~

~~CHAPTER 33 AUTHORISATION TO CARRY ON TEE BUSINESS OF PROVrvIng FlYANCIAE thicacth~~

142. Prohibition on carrying on the business of financial services without authorisadon. 143. Offence. 144 Exemption from requirement to obtain authorisation. 145. Grant of authorisation 146. Authorisation through selbregistration. 147. litigation, suspension or cancellation of authorisation. 148. Database of autholisadrinS and exemptions 149. File and the process for tinanClal prOducts. 150. Power 10 vary the meaning of financial products and financial services.

~~CHAPTER 24 PRUDENTIAL REQUIREMENTS CLAUSES~~

151. Regulations regarding regulated activities. 152. Capital resource requirements. 153. Notice of issuance of capital instruments. 154. Liquidity requirements. 155. Investment. 156. Systems of governante. 157. Governance and controls. 158. Risk management 159. Internal audit. 160. Outsourcing, 161. Restrictions on business and operadons. 162. Requirement to obtain Corporation insurance. CHAPTER 35 Miro-ORS AND ACTUARIES 163. Appointment of auditors and actuaries. 164. Powers and fractions of auditors and actuaries. 165. Disqualification. 166. Offence. CHAPTER 36

167. Actions involving regulated persons. 168. Transactions with related persons. CHAPTER 37 FUNCTIONS AND POWERS OP THE REGULATOR 169. General functions of the Regulator. 170. Conduct of stress tests. 171. Orders issued in exercise of supervisory functions. 172. Additional capital resources requirements. 173. Supervision of groups. 174. Responsibility of Regulators to co-operate.

~~PART VI CONTRACTS, TRADING AND MARKET ABUSE~~

CHAPTER 38 PRINCIPLES RE1ATENG TO CERTAIN CONTRACTS 175. Scope of this Part. 176. Utmost good faith. 177. Insurable interest. 178. Assignment of insurance policies. 179. Lapse of contracts of life insurance. 180. Subrogation. 181. Nomination, 182. Enforceability of d9nvatives. CLAUSES

~~CHAPTER 39 gingsTRUCTURP INSTITUTIONS~~

184. Additional requirements. 185. Requirement for Infrastructure Instingdons to make bye-laws. 186. Procedure for making bye-laws. 187. Prindples governing bye-laws. 188. Requirement for governance and monitoring mechanisms. 189. LiabLity . 190. Power of Regulator to give directions to an Infrastructure Institution . 191. Requirement of Infrastructure Institution to publish information. 192. Competition for Infrastructure Institution. CHAPTER 40 CONTRACTUAL 1SSURS PERTAINING TO INFRAsTRuCTURE INsTErwroaNP 193. Finality of transactions. 194- Lien of an Infrastructure Institution. 195. Regictradon of transfer of financial product with depository. 19& Options to receive security certificate or hold securities with depository 197. Securities in depositories to be in fungible tonal. 198. Rights of depositories and beneficial owners. 199. Register of beneficial ovmers. 200. Pledge or hYPothccation of financial produce held in a depository. 201. Furnishing of infompation and records by depository and issuer. 202. Option to op t out in resp ect of any mmdry'. 203. The Bankers' Books Evidence Act, 1891 to apply to depositories. 204. DepositoAes to Indemnify loss in certain aaSeS. 205. Secunues lending. CHAPTER 41 ISSUE AND LISTING OR SECURITIES 206. Public offering. 207. Violations. 208. Obligation in public offering. 209. Listing of securides on an exchange. 210. Application for listing of securities on an exchange. 211. Dudes of an exchange . 212. De-listing- 213 Takeover. 214. Buy Back. CHAPTER 42 SCANNER Asuse 215. Market abuse. 216. Abuse of inforMatiOn. 217. Insider Wading.

~~CLAUSES~~

~~218. Securides market abuse. 219 Dudes of the Regulator. 220. Punishment for criminal market abuse~~

~~PART VII RESOLUTION OP FINANCIAL SERVICE PROVIDERS~~

~~CHAPTER 43 OBJECTIVES AND FUNCTIONING OF THE CORPORATION 221. Objecnves. 222. Role of the Corporation . 223. Functions of the Corporation Board . Officers and employees of the Corporation . CHAPTER 44~~

225, Functions of examiners. . Regular evaluations. Special evaluations. 220. Power to cell for information. 229. Summoning witicesses and caning for information. 230. Enforcement action under this Chapter. CHAFFER 45 PROMPT OGGRIGTIVE ACTION 231. Framework for prom [corrective action. Risk assessment measure 3. ow risk to viability. 284. loderate risk to via 5. Material risk to viabi Cy. 5. mm nent risk to viabil ty Criti a risk t viabOty 13 -

~~CLAUSES~~

~~218. Securities market abuse. 219. Duties of the Regulator. 220. Punishment for criminal market abuse.~~

~~PART VII RESOLUTION OF FINANCIAL SERVICE PROVIDERS~~

CHAPTER 43 OBJECTIVES AND FUNCTIONING OP THE CORPORATION 221. Objectives. 222. Role of the Corporation. 223. Functions of the Corporation Board. 224. Officers and employees of the Corporation. CHAPTER 44 REPRERR AND SPECIAL EVALUATIONS 225. Functions of examiners. 226. Regular evaluations. 227. Special evaluations. 228. Power to call for information. 129. Summoning wimesses and calling for information. 230. Enforcement action under this Chapter. CHAPTER 45

231. Framework for prompt corrective action. 232. Risk assessment measure. 233. Low risk to viability. 234. Moderate risk to viability. 235. Material risk to viability. 236. Imminent risk to t Lability. 237. Critical risk to viability. 238. Capital distribution and executive remuneration. 239. Restoration plan. 240. Resolution plan. CHAPTER 46

241. 242. Appointment as receiver. 243. Resolution order. 244. Power to manage covered service plodder. 245. Functions of the officers, directors and shareholders of a covered service proTider. 246. Stay of proceedings. 247. Transfer not covered under Indian Stamp Ac 1899.

~~249. Agreements suspended. API -Ay~~

~~CLAUSES~~

~~CHAPTER 47~~

250. Process for purchase. 251. Resolution order: Purchase. 252. Transfer of assets, liabilities and qualified financial contracts. 253. Confidentiality and dridOSUre 254. Provisions of Competition Act nor applicable. CHAPTER 48 RESOLUTION BYBRIDGE SERVICE PROVIDER 255. Establishment of bridge service provider. 256. Resolution order: Bridge service proWdert 257. Terminadon and dissolution of bridge settee provider. CHAPTER N9 Apemen-ION EY TEMPORARY PUBLIC OWNERSHIP 258. Resolution order: Temporary public ownership. 259. Termination of temporal}, public ownership and liquidation of covered sertice provider. CHAPTER 50 RESOLUTION FUND 260. Duty to insure. 261. Eligibility for Corporation insurance. 262. Application process for Corporation insurance. 263. Assessment by Corwcadon. 264 Resolution Fund. 265 Conditions for the use of the Resolution Fund. 266. Revision of Corporation insurance limits. 267. Calrulanon of premix. 268. Calculation of administrative costs. 269. Obligations of the Corporation . 270. Grounds for termination of Corporation insurance. 27i Process for termination of Corporation insurance. 272. Revocation of termination of Corporation insurance. 273. Line of credit. 279 Advertisement of Corporation insurance. . CHAPTER SI

275. Initiation of compensation. 276. Compensation notice. 277 Objections to compensation notice. 278. Compensation order. 279. Payment of compensation. 280. Liquidation of a covered service provider. CHAPTER 52 APNEA:A

~~ea CLAUSES~~

~~281. No review of resolution order. 282. Appeal against compensation alder. 283. Payment of interest. 284. Review of decisions taken by the Corporation.~~

~~CHARIER 53 INTERACTION tyro- OTHER AGENCIES~~

~~Interaction between Corporation and Competition Commission. 286. Interaction between Corporation and Regulator. 287. Interaction between Corporation and Council.~~

~~CHAPTER 54 OTHER PROVISIONS a-Diu-NINO THE CORPORATION~~

~~288. RelurnS and reports 289. Application of other laws .~~

~~PART VIII FINANCIAL STABILITY AND DEVELOPMENT COUNCIL~~

~~CHAPTER 55 OBJECTIVE AND FUNCTIONING OF THE FINANCIAL STABILITY AND DEVELOPMENT COUNCIL~~

~~290. Objective. 291. Functioning of the Council. 292 Establishment of the Execudve Committee. 293. Establishment of the Secretariat. 294. Establishment of the Financial Data Management Centre.~~

~~CHAPTER 56 FUNCTIONS Of THE COUNCIL~~

295. Functions of the Council. 296. Principles. 297. Data analysis and research . 298. Councils access to data . 299. Ceterminadon of systemic indicators. 300. Application of systemic mole mots Lo financial service providers. 301. Formulation of system-wide measures. 302. Implementation of system-wide measures. 303. Facilitating co-ordination and co-operation. 304. Coordination and co-operation at tmemational Imanns. 305. Resolution of disputes. 306. Role of the Council during a financial system cgsis

~~CHAPTER 57 a6"~~

~~CiAtisM~~

~~307. Creation, administration and supervision ofthe financial system databas~~

~~308. Principles to be followed by the Data Centre. 309. Submission of financial regulatory data to the financial system database.~~

310. Access to financial regulatory data by a Financial Agency or Central Government. 311. Access to financial regulatory data by the Council. 312 Access to financial regulatory data by the public. 313. Offences in relation to the financigl system database. CHAPTER 58 OTHER r COHESIONS covouNGG THE COUNco 319 Decision making in the Council Bond. 315. Fund. 316. Allfillai report

~~PART IX DEVELOPMENT~~

~~CHAPTER 59~~

317. Objective. 318. Functions. 319 Power of Central Government to direct Regulators for prarriiortO nancial service. 320 Principles. 321 Need for measures. CHAPTER 60 PROViSIONS FOR REVIEW 322. Review of measures and directions. 323. Obligation to arrange for review of measures and directions. Research and analysis by the Council. 325. Collection of information or material by the Council.

~~PART X RESERVE BANK OF INDIA~~

CHAPTER 61 ONECTIvES AND samorminac. or THE RESERVE BANX 326 Objectives. 327. Capital of the Reserve Bank. 328. Reserve Bank Board. 329 Quorum for the meetings of Resein Bank Board. 330. Advisory council on banking and payment.

~~xiy CLAUSES~~

CHAPTER 62 MONETARY POLICY FUNCTION 331. Statement on objectives of monetary policy 332. Issue and publication of statement on objectives. 333. Monetary- Policy Committee. 334. Meetings of the Monetary Policy Committee. 335. Quorum and decision making 336. Right of Reserve dank Chairperson to supersede decision of Monetary Policy Conmiittce. 337. Publication of decisions. 338. Publication of minutes. 339. Power to obtain information. 340. Power of the ROSSOIS Bank Board to make bye-laws for procedure of Monetary Policy Committee . 341. Reports in relation to monetary policy. 342. Reserve power of the Central Government. CHAPTER 63

343. General powers of the Reserve Bank. 344. Business which the Reserve Bank may not transact. 345. Idmpormy liquidlry asastance. 346. Emergency liquidity assistance. 347. Payment system of the Reserve Dank. 348. Business of the Central Goverruncm. 349. Business of State Governments. 350. Right to issue bank notes. 351. Issue Department. 352. Issue of rupee coins. 353. Obligation co supply different fonds of currency. 354. Issue of demand bills and notes . 355. Power of Reserve Bank to obtain information. CHAPTER 64

~~356. Statement of assets and liabilities 357. .Allocation of surplus profits CHAPTER 65 OTHER PROWSIONS IN RELATION TO THE RESERVE BANE 358. Manner of publication of information.~~

~~PART da CAPITAL CONTROLS~~

~~CHAPTER 66 OBJECTIVES AND PRINCIPLES~~

~~CLAUSES~~

~~359. Objectives.. 360. Principles. CHAPTER 67 SCOPE AND CERTAIN OTE ER NATTERS~~

~~361. Scope. 362. Emergency circumstances. CHAPTER 68 INWARD ELOWS~~

~~363. Power DO make rules. 364. bile making process. 365. Emergency rule making. CHAPTER 69~~

~~366 Power to make regulations 367. Process for malting regulations. 368. Emergency rewalation rcak.rm CHAPTER 70 AUTHORISED DEALERS.~~

~~369. General. 370. Dealing in foreign exchange foc cawtal account rra neaa 371 Undertaking of transactions by authorised dealers. CHAPTER 71 NATIONAL Smunin AND REVIEW~~

~~372. Capital account transactions affecting national semidry 373. Review by senior officers. CHAFER 72 ANNUAL REPORTS AND MISCELLANEOUS~~

~~374. Annual report of the Central Government. 375. Annual report of the Reserve Bank. 376. Modifications of certain sections of this Am.~~

~~PART Nal PUBLIC DEBT MANAGEMENT AGENCY~~

CHAPTER 73 OBJECTIVE AND .FUNCTIONING OD IHE DEBT AGENCY 377. Objecrwe 378. Pstaff whroent of the Deb' Agency advisor/ Council . 379. FUILCUOLLS of the Debt Agency Adv sow Counca CHAPTER 74 FUNCTIONS OF THE DLE I AGENCY

~~xvi CLAUSES~~

380. Functions. 381 Public debt management. 382. Cash management 383. Contingent liabilities. 384. Research and information. 385. Fostering the market for government securities 386. Services to others. 387. Collection of information or marer/al. 388. Bar on transactions. CHAPTER 75 POWERS OF THE CENTRAL GOVERNMENT 389. Power of Central Government to issue directions. 390. Power of Central Government to temporarily supersede Debt Agency in exigency.

~~GRAPIER 76 OTHER 0.0.0%1SIONS GOVERNING THE DEBT AGEhLY~~

~~393. 393. Liability for financial transactions~~

~~PART XIII INVESTIGATIONS, ENFORCEMENT ACTIONS AND OFFENCES~~

CHAPTER 77 INVESTIGATIONS 399 Commencing investigations. 395. Process of investigation . 396. Powers of the investigator . 397. Report of the investigator. 398 Preventive measures during investigation . CHAPTER 78 NOTICES 399. Show cause notice for enforcement action. 400. Content and standard of show cause notices. 401. Access to material with regard to show cause notice and decision order. 002. Content and standard of decision orders. 903. Procedure for review of decision orders. 904. Conclusion of proceedings through discontinuance notice. 405. Confidentiality of certain notices. 406. Requirement to make regu:ations

~~■.■~~

~~CLAUSES~~

407. types of enforcement actions. 408. Factors for determining appropriate enforcement action. 409. Minimum amount of monetary penalties. 410. Compensation to persons affected by violation. 411. Transfer of penalties to the Consolidated Fund of India. CHAPTER BO COMPOUNDING Mantas AND scamp 412. Application for compounding action. 413. Procedure for making compounding order. 414. Regulations concerning compounding. CHARIER 81 OFEREcEs uNDER THIS ACT 415. Description of offences. 416. Institution of proceedings for offences. 417. Faccon to be considered for punishment. 418. \Iodations by bodies corporate. CHAPTER 82 MISCELLANEOUS 419. Misleading a Financial Agency. 420. General procedures.

~~PART xtv FUNCTIONS, POWERS AND DUTIES OF THE TRIBUNAL~~

CHAPTER 83 PRESIDING OFFICER AND FEIGNERS 421. Qualigcation of Presiding Officer and members. 422 Selection of Presiding °facer and members of the Tribunal. 423. Conditions of senice of Presiding Officer and members. 424. Resignation. 423. Removal of Presiding Officer or member of Tribunal. CHAPTER 84 FUNCTIONING 426. Power of the Tribunal. 427. Rower of Tribunal to recover penalties . 428. FunCLOGS of Presiding Officer 429 Presiding Officer's power to construf e benches CHAFFER 83

430. Registry of the Ilibunal 431. Requirement of the registry to provide computerised services. 432. Staff of the Tribune!. 433. Finances of the Tribunal. 424. Performance of the Mauna'. 435. Annual report of the Tribunal.

~~xv n a3• CLAUSES~~

CHAPTER 86 JuRiSaLCTION AND APPEALS 436. Jurisdiction of the 'atonal. 437. CHAPTER 87 PROCEDURE 438. Procedure of the Tribunal. 439. Composition and function of procedure committee of the Tribunal. 940. Enforcement of order of the Tribunal. Appearance before the INbunal. 442. Limitation.

~~PART XV MISCELLANEOUS~~

~~493. Members, officers, and employees of all Financial Agencies to be public~~

444. Protection of action taken in good faith. Application of other laws not barred. Exemption from tam 447. Liquidation. 448. Prohibition on avoiding this Act. 449. Power of Central Government to remove difficulties. 950. Repeals and savings.

~~PART XVI SCHEDULES~~

~~Schedule 1: Selection committee Schedule 2: Procedure of meetings of the board of rhe Financial Agency~~

Schedule 3 System-mde measures Schedule 4: Actions of Regulator and Corporaton consequent to de- temmrdng the ruk to viability of covered service providers Schedule 5. Members of the Monetary Policy Committee Schedule 6. Repeal of other laws b (20/3

~~Indian Financial Code~~

~~A BILL~~

~~rEgulafton, and p 1.311d0 IDE the ESMb:WT(91c 0 biRLIVES, ;WIWI'S Zt.i Diframeworkfor =median 221232 AA/•A regulatory agenaes, ond for multErl.VAIneded thir2Wt th Or InddEnrI therep,mth awair m bth~~

~~AND WHEREAS this Act is 2n nded to he pi tciplis-bosed !cm; enablmg itsappl;cation t any sesniene of the AAncialseclor, in AndAg to focus on ownershA -222tall / 2A (AAR g /ofOStEr COI p [Arian,~~

AND (VHEREA th2s Act u cmmed obe g and Arm.ultsmg the g ow.emanu 0322621 (20//027 OgenCIG, mid prowdefor comprenensive framework for consAier protect:2A prudent/21 egula regularion ofce nb! o.pers [manual CoNnucL, Markel ehure, (A01/1122 offina(cro/ sen/ceproviders, V5 rune ?sk over sigh; 09/2103 on( 2337312(le AAA 41,gnal &Oar se/3/At ma..ket deve ■OP^gC AAA/ 0202/3 23/ p(b13 Abr Manage/LAI in 3211A

~~Br IT ellaaed by ParliaMenr in die SA0prouat Year al the Repli312 o/Indm ea follows — -433~~

~~PART I~~

~~PRELIMINARY~~

~~CHAPTER 1 [MEGsnooty awn Ark. sspheacion see L (1) This Act will be called the Indian Financial Code, 2013. 5 (2) This Act extends to the whole of India.~~

~~(3) This Act will come into force from such date as may be notified by the Central Government.~~

~~(4) The Central Government will have she power to notify different dates for different Parts of this Act to be brought mto force, with no such Pan being made is effective partially~~

~~CHAPTER 2 GE FIN) TKOS~~

~~2. In this Act, unless the context requires otherwise —~~

(1) "actuary' means a person saki fled to practice as such by the Institute of Actu- aries of India under section 9 of the Actuaries Act, 2006 (35 of 20063 (2) "administrative law member' means an executive member of the board of a Financial Agency who is qualified in the field of law{ and is designated as such under section 33.

(3) "advice" means a recommendation, opinion, statement or any other form of so personal communication directed at a consumer that is intended, or could reasonably be regarded as being intended, to Influence the consumer in making a transactional decision.

(4) 'auditor" means a chartered accountant certified to practice as such by the Institute of Chartered Accountants of India under section 6 of the Chartered ks Accountants Act, 1949 (38 of 1949), and carrying out the task of audit.

~~(5) 'authorised dealer means a person authorised under Chapter 70, in relation to capital account transactions, to engage in the business of —~~

~~PO dealing in foreign exchange; or (6) receiving any payment by order or on behalf of any non-resident, in any so~~

~~(6) "banking" means the business of accepting deposits from the public with the promise of repaying such deposits at an assured rate of return.~~

~~Cl 'banking service prodder' means a financial service provider which caries on banItmg.~~

~~(8) "beneficial owner" means a person whose name is recorded as such with a depository and the term "beeeflcini ownerships! will be construed accordingly Part I: 2. DEFINITIONS 2~~

(9) "bridge service provider' means a wholly owned subsidiary of the Corporation, established in accordance with section 2550). to which the Corporation may transfer some or all of the assets or liabilities of one or more covered service providers. (10) "bye-laws" means the bye-laws made under this Act. (II) 'capital account transaction" means a transaction which alters the assets or liabilities, including contingent liabilities. outside India of residents, or in India of nonmesidenrs. (12) "capital distribution" means a distribution of cash or other property by a financial service provider to is ovmers made on account of their ovmership.

(13) "central counterpane means a person interposed between counterpardes to contracts traded in one or more markets for securities, becoming the buyer to every seller and the seller to every'very buyer (I4) "Class A offence means an offence described under section 415(1)(0). Mb (15) "Class B offence means an offence described under section 415(1) (16) "Class C offence" means an offence described under section 415(1)(c). OM 'Seating" means the process of transmit-Eng, reconciling and wherever relevant, confirming payments or securities transfers, prior to settlement.

(18) 'combination" has the meaning assigned to it under section 5 of the Comped- lion Act (19) 'compensation* means the amount that may be given tn persons identified under a compensation order. MO "compensation nod=e" means a notice issued by the Corporation under section 276. (21) "compensation order" means an order issued by the Corporation under section 278. (22) "Competition Act" means the Competition Act, 2002 (12 of 2002) . (23) 'Compecidon Commission" means the Competition Commission of India established under section 7 of the Competition Act. so (24) "complainant" means a retail consume: who has filed a complaint with the Redress Agency or whose complaint has been forwarded by the Regulator to the Redress Agency (25) "complying' means an oral or mitten expression of dissadsfaction made by, or on behalf of, a consumer, alleging that the consumer has suffered or is likely to suffer an inconvenience or loss on account of a financial product provided, or a financial service rendered, by a financial service provider or is financial representative. (263 "compounding larder means an order referred to in section 413.

~~(27) "conduct" includes any act or omission. (28) "consumer" means a person who has availed. avails, or intends to avail of a financial service or has a right or interest in a financial product.~~

~~(29) "Consumer Advisory Council" means the advisory council on consumer prates [Ion established under section 129 . Part l: 2. DEFannoNs 3~~

(30) "contract of insurancemeans a contract underwhich a financial service provider, consideration, assumes the risk of one or more persons, and distributes it across a class of similarly situated persons, each ofwhose risks has been as coed in a similar transaction, and includes any instrument that may be prescribed by the Central Government to be a contract of insurance.

(31) "control" means the right to control, individually or in concert with other persons, directly or indirectly, whether by virtue of ownership or management rights, by agreement or in any other manner, - (a) the management or policy decisions of a person; or (18 die appointment or removal of the majority of the members of the body is responsible for the oversight of the affairs of a person. (32) "Corporation" means the Resolution Corporation established under section 16. (33) "Corporation Board' means the board of the Corporation. (34) "Corporation Chairperson" means the chairperson of the Corporation.

(35) "Corporation insurance" means the contact of insurance issued by the Corpo- re ration to a covered service provider under section 262. (36) -Council" means the Financial Stability and Development Council established under section 20. (37) 'Connell Board' means the board of the Council. (38) "Council Chairperson' means the chairperson of the Council. (39) 'Council Chief Executive" means the chief executive of the Council. (40) "counterparty'' means a parry to a trade in the market for securities. (41) "covered service provider" means e Li:Lancia/ service provider that has obtained Corporation insurance wider section 262. (42) "covered service provider under resolution" means a covered service provider 25 that the Corporation resolves under a resolution order (43) 'credit arrangement" does not mcbide anarrangement, irrespective onto farm, which is a contract of insurance or credit emended by an insurer solely to maintain the payment of premiums on a contract of insurance, but means an arrangement that is - so (a) a credit facility; (F) a credit transacfrom (c) a credit guarantee; or (d) combination of any of the above .

(49) "credit facility" means an arrangement, Irrespective of its form but not includ- as ing a credit transaction, in terms of which — WO a creditor undertakes to supply goods or services or to pay any amount, MN or without collateral or guarantee, to the borrower or on behalf of, or at the direction of, the borrower; and (6) any charge, fee or interest is payable by the borrower or on behalf of o at the direction of the bonower to the creditor in lieu of the arrangement referred to in clause (a). Part I Z. Dilmentions

(45) "credit guarantee" means an arrangement, irrespective of its form but not in- chiding a credit facility, in terms of which a person undertakes or promises to satisfy upon demand any obligation of another consumer in respect of a credit fadlity or a credit transaction to which this Act applies.

~~(46) "credit transaction" means an arrangement, irrespective of in form, which is — (a) a lease; (A) a mortgage agreement or secured loan;~~

(C) an :nscalment agreement; or PO any other agreement ether than a credit facility or credit guarantee, in 10 terms of which payment of an amount owed by one person to another k deferred thereby attracting a liability to pay a charge, fee or interest to the credit provider in respect of — 03 the agreement; or (ii) the amount that has been deferred. is not a capital account (47) "current account transacdon" means a transaction mat transaction, and includes —

(a) payments dushortsnnection with foreign trade, other current business, - course services, and nn banking and credit facilities in the ordinary of business; 20 (b) payments due as interest on loans and as net income from invesoments; (C) remittances towards living expenses of relatives or dependents; or (d) travel expenses, medical expenses, insurance, or education expenses of relatives or dependents. Ida; Data Management Centre established under (48) "Data Centre means the Final- 25 section 294. (49) "Data Centre Director" means the director of the Data Centre.

~~(50) "deberifere" means any instrument evidencing debt, whether or not secured by a charge on assets .~~

~~(51) "Debt Agency" means the Public Deb:Management Agency established under section 24.~~

~~(52) "Debt AgencyAdvisore Courts" means the advisory council of the Debt Agency established under section 378.~~

~~(53) "Debt Agency Chief Execudve" means the chief executive of the Debt Agency.~~

~~(54) "Debt Agency Management Cammimee" means the Management Committee of the Debt Agency~~

~~(55) "decision order" means an order as described in million 402.~~

~~(56) "deposit" msans a contribution of money made other than for the purpose of acquiring a curiay,e made by a person which may be repayable at the demand of that person.~~

~~eo (52) 'depositary' means a person engaged in the business of providing depository service. -,137 Parr I: 2. DEFINITIONS 5~~

(58) "depository service" means the service provided by a person to another person where beneficial ownership in a financial product is held by such provider in must lot or on behalf of the beneficial owner or any other person nominated by the beneficial owner

~~(59) "derivative" means any transferable instrument -~~

(a) giving the right but not the obligation to acquire any security; (b) giving the right but not the ob2gadon to sell any security; (c) giving the right to exchange any security; (d) providing for exchange of one or more pa)wnents based on value of one or more securities, currencies interest rates, yields, other derivatives, an- lo cial indices, credit ratings, or financial measures; (e) giving rise to a settlement determined by reference to value of securities, currencies, interest rates, yields, other derivatives, financial indices, credit ratings, or financial measures; or (t) giving rise to a settlement determined by reference to commodities, other a than when - (i) such insnumenr is not traded on an exchange; GO the transaction is in ord Mon. course of business; (i) the transaction nanm¢ionu not subject to clearing and settlement Sough an Infrastructure Institution or subject to regular margin calls; and so (iv) neither of the panics to the transaction is a financialservice provider or an authoHsed denier

(60) "direct participant" means a financial service provider through which consumers use the services of an Infrastructure Institution. (62) "eligible enterprise" means a person, other than an individual, which at the as relevant time has a net asset value of not more than a specified amount or has a turnover of not more than a specified amount, but excludes a financial service provider who is a consumer of a financial product or financial service that identical to, or substancial/y similar to, the financial product or financial seance that such person provides. Co (62) "examiner' means an examiner appointed under section 224(3). (63) "exchange means any person that constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities. (64) "Executive Commiaee" means the Executive Committee of the Council established under section 292. as (65) "executive member" means a member of the board ol a Financial Agency, not being a nominee member, who is responsible for the day-to-day management and functioning of the Financial Agency

(66) "executive remuneration" means the remuneration paid or payable by a regulated to (a) persons exercising significant functions; (6) persons who have a specified connection with the regulated person, which may include, persons pronding specified services to the regulated person or their officers and employees; and

~~(c) officers and employees oda description specified by the Regulator ss e e~~

~~Part I: 2. Osciurnoris 6~~

(67) "Financial Agency' means - (a) the Corporation; (b) the Council; (G) the Debt Agency; (d) the Financial Authority; (c) the Redress Agency; and (f) the Reserve Bank. means the Unified Financial Authority as established un- (68) "Financial Authority! der section 3. (69) "Financial Authority Board" means the board of the Financial Authority. Is "Pillancial Authority Chairperson" means the chairperson of the Financial Au- (70) thority (71) "finandal contract" means a conic:1st for the provision of a financial product or financial service. (72) "financial product" means - (0) secutides; (0) contacts of insurance; (c) deposits; (d) credit arrangements,. 20 (e) retirement benefit plans; small savings instruments, foreign currency conwacts °he,. than contracts to exchange one ctudency (g) (whether Indian or nod for another that are to be settled immediately; and (h) any other Instrument chat may be prescribed under section 150(I). 25 (73) "finarcial regulatory data" means all information that a financial service provider or an authorised dealer is othigared to submit to a Financial Agency under law "financial representative" means any person acting on behalf of a financial ser- (74) vice prosider, as an agent or otherwise. in connection with the provision of a ys financial product or financial sendce (75) "financial service" means - (a) buying, selling, or subscribing to a financial product or agreeing to do so; safeguarding and administering assets consisting of financial products, (6) belonging to another person, or agreeing to do so; . as (G) effecting contacts of insurance (dl managing, or offering or ogretmg to manage, assets consisting of financial products belonging to another person; (e) rendering or agreeing to render advice on, for consideration, or soliciting for the purposes of - (i) buying. selling, or subscribing to, a financial product; (ii) availing a financial stria' or (ii) exercising any right associated with a Una ncial product or financial service; eon , 7

(f) establishing or opemong an )(Ivens) scheme; (.4.) maintaining er transiening records of ownership of a financial product (h) underwriting the issuance or subscription of a financial product; (i) providing info' rmation about a person's financial standing or creditworthi. not; (i) selling, providing, or oaring scored value or payment instrument or providing Payment sentes: (k) making arrangements for the earning on of any of the financial services in clauses (a) to (0; (/) rendering or agreeing to render advice on, or soliciting for the purposes so

(i) buying, selling, or subs:thing to, a financial product; (if) availing any of 'he finanCal services in clauses (a) to (i); or (iii) exercising any right associated with a financial product or any of the financial sertices clauses (a) to (i); (m) any service carried our by an Infoasolacture Institution; and (n) any other service that may be prescribed under section 150(2).

~~(76) "financial service provider" means a person engaged in the business of providing a financial service.~~

(77) "financial system" means the aggregation of all financial service providers in 20 India, along with - (a) the financial markets in which they operatm (5) their financial products and financial servmes; and (o) the financial contracts entered' ro by them. (78)'financial system crisis” means a state of the financial system where there is a as large-scale dismpdon to the provision of financial services due to an impairment of all or parts of the (Manta] ssstem that has the potendal to have serious negative consequences for India .

~~(79) "financial system database" means sae database of financial regulatory data.~~

~~(80) "fit and proper persons" means persona who - so~~

(a) possess sufficient relevant professional qualifications. knowledge, skills, expertise and experience to nary out the functions required te be per- fanned by them; (b) are of good repute and Integrity; (G) have not been convicted of an offence under this Act; and 75 (d) for the purposes of Part V, saucy such ocher requirements as may be specified by the Regulator.

~~(81) "foreign currency" means any currency other than Indian currency~~

~~(B2) "foreign currency contract' means 2 contact -~~

~~(o) Oa buy or sell any foreign currency; or (b) to exchange any one currency fur another~~

~~(83) "foreign exchange" means foreign cutency and includes -~~

~~e • c 0~~

~~8 Part I: 2. DEmenoms~~

(a) deposic, credits and balances payable in foreign currency; (b) drafts, travellers cheques, Miters of credit or bills of exchange, expressed or drawn in Indian currency Ira payable in foreign currency; or WI drafts, travellers cheques, lacer of credit or bills of exchange, expressed or drawn by persons outside India but payable in Indian currency.

(84) "government security" means a scummy that is created and issued by the Cen- tral Goyernmeth, a State Government or a public authority for the purpose of raising debt. (85) "group" means a person and any number of persons — (a) the control, are controlled b g or are under common control with that person; (5) that have the capacity to execise a significant influence over the financial decisions of that person doe to the existence of an arrangement or relationship between them; and (s) over whose financial decisions that person has the capacity to exercise a significant influence, due to the existence of an arrangement or reladom ship between them. (86) "Indian current means any currency which is legal tender in India. (87) "Infrastmeare Ins:Wean" means an Infrastructure Institution referred to in section 183 . (88) "insurer" means a financial service provider carrying on the business of effecting eontrace of insurance in India. (89) "investment contract" means an investment in any person, other than an in- diedual, with reasonable expectrcion of profit or ream to be derived from ss entrepreneurial or managerial (Rant . (90) "investment scheme means any arningemenr with respect to property of any description including money, the purpose or effect of which is to enable persons taking part in the arrangemom, whether by becoming owners of the property or any part of it or otherwise, to participate in or receive profits or income 30 arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income, where — persons partinpatag ipso& schemes donor have day-to-day control over (0) the management of the m& whether or not they have the right to be consulted or to give directions; and (h) the arrangement has either or both of the following characterisths- b) the contributions of the participants and the profits or income out of which payments arc to be made to them are pooled; or CO the property is managed es a whole by or on behalf of the operator of the scheme.

40 (91) "inward flove means a capital account transaction which alters the assets in India of non-residents. (92) "Issue Department" means the department of the Resent sunk referred to under section 351. (93) "issuer" means— as (a) a body corporate that issues or proposes to issue any See Or Part 2. Drool-oohs 9

~~(b) any person, other than a body corporate order clause (a), performing the acts and assuming the duties of an issue, depositor or manager pursuant to the relevant documentation or instrument.~~

~~(94) "Monetary Policy Gomminee means the M netary Policy CommiNee of the Reserve Bank established under section 333. 5~~

~~(95) "negodable instrumenO has the moaning as igned to it under Negotiable In- struments Act, 1881 (26 of 1881) .~~

(96) "necdng" means the process by which die obligations from and to a particular counterpart), may be set-off, reducing the umber and value of payments or deliveries needed to settle a sct of transactions.

~~(97) "nominee member" means a member of the board of a Financial Agency, nominated by persons identified under ?en II.~~

~~(98) "non-execudve member" moms a member of the board of a Financial Agency other than an executive member and a nominee member.~~

(99) "nonresident means a person other than a resident, (100) "notification. means a notification published in the Official Gazette, and the terms "notified" and "nodfrr will be construed accordingly. (10/) "outward flow" means a capital account Nansaction which alters assets outside India of residents.

~~(102) "payment instruction' meant any instrument, authorisation or order in any sr form, including electronic means, to effect a payment -~~

~~(a) by any person to a system part:ripant; or (b) by a system participant to anon-or system participant.~~

(203) "payment obligation' means an obligation of one system participant to pay another system participant such amounts that are due as a result of clearing or as settlement of payment inscructlons relating to funds or financial products.

(104) "payment system" means a system that enables paymen: of funds to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them and Endodes - (a) money transfer mechanisms Inca debit cards, credit cards, electronic money; 30 (b) systems to connect a payer ate a beneficiary operated by a person who is neiner the payer nor he beneficiary; or (r) creating subsdtut for legal tender with the promise of convening them into legal tender freely

~~(105) "person" includes - 35~~

~~(a) an individual; (6) a Hindu undivided family: (r) a confilanY: (d) a trust; (e) a parmership; NO a limited partnership; (g) a sole proprietorship; 10~~

(h) an associadon of persons or body of individuals, whether incorporated or not; (0 every body corporate, at-Elihal Jur. d Cal person not falling within clauses (a) to (h); or (I) any agency, office or branch ownec or controlled by any of the persons mentioned in clauses (a) to (h ).

(106) 'policy-holders' includes a person to whom the whole of the interest of the policy-holder in the contract &insurance is assigned once and for all but does not include en assignee thereof whose interest in the policy N defensible or is to for the time being subject to any condition.

~~(707) "premia' means the premia sayable by a covered service provider to the Cot- paragon under Chapter 50.~~

~~(108) "prescribed" means prescribed by rules made by Central Government under this Act, and the term "prescribe" will be constnted accordingly~~

rs (109) "Presiding Officer" means the °siding officer of the (11O) "pro-cyclical effects" means the extent to winch prudential requiremenrs imposed under this Act are positively correlated inch changes in overall economic conditions.

(111) "professional diligence" has the meaning assigned to it in section 85(2). so ❑ 12) "public authority' means any authority or body or institution of self-govenunent established or constituted, including any body owned, controlled or subotara daily financed, directly or indirectly with the funds provided by the Govern- ment, by or under — (a) the Constitution of India; (b) any law made by the Parliament or the legislature of any State; or (G) any notification issued or °Res made by the Government.

(113) "public debt" means the obligation arising from borrowings, whether internal or external, upon the Central Government. (214) "public servant" has the meaning assigned to it under section 2(21) of the as Indian Penal Code, 1860 (45 of 1860). (115) "publish" means publishing of information in a manner best suited to bits it to the attention of the persons which are affected by the informadon and to the public at large, including by way of Lectronic means, as soon as may be practicable, unless otherwise aro sided or specified.

~~its (1M) "qualified foreign investoth means a non-resident that fulfils the summer due diligence criteria prescribed by the Central Government.~~

(117) "real time gross serdement" means the reaS time settlement of paymeno, transfer instructions, or other obligations individually on a. transaction-by-transaction basis. (118) "Redress Agency"' means the Financial Redress Agency established under session 12. (119) "Redress Agency Boards means tie board of the Redress Agency

~~(120) "Redress Agency Chaingerson ' means the chairperson of the Redress Agency 11~~

(121) registered owner means a deposithry whose name is entered as such In the register of members or equivalent register of the issue; (122) "regulated activity' has the npanuth assigned co it in section 151. (123) "regulated person means a llamadoI service provider that - (a) is engaged in the business of cathping on a regulated actipity; or 5 (h) has been designated as a System tally Important Financial Insdrution.

(124) "regulations" means the regulations made under this Act. 025) 'Regulator?' means the Reserve Bank or the Financial Authority. as applicable. in accordance with the allocation of responsibilities under section 11 and "Reg- ulators" means both the Regulators, es the context may require. to

❑26) "regulatory inconsistency amens any mconststency in the regulation of Pnan- cial services that may be similar in upturn, or pose similar risks to the fulfilment of the objectives of a Financial Agency (127) "related persons" in relation to a person means - (a) persons belonging to the same group as that person; and is a° persons responsible for the Oneleiggt and strategic management of that person; or (c) relatives of the persons under cause (b), as may be specified by the Reg- ulator.

~~(128) "related person transaction" includes the following transactions between re- to lated persons -~~

~~(a) viancye;arr angemem for dr) proms:on of a financial product or financial ser-~~

(b) transfer of any assets al liabilities; (c) making of any advances or loans. 25 (d) entrusting assets or money; (e) any explicit or implicit gaarantees; CO donations of any kind; and (g) any other transaction specified Lth the Regulator

(129) 'relevant personal circurrviathes" mc n the objectives. financial situation and 22 needs of a recall consume; as woulci reasonably be considered to be relevant for the purpose of giving aggye to tits retail consumer.

~~(130) "Reserve Bank!' means the liner bank of India established under section 7. (131) "Reserve Bank Board" means the brad of the Reserve Bank.~~

~~(132) "Reserve Bank Chairperson' means the chairperson of the Reserve Bank. 33 (133) "resident' means -~~

~~(a) an individual whose domicile or habitual abode thin India, and includes~~

(0 a citizen of India, ocher than when such citizen stays onside In- dia for the purposes of cmpioyment, business, vocation, Or In cir- 40 cumstances as would indicate intention of such individual Co stay outside India fa- an uncerinin period; or 12 Part I: 2. Dune noes

(i0 an individual, not being a citizen of India, when such individual stays in India for the purposes of employment, business, vocation, or stays with spouse of such individual, such spouse being a resident, or in circumstances as would indicate intention of such individual to stay b lull, for an uncertain period; or (5) a person, ocher than an individual, the control and management of whose affairs is substantially located in India.

~~(134) 'resolution" means and includes any of the following measures, or a combine- don thereof, undertaken by the Corporation or the Regulator, as the case may~~

(a) 'prompt corrective action' under Chapter 45; (h) "purchase" under Charm,. 47; (C) 'bridge sersice provider' under Chapter 48; or (d) "temporary public ownership" under Chapter 49. (135) "Resolution Fund" means the Resolution Fund established under section 264. (136) "Resolution order' means an older oe the Corporation issued under section 243. (137) "resolution transferee" means a person ideneihed by the Corporation to which theyssets or liabilities of a covered service provider under resolution are trans- ferred, in whole or in part (138) "respondent' means a financial 3313433 provider against whom a complaint has been filed with the Redress &penes (139) 'retail sdesisor" means a financial see ice provider or financial representative that gives advice to a retail consume].

2.3 (100) "retail consumer" means a consumer who Is an individual or an eligible en- terpdse where the value of the Imancial product or of the financial service rendered, does not exceed such amount as may be specified.

(141) "retirement benefit plan" means any arrangement or scheme that — (a) is established or maintained for rne purposes of providing benefits in old- SO age to the beneficiaries of le; an ngement or scheme; and (5) reseucts withdrawals of contributions or accumulations until the maturity of the arrangement or scheme, in accordance with its terms

(142) "rules" means the rules made by she Central Government under this Act. (143) "3ectetariar means the secretariat of the Council established under section 35 293. (144) "seminar means a transferals fmam el interest which is not a negotiable instrument but includes — (a) shares and Instruments equivalent to shares in the capital of any person other than an individual: US debentures; (c) any form of secured de's; os SuOned under section 2(ze) of the Secuddsa- tion and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2001); (d) depository receipts la respect of SeCtriEje; -02 13

(8) derivatives: (0 government securities; (g) transferable warehouse receipts. (.3) rights or interest in SeciaritieS; (i) inslahments admitted to herding on an exchange; (;) any investment comma which is not a deposit or a contract of inSUranCe. unless exempted by the Central Government or (k) such other instruments as may be prescribed by the Central Government to be securities.

~~(145) "settlement' means the compvtion el delivery of funds or a financial product m against payment of funds, in order w settle obligations.~~

~~(145) "show cause notice" means t node -.3 described in section 400.~~

(147) "significant Inman" means a fontlien that enables or is likely to enable the person responsible Mr its performance to exercise a significant influence over the conduct of a financial settfie ptctfilees affairs and includes the functions of oversight, sire tegic managemmit and uffeetive control over the financial service provider

~~(148) "small savings instruments' means -~~

(0) a deposit as defined under section 3 of the Government Savings Bank Act, 1873 (5 of 1873); 13 (b) a savings certificate as defined udder section 2(c) of the Government Sam ulgs Certificates Act, 1959 (46 :1 :959); or (c) any subscription to the public provident fund issued under section 4 of the Public Provident Feud Au. 1968 (23 of 1968) .

~~❑49) "specified" means specified by regu. Lions made under this Act and the term as "specify" will be construed toodingly~~

~~(150) "system participant" means a honking service provider or any other person participating in a payment symem and includes the system provides~~

~~(151) "system provider" means 7elsomollo is engaged in the business of operating a payment system. 30~~

(152) "system-wide measure" mean, a measure that seeks to mitigate systemic risk in the financial system and may be applicable to the entire financial system or one or more parts of the financial sy,tem.

~~(153) Systemic indicator" means an indicator so determined by the Council under section 299 to designate finaucial service providers as Systemically Important as Financial Institutions.~~

(154) "systemic risk" means a risk, raising moiler in India or elsewhere, of large-scale disruption to financial serviscs due to an impairment of all or parts of the financial system, that has the potenua, to have Serious negative consequences for India.

~~(155) "Systemically Important Financial Irvmotion" means a financial senice provider so designated under section 300.~~

~~(156) 'trade repository" means a Onancii. service provider that maintains a cen- tralised electronic record or cam base of transaction data 14 Part I: 2. DATArtions~~

~~(157) (transactional decision' means a degston taken by a consumer concerning —~~

(a) whether, how, and on what terms, to avail of a financial product or financial service; or (b) whether, how, and an what terms, to exercise a right in reladon to a financial product or Anzac] sena ce or to demand the discharge of a duty owed to the consumer in scans of such product or service.

(158) 'Tribunal" means the Financial Sector Appellate Tribunal established under section 28. (159) "unpublished pike sensitive inloemadcn" means information which is not pub. lids, available and which's/cud. publuly available, be likely to have a significant effect on the price of semrams.

~~60) 'War ehouse receipt" has the mcaning assigned to it under section 2(u) of the ❑ Warehousing (Development and Resu a:ion) Am, 2007 (37 of 2007). - Li 7 art Escnnua 15~~

~~OAT(~~

~~ESTABLISHMENT OF FIN \ NCIAL REGULATORY~~

~~AGENC (ES~~

~~CliAPTI.P. 3~~

inosmorsoon or 3. (1) A body by the name of the Unified inancial Authority is established under this Act to exercise the powers and piny out the functions designated to the gwhooce Financial Authoty under fhb Am. (2) The Financial Authority will be a both corporate having — th) perpetual succession; to (b) a common seal; (C) the power to sue and be such; (d) the power to enter into and exec ate contracts; (e) the power to acquire, hold and dispose of properfy, both movable and immovable; and (f) the power to employ persons to discharge its duties. (3) The Financial Authodry will have its bead office at Mun,bai, and it may establish offices at any other place 'n or atiside India.

Conies:mmg he hum mei Authority 4. (I) The Financial Authority &cud will consist of executive, non-executive and nominee members, to be appointed by the Genual Government, where at all 20 tines — (a) the total number of men_beix cast not be more than twelve; (b) the total number of executive numbers must not be greater than half of the total number of men ib els, and (s) up to two members will be nominee members. (2) The executive members will Polude (a) the Financial Authority Chaitpc.mn; and (2) an administrative law am othci: (3) The nominee members under (abaci lion (1)(0 will be nominated by the Cen- Pal Government

~~(4) The Financial Authority Bond will appoint a senior officer of the Financial Authority to act as its secretary~~

BUGS:thy of members of S. Members of the Financial Guth°. cy Bored must be at and proper persons having Pinamialgutliehry expertise in dealing with ma Bps tclasps to finance, economics, law or public policy. ss

epic lal Au As 6. (1) The general superincendenco, dirccion and management of the affairs and business of the Financial Atli pup -dal vest in the Financial Authority Board, which may exercise all powers that may be exercised and do all acts that may be done by the Financial Authority

~~16 Part in 4lisroetc nT oci THE RESERVEBANN OF INDIA~~

~~(2) The Financial Authority Beare must keep under constant review the performance of the Financial Authomy in giving effect to its objects, carrying out its functions and utilising its resources~~

~~CI IMITEP. 4 EsbnaLlsoomir OF me Rbsencb. BANK OF Imam~~

alststmera 7. 0) The body corporate by the name of Roserve Bank of India" established under se a ,„„ o„3 section 3 of the Reserve Bank of India Act, 1934 (2 of 1934), will continue as if It were established under this Act, and will exercise the powers and carry out the functions designated to the Ref ewe Bank under this Am

(2) The ReserVe Bank will have — (a) perpetual succession; (5) acommon seal; (c) the power to sue and be sued; (d) the power to enter into cad execuw contracs; (c) the power to acquire, hold and dispose of proper both movable and immovable; and (i) the power to employ peis(Ios m cischarge its duties.

~~(3) The Reserve Bank will have its head (Mice at Mnmbai, and it may establish faces at any place in or Outgrip India~~

8. 0) The Reserve Bank Board web consist of executive, non-executive and nominee CeReseef °Ithe members, to be appointed by Me Reno Govemrnem, where stall timeS— Board (a) the total number of members must not be more then twelve; (5) the total number of execw ive members must not be greater than half of the total number of members: and 25 (S) up to two members will be nomMce members. (2) The executive members will include — (a) the Reserve Bank Chairpe woo; a] c If) an administrative law menthe':

~~(3) The nominee members under sub-section (M(e) will be nominated by the Pen- n tral Government. (4) The Reserve Bank Board will appoint a senor officer of the Reserve Bank to am as its secretary.~~

having Miseinitoce 9. (1) Members of the Reserve Bank Board must be fib and proper persons, upolbeil experthe in dealing with manes rehiring 10 banking, payments and monetary Reserve Banb policy (2) A person cannot be appointed as a member on the Reserve Bonk Board if such

~~(a) Is an employee of the Chin al Got ernment, except m case of the nominee members; 02 b9 — Part II: 6. B SLNLISIIMENT OF THE FINANCIAL RBERESS AGENCY 17~~

(b) is a member of Parharae.0 oc a stale leg:stature; (c) is a director, employee or officer of ny banking service provider; (d) is a director employee or office, of ny system provider: (5) is a member of an adaisoth council f the Reserve Bank; or (f) is a member of the Monthory Policy Committee, other than - (0 the Reserve Bank tqlairporson or (II) the executive member designated by the Receive Bank Board to serve on the Monetary Polly Committee.

Reserve Bank (1) Board. 10. The general superintendence, dirccion and management of the affairs and business of the Reserve Bank, other ban the formulation of monetary Rolle% la will vest in the Reserve Bark Board, which may exercise all powers that may ■M■ be exercised and do all acts circ may be done by the Reserve Bank. (2) The Reserve Bank Board mus: keep c Eder constant review the performance of the Reserve Bank in giving circa m Ixs objects, carrying out its functions and utilising its resources. 15

~~ALLCCAILON Cc DUTIES~~

Anocarron of dvAr (3) The Reserve Bank will be the ougulutor for banking and payment systems. Ford:mai Authoncy and the RESPNE (2) The Financial Autbatith wW be the Regulator for all financial services other than banking and payment systems. ao (3) AU references to the Regular, in Ni Act will mean the Regulator under sub- section (I) or sub-section (2), as the rue maybe.

~~CI ;APTI a 6 ESTABLISAM3NT OR IDE FINANCIAL REDRESS AGENCY~~

ErRAishmenr and hoolorrooso 12 (1) A body by the name of the Enrnaid Redress Agency is established under this zs the Redress AgeorY. Art to exercise the powers azid cars our the Mncdone designated to the Re- dress Agency under this Act. (2) The Redress Agency will be a body cc porate having - (a) perpetual succession; (b) a common seat; (c) the power to sue and be such. (d) the power to enter into mid exccr tc conthacts; (e) the power to acquire, hold and dispose of properth both movable and immovable; and

~~(t) the power to employ persons to discharge its duties. Si (3) The Redress Agency will have hood office at Mumbai and it may establish offices at any other place in or ou u5 c India.~~

~~(1) The Redress Agency Board will c11515.1I of executive, non-executive and nominee members, to be appointed by the 'regulators, where at all times -~~

•

~~Parr II: 7. Esimiusi ntiNT Od THE RESOLUTION Cothommtht 18~~

(a) the total number of menters mat not be mare than seven; (b) the total number of execthive members must not be greater than half of the total number of members; am (r) two members will be nominee members. The executivemembers will include the Redress Agency Chairperson, who will 5 (2) be aoponted by the Regulators, in contaltaHon with the Cenral Government ers under sub-section (1)(5) will be nominated by the Reg- (3) The nominee meco ulators, and will nsist of one a al from each of the Regulators.

~~(4) The Redress Agency Board will appoin: a senior officer of the Redress Agency ID to act as its secretary~~

Members of the Redress Agency &mid must be fa and proper persons having ex- Bmilebrs 14. Red„„ Aig„,8 perdse in dealing with matters rehiring 70 consumer protection. including redress of consumer disputes.

::782e"1 15. (1) The general supelintendence, directinn and management of the affairs and ER tautness of the Redress Agence Win 33333 in the Redress Agency Board, which ' is may exercise all powers chat may be exercised and do all acts that may be done by the Redress Agenth

~~(2) The Redress Agency Board mull keep under constant review the performance of die Redress Agency in giving effect to its objects, carrying out its functions cn and uthising its resources.~~

~~ESTABLISHMENT ON TIN RISC NTION CORPORATION~~

Establishment,,,,, azdi. 16. (I) A body by the name of the Resoludyn Corporation ix established under this Act ,d)„,Lporado to exercise the powers and tarry out ilia functions designated to the Corpora- the corporate 25 tion under this Act. (2) The Corporation will be a body commate having —

(a) perpetual succession; (b) a common seal; (5) the power to sue and be SNed; 30 (d) the power to enter into and NNECULN contacts; both able and (e) the power to acquire, hold and dispose of propetry, immovable; and (f) the power to employ persons to discharge its duties. (3) The Corporation will have Rs head tate at Mumbai and it may establish offices 33 at any other plane in or outside India.

~~17. (1) The Corporation Hoard will consist of the following executive, non-executive di it and nominee members, to be appointed Dy the Centel Government, where at CW-15133-aM'FI B°ard- all times —~~

~~(a) the total number of members Inuit not be more than nine; e~~

(6) the total number of execs lye members must not be greater than half of the total number of membcis and (r) three members will be nominee n.embers. (2) The execudve members will include — (0) the Corporation Chaiffiersun; and (b) an administrative lawmen/vit. (3) The nominee members under sub-seaion M(g) will consist of — (a) one nominee of the Reserve Bark (h) one nominee of the Fmancia: Aithority; and (r) one nominee of the Germ government ro (4) The Corporation Board will appoint a senior officer of the Corporation to as as its secretary.

ashilicy 18. members of fie Members of the Corporation Board mist he lit and proper persons having expertise in dealing with matters relating to the regulation, supeniision, or resolution of financial service providers.

Corporation fisard, 19. (/) The general superintendence, direct/ and management of the affairs and business of the Corporation will yrs( in the Corporation Board, which may exercise all powers that may he exercised and do all acts that may be done by the Corporation.

~~(2) The Corporation Board mus: keep under constant reView the perfonylance of zo the Corporation in giving effect to lu objects, carrying out its functions and utilising its resources .~~

Eslebhshosior and 20. (1) hisrporaton or A body by the name of the tniurfil Stability and Development Council is as he caused established under this Act to vierche the powers and may out the functions designated to the Council untie' this Asi (2) The Council wig be a body coi forme having — (a) perpetual succession; (b) seal; a common so (Cl the power to sue and be sued; (11) the power to enter into mitt exec La contracts; (a) the power to acquire, hold and dispose of property both movable and immovableand

~~(f) the power to employ pencils to is:harp its duties. ss (3) The Council will have SS herd :dike or Mumbai and it may establish offices at any other place in or outside Mdia.~~

~~Gomposlhon ri the council88mi 31. (1) The Council Board will cons:a of the following executive and nominee members— -11M PUBLIC DEBT MANAGEMENT AGENCY 20 Part it 9. ESTA3USEMENI OT~~

~~(a) pry O ccecutive members; and (El four nominee members. (2) The exennive members will consisc ni —~~

(a) the Council Chief Executive, f (b) an administrative law mem ben (3) The nominee members undel s ion airy) will consist of — (a) the Minister of Finance, of A oononee of the Central Govermnent; (6) the Reserve Bank Chairpen on, es a nominee of the Reserve Bank; (c) the Financial Autho dB; Chang: 2 on, as a nominee of the Financial Au- thoriBi; and (d) the Corporation Chairpctson, as a nominee of the Corporation. (4) The nominee of the Central Government under sub-section (3)(a) will be the Council Chairperson. (5) The Council Board will appoint a senior officer of the Council to act as its secretary,

ill of The 23. (1) The general superintendence, du eciirry and management of the affairs and r Council, of !sit business of the Council will wt in de Executive Committee of the which may exercise ail powers that rn ,y be exercised and do all acts that may be done by the Council. (2) All references in this Act no the 2o.ireil Board, or the board of a Financial 20 ill be read as references to the Peen]: tiye Committee, except as [woehied under sub-section (3).

(3) All references to the Council, oi io the Council Board in secdons 291,301,302, and SOS will he read as reEPIC:320S 10 tine Council Board. Where there is any disagreement, or lack of consensus in the Executive Com- (4) mittee regarding any proposed dry won or proposed action of die Executive Committee, the Executive Committee must request the Council Board to make a decision regarding such proposed :Richton or proposed action,

~~(5) The Executive Commitcee most lryni under constant review the perforyance of obiecis, carrying out its functions and utilising ro the Council in giving effect to its its resources.~~

~~The Council Chief Executive must In a in and proper person, having expertise on catentref mailers reledng to systemic risk.~~

~~Cl [Aril-a 9~~

13t Management Agency is established rj icothT"Co2fnd 24. A body by the name of the Putt]; a.., under this Act to exercise the powers rrd carry out the functions designed to {bpi] 1—ranLr Agency- the Debt Agency under this Act (2) The Debt Agency will be a body corporate having- 53

~~cot. SeCTORAPPELDDE TRIEIDDL 21~~

(a) perpetual succession. (b) a common seed. (c) the noisier to sue and be sued, (d) the power to enter into exceue connects; (e) the power to acquire Fold and dispose of property, both movable and 5 immovable, and

~~(3) The Debt Agency will have (a head Mfice at Mumbai and it may establish offices at any other place in or oinside~~

Deaf the subagency 25. (1) The board of the Debt Agente, refeitce. to as the Debt Agency Management to tessegemenc Committee will consist of execteive, non-executive and nominee members, to be appointed by the Cennai Govern:run; where ac all times -

(a) the total number of mem Din must not be more than eight; (b) the total number of executive members must not be greater than half of the total number of members; and 15 (c) at least two members w]i be nominee members, under sub-secdons (3)(a) and (3)(h).

~~(2) The executive members will .ni lude Me Debt Agency Chief Executive, who sill also be the chairperson of the Debt /Money Management- Committee.~~

(3) The nominee members under Tib-seifion (1)(a) will consist of - (a) a nominee of the Teeing Clovenen ent; (b) a nominee of the Resew° Milk. and (c) if the Debt Agency bomows on behalf of more than one State Govern- ments, one nominee on Indieff er all such State Governments.

(4) The nominee member under a Insetdm (3)(c) will, - 25 (a) if the Debt Agency brows mi I ehidfor one State Government, be appointed in accordance with rules mace by the Central Government; or (b) if the Debt Agency borrow:- cut dchalf of one or more State Governments, be appointed by rotation C. UMt 0th State Governments, and in accordance with rides made by the 6cenid Government. 30

~~(5) The Debt Agency Management Comm um will appointPlooint a senior officer of the Debt Agency to act as its Seen.' .11y.~~

el Debt 26. Members of the Debt Agency Manicemuni Committee must be fit and proper per- Ag enCy sons having expertise in dealing et h math relating to public debt, public finance Management or financial markets. COMEnitttt 35 Debi Agency Deenegement 27. (1) The general superintendence eeL Di and management of the affairs and business of the Debt Agencyvat in the Debt Agency Management Gem- mimeo, which may exercise ali pnweis that may be exercised and do all acts that may be done by the Debt Agrimy Management Committee

~~22 ttee must keep under constant review (2) The Debt Agency Managemer Commi the performance of the Debt Immo, p giving effect to its objects, carrying out its functions and utilising its ',mourns,.~~

CIIAPT- 10 EmnssusnDYNT or THE Ibmszny (1) A tibunal by the name of the Omni: I Sector Appellate Tribunal is established Enhaorr 28. under this Act to exercise the Mosdio on, powers and authority conferred upon the Tribunal under this Act . (2) The Trigunal will have its magi benc , at Mumbai and may establish benches so at any other place in India. Tc,":brlasr" the (1) The Tribunal will consist of the Pr:siding Officer and at least two other mum- 29. hers. (2) The Central Government may 11071151 a higher number of members of the Tri- bunal in consultation with the P15,i(11.1g Officer (3) The Presiding Officer and all member of she Tdbunal DM be appointed by the 15 Cenral Government in accordance 1L'' di the provisions of Chanter 81 (4) In the event of a temporary vacancy in the office of the Presiding Officer, the Cenral Government may nominate one of the members of the Tribunal as an officiating Presiding Officer for a penos, not exceeding one hundred and eighty days, having regard to suitability for offecfive oversight and administradon of 20 the Trbunars adjudicating films-tons Aser- Part 11P 11. FINANCIAL AGENCIES 23

~~REGULATORY GOVERNANCE~~

~~CIL 5 PEER n~~

~~FIKANCIA AGENCIES~~

SeIssas) ef Arum members 5E5E5 AO. (/) Except for nominee members, all members of the board of a Financial Agency s board era must be appointed by the Comm! Government from a list of persons short- Emends] AFAY listed by a selection comnbabb

(2) The selection committee se constituted by the Central Government in accordance with the First Stirblob and must follow the procedure laid down in that Schedule. :a (3) For any vacancy in the boats of a Financial Agency the selection committee must not consider any peHot -

(a) who has been appoimcd esrce ns a member of the board of that Financial Agency: (b) who has served as the chairperson of any Financial Agency; 15 EA whose age would not pima such person ea serve a tents of at least there years; or (d) who is a non-executive member of any Financial Agency for the position of non-executive member (4) The selection °DAME:ten 1115151. runs ides che following principles when selecting a

~~ES3 merit; (b) Independence; (c) balance of the board; ane Id) conflict of mteresr~~

~~(5) For the purposes of sub-setam. (d) -~~

(a) "merit" means goal:herHas, espedence, past achievement and reputation; (b) "independence" means LEe ability to maintain and exercise independent the Judgment in discharge of duties; So LS "balance of the board' means that the board of a Financial Agency rep resent expertise in fields of raw, finance governance, economics or such other fields as may be Henueed, m a fair proportion; and (d) "conflict of interest' moms that persons appointed do not have interests which may conflict with erne (lades of such member_ as (6) If any vacancy in the board of rmancial Agency is not filled within a period of one hundred and eighty days from the date such vacancy arises, the CenHal Government must make a report an the reasons fur the delay in the appointment within ninety days from die date on which the period of one hundred and eighty days expires, and ra. such report before both Houses of Parliament. so Part HE 11. FINANCIAL Acct.:mils 24

EDDem`;,,,ltivcil ecutiv e members of the board ol . Financial Agency must contribute their , 31. (1) Ex entire time to the oversight and mint-dement of the Financial Agency The board of a Financial Agency met permit, by anthmg, executive members (2) to undertake such honorary work re it Rat likely to interfere with their duty es . 5 executive members • Norothe ran-there (1) The Central Government roust make ides co govern the nominadon of persons 32. as nominee members to the board ol Financial Agencyi (2) While nominating persons as nomu uu members under this Act, due regard ence, past achievement and repute- must be given to the qualiilcationt don of such persons.

slaw The admithstthtive law member is nmcmbetof the board of aFinancialAgency mAmama (1) who will be responsible for — (a) the assessment and review o: De performance of administrative law officers of that Financial Athney. the review of decisions taken by a clm:rustrative law officers of that Finan- is (b) cial Agency under section lath aid

(r) other functions as monied by,is Act The administrative law member mac ensure that the allocation of duties, re- (2) view of performance, and general se' ace conditions of adminastradvc law of- Peers is canted out in a manner phi a 'nein tains their Independence and ac- 20 countability. The aderaniscrauve law meat r 1th I not be Involved any funeclons of the (3) dependence and neutrality of such Financial Agency that conilin with member. The precisions of this section 'Rhino! apply to theRedress Agency or the Debt ss (4) Agency

~~fisfilifigf of die 34. (I) The meetings of the board of a Doe r mai Agency will be held in compliance fnava a: with the requirements of the Second Schedule. alnandal Addy~~

(2) The board of the Financial Agency n., make bye-laws to govern the proceed- nths of its meetings. The bye-laws governing the pro reed lngs of the meetings of the board of the (3) Financial Agency must be consithent with the best practices of governance and nanspareacy for deliberative hot i es.

fib"hleollfsafil the (1) The board of every Financial Agency must discharge its duties by tatting rs 35. meeting of the board Financial Awned slant through a majority vote of the MDCIS present at a of the Financial Agency

(2) Each member of the board of a Innannal Agency will have one vote. ounon chairing the meeting will u dens (3) If there is an equality of votes, the otherwise provided, have a coating 115.2. Part 11 FINANCIAL AGENCIES 25

~~(4) The board of a Financial Agency must Make bye-laws to provide for the process of making decisions hitort the physical presence of the members of the board of the Financial Agency.~~

36. (1) Members of the board of a Financial Agency must, at all Mines, act honestly members of Ole board of and use reasonable diligence Iv the discharge of their dudes. Pommel Adeacc (2) Any member who has any him r or indirect interest in any matter coming up for the consideration at a mcming of the board of a Financial Agency wilt as soon as possible after retewinl circumstances have come to that member's knowledge, disclose the name of interest at such meeting. (3) A disclosure made by a member of the board of a Financial Agency will be to recorded in the procemings G: rho meeting of Me board of the FinandalAgencos and such member must reduce from any deltheradon or decision of the board of the Financial Agency with ropes co that matter.

Vatt011y Of 37. No act or proceeding of the Maid of Financial Agency wig be invalid merely by PeWeedmeS slot affected reason of — (a) any vacancy in, or any defect in the constitution of the board of the Fi- nancial Agency; (b) any defect in the amp:numIt of a person as a member; or (0 any procedural ix:emir:al7 not affecting the merits of the case.

Conthecas of 38. (/) mb f th b d f :, I Ad rm. dli Id ffi f t rm Hive service of members of the bawd of a years or and]. the age of retire mein under sub-secdon (2), whichever is earlier (2) The age of retirement for excirstive members and nominee members willII be the same as that for a Secretary to :he Central Government (3) The CenMal Govemmem must make rules governing the terms of appointment of members of the board inch Any — at

(o) salary; (b) leave; (r) medical benefits; and (dl any other aspect of emPloioneot (4) When making rules under tviucroamn (3), the Central Government must con- so sider the requirements of — (a) maintaining independent.: of the board of the Financial Agency; and (b) attracting requisite mos r and expertise to the board of the Financial Agency (5) The terms of appaimment Manymisting chairperson or member must not be as varied, to their disadvantage, WWI their appointment, (6) The Cenral Government may maim separate roles governing the terms of appointment for — PA non-executive members; (b) nominemember; (c) executive members; and

~~26 Part III: 11. Fitiatcat AGENCIES~~

(d) executive members acting as alio it poisons. (7) Nominee members will serve on the bond tie Financial Agency at the pleasure of the person nominating such member. (8) In this section - (a) in case of the Council. all tc fa eites to the chairperson will include references to the Council Chairperson nd the Council Chief Execudve; and (b) in case of the Redress Agency el mCarences to rules made by the Central Government will be replaced dry lit -laws made by Regulators.

~~gnaat 39) (1) My member of the board of a Pinar ad Agency may resign by giving a signed Rxi notice of resignation to the Center CF comment.~~

(2) A menter, after providing a notice c Lestenadon will continue to hold office until the earlier of - (a) the date the Central GOVeratena .12:Fotnts a person no the post vacated by such resignation; or ss (b) the expiry of ninety? days from a c date the notice of resignation was provided to the General Covemmeni

~~(3) In relation to the Council Board, aaasection will apply only to the Council Chief Execudve and the adminisumet law member of the Council Board.~~

40. A member of the board of a Financial XL.1C'ECY may be removed from office if such rGermo"wal 20 member has - (a) been adjudged to be insolvent (b) been sentenced no imprisonet 1 far one hundred and eighty days or

(C) been convicted of an offence meeting moral turpitude; 21 (d) engaged in any employment de: 'la. Me tenure of appointment, in violation of the terms and conditions Mser:Vet (e) acquired any financial or other interest contrary to their terms and condidons of service that is hltely te P; their funcdonst (0 failed to adequately disclose am ditat or indirect pecuniary am:crest under section 36(2); (g) made any material misrepresent! ton co the selection committee; (h) abused their position so as to eta ler mem continuance in office prejudicial co the objectives of that FinanaLlAgeny, or (i) has become physically Emmett incapable of discharging their duties.

ss 41. A member of the board of a Financ1F1 Agency may not be removed from office oPrTemt unless - (a) such member has been given a ceasonable opportunity of being heard; and (b) a nod fication under sub-sec tte a et is made. (2) If the Central Government propose: w remove a member of the board of a Financial Agency on any grounds mace section 40, the Centel GOVernillent must fallow the Following procedure - ,59 ow; Part III: H. FINANCIAL AGENCIES 27

(a) the Central Govenimenc must establish a committee, chaired by a nominee of the Chief Justice of India, to Inquire if the grounds for removal have been met; (I) the committee must have at least one retired judge of a High Court; (c) the committee must Micmac the Central Government, in writing, whether 5 one or more mounds for removal has been met; and (d) if the committee has informed the Central Government that one or more grounds for removal has been met, then the Central Government must remove such member by blishing a nonficanon in accordance with sub- secdon (3). (3) Anotification under this semen Inns: contain - (a) the grounds for the remoml of pith member under section 40; and (b) the facts that were considered by the Central Government to arrive at its decision.

~~(4) The member of the board et the Financial Agency will cease to hold office from is the date of the notification undu sub-section (3) .~~

aslia vacancies. 42. (I) If a vacancy arises cm the board of a Financial Agency for any reason other than under sections 39 or 40, the chairperson of the Financial Agency must immediately inform the Genial Government. (2) The Central Government may appoint any person on the board of a Financial 23 Agency to fill the vacancy on a temporary basis for a period not exceeding one hundred and eighty days, or cm il a person is appointed or nominated as the case may be, whichever is ear] in:

ReV1313 30222222122 43. (1) The members of the board of n Financial Agency must appoint at least two non-executive members from the board of the Financial Agency to constitute a 25 anew committee to renew whether - (a) the Financial Agency is in toincliance with applicable laws; (b7 the bye-laws of :he board of the Financial Agency promote transparency and best practices of governance, (a) the Financial Agency cs in compliance with the decisions of the beard of 30 the Financial Agency; and (d) the Financial Agency is managing risks to in functioning in a reasonable marmer (2) No member of the review animists.° may solve continuously for more than five years on such committee. 35 (3) The provisions of this section will no: be in derogation of the general powers of the board of the Financial Agency to constitute committees for other functions. (4) The review commiuce mustma:mai a system by which any person may communicate to the (MPG'S COMInn(35, any incidence of - (a) violation of laws by chc Poole:Ca Agency: so (57 theft or thisapprom iation o) resources of the FinancialAgency by any person, (c) abuse of powers of the rola ccia I Agency by any officer, employee or agent within the Financial Agana)); or b°

~~Fart mace Anishens =inure 28~~

~~Financial Agency by any (d) violation of any decision of the board of the othcer, employee or agent Financial Agency.~~

~~(5) The board of the Financial Agency -curt make bye-laws govening information to be provided to the review commithe.~~

(6) The review commthee win make a :sport, at least once every financial year, of its findings under sub-sections (1) and (4) to she board of theFinancialAgency and the report will be attached with the annual report of the Financial Agency

~~(7) In this section. in case of the Council, the review committee will comprise nominee members.~~

ro 44. (1) Unless provided otherwise, the bond of a financial Agency may, by order in ptn7Torcive eating allocate fens:ions of the inracial Agency under this Act to the chair- rsegnmens person of the Financial Agency es -ay other member or officer or employee lindens. of the Financial Agency, subject to. ny conditions that may be provided in the order

(2) Unless provided otherwise. the dal:person of a Financial Agency is the chief executive officer of the Financial Asency having powers of the general supenn- tendente, direction and oontrol in Icaper r of all admimssrative matters of that Financial Agency.

~~(3) In this section, in case of the council, reference to "chairperson of the Financial Agency' will be replaced by the "Conned Chief Executive".~~

~~45. (I) A Financial Agency may appointee ell officers and employees as are necessary eaffiffiffier of a for the efficient discharge of its nromns. =mender, nseath~~

~~(2) The Financial Agency must make Slayss to the procedure of seleceon, terms, compensation and bye-dtiors ofof the aPPointhrent and seralth of~~

~~LS persons appointed under this sensor~~

~~Affiffiffiseraffire raw 46. (1) Each EnancialAgency must deny a etc an :Appropriate number of employees as efficers. administrative law officer: eSCIUS len ly~~

(2) Each Enancial Agency must ensure the Independence and neutrality of admin. istradve law officers by making by:Taws governing the terms of appointment 30 ot administrative law o Ede ers. (3) The performance of the ad min is trailer law officer will only be appraised by the admhusuative law member of the beard of the Financial Agency,

~~(4) The provisions of this section will se: apply to the Redress Agency or the Debt Agency.~~

~~CHAPTER 12~~

Interprefficffin of 47. Unless provided otherwise the prOVoin 13 of ti a Chapter will govern the matters di S Chapter inrelation to funcsionme of the athase sal of she board ofa Financial Agency Parc111: 12. Andsorte canyons 29

t to the bOnd Ola 48. (1) The board of a Financial Agency may seup advisory councils to advise the board with regard to any dill,: following- (a) sectors of the financial ryrem which require particular skill, information or expertise, (b) specified classes of Imench d seance providers regulated by the Financial s Agency; or (0 any other matter as die board of due Financial Agency may require. (2) The board of the Financial agency must set up advisory councils if either of the following conditions is met -

(a) this Act or any ocher law enforced by the Financial Agency requires an ;a advisory coined co be co:attuned; or (b) the board of the Financial Agency finds that it is expedient, necessary or relevant for he discharge ;ens functions to set up such advisory council. (3) Each advisory comail must comprise experts in the Issues for which die advisory council has bees constituted

~~(4) No expert will serve as a men, ier of an advisory council for a period longer than ten years.~~

FunetionS of the 49. (1) The funcdons of an a ddsory council include - (a) making represent:adds to 'be board of the Financial Agency in the form of advice, commend or recommendaeons, on the policies and practices ao of the Financial Aucncy; (b) preparing and submidagn dons advising the board of the FinandalAgency on all draft reguiations uriur to the expiry of theperiod for receiving comments from the pudic on such draft regulations; (c) interacting with finuncial dee providers and the public, as may be nec- 25 2.223152 to Ca512155rge its hero dons; (d) on the request of any member of the board of the Financial Agency providing advice to the board of the Financial Agency on any matter; and (e) anyother matter red ted to areas for which it has been constituted. (2) The functions mentioned in au used-ion (1) will be limited to the issues for 30 which the advisory council was constituted. (3) The advisory council edll discharge its functions under this section by making reports to the board of the Financial Agency

(4) The Financial Agency must pubush all reports received from the advisory cotm- cil in accordance with the following - Si (a) reports under sub-ention t (b) must be published with the regulations; and (b) all other reports :oust be Aabiruhed within a period of one hundred and eighty days of being subtle!! ed to the board of the Financial Agency. emuaw gumming 50. (1) The board of the IX naticiul Apdtcy mmt make bye-laws governing the fume' 4° toning of advisory counces. (2) The bye-laws must include -

~~ilia:T111.13. REGULATIONS AND GU:DANcE 30~~

(a) the process of selecting experts to be members of advisory councils; (b) the resources to be allocated m the advisory councils to discharge their functions; (c) the terms, compensation and t endituns of appointment of members of the advisory council; and (d) any other provisson repired fen the effluent functioning of the advisory council.

~~13 REFUL iirioNs I) GJII ANT].~~

,dF j„7.,(daq,m m,,,q00 so 51. A Financial Agency may, by not] cano make re pularianS, where required. consistent with this Act and any ales Ina. I [hereunder to camp out the purposes of make regulation. due Act.

Pr Ttsailld'Isilialli. 52. (1) If a Financial Agency Proposes to ma ye any muslations, it musc, acting through its board publish a diner of he proposed regulations. (2) Every draft of the proposed regulanons which is published under this section rs must be accompanied by a statement setting out - (a) the objectives of the proposed legulattons; (b) the problem. that the proposen ogulaucns sacks to address; (c) the underlying prattiplesunder this Act, relevant to the proposed regulatons, and the expected outcome of the proposed regulations; te (d) how the draft regulations lulE1 the provision of this Act under which the regulations are made; (e) an analysis of costs and an a P.35,'Dis of lac IleftTS of the proposed regulations; and ss (r) the process by which any persoi. may make a representation in relation to the proposed regulations.

~~(3) If She Financial Agency prefers onc principle over any other it Must issue a smtement of reasons for such pref.:mace with the proposed regulations.~~

(4) Before making the regulations, the I. Panda: Agency must have regard to any Si representations made to it in actordanceVd7h subsection (2)(0. (5) To make the regulations - approve the regulations; and (a) the board of the Financial ngeney mut: (II) the Financial Agency must publ sh- 0) all the repusentations s mores by it under sub-section (2)(f); and (ii) unless specified othenviso, ft least a general account of theresponse of the Financial Agency Us the representations.

(6) If the regulations substantially elfin from the proposed regulations published by the Finannal Agency the P _ID Agency. In addition to complying with sub-eecdon (5). ours. publish - IP the details and reasons for such diffelencc, and 31

~~(5) an analysis of costs and an ana orris of benefits of the differing provisions.~~

Effiergenry regulaa„maidgg 59. (1) A Financial Agency may aspen 7c with the procedure under section 52, if the time taken to comply with such provision has the poftetial to cause considerable losses for consumers or financidi sernee providers. 5

~~(2) If a Financial Agency makes Inialairons under das section, it must — (a) publish the restore for inwAing this section; and (h) mibmit a report to the Pau nil Government within reasonable time~~

(3) The regulations mur se accompanied by the documents under sections52(2)(o) to 52(2)(d). It (4) Regulations made under the auction will cease to have effect after a prided of one hundred and mina nun from the date on which the regulations are notified under this SeLLiOn.

SZOIldint Of abllysn of Man 54. (1) When carrying out en analys4 of oasis and an analysis of benefits under this assi amino of Chapter, the Fineness AVEC, I nun consider the probable costs that will be 75 knchL5 borne by —

(ft financial service pros id a IS .11 complying with the regulations; (b) COnSIITerS, bosh directly and indirectly; It) the Financial Agency in en ',snag the regulations; and (d) any other persons affepos by the regulations.

~~(2) The FinancRl Agency must cohi:dee the probable benefits dui will accrue to the consumers and unsex p eras! s as a result of the regulations.~~

~~(3) The Financial Agelley must use~~

(e) the best available dam, and wherever not available, reasonable estimates to carry out the analysis; end 25 (5) the best scientific method available to carry out the analysis when data is available to the Financial

Pr 01pseove 55. appbcatme or Except for regulations nude under section 53, ail regulations made by a Fin.andal Agency must apply from an ideni i I ad prospective date that is set out in such regulations, with due regard to the lin c necessary for persons impacted to arrange to Si comply with such regalia Tuns.

56. (1) AFinancial Agency ide) [ruble teneral guidance Pah respect to — (a) the oper nolba n,Id sae regulars made under it; (b) any matters rein! rig to from'ions of die Financial Agency; (c) meeOng the obits Ives cf c Financial Agency, or (d) any other mat ei Punt . I , the "-Mande] Agency finds it appropriate to provide mossa n ion or ad ore

~~(2) All requirements of scoton 52 s1 ply to Me process of making general guidance, except the requ rens eels of-~~

~~.13-REOUuATIONS AND GUIDANCE 32 ar. 1.~~

(a) section 52(2)(e); and (6) sub-secdon 52(6)(b). amount to violation of any provi- (3) Violations of general guidance alonc not sion of law or regulation enforced If the p handal Agencyi (4) A general guidance issued under i ss Act will be biding on the Financial Agency

~~(5) The Financial Agency may withdraw ca amens any general guidance issued by it at any time for reasons to be recowal In wrung and published.~~

•are 57. (I) Any person may make an applicv lea to a Mnarnial Agency seeking special io guidance on Exansactions or actvitir. governed by this Ant. or applicability of (2) The special guidance will be limited to the nisch rvati on laws or regulations enforced by the !damn] Agency. manner in which it may charge fees (3) The Financial Agency may specify proportional to she cost of providing hem] guidance.

ss (4) The Financial Agency may require sl person seeking the special. guidance to provide infonnadon relevant to the issue or transaction for which the special guidance is sought. (5) The Financial Agency must publish he application and special guidance provided by it. 20 (6) If die infonnation madded by the Eason socking special guidance, or if the nacure of the special guidance is sommoicially sensitive, and the applicant makes a request to such effect, the k nand,: agency may decide —

(a) nor to publish an application o special guidance for until such time the information remains comma:claimsensitive, subject to a maximum period 25 of two years; or to withhold the it end ties of ay: Mants or panics involved. (7) No person has recourse to the Tribu — (u) against the refusz of she Thailand Amy cy to provide special guidance; or (5) against the special guidance pr by the Financial Agency

30 (3) Violation of a special au:dance alone wul. not consdrute a viondon of any laws or regulations enforced by tire Finart m. Agency. (9) A special guidance issued by a Pinar kt) Agencysysl! be binding on such Finan- cial Agency.

Renew bs. the 5$. (1) Any person aggrieved by any regal !tons or general guidance issued by the 'NAM! 35 FinancialAgency may prerer an apTs 1.1 -o Tribunal on the gdound of being contrary to this Act Including that — (a) they were made without ccmpynpg sdlh the requirements of this Part; (6) they exceeded the limits of the >rows tod under which:hey were made; (c) In the case of regulations, the was a manual and substantial error in the analysis of coon or the aorl xis m _shunts; (d) the condition Imes. seaman 5" d d not miss for regulations made under that section; ...- 02,65

~~Part p 33~~

(a) the regulations were in gross disregard of the principles that Financial Agency was required to fo:low while making the relevant regulations) or (f) the substantial proof:ens of the regulations did not address the stated objects of the regulations.

~~(3) The Tribunal must set aside the regulations or general guidance if it determines that any of the grounds under sub-section (I) are met.~~

~~regulaC:ens. 59. (2) All regulations made under this Act must be reviewed by the Financial Agency within three years of such regulations being issued.~~

~~(2) The review must caas.st of -~~

(a) an analysis of costs and an analysis pf benefim of the regulations; (b) an analysis of all intemrei pions of the Ingo/aliens made by the Financial Agency, the Tribunal, any ugh Court or the Supreme Court; and (c) an analysis of dm applicability of the regulations to any changes in circumstances since such mg./Pion was issued.

~~(3) Every review under this section roust be tabled before the board of the Finan- ss cial Agency as soon aspossible.~~

~~(4) The Financial Agency must pal Esh the fievicrn within one hundred and twenty days of being tabled before the hoard of the Financial Agency~~

aye-lams Of ;manna] Age7.0e 60. CO If a Financial Agency is required to make byedaws under any provision of this Act it must malls uch hypiasy, M compliance of this section. so (2) All proposals for maldng bye-laws by a Financial Agency, must be submitted to the chairperson of the Enact tisi Agency

~~(3) On receipt of a proposal under Jab-semen (2), the chairperson must introduce the proposal in the from of 211 agenda in the next meeting of the board of the Financial Agency yt~~

~~(4) If the board of the pmantiaal Agency approves the proposal in principle, the draft bye-laws must be rode available to the public for comments for a period of thirty days.~~

~~(5) The draft byeslaws meat clearly stare - 62) the provisions of the Act wider which it is proposed to be issued; ao (b) its objectces; and (c) the issue n seeks to mares.~~

~~(6) The Financial Agony, must publish all the comments received on the draft bye. laws and consider Mem before yabhahtng the final bye-laws.~~

~~ProCeSS Sir maiong bye lees ei 61. (1) The procedure mid clam" in section 60 may not be adhered to by a Financial as Agency in making byciawa ono if the circumstances so require.~~

~~(2) The existence and temps such circumstances must be set out in writing by the Financial Agency and published.~~

~~(3) Bye-laws made uncle: sub-sectiim (I) must clear:// state the requirements contained in section 60(5) ao Par LI 13 Rueurfinoge AND obintlact 34~~

~~(4) Bye-laws made under dus section e I. rem loi ta form for a period as may be identified by the Financial Agency, ...11 cfi may not exceed one hundred and eighty days.~~

~~0f emus] 62. The Central Government may by rum a. loon, ma ce rules where required for car- BeaterGovernment to~~

~~5 rying out the purposes of this Act make rube. f"' maims The Central Governrnert may mekerd cs under ilfis Act in accordancewiththe m 53 (1) ks. procedure laid down to this section~~

(2) The draft rules must be made seal.r co no Mc pnblc for comment for thirty days. (3) All comments received from the in bl c toes bc pub] shed and considered by the Central Government before Lee; file rules

(4) If no date is Identified in the notih r.h oil olds tules, they will come into effect from the date of their pub3caton. Reguiscout :Donde *nee; aJ byelaws made by a Financial g rugs 64. (1) NI regulations made by a F. Government must be laud before each ro3te laid before is Agency and all mks mode by thcC House of Parliament for a period of hiny clays Tatung from the day on which Parliament. the reguladOns, bye-lows, or rules die .ssued.

~~(2) In calculaung the thirty Lay period, ccount is robe taken of anytime doing which Parliament is dissolved or Prologue:I or (Wring which both Houses are adjourned for rnOre than four days~~

(3) The reguladons, bye-laws, or rules, bc deemed to be approved by Parlia- ment at the expiry of the thirty day R' ried unfits, before the end of that period, both Houses of Parliament agree de. Lie rug ola Lions, bye-laws or rules —

(a) siould not be made, in whhlreve the reguIs eons. bye-laws or rules will as be of no effect; or (b) should be made cermin int MU:moons. cvnich case the regulanions, bye-laws or rules :Le into effect .11 the =Titled form. (4) The annulment or modif ilia of thr oogulattens, bye-laws or 'Ides by Parlia- ment will not affect the ty M y thi ag already done under the requie- m tions, bye-laws or rules.

Financial Agency jtaL8cLaTAngbeaciy „ 65, (1) A Fintinejai Agency must refer a ma mar to (le Bounce, it the E is unable to arrive at an agreement uth another FUlancial Agency within one hundred and eighty clays of Comma:bog rho process cm any issue that requmes such Financial Agencies to —

~~as el; :Zee joint regulations undo: eh— Acre or (b) agree on any action required to a: talen undm this Act.~~

~~(3) The Council must resolve any issue in accordance with the provisions under section 305.~~

[7T eNitatfig 66. (1) EachFinancial Agency must en sm- min am emerancum of understanding with F each Financial Agency in respect of obligations under this Act to co-ordinate Agencies with one another or to undertake. jet-. occon. -42, 6 7

~~(2) The memorandum of undersio riling under this section may relate to-~~

m co-operation In making regulations, Inc:tiding joint regulations; (b) co-operation fur Hann tsl ig regulations governing similar matters; (c) access to and sharing of information; (d) cross .staffing oicinployies, or (a) consultation tegardint dui important changes that may have been proposed lay any party to the memorandum of understanding.

~~(3) Etter/ Financial Agency mur publish a report of compliance with this section in its annual report~~

~~Aptthannt geneTan.y. 67. (1) All applications regaled to be :nada to a Financial Agency under this Act must be disposed in accordance 3313.1 this Chapter~~

~~(2) In this Chapter, an 'applicant means the person who makes an application to a Financial AgenCy. 15~~

Pratedt for making 68 (/) All applications under (air ALL oust be made in the manner specified. (2) The Financial Agarm must arkLiuwledge the receipt of all applications, whether complete or not within th cl vs from receipt (3) An applicant may, b . nv mu( before the Financial Agency conveys its decision, by a second appl lea to I nancial Agency — 13

~~(a) modify an existing apphe ton, o- (b) withdraw an an$iatNuw for variation and re-apply~~

~~(4) If an applicant Ichatal alas 33 al =p ['canon for variation and reapplies, the nancial Agency Inas: ittoceLs ec application afresh~~

~~Addthatal 69. (1) The Financial Agency may ALLiiic the applicant to provide additional infomia- 25 don as it reasonably considles necessary to enable it to detemune the app/ica- don.~~

~~(2) While requesting act tionnl mil motion, the F nancial Agency must stare the relevance of the add iionaL !LC flat on Lo sought~~

Procedure for decertnnatan oi 70. (I) Where an appli ea' Loa rotetied I ly a Financial Agency is incomplete, the Finan- 30 5 PPILeanons cial Agency must 'Munn ilic iii9Iicant in this regard within thirty days from the dare of the meeIaL of Mc zip plicadon.

~~(2) The Financial Agency must dui Co all applications in accordance with the provisions and regulaiIsits goat:ling the ma cm (0which the application pertains.~~

~~(3) The Financial Agen: y Inuit :Lot mien any application merely on the grounds 35 that no regulations govermitt ihe subject ma Lcrr of the application are in effect. es '~~

~~(4) The Financial Agency must ensure t) tic eli applications are determined within a period of one hundred and eight, days Scam the date the application was received by the Financial Agency~~

~~(5) If the Financial Agency does not mica an application within one hundred and eighty days from the dace such applaaion has been made, then that applies- don will be deemed cc have been a6.—ed.~~

(6) The period mentioned under sub-sec:ion (4) may be extended by the Tribunal on an application by the Financial Agency- issue a show (7) If the Financial Agency proposes to injeci en application, it must cause notice to the applicanc.

~~(8) If the Knancial Agency decides to moan an applicaiion, it rims: issue a decision order ro the applicant~~

(9) If the Financial Agency derides to aextp an a pplicaEon, it must inform the applicant by issuing an approval coda. The aparoval Order, consis cent with applicable regulations, must state — Is (10) (a) the scope of approval; (b) the time-period for which the aanrciail is of feci ive; (c) the provisions under which the a ppreval is granted; and (d) any conditions, din ,mom or re minima:its subject to which the approval 2.0 is granted.

71. 0) If a Financial Agency proposes to ear ells ny pennisaon or approval granted in -7.91lire af", pursuance of an application othenvi,c Men as the request of the person who arp,e ariV made the opplicadon, then it must iisie a show cause notice to such person.

(2) If the Financial Agency decides to caned any permission or approval granted In pursuance of an application oche]. Lag the request- of the person who made the apolication, then it must give issi a a decision older to such person.

~~INFORMATION ANn INSPECT ON~~

,rff 72.(1) This section applies on y to mforna ion and doom-lents reasonably required ;77fe:t, ri so by a Financial Agency r connecion orb She poi: sit of as objectives or the ccerase of furanons conferred upon Jr by this Act or any other law enforced by the Financial Agency. (2) The Financial Agency may makerags Yl one :en wring nationalserviceproviders to mace reports in a paaicular form, nom er and fiequency

as (3) The Financial Agency may by notice la Tiding given to any financial service provider its financial representatives or eared peraons, require suchperson — (a) to provide specific inforrnatfith, or (b) in produce specified documents (4) The information or documents reguasad 3,■ale Financial Agency must be provided or produced —

~~Part 16. FUNCTIONING op THE Feraesna AGUNGY 37~~

~~(a) before the and of such reasonable period as may be specified; (I)) at such place as nay be specified; and (c) in such form or Manner as maybe spec:66d.~~

~~(5) The Financial Agency may req uire -~~

~~(a) any information provided, whether in a document or otherwise, to be 5 verified in such wanner, or (6) any document produced to be authenticated in such manner as it may reasonably require.~~

~~Regales 73. (1) A nnancial Agency may eery in inspection of financial service providers at regular mten ale -o~~

~~(2) The Financial Agency will I word documents Repeated and the finding of such inspections in a spec,'bed I r~~

~~(3) The Financial Agency will 64,1 regularons governing. -~~

(a) the iniewals at rhicl, a ioancial service provider may be inspected; (6) nonce of inspec, 711 bc the Financial Ag Utley, 15 (c) the steps the fin, ncial se - ice provider has to cam, out to enable the in- specron, and (d) such other condi thane , s':0 enable the Financial Agency to collect accurate information aboui the 11 anal service provided

(4) The regulations menuonee in seb seelyon (3) must balance the requirement of co the Financial Agency with Get equirement to prevent dthrupron in the bun ness of financial service verde-is or impose unreasonable burden upon Inam cal service providers

~~.6 lc PTER 16~~

~~0. urn F-ANcut AGENCY~~

~~bthumum standard for pubbeutanoc AFinancialAgency must nude Le in a webs:ie. or any other universally accessible mformeton repository of demonic inficrec.Fon to -~~

~~(a) record and publieh all lab( onauon that the Financial Agency is obligated~~

(p) provide a copy of ail _rules, regulations, bye-laws enforced and all guid- so ance issued by the Fria,,Cal Agency, including all amendments to such riles, rag Lila bons, byelaw( and guidance; (C) provide infoimat.on kw: the process and manner in which applications under this Actc usde; m'

(d) provide ma teria. Info) inGuart about the functions of the Financial Agency. as (2) All information published o' he website or other sepository of the Financial Agency must be in an easily rrruslble and text-seemehable format.

~~(3) The board of the Flniswal Apnea must review die quality of the website or other repositor; based on idleriational best practices, at least once every three years. ac 41°~~

~~/6. lififics07 NO or THE FINANCIAL AGENT( 38 Fran~~

~~(4) The board of the Financial Agency nun publ.sh the findings of the review under sub-section (3) with the annuli °port of the Financial Agency~~

~~(5) The Financial Agency may make ream:imam supplemendng she requirements of this secdon.~~

~~(6) Any information not recorded or publlshed on i he website or other repository of the Financial Agency will be preylimo:I to not have been recorded or published for the purposes of this Act.~~

7S. (I) Each Financial Agency is bound by IM1 weal:Weenie of this secuon in its al lo- .(fike,°lul°n ",_ly r canon and use of resoirces. F100110101 Agen00 Each Financial Agency must prepare a :epos of csioendre with respect to 10 (2) each of its duties and o Wartives kJ each f nanciil year

~~(3) Each Financial Agency mum mainiam dansparent system of allocadon of resources to cany out its duties and mem :is objectives as stared in its report of expenditure under sub-section (2)~~

~~(4) The Celtral GOVCIEMELL ma mai«. les rcqbring Lhe Financial Agency to make additional reporu of its expendsac.~~

(5) At least once every three years, the bcaul of Mc Eimmicial Agency roustreview the quality of the repot' of the Fitly:KAl Agency with die requirements of this section with the annual report of the 2o (6) The reports under this section muse be [7.1.6lisbed Financial Agency

76. (1) If any law requires the ' manwal Age lc to ems out illy hdriutton, the Fir= bl(eac,frfiari;:;:fid 2 „„cisi sal Agency must develop a system ic thy a ticieficy with which that function was discharged . E' Ledo.) in relation to its functions, in 25 (2) The Financial:Agencymust measure accordance with the system darnel I n del sec Ion (I) in a reasonable and objectve manner, for each lanai a ten.

(3) The Financial Agency must cetermu 2 .1 S for Nn discharge of each function for-which It has developed a system a r, seam] Si for the financial year. 30 (4) The Financial Agency musk at the al et each financialW prepareyear, a report companng Information from subset' ( 1 (2) -With e goals that were set for the financial year unde! sumsecuoi 7

~~(5) The antral GOvernDleht may make Irs requiring the Financial Agenck to urge of functons 3S make additional reports of us pelt-mum. an disc-~~

(6) At least once every due: years, the d rid of ihe I indnual Agency muscreview the quality of the report o f the Fmanifil (igen y with the requirements of this section. (7) The reports under this wet on must )-c 81.13181v d vvin the annual report of Ne io Firanual Agency (8) In this secton, Measonasie and obis!! , Ina u cr relation co the measure ment of a system, mem lcs — Part Ill 39

~~(a) a system of meaturen Ent that best represents any function being measured; (b) astandardised syscent Cat allows comparlson where possible; and (c) where possfMe, numectul systems of measurement~~

Returnssad 77. Each Financial AgenR. must ILMISh to the Canal Govermnent, at such time .5 and in such manner and foil) as may be pct.:abed, or as the Central Govern- ment may direct, such rem too a al statements, and such pardculars in regard to any proposed or exisutg of/caucus of the Council as the Central Go emment may from tulle Lo cut, requi le

~~(2) The board of the Fluinc;n1 Agmry mast prepare and submit to the Central so Government an annual ratan ....[cid ninety days from the end of a financial~~

~~(3) The annual report must be in swath manner and form as maybe prescribed, and must give a nue and Cull annum of the performance of the Financial Agency in the previous f no]tua- including - Is~~

(a) a recet, of die Finsnoial Agency's aeon. Les in relation to the discharge of Its functions and the 31 Let ment of its objectives, (5) all I-donnaLi on that 3 necessary to understand the discharge of functions and the aclueuener t ate ihe objectives of the Financial Agency that has been publia -Lea by the FL anal Agency, to (a) all mformat on that the thancial Agency is required to publish along with the annual .epoi L Lana- ids Act (3) a statement of Fs delikranons of the Financial Agency accompanied by the records of mutants of he tnanctal Agency, (e) a statement cid canny 91, statutory oaf canon that the Financial Agencyts or the boat of .1 e FRG aL Agency has not complied with, and reasons for such do (3a statemunt by the alt.-parson of the F.nincialAgenc3 in Nation to the activities and pa toimat cc of the ['manna: Agency, G) a staccmcni. of major act macs the Financial Agency was undertake In the so subsequent inanaial year and (h) a statement wh. Lary namberof the board may wish to include.

~~( 4) A copy of the report leceLyed Linde]. aid.) SCCuon (2) must be laid, as soon as possible after its recent bcfc e each House of Parliament~~

AccoaRES and 78. (1) Each Financial Agenc nILI3L I le Intur proper accounts and other relevant records Budit 35 and prepare an annuJ 5, tc nt of accounts Ln such form as may be prescribed by the Cern I Go ail I Gut in co-Gut-anon with the Comptroller and Auditor Gencal of In ca.

~~(2) The accounts a(a Fu natal reoncy must be audited mutany by the government auditor. 40~~

~~(3) The audit by L. a goa antad auditor will not Include an audit of performance of the Financial tgeica~~

~~(4) The government auditor I t‘ -~~

~~(C) Certl‘y LCCOtilLb ofJe pinandnlAgenct. and~~

~~recnces.22; or THE FriANC1AT AGENCY 40 .art Ill, 16~~

(b) make an audit repot (5) The certified accounts and the audit cpbte must be placed before the board of the Financial Agency and the boa. al the financial Agency must record id observations on the audit report. (6) The annual report of the Financial Asencs mug include -

(a) certified accounts and audit ream: tit peowded under sub-section (4); and (b) the observations of the board ob tha Iiinuiwal Agency under sub-section (5). (7) In relation to sub-section (1), the Anti id Tag s. while preparing its financial statements, must comply vah accomAng standards to the extent that it is, in o the opinion of the Roseate Book 0 oaml. appropriate to do so, having regard to the objects and funcdars of the Reeve Blank. government (3) In relation to the aud A of the drops nts s1dhe Rescree Bank, the auditor, will not audi: -

(a) the deliberations, decisions or ndoncs of dee Monetary Policy Committee under section 335, and she actions ol the Resent Baak under section 343 relation Co implementing robot cry policy decisions; (b) the transactions by the Reserve Rank under sections 345 and 346; and (c) any part of a discussion or comes inicalon between members of the Re. so sewn Bank Board, members of .hc onemry Policy Committee, and others and employees of the Resew(' :look ]elated to clauses (a) and (b).

~~(9) In this section, "goveirmstent auditor means the Comptroller and Auditor- General of India, or any other person dap:Anted by thc Comptroller and Auditor- General of India in this myard~~

~~115s1"Td evieoal es 79 (1) Eger): Financial Agency dust arrange at review of in performance and op- carets erations by a team of experts externaannal a that I tmanual Agency~~

~~(2) The review must take place once even June f manual years . (3) Every Financial &gene, must make hit Isms in sebum to the following mat ters regarding the team cf edema. exL=1s -~~

~~(a) the required compositiondid° ter r (b) the process of sales Bon (c) the process of appointment, (d) the terms o. see ce and (e) the duration and sums of the - Ts.~~

is (9) The Fmanclal Agency must ensure tl t. - (a) the team of exterr al experts ;ml ( experts a the same field as that of the Financial A ger -a and (b) there it no candler of interest I %eon the tesm of external experts and the Financial Agency:

~~-o (5) The review under this section mus - (a) be based on listen ',Donal ben p 1I gales as rola anq 09,7~~

~~(b) give an opinion en whosher the Financial Agency is soitably designed and operating efeechrel37 anal (t) identify good practices and make proposals for the Financial Agency to consider.~~

~~(6) The Financial Agency must ensure that the ream of external experts has access to relevant information and resources as necessary to carry out the review.~~

~~(7) The board of the Financial Agency must, within one hundred and eighty days~~

(a) determine a programme of action to implement the report of the review, as approprtatc; :a (b) publish the report of the rosdeve including all opinions and proposals made by the team of me moat experts; and (c) publish the programme of action coots and Laase 80. The Central Go \ mimic r may make to a Financial Agency, grants or loans of such Sy Centrai GO5e2050201 sums of money as It [(mho ht forbeing uphsw: for the purposes of this Act. '5

L022 and ceases; 81. (1) A Financial Agency may levy and col ett fees, as requ'rec for the discharge of diem by Swamp] A. sassy its functions unrr this Act, m. the relevant manner specified under this Act. (2) In levying fees, We Fineness: Agency must take Into consideration one or more of the follownot (amok, 313 may be relevant—

(a) the nature, scope and swe of business carried not by the financial service 20 provider; (b) the requirement that the ley( of fees does not constrain competition; (c) the requeremem that the lew of fees is nor disproportionate to the costs likely to be incurred by the Financial Agency in discharging the functions for the fees will be levied; and ss (d) the financial recuremems of the Financial Agency, ctvadentkbos 82. (1) Each Financial \ genera and oven, member of hoard of a Financial AgenCY, of and employee of a Wnancial Agency must maintain the con fidendaliry of any financial regul: [(my dim and other commercially sensitive information that is obtained or producer ht. the discharge of any of its functions under this 30 Art, unless —

(a) any provision of his Art permits or requires its publication or disclosure; CO any other law or soy agreement in. force (wonky or requires its publication or disclosure; Cc) the person from whom it was obtained, and, if different, the person to as whom it relates, tonsems, (d) it is already avelable to the public from other someeq (e) is in the form era ouoanaty or coliection of information so framed that it is not possible to ascertain from it information relating to any particular person; or (t) It enables or assists Me Financial Agent) or the Central Government to discharge as functions under this Art. - 4 s

~~Pan :111 la. InNCT NING Oa TAP FINANCIAL AGENCY 42~~

(2) The obligation under sub-section Amends to even, member appo'nred to an advisory council to the board of a Mauna! a Agency (3) No violation under this section is 031/.111Med if ihe in 'Co nation is disclosed — or (a) la accordance with the excepoura contained in sub-section (1); (b) for the purpose of any legal Traceedings. as may be directed by a body having appropriate jurisdiction. (4) Nothing in thissection will be taker ic be a restriction of the power of a public authority to exempt the disclosure of information raider section 8 of the Right to Information Act, 2005 (22 of 2003) -275- Parr IV' 18. PROTPC ION OF consumeas 43

~~PARC IV~~

~~FINANCIAL CONSUMER PROTECTION~~

~~CHAPTER i7 Darr-DE s AND DirNCIPLES~~

~~Objeenves 83. The Regulator must discharge its functions and exercise its powers under this Part with the objective of -~~

~~(a) protecting and furthering the interests of consumers; and (b) promoting pubic awareness of matters relating to financial products and financial services.~~

~~Pundples of 84. (2) The Regulator must have regard to the following principles while discharging so its functions and exercising its powers ander this Pact -~~

~~(o) the ley& or protection required by a consumer and the level of care required from a financial service ploviderr, which may vary depending on~~

(i) the level of knowledge, experience and expense of the consumer; Is (LO the nature and degree of risk embodied in the financial product or financial service being availed by the consumer; Oft) rho appropriateness of a furanclai product or financial service for different classes of consumers; and (iv) the extenr of dep endc floc of the consumer on the financial service ID Novi der, (b) consumers must ordinarily take lesponstfilry; for their vransacdonal decisions; (c) any obligation imposed on a hr3ndal service provider should be reasonably commensurate with the bene its for consumen, considered in general 25 temis, which are expected to reso from the imposition of that obligation; CO) competition in the markers for financial products and financial services is desirable in the interests or consumers and therefore - (0 banters to competition owing to adverse effects of regulatory actions should be minimised; and 3.7 (i) there should be competitive neutrality in the treatment of financial service providers, (e) facilitating access to financial products and financial services is desirable in the Interests of constunem; and ({)innovation in tnanciai products and financial services is desirable in the so interests' of consumers.

(2) In interpreting (his Part and ;ndisxhaising its functions or exercising its powers under this Part, if the Reguiator perceives a conflict between any of the principles contained to sub-section (it, or Li-more than one interpretation is possible, the Regulator must reconcile ono man age the conflict giving preference to the to principle whEch would be the most relevant for furthedng its objectives under this Part. Pax IV: In PROLicolon OP coosumaks

~~ate on received from the Re- (3) The Regulator must also cake :tato account dress Agency under set Gian :23 while thschaiging functions and exercising its powers under this~~

~~C' Ian( ER .fi~~

~~85 (1) Afinancialservice provider nust eXC rune piofessionil diligence while entering odRek:ai uFmyit '3e into a financial contract or discharging any obEgations under it.~~

(2) In this section. "professional moans the nandard of skill and care that a financial service OCCC r would be reason ably expected to exercne toth wards a consumer, commensurate kith - (a) honest market practice; (d) the principle of good Eafill; (G) the level of Icnowledge, experience and expertise of the consumer; (d) the nature and degree of tick embodied in the financial product or finaro cial service being availed by the consumer, and (e) the extent of dependence °thin consumer on the financialserviceprovider. Unfaixtcrrof 86. (1) An unfair term of a nop.ne,joUaced contract win be void. (2) A tenn .s unf ' f it (a) causes a signifinant imbalancelights and obligations of the parties 20 under the financial contha et, to the des (intent of lire consumer; and (6) is not reasonablynecessary to pion z: the legitimate interests of the 5nan- c(al service provida.

(3) The factors to be taken into account while determining whether a term is unfair, include- s (a) the nature of the financial product or financial service dealt with under the financial contract: (b) the extent of transparency of the 'amt. (C) the extent to which she 7errn aliops consumer 70 compare it with other financial contracts for similar financial product( or financial senices; and 30 (d) the financial contract as a whole and the terms any other contract on which it is dependent. (4) The Regulator may specify as illustrative list of tram that are considered to be unfair terms under this section. (5) At ws saw . it - as (a) is expressed in reasonably plain la naafie that is likely to be understood by the consumer; (d) is legible and othsencefi cleany; and Cr) is readily evadable to to consumer affected by the term. (6) If a term of a financia coo tract is determined to he unfair under sub-section 4C (3), the penes will rotations to be bour d io the rernoining terms of the financial connect to the extent thr t the linarca: contract is capable of enforcement without the unfair term -.277- Part IV. 18 Priorscrios OP CONSUMERS 45

son negotiated consaco 87. (1) In this Chapter, 'non-negotiated consiacr means a contract whose terms, other than the terms contained in section 98, are not negotiated between the patties to the financial contract and inch:7es -

(a) a financial contract in which, relagve to the consomer, the financial service provider has a subsLantially si eater bargaining power in determining 5 the terms of the financial contract; and (6) a standard form contract.

~~(2) In this section. "standard form contract ' means a financial contract that is substandally not negonable for the consumer, except for the terms contained in section 88. 10)~~

~~(3) Even if some terms of a finfinsial COALf JCL are negotiated in form, the fmancial constant may be regarded as a non-negodated contract if so indicated by -~~

(a)an overall Dad subsLar nal assessment of he 0 irincral contract; and (b) the subs circumstances suninunding the financial =tract. (4) Ina claim that a financial contract is a non-negotiated contract, the onus of demonstrating otherwise will be on the financial service provider

arms that are unarsettos 88. (I) Section B6 does not apply its a term of financial conchae( if it - (a) defines the subject matter of the financial contract; (b) sen the price chat is paid, or pay:lb/a, for the provision of the financial product or financial service under the financial contract and has been so clearly disclosed ina the consumer; or (C) is requived, or expressly perinified, under any law or regulations.

~~(2) The exemption under sub-section (12(h) does not apply to a term that deals~~

~~■■■ with the payment of an amount which is contingent on the occurrence or non- occurrence of any particular Teeny as~~

~~unfair conduct 89. (2) unfair condfict pronged in rilation m Onancral products or financial services Is prohibited~~

(2) In this Chap ohs unfair conduct" means an at. or orussion by a financial service provider or its financial represema o si that signinca niy impairs, or is likely to significantly impair, the abihry of a consumer to make an informed transac- so tonal decision end includes - (a) misleading conduct unger secoon 90; (b) abusive conduct under section 91, and (c) such o'h vs conduct as may be specified

Misleadirk (ass= 90. (I) Conduct of a Onanc]al service provider orris financial representative in relation as to a deternunhtive factor is rilsicadmi, if it is likely to cause the consumer to take a transactional decision chat the consumer would not have taken otherwise, and the conduct invoisos -

~~(a) providing :lie consumer with liar:arsto informaton or information that 40 to be tore; or Pmt M1£ ProrscrioN or argaonamgroascarram 46~~

~~(b) providing accurate in to the consumer in a manner that is deceptive.~~

(2) In determining whether a conduct is misleading under sub-section C11, the following factors must be considered to be 'g eternunative factors" a financial product or financial service, includ- (a) therein characteristics of ing its featurcs, hens fiss and risks to the consumer; (b) the consumer's need for a particular financial product or financial service or its suicabiligs for the consumer; (c) the consideration in be paid for the financial product or financial sensice or the manner in which dm emnon4 calcuMted; (d) the existenc exelasion cc of fee: of any term in a anandal contract, which is material germ in Me context of thar financial contract; Ce) the nature. attrilou-es and rights of the financial service providea including its identify. regulasorg ad and affiliations, and

~~15 CI) the rights of the consumer under any law or regulations.~~

~~said 91. 0) A conduct of a financial remise provider or its financial representative in tel to a financial product or financial service is abusive if it —~~

(a) involves the use of coercion or undue influence; and (P) causes or is lAfely to cause the consumer to take a transactional decision so that the consume]. would not nave taken otherwise. (2) In determining whether a conduct uses coercion or undue influence, the following must be considered —

(0) the taming, locado 0, Tadao or nernsrence of the conduct; (b) the use of threatening or abuslre language or behaviour; (c) the exploitation of any particular misfortune or elreumstance of die consumer, of which financial service provider is aware, to influence the consumeds decisionwall regard to a Cinancial product or financialsecs-ice; (d) any non-contractual barriers imposed, by the financial sundae provider where the consumer wishes sc exorcise rights under a financial contract, so includinge - (i) the right to termirnie Me finanall contrast; (ii) the right to swirch to a no inel financial product or another financial service provider; and CC) a threat to take any actions depending on the circumstances in which the threat is made.

~~CI 1619 ER 19~~

Mearung of 92. In this Chapter "personal information" means any inform on that relates to a personal consumer Or adOWS a conSiner identity to be iniened, 1fivrtly or indirectly, and alfaMadon. includes — (a) name and contaMnforma tier., Ill) biometric information, in case of individuals; -279-

~~(r) information relating te transactions in, Cr holdings or financial products; (d) information relating to the use of tinancial services; or (e) such other)orrna don as may be specified.~~

'Ramifies 93. 0) A financial service moulder must - teternett life of visions] (a) not collect personal Infomation relating to a consumer in excess of what s is requited for she provision of a haancial product or financial service; (b) maintain the confidentiality of personal info] mutton relating to consumers and not disclose it to a third party :sequin a manner expressly permitted under sub-section (2). (a) make best efforts to ensure chat any personal information reladng to a to consumer that It holds is accurate, up to date and complete; (d) ensure that consumers can obtain reasonable access to their personal infomiation, subject to any exceptions that she Regu.aror may specify; and (e) allow consumers an effective opportunity to seek modifications to their personal information to ensure that the personal infomiation held by the is financir I service provider is accurate, Up to date and complete. (2) A financial service provider may disclose personal information relating to a consumer to a third party only if - (a) it has obtained prior mitten Mformed consent of the consumer for the disclosure, after giving the consumer an effective opportunity to refuse re consent; (b) the consumer has directed the disclosure o be made; (t) the Reg rtator has approved or ordered die disclosure, and unless prohibited by the relevant law or regulations, the consume]. Is given an opportunity to represent uncler such law or regulations against such disclosure; 25 (d) the disclosure is required under elly law or regulations, and unless prohibited by such law sr regulations, the consumer is given an oppornmirY to represent under such law or regulations against such disclosure; (e) the disclosure is directly related tr. the lima ion of a financial product or financial scarce to the consumer tithe financial service provider - so (0 informs the consumer in advance that :he personal inforrnadon may be snared with a third parry, and (ii) makes arrangements to en) -re that the ash(' party maintains die confidentiality of the pe¢mUpets infomrt cion in the same manner as yoGUd under Ihis Pert or ss (0 the disc lc sure is made to protect agains) or prevent actual or potential fraud, in transactions or claims, if the financial service provider arranges with the third party co maintain the confidentiality of the personal information in the manner lequired under clUs Part. (3) In this section, -Child puny" means any person other than the concerned finals- la dal service movihen Including a person belonging to the same group as the financial sertace provider.

at (Axle ass The Regulator may Ante regulations co - frgrrthrt PerSelial (a) provide af diConal roc n iremenrs for the collection, storage, modification and pro testi or of personal informs don by financial service providers, inan eluding - 9B to the manner of raryntunance of records of personal information and the time-periods Ear which the records are to he maintained; and (P) the manner En wI cli records of persona: informa6on should be dealt with aUer the expiry of the sped peiiod; (h) exempt a class of financitil shire providers from the application of all or any portion of this Chapter or modify the manner in, or extent to which, all or any portion of the Chaprer applies to them, subject to any specified conditions; or (c) establish mechanisms to cusuffi that consumers have access co, and are given an effacryw opponupity to suck mod:floc:ions to, their personal information.

Ci IPPITIS 20 REQUIL11555531 Om FAER DISCLOSURE diselonres, 93. (1) A finalria: seffitice provider ffiusr ensure fair [Enclosure of information that is likely to be required by a consumer 70 make an infomwd transactional decision.

(2) In order to CC/net:ape fair disclosure, the information 51:List be provided — (a) sufficiently before the consumar enters into a 0:13.ncial contract, th as to snow the consumer reasonable time to understsnd the information; (b) in writing and in a maneur that is likely to be understood by a consumer belonging to a particular category.; an PO in a manner die: enabffis the consumer to make reasonable comparison of the financial produci or hnanda: senbce wE:] other similar financial products or financial services

(3) The Regulator may specify the types of information that must be disclosed to a consumer in try a don to a Itnancial product or financial serthee, which may include information regarding — MO main characteristics of the tin ancial product or financial service, inthuding its features, hermits and risks to the consumer; CIO consideration to ha paid for the financial product o: financial service or the manner in which the consideration is calcuPtee; fry existence, exclusion or effect GCany term in the Snancial product or financial caravan; (d) naffire, a ctribu tea and 3335:ts of the Br:uncial service provider, including its identity regulmosy smug and affiliations; as (e) contact details or the financial serthee provider and the methods of communication to be used betwc on the financial senecc provider and the ;consumer; fp rights of the consumer to rewind a financial eonI:act within a specified period; or

~~(g) rights of the consumer under any law or regulations,~~

~~96. (7) A financial service provider must provide 3 consuri. Cr that is availing a rinan- dtd^ l dal product ad inancffil sente 'p rovidd by it. with the following disclosures- wa g)~~

(a) any material change to the information that was required to be disclosed under section 95 at-he time when the consumer initially availed the fi- nancialproductorfinancial service; (h) information relating to the status or performance of a financial product held by the consumer; as may be required to assess the rights or interests s in the financial product or fin,mcial service; and (c) any other information that may be specified. (2) A conniving dissiosure must be made - (a) within a reasonable time-periodMom the occurrence of any material change or at reasonable periodic intervals, as applicable; and ro (h) in writing and in a manner that is likely to he understood by a consumer belonging io that category. (3) The Regulai or may specifY -

(a) the nature of information that must, be disclosed on a continuing basis to a consumer Mar has availed of a specified financial product or financial zs service; (5) the Mrachackhod within which continuing disclosures of information are to be made for a specified financial product or financial service, or (c) circumstances in which the consumer wil have aught to terminate the financial contract upon a continuing disclosure being made. 20

~~97. Regulator may make regulations to -~~

(a) provide for Me manner in which a disclosure of information relating Co a financial product or lac:annul sante has to he made Co a consumer; or (b) exempi a class of financral send cc providers from the application of all or any portion of Ulm Chapter or modify the manner in, or extent Co which, zs all or may potion of the Chapter applies tc the in.so 020222 to any specified condit; ans.

~~CHAPTER 21~~

Re22022E203n 00 fillandal sennee 98. (1) A financial service provider must have in place an effective mechanism to reso ceive and redress complaints atom its consumans in relation to financial products or nnancial senbces provided by W or on in behalf, in a prompt and fair manner (2) A financial service provider must inform a cons,: cloy at the commencement of relationship with the consumer and at such &bar lime when the information as is likely to be legaired by the consulter, of - (a) the consumes right to seek redress for anycomplaints. including through the Redress Agency: and (5) the processes followed by the fin:nuMI serbica provider to receive and redress complaints from its consumers. ao R220120022 rcgarduly'areSS 99. The Regulator must make regulations an the processes to be followed by a 022001plamcs, fixancial SerViCC provider to receive and redress complaints from its consumers in an effective manner 50

~~(2) The rekuladons must ororade for -~~

(a) the process to be followed by a consumer to 6 a complaint with a financial service provider and the tranc-period within which the complaint must fie filed; and :he process to be followed by a financial service provider to receive and (b) redress comp:RITA] and the time limits for cads step of the process.

~~(3) The regalations ma in addition, provide for -~~

(a) the time-periods and intervals at which inforunuon under section 98(2) has to be provided; the form and manner in which information ander tion 98(2) has to be (b) sec pprovided,rovided, including a requirement to make the informadon available on service provider's websirei (ra a requitement to mainnan records of cart roinplaifir received by a finan- redress; cial service prorado: and the measures taken for is o Lt periodic reports to the Regulator about the re- is (d) a requirement to aut ce.pt and redress of einsplairs in the specified moaner; (e) en alternate dispute resolution mechanism for romplamcs in relation spedfied financial products or financial services to be followed after, or in place DC the financial service provider's redress profess; (f) :he process to be followed where two or mote financial service providers 20 maybe jointly responsible. for we[ ediess of a complaint; or (g) any other matter relevant to the redress of complaints.

~~CHAPTER 22~~

~~ASSeigment Of 51111abtht,~~

(a) make all efforts :0 obtain correct and adequate information about the relevant personal circumstances of a retail consumer; and (b) ensure that the advice given is suitable for the reran consumer after due consideration of lm relevant personal circumstances of the retail con-

(2) If it is reason ably apparenr to the retail advisor Aar the available information regarding the iclevant personal circumstances of a retail consumer is incomplete at Inaccurate, the advisor must warn the reran corkumer of the conse- information. quences of proceeding on the basis of incomplete or (3) If a retail consarner intes to avail of a financial product or financial serf ce 35 cousume5 the retail that the retail advisor deterines unsuitable for file advisor - (a) must clearly communicate its advice to the retail Consumer in writing and in a manner that is Nicely to be understood by rho retail consumer; and (h) may pray:de the knancial product or financial senior requested by the retail consumer oniyarer complying with clause ne) and obtaining a written acknowledgement from the retail consumes: --;4

ReSlatalLosa Legardang 101. (I) The Regulator I:11-SL specify the financial. products or financial services hich Sillfabthly may be provided to retail consumers or a class of retail consumers, only after advice has been given to them under section 100.

~~(2) The Regulator may specify -~~

(a) the ffithe of enquiries that need to be made Co decermine the relevant per- 5 tonal Timms:knees 0 recail consumers for a financial product or fmandal smith: or (b) that certain types of cemmunications issuer by a thanker service provide to a retail consumer 5vonid nor consiirthe advice for the purposes of section ICO la

~~(3) The Regulator roust take into accourit the following factors while making reg- thadons under subvemion (th -~~

(a) the eaten to which she cost of seeking ithormation ahem the relevant personal circumstances of retail consumers mighr restrict the access of retail consulTlers co the financia: prodtht hthancial service; and (b) sufficiency of the disclosures made under sections 95 to 97 to allow retail consumers io assess she suitability of the financial product or financial service for their purposes,

~~Dea■Ing Vnth mania Revere 02 A retail advisor east -~~

(a) provide a re rail consumer with meesmatior regarding any conflict of inco terests, inclliding any conflicffid innunernion that the retail advisor has received or expects to receive for making the advice to the retail consumer and (6) give peloriry to she intereas of the retail consumer if the advisor knows, or reasonably ought to know, of a condict b:avec:1-. 25 (0 us own incerests and the inters of the retail consumer; or (i) tae ill[eres is of the concerned finarcia: service provider and inter- ems of the resail consume; in cases where the advisor is a financial refalaaaaltadVe.

(2) The informs:ion hnder sub-section Gi(a) must to giver to the retail consumer 30 invnting mod in a manner that is likely to he understood by the retail consumer and a nritier. acknowledgement of the receipt of the information should be °brained Mum the retail consumer

~~(3) The Regulaith miry specify~~

(N she eirminsiances which a c en ollI recclied b). a relied advisor would, la or would nor be considered to be 5 Lucian cd ien.uneration, or (b) the na type and structure of ounefith permitted to be received by a retail ammo' for a financial orodint or finstars alservice .

(4) In this serorn, confifficd remurerat des inear5 any benefit, whether none fry or nen-mong [thy derived by a rent I advisor from persons other than retail ea consumers, that ran. under the circa:nliances, reasonaely be expemed to in nuance the ad,. se given by the remil armor to n retail consumer gam

~~52 Pa~~

~~CI [AFTER 23~~

tUrrbOlIS 103 The Regulator must - rart out the purposes of this Port; (a) make regulotiDES (b) issue guidance to (Mont: al service providers in respect of any matter re- Par: or the regulations made under it, whether or not ferred m th A

(0 the Part expressly requires or enables du: Regulator to make regulations on such ma rter; or (it) a formal application seeking guMance luts beca made to it; supendsEd, financial Berne providers m ens ure (c) supervise, orcaas a 10 7.e compliance :AM the provisions of this Part and the regulations made under it; (d) take appropriate enforcement actions to deal with the violation of the provisions of this Part or the regulations made ynder and (e) carry out financial awyreness programmes.

(2) The Regulator mast make regulations within six months from the commencement of this Part to uroviii 00 the amount under section 2040) for the purposes of determining whether a consumer is a retail consume; which may vcry for different financial products m (inane; al services; (h) the manner of detembning if the value of a financial product Or of a financtal service render:of meets :ic value of the amount specified for the purposes of scaton 2(140): and (c) the net asset Yalue and turnover for ;he purposes of section 2(61i.

~~(3) The Regulator may form rime to time modify the regale:ions made under sub. section (2).~~

Ptomain of IndA:dual deals with con- 104. (1) A financial serviccaloy:cc(w must ensure that DO wthoduab beating sumers in t21 the proyas:on of a financial pmduct or financial ser- at vice by it or on its boball, including as an employee m financial representative, unless that individuci is regutered w:th the Rebrulaior

(2) The Regulator may specify - (a) roes m which an Individual would, or would not, be considered to beworthy of dealing wtrh consumers; (h) the egibiltty requrremunts to be satisfied by an ind:vidual in order to be registered m respect ef specified financial products or financial services;

~~(C) at code of cord net expected to be followed by an individual who is registered ia resp err of spec] bed onancial producA or Emanuel services.~~

~~ite and "c ao 105. [1) A financEal seru ye provider must Me op added infonnarion with the Regulator FProcess :CT in relation to - auwtw re-~~

~~(o) any financrar product that it proposes to offer to consumers, of Part N 24. Raoarss AGENCY 53~~

(b) any material variation co a financia!proday already offered to consumers. (22 ) A financial service provider must not offer a financial product referred to in sub-section (1) to consumers unless - (a) it has filed the specified information with the Regulator in respect of the finaocre: product; and (b) a period of six." days has elapsed from the dare of filing of the specified infant:arson with the Regulator.

(3) The Regulturr may seek any additional information or cianficadons in relation to the product E. om the financial service provider daring the period of sixty days and the finance] service provider must pr. rside the same. (4) If the Regulator does not seek any additional information or dad fications, the financial service provider ran commence offering the product to consumers after the expiry of the period of sixty drys. (5) The Regulator must specify -

(a) the information required to be filed with Jr in relation to any financial Is product or a material variation to a fmanthil product; and 05) what would, or would not, constiture a int letho t variation to a financial produth

~~Re=d2DIUM 106. (1) rmancolerwore. The Regulator 'fithisfiefilfi-~~

(a) the tenth and condi fions that are to be, orate not co be, included in (man- 20 cial contracts with specified coos 2. mrs for specified financial products or financyd senders; or (b) restrictions on mtitations or ind or emcnes to enter into financial contracts with specified consumers for spcc.fthd financial products or financial services.

~~(2) Any regulations made under sub-section (I) mutt be accompanied by a statement explaibing~~

~~(a) the other iniersencions made or tonsil:lento by the Regulator to address the concerns sought to be addressed through the regulations; and~~

~~(b) the reasons why such other interventions were or would be insufficient, in 30 the view of the Regmla ton to address the co 'kerns sought to be addressed through the regulations.~~

R222002.1.122 of 107. Llama! ser.lce (1) Any act or emission by a financial reprercnnatifie of a financial service providen Providers for in connection with the provision of a financial product or financials ervice on .finonuel behalf of the financial serfice provida will alto be deemed to be an act or as tepresencathes omission by the rae.ncial service provider 04 Nothing contained in sub-section (1) wik male a financial service provider responsible for an offence committed by o financial representauve.

~~CHAPTLR14~~

~~40 Functionsof tto Redress gigolo, 108. The Redress Age,irs evil redress the ccatriai is of retail consumer received directly or forwarded by the Regulator in cases se-~~

~~Pat IV 24. PinstEss AGELicv 54~~

(a) the tomplainain hes a needy made a complaint to the respondent and - G) the lespoodeni has failed to tee owe the complaint avithin the time- petod spa ciRcd by the Regulators; or tee elation of the complaint 00 the complainer L is not satisfied with the by the reLpondent (b) proceedings Concerning the subject-matter of the complaint are not pending before any other competent court. tribunal or otlaer authority set up by or under any ocher tiv/ for the time being in force; and (c) a fine: order on the su Rea-matter of the complaint has not been Made by any other court tabu:Lel or other anthotry.

~~(3) The Redress Agency may m exceptional circumstances aczept a complaint even if the conditions anc er sec. is n (1)(a) have not Seco ea tis hed.~~

(3) The Redress Agency must :Est harte its function in a at4 informal, economical and expeditious manner LECOUgh - (a) mediation ben.cen the ompleitant and respoodent to arrive at a volun- Is tary settlement of the crlaplant; and (6) if a complaint is no ledressed through mediation, adjudication of the complaint. systems, processes and in- (4) The Redress Agency mos! put in place adequate frascrusture to enable it co discharge its functions En an efficient and effective ze

~~net:amens or ne the Redress Agency Board and rwutlserc, 109. (2) The follmving pot n-ux be excrdsad by p, cannot be delegates .o an) oilier person - 3_~~

(a) raking the bye - laws of toe Redress Agency tar eguLacions under section 117; (b) appomtnv adjudical ars under section 110, CO adopting the al !mai husget of theRedress Age ocy under secton 122(1)(0); and (d) adopting die a natal report On the discharge of the Redress Agencys font tons under sen ion 123

~~110. (1) The Redress Agcy TRH( rprotrr OdjUthertOrr havng appropriate qualifies- 237,17:01 tons and experience in as ©Glenne with its ove-lats~~

~~(2) Adjudicators atone:rad by the Redress Agency must be persons of ability integrity and standnn L are -~~

(a) shown capacity in dealing with consume: protect on issues, including redress of consumer thspoies, or (b) knowledge and expert ix. in the fields of law at instate (3) The terms of epaOrl men': or a person as an aditiCkaaLar Must ensure die Mdr- peRdenle of the person apt. mated

~~(4) The powers and fur s-Lons ca adruchcarms under this Part may not be delegated to any other person . Part 25. ThoCir Rites BEFORE 55~~

~~CHAPTER 25 PROCEEDINGS serwall THE Rr.DRESS Amerecv~~

~~Screwing of coraviview 111. (1) A complaint that is received directly by the Redress Agency or fonvarded by the Regulator must he screened before it is refereed far mediation.~~

~~(2) The Redress Agency may dismiss a complaint upon screening, or at any later 5 time when the relevant information comes to :is knowledge, on any of the following grounds —~~

~~f) die complaint does no: satisfy the conditions contained in section 108(7); or~~

la (3) A dismissal of a complaint by the Redress Agency mast be accompanied by a statement in writing giving the reasons and groueds for the dismissal. (4) A complaint that is not dismissed udder this widen must be referred to a mediator for mediaion.

(5) If a complaint is Glowed m proceed for mcdiazion under sub-section (4) no le- Is gal proceedings concecoing the subject-matter of the complaint can be brought before any other court, tribunal or other authors/ while the matter is pending before the Redress Agency

Mediation widement woods 112. (1) The mediator must assist the complainant and respondent to arrive at a voluntary setdement of tee srompiaint. 2.0 (2) If die eomplainnnt and the respondent arrive m a settlement through mediation, the mediator must record the sew lemen Inwriting in due form of a settlement agreement to be signed by the comidainant, respondent and the mediator. (3) A complainant may challenge the senismcnt ag. cement before an adjudicator only on the grc nod ihat the consent to the settientem agreement was obtained by coercion, undue imitience, misrepresentation or fraud. (4) The settlement agreement, unless itisditesminec to he invalid by the adjudicator, will be binding on the complainant- and respondent and will be enforceable as though It were a decree of a chill tin so (5) A complain: will be referred to an adjudicator far detemeinadon if any of the following events °cam and the complahvint has not withdrawn the complaint

(a) a setdement agreement has not' een arrived at within the time limit ser out under11m regulations; as (b) the Died:mot is of the view that a settlement is not possible In the facts and weemnstances of the case and inform: the complainant and the respondent in switing of the decision along mlth rcascns; or (c) a settlement agreement is found by an ad ddicacor to be invalid under sub-section ( 40 adjklAltamor 113. (1) An adjudicator to whom a complaint has been fe (Erred must — (a) examine the complaint in accordance with the regulations made In this regard , g

~~Part rv. 26- Rgonfiss Aarmaths PROCEDURES 56~~

(b) determine the somplirth with reference to what ts equitable in the cth cumstances, with duo regard to - 0) the provr :ons ci this Act and the regulations, bye-laws and guidance ander it; the rem. th the arcincial contract between the complainant and the (ii) respond/at, witch forms the bass of the complaint; (iii) any coda of conduct applicable to the respondent; and (is) past der. smtha alms made by the Redress Agency in similar cases; and connunicare she termination made by the adjudicator to the com- (c) plainant and Ire respondent, in writing, in the forth of an adjudication order. (2) The adjudication order must - (th set out the ref( ors for the determinanon; (b) be signed by tic; ad/wren/or; and inform_ the con ,ilainant and the respondent of them/gilt to appeal against (c) the adjudicatithr orde: before the Trrbunal. if the adjudicator (I/tea/Lines a complaint in favour of die complainant, the (3) adjudication order may - make an award against the respondent of such amounts as the adjudicator (a) considers fair compensation, subject to the limits provided in the regatlas dons for any- 0) financia..oss suffe, ed by the complainant; or (if) toss or dc maga caused on accotmt of materic l distress or material inconstant ence coffered by the complainant; or o (b) direct that the sespondent rake such steps in relation to the complainant as che adjudicator confiders just and appropriate. An adjudication oak" providing for compensation may also provide for the (4) amount payabk unser the award to bear thterest at such rate and from such date as set our in tlth award (5) An adjudicadoo order is enforceable in the same manner as though it were a decree of a civil cot l ths 114. Any person aggrieved by an adjudication order may challenge it in appeal before ,Zc,La the Tribunal. as 115. No court, cribuna: or other roducriN will hear a claim on an issue that relates directly and substantia lm to the subject-matter of a complaint on which an adjudication order has bee made under seadon 113, except an appeal under section 114.

~~C)ien``' 116. Any withal contravenann of an adjudication order made by she Redress Agency is co punishathe as a Class B offence under thjs act.~~

~~CHAIcTER 26~~

~~Rs.DaES: AGENCY'S PROCEDURES~~

~~Nati/nor) segulatrons to provide fc- - retaang Es Redress 117. (/) The Regulators mur maNe ANSPAGP DrunsiUreP 57~~

~~(a) the time ling: within which a complainant has to submit a complaint to~~

~~the Redress Agency or to the Regulator and the circumstances in which~~

~~the time limit may be extended by the Redress Agency; and~~

~~Co) the monetary limit on the award of compensation that may be made by the Redress Agency, which may contain -~~

~~(i) differc, it limits for different kinds of complaints; or~~

~~(0) lower orb-limits for compensation awarded on the grounds of distress or inconvenience suffered by a complainant.~~

(2) Except as contained in sub -section (7), the Redress Agency must make regulations to provide mr the procedure to be followed for receiving, screening, is mediation and adjudfaation of complaints.

~~(3) Regulations made under sub-section (2) may. among other things -~~

~~(a) fix the time-peiods for the internal proceedings of the Redress Agency;~~

~~(b) provide for sm circumsances in which a complaint would be accepted by~~

~~the Redress Agency even if the condition under section 108(1)(0) has not been satisfied;~~

(c) provide for the reference of a complaint, in identified circumstances and with the consent of the complainant, to ancther hod); as maybe provided in the byerlares, with a new to its being ceiermMed by that body instead of the Redress Agency. so

~~(d) provide a list of maAers which are co be taken into amount by adjudicators in de Riming whether an act or omisston was fair and reasonable;~~

(s) make provision as to the evidence which in ay be required or admitted, the ex- ens ie which it should be ma/ or written and the consequences of a pc ssonh Sulure to froduce any informs Lon or document which that es person her been required to produce;

~~CO provide fur' he circumstances and the manner in which an adjudicator may award costs;~~

~~(g) prosedc for the fees to be (evied from finansel se Raceproviders under section 122(1)(S) for the establishment and operation of the Redress Agency; so and~~

~~(h) protean: for the fees payable by respondents to the Redress Agency under~~

~~section 122( .:9 (c), which may vary for different ids of complaints.~~

AdpdLIMIMISends posters of Vened' 118 The adtuthcatois are net bound by the procedure laid down by the Code of CAT use. Procedure, 1908 (5 of 1908) bet have the same powers as a civil court does under 35 the Code of Ch l ero. ^gore, 1908 (5 of 1908) in ree nest of -

~~swan nag cid enforcing the attendance of a: y person and examining them on oat'~~

~~(5) requmng :hc d movers and production of d acres Ants,~~

~~(c) rece's lig es] lc me on afndamts; ac~~

~~(d) issuing corm ishons lc. the examination of PP lateSeS or documents, tenespag decis'ens;~~

~~CO dismeeng au appbcauoa for default or deeding it ex parte;~~

~~(g) Settny aside an order of dismissal of any application for default or any~~

~~order passed ley it Expose; and 45~~

~~(A) any other ma :ter that may be aped by the Regulators. 58~~

efteetinnispi 119. (1) The Redress Agenc: muss make use of =Gem [ech o olcy, to improve access to the Redress A ger dy and H enable it to discharge as functions in an efficient manner — (2) The use of modern muewrology will Include use of mechausros that allow (a) parties to submit documenrs and mformauca co tlm Redress Agency through electronic meal s (6) parties and of el concerned persons to part512am in the processes of the Redress Agenc from temote lo(shoos - without being physically present, (c) electronic d lsp. and .nanagernent of complaLms, is (d) use of automated systems for scheduling the l'earlafi of complaints; and (e) providing of a arronic access to complain-related mho:manor to the par. tics to a comp] fir (3) If a complement ar. esses be Redress Agency nalg r. mechanism that allows pasties to peak Loam In the processes of the Reeass agency from remote 10- canons without bens physically present the respondent must also access the 15 Redress Agency n 1' le same manner

~~CHAPTER 27~~

120. (1) The adjudicator has the power to award reasonable costs against the resport GIPs' so dent and in favour el the complainant or he Redress Agency for the purpose of prOViding a contribl don Lc resources deployed in desang with the complaint if in the opinion of he adfiLdicaton the respondent's conduct was improper or led to an unreasonfihe burden on the compiainani or the Redress Agency.

(2) The acjudicator hpn the power to award reasofiatle cosis against the COM- 25 plainant and in Smear of the Redress Agency, for the purpose of providing contribuion to ra purees deployed in dealing web the complaint, if in the opinion of the Lai ud:caton die complaint is found Lc be vfithout foundation or merit or the compli Yam's conduct was improper o: lec to an unreasonable burden On the respondent Or the Redress Agency

~~(3) The adjudicator may whisa making an award of costs. ordy that the amount payable under He a hard rears interest at a rate end as from a date stated in the adiudication once.~~

~~(4) An amount due under an award made in favour of the Redress Agency is re- coverable as a debt He to the Redress Agency~~

.,W b3fesU for 35 121. (1) The Redress Ageney may by notice in writing given to any person who is a P° parry to a complaint require that person to provide any required information arouse ea or documents which the Redress Agency considers necossary for the detente- nation of the compl lint [3) The informadcn or documents must be provided or produced — (a) before the end a such reasonable period as may be required by the Re- dress Agency; Lnd (b) in she case of info n. in such manner or form as may be required by the Redress Maley. 59

~~122. (1) Funds for the eszab ishment and operation of the Redress Agency vnll consist~~

(a) allocations made by the Central Government of such sums of money as it thinks fit, based on the annual budget to be prepared by the Redress Agency and suomined to the Central Govenmaenr before the start of each financial year; (b) fees collected Roen financial service providers, in the manner provided under mutations made oy the Redress Agency; (r) fees collected from respondents, in the manner provided under regulations made by the Redress Agency; and to (d) costs imposed an the parties under section 120. (2) The Redress Agency must take into account the expenditure expected to be in- nuked by it in carrying our in functions and the funds available from other sources whiie determining he amount of fees payable by financial service providers for funding the Re(350-83 4311-Cy. 15

(3) The Redress Agency may rodeos the fees under sub-section (1)(b) through the Regulator eharthe 03 123. The Redress Agency thust, through the Data Centhe, share ithormation on com- infoonatien with the Ass-steers plaints received, °snag ered, sealed and determined by it, yvith the Regulator on an ongoing basis, in order to farimam she Regulator in effectively carrying oat its so functions.

Ferran-Ai= ot thc 129. (1) Nor to the ccmrmaicement of each year the Regulazors must, in consultation with the Redress Agency, determine - (a) the produccivny timeliness and service quality targets mcpected m be 8[310208d by the Redress Agency in that year; (b) the acceptable level of g cokation from the targen determined under sub. section (c)i and (c) the systems to be used to accurately measure the functioning of the Agency

(2) The targets and systems detennined under sub-section (1) must - 30 (a) promote thansparency; (b) provide an accurate rem esmtation of functioning of the Redress Agency; (c) consider the ragairernerts of persons appearing before the Redress Agency; (d) provide objecthre methods of measurement where possible; (e) provide subjective methods of measurement where objective measure- as merits are not hossible; and (f) incorporate glooal best practices in the measurement of fanctionnag of bodies set up to address consumer complaints.

(3) The targets uncle, sub-section (1)(a) may include tarp art' relating to — (a) the average cost per compiaint expected to be Roused by complainants. so respondents in the Red-es Agency; b) the number of complaints expected to be uocessed by the Redress Agency svithin a given time-period, or Part IV. 28. laidairclor xvioartms 60

(c) the average nnre expected to ke t n by the Redress Agency for processing a complaint. (4) The Redress Agency must publish - (a) the targets and systems tetermined under sub-so-non (I) and (b) details of the Redress Agency's performance against the targets and systems determined once( sub-section (I).

Eget:::AgE Li 125. (1) In addidon to the requirements contained in section 77, the annual report of the Redress Agency mum contain - ( a) a review of the Redress Agenda performance against the targets and systems determined under section 124; and (6) any other requirements specified by the Regulatois.

(2) If the Redress Agency fails to achieve a target determined under section 124 and theextent of demo:ion exceeds the acceptablelmel cici ermined under that section, the annum report must include an explanation containing reasons for 15 the failure to ackieve the target and the actions intended to be taken by the Redress Agency to remedy the situation.

~~CHAPTER 28~~

~~FINANCIAL AWARENESS~~

Ennio promote 126. (/) The Regulator inns i undertake measures to promote financial awareness. financial 10037011055. (2) In this Part,"Iinan CI. I awnrenes0" ineana the understanding and knowledge of members of the public regarding financial matters, including, the -

(t) benefits of financial planning; (b) rights and proiecriont available to consumers of financial products and financial sceviccs; and ES (0) features, eniES, risks and benefits 01 different Emu :J:1 products and financial services

(3) The Regulator may in discharge of the financial awareness function, make regulations to- (a) support the doing by other persoi .5 of anything that it considers would 30 enhance E landrl awareness; or (b) arrange for othei persons to do anathing that it considers would enhance financial awarcaess.

127. (1) The Regulator may establish a separate body corporate to carry out the promo- a no,[qqaq tion of financial awareness. incarencis Mar- as (2) If the Regulator deudes to establish a financial awareness body, it must - (a) take such stark ea are necessary to ensure that the financial awareness body is, at all i Miss, capable of discharging the funcrion of promoting financial a-EN:finnan: end (5) provide sePACCD10 the financ al an arm es body wroth the Regulator' considers would facilitate the promotion of financial aficareneSS -s93 - Part 17.7 29 ADVISORY COUNCIL. ON CONSUMER PXOTECTIOIc 61

Otechemisse to achieve and 128. (7) The Regulator must ensure that it has in place appropriate mechanisms to montior linancial achieve and monitor the achievement of the financial awareness objective, awareness. which include -

~~(a) the in elusion of a budget relating to financial awareness in its annual budget; and~~

(6) the inclusion of an annual plan relating to financial awareness in its ft nail- cial plan, which must se: out - (1) the targets of financial awareness for the year, which should, to the amen: possible. be In the form of quantifiable targets; (d) relative priorities of each of the tare as, to (iii) measures planned to achieve che targets; (tv) g etes manner in whish the extent of achievement of each of the targets is to be determined and monitored, and (0) the allocation of resources towards implementing each of the targets.

~~(2) In addition co the requirements contained in section 77, the annual report of the Regulator must include -~~

(a) details of the extent to which the targets for the year, as mentioned in the mutual plan, have been meo (6) an explanation curesaiititla reasons for any failure to achieve the targets so stated in the annual plan and the actions intended to be taken to remedy the situation;anti (a) details of its latest accounts relating to the cost of pursuing the financial awareness Mnction.

~~(3) The Regulator must publish details of its performance against the financial as awareness targets determined under sub-section (1)(b)(0.~~

~~CHAPTER 29~~

Estatitsamere of ,E„ 129. (1) The Regulator most establish and maintain a Consumer Advisory Council to covsutitt carry out the func7ons under section 49 while representing the interests of 30 protection. consumers.

~~(2) The functiontng of this advtsory council will be in accordance with Chapter 12, other than in the aspects provided here.~~

(3) The Consumer Adtisoly Counoti will consist of a minimum of five and a maximum of nine members who are consumers or persons representing the interests as of consumers, to be appointed by the Regulatoo

~~(4) The Regulator must ensure that the membership of the Consumer Advisory Council gives a fair degree of i :presentation to experts in he fields of personal finance and consumer tights~~

(5) While appointing the members of the Consumer Advisory Council the ReguLa- ter must also sake into aCeuunt the need to ensure propel geographical representation front across the country 62 The Regulator man appoint one of He members of He Consumer Advisor/ (6) Council to be the chairperson of the Consumer Advisory Council of the Con- sume: Advisory Council.

citts meiliremmsorj, 130. (1) The Regulator must take into account dry representations or reports that are , Council_ n discharge of its functions. a made to it by the Consumer Adviserv If the Regulator disagrees with a view expressed, or proposal made, in the rep- (2) resentation or report, it must give the Consumer Advisory Council a statement tirvitng of its reasons for disagreeing.

CHAPTER 3C INTEEACTION arnsREN TEE COMPETITION COMMISSION AND THE REGULATOR 10 Gonsultachntha reseadgps The Competiden Commission may submit its Comments on draft reguladons (7) Issued by the Regulator for public consultadon under Pert Ill. The Regulator must take Into account any codurscnts that are submitted to it (2) by the Competition Commission.

~~(3) If the Regulator disagrees with any commend make by ihe Competition Com- mission, it must give the Competition Commission a statement in writing with its reasons for disagreeing.~~

~~ithe This Nathan applies where the Compeddon Commission is of the opinion char acmortd 132. (1) a negative effect has been created, or is likely to be created, on account of — co ;swa.~~

(a) aregulatory provision or pracdce of a Regulator or a combination of regulatory provisions or practices'. or f atures, of a marker :hat could be dealt (b) a feature, or a LOntinag on o dith by rett Wateryproonsff spi mires.

(2) In this section — (a) 'negative effect" means the prevention, restriction or fiistordon of canape. 2S dtion in a market for financiat prodders or french) serviceS; means any egulations, guidance or code issued by (b) `regulator./ provklorvi the Regulrhor under this Act; and (c) 'feature of a market' means — (i) the cent ei tire of a market for financial plodders or financial services so or any aspect of that structure; and (ii) the conduct, whether or nol in the mairvet for the concerned financial products or financial services, of financial sersiee providers

~~oni (I) are satisfied, the Competition as (3) If the conditions nontained in sub-sect Commission mitst submit a report so the Replator statfirg —~~

~~(a) details or me Compeddon Commission's findings on the negative effect: and (b) its recommendation on acfions co be Taken by :he Regulator ti's--- 63~~

Rerprarc by Regality: 133.(1) The Regu:atormust, within the period agreed to between the Regulator and the Competition Commission, Emends a response to the Competition Commission stating how it proposes to des: with the Competition Commissions report. (2) The response must state -

~~(a) whether it has decided to take any action, or to take no action; (b) if it has decided to take as don, what action it proposes to take; and~~

~~(c) reasons for its decides .~~

~~(3) The factors to be tam into account by the Regulator while deciding its response must include -~~

(a) its principles, objectives and functions under the relevant Part to which lc the matter relates; (6) representations made to the Regulator in connection with the matter by any person appearing to the Regulator to have a substantial interest in the matter: and (c) any cost benefit analysis prepared by the Regulator in relation to the regulatory provision er practice that is the subject of the Competition Com missions report.

~~(4) The response must be -~~

~~GO submitted to the COM:2E2.CM Commission; and (I) published by the :Saguia's, along with the Competition Commission's re- 20 Pow~~

CoMpeetra CO2020E22[02'2 134. (I) if after the Competition Co.amission has made a report under section 132 and power to Arse the Regulator has submitted its response undo section 133, the Competition 2422210E1s Commission continues to remain oldie opinion that a negative effect is created under section 1320), she S:crapaition Commissionmay issue directions to the 22 Regulator requiring it to race paniculw actions to remedy the negative effect.

(2) If the Competition Commission issues a direction to the Regulator under this secdon, it must pubilsIt a statement containing details of die direction issued with reasons and subm.t a copy of it to the Central Government

~~(3) The Central Goyemmein must have a copy of the directions issued by the Corn- so petition Commission raid before the Parliament.~~

Reference by the <0202210non 135, (1) The Competition Commission must make a reference to the Regulator when it undertakes any procesd:ngs under the Compethion Act in which at least one of the parties is a financial nervlm provider

~~(2) The reference must cousin -~~

220 details of the circunistal.ccs relating to which proceedings are being urb dereaken by the Competition Commission: (b) any particular Asti: relating to the proceedings on which the Competition Commission realises LK' Rcb-ulatois inputs; and (c) any other matter agreed m between the Regulator and the Competition Commission. 0Z,

Part IV. 30. THE COmPm riots Comaussiov AND THE REGamiaTag. 64 - The Reg.gator muss assess the reference and respond to the Competition Com (3) Regulator and the Competi- mission, within the period agreed io acumen the tion Commission, with a report on the re/erred matter.

(4) The report most contain - the Regulator's response, with reasons, io any particular issues referred (a) by the Competition Commission for its &Tuts, the Regulates recommendations an faci ors that sbould be considered by (b) the Competition Commission in reisaion fa the proceedings, if any; and informosion ahous she Regulates decision to nuns/ nate a nonvoting mem- (c) o her under section 136. The Competition Commission most tali° into as account the Regulator's repots (5) while making its decision on the referred mater

the Compe- Autiaocinir.sz"(1/ 13& (1) The Regulator mai: nominate ape as a non-voiing member of ntion Commission in any proceedings under the Competition Aar if - =ter atleast One of the curves to ihe vsaceedings is a Gra aciai service provider; (a) and (b) It appears so the Regulator that it decision taken, or likely to be taken, by the Competition Commission may hmie a significant negative impact on the pursuance of the RegthatOdS objecLEVeS under this Act or any other law. (2) The person nominate by the Regulator -

(a) must he a member on the board of the Regular. Or a senior official; and must have )newledge of the sublet master to which the referred matter (b) relates (3) The person nominated by the Regulawr will be enudea to artend and participate in the Competition Commission's proceedings on the referred matter but will not entitled to vote on it.

liamss//a//r /he 137. (/) The Regulator must make a reference so he Competition Commission to report add of a 2nanciai semice pro /ides :hat appears to the Regulator to be giu any con ao a suspecd violation of the CompenCon act. (2) The reference muss contain demi& ol - the circumstances in respect of width the reference is being made; and (a) of the Competition Act. (b) the Regulatoes reasons for suspecEng a violas The Competition Commission must assess the reference and respond to the (3) Regulator, within the period agreed ro between the Regulasor and the Compe- 2.5 tition Commission, wirh a reposes the referred matter (4) The report must contain the Competition Commission's derision, with reasons, on whether or not is initiating proceedings under the Competition Act in reladon to the referred marten Memorandum of „smdias. sa 138. (1) The Comvedcion Commission and the Regulator use emer into a memoran- use dam of understanding to essalaiish the procedures for co-operation between them, within six months from the commencement of this Act 65

~~(2) The memorandum of understanding must provide for -~~

(a) the period within 7,11(ch the Regulator must submit ib response to the Competition Commlssion under section 133; 00 the detailed process for references to be made by the Competition Com- mission to the Regulator and by the Regulator to the Competition Corn- 5 mission under sections 35 and 137; (C) the process for appointment of a nominee by the Regulator as non-voting member of the CompetitionCommission under section 135; (d) process for co-ordination between the Competition Commission and the Regulator in relation 33 the review of any combination involving a financia( service provide[ under this Act; (e) exchange of information between the Competition Commission and the Regulator; (1) the manner in winch a market will be identified for the purposes of this Act; and la (g) any other matter that may be agreed to between the Regulator and the Competition Commission.

~~(3) The Regulator and the Competition Commission may agree to revise the temps of the memorandum of understanding from time to time.~~

C. (UTTER 31 OTHER LAWS Powertoondut applusom of the 139. (1) The Central Governmelt may by notification, provide that nothing contained Consumer in the Consumer Pralucliort AM, 1986 (68 of 1986) will apply to a retail con- PrOle[d[in Att. ''n re pew ", .11 t. d d his Ac , ' h parrs fl - dia, as considered ne crss (rum such date as may be notified by the Central as Government.

~~(2) A notification under [ass secure may he issued by the Central Government it is satisfied that -~~

(a) the number of comp] .12 ms being referred to the Redress Agency under this Act are Significantly higher than the complaints referred to the consumer 30 courts established undo-the Consumer Protection Act, 1986 (68 of 1986); (6) the Redress Agency T effecPrely discharging its functions under this Act; and (c) the tisane of the let! c I LOII MI not cause a significant detriment to the Interests of rc ad (consumers 3a Part V 32 Our acrsva wixcaus

~~PRUDENTIAL REGULATION~~

CHAVIRR 32 ooscnvEs AND Nr:P:es Vannes. s 140. (1) The Regu]nor must discharge. its functions and exercise its powers under this Parr with. the objective of — (0) promoting the safety and soundness of regulated persons; and Ora contributing to the stability and resilient^. of he .finand al system.

The objective of promoung the safety and soundness of regulaced persons must (2) be advanced in a manner that seeks 12 — (a) ensure that the affairs of PandaLed persons are organised, overseen and o managed in a manner that enables them to discharge the obligations owed co their consumers; and maintain the probability of failure of regulated persons within a level. am (h) cep table to the Regulator. Is In this section, "name of a regulated person" means — (3) ➢lrles as they fall due; or (a) the regulated person being unable m maw liab an action being initiated under Pact VI] to address a risk to the viability of (h) the regulated person.

dlli"cf to 141. (1) The Regulator most take into account the following principles while discharg.cancans! F" c wen under this Part — rentation. ing Its functions and exercising its . obligation Imposed on Tog:lam:I persons should be proportionate to (a) any

(0 the nature, scale and complexity of the risks inherent in the regulated activity being earned on by the regulated person; (p) the manner in which die rmu,atcd activity ranks on the factors contained in section 1510)(14; and fill) in use of regulated persons that ate Systemically Important Finan- cial Institutions, the relevance of the regulated person for the stability and resilience of the finaritial system; the feasibility of supervision by the Regulator and implementation of reg- DJ ulatory actions by regulated pelsors; (s) persons who control, oversee and menage the affairs of regulated persons must share the responsibilify of ensuring che safer)] and soundness of the regulated persons, :he regulatory approach towards resit- (d) minimisation of inconsistencies c an mane us pose similar risks to the fulfil- raced activities chat are similar ment of :he Regulator's objectives ',agar this Part; any obligation imposed on regbamd persons should be cons steal with (e the benefits. considered in general terms, which are expected to result from the Imposition of that onica Hon, cR99

~~Part V 33. ALITHOPISATECIN FOR PROLIDING FICA CAL SERVICES 67~~

(0 competition in the markets for fin ado) products and financial services is desirable in the interests of consumers and therefore - (I) bathers to coonethion owl 4 to adverse effects of regulatory an dons should be minimised; and (ii) there should be competitive neutrality in the treatment of financial 5 service prOVidein (g) facilitating access to lintntial products and financial services is desirable in the interests of consuinersi (h) innovation in Othrifid no ducts and financial terraces is desirable in the interests of consumein ro (i) regulatory actions should be canted out in a manner that is least detrimental to the global tomptfitiveness of the financial system; 4) the effects of regulatory actions over a continuing period of time, which means a period of a least five years after a regulatory action is taken, should be considereci anc ss (k) the effects of replaton Cc Liens on the stability and resilience of the finara cial system, in pamutat the need m minimise pro-cyclical effects, should be considered.

(2) In interpreting this Part am: in astharging its functions or exercising its powers under this Part, if the Itegilatoi perceives a conflict between any of the odnefi pies contained in sub-son:on ft), or if more than one interpretation is possible, the Regulator must Nth onle and manage the conflict gig preference to the principle which world be lac most relevant for furthering its objectives under this Paw.

~~IAP]IR 33~~

PaCintieg ori carrying on Re 142. (1) No person should cony on J¢ business of providing a financial service in In- business or dia, or purport to do so, wanner on its own behalf or on behalf of any other tnenciii 3333cei person, unless the peon has obtained an authorisation from the Regulator to inchoui carry on the badness of put 'ding Mat financial service accordance with the 30 auchoinniori provisions of this Pan. (2) In this section,"pronchng financial service in India" includes providing financial services to consumers in India, whether from within the territory of India or outside. (3) A person purports to provide a financial service in India i whether or not 33 intended, the person - (a) adopts the descUption of being authonsed, or exempt from the requirement of being a -Wonted, to provide the financial service; or (h) conducts itself in a mthaor that indicates or is likely to indicate that the person is authorised, or puma:from the requirement of being authorised, in to provide the imancial advice.

offeace. 143 Any tr do of S' -LOP 142 s p idsh ble s Class B ffe under this Ace, except in cases where the nanixivenCian is found to be withl, in which case it will be punishable as a Class A offs cc under. this Act 68 uth mamas

°0 '6 Rve 144.(1) The requirement to obtain authorauhor uo don nder- section 142(1) will not apply Temarcmenrn to to - obtain ummsaten. (a) an individual registered with the Ragniathr under sectthn 104; (h ) a financial representative of a Mare serece provider, if - (0 the financial representatim is calming on an antithty that is connected with the provision of a financial service for which the concerned financial service provther is authorised; (ii) them ncerned financial service pro, ider has accepted responsibility in writing for thencdvisiei of in financial representative; and (iii) the financial representative complies with such other requirements as may be specified. (0) the Central Governmen: or a State Cover r. meat while carrying out specified financial services, if so profi:(cd undo. regulations made by the Reg- ulator in this regard. odder means the financial seta a (d) In the section, "concerned financial ....:co pr vice provider on whose behalf a finans 01 representative is acting.

~~f 145. (1) A request for authorisation se carry ea n financial service must be made to the Rmfamtionsatiov. v Regulator in the (vim of an application.~~

(2) The Regulator may issue an approve' order granting authorisation for the cares ring on of any or all the financial services in respect of which an application is made after being satisfied that I he yerson rafilung the application -

(a) satisfies the authorisation criteria MCCified by the Reguiator under sub- section (3), if any such authorisv iMn etitena is specified; or (b) shows sufficient evidence of beim Ilk a peicion to comply with the movi- e stuns of this Act . (3) The specified authonsation criteria in sciatica to a financial service may include requirements in relation to one or more of the Miming marten -

(a) the capital scruceare of the appicant, including the minimum capital required to be held by it; so (b) the legal and organisational Mal CLUre of Cic appiicant; (e) the ownership structure of the appicanfi including restietions on ownership of the applicanz by spec in ed persons or class of persons; (d) the systems of governance remirce :o be put in place by the applicant: (s) fit and proper person criteria for persons engaged in the oversight or strategic management of the apple:se; (0 conditions to be satisfied in case the .pplicant is a member of a specified type of group; (g) evigence of being in a position to comply with die relevant prudential requirements under Chapter 34, if, and to die extent, applicable; and (h) any other criteria that the Regul a LE) r maY SP ecifY

The Regulator must specify the cacemacs of enancial service providers tha 146. (1) meta will be entitled to obtain authmisation shithigh self-registration, subject to sue ] conditions as may be spedfied. -30I ' Part 13 33, AUTHORISATION FOR /fin SIDING gyanand SERVICES 69

(2) The acknowledgment of an application for authorisation made by a person specified under sub-section (1) wig constitute the grant of en authorisation under Section 145 and the movirons of section 70 will not be applicable in such cases.

~~(3) The selerregintation process will not apply to any person that proposes to catty out a financial senice -~~

(a) that is specified to be a regulated activity; or (5) in respect of which any authorisation c3 tern has been specified. suspension or 147. (1) The Regulator may vat); suspend or cancel the authorisation of a financial cence.lAdOn Of either ed the application of the concerned financial service is provide,. or acting on its 0,va. (2) The authorisation may Le vared tinged sub-section (1) by - (a) adding or removing a financial service from the list of financial services for which the authorisation was granted; fb) varydng the description of a Lnannal service for which the authorisation ts was granted; at (c) varying the gond:root on which die authorisation was granted.

~~(3) The Regulator may voce suspend or cancel an authmisadon, acting on its own,~~

(a) the financial semue proacler has failed, or is likely to fail, to satisfy die ID a uthorisadon cpteria under_ ection 145, if applicable; (5) the financialsenice provider has failed to carryon a regulated activity for which the autborisai ion was granted for a continuous period of eighteen months; or (c) the action is renired to be taken in order to men any of the Regulators as OhjaCrVeS. (4) If the Regulator den. as to van{ suspend or cancel an authorisation issued to a financialselvice prorder aZ013, Os in Own, it must issue a show-cause nodce to the concerned financial seance provider followed by a decision order

(5) The variation, suspension or cancellation of an authorisadon under this see- 30 ton will not affect the [alidiy of any financial contract entered into or made before the date of notificahoo of the variation, suspension or cancellation by the Regulator paying or 148. (1) The Regulator will issue a unnuc nentification number to each person per- wfiontsnons ant e‘eMPt10115 mitted to carry out f; 3 .1, e d th; Act, hethe by grant of an 35 authorisation under nun], 145 cr by virtue of an exemption under section 144. (2) The Regulator must maintain and keep updated at all limes a publicly accessible database of -

(a) persons author:aid under set lion 145 to c airy out a financial service; and 40 (5) persons exempteduncle: Se.CL:CM. 144 from the requirement to obtain authorisation (3) If the Regulator varies, suspends or cancels an authorisation under section 147 it must maintain a r.utd of the a tine on the financial system database.

~~Non AD 34 PRUD7NTIAR REQUIREMENTS 70~~

~~555154 149. A financial service provider may offer fine mint pro:liters to consumers in the man- per provided under section 105. fie anciipnaducts.~~

meik".:1° 075U" 150. (1) The Central Goverment may prem. any facify or instrument, in addidon l to those listed in section 2(72), to Tr I-Inane:it product F. allows a person DIDLIpre03355 DEP Entmeld 5 spruces (a) male a contribution of money c: se2drides, where the person making the contribution does not have any My-to-day control over the use of the contribution, and the contribution is :trade with the objeetthe of - (0 getting a financial return or any benefit; or ID PO safekeeping of the cow fit mon; (h) manage. avoid or lima the finanur I censer uences arising from - Pt the happening or not happening of u ?articular event; or (i0 fluctuations in receipts or :fists. intruding prices, currency exchange rates and interest rates; (6 make payments, or cause patTncnk to he made, othenvise than by the physical delivery of Indian currency or (d) borrow money.

~~(2) The Central Government may prescfibc any service, other than those listed in section 2(75), to be a Enanciai sea cc~~

(3) The Regulator may specify any sereth or class of services, rendered by specified persons, to be excluded from the list of fTanc.a senices under section 2(75), subject to such conditions as may bu spar .M.

~~PRUDENTIAL IL-011~~

as 151. In this Act, 'regulated actikithi m a financial service that is specified by itfrgruratkilum the Regulator to be a regldaped Dictum/ (or the purposes of this Act, taking into reollaND akitties account the following factors -

(a) the inherent difficulties that may be faced by financial asnice prociders carrying on the financia. service »i fulfilling the obligations owed by them DO to their consumers; and (b) the nature of the relationship bet m an financial feriae providers carrying on the financial service and their consumm, including - CS) the nature and extent of dc miens Mat may be caused to consumers in case of non-fillfilment el obligations owed to them by the final-L- as dal service providers) (ii) the ability of consumers to access and process information relating to the safety and soundness 05 do financial service providers; and (di) the ability of consumers to cmordintne among themselves to monitor the safety and soundness of the financial service providers.

(2) While s/ecifying a regulated activity antler subs ecdon (7), the Regulator must also specify the manner in which a metro ry or sub-emegory of financial service ranks on the basis of the Diann smirk M section (1)(10. -303- Part V 34 Pnunlirrnirr tgliumEirEt r8 71

(3) The regulations under this section must be made within six months from the commencement of this Parr and may be modified from time to tune. ant @sour 152. (1) A regulated person must at all times - (n) maintain adetuaie capital resources that ensure that there is no significant risk that its liabilities cannot be met; 77 ensure that its camtairesourtee are equal to or in excess of the capital resource requiem: Is sited by the Regulator under sub-section (2)(b); and (a) monitor its compliance with the capital resource requirements on an ongoing basis and inform the Regulator of any actual or potential breach of ro the capital resource reqmemots. (2) The Regulator must specify - (a) the manner in which the provisions of this section apply to different categories of regulated persons; (6) the capital resource requirements, both as to amount and quality, for dit Is ferenc categories of regulated persons and the duration within which the requirements are to be met; (a) the manner in which the amounts or values of assets and liabilities are to be calculated for the purpose of meeting capita/ resource requirements; (d) the manner in which change in the value of assets and liabilities is to be to recognised and calculated; (e) the financial rerourees Nan will not be taken into account as capital resources for the purposes of assessing compliance with the capital resource requirements. (D the process to be followed by the regulated person in case of any actual 23 or potential breach of its capital resource requirements; (g) circumstances that may caustic= an actual or potential breach of the capital resource iequiremeassi and (h) the consequences ornon.comuliance with the regulations made under this section. so (3) While making regulations under sub-section (2)(b), the regulator may provide for - (a) the manner in which capitol instruments are to be classified into different tiers of capital if:sources; (b) limit on the use of different tiers of capital resources by regulated persons as to meet the capita: resource requirements; or Cr) a requirement than a ton:tied portion of the capital resources must be held in the form of speciged capital instruments, which, in the opinion of the Regulator. would facilitate enhanced assessment of the regulated person by specified persons. ro (4) If the Regulator makes real/aDIM under sub-section (3)(0), it must take into

(a) the extent to which a cap/ al instrument is likely to absorb losses; (b) the permanence of the capital instrument and the extent of its avagabilgy, when required including the extent of variation in as loss absorption 45 capacity upon variation of dine, context and circumstances;

~~ETC V 14. PAL:ENE-1AL REQUIREMENTS 72~~

(c) the manner in which the capist I :mmund at rasa for repayment, com- p, dissoludon or similar procedure involving the yes/Meted person; and (d) the extent of fixed costs, including chliga Len to paid scide rids or interest, associated with the capital ins Lameni

(5) In this section- (a) %aerial resources" means h minor:es held by a regulated person that are capable of absorbing inexpo ed losses; and (b) "capital instrumen ei means al: inssrum ens for making an investment in, or concribution to, the capital rc.sources cf the regulated person, including any security issued by or loon made Le i ha regulated person.

~~]53. A regulated person must notify dm Re gulmer, in writing, of as imention sue a capital instrument which it inteinls ic delude within its capital resources. env.~~

(2) The notice must be giveiatleasmne month before the intended date of issue, unless there are exceptional circumstamos 'Mich make it impracticable to give notice of such period, in which eve a: Me mbolaced person must give such notice as is practicable in those cirm insm tic as.

(3) When gxing notice, a regulated mmon must - (a) provide details of the amount M cep hal resources that the regulated per- mw hom m son is seeking to raise shrough miendad Issue and the person the capital instrument is emenmsi to he i-e-ed; (b) identify the tier of capita: resourcesresources=tar the capital instrument is intended to fall within; and (c) provide details of any features of the cipital instrument which are novel, as unusual or different from a capital Mstremens of a similar nature previ- oudy issued by the regulated person or seidely available in the market.

(4) The Regulaoor must specify - (a) capital instruments to which this section does not apply which may be detennined raking into account !mien inducing, the extent to which capital 30 instruments of a similar nature ere widely available in the market or have been previously issued by the regulated person; and (b) circumstances that will be considered is ha exceptional under sub-section (2), which may include Mammas whole there is a risk of a regulated person's capital resources falling ielow Its capita' resources requirements if the notice period under Men sub-semon is observed.

~~bideiddfd 154. (1) A regulated person must at all nines maSota in adequate liquidity resources, reemionems. and should satisfy the liquidity requirements sr/miffed by the Regulator.~~

~~(2) A regulated person must manage /tad m ntimr6 compliance with the liquidity requirements on an ongoing basis, intleding to ensure that -~~

4o (a) its liquidity resources contain an adequate buffer of high quality, unen- cumbe red asset; and (b) it maintains a prudent handind profile, including assets that are of appropriate maturilies, taking accent of via expected timing of its

~~(3) The Regulator must specify- -3 Part V; 34. PRUDENTIAL REQ013.511ENTS 73~~

(a) the manner in which the provisions of this section apply to different categories of regulated pelso Li (Is) the liquidity requgements, bosh as to amount and quality, for different categories of regulated persons and the duration within which the requirements are to he met; (r) the resources that will not be taken into account as liquidity resources for the purposes of assessing compliance wSth the liquidity requirements; (d) requirements relanng to the maintenance of a prudent funding profile for different categories of mg ula Ltd persons; (e) the process to be folowed by regulated persons in case of any actual or to potential breach of iquidity requirements; and CO the consequences ci non-compdance with the reguladons made under this section.

(4) While making reguladops under sub-section (3)(6), the Regulator may provide a 5 (a) the conditions that num be sansiled for a resource to be regarded as being a satisfactory liquiany resource for the purposes of meeting the liquidity requiremens; (k) requirements to maintain spar iged ratios or reserves to meet liquidity re- quiremenw; and (G) limits on the use ei different ;Wanda' resources to meet the liquidity requirements raking Ices actount the liquidity of such financial resources, as no red by the Reguator over a period of time. (5) In this section, liquidity resources" mean the financial resources to be held by a regulated person in order to ensure that there is no significant risk that its as liabilities cannot be met as they /al: due.

3.33533515111. 155. (1) A replaced person must naves: its assets and the assets of in consumers in a prudent maimer, raking into account the following principles — (a) investments must be made in assets whose risks can be properly identified, measured, monitored, mGnaged, controlled and reported by the regulated so person; (b) investments must bc made ma manner that ensures the secukty quality, liquidity and pronnbilicy of the assets of the regulated person, taken as a whole;

(G) investments must be made taktng into account the nature and duration of 35 the regulated person's ;nighties; (d) in case of any caulPet of Interest, investments must be made in the best interests of the consumen of the regulated person; and (e) assets Must he prcper34 dives sided in order to avoid excessive exposure to any particular pi-son 5533 L, sector or group, or geographical area and au excessive accumukkion o! risk in the assets of the regulated person, taken as a whole. (2) TheRegulatormustspeclly- (a) the manner in wh k h the' s wv.s ions of this section apply to different c gories regulated persons, (b) any investment rest L1ctions applicable to a regulated activity; and _396

~~(c) theconsequences of no me wrih the regulations made under this secfion.~~

(3) While making regulations under sew- sectior. (1)(b), the Regulator must take into account the need — limartry and profitability of the assets of (a) to ensure the security, quail the regulated person, taken as a whole (b) to ensure the protection of funds of core-rimers, which may be done through

(r) a requirement co segrcemie the funds or assets of consumers from too the other funds or assets of the regulated person; or (E) any other prohibition or mstriction on the disposal of, or other dealing with, funds or eskers belonging to consumers. (4) The power to make regulations under subsection (2)(b) must nor be used by the Regulator to provide for quandraihn rekrictions on the compositionof the assets of a regulated person, taken as a whole. (5) In this sccdon, "quantrtauve restri include the imposition of maximum or minimum limits on the holding cf any particular asset or category of assets.

~~Systems or 156. (1) A regulated person must — gaternamee.~~

(a) have ill place effiective systems of gm:Gm aoce which provide for sound and prudent management of es affairs, and (b) ensure that the systems of gowmance adopted by it are Implemented, reviewed and updated on a ye sa. lar Ms 5

~~(2) A regulated person must take into account the following factors while determining is systems of governance for the purposes of sections 156 to 160 —~~

2S (a) the nature, scale and complemw of its business; (b) the diversity of its operations, h.:Iodine geographical diversity; (G) the volume and size of transactions carried out by It; (d) the degree of risk associated ➢ iLa each area of its operation; and (e) its group-wide risks . (3) The systems of governance must include policies and procedures on —

(a) governance and controls; (6) risk management; (c) Mremal audit; and (d) where relevant, outsourcing (4) The Regulator must specify — (a) themanner in which the provisions of secnons 156 to 160 apply to different categories of regulated persons; and (b) the consequences of non-compliance wi.h the regulations made under see-

~~Go (5) The Reim lacor may also specifY tin- —~~

~~(a) regulated persons most put in place a .vritten policy on any aspect of its wirems of govhmance, includinh matte under sections 156 to 160; and 07 - Part V 34. PRUDENTIAL REQUIREMENTS 75~~

~~(b) the policies required robe pis in place under caul ( 7 t b re dewed and revised periodically.~~

Commence and 157. (I) A regulated person must have In place an appropriate organisational and governance structure with efficient policies and procedures to ensure that - (a) persons carrying on significant functions on its behalf are fit and proper s persons; (b) there is a clear allocation and appropriate segregation of responsibilities within its organisadon, (G) there are adequate imbues foireporting, communication and co-operaPon within its Mflunisal inn; to (d) the performance of muldp.e tasks by individuals does not, and is not likely to, prevent the sound performance of their dunes, (e) irs executive TeMll 'lora Eon. poticy is - (i) consistent with its available resources and risk profile; and (ism inimises any Palen tic I conflict of imeres Cl) it has in place ape] onriate aeminisrrative, accounting and incemal monitoring procedures; and (g) it maintains adequate and orderly books and records, in the manner and for the periods specified by rhe Regulator.

(2) The Regulator must speslfy leg diremencs relaring to - so (a) the appointment of persons, who are fit and proper persons, for the un- 16pIe0m; entanon of ally of the systems of governance under sections 157 to

(b) preventing conflict of Istorest of persons responsible for canying on significant functions in mks teen regulated persons; and as (c) the circumstances dud ]Anntier in which the Regulator may replace the body responsible for the oversight of the regulated person's affairs or che members of such body (3) The Regulator may also specify requirements relating to -

fa) appointment, responsibilities and process of appointment of persons car- 30 rying on significant functions, including a requirement to obtain approval before a person cat, :tarry on specified significant funcdoes; (b) the size and comnosplcn of the bodies :esponsible for the oversight or strategic managemn at of regulated persons; (c) the establishment of sr acilled committees or groups for carrying out spec- ss Med functions; (d) the processes to be I snowed by rhe bodies, coMmnteee and groups mentioned in clauses (i) and (e); the structure or roan of eYeCILLTive remuneration; co control and owners hip structure of regulared persons; so (g) systems and processes requIrucl to be put in place by regulated persons to ensure effective comithenec with applicable laws and regulations and internal policies; and restricdons on canna! din libur:ons by regulated persons under specified circumstances. 45 .3°$

~~, PA ovslAwaL dmeumgremers 76 Part V 34~~

53515505110.50Ment 158, (1) A regulated person must have in place an (festive risk management system compnsmg of policies and processes recess dy to properly identify, measure, prioritse, monitor, manage and repo]: on a mnrinuous basis, the risks to which the regulated person is or could be en posed. b; the regulated person must - 5 (2) The risk management system put :11 p (a) be effective and well integrate( isto its organisational structure and decision making processes; (6) enable it to properly identify aro asses the risks to which it is, or could be, exposed in the short, medium and land-berm (c) take into account inter-depended:les of esks, concentration of a particular risk and overall risk tolerance :eaels; (d) provide for the reporting of risk expos des ro the bodies responsible for its oversight and smategic managemene (e) implement risk mitigation 5000 0.51525 Mat are appropriate according to the nature of the risks assumed by it; avid (0 ensure that its affairs are cord ma in a manner that enable it to cover ics expected losses, (3) The Regulator may specify - (a) rhe types of risks that need to be raker into account in relation to a reg- 20 ulated activity, svhich may include bush ens nsks, investment risks, operational risks, credit risks, concena a tion :isks and liquidity risks; (5) the. rypes of risk management and risk mitigation techniques required to be followed in respect of a odd-rad at: ivity; (0 methods to be used for identiffffr, me; outing and monitoring risks; and (d) reporting requirements to be romplled with by a regulated person when it undertakes specified types of asks.

In5e a 159. (1) A regulated person must have in wace an of cctive internal audit system to - (a) examine and evaluate die adsiloery mid effectiveness of is systems of governance; and 30 (b) issue recommendations based m the lasult of examinations and evalum tions carried out in accordance ad di clause (0) and verify compliance with those reoommendanons.

(2) The internal audit system must be designed is a manner that - (a) ensures the independence and Ateamda Iffy of the persons carrying out the 35 internal audit function; and (5) allows persons carrying our the Miernai audit function to - (i) express their findings and tem rn.nondations to the bodies responsible for the oversight cis swats pie management of the regulated person; and (a) communicate directly with any c: icer or employee of the regulated person and have complete rod un esnimed access to all information and records, as they consider necessary for the discharge of died functions, subject to cove:ea:id y requirements,

~~(3) The Regulator may specify - Part v. 77~~

(a) the procedures that must De followed by persons performing the internal audit function; and (e) requirements that certain findings that are made in exercise of the internal audit function most be notified to the body responsible for the oversight of the regulated person or to the Regulator. wesouratag 160. (Isection

(a) lioucsourcing" means an ste alignment between a regulated person and any other person by which inn person performs a function or activity whether directly or by sub-Du:souping, which would otherwise be performed by the regulated person itself and to (b) "service provider means a person who performs a function or activity under an outsourcing arrangement with a regulated person.

(2) This section will apply to the outsourcing of a function or activity to a service propider, whether or not the service >rapider is a financial service provider and irrespective of the service provider's place of business. 15

~~(3) Ira regulated person pmDoses m outsource any function or activity to a service provider, the regulated pet sop must —~~

(a) obtain die prior permission of the Regulator if the function or activity being =sourced is a critical function or activity specified by die Regulator under sub-section (6)(a)', (b) remain fully responsible for discharging all of its obligations under this Au and regulations mace under it in respect of that function or activity; and (C) ensure that the outsoaDcmg of that: function or activity does not — (0 impair the quality if is systems of governance or impede the ability as of the Regulator to monitor the compliance of its obligadons by the regulated person; GO cause an excesses. increase in the risks faced by the regulated person; or (2) undermine the continuous and satisfactory provision of financial 30 services to the consamers of the regulated person.

~~(4) While choosing a servite provider for outsourcing any function or activity, a regulated person must steure. 1Lar —~~

(a) a detailed review ia palormed of the potential service provider's ability to deliver the required ft:net:ups orsctivities satisfactorily; as (b) there are no actual or pc until I conflicts of interest that may impair the service providers abilitylo denDel to the required standard; (s) the service provider aoplass equivalent provisions to those that the regulated person wcild The to apply in respect of the confidentiality of consumer data, if applicable; so Id) the outsourcing an ongeThitti is not in breach of any law; and (e) the service provider is requi9 to disclose any developments that may have a material impact on its apility w cast' out the outsourced function or activity. -- 31 0

~~Pap 135. Allgroas Ago ACTUARIES 78~~

The Regulator will continue m have the pot: r to supervthe ouuoumed functions and activities and the service powder to whom a function or activity is othsourced must co-operate with the Regal Urn connection with the outsourced function or activity. The Regulator must sPeolth — are considered to be critical Pune- (a) the particular functions or acdvb lea the bons or actonnes m relanon to A I e gala: cd activity and which must not be toed without obtaining lb: Reg scats prior permission; of any function or activity may be (b) the conditions under which this:aimcc, takingsthat the service provider IC perfomthd, induchng any pa root than. 2i- may be required to provide; and (th continuous disclosure requirements in relation to the outsourced funs- dons or activities.

Reithaions 161. The Regulator may specify restriction on— bUSIllss sad Opers.nons hr (a) the activities including Cazegoix of I nancial services, permitted to be canted out by regulated persons engaged m scestPed regulated activities; or (p) subsidiaries or other periods dr t Jr the control of regulated persons engaged In specified regul the ac wines; and (b) the creation of encumbrances or esseis -le:longing to the regulated person or Its consumers. (2) The Regulator must specith — (a) the manner in which the provision section apply co different categories othegulated persons; and (5) the consequences of non-complinnee gel b. the regulations made under this section.

162. The Regulator may specify that certain classes o t regulated activities are permitted V:inTorpenot ratto Ian to be carried out only if Corporation insup.thellas been obtained under Part VII. Insurance.

~~CHAP_Gi 35~~

163. (1) A regulated person must app Dint an pidito... actuary or any other person per- .cu7itnamsennat forming a similar function, as may be specthed by the Regulator, to exercise ac.wang the powers and functions under sewed 164

~~(2) The Regulator must specify —~~

(a) the categories of financial services din: are regulated activities for the purposes of this section; (8) requirements as to qualifications and ethe dense to he satisfied by auditors and actuades of regulated cethoth and 6) the powers, functions and resoodsihilitics of auditors and actuaries acting se for regulated persons, in addition co three specified in this Act. (3) The regulations made under sub-seuidn (2J tag provide for — Part V; 36. PROVISIONS COVERNir (Affacuinn TRANsAccaocrs 79

(a) the manner and time watan which an auditor or actuary is to be appointed; (3) a requirement for the Regulator to be informed of such appointment (c) provisions that enable the Regulator to make an appoinwnent if no appointment has been made or information about such infonnation has not s been provided to the Regulator, and (d) conditions relating to the term of office( remuneration, removal or resignation of an auditor or actuary (4) An auditor or actuary appointed under this section must act in accordance with the regulations specified by the Regulator

164. (2) An auditor or actuary appohRed under this Act to act for a regulated person - Anet(ons of auditors and (a) will have the right to access the books and records of the regulated person at all times; and (5) will be entitled to require such information and explanations from the regulated person or as rffraff, as it reasonably considers necessary for 75 the performance of its duties as en auditor ur actuary (2) The Regulator may make recitations to specify that an auditor or actuary must COTTLIIIICa LC specified mformanon or opinions to the Regulator on any matter that the Regulator reasonably believes to be relevant for the exercise of any of its functions. (3) The matters to be communicated to the Rego!, later under sub-section (2) may include matters relating to persons other than the concerned regulated person. (4) If the Regulator specifies tha this section applies to any person other than auditors or actuaries it must also specify the manner and extent to which the secdon applies to them. 25

Daraffaranon 65. (I) If it appears to the Regulator that an auditor or actuary appointed under this Act to act for a replete:I put-.con has failed to comply with the requirements Imposed on it under that Act or legalations made under it it may disqualify the person from acting as the outtor or actuary as the case may be, for any regulated person or any Paifffflaf category of regulated persons. ao (2) If the Regulator proposes to disqualify an curia(); or actuary under this section it must give the person 6 shouwause notice after which if it makes a decision to disqualify the person it mist issue a decision order (3) The Regulator may cancel a decision notice imposing a disqualificadon imposed under this section IC satisfied that the disqualified person will in fature as comply with the duty in 45124(2'n

~~(4) A person who has been issued a derision order under this section may appeal to the Tribunal.~~

~~166. Any contravention of this tatty cr is punishable as a Class C offence under this Act.~~

~~CWAIWER 36~~

~~Aviatcd. warns 167. (1) No person should cant out any of the following actions without complyin with the provisions of this Ac -~~

~~80 Parc V: 36. Paotesto.~~

(a) a merger, amaigamanon or refute:urine involving a regulated person; (5) the transfer or acquisition of CD in c. or significant interest in, a regulated person; (0 sale, disposal or acquisition of I be teknle, or substantially the whole, of the undertaking of a regulated person t - a significant portion of its assets or liabilities; or (d) voluntary windWg up, dissolution or si char action involving a regulated person or di scononoatio n of its bushes) in any other manner.

(2) A person that proposes to take an abhor under sub-section (2) must make an application to the Regulator. (3) The assessment of the application by the Regulator must be done taking into account, among others, the following Inctore -

(a) the interests of consumers of financial ;to ducts or financial services provided by the regulated person and live other persons who may be affected by the action envisaged under seb-secenn 0); (b) thesuitability end financial soundness ol the person who will carry out the regulated adeptly if the action envisage; under sub-section (2) is effected; and (c) the likelihood of compliance 'Nab die provisions applicable to the regu- 20 laud acdvity under this Act, if die acne ti ern/Waged under sub-section (1) is effected.

~~(4) The Regulator must sped& -~~

(a) themanner in which the provisions of taus section apply to different categories of regulated persons: (b) the scope of the terms "significant tinfreed' and "significant portion of assets or liabilities" in respect of rech r tgulated acttvity governed by this section; and (c) the information required tobesubmit:chi by any person that seeks to carry- out an action under Sub-Section 1, 7;

Transactions vett so 168. (1) A regulated person most ensure that lb resections with related persons are en- relafed pertset. tered Into on an arms-length basis and tau IMIIS of such transactions are no more favourable than the terms conwined , or likely to be contained in, corresponding transactions with persons ooheri han related persons. (2) The Regulator must specify - fa) the manner in whirl) the provisions of Ii Os section apply to different categories of regulated persons; (b) ehRelrucalateogrories of related person 0:inset tions that must be reported to the

(s) ant limits on the permissible value, Si c queasy or proportion of related person transactions; (d) the cawgoriregulate ced persond iraasacnons that are prohibited in:elation to specified regulate activities: and (e) the meaning of Erelatwes" for the puipcses of subsection 2(127)(W. (3) While making regulations under sub zealot (2)(d), the Regulator must take 45 into account - -3)3 - Part V 17, FUNCTIONS AND POWERS OP TUE REGULATOR 81

(a) the risks arising from we related person fransacrion to the safety and soundness of the regulated person; (1)) the conflict of interest that may arise on account of the related person transaction; and (c) the manner in which the related party transaction may affect the ability 5 of the regulated person to effectively discharge its obligations towards its consumers_

~~Ch AFTER 37~~

General funcoons of the Rerlecor 169. The Regulator must - (a) make regulations ro cany out the purposes of this Part (b) Issue guidance to financ,ff service providers In respect of any matter referred to in this Part or the regulations made under it, whether or not

(i) the Part expreesy requires or enables the Regulator to make sepia- Pons on such maffer; or (if) a formal applicatun seeking guidance has been made to it; (a) supervise financial senisc providers to ensure compliance with the provisions of this Parr and the regulations made under it; and 61) take appropriate enforcement action to dear with the violation of the pro- so visions of this Part or the regulaflons made under it.

Condue of mess 170. In this section, "stress tests" nmans ters to assess the ability of regulated persons to cope with possible events or future changes in economic conditions that could have unfavourable casts on their ffsmall financial standing.

~~(2) The Regulator may sped( - (a) the reqlthbMent that red AS and persons omen Conduct StreSS WSW; and (b) quantitative tools and methods for the conduct of stress tests by regulated~~

~~(3) if the Regulator makes regul mons under sub-section (2), it must provide for the categories of regulated persons covered by those repmlatuons~~

Oraers issued Le 171. II) The Regulator may In ocescus of its supervisory functions, issue a show-cause werose of notice, followed by a decision other to a regulated person if the Regulator Mumps. concludes that the affairs of die regulated person are being conducted in a manner that contravenes, or is likely to contravene the requirements contained in section 158 or the regulatif As made under it. as (2) The Regulator must specify - (a) the circumstances in 5vs is], a decision crder may be issued under sub- section CO; and Off the types of resticnons or requirements that may be imposed under the decision orde; which Iffy)) be appropriate Mr the purposes of addressing as the deficiencies leading 10 their imposition. :514

~~82 Part V: 37. Mficwous Aiso Pow.eas os THE Reaumficas.~~

~~(3) The regrladons made ander sub-section (2)(n) may provide that decision orders issued under di 7 secsion may impose —~~

~~(a) restidions on the manner in which the regulated person conduces its business; or (b) restrictions on the liabilities ands sanci7 obligations that may be undertaken by the regulated person.~~

~~(4) The Regulator must —~~

(a) review compliance by the rag uiated p cis on with the decision order issued to is under sub-section (13 (b) reefer the effectiveness of the derismn order in addressing the deficiencies which led so the imposition or me ms¢¢nans of requirements: and (c) remove the restrictions or requccoscre s when the regulated person has remedied the defiziencies. which led to their imposidon, to the satisfaction of the Regulator

3i "el (6461 is 172. (1) The RegainSOS may, under exceptional circumstances, issue a decision order wit to a regulated person setting additionai capital resources requirements to be „quirfiessis satisfied by the reg a la red person, 7 the Rem lator finds thac —

(a) the risks undertaken by the regu wed person deviate significantly from the basis on which the capital resew rte.: requirements under section 152 were determined by the Regulates, (b) the systems of governance or the reiuieted person deviate significantly from the standards contained in ceesions 156 to 160 or the regulations made under those sections, where — (0 those deviations prevent b (sons being able to properly identify, measure, monitor, manage and report the risks that 7 is or could be exposed to; and ( ) the application of other megsures is in itself unlikely to improve the deficiencies sufficiently witica appropriate timeframe; or (c) the regulated eel son is a System:cells- Ii monanc Financial Institution and 30 concribuces disp sop ortioaately, as compired to other Systemically Impor- tant Financial Institutions, to the mels. 8. the stability and resilience of the financial system.

(2) The regulated person must. make sues, ifist to remedy the deficiencies that led to the imposition of to additional capital resources Tequirement under as sub-section (1). (3) The Regulator must — (a) periodically review the additional es pu.d resources requirement imposed on a regulated person; and (h) remove the remerernenr when th e regulated person has remedied the deficiencies which led to its imposidon m the satisfaction of the Regulator

~~(4) The Regulator must specify the cimuniscames in which an additional capital resources requirement may be imposed and the manner in which it ME be calculated. /~~

(5) In this section, "additional capital resources requirement" means a requirement to maintain additional capital resources over and above chose required to be maintained as per the capital requirements contained m section 152(2)(b) or the regulatons made under lb supervmon of The Regalarr may specify the following requirements in cases where persons 3-"P5 belonging to a group arc engaged in carrying out more than one category of regulated activides - (a) group-wide requirements to supplement any of the requirements contained in Chapter 34; or (6) group-wide supetvisorweview and reporting procedures and intervention measures to ensure compliance with the group-wide requirements sped- fled under clause (a) (2) The Regulator must specify the rammer in which the provisions of this section apply to groups consisting of persons engaged in carrying out different categories of regulated activities. 15

~~(3) While making regulations under sub-section (1), the Regulator must take into account the risk exposures inherent in groups carrying on specified regulated acdvities.~~

R022.32221221 NOP R02,4E0012 02 170. The Regulators must enter into arrangements to co-operate with each other in connection with the authorisation, regulation and supentsion of - 20 (a) financial service providers that are engaged in carrying out more than one financial service, and such financial services are regulated by different Regulators; and CD) financial service providers belonging to groups where the members of the group are engaged in carrying out more than one financial service, and 23 such financial services are regu:ated by different Regulators. ...3,6-

~~84 Part ak 38. Paige area ROtAmeg TO csmegiss CONTRACTS~~

~~PART Vi~~

~~CONTRACTS, TRADING AND MARKET ABUSE~~

~~CHAPTER ell~~

~~[Of 5 175. The provisions of this Pam will govern contacts of insurance or contracts regarding securkies. as the case may X'~~

~~(2) The provisions of sections 176 to ISO -gill govern only contracts of insurance.~~

~~176. (I) The pollay-holder has a (114' of unnoat good faith towards the insurer in Na- don to a connect of insurance, inch:mug while entering into such a contract.~~

~~(2] The Regular°. may speclia, the memos; and scope of LICIIIOSe good faith in relation to sped fled contracts of insurance.~~

~~ll l"'" 177. (7) Unless specified, tamable interest nil not be required to consutute a valid lalltra insurance contract.~~

~~(2) The Regulator may specify the types of connects of insurance that may require Is insurable interest.~~

~~gseigyneut of 178.OS No imager may gefigsa to recold an ass tenmenc of a contact of insurance made iptusappepok.„ in accordance with regulagions.~~

(2) The Regulator may snake regulauons o restrict assignment in relation to specified classes of contracts of insurance. as 179. The Regulator may make regulations to protect Interests of policy-holders in the .3L7[6e:ZIEscifarcae7 event of lapse of contracts of life insurance

180. (1) Where an insurer is table under a conmacc of insurance in respect of an act of suRess661. a third parry, the insured must diselose to the insurer, at the time of making the claim, if it has gee:lye:I any amours from the third party towards indemnis as &cation of she Maser. (2) If the insured has not received any annum from the third parry before making the claim but receives such amogim after the insurer has fully and finally settled the insured, the insurer has a Lien on such amount up to the sum so Indemnified.

~~(3) Subject to any contract to the congas the insurer will have a right of ac- don against the tmth gam only aim: it has fully and finally indemnified the insured.~~

181. (1) Every individual owner of financial product or beneficiary of a financial service may at any time, nominate any indivldual to whom such financial product or Sc benefit of finandal service must be trammitted in the event of death of such individual owner. -3/7- 85

(3) Where a financial product or benefits of a financial service are held jointly by more than one individual, the joint holders may together nominate any individual to whom all the rights In the financial product or benefits of the financial service will be transmitted to in the event of death of all the joint holders. 5 (3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, m leaped of a financial product or financial service, where a nomination made in the specified manner 'awaits to confer on any individual the right to vest the financial product or financial service, the nominee ;sill, on the death of the owner of so the financial product or beneficiary of the financial service ob as the case may be, on the death of the joint holders, become entitled to all the lights in the financial product or financial service, of the owner of the financial product or beneficiary of the financial service, or as the case may be, of all the joint holders, in relation to such financial product or financial service, to the exclusion of is all other persons, unless the nomination is varied or cancelled in the specified manner (4) Where the nominee is a minor, it w61 be lawful for the owner of a financial product or beneficiary of a financial service making the nomination, to appoint any individual to become entitled to the financial product or benefit of the La financial service, in the eventol the death of the nominee during minority.

~~(5) Nominations under this section must be made in the manner as may be sped~~

(6) If the nature of the finandal product or financial service is such that it is only applicable to the owner or beneficiary and no rights subsist on the death of 25 such owner or beneficiary, :hen the provisions of this section will not create any such light.

18 I) Derivative contracts traded over an exchange and non-exchange oaded derive- dye contracts between sophisticated couiherpardes are not void notwithstanding anything contained In section 30 of the Indian Contract Act, 1872 (9 of 30 3872). (2) Under this section,"sophisticatcd counterpanes' means any person other than a retail consumer render this Arc.

ElhaS CrUallre InSanin011 183. (1) Infrastructure Institutions inciude any person which act as — N6 exchange; (b) depository; (a) trade repository; (dl central counterparry; or La (e) settlement system including a settlement system in a payment system.

~~(2) The Cmtral Government may include any other person under sub-section (1) by notification in the Official Gazette. -3i2~~

~~Part VI: 39. INFRASTRUCTURE INSTITUTIONS 86~~

Aadiaonsl 184. All Infrastructure Institutions are financial sersice providers and the provisions of lequtrements. this Act apply to Infrastaictute Institutions in addition to any requirement provided in this chapter

Ptheutemem tar 185. (1) An infrastructure Institution must made -thee-laws to govern- senastruccutt I:B[3moms rs 5 (e) the financial services provided by it; (h) the direct participants dealing with it. to the extent required for the groper make :motioning of the financial senece provided; and

~~(C) anything incidental to clauses (a) and (b).~~

~~(2) No condition may be placed on persons using the financial services provided to by the Infrastructure Institution un:ess provided in the bye-laws of the Infras- micture Institution.~~

~~(3) No byeeaws of the Infrastructure Institution will be applicable unless approved by the negufacor.~~

186. (l) If an Infrastructure Institution proposes to make or amend any bye-laws, it Prarbydtasa 15 must make an application to the ReguIaror. (2) The application must contain a copy of the proposed bye-laws.

(3) If the Regulator considers it appropriate, it may specify the Infrastructure In- SdrUtiOr. OD publish the proposed bye-laws, invite comments on the bye-laws from thc publi nd submit Me comments received to the Regulator

~~ac (4) The Regulator may reject an application under this section if any proposed bye-laws undermine the requirements contained in section 187(1).~~

~~(5) The Regulator must decide the application under sub-section (1) in accordance with this Act.~~

187. (/) whenever an Infrastructhre Institution makes bye-laws it must ensure that the PEInaPiSossesseg-cs 25 bye-laws - dys-lesso (a) promote the objectives and tale into consideration the principles as the Regulator as contained in sections 83. 84,140, and 141; (b) provide non-disarm:nen:try access to all persons using its financial ser- ces: (C) promote the objective that the Council is required to pursue as contained in section 290; (d) It irnise market abuse; and (e) foster transparence.

(2) In this section- 0d snonshiscriminatery access" includes - (0 not creatIng drfferennal obligations fors:milady placed parties availing any financial services provided by the Infrastructure Institution; and Un not preventing similarly paced partIes from availing any financial services provided by the Infrastsucture Institution; and - 319 Part Ilk 39. INFRASTRUCTURE INSTITITIONS 87

(b) "transparency" means that adequarte information about the (unions and ■•■ transacdons canted out on the Infiastructure Instal:ion are available to persons using the financial services provided by the Infrastructure Inscitur don to make Informed decisions about their transactions. (3) In relation to exchanges, 'transparency'' in addition to the provisions coth rained in sub-section (2)(b). includes the requirement that an exchange must freely provide information about the issuer price, volume and liquidity of all securities thaded.

qu ument for governance sad 188 All Infrastructure Institutors must have adequate governance and monitoring modulus! mechanisms to identify and minimise marker abuse. ID (3) The Regulator may make regulations requiring Infrastaaure Institutions to lake measures to meet the rea itemenrr of this section.

Latino 189. (1) An Infrastructure Ensttution and its officers and staff are not to be liable in damages for anything done or omitted in the discharge of regulatory functions of such Infrastructure Institution unless it is shown that the act or omission w was in bad faith (2) "Reparatory function" in this section means the ftmctions of the Infrastructure Institution so hr as relating to, or to mutters arising out of the obligations to which the Infrastructure Institution is subject under or by virtue of this net.

PT"r of 201vds23 190. (1) The Regulator may give directans to an afrastructute Insthution, if it appears to n thretuons to an Infrastructure to the Regulator that an Innen retype Institution - (a) has failed, or is likely to fail, to sous fy the authorisad on requirements; or (b) has failed to comply with any alai obligation Imposed on it by or under

(2) If the Regulator proposes to give directions under this sec ion, rt must issue a as show cause notace. (3) If the Regulator decides to give directions under this section, it must issue an decision order. (4) Directions under this section mast be is trued to taking remedial measures relevant to preventing the Infrastructure latitudon from failing to provide Enan. 30 cial senhces.

191. (2) An Infrastructure Institution must publish. information of Ts activities which — (a) protect the interests of ;arsons availing financial services from the Infras- aucture Institution; and (1) allow the Regulator and the Counei I to make informs decisions. 55 (2) The Regulator may make reguIttions sposifying — (a) the information which sr tithes the conditions contained in sub-section (1) (b) the faun and maser in which info. mation has to he 7ublished; and (r) the frequency of the publication. a -3.2®

~~38 Part N; AL. CONTRACTUAL ESSUOS PERTAI VIRG TO INFRASTRUCTURE INSTITUTIONS~~

~~5°Tefresice 192. (I) While cm/Miming functions and exeinsing powers under this Chapter, the Reg- 1111MS131.1.[N:e ulster mien ensure that appropriate balance is maintained between -~~

~~(a) the requirements placce on the intrastnacture Insgturion under this Act;~~

(b) the mu of setting up new Inl restructure Instrutions and the costs to pemoes using financial sentries oroviClei 'ay lanes tincture InStiCUtions. (2) The Requiems must publish a report every five years - (a) resinsMg its conduct it inatior ea its functioning and exercise of powers :fled in sub.-Seedy: (/); and (1) so (b) each ining the manner ie which the balance contained in sub-section has been achieved.

~~CHAPTER. 40 CONTRACTUAL ISSUES PEE:CA.1%21NC TO INFRASTRUCTURE INSTITUTIONS~~

193. (1) When a transaction carried out usine :he services of an Infrasmicture Insuru- 2,tlialopsi ss tion attains - (a) such transactions muse not be reversed; or (b) no coon. tribunal or authority an insolvency dissolutiOn or winding up proceeding must reverse the examaction. (2) The Regulator may specify the conditions under which a transaction attains ao finality (3) The Rectilinear may specify differeni conditions for different transactions or different infrastructure Inn anions. (4) The pensions of this SeCtIon applies nOLsvichstanding any other provision of any °thee law for the time heing inform.

ss (5) Sub-section(4) does not bar any person from making a claim for compensation of any less arising out of any cransacton under any other law, subject to section 189. men am 194. (1) This seccon applies if all the following conditions are met - thetssmmstic Insneetan (a) an loreastextuce Instill/lien acts as a settlement system; (b) a person uses the services pronged by such Infrascruccure Institution; and (c) such person has deposed or placed in the possession of the Infrastructure Institution any asset or collatere. for completion of any transactions.

(2) The Infrastructure Institution will have lien over such asset or collateral until all transactions initiated or carried out by such person are completed. (3) The Intranet:IC[11re Institution may use such asset or collateral to settle any claims arising our of any animation canted out by the person using the services provided by the InfraslAIICtUrc I nstitu tioa.

~~(4) The provisions of this setioni applies notwithstanding - (a) any decision made in an insolvency, dissolution or winding up proceeding; or /~~

~~Part VI: 40. CONTRACTUAL ISSUES PERTAINING SO INFRASTRUCTURE I.: STrtuTSONS 89~~

~~(5) operation of any law for the time being in force.~~

Hammonton of 195 OE A depository must, on receipt of informe bon] register the confer of a security cransfer of :googol ?redeemed. or other financial product in the name sl the transferee. (2) Where a person opts to hold a secuties with a depository i he issuer must in- timate such depository the details of alloonent of the sett t..r and on receipt of such information the depository, int A enter in its records the name of the allottee as the beneficial owner of that sonority.

~~(3) The Regulator may make regulations dr terminmg the font and content of information to be provided under this sw on.~~

Optons to memo Every person subscribing to securities vowed by an issuer Foist have the option to secuoty emthrate 196. (1) or hold secunues either to receive the security certifiers., or hold securitios with a depository trade depostrom unless che securities are issued by way of pubic offering. (2) Every person subscribing to fin: ncial poructs, other than asides, must have the option either to receive such alum :Ai products in pla . bnl form or in de- m ten Its d form Is th a depository. 15 agendum tit 197. (1) All securities or other finandal product: held by a deposncly must be demote- Moonbeams Abe in fungible form nalised and must be in a fungible form (2) Nothing contained In section WS of the Companies Act, Ii (I of 1956) will apply to a depository in respect of unities held by It or behaff of beneficial 20

Leers of tiny other bt the time being in deJOSgOneE and 198. (1) Notwithstanding anything contained law force, a depository ssill be the registecar wader for the wr poses of effecting and recording transfer of benekcial .ership of SeCtiriEh.', or other financial products on behalf of a beneficial anti • .

(Z The beneficial owner wiE be winded to ell the rights and IThefitS and be sub- as sewed to all the liabilities in resoect of t! a securities or oths: financial products held by a depository (3) The depository as a registered owner iv ill have no voting kghts or any other rights in respect of securities held by ft compt to the ewe] contained in sub- section (1). 30 arra', re 199. A depository must maintain a re r Ater An. an Index of bent owners of the bencfinal ew ers. StIlityeC or other financial product in ;he .11:nner providec m canons 150 to 152 of the Companies Act, 1956 (1 of 956) to tae extent specific '

Please or of 200 (1) A beneficial owner may create a piedgo or hypothecation lu respect of a se cu- robot terror onanew products ray or other financial product 9wned such beneficial w net; subject to any sr held regulations. depoormA (2) The Regulator may specify a require:wet of approval bpi :he depository before creation of any pledge or wpothebitiOn under subsea ion (I) (3) Every beneficial owner must give imintbion of such plena: or hypothecation to the depository and such depository nest then make (se des in no records ao accordingly , 3 2-2--

~~suolnungs 90 iiidrn~~

~~(4) An enrny the records of a eposicc 7 under sub-secdon (3) will be evidence of a pled or hypothecatio-~~

201. (2) A depos. 88 must furnish in :he issuer or concerned financial service provider, fthameom 8rand inform n about the maw kr of secintles or other financial. products in the recorg, name o: kineficial owners n such intervals and in such manner as may be kpoinnty and Mkt specme

(2) The Issve. or financial send provic must make available to the depository copies o :he relevant (won respe it of securities or other fir:andel products he:d by ,ink depository as iffy be specified.

T so 202 If a keno dal owner seeks in opt out of a depository in respect of any security LpiTt8Z.I vuY or other kiancial product, iush bent Odd owner must inform the depository Nikki accorcUrn (2) The deg nnory must on reciipt of imiroadon under subiseCtion (1) make appropriate entries in its remks and must Inform the issuer or the concerned financitiireice provider

(3) The issue! or financial senh a Tarmac Sr must issue the certificate of security or other fin( dal product io f.c bonefir:al owner or the transferee, as the case may be, thirty days the recatt of intimation from the depository. (4) The Regulator must make rwalacions regarding the mode and manner of intimation inis and other luck inral issues, (5) The duty on the issuer or e vandal scinice provider under sub-section (3) is subject compliance with kuiroprind neglikkons under subisecdon (4).

~~rE,h/ .Bw`krers' 203. The Bankers' kooks katente by 1891 (18 of 1891) applies in relation to a de- ke enekka 1391 pository as I it were a bank as :eg'ned in section 2 of that Act. oatone~~

dOindet;sktikii.:15::; so es 204. 08 A deposi .i.iy must indemnik benefkial owner for any loss caused to the beneficial okker due to the Deg:: gence of the depository or any direct partidpant „,,E„,~ of the dincSitOry (2) Sub-secrya (1) is subject to .tay other law to the contrary

(3) Where the loss due to the nerylgence of any direct participant of the depository under sib-section (1) is ivdcvnified iy the depository the depository has the right to hinover the same frula such c irect participant.

same 205. (1) An Infra ink nure Insticudon acting ai a secdement system may lend securities krying: to persons that use such series. (2) The Rep acor may make nu:illation% governing the lending of securities by 55 Infrasrnicutre Institutions.

~~GRAFTER 41~~

~~206. (1) A p.thlk e Tering of sevuitira must hr pursuant to filing of a statement pradd- Pb.ic5ffeer1g Ing adgeate mfoimation arner the issuer and the security being issued, with ,3 3~~

~~Parr VI: 41.11511E AND usinrc. op SECOOTIES 91~~

(2) The Regulator may specify - (a) what constitutes public offering; (b) what constitutes adequate infommi ian; and (c) the form and content of the iniam :Mon to be provided. (3) The Regulator may impose different co ditions on public offering,

~~(a) different classes of securities; and (b) different classes of issuers. (4) The Regulator may make regulations exampang sped Tom comply- Mg with the provisions of this te(tian.~~

~~207. If any person makes a pudic offering m oblation of this Act, Men such person is i s Gable to pay a penalty DS may be specified.~~

Oargacka 208. (I) Every issuer making a. public offering h: :s an obligation to - public affeang fa) provide adequate information, before a public offering is made, about the issuer and the security to allow persons to make adequately informed decision to subscribe to such public offering; (b) provide adequate informaLion, one regular basis, about the issuer and the securities to allow persons to make adequately informed decisions about dealing m such securities: and (c) have in place systems of govema Ice and processes o ensure that the functions of the issuer do not discriminate between owners of a class of 21) securities of clic issuer

~~(2) the public offering is made by a nelson other than the issuer, then the person must provide infornwrion which is rely vans for a porennd subscriber of the issue to make an informed dec.sion.~~

~~(3) The Regulator must make req alations -.] enforce the provisions of this section as including -~~

(a) the information that must be pray If:ad under this section; (b). the form, manner and fibquenelff • 4th which such information most be provided; and (1) the systems of governance and prc., es es the issuer mkt undertake. 30

~~bbting unswarbles 209. (1) securitycu with respect co which a public offering has been made must be mar exchange. listed on an exchanne.~~

~~(2) If any class of secuxiiies is liszed on an nage, further issue of the same class of securities of the scone issue: most be Iffted.~~

210. (1) Any person seeking to bar any security ,u, an exchange mu:., make an applica- 35 on an VIdlallge• lion to such exchange. (2) No such application to an exchange may be entertained unless it has been made - (a) with the consent of the isrff er of the securities concerned; and

~~92 Partsil 41. ISsuE AND LISTING OF SECURITIES~~

~~(b) Ins E form and manner provided by the bye-laws of the exchange~~

(3) The eDd rge must inform app n -int of its deemon on an applmaton for luting minhco durty days (min the dure on which the complete appimailon is received . . (4) If the c !Dogerejects the sp thcat:m for rissing It must give an decision order (5) A person aggrieved by the older of rite exchanga contained In (4) may appeal to their:one .

~~DU= Of aft pan exch ,..ge must make bye- aws in elation to — PI-Change~~

(a) disc:Osore by the issuer of material informatics) regarding the Issuer or the ccurity listed on the exchange within a definite time; (b) the ern and manner or application for listing; and (C) the: y minions for approval for Ecting.

~~(2) The em ange must monitor Me compliance of the issuer with in bye-laws.~~

~~(3) In addin a to imposition ui Eny penalty for violation of any bye-laws by the issuer, My exchange must ink rm the ISegrTator of any violation of the bye-laws by the :5 Len~~

~~212. (1) Securrus. listed may be de-Emcd if any of the following conditions are met — 1)1771":7~~

(a) the suer of the secants makes In application for de-hsrang. or (b) cumin- does not hs e enough liquidity and may be used for market so abs consider (2) In decic g auf application u rder :dame (1)(0), the exchange must the cffe. the de-listing will have on oil per DRS owning the securities.

(3) The Res.ca tor must make rep governing the de-luting of securities. (4) The Res. lator and the exchange must ensure that de-listing process protects an the nics., ism of the persons who have purchased securities prior to such de- listing. (5) An exch .ge must de-lie se: mines, M so directed by the Regulator, in accordance 1.) regulations.

(6) If the Re. alarm proposes to !Rake en order for de-listing it must issue a show cc cause no .De to the issuer of Me secunsies. (7) If the Re :dater decidesto ma ke an order for de-listing it must issue an decision order co re issuer of die semdties.

(8) In case a exchange de-lists a securim other than on a direction by the Regula- tor or am Manon of the Issues it mus: make a reasoned order en (9) A perm- iggrieved by the order of 1 e exchange contained in sub-section (8) may app. AI Co the Tribunal.

213 (1) Ommen r. seatrities listed co an exchange must be provided with the mayor- (bimmm [oath co ell their securities t a fans ice In the event of en actual or potential change la she control of the isuer Part VI 42. Maxon ABUSE 93

~~(2) The regulator Must make regulations to -~~

(a) determine the criteria of change N control; (b) ensure all owners of listed securities have adequate i .fonnation to make informed decisions; (a) the process for determining the fair price; and (d) prevent any action which may prevent the determination of the fair price.

~~(3) The Regulator -~~

(a) must, consulration with the Corporation, sPeeilY tie conditions under which specified transactions may be exempted from compliance with rag- Wations under sub-section (2) for the purpose of carr) rig out transactions is under Part and (b) may, in consultation with the Corporaeon, exempt a transaction from compliance with regulations under sub-section (2), im a reasoned order, for the purpose of gaming out transactions under Pai VII

~~214 (1] The issuer must ensure that any buy back of securities by I be issuer is carried is our in a manner which -~~

~~(a) does not discriminate benveen owners of the securiti (b) provides a fair vaiue to persons atom whom the scowl:au are bought back; and (c) is equitable to (hose who choose to sell their securide 20~~

(2) The Regulator must make regulations governing the bu9 latic of securities by the issuer. (3) The regulations under subesecrion (2) must specify: (C) conditions of buy back: (b) procedure of buy back; sa (c) general obligations of ismer; and (d) penalties for violation.

~~CHAPTER 42 MARKET AsosE~~

Mimicam:a 215. (1) A person is prohibited fromcommitting market abuse. so (2) A person commits market abuse if the conduct of such pesos is intended to interfere with free and fair operation of the securities moist by hampering the ability of persons to make infomied decisions in relation to dealing insecu- rities, and is amulet our to make a financial gain and includes criminal market abuse. 35

(3) CTminal market abuse consisis of - (a) abuse of information as described in section 216; (b) insider trading as described in section 217; or (C) securities market abuse as described in section 218.

~~94 Part la 42. MARKET Acuse~~

theorvincncton. 216. (1) A pei so, emetics abuse of 111515111113.51055 !Ether parson, for the purpose of making a no irial gain, — 00 fah, .o disclose material informs Ton thorn n security when there is a legal obI wion to disclose such Information. or (b) p .hes information that the pa CSOT knows is raise, misleading, decep- chic .r will result in misrepresentation.

~~(2) In this s.. don, "publishes" Include dissemination of information in any form which o. y be reasonably used by any person .~~

217 A person cc .1 nits insider trading if that person, while in possession olimpublished 1^91"33dIag. lo price &cosi' : information, in breach of a fiduciary duty or ocher relationship of trust or con ,,tare, for the purpose of ma Icing a financial gain — (d) do a! . directly or adireed2 in securities; or (b) disc: ises, actively or otherwise, unpublished price sensitive information to a. y other person likely to engage lc insider trading

212 (1) A pars c commits securities marker a:use if such person, with the intention of sYyndde " 15 n achieving, results abai making Onandal gain, attempts to achieve or succeeds i cocaina :n sub-sea:or (2), by — (a) deo rg in securities, directly es icidirectly; or (1) us', 2 or employing fictidous, ma-tip:dative, deceptive or artificial devices 20 137 1111 other form of deception, scheme, artifice or contrivance. (2) Resula 'wended by securides market abuse may be any of the following —

(a) aril wally creating, maintaining or affecong the once, liquidity demand, suovIto trading or marker for sesames, or IS) gra g false or misleading more:non about the price, licuthity, demand, recur rides. 25 5050 111 trading or market for (3) In this acesedam, "conduct" includes any act, expression, omission or conceal- mem, v tither committed in a decc.thil manner or not, and whether or not resultin, in any wrongful gain or avoidance othoss, by —

~~(a)an, person: .2) one 5ther person with comw2n(e of such person; or (a) by a.l eat of such person.~~

Dcties 219. (1) The Rego later may make regulations speciMng conduct which amounts to thaviarov market tiouse. (2) The regth dons may require persons acuthaccing in scarifies — 55 (a) to within From taking specified actions; or CD] co 10 port mansacnom m seer ors. (3) The Reg lator may make different regulations for different securities or different classos of persons. (4) The Reg hit for may exempt specified sec:Tries or spec:fled classes of persons. 95

(5) The Regulator may take enforcement actions, as applicable, against anyperson who commits, attempts to commix, or abets market abuse. (6) If the Regulator prope7.c to take any enforcement action against a person wider this section it must give the person a show cause nonce. (7) If the Regulator decides to take any enforcement action against a person under s this section it must give the person an decision order. (8) Any enforcement action by the Regulator does not bar the Regulator from pros- ecuting such person for criminal market abuse, but any fine required to be paid as a result of a conviction for c:Munal market abuse may be set off against any amount paid for an eJtforcemcnt action for the same cause of at Lion. eurn.E.hm marketror mmulel market 220. (1) A person who commis or abels criminal marker abuse, is punishable with Class A offence under this Act. (2) A person who attempts to engage in market abuse, is punishable Atli Class C offence under this Act . AND SPECIAL EVALUATIONS 96 Pert V119 a4 RE

~~PARC AM~~

~~RESOLUTION OF FINANCIAL SERVICE PROVIDERS~~

~~CHAPT2R OrMCTI•ES AND FUNCTIONING OF THE CORPORATION~~

a 221. The Corpora 'ion will be guided by the follotving objectives in carrying out its °133``the' functions under this Pan — (a) to protect and enhance the stability and resilience of the financial system;

(6) to enhance financial market efficiency through the efficient pricing and alkution of risk; (c) to protect consumers of covered obligations up Kt a reasonable limit; and (d) to protect public funds.

~~222. The role of ch: Corporation is to carry Du:theresolution arcovered set-doe providers Roped in accordance within objectives and the provisions of this Part.~~

223. (1) The Corporadon Board may ',rondo an opinion to the Corporation on any manatianaComm-Mee dine Gear& matter "Caning to resolution as it finds ielcant. (2) The ColumatiOn Board must disseminate infoanation to the public relating to its funcdons in a transparent and accountable manner

224. (1) The Curpmadon must ensure that the persons appointed as officers and ern- ployees lout knowledge and experience iu the regulation, supervision or res- mention. e 20 olution or financial suite providers, including of Systemically Important Fi- nancial Institutions, bankruptcy and liquidation, or have knowledge of finance, economics, accountancy and law. • before entering into any (2) Each pencil appointed as an officer oi employee wilt dudes vehh the Corporation, take an otth of Nicht./ and secrecy in the do= 25 Provided by bye-laws.

~~(3) The officers and employees of the Corporation may include such examiners as are necessary to early out the functions under section 225,~~

~~CHAPTER REGULAR AND SPECIAL EVALUMIONS~~

~~Puncions of so 225. (I) An eXaMEner must conduct such regular and special evaluations, in accordance eamj.j„ with the provisions of this Chaptei as may be necessary to —~~

~~(a) provide by way of a racing, or any ether means, an assessment of the safety and soundness of the covered service provider, including its financial condition;~~

~~35 (b) initiate any necessary condngency pianning for the resolution of a covered service provider; e~~

~~Part VII 97~~

(E) enable the Coilimntion to make a decision order regarding Whether a covered service provider should be placed in the receivership of the Cor- poradon; and (d) pay compensaticri relating to, and apply for the winding up of, a covered service provider (2) Every examiner must submit reports to the Corporator at such frequency and in such form and accuser as may be specified.

~~Rogan 226. (1) An examiner will have the powcf on behalf of the Corporation, to conduct the~~

(a) a financial sendee provider that applies to the Corporation to become a ro covered service provider; and (b) a covered servict provlder, whenever the Corporation Board makes a decision order that an evaluation of such covered service provider is necessary.

(2) An examiner must curet eat the regular evaluation under Sub-Section (1) in such tom, manner and frequency as may be specified. tr specal 227. (1) An examiner will have the power, on behalf of the Corporation, to conduct a special evaluation of any Ecvered service provider if the Corporation makes a decision order that -

(a) a covered service provider is at a risk other than "low risk to viability' under the framework Co: prompt corrective action under Chapter 45; or 25 (b) the special eveliinion is necessary for the Corporation to exercise its authority for the wa elation of a covered service provider.

~~(2) Before conducting a „peual evaluation, the Corporation must review the resolution plan submitted by the covered service provider.~~

~~(3) Where a special ea-ail-ton :s carried out, the Corporation may - is~~

(a) bear the costs, or (b) charge the cost, 10 the covered service proaider in respect of which they were incurred. (4) If the covered service provider is unable, or refuses, to pay the costs under sub-section (3)(b). the Corporation may recover such costs from the covered so service provider as a debt due and payable no the Corporation.

Power m ior 228, (1) The Corporation, and any examiner appointed and acting on behalf of the Cob poradon, for the purposes of any actions undertaken lancer sections 225, 226, and 227 will have the pow:- to access records of a covered service provider, whether In the comb- of kanducting a regular or special evaluation, regarding as the affairs of the cc, c lee set vice Toaid en or a person beonto g to the same Scene, Or its related P-ao a.

(2) The examiner must, nihmc t delay Glom the Corpora non, in the sped6 ed loran and manner, U et sty Lime, there comes to the WWIawn of the examiner any change in the Ce II 'Maiden of the covered service provider that might 4. have material censer, wni Es on the position of the Corporation .

~~Summoning 229. For the purposes of Je sal_ ion, 'agency.' - votress mg Eames far infarmatien _330~~

~~98 Part WI. vd. PROMPT Canaan-3W ACTION~~

~~(a) means the Corporadon, the Regulatof or Me Tribunal, as the ease may be; and (6) incanles any designated representative Wu body under clause (a), includ- fog mines~~

~~(2) An agency conduaing or canrying out any proceedings, evaluation, investtgar don. assessment, uonsideradon or Tecemilnnuun under this Park may by en order in vWfing, da any of the following -~~

(a) cal. for such information or ma:anal from a covered service provider, or in related persona, as the agency de:cm:pas necessary; or (b) summon such covered service provider, of Its related persons, to depose before the agency as it determines necessary.

(3) The information or material received under this section must be disseminated to the public only to the extent required under the Right to Information Act, 2005 (22 of 2005). nder sub- Is (4) An agency may apply to the Tribunal :o enforce an order made; secnon (2), and the Tribunal will have :he power to require compance with such olden (5) Where Cr- agency conducts or cardas out a proceeding, evaluation, investigation, assessment, consideration or determination under this Part at the instance of a covered service provider -

(a) the agency may bear such reasondn:e expenses and fees as it determines appropriate; or (6) require such expenses and fees to 'w paid by the covered service provider; or recover such expenses and fees from its assets.

~~(6) The recipient of a request under sub.scodon (2) is bound to -~~

~~(a) produce the Information or material, if available with it, to the agency in a dmely manner; Or (b) attend the proceedings at a time and location as specified by the agency~~

230. 01 While undertaking an enforcement return. and imposing a monetary penalty wfie•mCaapttr.En Iff55,5isw. sw" SO under sections 225, 226, and 227 against a covered seance provider, the Cor- poration may take into consideration the following factors -

(a) the number of days that the covered service provider fails to permit an examiner to conduct a regular or spacial evaluation; or (b) the number of days that the covered seance provider fails to provide any as information required to be disclosed frith° course of the regular or spedal evalua don.

~~(2) While undertaking an enforcement action and imposing a monetary penalty under section 227(3), the Corporation may take into consideration the following factors -~~

~~90 (4) the number of days it fails to PaY the costs. or (b) the number of days it fails to repay the cow due as debt to the Corporation. -33) .0"~~

~~Part VII: 45. PROMPT CORRECTIVE iwrioN 99~~

~~CHARTER 45~~

~~(22neworkthr otorox parrecdve 231. (I) The Corporation and the Idgularor must make join: regulations to establish a cation. framework for prompt co I-active action for all covered service providers.~~

(2) The Corporation and tbt regulator in establishms a framework for prompt 5 corrective action, must to w into account the following factors - (a) the abilmi of a covemd service provider to access additional capital; (b) the ability of a mom od service movider to promptly address supervisory concerns that may a se from time to time; (c) the likelihood of theI !ability of the covered service provider deteriorating ID huther if problems addressed within reasonable time; and (d) the proportionality D. any measures identified nd specified by the framework to the risk to LI .2 viability of the covered service provider

~~(3) The framework for promo corrective action mum seek to -~~

(a) identify- the risks to Jac viability of a covered service provider at an early is stage; (b) identify the remedia. measums that may be when by the Corporation, the Regulate, and any[ DIX public authority in a manner that is timely and proacave; and (c) identify the remedi measures that must be taken by covered service DD providers to reduce ya probability of failure, ystd enscre that the measures are taken in a : winer Mat is timely and , aloe ask sperms 232. (I) 'Risk assessment mcasto •''ears the task assessment measures specified by the Regulator to assess the risk to viability of a [Ina [trial service provider and includes a risk-based cap ;.1 requirement. as (2) The Regulator may make frgularions to provide for the imposition or vdth- drama of a risk aaaeramco measure. (3) The Regulator must make i ago:aliens to provide, for each risk assessment mew surethe levels at which •• covered service previiier has a low risk to viability, moderate risk to viability material risk to viabiltiv imminwo risk to viability so and critical risk to viabilia (4) The Regulator must on a : agular and periodic Rico, review the risk assessment measures specified after sub-section (22) if whether the risk assessment measures are a freient to -

(a) facilitate prompt car .use ac1on; and is (b) prevent or minimise F. La to the Resolution Fund. (5) While determining risk ae wsment measums, ac Roy ilia tor must take into account standard business e .5 conditions. (6) Regulations under this se Lon must be issued only' after consultation with the Corporation.

~~233. (I) There is low risk to vial litof of a covered send cc provider if the Regulator sb hty makes a decision order CI the covered service provider - ,532. 100~~

~~(a) I -antly exceeds the rew red m inin level for each relevant risk - runt measure; and 11 mit to post normal adverse L,1 t and economic conditions~~

~~(2) Coasts ro dec son order d at dr s v risk to viability of a covered sertne c, der, he act one to hc taker s if orporauon and the Regulator are mudded in the Fourth Schedule~~

- 234.0) There lb tuts le Yak to triad's} o' a d service provider if the Rego d:ry lator n, I t a Wt.rice. order that the cowl ,. Ornce provider - (a) meets the repassed minimum level foe relevant risk assessment mea-

ns) es tissarable to nom-sal adverse busb , economic conditions in a manner that could cause the covered Sr ere provider to be at material nod I, stabil w if its concerns we no p ihdy addressed, and (c) may ro oven( prompt correct ire anent undertaken,

~~15 (2) Consetwor ro the decision order that Su c moderate risk to viability of a covered t. %Ace romder, the obe s by the Corporation and the Regai e pros ided in the Fonvb Sch. I~~

~~235 There is' rrwerial risk tonab:lir eta con. ervice erovider if the Regulator ylbteruy'ts(k makes t dcrition order that the covered cm If provider -~~

~~en (a) fair to meet the required minimum ksvI tot any relevant risk assessment metruw, and (b) inn raurverecover prompt corrective arils- undertaken .~~

(3) Consequenr to the decision order that I WIC material risk to viability of a covered s, wice provider, the actoas to Fr it on by the Corporanon and the 25 Frghla oh re provided in the Fourth Sclt-cl

~~lim4men( to 236 There ' wrnment risk to suability a raved service provider( the Regu- risury tor I es a decision order that the act~~

(a) Is =In ificands below the required nine ism level for any relevant risk assessment measure, and so (h) ma, recover if prompt corrective atoll indertaken (2) Cowerpeat to the decision order hat hr.- c imminent risk co viability of a covered service provider the smuts to I ^ -I by the Corporation and the Regulator we provided in the Four] Sell I t

~~237. (1) There is "critical risk to viability" of a covc,and bovine provider if the Regulator as makes a decision order char the covered sorbs, provider -~~

(a) is s iff)lificant, below the required mu., num level for any relevant risk 235mente55 measure, and (b) will :I oor recover even if prompt corre2LI VC salon is undertaken. (2) Consequent to the decision order that[hew h :Waal risk to viability of a coves ered service provider, the actions to be 5555.511 157 die Corporation and the Reg. ulator are provided in the Fourth Schedun. -333- 101

Palatal distribution 238. OD The Regulator may, by der.slon order, provide for the Limits within whicha cov- sad evacuate ered service provider make capital disoibution or executive remuneration if the Regulator makes a c Lision order that, after doing so, the covered service provider is likely to be an, :water water risk to viability than it is before making such capital disthibution or axe, utive rcmuneradon.

~~(2) No covered service provir er will make any capital distributions while it remains in default with Tea ..rd to the payment of any assessment due to the Corporation.~~

(3) This section will not apply lf - (a) there is a dispute bev then the covered service provider and the Corpora- w tion over the amount of such assessment, and (b) if, pending final deter lunation of the dispute, the covered service provider deposits with the Co ?oration a security for the disputed amount as the Corporation deterrth us to be satisfacoory, oestaiaton a Every covered sewice pm.ider must prepare a restoration plea and get it approved from the Regulator as soon as the Regulator makes a decision order that the covered service pa Trader has moderato :NV to viability

~~(2) The restoration plan must contain, in the event of specified circumstances al fatting the viability of a c. rued service provider, the measures to be taken -~~

(a) to restore the coverer service provider to low risk to viablity; and (6) tocontinue the can; Lag on of the whole or part of the business of the covered service provther by itself, achy any ocher person. (3) The Regulator must make .egularions to provide for -

(a) the contents of the rwtoration plan other than what is contained in sub- as section (2); (b) the manner by whirl a covered service provider myth update its retbara- don plan; and (C) the manner by whirl a covereL service provi der tray get its restoration plan approved. (4) If the Regulator determin t hat a restoration plan fads ro make satisfactory provision in relation to th matters required, the Regulator mast take steps as it considers appropriate. (5) The steps that the Regulthy may take Laclude uinth L c restoration plan to be revised. as (6) The Regulator most subny. a copy of every restth y don p,an approved by the Regulator to the Corporan m, as soon as may be pmetichble Ler the approval is granted. (7) Regulations for Instoratith pans must have regard to the relevant international standards, if any. to

~~(8) Regulations under this set Da must be issued only :Lay consultation with the Corporation. _334 -~~

~~Part Olt; 4 POWERS AND DUTIES. AS RECEIVER 102~~

~~240. (1) A covered servis -:ovlderows pm pare. resolution plan and get it approved Regulus-la^ plan from the Casco' I yor makes a decision order that the covered service at fakir viability~~

(2) The Corporation regulations . provide for the form, manner and frequency by Sc :.: s a co red senoce ,vider must prepare and update a resolution plan. (3) A covered servir roviden in preparing . updating the resolution plan, must

(a) minimise ii potent a loss from reo mon, (b) ensure Theo me resole ion plea can c implemeored without recourse to public funcl (c) minimise ohs 'weer on ;gnaws] sta hty, (d) minimise de ilmental effects on con. mere, and (e) alma clThio ns and acuons to be r lin and executed In a short span of ume

~~(4) The resoluccon plat most Identify -~~

(a) coce css clones of Cre cr.o, red service proonder, (b) the parts m b istness of toe cm. nice service provider which must be continued, Ler by chat covered Mee provider or otherwise, or be no alcoved to loll, and (c) the manner 'shah coertnusdca mi. dime

~~(5) The resolution v,Ith respect cc the c -comic functions that maybe antcal to the funtrionry of the 'Mena cal nsten lary -~~

(0) identify Nnoions that need to aork ne because the availability of those fo tenons co neal o roe fmannal em. or would need to be wound up m an order co so as to avoid 11 a nual instal:Mc,/ (b) identify and consider ways of remo g barriers that would prevent crick cal econoin 'enemas being iesolro successfully; and (c) csclace and lenafy critical economb Functions from nonanitcal activities bkuch could be allowed to fol.

(6) The resolution pl c¢ must provide for one more of the measures identified to be taken by the o coerce service 41-741441 he Corporation, the Regulator, and any other publicinthoody, as the case ma• be

(7) The Cerveratior I lost submx a copy of I -esp.:noon plan, including them on- eg ified oe,elotion el n, as and when s pi oared or updated, to the Regulacoc as soon as may be mac ocable after ct ri Cued

~~(8) Reg-Lilaeons for zoselonon plans must hay egad to the relevant international standards, if any~~

~~CHAPTER 46 Pootmas AND DUTIES AS n ECEIVER~~

241. The Regulator has inc power co appoint the l arporation as receiver of a covered to onvoinc service provider in . rdance with the pros 1 one of the Part. camenatse as receivec. -33 Sar Part VII: 46 POWERS AND nuns A I,CCEPPEI 102

nspoictmeno as 242. (Pi The Corporation may op] y to the Regulator, in the fre m and manner pies =eats scribed, for appointment receiver of a covered service provider only if at least one of the following osditions is met —

(a) there is any conceal . sat of the books, records or (wets of the covered service provider, or .1 s. refusal to submit the covered service provider's books, records or a(fi la for evaluation or inspection to any examiner; (b) the Corporation tern antes or cancels all Corporation insurance that the covered service pro' may have acquired in accordance with Chapter 50; (c) the covered service ! :dder materially fails to submit and implement a is restoration plan with . the time specifieO under sec non 239; or (d) there is "imminent i k to viab➢ict of a covered service provider under the framework for per .opt corrective action contained in Chapter 45.

~~(2) Upon receiving an applicrein from the Corporation under sub-section (2), the Regulate; by order, mus; 1;point the Corporation as receiver of the covered is service provider~~

~~(3) Upon appointment as nes • se of Na covered service provide; the Corporation may by decision artier db . —~~

(a) the vesting of shares ,..d subord:nate debt of the rowed service provider in the Corporation; o so (6) the incorporation of . iidge service provider in acwrclance with the pro. — visions contained in ipter 48, (4) The Corporation wig, up .. appoin;me as recciscr of ire covered service provider, succeed EP all ss, wigs. powers, and privileges of the covered service provider, and of m: "liareholder, member, consume; officer, or director r, of such covered service ider with respect to 1 coves-d service provider and the assets of the cove !service providen

PPOWILOR WW: 243. (1) Upon apporntmenc as rec er of a covered service prow Isr, the Corporation may, by a resolution ordv es olve the covered Su w to povider, in one, or a combination, of the folio 1, modes of resolution — 3D

(a) purchase in accorda; with the provisions col rencol in Chapter .97, (5) the incorporation of geeenwe providerw (co lice with the pawl- sions contained in CI . er 43, 01 (c) temporary public tar WIT) is accordance irPM1 II c ^ ()visions contained in Chapter 49; 35

~~(2) The resolution order may aside for an exemption 'rum impliance with cern min regulations, in ace= oe with section 2.3((~~

~~(3) The Corporation may ew c any of its powers a, r contained m this Chapter under the resolu order.~~

~~are taken in connewran it, as may be necesod p.~~

~~(5) The resolution order rovice 'or the anon Nat II be taken by the Corporationwith regard covered service proadeh .soluding any process for compensation under ( reer 51 . --3)41~~

~~POWERS ADD DUTIES AS RECEIVER l04 Part WI~~

~~et paw art a copy L. 1 le resolunon order to the covered~~

~~service p the Regillai.o - as in as may be pracncable after the~~

~~resolt tei le issued~~

~~ul,,Mtlapp82,22` 244. Upon tato, II weetier of a wit ea vice provider the Corporation ma5 l us accord,' 1, regula tons made u ler this Parc, take the following art panda. tons -~~

~~etr and endertalung of the covered fa) to e i. and control of the se e n ovider, (b) take managernert of die ea led service pr~~

~~(t) repel ued to the c. -cd service provider to account for a rd I I the Corporation the I , aseston and control of the assets of ti e: Nice provider~~

~~drspose of the ass: Ind undertalung in such other man (d) selc , ich term: and cancan() a as the Corporatton determines to~~

~~ts be~~

~~(e) an o assumption rt.. any p ion of all or part of the liabilities of ince prov cer;~~

~~(0 co. ' 11 iustness et the covert_ anice provider to the extent that it pc It, or beneficial to the welters*,~~

~~' n the name of the covered service (0 sue, a' compromise and sen d Neu aamm made by or agn t~~

~~((I) ext., ulouu nerrts muter rte seal el he covered service provider;~~

~~0) do 9 [ 9. .1 her things as ma be essary or incidental to the exercise~~

~~( r(1( ((LOP nglts, Pon eri, Pneges and illamunlaies asDeceiver, 25~~

~~rea the assets of the cove I sennce provider all cons incurred in di [Dui islup pnority over I ocher damn~~

~~245. The Corpolart in may make regulations co provide for the performance of any F arim=hear,~~

~~3: covered nap Ian ter for which the Corporation has been app~~

~~246. (I) Upon the Corporation being appom ed as receiver of a covered service provider, __ re there v i ' I e 1 at au on other proceedings vowing the covered service provider "c 1O2"~~

~~to we 9 9 9 b-ed for IS this serton~~

~~Intl (ling any execution or enforcement (2) No ac (I 911 9 civil pence dl r 99 commenced or com I led the covered service provider Proea et 41 4 rs against Or in -essILLL 00 assets or habitues.~~

ofr nut proceedurtg may be commenced or coma/rued against (3) No act on o r mono; or for the enforcement of any se. any third party far the recovery or Curry rcluding any guarantee Prodded I It the benefit of any covered service provider1n respect of any liabilities of he covered service provider

~~247. Nothing coma-and in the Indian Stamp let, l ' 99 (2 of 1299) will affect the power of the Corpm ion to recommend that any a content relating to a transfer of ea cipar, slltalleperrt„~~

~~sert or:Intl:1(w of a covered service pond° inder this Pas will nor attract stamp law( duty, and such rocom mendaton will mdmara ( be followed by the Central Govern-~~

~~4; -337° Part VII: 47. RESOLUTION ay PURCHASE 105~~

NO termthadon or vviebithem or 248. No person may terminate or amend any agreement with a covered service provider or claim ants ccelerated payment by reason only of — NO the covered service provider being placed in receivership; or (b) the agreement being assigned to or assumed byte bridgeseri:ice provider

~~Agretmenis 249. Where an order appointing the Corporation as receiver is made under section 242, any provision in any agreement contrary to the provisions in that section is void.~~

~~CHAPTER 47 RESOLUTION by PURCHASE~~

Prof es{ for purchase. 250. (1) The corporation must estimate the net worth of a covered service provider under resolution using industry accepted best practices of valuation, as specified. Is (2) Any estimation of the net worth of a covered service provider under resolution made by the Corporation under this section is confidential, and must not be disclosed to any person, including any potential purchaser

(3) The Corporation must prepare and issue a hid package, which must conic all the initial information which a potential purchaser needs to be provided with is before placing a bid. (4) The mode and manner of issuance of a hid package will be as specified. (5) Potential purchasers may submit an intention to bid to the Corporation in the manner and form, and within such time, as may be specified. (6) Based on the intentions to hid, the Corporation may approve or reject potential at purchasers, in a manner as specified.

~~(7) The Corporation must permit every approved potential purchaser to conduct due diligence of the covered service provider under resolution.~~

(8) The Corporation must provide an oppornmity for negotiations between the potential purchase: and the covered service provider before the submission of vs final hid. (9) The approved potential purchasers must tubint a final bid after conducting the due diligence in such manner and form, and within such time, as may be specified.

(10) Within such time-period after all approved potential purchasers submit their 30 final bids, as may be specified in the bid package, the Corporation must inform one or more identified purchasers, in a manner specified.

(11) When carry. ing, out the process under this section, the Corporation must take into consideration — (a) the composition of assets and liabilities of the covered service provider 33 under resolution; O the competitive and economic conditions prevalent in the financial system; and (r) the need for expeditious resolution. -33 $ '

~~106 Part VP: 47, RESOLUTION BY PURCHASE~~

~~(12) When carrying our the process under dais section, the Corporation must seek~~

(a) maximise the number of potential purchasers; (b) explore multiple thansaction structures; (a) give accurare and ample information to potential purchasers; (d) conduct thorough due diligence of potential purchasers; (2) minimise disruption to consumers of the covered service provider under resolution; and (f) m(nimise disruption to financial services provided by the covered service IC urcvider under resolution.

~~❑ 3) In this section —~~

(a) "bid package means the set of documents necessmy U2 invite bids to purchase the underlying assets or liabilities of a covered service provider under resolution; (h) "intention to bid' means a communication, in the form and manner specified, submincd by a potential purchaser to the Corporation, in response to a bid package, indicating an intention ro bid for a covered service provider under resolution; and (c) "potential purchase means a person who has submitted an intention to 20 bid.

order. h PSI_ The resolution order issued under section 243 for resolving a covered service popurcrch provider by purchase may provide for all or any of the following — fa) the identificarion of one or more purchasers; (b) the merger of the covered SerViCC provider under resolution with one or as mere of the purchasers; and th) the transfer of the assets, liabilities and qualified financial contracts of rho covered service provider under resolution to one or more of the purchasers . .gets. n 2. (1) Where a resolution order directs the transfer of assets or liabilities of a cow uthiiides and so ered service provider under resolution, which includes any qualified financial qualified thauith. contracts, the Corporation must do etcher of the following — oondacrs.

(a) transfer all the assets, liabilities and quail ded financial contracts to a purchaser, or ft) transfer some of the assets, liabilities and qualified financial contracts to one or more purchasers. (2) The Corporation must inform all persons who are parties to qualified financial contracts under transfer under this section, if any within rwenty-four hours of the trausfer.

(3) A person who is a party to a qualified financial contract unther transfer under this section carmot exercise any tight under such contract by virtue of any provision in such contract, solely by reason of or incidental to the issuance of a resolution order against the covered service provider. 33,- Part VII: 48, ResobuRON ay nrtmcs SERVICE PROVIDER 107

(4) A resolution order under sut-secdon It) ma v direct the transfer of assets or liabilities of a covered service provider unde lesolution, which includes any qualified financial contracts, to a foreign fina cial service provider only if the contractual rights of parties to such qualified financial contracts, are enforceable substandally to the same extent as permitted under this section.

(5) In this section — (a) "foreign financial service provides' me ns a financial service provider which is not an Indian financial service provider and any branch or agency of such financial service provider; (b) "qualified financial contract" means any nancial contract as maybe spec- to ified by the Corporation; and (c) 'transfer of qualified financial contracts includes the transfer to a put- chaser of all of the following — (i) all qualified financial contracts between any person and the covered service provider under resolution; Is RD all claims of the person against the covered service provider under resolution under such contract other than any claim which, under the terms of the contract, is subordinated to the claims of general Tense:cured auditors of the covered service provider under resolu- 20 (HO ail claims of the covered service provider under resoludon against the person under such contract; and (iv) all property securing or any other credit enhancement fox such contract or any claim under such contract. (6) For the purpose of this section, part!es to qualified financial contracts do not 25 include die covered service provider under resoludon.

(1) Any bid package provided under section 250 is confidential, and may not be disclosed to any person other than those identified by the Corporadon, until the purchase by a covered service provider is concluded. (2) The Corporadon must, after the purchase is concluded, publish the relevant 30 details about the transaction to the public in a transparent and accountable manner

254. (3) The provisions of section 43A of the Competition An toill not apply to any party to the purchase of the assev and liabilities of a covered service provider under resolution by a purchaser under this Chapter (2) In this section,"paity indtdes — (a) the Cotporadon; (b) the Regulator; (c) the covered service provider under resolution; or co the purchaser.

~~CHAPTER e8~~

~~RESOLLITIOA 13Y BRIDGE SERVICE PROVIDER~~

255. (1) The Corporadon may establish one or more wholly owned subsidiaries as ap- balsa cut' propriate to be referred to as "bridge service provider". 108 Part WI: 48. Renown or By emo of smoncr mon=

(2) The general superintendence, direction and management of the affairs of the bridge service provider will vest in the board of the bridge service provide; which may exercise all powers and do all acts that may be exercised and done by the bridge service provider s (3) The Corporadon must appoint the board of directors of the bridge service provider. (4) The board of a bridge service provider must elect a chairperson who may also sere in the position of chief executr, e officer of the bridge service provider.

~~(5) The Corporation may —~~

(a) remove the directors of the board of a bridge service provider; (b) Hs the compensation of directors of the board of the Midge service provider and its senior management; and (c) indemnify directors. officers, employees, and agents of a bridge service provider on such terms as the Corporation determines to be appropriate.

(6) The Corporadon may on its own, or whenever the board of the bridge service provider determines to be necessary, make available to the bridge service provide; upon such terms and conditions and in such form and amounts as the Corporation may determine, funds for the operation of the bridge service Provider. (7) The funds for the operation of the bridge service provider under sub-section (6) may be in addition to any portion of the share capital of the bridge service provider that may be purchased or retained ky the Corporation,

(8) Whenever the board of a bridge service provide; with the approval of the Corporation, determines it is advisable to do so, the board of the bridge service provider will cause capital stock of the bridge service provider to be issued and offered for sale in such amounts as it may determine.

~~256, (1) The resolution order issued under section 243 for resolving a covered service btEufdtt"Zed". provider by a bridge senice provider may direct all or any of the following — pih„~~

(a) the transfer of some or all of the assets or liabilities of the covered service provider under resolution to the bridge service provider; or (b) the performance of any ocher temporary function by the bridge service provider which the Corporation may specify.

(2) The transfer of any assets or liabilities under this section vvill be effective without any further approval under law. as (3) When issuing a resolution order under this section. the Corporation must keep in consideration the following factors —

(a) the extent to which the continued operation of the covered service provider is essential to provide adequate financial services in the community where such covered service Provider is located; (b) the inability to effect a resolution by purchase under Chapter 47 immedk ateln (c) the necessity to create conditions to enable the carrying out of a purchase under Chapter 47; and Part VII 49 RESOLUTION BY TEMPORARY PUBLIC OWNERSHIP 109

(d) the amount reasonably necessary to operate such bridge service provides which should not exceed the amount reasonably necessary to liquidate the covered service provider under resolution, (4) The resolution order under this section must be implemented fully withal two years from the date of the issuance of the order. (5) The Corporation Board may extend the period under sub-section (4) for one year at a time not more than three limes. reEmpanon Ass 257. (1) The status of a bridge senjce provider must terminate at the earliest of the ansacoor. or badge serape following circumstances— pravalaw (a) the bridge service provider is merged or consolidated with an entity oilier than the Corporation and other than another bridge service provider; (b) the liabilities of the bridge service provider are assumed by an entity other than the Corporation and other than another bridge service provider; CC) the assets of the' ridge service provider are acquired by en entity other than the Corporation and other than another bridge service provider; or 15 (d) the expiration of the period under sub-section 256(4). (2) If the scarps of a bridge seance provider has not been terminated under sub- section (1), the Corporation must liquidate die bridge service provider upon the full implementation of the resolution order under section 256. (3) The liquidation of a bridge service provider must be in accordance with the co provisions laid down under Chapter 51.

~~CHASTER 49~~

RESOLUTION BY TEMPORARY PUBLIC OWNERSHIP acsoncen order: 258. (la The resolution order issued under section 243 for resolving a covered servic e reaccorannablc ownership. provider by temporary public ownership may provide for — 25 (a) the identification of a designated service provider; and (0) the transfer of all organs of the assets and liabilities of the covered serAce provider under resolution to the designated service provider (2) The resolution order may direct a designated service provider to —

(a) exercise normal shareholder sights in the covered service provider under 30 resoludon; (b) manage the covered service provider under resolution; or (c) exercise any other powers as may be specified in the resolution order. (3) The designated service provider must introduce corporate governance arrangements in the covered service provider under resolution in line with best practice ss as soon as is reasonably practicable. (4) The designated service provider may, subject to the approval of the Corpora- tion, design, and implement a business plan, to operate the covered service provider. (5) The Corporation may specify the requirements for a business plan under sub- section (4). uo Part VII. 50. Remus-rum Fusin

(6) The Corporation mutt monitor the traplemenration of the business plan to en- surerhat continues to meet its objectives. (7) When issuing a resolution order under this section, the Corporation must keep in consideration the following fantrs

(a) the exercise of the power is necessary to resolve or reduce a serious threat to the stability of the financial system; (b) the exercise of the power seeks to create and protect value for public funds, taking account of risk; (c) the exercise of the power is subsequent to the Corporation having consids ra ered and eliminated the exercise of the power under Chapters 47 and 48; and (<1) the exercise of the power requires the Central Government to provide financial assistance in respect of the covered sertXce provider for the purpose of resolving or reducing a serious threat to the stability of the :Than- IS cial system.

~~(8) Before issuing a resolution order under this section, the Corporation must consult the Council, in accordance with the provisions under section 287.~~

~~(9) In this section —~~

(a) "designated service provided' means a financial service provider that nominee of the Corporation, and may include a wholly owned subsidiary of ;he Corporation; and (1) "financial assistance" means providing guarantees or indemnities, or any other kind of financial assistance, whether actual or contingent, as may be notified by the Central Government.

as 259. The Corporation must terminate the resolution order under section 258 when temporary6971x it makes a decision order that the factors under section 258(7) are no longer ownereEp sod hes:dynes or

(2) If necessary, the Corporation must liquidate the covered service provider under (Novae. resolution after its decision order under this section. as (3) The liquidation of the covered service provider under resolution under this section MUSE be in accordance with the provisions laid down under Chapter

~~CHAPTER 50~~

~~RESOLUTION FUND~~

os. 260. (1) The Corporation has the dux/ to insure — (a) each consumer of a specified category of covered obligations with a coy ered service provider to the extent of a specified limit; and UN each covert rents presider to the extent of a 5pec!fied limit

~~(2) The Corporationmust specify — 40 (a) the limits under this section; and (1)) the specified categories of consumers under subvection fIj(a 43•- 00.0E VW 50. RESOLUTION FUND 111~~

~~(3) The Corporation, in detembaung the limits under this section, must take into consideration its objectives under Chapter 43.~~

(4) The Regulator in consultation with the Corporation, will determine the spedfied categories of covered obligations under this section, and in doing so, must take into consideration the followMg factors - (a) the nature and extent of detriment that may be caused to consumers in case of no of obligations owed to them by the covered service provider; (b) the lack of ability of consumers co access and process informed= relating to the safety and soundness of the covered service provider; and 10 (c) the inherent difficulties that may arise for financial service providers in fulfilling those obligations.

Eh:0040w 261. (1) The following financial service providers are eligible to obtain Corporation in- CorporatEan surance under this Pert- (a) each financial service provider that makes covered obligations for the pur- ;a pose of this Fart; and (b) each financial service provider designated by the Council as a Systemically Important Financial Insfitution. (2) No financial service provider that is not eligible under sub-section (1) can ob- tab Corporation insurance index this Para 20

^pokadnr— 262. (1) Every financial service provider that is eligible under section 261 must apply to Lorcorp—on the Corporation for Corporation insurance, in the manner and form specified nsurance- by the Corporation. (2) For every financial service provider that is eligible and applies to the Corpo- ration under sub-section (1), the Corporation must cony out an assessment 25 within sixty days of that financial service provider making an application to the Corporation. (3) If the Corporation, upon carrying out an assessment, makes a decision order that a financial service provider can be a covered service provider the Corpo- tion will issue Corporation insurance to that financial service provider under 30 such terms and conditions as may be specified by the Corporation.

Assessm01( by 263. (1) The Corporation must carry out an assessment of a financial service provider, in the specified form and manner. to make a decision order whether that financial service provider can be a covered service provider

~~(2) A financial service provider may not obtain Corporation insurance if the Con 35 pot non has not carried out an assessment of that financial service provider.~~

ReS01001000000[1 264. (1) There wild be constituted a find, established and maintained by the Corpora- tion, called the Resolution Fund, to which will be tiredited all amounts received as premium from covered service providers, towards - (a) insuring each consumer of specified categories of covered obligations un- go der section 260(1)(a); and (X) insuring against the resolution of each covered service provider under section 260(1)04 112 Part VII 50. Rllsolluriffr ?PPE)

~~(2) The Resolution Fund will be applied for meeting -~~

(a) the costs of Compensation as may be incurred by the Corporation in the exercise of its duty under section 260; and (b) the costs of resolution and any administrative costs and expenses as may be incurred by the Corporation in the exercise of Its duty under section 260.

265. The Corporation may invest the amounts credited to die Resolution Fund, when ,=1(7 for the not required by the Corporation, in promissory notes and sew:cities of the Central trersluyan vend . Government and money market mutual funds.

~~tie w 266. (1) The Corporation may specify revisions to the limits of Corporation insurance Comm-sem from time to tele. m. ranee:l~~

~~(2) The rev.sion of Corporation insurance limits must be guided by the principle of proportionality to the risk to viability of the covered service provider.~~

Calculation of 267. (1) The Corporation must specify, for the purposes of calash:Mg premia, to under- 1.5 take the following - (a) the manner of classification of covered service providers into different categories; (b) the manner and methodology of assessment of premia payable by different categories of covered service providers; (c) the process of collection of premia from covered servicc providers; and (d) the manner and mode of payment of premia by covered service provides to the Corporadon. (2) The premia under this section will be collected by the Corporation once every six months. (3) The regulations under sub-section 0)(a) will take into consideration the following factors - fa) the probability of failure of the covered service provider; and (h) the consequences presented to the Corporation by he probability of failure of the covered service provider

so (4) No Catered service provider may, without- prior agreement with the Corpora- tion, change a premium amount. interest or any other payment to be made to against poration by reason of a ser-off or claim by the covered service provider against the Corporation.

The premium under section 264(I)(b) will include administrative casts. which Cakillaii"ee 268. (1) adminteaone ss must be specified by the Corporation, and must include the following - fa) the costs for a particular function or service, including the coat for making an application to the Corporation for Corporation insurance; (b) any exemptions from or reductions in costs; or (C) any remission of costs in whole or in parr

~~to (2) In specifying costs under tiff s section, the Corporation must she into account .-3 tat 113~~

(s) adequacy in meeting the financial requirements and present and projected expenditures of the Corporadon; and (6) fairness in comparison to the costs incurred by the Corporation for which the costs are payable.

°tit 269. (1) The Corporation must make pay-outs from the Resolution Fund when a reso. s Corporation.s's'se ths lotion order under section 243 provides for the payment of a specified amount to specified consumers of a covered service provider, on the date on which the resoludor order comes into force. (2) The Central Government must, in consultaton with the Corporation, prescribe the maximum amount that may he made as pay-outs. in

~~(3) The Corporation may make pay-outs in instalments, Sit is appropriate and necessary m do so.~~

~~(4) The Corporation must make regulations to provide for the process of making pay-ours, which must include the following -~~

(a) the notice pesiod to be given by the Corporation to the consumers with is respect to the pay-out; (b) representations, if any, to be made by the covered service provide; or the consumers, to the Corporation in relation to the pay-out; Co) any extension of die nadea period; and (d) alternate provisions for making payments to consumers who are not found ao or readily traceable, at the time of making pay-outs.

(5) If a covered service provider makes a claim for compensation over and above ics specified insured amount, such claim will be referred to the Corporation under the provisions of Chapter 51. (6) Any amount paid by the Corporation under this Chapter in respect of a covered obligation will, m the extent of the amount paid, discharge the Corporation from its liability in respect of that covered obhgation.

GEOWldi far 270. The Corporation retains the right to terminate the Corporadon insurance of a cov- lemma= of Cor7oanan ered service provider in any of the following circumstances - 37'51.rase (a) if the covered service prov ider fails to pay premia for two consecutive Sc periods; (b) the covered service provider has, by a decision order, been determined to be at critical risk to viabikey under section 237; (o) the covered service provider or its directors or trustees have engaged or are engaging in unsafe or unsound practices in conducting the business or 3S continuing the operations of the covered service provider; (d) the covered service providers or its directors or its zustees have violated any applicable law, regulations or condition imposed by the Corporation or Corporation insurance or written agreement entered into between the covered service provider and the Corporation; 4 0 (e) the Regulator makes a decision order that the covered service provider is not engaged in the activity it is registered to carry on; or (f) the Regulator withdraws any authorisation that it may have granted to the covered service provider 114 Part VII. 50 RESOLUTION Form.

~~,PeZsin"at 0, 271. (1) If any of the circumstances under section 270 are met, the Corporation may by a decision order terminate the Corporation insurance of a covered service provider ram?'~~

~~(2) Before issuing an order under this section, the Corporation must —~~

Inform the covered service provider of its intended actions; (b) provide the time-period within which a representation may be made by the covered service provider to the Corporation, which may not be more than ninety days; and (c) consider representations from the covered service provider, if such repre- :0 sentation is made within the notice period provided. (3) The Corporation may extend the time-period for submitting representation, upon the request of the covered service provide; for a period of not mote than ninety days, if it is satisfied hat such a request is reason able

(4) If no representation is received by the Corporation from a covered service IS provide: with the time-period provided, the Corporation must terminate the Corporation insurance of that covered service provider. (5) If the Corporation insurance of a covered service provider is terminated, the Corporation must, without delay — (a) inform the covered service provider of such termination; and (7) ruire the covered senice provider to inform its consumers maybe lieqc maybe speci fied.

Revocavor or 272. (2) The Corporation may revoke the termination of the Corporation insurance of a covered service provider if it is satisfied that the reasons for termination have porporarien 2S been suitably remedied or the risk to consumers or any other person has been siswerce averted or substantially reduced, to the satisfaction of the Corporation. (2) If the termination of Corporation insurance of a covered service provider cakes place under section 270(6)(0), the CorpOratOn may revoke the said termination and restore the Corporation insurance if that covered smite provider pays at all the amounts due by way of premix from the date of default ail the date of payment, together with interest due on the date of payment.

273. 01 The Corporation may mail of a line of credit from the Central Government for I-1"of 'cab a period of five years from the dare of establishment of the Resolution Turd, in such form and manner as prescribed. as (2) The Central Government may extend the lime of credit upon a request by the Corporation, in dm form and manner prescribed, as it thinks fit. (33 The terns of the line of credit must include thc following — (c) the amount that may be borrowed by the Corporation under this section; (h ) the repayment schedule according to which the amount must be returned ea to the Central Government; (c) the interest rate that the Corporation is obliged to pay on the amount availed under the line of credit; and Part VII: 51. Comm gtholv nun hlpum.SrION 115

(d) the nature of investments the Corporation can make with the amount availed under the line of credit. (4) The Central Government will determine and review the terms of the line of credit, in accordance with this secdon.

(5) The Corporation may during the period that it avails the line of credit, apply to the Central Government, in the form and mariner prescribed, for extension, renewal or temporary increase of credit.

(6) Each request by the Corporation to the Cenual Government for extension, renewal or increase of credit under this section must be accompanied by a detailed report stating the reasons and need for such additional borrowing and is its intended uses. (7) The Central Government may, upon a request by the Corporation under sub- section (5), extend, renew or temporarily increase the line of credit, for such period as it thinks fit. (8) The Corporation may use the amount availed under the line of credit for in- w vestment purposes, subject to section 265. (9) If the Corporation avails the line of credit for the resolution of an identified covered service provider. the Corporation may meet its repayment obligations against that line of credit by claiming to be a creditor of the first priority of that identified covered service provider. in accordance with section 280, if that .2.0 covered service provider is liquidated or dissolved.

gthugeinenc of 274. The Corporation must make regulations to provide for the form and ma ncr ofithranon nliurliun which a covered service provider must advertise to the public at large about its Corporation insurance. (2) No financial service Provide; or a person belonging to the same group, or its cs related person, may represent or imply that the financial service provideb or any obligation or amount credited to the Corporation, is insured or guaranteed by the Corporation, if such obligation or amount is not insured or guaranteed by the Corporation, including by—

(a) the use of the terms "Resolution Corporation" the "Corporation", 'Cor- poration insurance", "Resolution Fundy the "Fund' or any other term that gives the impression that it is associated with the Corporation or the Res- olution Fund, as part of the business name, or brm name, of any person, including any corporation, partnership, trust or any other crag: or CO the use of any other terms, signs or symbols as part of an advertisement a or any other representation.

~~CHAPTER 51 ComthusgoON AND LIQUIDATION guaton of 275. (I) A resolution order issued under section 243 must provide for compensation in connection with the covered service provider under resoludon. 40~~

~~(2) Under this section, the Corporation must specify the categories of persons who are entitled to compensation from the resolution of the covered service provider under the resolution order -3'18'~~

~~716 Part Ell Si.COMPENSATION AND LIQUIDATION~~

(3) The Corporation may specify the categories of persons who may be entitled to compensation from the resolution of a covered service provider under a resolution order] and the time-period within which the determination under sub-section (2) must be made.

es don 5 276. (1) meta determination under section 275(2), the Corporation must issue, within nom a specified time-period - (a) a general notice to the public; and (b) special notices to individuals who fall within the specified categories. (2) The notices under sub-section (1) must be issued in a manner hest suited to na bring it to the attention of the. public or the individuals, as the case may be (3) The notice under sub-section (1)(b) to every individual who falls within the specified categories must -

(a) stare the amount of en:Eternal-It to compensation of char individual, (b) crate the proof of entitlement to compensation that that individual must provide to the Corporation; and (c) provide the form, manner and reasonable time-period within which individuals must respond to the notice.

~~(4) The Corporation may specify -~~

(a) under sub-section 0 )(a) and sub-section (17(b), the form and the time sc period within which such notice must be issued; and (b) the proof of entitlement that specified categories of persons may Provide under sub-section (2)(b).

(5) Every individual to whom a notice has been issued by the Corporation must respond in the form, manner and ttme-period provided. (6) The Corporation may reject the enudement to compensation of an individual if section (5) is nor complied with. (7) Regulations under this section must be issued only after consultation with the Regulator

(8) In this section, 'proof of entitlement to compensation" means all information 30 or documentation,en as may be specified, that en individual must present to the Corporation under section 276, to prove that that individual is entitled to the compensation.

277. Any person, including an individual under sub.section 275(2), may object to Eltle2(°"'E the notmes under sections 276(1)(a) and 276(1)(b), in connection with the =7 "° resobidon of a covered service provider under a resolution order, on one of the following grounds - (a) that person has not been identified as an individual under sub-section 275(2) butts enthled to comp cnsatEen (b) that individual has complied with section 276(5) but has been rejected 40 under section 276(6); or (c) that individual has been offered compensation of an amount less than their entitlement to compensation. -399- Part VIE 51. COMPENSATION AND ErmumpTio• 117

(2) The form, manner and reasonable time-period within which objections co the notices under this section may be made must be in accordance with reguladons Made by he Corporation. (3) The Corporation must consider the objections to the notices received under this section, and determine whether the person making the objection is entitled to s compensation, and the amount of such entitlement to compensation, from the resolution of the covered service provider under the resolution order.

Co up ens arma 278. (1) The Corporation must issue a compensation order in accordance with the provisions of this section. (2) A compensation order must be issued within reasonable time, as may be spec- lo ified, after issuing compensation notices under section 276, but not before the objections to the compensation notices have been received under section 277.

(3) The compensation order must — (a) adhere to industY accepted best practices of valuation, as May be Vert- fied; is (6) after due consideration of sections 276(5), 276(6) and 277(7) — (i) identifyd she persons or individuals who are to be given compensa-

(ii) didoenntify the persons or individuals who will not be given compensa- no (c) identify the final amodn( of such compensation that is to be given, which may be different from the amount of entitlement to compensation under section 276(3)(a); and (d) provide details of the mode, manner and time-period within which such compensation will be given. 25 (4) The Corporation must specify — (a) the form and manner of issuing a compensation order; (b) the valuation methods m be followed by she Corporation for the purposes of valuing compensation; and (e) the mode, manner and time-period within which any compensation under so a compensation order must be given. (5) An affected person under a compensation order has the right to appeal such older before the Tribunal in accordance with the provisions of section 282.

~~Payment of 279. (1) Any compensation to be given under a compensation order must be given by compensanon the Corporation in accordance with section 264(2). 35~~

(2) Any amount given by the Corporation under this chapter in respect of compensadon to a person will, to the extent of the amount paid, discharge the Corporation from in liability in respect of that compensadon to that person.

Ltindatian 01a 280. (1) The Corporation must only apply for liquidation or dissolution of a covered mere!' sena, — pronder sante provider under resolution (a) under section 257; (6) if it so determines Lander section 259; or 118 Part VII; 52. APPEALS

(c) if a covered service provider has, by decision order, been determined to be at critical rlik to viability under section 237, and the Corporation determines that it is necessary to limddace or dissolve that covered service provider (2) The Corporation must apply for liquidation or dissolution of the covered service provider under the law applicable to that covered service provider for liquidation or dissolution, within — (a) the duration specified in the resolution order; or (b) if the resolution order does not provide for a duration for such application, to within a period of thirty days from the date of the order.

(3) Where the law applicable to the covered service provider for liquidafion or dissolution provides for the appointment of a liquidator or such other person, as the case maybe, the Corporation is deemed to be the liquidator or such other person, as the case may is (4) Where a covered service provider is being liquidated or dissolved under the applicable law and where the Corporation has utilised proceeds from the Res- olution Fund towards such covered service provide; the Corporation —

~~(a) is deemed to be a creditor of the first priority of the covered service provider; and~~

~~20 (b) will be reimbursed by the liquidator or such other person as the case maybe, to the extent and in the manner provided under the appacable law.~~

(5) where the Corporation had availed a line of credit undersection 273 toresolve the covered service provider being liquidated or dsssolved, such amount must 25 be repaid first out of the proceeds of iquidation or dissolution.

~~CHAPTER 52 APPEALS~~

~~130 review of 281. A resolution order issued by the Corporation under this Part is for all purposes (mission emu final and conclusive and may not be questioned or reviewed by the Tribunal.~~

APP"l 8285585 30 282. (7) An affected person under a compensation order issued under section 278 has pompous= the right to appeal against that compersaiion order before the Tnbunal. 13MP! (2) The form, manner and time-period within which such appeal must be made will be in accordance with this Act. (3) A person is an affected person under a compensation order if that person, under that compensation order — (0) has been identified and offered compensation, but of an amount less than that person's entitlement to compensation; or (il) has been refused comp von, but is entitled to compensation.

The Tribunal ma; having regard to an appeal under section 282, order the S8358°555 283. (1) aseresp payment of interest on the reassessed compenSadOn amount, along with the reassessed compensation amount, if it determines that the such payment is just and reasonable. 3

~~Part Vlli 53. INTERACTION WITH OTHER AGENCIES 119~~

~~(2) The payment of interest under this section may be calculated at a rare and from a time that the ITiTunnal determines to be just and reasonable.~~

~~aarie"ErdTHIJITE 284. OA m/an bathe A decision or determination of the Corporation may be reviewed by the Tri Comorston. bunal only if one of the following conditions are met –~~

(a) the Corporation, in making the decision or determination, has made an s error apparent on the race of record; (b) the Corporation, in making the decision or determination has not considered all relevant material, Wallas relied on irrelevant material, in making a decision or determination; or (C) rite Corporation, in malting the decision or determination, has violated is the principles of natural justice.

~~CHAPTER 53 INTERACTION WITH OTITER AGENCIES~~

Inte33313311 be&3353 225. (1) Prior to exercising any powers under Chapter 46, the Corporation must prepare Coro:motion and a report detailing the effect that any action it is likely to take may have on Is competition competition in the relevant market Commission. (2) Prior to exercising any powers under Chapter 46, the Corporation must —

AO consult with the Competition Commission regarding the effect of the Con. poradon's proposed action on competition in the relevant market mcluding by way of providing the report prepared under sub-section (/), and 20 (b) make available any data, information or material in the possession of the Corporation relating to the action it is likely to take, as may be required by the Competition Commission under the Competition Am.

(3) For the purpose of subsection (2), sections 21 and 43A of the Competition Act nocapply 25 (9) Any data, information or material obtained by the Competition Commission from the Corporation under sub-section (2)(b) will be treated as corddenlial in accordance with the provisions of section 57 of the Competition Act.

(5) The Competition Commission, in carrying out any evaluation or making any determination in relation to a matter on which a report has been provided Is by the Corporation under sub-section (2), must give due regard to section 20(4)00 of the Competition Act.

~~(6) Sub-section (2) will not apply if the Corporation determines char –~~

(a) it must act immediately in order to prevent the probable failure of a covered service provider or 35 (b) the exercise of its powers relates to a combination involving a covered service provider and one or more persons belonging to the same group as the covered &entice providen

(7) Except the proviso to section 20(1) of the Competition Act, the provisions of section 20 of the Competition Act wiu not apply to a determination under sub- w section (6) until the completion of an action taken by the Corporation under Chapter 46. Part NC 53, INTERACTION WITH OTHER AGENCIES 120 will prevent the Competition Commission Nothing contained in sub-section (7) (8) from reviewing a combination and suggesdng modifications to the terms of a combination effected as a result of the exercise by the corporation of its powers under Chapter 46 if the Competition Commission determines that the combination causes or 4 likely to cause an appreciable adverse effect on competition 5 within the relevant market. In. this section, "relevant market" has the meaning assigned co It under section (9) 2(r) of the Competition Act, as may be determined jointly by the Competition Commission and the Corporation for the purposes of this Part.

InteraenoT The Comoradon and each Regulator must seek to — bensees to 286. (1) Cosporason and (a) consult on a regular and frequent basis; co.ordinare on a regular and frequent basis; ensure and achieve harmonisation of regulatory action; Id (d) issue regulations jointly and it a timely manner on the matters under other matter as may be provided under this Act; sub-section (3), and any (a) make relevant information available to each other M. a timely manner] and other area considered relevant under this

(2) The frequency of interaction with respect to a covered service provider should x) take into account the stage of Ask to viability of the covered service provider (3) The Corporation and the Regulator must make regulations Jointly in a timely manner, on all the following —

(a) the framework for prompt corrective action; (b) the risk assessment of covered senice providers; (c) the actions to be taken with respect to a covered service provider at dif- ta ferent stages of risk to the covered service provider; and (Q the identification of emerging risks, their assessment, quantification and impact upon the financial sector. 4) The Corporation must inform the Regulator if the Corporation considers taking ( 30 any action with respect to a covered service provider under sections 234, 235, 236 or 237 under the framework for prompt collective action. The Regulator must provide the Corporad.on with the summary of Ask assess- (5) U- ment carried our by ft in connection with covered service providers, on a reg-

ss lar basis, and in a timely fashion. determination, with respect (6) The Regulator must inform the Corporation of its to a covered service provider, with regard to — (a) the ask to viability of the covered service provider; (d) the reasons for such determination; and the measures that the Regulator proposes to take. <7 (C) (7) The Regulator must provide the Corporation with copies of Its intervention, if any, with respect to a covered service provides: 5-3

~~Part VII: 5W OTHER REcivisloto GOVERNING THE CORPORATION 121~~

nueratOn 287. (I) If there is a difference of opinion with regard to the issuance of regulations boom coot:ado) and between doe Corporation and the Regulator, the dispute will be resolved by the Cpool. Council in accordance with the provisions under section 305.

~~(2) Prier to initiaung any measure in respect of a Systemically Important Financial kistiCution, the Corporation must —~~

~~(a) inform the Council of the measures that the Corporation p roposes to take; and (h) take such measures only twin the approval of the Council.~~

~~CHAPTER 59 OTHER PROVISIONS GOVERNING THE CORPORATION~~

Reams and 288. In addition to anything contained in this Act with regard to the annual report, the Corporation must submit to the Centel Government the following additional information — (a) a statement setting out the value of the Resolution Fund; (LO a statement mentioning the use of the Resolution Fund; ha (c) a statement including details on actions taken against covered service providers; and (d) any other statement that is necessary to give an accurate assessment of its functioning.

"'Homo oe 289. Nothing contained in any other law creating a body corporate carrying out a (Man- co ocher laws dal service will affect the applicability of the provisions of this Part against such body corporate -35

~~122 Part WI: 56 UNCTIONS OF THE COUNCIL~~

~~PART VIII~~

~~FINANCIAL STABILITY AND DEVELOPMENT COUNCIL~~

~~CHAFFER 55~~

~~OBJECTIVE AND FUNCTIONING OF THE FINANCIAL STABILITY AND DEVELOPMENT~~

~~COMme 290. (1) The Council will pursue the objective of fosceting the sablity and resilience of the financial system, by —~~

(a) identifying and monitoring systemic risk; and (b) takng all required action to elvninate or mitigate systemic risk. la (3) The Council must have regard to India's international obligations, as relevant, in the process of achieving its objective.

~~291. (I) The office of the Council will consist of the Council Board, an Executive Corp- S2'925-27t of the mdtee, a Secretanat, and a Data Cenn-e.~~

(2) The Council Board must publish a report vithin thirty days of the beginning of every financial year to disclose all delegations to the office of the Council, or by the office of the Council for the previous financial year.

292. (1) There will be established, for the purposes of this Act, an Ex.eautiVe COMMittee 05E5e sislIshtcte of which will have administrative and managerial control over the affairs of the o7„,m,o,..5. Council.

~~(2) The Executive Commiuee will comprise —~~

~~(a) the Reserve Bark Chairperson as the chairperson of the Executive Com- mittee; (b) a nominee of the member mentioned under section 21(3)(a);~~

~~(G) the Einandai Authority Chairperson: 25 (d) the Corporation Chairperson; (e) anadministrative law member; and (f) the Council Chief ExeCutiVe.~~

~~trat slale BIG:a;.o 293. (1) There will beestablished, for the purposes of this Act, a Secretariat which will assiar the Council in the performance of its functions under this Act.~~

~~(2) The Secretariat will be headed by the Council Chief Executive .~~

294. 0) There will be established, for the purposes of this Act, a Data Centre by the EEthcariblishFory,I05155 name of the Financial Data managemem Centre to perform the functions laid m eme„, down in Chapter 57. centre. e 5 SC- 123

~~(2) The Data Centre will be headed by a Data Centre Director who will be appointed by the Council Board in accordance with section 45.~~

~~CHAPTER 56~~

~~FUNCTIONS OF THE COUNCIL~~

FULICCLODS die council 295. The Council must— (a) conduct data analysis and research; (b) designate nnannal serviceproviders as Systemically Important Financial Institution; (c) formuhte and implement the application of system-wide measures to the financial sptem; ao (d) promote co-operation and co-ordination among members and Financial Agencies; (e) assist the members and Financial Agencies in the pertonnance of their functions; (ff assist the Central Government, members and Financial Agencies during a Is financial system crisis; and (g) ensure the performance of all other actions that are required to be undertaken by the Council under this Act.

296. (1) The Council must-, while discharging its functions and exercising in powers under this Act, ensure that its actions — so (a) cake into account the principles of propoetonaliry between the costs imposed and the benefits expected to be achieved; (b) seek to reduce the potential for regulatory inconsistencies; (t) do not cause a significant adverse effect on the competitiveness of the financial system; 25 (d) do not cause a significant adverse effect on the growth of the financial system in the medium or longoemil and (e) lead to greater transparency and sharing of mateff al information in relation to the financial system. (2) If a proposed action of the Council is likely to conflict with any principle under sub-section (1), the Council has a duty to explain before it can continue with the proposed =Lee

(3) In sub-section (2), a "duty to explain' means that the Council must publish — (a) the principles that are likely to conflict with the proposed action, and the extent of such conflict; 95 (h) the efforts taken by the Council to reconcile its proposed action with the principles; and (c) a justificadon of the proposed action in relation to the achievement of its objecdve.

~~DaM analyns sad 297. (/) The Council must monitor and analyse all accessible data, and conduct such research, as is relevant to the achievement of its objective. 354 -~~

~~Part VIII: 56. FUNCTIONS OF THE COUNcir 12e~~

(2) The functions of the Council relating to the monitoring and analysis of accessible dam and conducting research include - (a) developing expertise and information systems to monitor and conduct statistical, mathematical, financial and related analysis of accessible data; CI) identifying trends in the financial system that assist in the identification, measurement, and monitoring of systemic risk in the financial system; (c) developing systemwide measures, systemic indicators for designating systemically Important Financial Institutions, and other tools that may be used to eliminate or mitigate systemic risk in the financial system; (d) studying the impact on the financial system of any measures, systemic indicators, or tools that have been developed under clause (c) on the financial system; and (e) analysing international best practices for the efficient discharge of its functions.

~~(3) The Council must publish the results of its ta monitoring, data analysis and research frequently and at least once everyone hundred and eighty days.~~

~~298. The Council may specify the collection of financial regulatory data where -~~

~~(a) such data is relevant to the achievement of its objective; and (X) the relevant Financial Agency has not specified the submission of such ea data.~~

b(yscettrs 299. (3) The Council must specify, the systemic indicators for designating financial set- ♦vice providers as Systemically important Financial 'munitions. (2) The Council must review regulations under sub-secdon (1) every financial year.

(3) The Council, in determining the systemic indicators, must consider all of the following factors - (a) the nature of the financial senice or financial product provided, if any by the financial service provider; (I) the size of the financial service provider; (r) the interconnectedness of the financia: service provider with the financial system, and other parts of the economy; (d) the substitutabinn/ of the financial service. the financial product or the financial service provider in the financial system; and (e) any additional factors as may be specified.

(4) In addition to the requirements under section 52(2). the following documents must accompany the draft regulations - (a) a statement explaining the application of the systemic indicators to the data of various categories or classes of financial services, financial prod- and financial service providers; the time-periods within which the Council will designate financial service providers as Systemically Important Financial Institutions; (C) the conditions and process of deciding requests for exempnon from such designation; and (d) the time-period within which the Council will convey its decision En relation to any requests for exemption from such designation. -36-7 Part VIII 06 FUNCTIONS OF rile COUNCIL 125 essindess d 300. (1) The council must reyiew as frequently as required, and at least once every iystemm mthcators co nnancidl Senit financial yeah hie applicability of the systemic indicators contained in regu- ?widev lations made under section 2990) to financial sewice providers to identify which financial service providers are to be designated as Systemically Impor- tant Financial Institution

~~(2) If the Council proposes to designate a financial service provider as a Systemi- cally Important Financial Institution it must issue a show cause notice to such financial service provider.~~

(3) If the Council decides to designate a financial service provider as a Systemically Importan: Financial Institution it must issue a decision order, t. (4) If any Systemically Important Financial Institution carries out a financial service that is not allocated to a Regulator under section 11, the Council must, through the decision order mentioned in sub-section (3), identify the Regula- tor who will logulate such Shstem:cony Important Financial Institution.

~~Formulation of 301. The Council may, for the purpose of implementationunder section 302, specify Is Vnde 5Y3t2r4- the formulation of any system-wide measure specified in the Third Schedule.~~

~~(2) Inns formulation of the system-wide measure, the Council should consider the following factors -~~

(a) that the system-wide measure applies to the entire financial system; or (b) that the system-wide measure applies to a substantial part of the financial so system that is exposed to, or is contributing to, a similar source of systemic risk. (3) In addition to the requirements undersection52(2), the following documents must accompany the draft regulations -

(a) the scope of implementation of the system-wide measure; 25 (b) an explanation of the possible implementation of the system-wide measure to specified types of financial services, financial products, or financial service providers; and (s) the parameters of discretion that win he provided to the Financial Agen- cies in the implementation of the system-wide measure_ ro (4) The formulation of the system-wide measure, as specified under sub-section (1) will be implemented by the Financial Agencies, as appropriate, in accordance with section 302. (5) Any action to be takenby the Council under this section must only he taken by the Council Board. 15 slynfogmleiligegriii cif 302. (1) The Council may by order[ writing, direct the implementation ofasystem- neisurec wide measure, if it determines that such implementation is required to achieve the Council's objective, (2) The order under sub-section (1) must -

~~(a) identify the parameters of application of the system-wide measure; (b) siclueren;dly the Financial Agencies that will implement suchsystem-widemem -35'8~~

~~Part VIII. 36 FUNCTIONS 0? THE COUNCIL 126~~

(c) direct the Financial Agencies to exercise their powers to ensure the implementadon of such system-wide measure; (d) allocatespecific implementation to specific Financial Agencies, if the measure requires implementation by more than one Financial Agency; and (c) direct the Financial Agencies to monitor and review the implementation of the system-wide measure and report to the Council as frequent, and in such f An and m et as may be provided for in the order.

~~(3) The existence of the order is relevant to the exercise of any discretion conferred on the Anancial Agencies.~~

~~(4) The Council must regularly and at least once every financial year, review the effectiveness of all orders issued under this section.~~

(5) If the Council determines that a specific system-wide measure no longer con- tibutes to its objective,thenicmust- (a) revoke the implementation of such system-wide measure, through an or- Is der in vniting, to the Financial Agencies directed to implement the system- wise measure under sub-section (2)(c): or (b) suitably modify such system-wide measure in accordance with the procedure in section 301, before ordering the implementation of the modifiefi GA:cm-wide measure under sub-section (1). so (6) The Council must conduct an analysis of the impact of any revoked, or modified system-wide measure within one year of such revocation or modification.

~~(7) Any action to be taken by the Council under this section most only be taken by the Council Board.~~

~~fiaciticasing~~

~~303. (1) The Council must facilitate co-ordination and co-operation among Financial 25 Agencies.~~

(2) The functions of the Council relating to the facilitation of co-ordination and co-operation include - (a) she review and examination of concerns of regulatory inconsistencies; (0) the identification of gaps in actions of the Financial Agencies in dealing so with similar matters; and (c) the facilitation of knowledge-sharing and cross-staffing.

'll'fi 304. The Council may, upon direction from. o_ in cons:Aaron vbh, the Central Gov- sonpAsefincbGfilfi at ernment- insernationfi Combs. (0) co-ordinate and co-operate with, and represent India at specified international forums and foreign regulatory bodies, as may be necessary to achieve is objective; (b) seek to initiate knowledge-sharing and cross-staffing with international forums end foreign regulatory bodies, as may be necessary to achieve Its objective; and (c) undertake actions that are required to he taken as a result of India's inter- nafional obligations, as may be necessary to achieve its objective. Part VIII: 56. FuNcTbaNs OF THE COUNCIL 127

Resokaqn 305. (1) The Council Board must resolve any dispute between two or mare of Its members or betweenany of its members and other Financial Agencies, or between Financial Agencies. (2) The Council Board must resolve a dispute under this section only if at least one of the following conditions is met - 5 (a) a member or a Financial Agency submits a klnitten request to the Council Board for the determination of such dispute; or (b) in the opinion of the Council Board, a dispute adsts between two or more of its members, or between any of its members and other Financial Agen- cies, or between Financial Agencies, that has the potential to cause regulatory uncertainty and adversely impact the stability of the financial system.

(3) Before resolving any dispute under this section, the Council Board must, as soon as practicable, and within ninety days of receiving such s‘TitLen request, or coming to an opinion that a dispute exists - (a) determine that the parties involved in the dispute have failed to resolve is the dispute in good faith; (0) provide a copy of the written request, or a statement of its opinion, to all parties to the dispute; (5) undertake to seek the agreement of all parties to the dispute in relation to the resolution of such dispute by the Council Board; and (d) publish the procedure of dispute resolution that the Council Board intends to follow, as described in sub-section (4).

(4) The Council Board must follow a procedure of dispute resolution that is necessary to resolve the dispute fairly and expeditiously and is in conformity with the principles of natural justice. is (5) The Council Board must resolve all disputes as soon as possible, and at least within one year of publishing the procedure of dispute resolution.

(6) In resolving a dispute under sub.section (4), the Council Board must ensure that, where a dispute relates to any ac don taken by a Financial Agency including the extent of jurisdiction of a Financial Agency in takin,g such action, the 30 decision of the Council Board does nor - (n) exempt the statutory duties of a party to the dispute; or (6) divest a party to the dispute of any authority derived from this Act, or any other law currently in force. (7) A derision made by the Council Board under this section must be in gating, ss and published immediately

ROle or councq 306. (I) The Council must specify, as frequendy as appropriate, the parameters for the 310333 0 finar.coo SYSIelll Cat. identification and determination of a financial system crisis. (2) The Council must specify, in preparation for assistance during a financial system crisis, a statement of action in reladon to potential financial system crises. too

(3) The statement of action under sub-section (2) must - (a) be updated every financial year; (b) take into account internationalbest practices in relation to assistance during various types of financial system crises;

~~-340~~

~~128 Part VIII: 57. FINANCIAL DATA MANAGEMENT CENTRE~~

(c) conmin a statement of policy in relation to the provision of fiscal assistance or other extraordinary assistance by the Central Government; and (d) describe, in general terms, the manner in which the Council may provide assistance to the Central Government and Financial Agencies for various types of financial system arises.

(4) If the Gemmel Governmtt on its own, or upon advice from the Council, de- tenmtes that there is a financial system crisis, the Council must assist the Centel Government, and Financial Agencies as regumed, and particularly as mentioned in sub-section (5).

(5) The Council must — (a) provide and conduct such data analysis and research as may be net sary to understand and resolve the financial system crisis; (b) assist Financial Agencies in their efforts relating to resolving the financial system crisis: 15 (C) provide advice to the Central GOveffillICIC in relation to the provision of fiscal assistance or other extraordinary assistance; (d) initiate an audit of ail actions leading up to, and taken during, the financial system crisis, and publish the results of the audit within a period of one year after the commencement of the financial system crisis; and (e) where the financial system crisis continues corn period beyond one yeag initiate an audit as described in this sub-section for every year of the financial system crisis, until such financial system crisis has ended.

~~CHAPTER 57 FINANCIAL DATA MANAGEMENT CENTRE~~

acelaidEuTcraimi: add 25 807. (1) The Council most make bye-laws to provide for the creation of a financial system database, including the process of upgrading the eaP abiliriCS of the supenision of Me financial system database.

~~(2) The Data Centre must administer and supervise the funcdoning financial system database.~~

~~so (3) The Date Centre must have regard to international best practces in the administration and supervision of the financial system database.~~

~~(4) The Data Centre must publish reports in relation to the functioning of the financial system database frequently, and at least once every ninety days.~~

~~(5) The Data Centre may enter into agreements with any person for the purpose of administration of the financial system database.~~

PrIcmples In Ix 808. (1) The Data Centre must ensure that its actions — followed by the Dam Ccnee. (a) lead to efficient end accurate means of accessing financial regulatory data; (b) reduce the costs of reporting of financial regulatory data; (c) acaons seek to protect the confidendalit, privacy and security of financial regulatory data; and () increase access to material information about the financial system.

~~36/ ar~~

~~129~~

~~(2) The principles to be followed by the Data Centre under this section are in addition to the principles to be followed by the Council under section 296.~~

sub mews T 09. (1) very Financial Agency must submit financial regulatory data — manual regrtho did the tiathat system (u) only in electronic form; and database (4) only through the financial system database at the first instance. (2) Nothing in this section restricts the power of a Financial Agency under law to seek the submission of financial regulatory data in any form other than electronic form, where such data cannot be adequately convened to electronic form, provided that the Data Centre is informed. (3) Nothing in this section resdicts the power of a Financial Agency to seek the to submission of data other than financial regulatory data to any person other than the financial system database, where such data may be required for the purposes of an investigadon by such Financial Agency (4) Nothing in this section restricts the power of a Financial Agency under law to specify the content and nature of financial regulatory data that must be is submitted by a financial service provider.

~~(5) Nothing in this section prevents a Financial Agency from maintaining a separate database of financial regulatory data that may be transmitted to it by the financial system database.~~

Abbess to fins.-, qtr 3 10. (1) The Council must enter into a memorandum of understanding with a Financial 2o Fisica.). data th a 5thisid Agency that seeks the submission of regulatory financial data or the Central c Government, as required. Pthenthent (2) The Council must enter into a memorandum of understanding with a Financial Agency that seeks to share financial regulatory data, or other data, with one or more Financial Agencies. 25 (3) The memoranda of understanding described under sub-sections (2) and (2) must dearly set out the terms and conditions of access and use by the recipient Financial Agency for such financial regulatory data, or other data.

Access to financial 311. (1) The Council must specify the terms and conditions of the Council's access to regillateby data by the to.wu. the financial system database. SO (2) The Council must receive such access to the financial system database as may be required to achieve its objective .

Acmss to finalual 312. The Council musf in consultation with relevant Financial Agencies, specify a state- regulatow eatb by the pith ment of policy regarding the access to financial regulatory data in the financial system database, by members of the public, which includes — it (a) the terms and conditions of access to financial regulatory data in the financial system database by members of the public, including the fees payable forsuch access: (b) the categories of financial regulatory data that may be instantly accessed by members of the public, 40 (c) the categories of financial regulatory data that may be accessed by members of the public only after a padicular timetheliod; and 130 Part 1.1111: fa OTHER is grandmas GOVERNING THE Caugc

~~(d) the categories of financial regulatory data that may never be available for~~

~~Ion 313. (1) Whoever wilfully commits any of the following acts in relation to the financial Er system database, commits a Class A offence — systemsaran~~

(a) without being authorised to do so, accesses or secures access, or denies, or causes a denial of access, to the financial regulatory data in the financial system database; (b) without being authorged to do so. downloads, extracts, copies, or re- produces in any form, financial regulatory data in the financial system ro database; (c) knowingly introduces or causes to be introduced, any computer virus or other computer contaminant into the financial system database; (d) knowingly damages or causes the damage of any financial regulatory data in the financial system database; (a) without autboTsation, disrupts or causes disruption to the functioning of the financial system database; CO knowingly damages, destroys, deletes: alters, diminishes in value or util- icy, or affects by any means, the financial regulatory data in the financial system database; or (g) knowingly provides any assistance to any person to do any of the acts mentioned above. (2) In this section. die expressions °computer contaminant", "computer virus" and "damage" have the meanings respectively assigned to them under section 43 of the Information Technology Act, 2000 (21 of 2000) .

~~CHAPTER 58 OTHER PROVISIONS GOVERNING THE COUNCIL~~

~~DeaSKID Malang a 314. The provisions of section 35 will apply to the Council Board in the foil the Coyne) Bawl~~

(a) an provisions of the scale n will apply when there is a financial system 30 cnbis; and (b) where there is no financial system crisis, the Council Chairperson must seek to secure all decisions that the Council is authorised or required to make only by aniving at a consensus.

an. fl) There will be consff rated a fund, established and maintainedy the Council, dug& 35 to which the following will he credited — (a) all grants, loans, and fees received by the Council; and (b) all sums received by the Coun I fr m such other sources as may be decided upon by the Central Government.

~~(2) The fund will be applied for meeffng — so (a) the salaries, allowances and other remtme don of the membeq officers, and employees of the Council; -363-~~

~~SIONN GOVERNING THE COUNCIL 131~~

~~(6) the expenses of the Council in performing its functons; and (c) any other costs and expenses as may be incurred by the Council in the performance of its functions under this Act.~~

316. In addition to the requirements under section 77, the Council must submit the following additional information in its annual report — (a) a statement setting out the value of the hind of the Council; (b) a statement mentioning the use of the fund by the Council for the previous financial year: (c) all significant :rends identified in the financial system relevant to the ob- jecdves of the Coimcil; (d) an assessment of the stability and resilience of the financial system; (e) an assessment of the (-motioning of the Council in relation to India's international obligations, as relevant; and (E) any other statement that is necessary to give an accurate assessment of the functioning of the Council. -30

~~-mei AND FUNCTIONS 132 Part MI 59. Gains~~

~~PARTE<~~

~~DEVELOPMENT~~

~~CHAPTER 59 OBJECTIva AND FuNcrish8~~

~~ObieTve 5 317. (1) The Regulator must pursue the objective of fostering the development or improvement of market infrastructure or market process under this Parr.~~

(2) In this section - fa) "marker infrastructures means an infrastructure that is provided, operated or maintained by the Regulator, the Central Govenunent or an Infrastruc- i5 Cure Institution; and (b) ''market process" means a process that is followed by any or all financial service providers.

~~318. The Regulator may, through regulations, adopt any of the following measures to FLuslems purcue its objectives contained in section 317(1) -~~

(a) measures to modernise marks:infrastructure or market prore5s,Mcluding in particular, the adoption of new technology; (b) measures to provide for product differentiation, or enlarging consumer participation; or (c) measures to align market ithascructure or market process with international best practices.

319. (1) The Central Government may notify. by an order in writing, a direction to a Regulator to ensure the provision of any identified financial seance, on such conditions as may be contained in the order, -

~~(a) by any identified category of financial service providers; or 25 (b) to any identified consumers or classes of consumers.~~

~~(2) The directions under this section must be with a view to ensure effective and affordable access of financial services to persons who would ordinarily not have such access.~~

~~(3) The Central Government will reimburse the cost of granting such access by 32 providing either rash or cash equivalents, or tax benefiU to identified financial setuice aroviders.~~

Pr inciples 320. The following principles must be taken into account by the Regulator when adopting any measures under section 318, and by the Central Government when issuing any directions under section 319 -

~~IS (a) miaimising any potential adverse impact on the objectives of - (i) the Regulator under Part Di; (f) the Regulator under Part and (iii) the Council under Pat VIII; , re~~

~~Part IX: 60. IcnovIstons FOR raving 133~~

(6) minimising the adverse impact on the ability of die financial system to achieve an effident allocation of resources; (c) minimising the impart on the ability of consumers to take responsibility for their transactional decisions; and (d) ensuring that any obligation imposed on a financial service provider is 5 consistent with the benefits, considered in general terms, that are expected to result from the imposition of that obligation.

Ne41 for aleaS 21. (/) A Regulator may adopt a measure under section 318 only after it has deter. mined that La the absence of adopting such measure, the market infrasirucaire or market process will fail corn (a) develop or improve adequately or (b) function poorly. (2) A Regulator must consult and co-ordinate with every other Regulator on a regular and frequent basis to identify instances where the adoption of such measules may be required or justified, and assess whether such intervention would develop or improve market infrastnactme or market process.

~~CHAPTER 60 Pnowstogs FOR REVIEW~~

(belaw-es and 322. Oa There must be a review of - (a) every measure that has been adopted under section 318; and (b) every direction that has been issued under section 319. (2) A review under this section must be canied out at least once every twelve months after the adoption of the measure, or the issuance of the daemons, as the rase may be.

~~(3) A review under this section must - as~~

(a) examine the efficacy and the impact of the measure or direction under review; (b) estimate the cost of having introduced such a measure or direction in the financial system; and (c) seek to identify beat practices and make proposals to the Regulator or the 30 Central Government, as the case may be, for any modifications that may be required in respect of such measure.

~~(4) The findings of the review must be submitted to the Agency as a report of recommendations.~~

(5) There most be no conflict of interest between the team of experts and the 20 Agency under review (6) The Agency must ensure that the team of experts has access to relevant information and matenal as necessary to carry out the review. (7) The Agency must publish -

~~(a) every review submitted under sub-section (4); and -361-~~

~~Part IM 60, PROVISIONS FOR RENNER;~~

~~34 all information or data collected for the purpose of the review in a manner that does not allow information relating to any particular person to be ascertained from it.~~

~~(8) In this section, "Agenelf! means the Central Government or the Regulator, as the case may be.~~

ompum 323. A review under section 322 must be arranged — rturauutrsrea‘ (a) by a Regulator f a measure under section 318 is implemented by only that d,„,,;„,, nr Resulator; (6) by the Central Government if a direction under section 319 is issued to to not more than one Regulator; or (c) by the Council if — 00 a measure under section 318 is implemented by more than one Reg- uLator; or . (ii) a direction under section 319 is issued to more than one Regulator

~~137La 'd e The Council must collect and analyse all accessible data, and conduct research, Fr is 20 3„2(5 Nat is relevant to the achievement of the objectives under this Act.~~

~~(2) The Council must — (0) review and analyse the design and implementation of a measure or direction under sections 313 and 319; and~~

rte 0) seek to facilitaw co-ordination between the Regulators and identify areas where action needs to be taken by the Regulators to octave the objectives under thisAct, if — CO a measure under section 318 is implemented by more than one Reg- ulator; Or 50 a direction under section 319 is Issued to more than one Regulator.

~~(3) The findings of the Council must be — (0) submitted to the Central Government and each Regulator; and 80 published.~~

325. (1) The Council may call for such information or material as it determines neces-ton of ary from the Regulator, Central Government, or financial service provider to s carry out its functions under this Att.

~~(2) The recipient of a request under sub-section (1) is bound to provide the infor- Soonen. matiOn Or material, if available with it, to the Council in a timely manner~~

~~(3) The Central Government must prescribe the procedure to be followed by the Counci to requisition information under this section. Part X. 62. MONETARY POLICY FUNCTION 135~~

~~PART X~~

~~RESERVE BANK OF INDIA~~

~~CHAPTER 61 08JENTIVES AND FUNCTIONING OP TNE RESERVE BANK~~

326. The objectives of the Reserve Bank under this Part, are to — (a) formulate and implement monetary policy; and (b) cony on other activides of a central bank, including — (i) to issae currency of India; BO to transact certain business of the Central Government and the State Government, as contained in section 348 and section 349 respec- and (iii]020 thovelacYt; to ranking service providers.

Weal of de 327. Reserve Ball (1) The capital of the Reserve Bank may be increased by — (a) payment of additional amounts to the Reserve Bank by the Central Gov- ernment; and (b) subscription to additional capital of the Reserve Bank by the Central Gov- ernment.

~~(2) Any increase in capital of the Rexene Bank must be notified in the Official Gazette.~~

~~328 The Reserve Bank Board will— 20 (a) approve the budget and operating plan of the Reserve Bank; and (6) be responsible for such other matters as provided under this Act, or any other Act.~~

Qumuni (wild miNongs of 329. The quomm of a meeting of the Reserve Bank Board will be at least half of the RELLIR Bank members of the Reserve Bank Board, ac least one of whom must be the Reserve rs Bank Chairperson, or, in the absence of the Reserve Bank Chairperson, the executive member designated by the Reserve Bank Board TO act in such capacity wagAdvisory an2 camel on 330. (2) The Reserve Bank Board will be supported by advisory councils in the following areas —

BS berthing; and so (h) payments. (2) The advisory councils on baniung and on payments must, in addition to the matters contained in section 49, prepare and submit to the Reserve Bank Board an annual statement on the material developments in their respective fields and recommendations in relation to such developments.

~~CHAPTER 62 -~~

~~Part X: 62. MONETARY POLICY FUNCTION 136~~

~~MoNsmax POLICY PuNcnow~~

331. (1) The objectives of the Reserve Bank in the discharge of its monetaty pokey sal:Tilt; function must be provided by the Central Government, in consuliation with mPnerary policy. the Reserve Bank Chairperson, by way of a written statement, which identth es 5 and provides- ) an explanation of the predominant objective of the Reserve Bank in discharge of its monetary policy function; and (b) an explanation of any additional objectives, if relevant, and the order of priority in which the additional objectives must he achieved.

(2) The statement under subsection (/) must - (a) provide quantified medium-term targets in respect of each objective; (b) enumerate the circumstances under which the Cenral Government may determine that the Reserve Bank has failed to achieve the provided targets: and (C) elaborate the manner in which the Reserve Bank will communicate to the Central Government - (0 the reasons for its failure to achieve the provided targets under clause (a); 00 any remedial action proposed to be taken by the Reserve Bank; and UM an estimate of the rime-period within which the provided targets would be achieved pursuant to such remedial actions.

NM 332. (1) The Cmtral Government must issue the statement under section 331 within MaepUbliestoft Or one week from the day on which this Act comes into force. /casement oft eamax at least once every two years beginning on the shj (2) The Cenral Government must, day on which this Part comes into force, review the statement issued under sub-section 331(1), in consultation with the Reserve Bank Chairperson.

~~(3) The Central Government Must - (a) publish dm statement under section 331; (b) place a copy of the statement before Parliament; and Bank. (c) provide a copy of the statement to the Receive~~

~~PGG 333. (1) There will be a committee !mown as the Monetary Policy Committee, whichCOMMace. man/ will be responsible for formulating the monetary policy of the Reserve Bank.~~

(2) The Monetary Policy Committee will consist of - (a) the Reserve Bank Chairperson, as chairperson of the Monetary Policy Committee, (b) one exendive member Of the BOald of the Reserve Bank. as designated by the Reserve Bank Board; (a) two members. appointed by the Central Government, in consultation with the Reserve Bank Chairperson; and (d) Mree members appointed by the Central Government. (3) The Central Government may nominate a representative to attend any meeting of the Monetary Policy Committee. - 15 Nub XL 62. MONETARY POLICY FUNCTION 137

(4) All members appointed under sub-sections (2)(c) and (2)(d) must possess adequate knowledge and experience in the field of economics or finance which would be relevant for the discharge of the functions of the Monetary Policy Committee.

~~(5) A person must not be appointed as a member of the Monetary Policy Commit- bee under sub-sections (2)(c) and (2)(d), if such person —~~

(a) is a member of the Reserve Bank Board or any advisory council of the Reserve Bank; (h) is a public servant; or (t) is a member of Parliament or state legislature. is (6) The administrative law member of the Reserve Bank Board Cannot be appointed to the Monetary Policy Committee under sub-section (2)(b). (7) No person may be appointed as a member of the Monetary Policy Committee, if such person —

(e) has any financial or other interest that is likely to prejudicially affect their is functions as a member of the Monetary Policy Committee; or (6) attracts any of the geounds for removal of members of the Monetary Policy Committee mentioned in the Fifth Schedule.

~~(8) The Reserve Bank must, by way of bye-Mws, define what constitutes an interest under sub-section (7)(a). 20~~

~~monciarpeuryt5leetm3'°nt Pe 334. (1) The Monetary Policy Committee must meet at least eves, two months during a CO(0001515.5 financial year~~

(2) The meeting schedule of the Monetary Policy Committee for a financial year must be published by the Reserve Bank at least one week before the first meet. ing in that financial year 25 (3) The meeting schedule may be changed only —

(a) by way of a decision taken at a prior meeting of the Monetary Policy Committee; or (b) if, in the opinion of the Reserve Bank Chairperson, a meeting is required and advance intimation has been provided to the members of the Mone- so

~~(4) The decision to hold a meeting under sub-section (3)(6) must be published by the Reserve Bank as soon as practicable.~~

~~(5) Prior to every meeting, the members of the Monetary Policy Committee most~~

35 (a) the report issued by the Reserve Bank under section 341(1)(0); and (Is) any information which the Monetary Policy Committee has requisitioned and obtained under section 339. quourr and de(15100 The quorum of a meeting of the Monetary Policy Committee will be five mem- b.s, at least one of whom must be the Reserve Bank Chairperson and in the or absence of the Reserve Bank Chairperson, the executive member designated by the Reserve Bank Board to act in such capacity. - -370

~~Part X: 62. MONETARY POLICY FUNCTION 138~~

Each member of the Monetary Policy Committee will have one vote. (2) e votes of the members will be mekn by a majority of th (3) Decisions in a meedng of the Monetary Policy Committee present. decisions of the MonetaryPolicy Committee will be binding on the ReserVe (4) , unless such decision has been superseded by the Reserve BariChairper- Bank son under 336.

,e BarM Chairperson 336. (I) In excepdonal and unusual drcumstances, if the Resen g 2;`,M, of e monetaryPolicy Committee, rees ‘..lth a decision taken at a meeting th disag ht to supersede such decision. L:tusCsT the Reserve Bank Chairperson will have the rig MennenPoem committee. ht under sub-secuon (11 will not be available to any person chairirm The rig e Bank (2) e Monetary Policy Committee, place of the Resen, the memings of th the absence of the Reserve Bank Chairperson. Chairperson during ht under sub-section (1), an If the Reserve Bank Chairperson exercises the rig (3) explanatory statement must be - submitted by Me Reserve Bank Chairperson to the Central Government on (a) ht was exercised is held; de same day when the meeting where such rig and g in which the right has publhed along with the minutes of the meenn (h) been exercised by the Reserve Bank Chairperson. (4) The statement under sub-section (3) must include - 20 MO the details of the decision of the Monetary Policy Committee which has been superseded; and ight under this section. (b) the reasons resulting in the exercise of the r Pubincie"f 337. The Monetary Policy Committee must ensure that the Reserve Bank publishes the decisions g of the Monetary Policy Committee on the day on 25 decisions taken at the meetin which such decision is taken. oublerams Of MblisheS 'pdputes. 938. (I) The Monetary Policy Committee must ensure thm the Reserve Bank S of the Monetary Policy COMMitiee Within three the minutes of the reeedilg Week( after each meeting. must reconb in relation to every decision of the Mon- (2) Minutes of the meeting preference and reasons for voting of each etary Policy Committee, the voting Policy Committee, present in such meeting. member of the Monetam wer mobtam quire the e 339. ) The Monetary Policy Committee may by a statement in writing, re information that the Monetary Policy Committee !'nE co Bank to provide such edient to discharge its duties under this Chaoten considerss necessary or em (2) The statement must indicate - the form or marmer in which the information must be provided; (c) OM the time within which the information most be provided; (C) the entities, if any in relation to which the information must be provided; and (d) the period in relation to which information must be provided. 7 /

~~Part X 62. MONETARY POLICY FUNCTION 139~~

(3) If the Monetary Policy Committee requires information relating to a individual financial service provider, it must obtain the approval of the Reserve Bank Board before obtaining such information.

Poker al dm The Reserve Barth Board must make bye laws in relation to the procedures of the Ft[SCM1P Bank 340. - Board is made Monetary Policy Committee, including - 5 procedure of (a) the manner of publication of schedule of meetings under section 334(2); Monti/my Policy Conuniffee. (6) the manner of publication of decisions under section 337; (c) the manner of publication of minutes of meetings under section 338; (d) process for requisitioning information from the Reserve Bank under secdon 339 and the process for obtaining the approval of the Reserve Bank is Board under sub-section 339(3); (e) the manner and process of recording and counting of votes at the meeting; (0 conduct of meetings, including prosision for meetings to be held without the physical presence of a member; (g) the manner of noting of minutes of the meetings; and is (h) any other matters in relation to activities of the Monetary Poll*, Commit-

~~Report Es Matto m„,my policy. 341. (I) The Reserve Bank must -~~

(a) submit a report to the Monetary Policy Committee, at least three days prior to each meeting of the Monetary Policy Committee, containing inas formation relevant to the decisions to be made by the Monetary Policy Committee in that meeting; and (b) publish a quarterly report containing - (i) a review of the monetary policy decisions published by the Reserve Banh during such quarter; as (ii) an assessment of the developments in relation to monetary policy in the economy during the period to which the report relates; and (iii) an indication of the approach which may be adopted by the Reserve Bank to meet its objectives in relation to monetary policy

~~(3) A report submitted to the Monetary Policy Committee under sub-section (1)(a) must be published simultaneously with the submission of the report to the Monetary Policy Committee.~~

~~(3) Any report under sub-section (1)(B) must be published after approval of the Monetary Policy Committee.~~

Reseme power of the Perak 342. (1) The Central Government may provide a recommendation in wridng, on mon- 13 etary policy, to the Reserve Bank, if it is satisfied that such recommendation is required on account of extreme economic circumsthnces.

(2) Upon thereceipt of a recommendation from the Central Government under sub-section (2), the Reserve Bank Chairperson must provide a copy of such recommendation to the Monetary Policy Committee as soon as possible and at ao any rate, prior to the first meeting of the Monetary Policy Committee which is to be held after the date of receipt of such recommendation. 31 -

~~Part M 63. Onkut atrktk BANK POWERS 140~~

(3) The Monetary Policy Committee must consider the recommendation of the Centel Government provided under sub-section (1) in the first meeting of the Monetary Policy Committee held after the date of receipt of such recommendation.

(4) If the Monetary Policy Committee rejects the recommendation of the Central Government wholly or subscasiallg the Centel Government may, by order in wng, direct the Reserve Bank on matters with respect to monetary policy

(5) The order under sub-section (4) — (a) may be issued only after consultation with the Reserve Bank Chairperson; (b) most be laid before both Houses of Parliament for approval; and (c) will cease to have effect at the end of the following period, whichever is earlier — (i) twenty-eight days from the date on which the order is made, unless it is approved by a resolution of each House of Parliament before die end of that period, m accordance with sub-section (6); or 15 (if) ninety days from the date on which the order is made. (6) In calculating the period of twenty eight days for the purposes of sub-section (5)(c) h), no account is to be taker of any Ewe during which Parliament is dissolved or prorogued or during which either House of Parliament is adjourned our for a continuous period of more than four days. (7) Any objectives provided to the Res Wee Bank by the Centel Governmert under section 331 will not Wive effect while an order under sub-section (4) is in force.

~~CHAPTER 63~~

eneral functions G61 25 343. (I) The Reserve Bank has such powers as are necessary to carry out its ltrawceank as a central bank under this Act. (2) Powers under sub-section (1) include the power to — (a) receive money on deposit and pay interest on the deposit; porchase, sell, discount and rediscount bills of emhange, promissory ores tea and treasury bills; (c) purchase and sell government securities; (d) hoLd, purchase and sell securities issued by foreign counties; (e) mainrain deposits with other banks, including foreign banks; co purchase and sell special drawing rights issued by the International Mon- wary Fund; (g) purchase, sell and otherwise deal in gold, specie and other precious met. als; (h) establish credits and give guarantees; (I) open accounts M a central bank In any other country or in the Bank for International Setdement or any other international or regional bank, and to act as agent or mandatory or depository or correspondent for any of those banks or organisations and pay interest on any of those deposits; OP issue bills and drafts and effect transfers of money; and X373

~~Part X: 63 OTHER CENTRAL Bess PoweRs 141~~

(k) acquire, hold, iease or dispose immovable property (3) In this section "International Monetary Fund" has the meaning assigned to it under the International Monetary Fund and Bank Ace 1945 (47 of 1945).

ReserreBlvillev saq< "bit may" a` 314. (1) Unless the Reserve Bank, in the pursuit of its objectives under this Part m acting notvrerea in accordance with its powers, it must not (a) engage in made or otherwise have a direct interest in any commercial, industrial, or trim undertaking,g, other than where such interest has been acquired for the satisfaction of any of its claims; (0) purchase any capital, including any shares of any bankingserrice provide; or, of any other person, or grant loans against such capital or shares; or =D (c) advance money on the mortgage of or otherwise against the collateral of, immovable property or documents of title relating to such immovable property, or become the owner of immovable property

(2) Any interest of the nature under sub-section (1)(b), acquired by the Reserve Bank for the satisfaction of its claims will be disposed of at the earliest. 15 (3) The provisions of subsection N(c) will not prevent the Reserve Bank from acquiring or holding property necessary for its business or residential premises for its use.

Temporary 1.1qUld assistance 345. (1) The Reserve Bank may provide short-term funds against adequate collateral to system participants for which the Reserve Bank directly operates payment 25 systems, in order to meet a shortage of funds of such system participants. (2) The Reserve Bank must make regulations to provide for —

(a) the procedure for availing assistance under sub-section 0); and (b) the manner in which relevant information in relation to the utilisation of assistance under this section, will be shared with relevant Financial 25 Agency for regulatory purposes. (9) In this section, short-term means overnight or any such other period as may be notified by the Reserve Bank for the purpose of this section.

EriciptitY EqUiThry 346. (.1) The Reserve Bank may provide liquidity assistance against adequate collateral to a financial service provides or, a class of financial service providers, in case so of shortage of funds, including where such shortage arises on account of severe or unusual stress in the financial system. (2) The Reserve Bank must make regulations to provide for — (a) the nature of collateral to be provided by a financial service provider to avail liquidity assistance under this section; and 35 (b) additional criteria to receive assistance under this section. (3) Prior to extending assistance under this section, the Reserve Bank must consult

~~(a) the relevant Regulator, when assmance is sought to be provided to a financial service provider not regulated by the Reserve Bank under Part V; 40 and Part X: 63. OTHER CENTRAL Bnsfic POWERS 192~~

~~(b) the Corporation, when assistance is sought to be provided to a covered serdce provider.~~

~~(4) The Reserve Bank must make a determination with regard to the matters under sub-secion (2) prior to extending assistance to a financial service provider under this section.~~

(5) No person will have recourse to the llibunal against the detemdmation made by the Reserve Bank under subssermon (4). (6) The Reserve Bank must make reguladons to provide for — (a) the procedure to be followed by a financial service provider for availing o liquidity assistance under subsection US; and (5) the anner in which relevant information in relation to the udlisation of caistance under this sermon, will be shared with relevant Financial Agency for regulatory purposes. (7) The Reserve Bank will be guided by the following principles while extending liquidity assistance under this section —

(a) corthdendality regarding the use of this assistance by financial service providers; and (b) expediency in making a decision to extend assistance under this section. pannertscrem of 347. (1) In order to reduce risks relating to payments and settlement, arising from the p

~~failure of idendfied financialservice providers, theReserve Bank must maintain de 72``'ssafts a real ime gross settlement system for transferring payments of funds.~~

(2) In this seetton — (a) "the payment system" means the reat time gross settlement system under sub-section (1); and (b) "identified financial service providers" means — (0 banking service providers; (if) Infrastructure Institutions which provide clearing and settlement services mad have been designated Systemically Important Finan- cial Institutions by the Council; and

~~(ii) any other financial service provider notified by the Central Govern- ment. in consultation with the Reserve Bank.~~

(3) The Reserve Bank must make regulations governing — (a) the mode of operation of the payment system; (6) the conditions under which the access to the payment system may be 35 withdrawn and (c) all other issues connected or related to the payment system. (4) If access of an identified financial service provider to the payment system is withdrawn under sub-section (3)(b), then the Regulator must cancel tbe authorisation of such identified financial service provider to act as a banking ser- a vice provider, 013 to as as an Infrastructure Institution which provides clearing and settlement services, where — m) if the Reserve Bank proposes to wfihdraw the access to the payment system, it must issue a show cause nodce to the identified financial service provider; and e

~~Parr )b 33 OTHER Cerwwa. 8.33x POWERS 143~~

(b) if the Reserve Bank proceeds to withdraw the access to the payment system, it must issue a decision order to the identified financial service provider (5) The payment system will be an Infrastructure Institution for the purposes of section 193 and no other provision of Na Act will apply to the payment sys.

Business of the cemrai 348. (1) The Central Government must - (e) enthust the Reserve Bank with all its money, remittance, exchange and banking transactions in India; and (b) deposit, free of interest, all in cash balances with the Reserve Bank. (2) The Reserve Bank will accept monies on account of the Central Government and will make payment up to the amount standing to the credit of its account. (3) The Reserve Bank will carry out exchange remittance and other banking operations for the Central Government. (4) Al actions under sub-section (I) will be in accordance with the conditions Is agreed between the Reserve Bank and the Central Government. (5) Any agreement under sub-section (4) will be laid before Parliament, as soon as practicable and must be published by the Reserve Bank. (6) Sub-section (1) does not prevent Cenral Government from canythg on money transactions or holding requisite balances at places where the Reserve Bank 20 has no branches or agencies. (7) The Reserve Bank will include a descriptionof the business of Central Govern- ment carried on by the Reserve Bank in its annual report.

BUMPH Or sra-e 349. (1) The Reserve Bank, by agreement with a State Government, may - (o) undertake all the money, remittance, exchange and banking transactions as in India of such State; and (b) maintain the deposit of all cash balances of the State with itself, free of interest. (2) Any agreement under subsection (1) will be laid before Parliament, as soon as practicable and must be published. ao (3) The Reserve Bank most include details of the business of State Governments carried on by the Reserve Bank in its annual report .

t 350. 03 The Reserve Bank will have the sole right to issue bank notes in India. (2) Every bank now issued by the Reserve Bank will be legal tender at any place in India in payment or on account for the amount expressed on it, and will be as guaranteed by the Central Government. (3) The Reserve Bank. after considering the recommendations of the Central Gov- ernment, must notify -

~~(0) the denomination value of the bank notes to be issued by the Reserve Bank; and 40 (b) the f tar, des'gn d material of the bank notes.~~

~~Part X; 63. Onifix. CENTRAL Gum POWERS 1ea,~~

(4) The Central Govenunent, on the recommendation of the Reserve Bank, may by nodficacion. direct — fa) the non-issue, or discontinuance of issue, of bank notes of certain denom- madonal values; or OM that any series of bank notes of any denomination will cease to be legal tender in accordance with die conditions mentioned in the notification.

(5) The Reserve Bank will not reissue bank Dotes, which in its opinion are torn, defaced or excessively soiled. (6) No person will have the right to recover from the Central Government, or, the Reserve Bank, the value of any lost, stolen, mutilated or imperfect bank note. ro (71 The Reserve Bank, with the sanction of the Central Government, may by nod.- ficadon, provide conditions under which value of a note described under sub- section (6) may be refunded as of grace.

~~(8) The Reserve Bank will not be liable for the payment of any stamp duty under the Indian Stamp Act, 1899 (2 of 1899), in respect of bank notes issued by it. rs~~

~~lan 351. (1) The Reserve Bank will issue bank notes through a separate and wholly distinct 1-995De dcp rtnent ailed do Issue Department.~~

~~(2) The aggregate assets of the Issue Department must be an amount not less than the total liabilities of the Lssue Department.~~

00 (3) The Reserve Bank, in consultation with the Central Government, must make bye-laws in relation to the nature, minimum value and other aspects relating to the assets of the Issue Department. (4) The assets of the Issue Department will not be subject to any liability other than the liabilities of the Issue Deparonent. (5) The liabilities of the Issue Department will be an amount equal to the total ss bank notes in circulation at Mat point of time.

(6) The Issue Department will not issue bank notes to any person except in exchange for other bank notes or for such coin, bullion or securities as may be notified by the Reserve Bank in this regard.

~~166°I so 352. (1) The Central Government will not put into circulation any rupee coins, except through the Reserve Bank.~~

~~(2) The Reserve Bank will not dispose of rupee coins otherwise than for the purposes of circulation.~~

~~(3) The Reserve Bank will, in exchange for bank notes, supply notes of lower value 35 and rupee coins in such quantities, which in the opinion of the Reserve Bank, are required for circulation.~~

~~(4) The Central Government will supply coins to the Reserve Bank on demand for the purpose of supply undu sub-section (3).~~

~~(5) If the Central Government fads to .supply coins upon demand by the Reserle o Bank, the Reserve Bank will be released from the obligation under stimsecdon (3) . e37)--~~

~~Part X: M. ACCOUNTS OF r'IN Rooravo BANK 145~~

°Mem so suplyp Memo 353. The Reserve Bank MI' issue rupee coins on demand in exchange for bank notes Eros of surtensv and will issue bank notes on demand in exchange for coins which is legal tender under the Indian Coinage Act, 2011 (11 of 2011) .

Issue of demand Ms and notss 354. (1) No person, other than the Reserve Bank, or, the Central Government, where expressly authorised, will — (a) draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand; 0.9 borrow, owe or rake up any sum or sums of money on die bills, hundis or notes payable to bearer on demand of any such person; or (c) make or issue any promissory note expressed to be payable to the bearer 10 of the instrument. (2) Sub-section (1) does not prevent any cheque or drafts, including hundis, which may be payable to the bearer on demand, to be drawn on a person's account with a banker, shroff or agent

~~(3) In this secdon, the phrases 'bill of exchange, "promissory note", "cheque", SE 'draft' and "banker" have the meaning assigned to them under the NegOdable Instruments Act, 1881 (26 of 1881).~~

Ismer orRome MEAD shoo 355. (1) The Reserve Bank must specify the procedure for the Reserve Bank to obtain inforrnenon information relevant for its functions under this Part (2) A person must comply with a request for providing information issued under 20 sub-section (1) and provide the required information or documents, in its possession or power, to the Reserve Bank.

~~CHAPTER 64~~

~~ACCOUNTS OE THE RESERVE BANK~~

Statemens damsels and SEMEN 356. (1) The Reserve Bank must prepare and publish a statement of its assets and lie- as bilities on a weekly basis. (2) The statement must relate to assets and liabilities as at the close of business of the day on which such statement is prepared, (3) If a day on which a statement is to be prepared is a holiday, as notified by the Central Government, then the statement must be prepared and published on so the last business day preceding that day (4) A copy of the statement must be submitted to the Central Government.

~~PEocasvis of 357. (2) The Reserve Bank Board must maintain a policy in relation to the payment of surms miss surplus profiw to the Central Government.~~

(2) In accordance with its policy, the Reserve Barth must pay profits held by it to os the Central Government, after making adequate provisions for — (a) reserves to meet future contingencies; and (b) had and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and for all other (natters for which provision are usually provided for by a banking service provider to )7 g

~~Pare X: 65. OTHER PROVISIONS IN RELATION TO THE RESERVE BANK 146~~

(3) The Reserve Bank must publish the policy issued under sub-section 03 and any modifications made to such policy from acne to time. Reserve Bank must clearly (4) The an ru al financial statements prepared by the explain the provisions made by the Reserve Bank, along with the reasons for every prowls' ion.

~~CHATTER 65 OTHER PROVISIONS IN RELATION TO THE RESERVE BANK~~

Monne, or to comply with the provisions relating to the man- - , of 958. The Reserve Bank's obligation puncoils] net of publication of information as contained in Part III, does not release the hearmatiax. Reserve B k from the obligation to comply with a higher standard of publiCadon, if provided elsewhere under this Act or any other law. -379- Part XI. 67 SCOPE kis CERTAIN lamer; Mai-TEAS 147

~~PART XI~~

~~CAPITAL CONTROLS~~

~~CHAPTER 66 Of !semis Ark PRiNcinES~~

05:e0:ves. 359. The functions and powers under this Paid must be discharged and exercised by the competent authority with the objectives of - (a) facilitating capital account mansactions in a manner that encourages investment and economic growth in India; (b) managing adverse short-tem fluctuations in balance of international pay- MentS, an 10 (c) ensuring review of capital account transaccions that could affect national security.

~~(2) In this Part, "competent autholitY means - (a) the Central Government for making rules under this Part; or (5) the Reserve Bank for making regulations under this Part. IS~~

Prinkples 360. The following principles must be taken into consideration white discharging functions and exercising powers by the competent authority under this Part - (a) similar investments made by residents and non-residents in India must be treated shElkarlk to the extent practicable; (6) investment restrictions must be so designed that the benefits of policies do relating to capital account transactions outweigh the potential impact of such resoictions; Cr) investment measures must be tailored to the particular risks posed by par- dadar Mvesunent proposals; and (d) policies that restrict capital account transactions on national security con- as siderations must be used only when other policies cannot be used to eliminate such national security considerations.

~~CHAPTER 67~~

~~SCOPE AND CERTAIN OTHER MATTERS~~

361. (1) Cross-border trade in goods, services, payment transactions or other current 30 account transactions are not subject to any restrictions, conditions or prohibitions under this Pan. (2) Capital account transactions are subject to restrictions, conditions or prohibition; if any contained inn Part, or as may be prescribed or specified under this Part. 35 sireLlpistInces The foll5thng circumstances or conditions will be considered emergency circumstances GI conditions under this Parc - (a) the outbreak of a natural calamity in India; -3$°

~~Fart 551: 68. trysts]) FLOWS 14S~~

(b) grave and sudden changes in domestic economic conditions; (a) grave and sudden changes in foreign economic conditions; (d) If international payments and international finance are facing or expected to tee stious difficulties; (e) the proclamation of national emergency under Merle 352 of the Consti- tudon of India; or tf) the proclamation of financial emergency under Article 360 of the Consti- tution of India.

~~CHAPTER 63 I•viAma FLOWS Ater to maks~~

~~363. (1) For carrying out the purposes of this Part the Central Government will make Les. rules in accordance with this Chapter in relation to inward flows.~~

~~(2) The Central Government must prescribe cetera that qualified foreign investors~~

15 (3) The Central Government may prescribe — (a) the prohibition of one or more classes of inward :lows; or (5) procedures, conditions, Truitt restrictions or approval requirements M relation to — (0 any class or classes of inward Rows; (if) the acquisition or transfer of immovable properw situated in India, 20 by a qualified foreign investor; (2) any borrowing by a resident from a non-resident; or (iv) die giving of any guarantee or surety in respect of any borrowing, obligation or other liabilitY by a non-resident.

11215 '3555 as 564. (1) Nothing contained in section 63 will apply to rule-making by the Central Gm,- Rake ernment under this Part. Fan (2) The Centel Government may make rules for the implementation of this and must consult the Resent Bank before malting draft rules under this sec-

— 20 (3) The consultation with the Reserve Bank must relate to (a) the pr oblem to be addressed and the goals sought to be achieved as well as the alternatives available for addressing the problem or achieving the goals; (5) the economic rationale, including the expected benefits and likely costs; and (e) the effect on investment climate, efficiency, and balance of payments. (4) Subsequent to consultations with the acserve Bank, the Central GoVernMent must make rules in accordance with the process contained in section 52.

~~Estrttss 58e 365. (1) Unless provided otherwise, nothing contained in Chapter 13 will apply to emergency rules made under this Part. 391 Part 69. Otrrivaar stows 149~~

(2) The Cenral Government may make rules in accordance with this section, in any circumstance or condition contained in section 362 without complying with the process contained in section 364. (3) If any condition or circumstance contained in section 362 erdsts, the Central Government must consult the Reserve Bank prior to making rules under this section, within fifteen days from the day on which a condition or circumstance was determined by the Control Govenunent to be an emergency condition or circumsrance.

~~(4) Upon consultation with the Reserve Bank, the Central Government may make rules, temporarily suspending — to~~

(a) any payments or receipts on account of any inward flow, or the whole or a part of any inward flow; (b) borrowings from any non-resident; or (c) any payment to non-resident or mandating prior approval or safe-keeping of parr of any funds borrowed from any non-resident,

(5) The roles made under this section most be accompanied by the documents contained in sections 52(2)(a) to 52(2)(g). (6) The rules made under this section must be laid before the Parliament. (7) Unless withdrawn earlier, the rules made under this section will cease to be in force on the expiry of ninety days from the date on which the rules come into 20

(8) If the Central Government determines that the rules made under this section are required to be in force for a period of more than ninety days, it must make the mks by following the procedure contained in section 364.

~~CHAPTER 69 25 OUTWARD PLOWS~~

366. (1) For Carrying out the purposes of this Part, the Reserve Bank will make reguladons in accordance with this Chapter in relation to outward flows. (2) The Reserve Bank may specify procedures, conditions, limits, restrictions or approval requirements in relation to — 51 (a) any class or classes of outward flows; (b) the acquisition or transfer of immovable property situated outside India, by a resident; (c) any borrowing by a non-resident from a resident; or (c1) the giving of any guarantee or surety in respect of any borrowing, obligor 35 Eon or other Habana. by a resident to a non-resident.

Process for makthg 67. (1) The Reserve Bank must consult the Central Government before making draft regulations under this section. (2) The consultation with the Central Government must relate to the matters con- rained in section 364(3). 40 382'

~~150~~

ellobL„;z8 Unless provided othermse, nothing contained in section 53 will apply to emer- mtetad 368. (1) gency regulations made under this Part. The Reserve Bank may make regulations in accordance with this section, M any (2) of the circumstances or conditions contained in secdon 362 without complying with the process contained in section 367. the ReServe (3) If any condition or circumstance contained in section 362 regulations Bank mum consult the Central Government prior to maldog regulations under this secdon, within fifteen days from the day on which a condition or circumstance was determined by the Reserve Bank to be an emergency condition or

10 circums;ance. (4) Upon consultation with the Central Govenunent, the Reserve Bank may make repiladuns temporarily suspending— (a) any payments or receipts on account of any outward flow, or the whole or a part of any outward flow; or 15 (b) borrowings by any nonmesidenc from any resident. (5) The regulations made under this section must be accompanied by the documents contained in sections 52(2)(a) to 52(21(d). (61 The regulations made under this section must be laid before the Parliament.

so (7; Unless withdrawn earlier, the regulations made under this section will cease tO be in force on expiry of ninety days from the d te on rich the c gelation come into effect. (5) If the Reserve Bank determines that the regulations made under this section are required to be in force for a period of more than ninety days, it must make the regulations by following the procedure contained in section 367.

~~25 CHAPTER 70 AUTHORISED DEALERS~~

~~369. (1) The Reserve Bank must specify the conditions or requirements to be satisfied Gem`al•• by an autborised dealer.~~

~~(2) The regulations must—~~

~~so (a) be neutral to the legal structure of a person, and (b) allow any person meeting the conditions or requirements to act as an authorised dealer.~~

~~(3) The regulations may require any person to obtain authorisation from the Re- serve Bark tO act as authorised dealer~~

oecitus (26191 23 370. (1) Only authorised dealers may, for capital account transactions, — exaange eapiolarecont (a) deal in or mansfer any foreign exchange to any person; or vautamons. (b) receive, in any manna any payment by order or on behalf of any non- resident. .383 Parr 71. NATIONAL sucumov Alm ammo 151

~~(2) Any person may sell or draw foreign exchange for a capital account transaction, to or from an authorised dealer, in accordance with the provisions of this Part or as may be specified.~~

Undendkog of wansanions by 371. (1) Prior to undertaking a transaction on behalf of any person, an authorised ,whorl deEen. dealer must be reasonably satisfied that die transaction - (a) is genuine; (b) will not involve a contravention of the proldsions of this Part or rules or regulations made under this Part; and (c) is not designed to contravene or evade provisions of this Part or rules or regulations made under this Part. 10 (2) In order to be reasonably satisfied, the authorised dealer - (a) must review and verify the documents and declarations made; (b) must ensure compliance with provisions of this Part and the rues or regulations made under this Part; and

(c) may require any person on behalf of whom the transaction is to be un- 75 dettaken, to make declarations and provide information as the authorised dealer may reasonably require under the circumstances. (3) The authorised dealer must refuse, in smiting, Co undertake a transaction if lc determines that a person refuses to comply, or unsatisfactorily complies, with any requirement of the authorised dealer contained in sub-section (2)(c). co (4) My person aggrieved by a refusal of the authorised dealer under sub-section (3) may file a complaint. in such manner as may be specified, with the Reserve Bank.

(5) If the authorised dealer has a reason to believe that any contravention or evasion of this Part or rules or regulations made under this Pan is contemplated under sub-section (3), it should report the matter to the Reserve Bank, as soon as possible.

~~CHAPTER 71 NATIONAL SECURITY AND REVIEW~~

Capita: RIL01.131[ 372. (2) A capital account transaction affects national security if it involves any of the is - affeving national following - security. (a) ownership of critical infrastructure by a foreign investor; (b) ownership of critical technologies by a foreign invescor; (c) control or ownership of assets in India by a foreign government;

(d) a non-resident or a foreign government - 35 (0 which presents a threat Co the peaceful coexistence of India with other nations; or (E) which presents a threat, or a major disruption, to foreign relations of India; or (e) any other matter as may be prescribed or specified, as the case may be. la (2) In this section -

~~39.1/4~~

~~Part XI: 72. ANNUAL REPORTS AND mISCELLANEOUs 152~~

(a) 'critical infrasmmture" means systems and assets whether physical or virtual, so vital to India that the incapacity or destrucdon of such systems or assets would have a debilitating impact on the Indian economy; and (b) "critical technologies" means teclmology, critical components, or items essential to national defence. Renew by SeilLar etheete Any person who has received a decision order or any approval order from the Central Government may apply to the senior officer of the Central Government for review of such code; within fourteen days from the date of receipt of such order (2) If the senior officer finds that there is an apparent error in the order, the senior officer may amend or set aside such order.

~~(3) The senior officer must convey its decision within a period of one month from the receipt of the application under sub-section (1).~~

(4) The senior officer must give a reasoned decision. (5) An appeal from the order of the senior officer will lie co the Tribunal. (6) in this section, "senior office means an officer of the Central Government not below the rank of Secretary to the Government of India, having the competence necessary for dealing with applications under Chapter 14, and designated by the Central Government to act as senior officer for the purpose of this Part.

~~(7) An adminffiffiadve law member reviewing the order of the Reserve Bank in relation to this Park under section 403, must follow the procedure contained in this secdon.~~

~~CHAPTER 72 ANNUAL REPORTS AND allScILLANEOSS~~

PaLltlalthe peetth rEp011t Of 25 374. (I) The Cenffial Government must publish an annual report within ninety days of the expiry of the year for which the report relates to Gowffimenc (2) The annual report must contain — (a) the rules and amendments to rules made by the Central Govemsitent ore der this Part; (h) a summary of cost-benefit analysis for the rules made by the Central Gov- ernment under this Part; (C) analysis of each inward flow affecting national security, including the nature of the acquisitions and potential impact on critical infrastructure or critical technologies; Government 35 (d) an analysis of effectiveness of the rules made by the Central under this Parc; and (a) such other matters as are necessary to give a complete disclosure and analysis of the performance of functions by the Central Government under this Part. 4/ (3) In adcition to the annual report under sub-section (1), the Central Government must publish a table showing — (a) by sectox product and sonny of foreign ownership, the number of acqui. canons reviewed by the Central Government; ~385- Part )2/ 72. ANNUAL REPORTS AND MISCELLANEOUS 153

(5) the total number of approvals granted by the Centel Government; (c) the total number of applications rejected by the Central GOVemment; (1) the total number of decisions along with a summary of decisions of the senior officer; (e) the total number of decisions of the senior officer upheld by the Tribunal along with a summary of such decisions of the Tribunal] and Ifl the total number of decisions of the senior officer struck down by the Tribunal along with a summary of such decisions of the Tribunal.

AR^RIRP" er 375. (7) In addition to die requirements contained in section 77, the annual report of RESerVe Ban. the Reserve Berl must Contain — it (C) the regulations and amendments to regulations made by the Reserve Bank under this Part; (b) a summary of cost-bene6c analysis for the regulations made by the Reserve Bank under this Part; (c) an analysis of each outward flow affecting national security, is (d) an analysis of effectiveness of the regulations made by the Reserve Bank under this Part; and (5) such ocher matters as are necessary to give a complete disclosure and analysis of the performance of functions by the Reserve Bank under this 20

~~(2) In addition to the annual report under subtsection (I), the Reserve Bank must publish a table showing —~~

(a) bysector and product, the number of acquisidons reviewed by the Reserve Bank; (b) the total number of approvals granted by the Reserve Bank under this 55 Part; (c) the total number of applications rejected by the Reserve Bank in this Par[ (d) the total number of investigations conducted the Reserve Barth in this Part; (e) the total number of decisions along with a summary, of decisions of the administrative law member of the Reserve Bank under this Part; CO the total number of decisions of the administrative law member of the Re- serve Bank under this Part upheld by the Tribunal along with a summary of such decisions of the Tribunal; and (g) the total number of decisions of the administrative law member of the Reserve Bank under this Part struck do/cm by the Tribunal along with a 35 summary of such decisions of the Tribunal. notharencie cd 376. (1) For the purposes of the applicability of this Part, the provisions of certain sec- terbt, setvatt of dons in this Act will be modified to the extent provided in this section.

~~(2) The obligation on Financial Agencies in relation to review of. regulations con. cafined in section 59 WM also be applicable to the Central Government for the to rules made by it under this Pare~~

~~(3) All references ro "Financial Agency" contained in Chapter 14 will be replaced with "competent authority'. Part XI: 72. Aiwugg aucans AND kitscguwrgous 154~~

(4) AT references to "financial service providecontained in Chapters 15 and 77 Hill be replaced with "authorised dealer or any person involved in a capital account transaction". (5) The words "or any rules made by the Central Government under Pan XI" will be added after -

(a) the word "Agency' contained in section 58(1); and the word "regulations" contained in sections 580)(0, 58(1)(t), 53(1)(0, (b) 58(2), 426(4)(a) and 394(1). (6) The following clause will be added in section 58 - (a) the conditions contained in section 362 did not ewbc for rules or regulations, as the case may be, made under that section. (7) The word ", rules" will be added after the word "regulation? contained in section 436(1)(b).

(8) The words "or prescribed" will be added after the word "specified" contained in section 68(1). (9) The following sub-section will be added after section 70(10) - (a) In relation to the applications made under Part XI, the requirement to give show cause notice contained in sub-section 70(7) will not apply if the competent authority provides in the decision order or the approval ordeo as the case may be, that such order is in the interest of national security considennons conthined in section 372.

(10) The following sub-section will be added after section 71(2) - (a) If the competent authority proposes to cancel any approval granted by it under Part XI, other than the approvals granted ender Chapter 70, it must Os (i) take into account the investment protection agreement entered into between the Central Government and the government of the country of which the non-resident is resident, if any; (ii) provide for adequate compensation to the non-resident, or the resi- 30 dent, as the case may be; and (iii) provide for reasonable time-period to divest to the noa-resident or the resident, as the case may be.

(11) The following subsection will be added after section 394(1) - (a) Where the Central Government has infOmlatien or reasonable grounds 35 to suspect that any authorised dealer or any person involved in a capital account transaction is violating or has violated any provision of any law a rules made under Part XI, or any condition of any approval granted by the Central Govenunent, the Central Government must share such infoc nation or the basis of such grounds, as the case may be, with the Reserve Bank and the Reserve Bank must investigate such authorised dealer or person involved in a capital account transaction.

~~(12) The words "approval order under Part IT will be added after the words Week sion crdee in section 403.~~

~~(13) The following clause will be added after section 407(3)(0 - -397-~~

~~Pair X1: 72. ANNUAL REPORTS AND MISCELLANEOUS 155~~

(a) condition of any approval order granted by the competent authority under part Xl. (14) The following sub-section will be added after section 407(3) - (a) In relation to Parc %I, enforcement action includes - (0 direction for reversal of transaction; (ii) direction to the qualified foreign investor to divest itself of control or of its investment in or transactions with the resident; direction to the resident to divest itself of control or of iv investment in or transactions with the non-resident; ((v) declaration of annulment of transaction; 10 (v) direction for amendment of the sgucalre of the transaction; or (vi) direction co authorised dealer to undertake a transaction. (15) The following sub-section will be added after section 40(3)-

(a) In addition to the factors contained in sub-section 408(2), the Reserve Bank must take into account the investment protection agreement entered Is into between the Central Government and the govemmenc of the country of which the non-resident is resident, if any. Part /Ca: 74. FUNCTIONS OF THE DEBT AGENCY 156

~~FART II~~

~~PUBLIC DEBT MANAGEMENT AGENCY~~

~~CHAPTER 73 OBJECTIVE AND FUNCTIONING OF THE DEBT AGENCY~~

abjecuve- 5 377. The Debt Agency has the objective of minimising the cost of raising and servicing public debt over the longterm within an acceptable level of risk at all times, under the genera] superintendence of the Central Government, as provided by this Part.

378. (I) There will be a Debt Agency Advisory Council to advise the Debt Agency Man- en nge agemert Committee under this Part. shape ouncil. The functioning of this advisory council will be in accordance with Chapcer 12, 0 (2) other than in the aspects provided here.

(3) The Debt Agency Advisory Council will comprise — (0 a member designated as chairperson: her than the rats officer in (b) an officer ofency the CenMal Government hig the Debt Ag Management Committee as member; ilk of i (c) officer of the Reserve Bank higher than the rank of its officer in the Debt Agency Management Committee as member; (el) four experts as members; and (e) the Debt Agency Chief Executive as member. The members of the Debt Agency Advisory Council will be appointed by the 20 (0) Central Government.

~~(5) The members of che Debt Agency Athisory Council cannot be the same as the members of the Debt Agency Management Committee, except for the Debt Agency Chief Executive.~~

(6) Members of the Debt Agency Advisory Council must be persons who have shown capacity in dealing with problems relating to public debt, public finance or financial markers, or have knowledge and experience of accountancy, economics, finance or law

(7) The Debt Agency Advisory Council must meet at least once in a quarter to review the borrowing programme for the upcoming quarter, and as and when it is called upon by the Debt Agency Management Committee to provide an opinion on any mercer under this Part.

~~379. (V) The Debt Agency Advisory Council must provide its opinion on any matter Da"A6n6y the referred to it by the Debt Agency Management Committee.~~

~~35 (2) The Debt Agency Advisor' Council may provide its opinion on any activity of the Debt Agency as it finds relevant.~~

(3) The Debt AgenCY Ad20507 Catalan must advise the Debt Agency Management Committee to disseminate information relatmg its functions to the public in a transparent, accountable and timely marmer 9 •-

~~Paring' 74 FUNCTIONS Or THE DEBT AGENCY 157~~

~~CHAPTER 74 FUNCTIONS OF THE DEBT AGENCY~~

~~380. The Debt Agency wili —~~

~~(n) manage the public debt, cash and contingent Dobai:des of the GenGal Gov- ernment; and (b) undertake other activities Incidental to the functions under this section.~~

~~Pubic deb, 381. (I) The Debt Agency must manage the public debt, in accordance with this Part, and any rules made thereunder~~

(2) The Debt Agency must submit a draft annual public debt plan, in such form as may be prescribed, for the following financial year, to the Central Government, so cot later than 1st January of each year. (3) Before the draft annual public debt plan is submitted to the Central Govern- ment, the Debt Agency must —

(o) seek the opinion of Use Debt Agency Advisory Council under section 379(1 ); and 15 (b) if the Debt Agency disagrees with the opinion of the Debt Agency Advisory Council, publish a written opinion explaining why it so disagrees.

~~(4) The draft annual public debt plan must take into account —~~

(a) the opinion of the Debt Agency Advisory Council under section 379(1); (b) the current public debt portfolio, including inherent risks and wilnerabil- 11 ides, of the Central Government; (c) the forecasts of revenue and expenditure of the Central Government; (d) the prevailing and evolving market conditions for government securities; (e) aspects of efficiency such as costs, risks and phasing of borrowing and repayments; and 25 (J0 such other factors as the Debt Agency considers appropriate.

(5) The draft annual public debt plan must advise on — (a) the composition of the borrowing and repayment of public debt, including the amount, structure, maturity currency inde,dng, and mode of issuance of public debt; and Os (b) the optimal annual calendar for the issuance of public debt. (6) The draft annual public debt plan may advise on —

~~(a) the medium-term and long-term debt strategy of the Central Government; and (b) the policy to mitigate risks to the debt portfolio, including any limits that 35 may be placed for such risks.~~

(7) The Central Government must approve the draft annual public debt plan, with or without modifications, each year for the following financial year, and communicate the same to the Debt Agency, as soon as may be practicable.

~~(8) The Central Government may modify the annual public debt plan any Erne 2.0 during the year as may be necessary; in consultation with the Debt Agency. 31~~

~~Part MI. 74 FUNCTIONS OF THE DEBT AGENCY 158~~

(9) The Debt Agency must implement, to the best of its abilities, the annual public debt plan as approved and modified by the Central Government from time to time. (10) The DeFt Agency must prepare a public debt management plan for the Cen- tral Government on daily, weekly or monthly basis, as the Debt Agency may s determine to be practicable and necessary, in consultation with the Central Government. (11) The Debt Agency must disseminate information relating to public debt management and the annual public debt plan to the public in a transparent, ac- o countable and timely mamaer.

(a) 'Rnnual public debt plan" means the annual plan for managing public debt as approved by the Central Government; and (b) "draft annual public debt plan" means the calendar of the Central Gov- emment for borrowing and repayment of public debt during the next fi- IS nancial yeas as proposed by the Debt Agency to the Central Government.

~~382. (1) The Debt Agency must undertake cash management for the Cenral Govern- °' marnarnra- ment, maccordance with this Para and any rules made thereunder.~~

(2) The functions of the Debt Agency relating to cash management include - (a) co-ordinating with the departments, ministries and agencies of the Central Government and the Reserve Rank to esdmate the cash balances every day; (b) monitoring the cash balances of the departments, nunistries and agencies of the Central Government; (c) advising the Central Government on measures to promote efficient cash management practices and to deal with surpluses and deficits; and (d) managing cash balances of the General Govennem. (3) The Debt Agency must prepare a cash management plan for the Central Gov- ernment on daily, weekly or monthly basis, as the Debt Agency may determine e. to be practicable and necessary, in consultation with the Central Government. - (4) The periodic cash management plan must take into consideration (a) the forecasts of cash flows of the Central Government; (b) synchronisation of sash flows with public debt management; an (c) aspects of efficiency such as costs and risks associated with cash flows and as measures so deal with deficit and surplus. (5) The Central Government must approve the periodic cash management plan, with or without modifications, each year, and communicate the same to the Debt Agency, as soon as may be practicable.

(6) The Central Government may modify the periodic cash management plan at any time as may be necessary in consultation with the Debt Agency (7) The Debt Agency must implement, to the best of its abilities, che periodic cash management plans as approved and modified by the Central Government. (8) The Debt Agency must disseminate mformation relating to cash management co the public in a transparent, accountable and timely manner --39/ Part 74. FUNCTIONS OF THE Dub Acuity 159

ContingenE halal ma 383. (1) The Debt Agency must manage contingent liabilities for the Central Govern- ment, in accordance with this Part, and any rules made thereunder. (2) The functions of the Debt Agency relating to the management of contingent liabilities mclude —

(a) developing, maintaining and managing a database of contingent Habig- s ties; (b) managing and monitoring contingent (c) undertaking risk assessments in relation to contingent liabilities; and (d) advising the Dental Government on the pricing and issuance of contingent liabilities, and the arrangement of contingent ernes of credit. in (3) The Debt Agency must undertake risk assessments in relation to comingenr liabilities on an annual basis, and in accordance with international methodology and practice. (4) The Debt Agency must disseminate information relating to contingent liabilities to the public in a transparent, accountable and timely mariner. is

Posen must- inarmation. 384. The Debt Agency (a) develop, maintain and manage information systems that are necessary to carry out its functions efficiently; (b) disseminate information and data relating to its functions to the public in a transparent, accountable and timely manner; and (c) conduct and foster research relevant for the efficient discharge of its functions.

Frorrag the m5r55E for 385. (I) The Debt Agency most take steps to foster a liquid and efficient market for Scvernocra government securities. securme3 (2) In the discharge of its functions under this section, the Debt Agency will advise the Regulator, he Central Government or any public authority on the policy n and design of the market for government securities.

(3) In carrying out the functions under this section, the Debt. gency must seek to ensure — (a) equal access to the market for government securities; N) growth and diversity in the investor base for government securities; (c) fair competition in the market for government seaulties; and (d) transparency in the issuance and trading of government securities.

Seroces to !Thus 386. (1) The Debt Agency may, on behalf of any public millionth as may be permitted by the Central Government, or any State Government— 35 HO Carry out the functions under section 380; or (b) provide technical assistance to enable the public authority or State Gov- ernment, as the case may be, to carry out the functions under section 380.

~~(2) The Debt Agency must not carry out any function under this section if there is 40 a conflict of interest with the obligations of the Debt Agency under this Part.~~

~~Part XII: 75. POWERS OA THE CENTRAL GOVERNMENT 160~~

(3) The functions carried out under this section must be subject to a written agreement to this effect between the Debt Agency and the public authority Or Stam Government concerned. Unless excluded by the written agreement, provisions of :Us Part will apply, (4) with the necessary modifications, to the functions carded out under this section. (5) For an agreement under this section to be valid, it must — (a) require the Debt Agency to carry out, or provide technical assistance to enable the carrying out of, at least one of the functions provided under to sections 381, 382 or 383; and (8) be published. (6) In this section, "technical assistance" means any advice, assistance or darning pertaining to the functions under section 380.

ififilleed'A Rec., 387. (1) The Dem Agency may from time to erne, in writing, call for such information Is or material as it determines necessary from the Central Government, any State Government, or any public authority to carry out its functions under this Part.

(2) The information or material that may be called for by the Debt Agency includes infomiadon or material relating to — (a) public debt; 20 (8) contLngent liabilides; (C) cash balances; and (d) forecasts of daily cash flows and net cash requirements. (3) The informadon or material received under this section will be disseminated to the public only to the extent required under the Right to Inforniacion Act, 25 2003 (22 of 2005). infor- The recipient of a request under sub-section bound to provide the (4) an mation or material, ifailab av le withit , to the Debt Agency in a dmely mner.

~~388. The Debt Agency must not raise funds or undertake transactions in financial mar- tranaz.uonf kets on its own behalf.~~

~~CHAPTER 75 POWERS OF THE CENTRAL GOVERNMENT~~

doPflAlleCeeancolr'l 389. The Central Government may issue to the Debt Agency, by an order in writing, directions on policy from time to time. urve di:6[RIP (2) The decision of the Central Government as to whether a direction is one of policy or not is final. (3) Before issuing any directions under this section — (a) the Debt Agency must be given a reasonable opportunity to be heard to express its views; and (4) the Central Government must publish any views expressed by the Debt Agency in a manner best suited to bring them to the attention of the public, and consider the same. -353-

~~Part XI 76. OTHER thethscoNs thsvinfil20 THE DEBT AGENCY 161~~

~~(9) The Debt Agency is bound by any directions issued under this section in the exercise of its powers or the performance of its functions under this Part.~~

TWA 00Centrat 390. Gthimment to (1) The Central Government may by notification, temporarily supersede the Man- trrvpirvity agement Committee at any time, if the Centha: Government is of the opinion ithifieth Debt that — &gess( ethesth (a) on account of an emergency, the Debt Agency is unable to perform its functions; or (5) the Debt Agency has persistently defaulted either in complying with any direction issued by the Central Government under this Part or in the performance of its functions. la (2) The notification must provide for the period of supersession, which may not exceed a period of one hundred and eighty days.

(3) Before issuing the notification, the Central Government must — (a) give a reasonable opportunity to the Debt Agency to make representations against the proposed supersession; and is (5) consider representations, if any, made by the Debt Agency (4) Upon the publication of the notification —

(a) all the members of the Management Committee as from the date of supersession, vacate their offices; and (b) all the powers and functions which may be exercised or performed by io or on behalf of the Debt Agency, will, until the Management Committee is reconsdtuted under section 24, be exercised and performed by such person or persons as the Central Government may direct. (5) Before the period of supersession expires, the Central Government must take action towards reconstituting the Management Committee. 25 (6) The Central Government may reconstitute the Management Committee of the Debt Agency by fresh appointments, and no person who vacated office under sub-section (4)(n) will be deemed disqualified for appointment (7) The Central Government must, at the earliest, lay before each House of Parlia- ment, the notification and a report of the action taken under this section and 30 the circumstances leading to such action.

~~CHAPTER 76~~

~~OTHER PROVISIONS GOVERNING THE DEBT AGENCY~~

~~391. (1) The Debt Agency may in consultation with the Central Government, make bye- laws to provide for fees payable in respect of its services rendered under this 35~~

~~(2) The bye-laws may levy the fees on the basis of the kind or scale of service rendered.~~

~~(3) While levying fees, the bye-laws must cake into account —~~

(a) the financial requirements of the Debt Agency; and yo (5) the costs associated with the service for which the fee is being levied. Fart 331, 76. Ormsrt paovisrams cavgam.33 THE DEBT AGENCY 162 For services provided under sexton 386, if the fees are not provided for by bye- (4) laws, the Debt Agency may provide for the fees through the agreement entered into under that section.

392. (I) There will be constituted a fund, established and maintained by the Debt — 5 Agency to which the following will be credited (u) all grants, loans, and fees received by the Debt Agency; and all sums received by the Debt Agency from such other sources as may be (h) prescribed by the Central Government (2) The fund will be applied for meeting — the salaries, allowances and other remuneration of the members, officers, (a) and employees of the Debt Agency; (b) the expenses of the Debt Agency in performing its (uncdons under this Part; and objects and for purposes authorised by the Act. (c) the expenses on 41,33.1,. For 15 393. 0) The Ccnrral Government is liable to meet the obligations. arising from — finensI c("5- (a) any financial transaction authorised by the Central Govenunent that is """ undertaken by the Debt Agency, or (b) any funds that are raised on behalf of the Central Government by the Debt Agency A State Government or public authority is liable to meet the obligations arising 20 (3) from — (a) any financial transaction authorised by that State Government or public authority that is undertaken by the Debt Agency; or (h) any funds that are raised on behalf of that State Government or public 21 authority by the Debt Agency Past 77. I, STIGATIONS 163

~~PART XIII~~

~~INVESTIGATIONS, ENFORCEMENT ACTIONS AND OFFENCES~~

~~CHAPTER 77 INVESTIGATIONS~~

commencing invefifiebom 394. (1) lfilere a Financial Agency has information or reasonable grounds to suspect that any person is violating, or has violated, any provisions of the Act or relevant regulations, the Financial Agency may investigate such violation.

~~(2) The Financial Agency must appoint one or more competent individuals to investigate the financial service provider and record such appointment. Lo~~

(3) The record of appointment must probide for - WO the person who will be responsible for caning out the investigation; ■■■ (b) reason for such appointment; (c) scope of the investigation; (d) the time for the investigation, which will not exceed one hundred and is eighty days at the first instance; and (e) the method of reporting of the investigation.

(4) The Finaial Agency may modify the terms of appointment contained in sub- section (3)(e), if the circumstances of the investigation require such modification. 20 (5) In this ChapterMinvestigatof means an individual appointed under sub-section (2).

PrIX.255 De 95. (1) An investigator may exercise powers contained in sub-section (3) over - mrescigrron- (a) any financial service provider; (b) any person who is an employee or financial representative of any financial 25 service provider; (c) any person carrying out any activity subject to regulation by the Financial Agency under the authority of law, with or without the permission of the Financial Agency, and the person in control of such person; (d) any related person of financial service provider; 30 (e) any other person who has been a party to any regulated activity or has information relevant or helpful to the investigation being cartied out; and

If ) any person suspected of market abuse. (2) The investigator may exercise the powers contained in this section only after - ere (a) recording the reasons stating the relationship between the person over whom the power is being exercised and the scope of the investigation under section 394(3)(c); and 316

~~164 Part XIII: 77. Irtv5salartiors~~

~~(b) providing the reasons recorded to such person, along with any order exercising such powers. (3) The investigator may order a person under sub-section (1) to —~~

~~(a) respond to the questions of the investigator, in person or any form of convenient comm.unication; and (b) produce any docwment or Mformation the investigator may require.~~

(4) The investigator may make copies of any document produced. (5) The investigator will have the same powers as are vested in a civil court under the Code of CM Procedure, 1908 (5 of 1908) while trying a Suit)in respect of 10 the following matters — (a) summorling ' and enforcing the attendance of any individual including goverment officials; (b) requiring such individuals to produce relevant records and documents; and IS (c) recording their statements. (6) Any copy of a document or record made by the investigator will be presumed to be true and accurate unless evidence is produced to the contrary.

~~Portars al the 396. (1) An investigator may — (a) enter the premises of any person without prior notice; and 27 (b) seize and retain custody of books, accounts, or any other records of the~~

(2) If an investigator proposes to use the powers under sub-section (1), the investigator must make an application to a Judicial Magistrate of the first class of the district where the head office of the Financial Agency is situated. as (3) The Judicial Magistrate rnayissue an order authorising the investigator to carry out the actions contained in sub-section (2) if the Lavestigator satisfies the Judicial Magisaate that — (a) the person may not co-operate with the investigation; or (b) any direction to the person may lead to destruction of information or so records which is required by the investtgator. (4) The order of the Judicial Magistrate under sub-section (3) will have the same legal effect as a warrant issued by an appropriate court under the Code of Criminal Procedure, 1973 (2 of 1979).

~~(5) The investigator may retain books, accounts Or any other records seized under 23 this section, for a period not exceeding thirty days.~~

~~397 After the conclusion of the investigation or lapse of time allocated in the appoint- Report °fart .ment order, the investigator will make a final report to ale Financial Agency:~~

398. (1) This section applies if, pending investigation under section 395, the ifivertiga- rteve"‘""d oor has reasonable grounds to believe that any person mentioned in Section mvettigataft.fneam " eo 395(rt is taking, or about to rake, any action which — 165

(a) constitutes a violation of any provision of law or regulations enforced by the Financial Agency; and (6) may prevent the investigator from collecting information or evidence. (2) The investigator may apply to an administrative law member for a decision order requiring a person to take actions contained in sub-section (5).

(3) An application under sub-section (2) musrbe accompanied with reasons for the investigator considering a decision order wider this section to be necessary (4) The administrative law member must issue a decision order under sub-section (2) only when the administrative law member has reasonable grounds to believe that - (a) the actions of the person disclose apparent violadon of laws and regulations enforced by the Financial Agency' (b) if no order is passed. persons availing financial senices from th financial service provider will suffer injury which may not be compensated adequately after the investigation is complete; is (c) if no order is passed, the investigator will not be able to effectively carry out the investigation; or (d) if no order is passed, any eventual remedy or penalty that maybe imposed by the Financial Agency after the investigation is complete, will not be enforceable due to change of circumstances. 2a

(5) The administrative law member will have the power to issue a decision order against any financial service provider or person suspected of being involved in market abuse - (a) to cease or desist from tarrying out such specified activities as would meet the objectives contained in sub-section (4); 22 (b) to keep specified records in a manner and form specified by the investigator; and (c) to keep any monies collected from consumers in a separate account or deposit such monies with the Financial Agency.

(6) Before passing a decision order under this section, the administraTve law mem- 30 ber will consider the requirements contained in sub-section (4) and the re- quirernent of causing least possible disruption to the person to whom such order applies. (7) In exceptional circumstances, a decision order under this section may be passed without hearing the person on whom such decision order is passed, but such 25 person will be given a hearing at the earliest possible opportunity before an administrative law member

(8) After a hearing under sub-section (7), the administrative law member must make a new decision order modiffing, confirming, recalling or setting aside the previous order to (9) A decision order passed under this section will remain M force for a period of ninety days.

(10) Upon the expiry of ninety days, if the investigation under section 395 has not been completed, the decision order may be extended by the administrative law officer, upon an application by the investigator to extend the decision order for is a further period of ninety days if - Part )CI0 78. NOTICES 166

(a) the conditions contained in sub-section (4) have been met; and (b) the administrative law member, by a decision order determines that a longer period is appropriate for completion of the investigauon.

~~(71) Any person who wil(Wly violates a decision order passed under her section commits a Class A offence.~~

~~CHAPTER 78 NOTICES~~

~~50022 LIOtiCE aai ,;ercep„,;; 399. (1) The Financial Agency must issue a show cause ;mike to a person against whom it proposes to undertake an enforcement ardon. athan.~~

Agency Io (2) The show cause notice must contain an assessment by the Finandal of the manner in which the factors under section 908 are applicable to the violation committed by the person. (3)A person to whom a show cause notice is issued may produce evidence to disprove the existence or applicability of any of the factors under section 908 Mat are identified by the Financial Agency in the show cause notice.

~~400. 0) A show cause notice must — 20111d2ld of show (a) be in wilting; (b) state the action which the Financial Agency proposes to take;~~

~~(0) give causes requiring the proposed action;~~

~~20 (d) comply with section 401; and (e) if section 401 applies, descnbe its effect and state whether any material atsts to wh' h the person concerned must be allowed access under it.~~

(2) The show cause notice must provide for a reasonable period, which must not be less than twenty-eight days, within which doe person to whom it is issued 25 may make representations to the Financial Agency

~~(3) The Financial Agency may extend the period provided for in the notice.~~

(4) After the period under sub-section (2), as may have been extended under sub- section (3). has expard, the Financial Agency most decide, within a reasonable period, whether to issue the person concerned a decision order.

~~(5) In sub-section (2), the oppornmnty to make representations must include a hearing before an administrative law officer, either in person or through elew tronic communication.~~

A5(225 tO 010.00010i 407. (7) When a Financial Agency issues any show cause notice or decision order, it manesard; must — show caise nolik alld sermon Other. Oa) allow the notices access to the material that was relied upon in taking the decision which gave rise to the obligation to issue the show cause notice or decision order; and (8) allow the notcee access to any material that might undermine that deci- son. 130.11 76. NOTICES 167

(2) The provisions of this section will not bar any cowl, tribunal or pther authority from requiring any information in proceedings before such court, mibunal or other authority (3) In this section, "notices" means a person to whom a show cause notice or decision order applies.

Concern and 902. (1) A decision order must — siandard of derision Orden (0) be in writing; (b) give the Financial Agency's reasons for the decision to take the action to which the order relates; (c) state whether the Financial Agency has depended on any materials con- is mined in section 401; and (b) clearly state — CO any right to have the matter referred to the Thbunal which is given by this Act; and (ii) the procedure for such a reference. 15

~~(2) If the decision order was preceded by a show cause notice, the action to which the decision order relates must be the same action proposed in the show cause notice.~~

(3) A derision order does not become effecdve until thirty days have elapsed from the date of issue of the decision order. to (4) A decision order which requires a person to take certain identified actions must provide reasonable time to such person to perform such actions.

Nocolso Sir 403. (1) My person who has received a decision order may make an application to the onto of Noses orders administrative law member of the board of the Financial Agency for review of the decision order, within fourteen days from the date of such order. 25

(2) If the administrative law member finds that there is an apparent error in the decision order, the adnuniscative ' law member may set aside the decision order. cossittf on et srstesdthst 909. (1) The Financial Agency must give a discontinuance nonce to the concerned per. through son if it decides not to take — so disco:swans were. (20 the action proposed in a show cause noticm or (b) the action to which a decision order relates. (2) A discontinuance notice will not be given with respect to an application for an authorisation to carry on a financial service.

~~(3) A discontinuance notice must identify the action or actions which are being 33 discontinued.~~

~~ConEdonialtry of casein notices. 405. (1) The Financial Agency must not publish a show cause notice and must keep it confidential.~~

~~(2) A discontinuance notice may be published by the Financial Agency tithe person to whom such discontinuance notice requests such publication. ta~~

~~ENFORCEMENT ACTIONS 168 Part n.~~

~~(3) The Financial Agency must publish all decision orders unless they fall under the exception under sub-section (4).~~

~~(4) A Financial Agency may not publish a decision order, if not publishing such notice is in the interests of the consumer, and the reasons for the same arc recorded in writing by the Financial Agency~~

~~(5) The Financial Agency must publish a compounding order co the extent it refers co the proceedings and the terms of the order.~~

~~906. (1) The Financial Agency must make regulations governing the show cause notices Ma LB rr$111.940“5 and decision orders it issues.~~

IC (2) The reguladons must — (a) ensure that show cause notices and decision orders are issued by administrative law officers only; (5) ensure that responses to show cause notices me received and considered by administrative law officers only; and 15 (c) state the procedure the Financial Agency will follow to issue decision orders. (3) The Financial Agency must make a report of every violation of regulations made under this section and include such report as a part of the annual report of the Financial Agency.

~~re CHAPTER 79 ENFORCEMENT 53CTION5~~

Wpm at 407 (I) Each of the following constitutes an "enforcement action" under dais Act — rrirameetnerf anions (a) issuance of a private warning; (b) issuance of a public statement; 25 (r) issuance of a direction requiring the person to correct the violanon, (d) imposition of a monetary penalty; and (e) variation, suspension, or cancellation of an authorisation, permission or registraton granted by the Financial Agency to the person, which ate related to the violation.

ao (2) When a Financial Agency issues a private warning, it must not publish such warning, but may provide copies of the warning to any other Financial Agency. (3) The appropriate Financial Agency may undertake one or more enforcement actions against a person for violation of — (a) any applicable provision of this Act; 35 (b) any applicable regulations made by the Financial Agency under this Act; Or (c) any order or direction issued by the Financial Agency under this Act.

408. (1) Any enforcement action taken by a Financial Agency must be proportionate 7e:6mb-sit to the violation in respect of which the enforcement action is proposed to he ,p13,0051,„2 dO undertaken. anfth-CerneR7 Part XIII: 79 ENFORCEMENT ACTIONS 169

(3) The Financial Agency must consider the following factors while determining the enforcement action to be taken against a person - (a) the nature and seriousness of the violation committed by the person, including whether the violation was - (t) deliberately [allied out by the person; 5 (ii) caused due to the recideeenese of the person; or (id) caused due to negligence on the part of the person; (b) the consequences and impact of the violation, including the extent of - (0 benefit or unfair advantage gained by the person as a result of the violation; and so (ii) loss caused, or likely to be caused, to consumers or any other persons as a result of the violation; (C) the conduct of the person after the occurrence of the violation; and (d) prior violations or offences committed by the person.

(3) If the violation was due to a negligence under sub-section (2)(a)(iii) and did is not cause any substantial loss to any person, the Financial Agency must not impose any enforcement as contained in section 407(1)(e).

Minim= emounz 409. (1) The maximum monetary penalty that may be imposed by the Financial Agency enmonecary penalties. under section 407(1)(d) will be determined in the following manner - (a) tithe Financial Agency determines that the violation under section 4073) was committed deliberately by the person, the maximum monerarYPenaltY m that may be imposed will be higher of - (0 three times the amount of the loss caused, or likely to have been caused, to consumers or any other persons as a result of the violation; or 5 01) three times the amount of the beneEr or unfair advantage gamed by the person as a result of the violation; (b) if the Financial Agency determines that sal do und section 407(3) was caused due to the recklessness of the person, the maximum monetary penalty that may be imposed will be higher of - so ( tun O times the amount of the loss caused, or likely to have been caused, to consumers or any other persons as a result of the viola- tien; or (ii) two times the amount of the benefit or unfair advantage gained by the person as a result of the violation; or 3 5 (c) if the Financial Agency determines that the violadOn under section 407(3) was caused due to the negligence of the person, the maximum penalty that may be imposed will be the higher of - (q one and a half times the amount of the loss caused, or likely to have been caused, to consumers or any ocher persons as a result of the so violation; or (ii) one and a half times the amoum of We benefit or unfair advantage gained by the person as a result of the violation.

(2) The total amount of the monetary penalty must not he more than rupees one crore, or any amount that the Cenral Government may prescribe from time to as time, if the amount of loss caused, or likely to have been caused, is - (a) not substantial; or (.1 e

~~Comboulllimo balmrs euaO NOTICE 170 Part ball, ea~~

~~(b) cannot be reasonably estimated.~~

~~:21Tby 410. (1) A Financial Agency may compensate persons who have been affected by a to- ,enC7t") ladon, under this section, if the following conditions are met -~~

(a) the loss suffered by the persons is directly attributable to the violation; (b) the persons who have suffered loss due to the violation can be reasonably idenlified; and (v.) the amount recovered by the Financial Agency is sufficient to provide some compensation to all similarly situated persons.

~~(2) Ifthe Rnandal Agency decides to pay compensation under this section, it must make an notice stating the conditions a person has to meet to qualify for such compensadon.~~

~~(3) The Financial Agency most keep any amount collected as monetary penalties for this section for a period of two years.~~

~~(4) A person most approach the Financial Agency for compensation under this sec2on within a period of two years from the date of the publication of the notice under sub-section (2).~~

~~(5) After the expiry' of the period of two years, the Financial Agency most transfer any amount kept for the purposes of this section to the Consolidated Fund of India.~~

(6) This section does not prevent any aggrieved person from pursuing any other legal remedies against a person who has committed a violation, provided that any amount payable by a person who has committed a violation to an aggrieved person must be reduced by any amount the aggrieved person has received under this section.

25 411. A Financial Agency must transfer all monies collected try it from the imposition of Tpet"Eieltth.of dthe any penalties under section 407(1)(d), subject to any amount kept under section Consoi e Fald 410, to the Consolidated Fund of India.

~~CHAPTER SO CoSh)ocilnttvG ACTIONS AND NOTICE~~

acbcopupolienvuliourer mpo Rd ng so 412. (1) Any person may make an application to a Financial Agency requesting for a compcunding action if - (a) such person apprehends enforcement action; or (b) such person has received a show cause notice.

(2) An application for a compounding action may be made at any time before a 35 decision order concerning the same matter has been issued to the person by the Financial Agency (3) TheFinancial Agency must dispose of an application for compounding action within ninety days from the receipt of the application.

~~(4) The application for compounding action must be decided by an admininative en law officer. - 463~~

~~Part XIII. 80. Comeouanima ACTIONS mars N VICE 171~~

~~(5) If the application for compounding action is rejected by the Financial Agency it must issue a decision order to lb person making the application.~~

Sleeeelie for 413. (1) If an application for a compounding action is acceptable to the Financial Agency Mane conic/amass it may issue a compounding order to the person making the applicanon. nNen (2) A compounding order must be issued by an administrative law officer, (3) In a compounding order, the Finn ad Agency may -

~~(a) require the person to pay an amount towards settlement charges; (b) restrain the person from undertaking particular actions; or (c) impose a combination of any of the actions mentioned above.~~

(4) The Financial Agency must not take any enforcement action against a per son 30 on an issue which constitutes a violation under section 407(3), if that issue is the subject matter of a compounding order.

(5) The restriction under subsection (4) will not be applicable if the person making the application for compounding action - (a) withholds any material fact regarding the compounding action from the is Financial Agency; or (b) misleads the Financial Agency in any other manner in connection with the application for compounding ac on.

OS) The Financial Agencymust not initiate any criminal proceedings under this Ant on a matter in relation to which a compounding order has been issued. so (7) If the compounding order is issued after the institution of criminal proceedings, the Financial Agency or the noticee must make an application to the court before which such criminal proceedings are pending, to compound such offence terms of the compounding ordea (8) Before issuing a compounding order the Financial Agency must provide the ss concerned person with a statement containing the conditions or requirements it proposes to impose under sub-section (3).

~~(9) If the person rejects the conditions contained in sub-section (8), then the Fi- nancial Agency must not issue any compounding order.~~

(20) Any offer made by a person in proceedings under this section will not be to the so prejudice of the person in any other proceedings or imposition of enforcement actions by a Financial Agency (11) A person is presumed to have rejected the conditions contained in sub-section (8), if such person does not respond within fourteen days of the statement being issued. 35

(12) A person who has received a compounding order has no right to approach the Tribunal against any content of the compounding order. (13) If the person with respect to whom a compounding order has been issued, wilfully violates any requirements or conditions of such compounding order, the person commits a Class A offence. so

~~(24) A compounding order under this section does not amount to the application of an enforcement action under this Act. 4 oy~~

~~Part 3ff II: 81. OFFENCES thou. THIS ACT 172~~

Regulvoons;3tg 414. (I) Each Financial Agency must make regulations regarding the manner and pro- 00a3.3, cess governing compounding orders so as to ensure that compounding is car- compnwains. tied otu in a nansparent, consistent and impartial manner. (2) The regulations under sub-section (1) must provide for -

(a) the list of violations that casmot be compounded; (b) the list of violations that may be compounded; (C) the method of calculating any monetary penalty chat may be imposed under a compounding order; (d) the considerations that the Financial Agency may take into account while issuing a compounding order; and (e) the process for making an application for compounding action.

CHAPTER 81 OFFENCES uNDER THIS ACT DeSCrIpuon of 415. (1) The punishment for - off enCeS. IS (a) a Class A offence is a fine, or imprisonment not less than two years but up to ten years, or both; (b) a Class B offence is a fine, or imprisonment up to two years, or both; and (s) a Class C offence is a line. (2) All offences under this Act are non-cognisable and compoundable. (3) Irony act is punishable under provisions of any other law the provisions of this Act will not be in derogation to such provisions.

~~Trnkfi rn °3 416. (7) No criminalproceedings for any offence under this Act against any person may PrOCeed3ngs (Or be initiated except by an application from the Financial Agency oftenth~~

(2) Criminal proceedings for any offence under this Act must be instituted before zs a Court of Session. (3) The Central Government may make a nobs-mutton designating a particular Court of Session or establishing a Court of Session for vying offences under this Act. (4) A Financial Agency may appoint an advocate to act as a public prosecutor for any offence committed under this Act.

(5) A prosecutor appointed by a Financial Agency under thissection will be deemed to be a public prosecutor under the Code of Criminal Procedure, 1973 (2 of 1974). (6) The Central Government may make rules for the purpose of this section. ss 417. (1) The following factors are to be taken into account while determining the ap- cr.:Ns:at profit-tate period of imptisonment and fine under for an offence - prnsthew (a) the role of the person in the commission of the offence; and (b) the factors contained in sections 408(2)(b), 408(2)(c) and 408(2)(4). - re- 173

~~(2) The maximum amount of fine to be levied upon a person for an offence will be the higher of - (a) three rimes the loss caused by the person; or (b) three times the gain made by the person.~~

~~(3) if the loss caused or the gain made by the person cannot be reasonably deter- 5 mined, the maximum fine that may be imposed is rupees one core.~~

(4) The prosecution of a person for any offence under this Act Ivill not bar any enforcement action imposed on such persons, but any fine imposed for an offence may be reduced by any penalty paid to a Financial Agency for the same violadon.

2goladons by QJ If any violation under any this Act is found to have been committed by a body corporate, then an officer of the body corporate is liable, if - (a) the violation is shown to have been committed with the consent or con nivance of the officer; or (5) the violation 25 attributable to any wilful neglect on the part of the officer Is

~~(2) Any criminal proceedings or enforcement action against either the officer or the body corporate will not be a bar against proceedings against the other.~~

(3) In this section,"offichs includes director, member of the managing committee, chief executive, manager, secretary, individuals in control, and persons who purport to be officers with knowledge of the body corporate. so

~~CHAPTER 82 MIS estrussa05~~

419. (2) A person that, in purported compliance with any requirement imposed by or under this Act, knowingly gives a Financial Agency material infomiation which is false or misleading, is guilty of a Class A offence. 25

~~(2) Sub-section (1) applies only to a requirement in relation to which no other provision of any Act creates an offence in eomtrction with the giving of infor- mations~~

~~Gereral 420. (I) The Financial Agency must make regulations governing the process it will fol low in implementing provisions of this chapter. na~~

~~(2) The Financial Agency must make general guidelines Stating itS -~~

(a) interpretation of the provisions of this Chapter; and (5) the method it will apply in derennining the enforcement action and penalty to be imposed. (3) While taking en enforcement action under this Act, the Financial Agency may ss impose a lower penalty after recording reasons for doing so . .... 401

~~Part 5312. 83. PRESIDING DEPICER AND inn 174~~

~~PART )23/~~

~~FUNCTIONS, POWERS AND DUTIES OF THE TRIBUNAL~~

~~CHAPTER 83~~

~~5 PRESIDING OFFICER AND DIEMBERE~~

~~. Ovalaracon of 421. (1) A person will not be qualified for appointment as the Presiding Officer of me Ensiling Dens. Tribunal unless such person— sad TeMberi.~~

(a) is a sitting or retired Judge of the Supreme Court or a Sitting or retired Chief Justice of a High Court; or Io (5) is a sitting or reth31.1 Judge of a High Court who has completed not less than seven years of SenSce R Judge in a High Court.

(2) A person will not be qualified for appointment as member of the Tribunal unless that person is a person of ability, integrity and standing who has shown capacity in dealing with problems relating to finance and has qualification and experience of law, finance, economics or accountancy

~~(3) A person may not be appointed as member of the Tribunal within two years fr m reds; g or reshming as m :fiber of the board or employee of any Finan- cial Agency~~

Selectorprwd. office of , (1) The Central Government must constitute a selection commicse in accordance 422. and TERRg,ise.„s 20 mith the First Schedule for selection of the persons for appoindnent as Presid- ing Officer or members of the Tribunal. the mbmwil.

~~(2) The selection committee must comply with the procedure hid down in the Fin: Schedule.~~

(3) The Central Government must appoint the members of the Tribunal from the 25 persons nominated by the selection committee in consultation with the Chief Justice of India. (4) In the event of a temporary vacancy in the office of the Presiding Officer the Central Government may nominate one of the members of the Tribunal as an officiating Presiding Officer for a period not exceeding one hundred and eighty so days, awing regard to suitability for effective oversight and administration of the Tribunal's adjudicating functions.

(5) If anyvacancy in the "[banal is not filled within a period of one hundred and eighty days from th d t h cy ri .N Central Government must make a report on the reasons for the delay in the appointment.

~~95 (6) The report mentioned under sub-section (5) will be laid before both Houses of Parliament.~~

423. (I) The Presiding Officer and members of the Tribunal will hold their respective cmullstss . Nis offices till they reach the age of seventy years. Oakes un roemben (2) The salary and other entitlements of the Presiding Officer sill be the same as the Chief Jusdee of a High Court. 1/4 D7

~~175~~

~~(3) The salary and other entitlements of the members will be the same as a Judge of a High Coutt.~~

ROGnacion 424. (1) The Presiding Officer or any member of the Tribunal may resign by giving a signed notice of resignation to the Central Government. (2) On receipt of a notice of resignation, the Central Government must forward a 3 copy of such notice to the Chiefjusdce of India.. (3) The Presiding Officer or any member of the Mem& after providing the notice of resignation, will continue to bold office till the earlier of —

~~(a) the date the Central Government appoints a person to the post vmared by such resignation; or (b) the expiry of one hundred and eighty days from th d t f providing of the notice of resiffiation-~~

Removal al 1152213152205G32 3 or 425. (1) The Presiding Officer or any member of the Tribunal may be removed on the member ar same grounds es a member of the board of the Financial Agency under section TrOunal. 40. 15 (2) The procedure for removal of Presiding Officer or any member of the Hibunal must be the same as a member of the board of the Finandal Agency under section 41, provided that no Presiding Officer or member of the Tribunal may be removed without consoling the Chief Suffice of India.

~~CHAPTER 84 20 FUNCTIONING~~

F51233 DI th5 11113.521 426. (1) The "ffibunal will have the same powers as are vested in a Civil Coon under the Code of Civil Procedure, 1908 (5 of 1908). (2) Every proceeding before the Tribunal Will be deemed to be a judicial proceeding within the meaning of tendons 193 and 228, and for the purposes of seenon 25 196 of the Indian Penal Code, 1860 (45 of 1860). (3) The "tribunal will be deemed to be a civil court for all the purposes of section 195 and Chapter /TOT of the Code of Criminal Procedure, 1973 (2 of 1974) while trying a suit, in respect of the following matters — (a) sununoning and enforcing the attendance of any person and examining 50 the person on oath; (5) requiring the discovery and production of documents; (s) receiving evidence on affidavits; (d) issuing commissions for the examination of witnesses or document; (e) dismissing an application for default or deciding it ex parte; ss CO setting aside any order of dismissal of any application for default or any order passed by it exparre; (g) ordering the attachment of any property; and (h) any ocher matter which may be notified by the Central Government.

~~(9) The Ilihunal may — 40 Part = 85. AnminisaTexioN 176~~

(a) seeable any regulations; (6) modify, suspend or confirm any ordec notice or direction of a Financial Agency or Cenral Government; or (C) inS:ruct a Financial Agency to issue a new ordec notice or direction. 9 (5) The Tribunal must attempt to dispose any appeal before it within a period of one hundred and eighty days from the date of receipt of any appeal.

(6) If the Tribunal does not dispose any appeal within one hundred and eighty days it must record such incidence and publish ft with its annual report. Power of abseil 427. (1) Ira monetary penalty imposed on any person has been finally upheld and such person fails to deposit such penalty within a reasonable time, the Financial Ls, to Agency may make an application to the Tribunal for artachment •of the properties of the person for recovery of such penalties.

~~(2) If the Tribunal is satisfied that the person has defaulted in payment of penalry, it may issue an order attaching properties of the person.~~

~~(3) The order of the ilibunal attaching properties will have the same effect as a decree of a court under the Code of Civil Procedure, 1908 (5 of 1908).~~

~~(4) In this section, "properef includes tangible and intangible property~~

~~Fpurs,,E,8,.( „ 428. (1) The Presiding Officer will be responsible for the functioning of the Tribunal and have all powers inddencal to the discharge of such dudes.~~

~~• 0 (2) A person appointed as a Presiding Officer must, in carrying out the functions of that office, have regard to —~~

~~(a) the need for the Tribunal to be accessible; (b) the need for proceedings before the Tribunal — (0 to be fair; and~~

55 80 to be handled quickly and efficiently: (c) the need for members of any bench of the Tribunal to be experts in the subject Matter OD or the law to be applied in, cases in which they decide • matters; and (d) the need to develop innovative methods of settling the types of disputes that may be brought before the Tribunal.

~~brst`31-Ot °asset 429. (I) The Presiding Officer may constitute benches composed of members of the benwerd,ecurconsteste Tribunal.~~

~~(2) Benches may be created at any location, or for any type of proceeding.~~

CHAPTER 85 3S ADMINISTRATION eth` 430. (1) The Tribunal will be supported by a registry, which will be headed by a regis. Thtaff trat (2) The registrar will be appointed by the Central Government in consultation with the Presiding Officer, Part IOW 85. Aomons Irmion 177

(3) The registrar will be responsible for the following functions — (d) establishing an effective and efficient system to support the business of the Tribunal; and (6) discharging administrative functions of the Tribunal, including in relation to matters dealing with all staff of the Tribunal. (4) The registrar will be subject to the supervision of the Presiding Officer in the discharge of such functions.

Bik wok*kjii to' provided 'jthi 431. (7) The registry must develop systems and procedures to ensure functions of the com pare nsed Inbunal are provided through computerised systems that are easily accessible. (2) The registry must develop systems to — (a) allow all parries to submit documents through electronic means; (b) schedule hearings of the Tribunal in an efficient manner; (c) provide systems for recording evidence of witnesses communication sys-

(d) enable parties to present their case without requiring their personal ap- Is pearance at the Tribunal, through electronic means; and (e) enable public viewing of proceedings, including byway of wansmission of hearings by electronic means.

(3) The Presiding Officer may direct the usage of electronic means enabled pursuant co this section in proceedings wherever appropriate. so staff a the Thermal 432. (1) The Tribunal will have staff comprising such types, categories and number of officers and other employees as may be required to assist the Tribunal in the effective discharge of its functions, as determined by the Central Government. (2) If the Presiding Officer, based on the recommendation of the registrar, is of the opinion that more employees or different categories of employees are required to ensure the effective functioning of the Tribunal, then the Presiding Officer must make a requisition to the Central Government in this regard. (3) The officers and other employees of the Tribunal must discharge their functions under the general superintendence of the registrar.

~~(4) The salaries and allowances and conditions of service of the officers and other so employees of the Tribunal will be such as may be prescribed by the Central Government.~~

~~433. (1) The registrar must prepare a report, each financial yeas stating the financial requirements of operating the Tribunal.~~

~~(2) The report must be made in consultation with the Presiding Officer and the as Central Government.~~

(3) The registrar must forward the report to the Financial Authority and the Re- serve Bank. (4) The Financial Authority and the Reserve Bank must provide the Tribunal with funds to m. eet the financial requirements set out in the report in accordance 40 with the time schedule contained in the report.

~~Part TM 86. JURTDICTior AND sinsis 178~~

(5) The Tribunal must make pro on in its procedural rules to charge fees for appeals. ;effob rmance of the 434. (1) The Presiding Officer, in consultation with the registrar must formulate systems to accurately measure the fundioning of che Tnbunal and each member s of the Tribunal. (3) The Presiding Officer, in consultation with the registrar, must create targets for per of each measure for each financial year (3) The systems and targets mentioned in the previous sub-sections musty

(a) promote transparency; (b) provide an accurate representation of functioning of the Itibunal; io (c) consider the requirements of persons appearing before the TnIunal; (d) provide objective methods of measurement where possible; (e) provide subjective methods of measurement where objective measurements are not possible; and (i) incorporate global best practices in measurement of functioning of other abunals and courts. (4) The Presiding Officer must review the systems created under sub-section (I) once every three years to — (a) incorporate global best prasices; vat (b) update the systems of measurement; and (c) include new metrics of measure of processes and functions

~~435. ( The registry of the ltibunT must publish a report within ninety days of the end ek eurenir of every financial year~~

(2) The report must contain— as (a) audited financial statements of the Tribunal; (b) the details of measurement of the functioning of the Tribunal in accordance with section 434; and (t) the targets for the following financial year in accordance with section 434.

~~CHAPTER 86~~

~~so JumSmcnos AND APPEALS Jun sd tle on of the 436. (1) The Tribunal will have jurisdiction in the following instances —~~

(a) from any decision order; (5) from any regulations or general guidance in accordance with section 58; (c) from any adjudication order of the Redress Agency under secdon 114; is (d) from any decision of the Regulator to disqualify an auditor or actuary tmder seedon 165(4); (e) from any order of the exchange under section 210; (f) from any order of an exchange under section 252 179

~~(g) from any compensation order under section 282; and (h) from any order of the senior officer under section 373.~~

(2) No appeal will lie against a show cause nodce or compounding order issued by a Financial Agency (3) All appeals to the Tihunal against any order of a Financial Agency must be 5 made within sixty days of the date of the order. (4) The Tribunal may, if it is satisfied that such party was prevented by sufficient use from filing the appeal within sixty days, allow an appeal to be filed within a further period not exceeding thirty days. (5) Sub-section (3) does not apply to appeals against regulations and guidance io under section SR. (6) No civil court will have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal is empowered by or under this Act to determine, and no injunction will be granted by any court, tribunal or other authority in respect of any action takes; or to be taken, in pursuance of any is power conferred by or under this Act or rules made hereunder.

(1) An aggrieved party may appeal to the Supreme Court of India against the order of the Tribunal only on a question of law, within a period of ninety d ys from the receipt of the order of the Tribunal.

(2) The Supreme Court may, if it is satisfied that such party was prevented by 20 sufficient cause from fling the appeal within ninety days, allow an appeal to be filed within a huffier period not exceeding sixty days.

~~CHAPTER 87 PROCEDURE~~

Pmcedure Or the Ibbunso 438. CO The Itibunal will not be bound by the procedure laid down in the Code of Civil 25 Procedure, 1908 (5 of 1908). (2) The Tribunal will have a procedure committee which will be responsible for making the rules of procedure to be followed by the Tribunal (3) The Tribunal, acting through the procedure committee, may evolve its own procedure which will be guided by the following principles — 3D

(a) that the principles of natural justice are followed: (8) that the Ibibunal system is accessible and fair; (c) that the proceedings are handled quickly and efficiently; (d) that the procedure allows for conduct of proceedings by electronic means, where possible; and 35 (e) that rules of procedure are simple and clear.

(4) The Tribunal must ensure chat the entire proceedings of the Tribunal are recorded and published. (5) The Presiding Office; by recording reasons in wriling, may prevent the publication of certain proceedings. rn e- IA

~~Part mVi 87. PROcEogo. 160~~

arapoolom 439. (1) The procedure committee of the gibunal will comprise — nogg of ggegff mammas of the (a) the ?residing Officer; rognel (b) the registrar of the Itibunal; and (c) three experts in the field of law, nominated by the Presiding Officer. (2) The procedure committee must undertake the following functions —

(a) make rules governing proceedings of the Tribunal, which will come into effect upon being notified by the Central Government; (b) make roles governing payment of fees payable for Ming appeals in the Tri- bunal, which may vary depending on the nature of the appeal preferred; (r) identify measures or parameters for detennining the performance of the 10 re giStry; and (11) any other OLUICtiOn which may be delegated to the procedure committee.

~~(3) The procedure committee will have the power to consult such persons as it Considers appropriate in doe discharge of its functions.~~

~~(4) The procedure committee must publish, inducing by electronic means, the rules made by it.~~

e:M-4de 440. CO Every order made by the Tribunal will be enforced by it in the same manner r as if it were a decree made by a coon, and it Mil be Lawful for the Tribunal to Totomi, send, rase of its inability to execute such order, to the court within the local — 20 limits of whose Jurisdiction

(a) in the case of an order against a company, the registered office of the company is situated; or (8) in the case of an order against any other person, place where the person concerned resides or carries on bushaess or personally works for gain, is situated. (2) Nothing contained in sub-section (1) will affect the power of the Tribunal to transmit any order made by it to a civil court having local jurisdiction, and suchcivil court ...a execute the order as if it were a decree made by that court.

~~441 My person may appear before the Tribunal in person, or authorise one or more— ,Ahl:orZeutlfer"`~~

~~30 (a) of its officers; (b) advocate; (c) chaffered accountant; Id) company secretary; or (e) cost accountant.~~

~~so 442. The provisions of the Limitation Act, 1963 (36 of 1963). will, as far as may be, ifamitalmt apply to an appeal made to the Tribunal. tif Part XV: 82 Pa ocsouRE /3 181~~

~~PART XV~~

MISCELLANEOUS members affirm sof eujimes or 443. The members, officers, and employees of all Financial Agencies, or any other per- ci Manual son who has been delegated any function by any Financial. Agency, or by the Cen- Arms to be tral Government, will be deemed, when acting or purporting to act in pursuance 5 of any of the provisions of this Act. to be public servants within the meaning of section 21 of the Indian Penal Code, 1860 (45 of 1060). Plocecom [Maim lajen 51 go[Main `. 144. No suit, prosecution or other legal proceedings will lie against the Central Govern- ment or any Financial Agency or their members, officers, employees, or delegate, for anything which is done, or breaded to be done, in good faith done under this it

Apprracon Or other lam no, 445. (1) The provisions of this Act are in addition to, and not in derogation of, the provisions of any other law for the dove being in force. (2) Unless provided othenvise, nothing contained in this Act will affect the application of any other law. IS

EXeMpdell ISOM 446. Nothing contained in any law or enactment in force, in relation to taxation, b. eluding the Wealth Tax Act, 1957 (27 of 1937) and the Income Tax Act, 1961(43 of 1961), make any Financial Agency liable to pay wealth tax, income tax, service tax, or any other tax or duty with respect to its wealth, income, services, profits or gains. is riam, Ma 447. No Financial Agency will be placed in liquidation save by order of the Central Government, m such manner as it may direct

Prohlreml on 448. (1) Mold DIS MI An A person must not, either alone or with others, engage in any conduct that can be reasonably construed as being done for the purpose of avoiding, or abusing, the application of this Act, unless such conduct is justified by legitimate needs is of a financial, economic or legal nature. (2) Any person who violates sub-section (1) conceits Clas C fierce

Bre er of Central 449. (/) If any difficulty arises in giving effect to the provisions of this Au, the Can- GOVEllillle III ICI remms difficuldes. tral Government may, in COOSUltatiOn with the concerned Financial Agency or Tribunal, make provisions that appear to it to be necessary for removing the Is difficulty, through a notification. (2) The Central Government must not nobly anyprovision that is inconsistent with the proxisions, intent or purpose of this (3) The power of the Central Government to remove difficulties, as described in sub-section (1) will nor extend to the removal of difficulties in the regulations, sr or bye-laws of any Financial Agency (4) The Central GOVernMeneS power to issue orders wider this section may be exercised at any time prior to the expiry of three years from the commencement of this Act. (5) The Central Government must lay every order made under this section before zo each House of Parliament. Repeals end. 450. The Cenffal Government may notify the repeal of the legislations listed in the Sixth Schedule, in whole or in part, from erne to time, in accordance with a schedule of giving effect to the provisions of various Parts of this Act. -414°

~~PartXVI: Smutty:Es 1S2~~

~~PART )N1~~

~~SCHEDULES~~

~~Schedule 1: Selection committee~~

~~See section 30, Pan III~~

~~Selection committee 5~~

(1) Constitution of selection committee (a) The Central Government will maintain a list of at least ten independent experts from the fields of finance, law, and economics who are available to serve as experts of the selection committee. The selection committee will consist of — 10 (I) V) a chairperson of the selection committee; CO three independent experts; and (H) a variable member as defined in item (e) of this Paragraph. (c) The chairperson of the selection conuttitme will be— CO a nominee of the ChiefJustice of India, for the selection of the Pre- siding Officer and members of the Tribunal; and (ii) a nominee of the Central Government, in all other circumstances. (d) The chairperson of the selection committee must select the three independent experts from the list maintained by the Central Government as members of the selection committee. (e) The variable member will be — (0 a nominee of the Central Government for the selection of chairperson; Or (it) the chairperson of the Fmancia, Agency for selettion of all other members of the board of that Financial Agency. 25 (0 The Cenaal Government must provide the selection committee with adequate resources to advertise the vacancies it the board and carry out the selection in an efficient manner

(2) Procedure to be followed by the selection committee document stating the procedure it en (a) The selection committee must make a ws follow for selecting persons. (b) The procedure must be fair, transparent and efficient. (c) The selection committee must widely advertise the vacancy and the procedure for selecting person in the best possible way to attract attention of 95 suitable candidates. (d) Selection committees may consider persons who have nor applied after recording reasons for considering such persons. (e) Tae selection committee may nominate up to three persons for every vacancy for which it has been conslicuted. (t) The selection committee must complete its process within one hundred and twenty days of being constituted. Part Nth: Scstenudds 183

~~Schedule 2: Procedure of meetings of the board of the Financial Agency~~

~~See section 34, Part III~~

~~Procedure of meedngs of the board of the Financial Agency~~

~~(1) The board of a Financial Agency must meet as frequently, and at such place, as may be provided for by bye-laws.~~

~~(2) The members may attend meetings of the board of a Financial Agency using mechanisms that allow members to participate in the meetings from remote locations without being Is hysically present.~~

~~(3) The quorum of a meeting of the board of a Financial Agency will be more than half of the number of members appointed to the board of the Financial Agency so~~

~~(4) The chairperson of a board must convene a meeting within reasonable time, if two or more members of the board of the Financial Agency make a request in wridqg.~~

~~(5) If the chairperson fails to convene a meeting within thirty days of a request in writing, the members may convene a meeting without the chairperson.~~

~~(6) Each member of the board of the Financial Agency must be given at least seven days notice of a meeting, unless the circumstances require the meeting to be convened with shorter notice.~~

(7) The chairperson of the Financial Agency will chair the meet-gigs of the board of the Financial Agency. sn (8) If the chairperson of the Financial Agency is not present at a meeting, the person who has served as member for the Longest period of time will chair the meeting, unless otherwise specified.

~~(9) The secretary of the board of the Financial Agency will be responsible for keeping the records of every meeting of the board of the Financial Agency~~

~~(20) The records will be published by the Financial Agency within three weeks of each meeting.~~

~~(11) Selected portions of records may not be published if such portions meet any of the following conditions -~~

(0) they relate exclusively to functions of individuals within the Financial sa Agency; (b) they relate to information that has been obtained from a person in confidence, where such information is exempt from disclosure by that person under the Right to Information Act, 2005 (22 of 2005); (c) they involve discussion of a particular instance of violation of laws or as censuring any person; (d) they disclose information about a particular investigation which is ongo- Mgt (a) they disclose techniques and procedures for investigation or inspection; 06 they disclose information of a commercial nature relating to a financial w sen.Sce provider which has been obtained for regulatory purposes; or (g) they deprive a person of a right to a fair and impartial adjudication. Part /VI: SaNeliuLlie 184

~~(12) The selected portions of records may be published with appropriate delay if such portions meet any of the following condidons —~~

(a) they are likely to lead to major instability in the financial system; they are likely to significantly fruse implementadon of an action pm- (b) trat board, where such action has not t posed by the Financial Agency or its been disclosed to the public; or (r) they involve discussion of any pardcular legal proceeding before a al- bunal, court or arbitratior

❑3) The publication of records relating to a particular meeting, may be delayed or prevented only if the board of the Financial Agency M. such meedng — to of this Paragraph applicable (a) records the reason under items (11) or (12) M respect of each portion of the records; On the majority of members present at the meeting, vote in favour of such aMon for each portion of the records separately; and

~~(c) the vote of each member is recorded and published in accordance with item (10) of this Paragraph.~~

(14) Portions of records delayed for publication must be published by the Financial Agency within six months, Or as soon as the reasons for their delay cease to applicable, whichever is earlier. 53 In this section, "records" means the agenda, proposals, and decisions taken at 20 ❑ the Ineetillg, and includes the vote; of each member of the Financial Agency 7 Part XV. SCHEDULES 185

~~Schedule M System-wide measures See section 301, Part VIII~~

~~Syem-avide measures~~

~~(1) The fallowing system-wide measures will be the subject of the decisions of the Council under section 301—~~

~~(a) a counter-cyclical capital buffer seeMng to address pro-cyclical effects in the financial system. Part Xeer. Scidgoliges 186~~

~~Schedule 4: Actions of Regulator and Corporation consequent to determining the risk to viability of covered service providers See sections 233, 254, 235, 236 and 237, Part VII~~

~~Actions of Regulator and Corporation consequent to determining the risk to 5 viability of covered service providers~~

(1; Actions consequent to low risk to...debility of a covered service provider — (a) Consequent to the determination that there is low risk to viability of a covered service provider, the Corporation may monitor the covered service provider based on regulatory dam, reports from examinadons and inspections, if any and any other data that may be available to the Cor- so porat on. (2) Actions consequent to moderate risk to viability of a covered service provider

(a) Consequent to the detemMiation that there is moderate risk to viability of a covered service provide; the Corporation may, in addition to the I S actions under Paragraph (1)( conduct a special examination of the affairs of the covered service provider to assess its health, and communicate its concerns to the covered service provider.

(3) Actions consequent to material risk to %debility of a covered service provider— (al Consequent to the determination that there is material risk to viability of a covered service provider, the Corporation may in addition to the actions under Paragraph (2) — CO require the covered service provider to prepare a resolution plan; and (it) intensify engagement on the resolution plan, including obtaining all the information related to the dim.

~~(4) Action consequent to imminent risk to viability of a covered service provider~~

(a) Cansequent io the determination that there is imminent risk to viability of a covered service provider, the Corporation must with ninety days of determination, apply for receivership under Chapter 46. (6) Consequent to the determination that there is imminent risk to viability of a covered service provide; the Corporation may in addition to the actions under Paragraph (3), and upon aPPointment as receiver exercise 35 any powers under chapter 46. (5) Actions consequent to critical risk to viability of a covered service provider — (a) Consequent to the determination that there is critical risk to viability of a covered service provide; the Regulator must withdraw any authoreation that it may have granted to the covered service provider. (5) Consequent to the determination that there is critical risk m viability of a covdere service provider, the Corporation must — (0 if the Corporation is of the opinion that the covered service provider is about to become insolvent terminate 01 cancel all Corporation insurance that the covered service provider may have acquired, in accordance with Chapter 50; and Part XVI. SCHEDULES 187

(ii) apply for IITAidacion, in accordance with the provisions under Chap- ter 51. (c) Consequent to the determination thar here is critical risk to viability of a covered service provider, the Corporation may carry' out any actions under Paragraph (4). Part Saisumms 183

~~Schedule 5: Members of the Monetary Policy Committee See section 333, Pan X~~

~~Members of the Monetary Policy Committee~~

(1) In this Schedule, the term "member of the Monetary Policy Committee" excludes die members appointed under section 333(2)(b) and the Reserve Bank Chairpersons (2) Ever/ member of the Monetary Policy Committee will be appointed for a term of four years.

(3) A member of the Monetary Policy Committee may resip by giving a wilitten notice of resignation of at least six weeks duration to the Central Government, with a =toy to the Reserve Bank Chairperson.

(4) The terms and conditions of service of the members of the Monetary Policy Committee including honorarium will be provided for by the Reserve Bank by way of bye-laws and published. is (5) The Reserve Bank Board may remove a member of the Monerary Policy Com- mittee, if it is satisfied that such member has —

(a) been absent from the Monetary Policy Commitree's meetings for more than three consecutive meetings, without obtaining prior leave; (b) developed any interest under section 333(7)(a) of this Act or it is discov- ered that the member had failed to adequately disclose such interest prior meneir appointment; (c) been at any time, or is, adjudged insolvent; (d) been convicted of an offence, where such an offence does not constitute a minor offence; 25 (e) acted in a manner which amounts to abuse of position that such member holds or renders the member's continuance M office prejudicial to the onecrives of the Monetary Policy Comminee or thc Reserve Bank; or (I) become physically or mentally incapable of discharging a member's dudes. (6) The principles of natural justice must be observed in relation to the procedure followed by the Reserve Bank board, for the removal of any member of the Monetary Policy Committee. Part XVI: SCHEDULES 189

~~Schedule 6: Repeal of other laws See section 450, Patt XV~~

~~Repeal of other laws~~

(1) The Securities Contracts (Regulation) Act, 1956 (42 of 1956) (2) The Securities and Exchange Board of India Act, 1992 (15 of 1992) (3) The Depositories Act, 1996 (22 of 1996) (4) The Public Debt Act. 1944 (18 of 1949) (5) The Government Securides Act, 2006 (35 of 2006)

~~(6) The Reserve Bank of India Act, 1934 (2 of 1934)~~

~~(7) The Insurance Act, 1938 (4 of 1938) Ia (8) The Banking Regulation Act, 1949 (10 of 1949)~~

(9) The Forward Contracts (Regulation) Act, 1952 (74 of 1952) (10) The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) MR The Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of is 1961) (12) The Foreign Exchange Management Act, 1999 (42 661999) (13) The Insurance Regulatory and Development Authority Act, 1999 (41 of 1999)

(19) The Payment and Settlement Systems Act, 2007(5] of 2007) (15) The Arts establishing bodies corporate involved in the financial sector (for ex- 20 ample, The State Banl: of India Act, 1955 (23 of 1955) and The Life Insurance Corporation AR, 1956 (31 of I956))• a-412_ ,....

~~REPORT~~

~~JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~Presented to Lok Sabha on 22.122008 Laid in Roo-ye Sabha on 22.12.2008~~

~~LOK SABHA SECRETARIAT NEW DELHI~~

~~December/Agrahayana. 1930 (Saka) CONTENTS~~

~~PAGE~~

Composition of the Joint Committee to examine the Constitutional and legal position relating to office of profit (iii) Introduction PART I REPORT 3. CHAPTER I Introductory 1 4. CHAPTER II Origin of concept of office of profit in India 4 S. CHAPTER III Background Analysis 9 A. : First term of reference to examine, in context of settledinterpretational the expression "office of profit" in Article 102 of the Constitution and the underlying constitutional principles therein, and to suggest a comprehensive definition of "office of profit" 9 B. : Second term of reference to recommend, in relation to 'office of profit", the evolution of generic and comprehensive criteria which are just, fair and reasonable and con be applied to all States and Union Territories 37 C. : Third term of reference to examine the feasibilityof adoption of system of law relating to prevention of disqualification of Members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty Second Amendment) Act, 1976 49 D. : To examine matters incidental to the terms of reference 57 PART 11 CONCLUSIONS AND RECOMMENDATIONS (i) Need for definition and its feasibiLity 58 Generic Criteria and definition 60 (iii) Opportunity for resignation 70 (iv) Uniform application of the criteria and definition in Union and State Governments/Union Territories 72 (v) U.K. Law and revisiting 42nd Amendment 74

~~01 1/14 vi 4--~~

~~PAGE~~

ANPEXURES 81 Parliament (Prevention of Disqualification) Act, 1959 90 II Acts of Parliament on the offices of profit 96 III List of enactments of State Legislature on offices of profit Compilation of decisions of the Courts and Tribunals on offices of IV 98 profit Summary of views of State Governments/U.Ts. on the first term of V 110 reference of the JPC Summary of views of State Goyernments/U.Ts, on the second term of VI 115 reference of the JPC 119 VII House of Commons Disqualification Act, 1975 VIII Summary of views of State Governments/U.Ts. on third term of 141 reference of the JPC Summary of views of State Governments/U.TA on issues incidental IX 143 to the terms of reference of the JPC

~~APPENDIC6 151 Motion in Los Sabha for reference to the Joint Committee~~

List of Experts, NG0s/individuaIs etc. from whom memoranda II 152 were received by the Committee 158 III List of witnesses who tendered oral evidence before the JPC 159 IV Minutes of the sittings of the Joint Committee --- 9 2-1-

~~JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~COMPOSITION OF THE COMMITTEE~~

~~Shri lqbal Ahmed Saradgi — Chairman~~

~~MEMBERS~~

~~Lok Sabha~~

2. Slid V. Kishore Chandra S. Dec 3. Shri Santosh Gangwar 4. Dr. Satyanarayan Jatiya 'H. Shri Ganesh Prasad Singh 6. Shri A. Kdsbnaswamy 7. Shri Madhusudan Mistry 8. Shri Mohammad Salim 9. Shri Rajesh Verma "10. Vacant

~~Rajya Sabha~~

~~11. Slid Virendra /Thalia 12. Shri Arun Jaitley 13. Shit Ram Jethmatanf 14. Dr. Abhishek Many Singhvi 15. Shri Sitaram Yechury~~

~~SECRETARIAT~~

~~1. Shri PK. Grover Joint Secretary 2. Shri R.S. Misra Director 3. Shri Kusal Sarkar Deputy Secretary-// 4. Shri D.K. Arora Senior Committee As ant~~

*NOrmnated toed 21 May, HOP vire stun Rayhunath ma repg.netl- - ere Prof. Ram Copal Yaday (ceased to be member of Lott Sabha consequent on ction to Raiya Sabha e zoos) (iii) -Ai 2-6-

~~INTRODUCTION~~

I, the Chairman, Joint Committee to examine the constitutional and legal position relating to office of profit having been authorized by the Committee to submit the report on their behalf, present this report of the Committee. 7. The Lok Sabha at its sitting held on Thursday, the 17 August, 2006 adopted the foLlowing Motion (Appendix-I) regarding constitution of Joint Committee to examine the constitutional and legal position relating to Office of Profit. "That a Joint Committee of Houses to be called the Joint Committee to examine the constitutional and legal position relating to Office of profit be constituted consisting of fifteen members, ten members from this House to be nominated by the Speaker including the Chairperson of the Joint Committee and jive members from the Rea Sabha to be nominated by the Chairman, Rajya Sabha The Motion was forwarded to Rajya Sabha for its concurrence and the Rajya Sabha concurred 3. in it on 18 August, 2006. Consequently, in accordance with the motions adopted by both the Houses, Joint Committee to examine the constitutional and legal position relating to Office of Profit was constituted on Wednesday, the 30 August, 2006 consisting of ten Members from the Lok Sabha and five Members from the Rain Sabha. 4. The Committee held 15 sittings in all. 5. As Chairman of JPC, I would like to place on record my sincere gratitude to the members for their active participation in the Committee's deliberations and their valuable contribution to arrive at the conclusions. 6. The Committee wish to express sincere thanks to the Officers of the Ministry of Law ft Justice (Legislative Department) for making available the material called for in connection with the examination of the subject. The Committee also wish to thank all the constitutional and regal experts, political parties/groups in ParLiament, State/11.T. Governments, Institutions and members of general public who have contributed through their valuable suggestions/opinions to enable the Committee to arrive at a conclusion and present their report. 7. The Committee would like to piece on record their deep sense of appreciation for the invaluabLe assistance rendered to them by the officers and staff of the Lok Sabha Secretariat attached with the Committee. S. The Committee considered and adopted the Report at their sitting held on 16 December, 2000.

~~IQBAL AHMED SARADGI, New Dux Chairman, 16 December, 2008 examine Constitutional 25 Agrahayana, 1930 (Sokol Joint Committee to Legal PositiontingRela theto O tfficeofit.of Pr and (v) REPORT~~

~~CHAPTER I~~

~~INTRODUCTORY~~

The Parliament (Prevention of Disqualification) Amendment Bill, 2006 was assented to by the President on the 18th August, 2006. While reconsidering the Parliament (Prevention of Disqualification) Amendment Bill, 2006 by the Lok Sabha on 31St July, 2006 an assurance was given on the floor of the House that the various points raised in the message of the Hon'ble President will be examined by the Joint Committee of both the Houses of Parliament. Accordingly, the Hon'ble Minister of Law and Justice moved a motion in Lok Sabha on 17 August, 2006 for constitution of a joint Committee to examine the constitutional and Legal position relating to office of profit. The motion was adopted by Lok Sabha on the same day i.e. on 17 August, 2006. The motion provided for inclusion of the following members of Lok Sabha:-

1. Shri V. Kishore Chandra S. Deo 2. Shri Santosh Gangwar 3. Dr. Satyanaragan Jatiya 4. Shri Raghunath Jha 5. Shri A. Krishnaswamy 6. Shri Madhusudan Mistry 7. Shri Mohammad Salim 8. Shri ION Ahmed Saradgi 9. Shri Rajesh Verma 10. Prof. Ram Dope( Yadav 2. The motion regarding appointment of the Committee was concurred in by Rajya Sabha on 18 August, 2006 and included the following members of Rajya Sabha:—

~~1. Shri Virendra Bhatia 2. Shri Arun Jattley 3. Shri Ram Jethmalani 4. Dr. Abhishek Manu Singhvi 5. Shri Sitaram Yechury~~

~~3. Hon'ble Speaker appointed Shri lqbaL Ahmed Saradgi as Chairman of the Committee.~~

4. Thus, a Committee of 15 members of Parliament (10 from Lok Sabha and 5 from Rajya Sabha) was constituted as Joint Committee to examine the constitutional and legal position 1 relating to office of profit with the following terms of reference:—

(i) to examine in the context of settled interpretation of the expression "office of profit' in Article 102 of the Constitution and the underlying constitutional principles therein, and to suggest a comprehensive definition of "Office of Profit";

(iii to rec end, in relation to "office of profit", the evolution of generic and comprehensive criteria which are just, fair and reasonable and can be applied to all States and Union Territories; (di) to examine the feasibility of adoption of system of Law relating to prevention of disqualification of Members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty-Second Amendment) Act, 1976; and (iv) to examine any other matter incidental to the above.

5. The Committee were expected to present a report to Parliament by the first day of last week of Winter Session 2006. But the Committee had to seek five extensions (on 12.12.06, 14.05.07. 07.09.07, 29.11.07 and 30.04.08) of time for presentation of the report.

6. At their first sitting held on 14 September, 2006 the Committee held discussion among themselves regarding the concept of office of profit and deliberated upon the broad procedures to be adopted by the Committee for its working. The Committee also decided to issue press communique inviting suggestions/views in the form of memoranda from constitutional/legal experts, academicians, law institutes, bar councils, public bodies or individuals. In response, the Committee received 57 memoranda (Appendix-II). The Committee also decided to seek the views of all Parliamentary Parties/Groups, and State Governments on the subject. The Committee were also given a briefing by the representatives from the Ministry of Law and Justice (Legislative Department).

7. At their sitting held on 19 October, 2006 the Committee took stock of the action taken in pursuance of the decisions taken by the Committee at their first sitting and shortlisted the names of experts who migl-t be asked to appear before the Committee for oral evidence. The Committee also held discussion with the representatives of Ministry of Law and Justice (Legislative Department) and sought certain clarification and material.

8. At their third sitting field on 17.11.06, the Committee heard the views of constitutional and legal experts : shri Fait S. Badman, Senior Adovate and Shri Rustom S. Gae, former Law Secretary, Government of India on matter under reference to the Committee.

~~9. At their fourth sitting held on 1 December, 2006 the Committee heard views/suggestions of Sarvashri Rajeev Dhavan and Harish N. Salve, both Senior Advocates.~~

~~10. At their sitting held on 20 March, 2007 the Committee heard the views of the representatives of Ministry of Home Affairs, NCT of Delhi and Union Territory of Puducherry.~~

11. At their sitting held on 9 May, 2007 the Committee held discussion and decided to seek extension of time for presentation of their report till the first day of last week of Monsoon Session, 2007. The motion for extension of time for presentation of the report was moved on 14.5.2007 which was adopted by the House on the same day.

~~2 12. At their sitting held on 23 August, 2007 the Committee heard the views of the representatives of the State Government of Gujarat on the terms of reference of the JPC.~~

13. At their sitting held on 5 September, 2007 the Committee decided to seek extension of time for presentation of the report till the first day of the Last week of the Winter Session, 2007. The motion was moved in and adopted by the House on 0T09.2007.

~~14.At their sitting held on 31 October, 2007 the Committee heard the Wews of the representatives of Governments of North Eastern States on matters under reference of the JPC.~~

15. The Committee heard the views of the representatives of State Government of Rajasthan at their sitting held on 27.11,07. The Committee also proposed to seek extension of time for presentation of their report till the last day of the Budget Session, 2008. The motion for extension of time for presentation of the report was moved on 29.11.07 which was adopted by the House on the same day.

16.At their sitting held on 28 April, 2008 the Committee heard the views of representatives of State Government of Uttar Pradesh, The Committee also decided to seek extension of time for presentation of the report till the last day of Monsoon Session, 2008.

17. At their sitting held on 5 June, 2008 the Committee heard the views of State Governments of Orissa and Chhattisgarb. Similarly, at their sittings held on 20 August and 9 September, 2008 the Committee heard the views of State Governments of Madhya Pradesh and Kerala respectively.

18.The Committee undertook study visits to Mumbai and Bangalore (17 to 19 January, 07), Kolkata and Chennai (8 and 9 February, 07) Chandigarh and Shimla (25 to 27 June, 07), Patna (on 08.02.08) and Hyderabad (on 31.07.00) and held informal discussions with the representatives of respective State Governments.

~~3 CHAPTER II~~

~~ORIGIN AND CONCEPT OF OFFICE OF PROFIT IN INDIA~~

The concept of disqualifying a holder of office of profit under the Government for being chosen as and for being, a member of the Legislature originated from the need in democratic Governments to Limit the control and influence of the Executive over the Legislature by means of an undue proportion of office holders being members of the Legislature. Further, holding of certain offices was considered incompatible with membership of legislatures due to physical impossibility of a person attending in two places, or heavy duties being usually attached to those offices. Exception was, however, made in the case of Ministers and other members of Government with a view to having effective coordination between the executive and the legislature and making the executive accountable the Legislature. 2. The concept of discualifying the holder of an office has developed as a necessary and inseparable part of a democratic government. The Government of India Act, 1935, made a clear and precise statement in this direction. Sub-section (1) of section 26 of the Government of India Act, 1935 provided disqualification for membership of the Federal Legislature which read as follows:. '26.(I) A person shall be disqualified for being chosen as, and for being, a member of either Chamber (a) If he holds any office of profit under the Crown in India, other than an office declared by Act of the Federal Legislature not to disqualify its holder.

3. Similarly sub-section (1 ) of section 69 of the said Act provided disqualification of membership of a Provincial Legislative Assembly or Legislative Council which read as follows:. "(I) A person shalt be disqualified for being chosen as and for being a member of either Chamber- (a) If he holds any office of profit under the Crown in India, other than an office declared by Act of the Federal Legislature not to disqualify its holder.

4. These sections 26(1) (a) and 69 (I) (a) of the Government of India Act, 1935 with consequential changes were taken in the "first draft Constitution of India" prepared by the Constitutional Advisor as Articles 68 and 141. Relevant portion of these Articles is reproduced below: "(I) A person shall be disqualified for being chosen as, and for being, a member of either House of the Federal Parliament— (a) if he holds any office of profit under the Federation or any unit other than an office declared by Act of the Federal Parliament not to disqualify its holder

4 5. For the purposes of this section a person shall not be deemed to hold an office of profit under the Federation or any unit by reasons only that he is a Minister either for the Federation or for a Province."

6. The above draft articles alongwith other draft articles of the Constitution prepared by the Constitutional Advisor were considered by the Drafting Committee chaired by Dr. B. R. Ambedkar at their meetings held between 1947 and 1948 and the same were extensively revised. The Draft Constitution prepared by the Drafting Committee suggested the fallowing Articles on the above subject: (I) A person shall be disqualified for being chosen as, and for bein g, a member of either House of Parliament—

(a) if he holds any office of profit under the Government of India or the Government of any State other than an office declared by Parliament by Law not to disqualify its holder. (b) if he is of unsound mind and stands so declared by a competent court; (c) if be is an undischarged insolvent; (d) if he is under any acknowledgement of allegiance or adherence to a foreign power, or is a subject or a citizen or entitled to the rights or privileges of a subject or a citizen of a foreign power; and (e) if he is so disqualified by or under any law made by Parliament. 7. For the purposes of this Article, a person shall not be deemed to hold an office of profit under the Government of India or the Government of any State by reasons only that—

(a) he is a Minister either for India or for any State for the time being specified in Part II of the First Schedule; or (b) he is a Minister for any State for the time being specified in Part III of the First Schedule and be is responsible to the Legislature of the State, or where there are two Houses of the Legislature of the State, to the Lower House of such Legislature and if not Less than three-fourths of the members of such Legislature or House, as the case may be, are elected.

~~8. A person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly or Legislative Council of a State—~~

(a) if he holds any office of profit under the Government of India or the Government of any State for the time being specified in the First Schedule other than an office declared by the Legislature of the State by Law not to disqualify its holder. (b) if he is of unsound mind and stands so declared by a competent court. (c) if be is an undischarged insolvent. fd) if he is under any acknowledgement of allegiance or adherence to a foreign power, or is a subject or a citizen or entitled to the rights or privileges of a subject or a citizen of a foreign power.

~~(e) if he is so disqualified by or under any Law made by the Legislature of the State.~~

~~5 -"1St-~~

9. The above draft Articles as settled by the Drafting Committee were widely circulated to invite comments and suggestions. The Drafting Committee further revised the said articles in the 'Revised Draft Constitutior November, 1949". The following Articles were suggested:—

~~(1) A person shall be disqualified for being chosen as, and for being, a member of either House of Parliament—~~

~~(a) if he holds any office of profit under the Government of India or the Government of any State other than an office declared by Parliament by law not to disqualify its holder;~~

~~(b) if he is of uneffind mind and stands so declared by a competent court;~~

~~(c) if he is an undischarged insolvent;~~

~~(d) if he is not a citizen of India, or has voluntarily acquired the citizenship of a foreign State, or is under any acknowledgement of allegiance or adherence to a foreign State;~~

~~(e) if he is so disqualified by or under any law made by Parliament.~~

(2) For the purposes of this Article, a person shall not be deemed to hold an office of profit under the Government of India or the Government of any State byreason only that he is a Minister either for the Union or for such State.

~~10. The above provisions were discussed in the Constituent Assembly and after discussion the said provisions were adopted as Articles 102 (1 ) and 191 (1) (a) respectively.~~

~~Art. 102(1)(a) of the Constitution of India reads as under:—~~

~~4102(0 A person shall be disqualified far being chosen as and for being a member of either House of Parliament—~~

~~(a) If he holds any office of profit under the Government of India or the Government of any State, other than office declared by Parliament by law not to disqualify its holden"~~

11. The Constitution, however, has not defined what constitutes an office of profit, the holder of which would disqualify a member within the meaning of the said Article. The Parliament has, however, been empowered to declare by Law the offices, the holding of which would not disqualify a member. To constitute an'office of profit' under Art.102(1) (a) of the Constitution, three conditions are to be satisfied—there should be an 'office' to which an appointment is made; it should be an 'office of profit' and the 'office' should be one under the Government.

12. The Parliament and State Legislatures are, however, empowered to exempt any such office entailing disqualification. The Parliament (Prevention of Disqualification) Act, 1959 specifies certain offices, which will not come within the purview of the disqualification, and several offices have been added after enactment of the lam Acts of the respective legislatures prescribe the exemptions of the state legislatures. This rule is founded on the imperative need for neutrality and impartiality in the realm of public service.

6 13. In pursuance of Article 102 (1) (a), the Parliament had enacted the following Acts for the purposes of declaring offices, the holding of which shall not incur disqualifications for membership of Parliament—

(a) The Parliament (Prevention of Disqualification) Act, 1950 (XIX of 1950) (b) The Parliament (Prevention of Disqualification Act), 1951 (LXVIII of 1951) (c) The Prevention of Disqualification (Parliament and Part C State Legislatures) Act, 1953 (1 of 1954) 14. Since none of the above enactments had decided the matter appropriately covering all the necessary aspects of the problems to the satisfaction of all concerned, the Hon'bte Speaker, Lok Sabha in consultation with the HontLe Chairman of the Rajya Sabha on the expressed desire of members of various political parties, constituted a Joint Committee under the Chairmanship of Pandit Thakurdas Bhargava, M.P. to study various matters connected with the disqualification of members under Article 107(1)(a) of the Constitution with the following terms of reference:-

- to study various matters connected with disqualification of members, to make recommendation in order to enable the Government to consider the lines along which a comprehensive legislation should be brought before the House; and — collect facts, data and make suggestion as to how the matter should be dealt with.

15. The Joint Committee presented their report to Parliament in November, 1955. In the view of the Bhargava Committee, Members of Parliament should be encouraged to serve on such committees, which are of an advisory character and represent the Local or popular point of view, in a manner, which will effectively influence the official point of view. Members of Parliament by virtue of their membership are in a position to say and represent certain matters with some authority and confidence, and their views are likely to go a long way in influencing the view point of officials. But at the same time, it felt that consistent with the above view expressed, Members of Parliament should not be permitted to serve on committees, commissions etc. which jeopardize their independence or which will place them in a position of power or influence or in a position where they receive some patronage from Government or are themselves in a position to distribute patronage. The Committee recommended, among other things, that a Standing Committeett of Parliament might be constituted to undertake the work of continuous scrutiny in respect of existing and future office of profit. Accordingly, the Joint Committee on Office of Profit were onstituted for the first time in August, 1959 during the Second Lok Sabha. Since then the committee has been constituted from time-to-time after each General Election for the duration of the term of the House except during the term of Sixth Lok Sabha when no such Committee were constituted. The functions of the Committee are:

(i) to examine the composition and character of all existing `Committees' and all 'Committees' that may be constituted, membership of which may disqualify a person for being chosen as, and for being, a member of either House of Parliament under Article 102 of the Constitution. (ii) to recommend in relation to the 'Committee' examined by it what offices should disqualify and what offices should not disqualify.

(iii) to scrutinize from time-to-time the Schedule to the Parliament (Prevention of Disqualification) Act, 1959 and to recommend any amendment in the said schedule, whether by way of addition, omission or otherwise. 7 16.The Committee examine the detailed particulars regarding the composition, character, etc. of the "committees" constituted by the Ministries/Departments of the Central Government as well as the State Governments. The Committee also examine various queries received from Members of Parliament pertaining to "Office of Profit" and express their opinion in appropriate cases. The Committee, however, do not examine the composition and character of 'Committees' which consist wholly of officials or which are constituted for ad hoc purposes. Further, during the Third Lok Sabha, the Committee decided that the composition and character etc. of the bodies registered under the Societies Registration Act need not generally be examined unless any particular case merited consideration.

17. The Committee also decided [(8th Report (8th LS)] that all the Ministries of Government of India and the State Governments might be asked to obtain prior approval of the Speaker, Lok Sabha or Chairman, Rajya Sabha as the case may be before nominating any Member of Parliament to any Government Committee/Body, unless the Act under which such Committee/ Body have been set up to provide for appointment of an M.P. or where Members of Parliament aresaved from incurring disqualification by the provisions in the relevant Act itself as is the case with the Rubber Board, Coffee Board, Tea Board etc.

18. Proposals received from the Central/State Govts. seeking Speaker's approval for nomination of Members of Parliament on various Committees/Bodies constituted by them are examined by the Committee as to whether the office of Member/Director/Chairman of the Govt. body in question constitute an Office of Profit under the Government which would disqualify the member for being a Member of Parliament. The Committee also examine requests received from Members of Parliament seeking clarification about the Office of Profit under Government and members are apprised of the views of toe Committee.

~~8 CHAPTER III~~

~~BACKGROUND ANALYSIS~~

A. First Term of Reference to examine, in context of settled interpretation of the expression "office of profit" in Article 102 of the Constitution and the underlying constitutional principles therein, and to suggest a comprehensive definition of "office of profit"

1.1 An office of profit is a term used in a number of national constitutions to refer to executive appointments. A number of countries forbid members of the legislatures from accepting an office of profit under the executive as a means to secure the independence of the Legislature and preserve the separation of powers. In all democracies Like United States of America and the United Kingdom, the holders of offices under the Government, as a rule are disqualified for being Members of the Legislature. The inherent idea seems to be that the personal and pecuniary interest should not come in the way of discharging their obligations by the legislators. In India, this principle is embodied in Articles 102 (1)(a) and Article 191(1Hal of the Constitution. 1.2 The principle contained in Art.102 is based on sound public policy of ensuring impartiality and neutrality in the public service and avoidance of conflict between duty and interest of an elected member, enabling him to carry on his duties freely and fearlessly without being subjected to any governmental pressure thereby maintaining purity of the legislature. The provision is undoubtedly designed to protect independence of Members of Parliament. The object of Art.102 (1) (a) is to disqualify a person from the membership of Parliament if he is obliged by the Government for an office of profit which carries profit or benefit and thus compromising his independence. Constitutional Provisions 1.3 The expression "office of profit" occurs in the following articles of the Constitution namely:— Article I8(3)—No person who is not a citizen of India shall, while he holds any office of profit or trust under the State, accept without the consent of the President any title from any foreign State. Article 18(4)—No person holding any office of profit or trust under the State shall, without the consent of the President, accept any present, emolument or office of any kind from or under any foreign State. Article 58(2)—A person shall not be eligible for election as President if he holds any office of profit under the Government of India or the Government of any State or under any Local or other authority subject to the control of any of the said Governments. Article 66(4) A person shall not be eligible for election as Vice-President if he holds any office of profit under the Government of India or the Government of any State or under any local or other authority subject to the control of any of the said Governments. 9 -431-

Explanation—for the purposes of this article, a person shall not be deemed, to hold any office of profit by reason only that he is the President or Vice-President of the Union or the Governor of any State or is a Minister either for the Union or for any State. Art.102 (f)(a) of the Constitution of India reads as under:— "102(11. A person shall be disqualified for being chosen as and for being a member of either House of Parliament— (a) if he holds any office of profit under the Government of India or the Government of any State, ath th the office declared by Parliament by law not to disqualify its holder" Explanation : for the purposes of this clause a person shall not be deemed to hold an office of profit under the Government of India or the Government of any State by reason only that he is a Minister either for the Union or for such State.

~~Article 158(2) The Governor shall not hold any other office of profit.~~

Article /PM) A person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly or Legislative Council of a State— (al if he holds any office of profit under the Government of India ar the Government of any State specified in the First Schedule, other than an office declared by the Legislature of the State by law not to disqualify its holder. Explanation : for the purposes of this clause a person shall not be deemed to hold an office of profit under the Government of India or the Government of any State specified in the First Schedule by reason only that he is a Minister either for the Union or for such State. 1.4 The expression "office of profit" has not been defined in the Constitution or any other statute. It has, therefore, been open to the courts to explain the significance and meaning of this concept. Most of the cases which are arisen under Article 191(1)(a) of the Constitution are only relevant to Article 102(1)(a) of the Constitution as both these provisions are identical, in text and purpose. 1.5 In pursuance of above Articles, the Parliament (Prevention of Disqualification) Act, 1959 (Annexurel) was enacted by Parliament. The said Act has been amended from time-to-time to include office exempted from disqualification from the purview of office of profit. A list of amendments made visa vis the offices exempted from the purview of office of profit is enclosed (Annexure•I1). In pursuance of Article 191(1)(a) of the Constitution, the State Legislatures have enacted their own laws relating to removal of disqualification. A List of State enactments is enclosed (Annexure-III) 1.6 If any question arises as to whether a Member of Parliament has become subject to any of the disqualification laid down in the Constitution including the one whether he is holding an Office of Profit or not, the question is referred for the decision of the President and his decision is final. However, before giving any decision on any such question, Art.103(2) requires the President to consult the Election Commission and the Commission may make such enquiry as it deems fit. it is important to note that in this matter the President does not act on the advice of Council of Ministers.

10 1.7 The underlying object of this constitutional provision is to secure independence of the Members of Parliament or a State Legislature and to ensure that Parliament or the State Legislature does not contain persons who have received favours or benefits from the Executive Government and who consequently, being under an obligation to the Executive, might be amenable to its influence. Obviously, the provision has been made in order to eliminate or reduce the risk of conflict between duty and self-interest among the Legislators.

~~Connotation of the word 'office'~~

1M In the usual sense of the word an 'office' means a right to exercise a public or private employment and to take the fees and emoluments there unto belonging In its fullest sense an office embraces the elements of tenure, duration, duties and employments, but the emoluments is not essential to office.' It has also been held that an office is an employment on behalf of Government in any State or public trust and one not merely transient, occasional or incidental."'

1.9 According to the @Supreme Court, the following connotation of 'office' given by Justice Rowlett in Great Western Railway Company Vs. Baker can appropriately be applied to the word 'office' in Article 191 of the Constitution.

" ...mn office or employment which was a subsisting, permanent, substantive position which has an existence independent from the persons who filled it, which went on and was filled in succession by successive holders; and if you merely had a man who was engaged in whatever terms, to do duties which were assigned to him, his employment to do those duties did not create an office to which those duties were attached. He merely was employed to do certain things and that is an end of it; and there was no office or employment existing in the case as a thing, the so-called office or employment was merely an aggregate of the activities of the particular man for the time being.. "

1.10 The words its holder' occurring in Article 191 (1) (a) of the Constitution indicate that there must be an office which exists independently of the holder of the office. The very fact that the Legislature has been authorized by Article 191 to declare that an office of profit would not disqualify its holder contemplates the existence of an office apart from its holder.

~~Connotation of holding an office~~

1.11 A person is disqualified for being chosen as a member of Legislature if he holds an office of profit under the Government at the time of filing his nomination paper. The disqualification is not removed on his submitting an unqualified resignation of his office or by ceasing to work but only when the resignation has been accepted by the proper authority prior to the filing of the nomination paper (Election Tribunal, Beharisput in Ram Musty Vs. Sumba Soder 2, SLR., 330). The disqualification is not removed if the resignation has been accepted by an authority not competent to accept it. In such a case the acceptance of the resignation is invalid and the person submitting his resignation will be disqualified since it must be considered to have continued to hold office. (Election Tribunal, Rajnandgaon, in Thakur Daoo Singh Vs. Ram Krishna Rathor, 4 E.L.R., p.34).

"stroundk Judicial Dictionary MI Ed. "wehmer's New International Dictionary of tile English Language 11 9531, Vol. w 'En John Rep.492. 7th ohio stare 556 @Sint. Kanto Katnuria Vs. M. Kapok Chanel Khorana.E.L.R. Vol.XLIII, p.55 11 -

1.12 The disabiLity under Articles 102 and 191 being a constitutionaf one, it cannot be removed by acceptance of resignation from an office of profit with retrospective effect. (Kamta Prasad Upadhyaya Vs. Sarjoo Prasad Tiwari and others, E.L.R., Vol. XXXV, p.10).

~~Connotation of profit'~~

1.13 To define 'profit' is more difficult. It normally connotes any advantage benefit or useful consequence. In India, however, the Election Tribunals/Courts have construed "pecuniary gain" to be an essential ingredient of 'profit'. According to the Election Tribunal, Mangalore in Shivaroma Karanth Vs. Venkataromana Gowdo and others, 'pecuniary advantage' is an essential element of 'office of profit.' If honour and prestige were sufficient to constitute 'office' then any office under the Government though strictly harmony, would be hit. In the words of the Tribunal,

"We do not consider that the Constitution intended to impose a wholesale ban on every type of office, irrespective of whether any remuneration is attached to it or not. We decline to place such a construction, as we believe, that such an intention does not follow from a reading of the clause."

1.14 In another case (Chancier (Lath Vs. Kunwar Jaswant Singh)," it was held that the membership of a District Vittran Committee, which wasconstituted for the purpose of controlling the distribution of controlled commodities. i.e. foodgrains, sugar, cloth, etc. to the people in the district, did not constitute an 'office of profit' as a member did not receive any remuneration either in cash or in kind, even though it was contended that the Committee carried with it a lot of influence.

~~Judicial Interpretation of Article 102 of the Constitution~~

1.15 As already stated the expression "holds any office of profit under the Government" occurring in the Article 102(1) of the Constitution has nowhere been defined precisely. Its meaning has to be gathered from the construction of the words used and pronouncements of judicial tribunals.

1.16 In the case of Guru Gobinda Basu Vs. Sankari Prasad Ghosal. [AIR 1964 SC 254] the Supereme Court pointed ost that one of the dominant tests to determine this question would be the location of Powers of appointing and removing authority to or from the office. After reviewing some decisions, the Supreme Court in Guru Gobinda Basu's case observed as follows:

"it is clear from the aforesaid observations that in Maulana Abdul Shakurb cash (A/R 1958 SC 52) the facts which were held to be decisive were (a) the power of the Government to appoint a person to an office of profit or to continue him in that office or revoke his appointment at their discretion, and (b/ payment from out of Government revenue though it was pointed out that payment from a source other than Government revenues was not always a decisive facto,:

12 1.17 In another case Pradyut Bardoloi Vs. Swapan Roy [AIR 2001 SC 296], the Supreme Court observed that a variety of situations have come up for the consideration of the court wherein the court was called upon to apply the determinative test so as to find out whether a case of holding an office of profit under the Government was made out or not. The first and foremost question to be asked is whether the Government has power to appoint and remove a person to and from the office? If the answer is in the negative, no further enquiry is called for, the basic determinative test having failed. If the answer is in the affirmative further probe for the remaining ingredients of an office of profit will have to be undertaken. In the Pradyut case, the courts further observed that the inquisitive over-view-eye would finally query that whether on account of holding of such office—would the Government be in a position to so influence him as to interfere with his independence in functioning as a Member of Legislative Assembly or would his holding of the two offices namely one under the Government and the other being Member of Legislative Assembly involve a conflict of interests inter se? This is bow the issue has to be approached and resolved.

1.18 As referred above, in the Shivamurthy Swami Inamdar etc. Vs. Agadi Sanganna Andanappa [(1971) 3 SC 870] it was observed by the Supreme Court that the Court in several decisions has laid dawn the tests for finding out whether an office in question is an office under the Government and whether it is an office of profit. Those tests are:—(1) Whether the Government makes the appointment; (2) Whether the Government has the right to remove or dismiss the holder; (3) whether the Government pays the remuneration; (4) What are the functions of the holder? Does he perform them for the Government; and (5) Does the Government exercise any control over the performance of those functions?

1.19 The proposition of the Law Laid down in the above cases may indicate that the expression "holds an office of profit under the Government" is settled. But a Look at the recent decisions of the Supreme Court reveal that it is not so in all the cases and in all situations. In the recent Supreme Court decision in Shibu Soren Vs. Dayanand Sahay AIR 2001 SC 2583, the Court observed as follows:

With a view to determine whether the concerned office b on "office of profit" the Court must, however take a realistic view Ink* a broad or general view ignoring essential details is not desirable nor is it permissible to take a narrow view by which technicality may overtake reality It is a rule of interpretation of statutes that the statutory provisions are so construed as to avoid absurdity and to further rather than defeat or frustrate the object of the enactment.

While interpreting statutory provisions, Courts have to be mindful of the consequences of disqualifying a candidate for being chosen as, and for being a member of the legislature on the ground of his holding an office of profit under the State or the Central Government, at the relevant time. The Court has to bear in m' that what is at stake is the right to contest an election and to be a member of the legislature indeed o very important fight in any democratic set up. A practical view no pedantic basket of tests must, therefore, guide the Courts to arrive at an appropriate conclusion."

~~13 (t~~

~~1.20 In the recent Supreme Court decision in Jaya Bachchan Vs. Union of India (2006 5 SCALE 411) the Supreme Court observed that~~

"the question whether a person holds an office of profit is required to be interpreted in a realistic manner. Nature of the payment must be considered as a matter of substance rather than of form. Nomenclature is not important. In fact mere use of the word 'honorarium' cannot take the payment out of the purview of profit, if there is pecuniary gain for the recipient. Thus, if the pecuniary gain is receivable inconnection with the office then it becomes an office of profit, irrespective of whether such pecuniary gain is actually received or not."

1.21 On the basis of the above analysis, according to the Ministry of Law Et justice (Legislative Department) it seems that the expression officeof profit occurring in ArticLe 102 of the Constitution has assumed a settled expression.

1.22 Under varying circumstances judgments have been delivered by the courts in the past depending upon the peculiarity of each case. The grayness of the area can be gauged from the fact that on a number of occasions, the judgments of the Election Tribunals have been reversed by the High Court and on many other occasions, the Supreme Court has reversed the judgments of the High Courts. Furthermore, even in the Supreme Court, there have been instances when an issue was referred to a five-bench judge, three judges gave one judgment and two judges gave different judgement on the same issue. These facts reflect the complexity involved in interpretation of the term holder of an office of profit under the Government for the purpose of incurring/prevention of disqualification from the membership of legisLature. A compilation of some of the decisions of the courts and tribunal. is placed at Annexure IV.

~~'Settled' Interpretation of the term "office of profit" in Article 102~~

1.23 The expressions which assume significance are "office", "profit" and "under the Government". In order to bring a case within ArticLe 102 (1)(a) of the Constitution it must first be proved that what was held was an "office". The word "office" means no more than a position to which certain duties are attached. Thus, if a person does not hold office he is not disqualified even if he is making a profit es. a Lawyer engaged by the Government to appear in a case on its behalf and paid fee by it holds no office and thus is not disqualified to be chosen as, and for being, a Member of Parliament. The word "profit" connotes the idea of pecuniary gain.

~~1.24 Hence, in deciding any question whether the office really carried any p milt, the amount of money receivable by a person by virtue of holding such office becomes material.~~

1.25 An important expression which occurs in Article 102 (1) (a) of the Constitution is "under the Government". As discussed earlier the courts have enunciated certain broad criteria for determining whether a particular office could be termed as an office of profit under the Government for the purposes of Article 102 (1) (a) and Article 191 (1) (a) of the Constitution, These are as follows:—

~~(a) Whether Government makes the appointment? (b) Whether Government has a right to remove or dismiss the holder of office? (C) Whether the Government pays the remuneration?~~

~~14 -44 1~~

(d) What are the functions of the holder of office? and (e) Does the Government exercise any control over the performance of those functions? 1.26 Whether an office in order to be characterized as an office of profit under the Government should satisfy these tests or whether any one or more of them may be decisive of its true nature has been the subject matter of several cases decided by the Supreme Court. But no decision appears to lay down conclusively the character of an office of profit under the Government although the court has no doubt determined in each case whether a particular office involved in the case before it was or was not an office of profit under the Government.

~~Definition of the term ((Office of profit"~~

1.27 The Joint Committee to examine the constitutional and legal position relating to office of profit has been mandated to examine in context of settled interpretation of the expression "office of profit" in Article 102 of the Constitution and the underlying principles therein and to suggest a comprehensive definition of office of profit. The Committee invited comments/views from Political Parties/Groups in Parliament, general public/institutions/constitutional and legal experts, The Committee also took up the issue with the Ministry of Law and Justice (Legislative Department) Government of India and all the State Governments/C.Ts. The comments/views so received are summarised in succeeding paragraphs:—

~~POLITICAL PARTIES IN PARLIAMENT~~

~~1.28 In response to the requests sent to political parties/groups in Parliament for sending their comments in the subject matter, the following views were received by the JPC:—~~

Indian National Congress 1,29 The expression "office of profit" has not been defined in the Constitution or in any other Act not because it was impossible to define it but because it was not easy to frame an all embracing definition covering all the different kinds of offices which existed under the Government and those which might be created under it in the times to come. Under the existing Legal framework, the only way to exempt the holder of an office which conferred executive, judicial or Legislative powers or which entitled the holder to draw any allowances other than compensatory allowance was to exempt such office by making a specific Legislative provision to that effect. Accordingly, a comprehensive Legislation, namely, the Parliament (Prevention of Disqualification) Act, 1959 was enacted repealing the previous statutes on the subject. The Parliament (Prevention of Disqualification) Act, 1959 has been amended from time to time and the Latest amendment to this Act has been carried out vide the Parliament (Prevention of Disqualification Amendment) Act, 2006 which received the assent of the President on 18 August, 2006.

~~Shiv Sena Parliamentary Party~~

1.30 The following broad norms might be taken into account in formulating the recommendations of the Committee:— 0) the Law relating to office of profit should conform to the provisions of Articles 102 and 103 of the Constitution and the decisions of the Supreme Court in relation to these provisions. 15 to-

(ii) there should be a clear distinction between an office which was sue generls and identifiable with the privileges of the Members of the Parliament as distinct from an office which carried with it the broad contours of executive and financial powers capable of dispensing patronage. The law providing for exemption of members in relation to an office of profit should not become an alibi for extending patronage to Members of Parliament. This would negate the spirit of Articles 102 and 103 of the Constitution. (iv) The law on office of profit should be capable of being adopted by the States on uniform basis.

~~Lok Janshakti Party~~

1.31 The term 'office of profit' should be defined and the definition should not be exhaustive but inclusive since in view of rapid development in various sectors of the economy, it was not possible to predict participation of the Government in any entity in a particular sector of the economy. An inclusive definition was also necessary because there was no consensus among the various States on the definition of office of profit and therefore every State Government according to its sweet-wilt exempted certain offices from the operation of Art. 102 r/w Art.103 to take political mileage. Certain and definite definition of 'office of profit' would also be in the larger interest of the nation and public at large as it would end chaos and enable every citizen as well as MP to know the law before hand. The following suggestions have been submitted for consideration of the JPC:—

1. The parliamentarian holding any 'office of profit' but only benefiting to the extent of adjustment of expenses incurred, should be exempted from operation of Art. 102 and 103 or other disqualification on account of holding 'office of profit'. 2. The parliamentarian holding any 'office of profit' should have right to vote and to exercise other administrative/managerial powers or authority as might be invested under the rules of the said office. 3, The parliamentarian should be allowed to hold 'one', 'office of profit' and should be exempted from the operation of Art. 102 r/w Art. 103. 4. Any office in which there was no remuneration, should not be included in the definition of office of profit.

~~The proposed definition of "office of profit" was as follows:—~~

a. any office under the State or the Union Government in which any remuneration was paid and the person should not hold more than one any such office. b. Any office under the State or the Union Government which gave the voting power to the member of such office. c. Any office under the State or the Union Government which gave the power or authority to make or approve rules for the management, or which gave control over the financial matters.

16 Explanation: Any 'office' in which the 'holder' did not draw any pecuniary or other monetary benefits or allowances, and the person was only reimbursed of his expenses should not be included in the definition of the 'Office of Profit'. Muslim League Kerala State Committee 1.32 It has been stated that the following tests have to be done to determine whether a person is holding an Office of Profit.

1. The power of the Government to appoint a person in office or to revoke his appointment at its discretion was one of the major factors. But, here again a mere control over the appointment would not be sufficient.

~~2. The payment of salary to a person holding a particular post was being given out of Government's exchequer was an important factor as well as pecuniary benefit to the holder of Office.~~

3. The nature and degree of control the Government had over the post for its financial needs and the functional aspect, namely whether the body was discharging any important governmental function or just some function which was merely advisory in character was another factor to be considered.

4. One more test had to be applied to see whether the post was an Office of Profit or not. The test was to see how much the person holding the Office was dependent on the Government or the influence the Government would have on him. In other words, hoLding an Office would curb his independence to function and to speak without fear or favour as Member of Parliament. If a person hoLding a post which was advisory in nature and without any executive authority on the functioning of the office he held, shouLd definitely be exempted from the purview of Office of Profit. But any payment of honorarium or even making use of other perks except TA/DA for attending the meeting of the Body/Authority of which he was a Member or Chairman shouLd be avoided.

~~5. Removal or disquatification from holding the position should specifically be mentioned at the State as well as Central level.~~

General public 1.33 Some of the important views received from the general public in response to a press communiqué are as follows:- 1.34 shri Rustam S. Gae, Senior Advocate and former Law Secretary to Government of India appeared before the JPC to tender his views and stated that so long as the exemptive power under Article 102 (I) (a) was exercised reasonably and with due restraint and in a manner which did not drain out the Article of its real content or disregard any constitutional guarantee or mandate, the court would not interfere. (8haywandas IC Haryana A/R 1974 SC 2355). In the absence of any principle to be applied for creating under it exceptions to disqualification specified in Article 102, the explanation would serve as an aid to the construction of Clause (a) in general and declaring by law of office of profit not to disqualify holders from disqualification in particuLar. It would, therefore, be useful to follow the example provided by the explanations while enacting the law under Article 102(1) (a) exempting offices from disqualification. Provisions set out in the 17 explanation or provisions akin thereto would serve as a guide in determining the nature of the law to be enacted under Article.

~~1.35 Similarly, in response to press communiqué one Shri Sftaram Aggrawat suggested the following definition:—~~

the term "office of prfit' means and includes holding any position by a Member of Parliament or his/her spouse in Government or its associate bodies or institutions and entitled to there for anything by way of remuneration, whether actually obtained or not. The remuneration may be by way of salary, fee, commission, perquisites the right to occupy free of rent any premises as a place of residence, or otherwise, and it includes all benefits or advantages having a money value derived from the Government.

Explanation: Government means and includes Central Government, State Government, seinhgovernment, public sector undertaking, bodies and institutions established, aided or supported directly or indirectly by Government including through MPLAD fund etc.

1.36 He had further stated that anything connected with or related to Constitution, whether any clarification of a word, term, etc. or amendment to existing content including definition of "office of profit" in the Constitution could be and should be only by adopting procedure of law for amendment to Constitution under its Article 368.

1.37 Further any office of profit held by any MP, MLA or MLC in contravention of Constitution of India was ad initio and no Law passed by Parliament or Legislature by simple majority could revalidate the void action or holding of profit by an MP, MLA or MLC retrospectively. Moreover, any declaration of exclusion of office not covered by office of profit would be applicable only prospectively i.e. only after declaration as such through Constitution of India.

1.38 Submitting his views to the JPC, Shri Ashoke Kr. Singh' had observed that while defining 'office of profit' under Government under Art. 102(1) our Constitution mandated the State to take multiform public welfare and socio-economic activities involving technical persons.

1.39 Likewise, suggesting definition one Shri Bhanwar bat Sharma had stated that the term office of profit could be defined in a fair and transparent way in the following manner, which could be made a ppLicable to Members of Parfiament/MLAs of all States/UTs:—

Office of profit "the office wherein the MP/MLA received additional salary/allowances/ honorarium from the Union funds in the Union/State/Union Territories even getting salary/ allowances and other facilities from the Union funds which was against the provisions of Article 102(2)."

~~MINISTRY OF LAW AND JUSTICE (LEGISLATIVE DEPARTMENT) GOVERNMENT OF INDIA~~

1.40 The Ministry of Law and Justice were of the view that any comprehensive definition of the term "office of profit" which cast the net so wide that all our citizens with specialities and know-how offering some voluntary services in para-official, statutory or Like projects run or directed by the Government or controlled by the State were inhibited from entering elected organs of public administration might be detrimental to the democracy itself. Equally, it was to be seen that Members of Parliament who were willing to offer their services in pare-official, statutory body or non-statutory bodies run or directed by the Government should not receive

~~18 •-•941-~~

remuneration apart from the salary as Member of Parliament and reimbursement of reasonable expenses. Thus, it seemed difficult to provide a comprehensive statutory definition of the term "office of profit". However, the Ministry had attempted a tentative definition for consideration by the JPC which was as follows:—

~~On Article 102 of the Constitution, in clause (I) for the Explanation, the following Explanations shall be substituted, namely:— Explanation 1. For the purpose of this clause—~~

(0 "Office of profit" means— Any office— (1) under the control of the Government of India, or the Government of o State, as the case may be, whether the salary or remuneration for such office is paid out of the public revenue of the Government of India or of the Government of State; or Mt under a body, which is wholly or partially owned by the Government of Indio or the Government of any State and the salary or remuneration is paid by such body; and (A) the holder of office under sub-clause /0 is capable of exercising legislative, judicial or quasitudkial power; (B) the holder of office under sub-clause rio is capable of exercising powers by means of disbursement of funds, allotment of lands, issuing of licenses and permits or making of public appointments or granting of such other favours of substantial nature. MI A person shall not be deemed to hold on office of profit under the Government of India or the Government of any State by reason only that he is a Minister either for the Union or for such a State." Explanation IG For the purposes of this clause the expression— (a) "office"means the permanent substantive position which exists independently of the holder of the office; (b) "remuneration" means any pecuniary gain commensurate with the status and responsibilities attached to the office; (r) "salary" means safety or pay scale attached to the office whether or not the holder of such an office draws such salary. After Clause (1), the following clause shall be inserted, namely:— 71A) Notwithstanding anything contained in sob-clause (al of douse MI if a member of either House of Parliament has become subject to any disqualification mentioned in that sub clause he shall not be so disqualified unless he has not resigned from such office which is the subject to disqualff Motion." 1.41 On being asked whether the proposed definition would be applicable to States also, the Legislative Department in their O.M. (dt. 06.06.08) stated that the tentative definition was proposed to be inserted under article 102 of the Constitution which was applicable in the cases of Members of Parliament only

19 1.42 when it was pointed out that according to a Legg expert, any definition of 'office of profit' could be introduced only by an amendment to Article 366 of the Constitution which defined the phrases and words used in various provisions of the Constitution, Ministry of Law and Justice (Legislative Department) (2M. dt. 21.4.08) stated that once the question of bringing in the definition of the term "office of profit" was decided, the question of placement of the same in Article 366 of the Constitution might be settled by them.

STATE GOVERNMENTS 1.43 Besides inviting their considered views in the matter, the draft definition of the Ministry of Law and Justice (Legislative Department) Government of India was circulated to all the State Governments/Union Territories to elicit their comments whether the 'definition' defined the expression of "office of profit" comprehensively in the context of the underlying constitutional provisions. The views expressed by the State Governments/UTS, were as follows:—

1.44 The State Government of Karnataka were of the view that on the Lines of principles laid down in different judgments, a compartmentalized definition of the term, was difficult to arrive at. It had further been stated that Parliament might lay down some comprehensive guidelines to determine the office of profit and rest had to be left to the courts to decide depending on fact of the each case and the merit therein. On the issue of liberal interpretation of concept of office of profit, the State Government was of the opinion that "Liberalized view of incLuding a large number of offices in the "Schedules" for being exempted by declaring such office from disqualification:— (p would defeat the purpose of constitutional provision in Articles 102(1) and 191(1), which stipulated its intention that representatives of the people must associate only with the developmental activities and other activities, which had a direct connection with the welfare of the people. The exemption would empower the member to restrict his function to executive, financial or some times judicial function.

(ii) members appeared incompatible due to physical impossibility of attending in two places due to heavy duties attached to the office. (iii) proper scrutiny of implementation of Government's projects might be affected and the intended object of the project would be an utter faiLure.

~~Therefore, Parliament could lay down general generic or comprehensive guidelines and rest be Left to the State Legislatures to take care about."~~

1.45 The JPC visited Kolkata to hold discussion with the representatives of State Government of West Bengal to elicit their views. According to the State Government of West Bengal, the Governments should continue to be guided by the provision of Article 102 (1) (a) for Members of Parliament and Article 191 (1) (a) relating to Members of the State Legislatures. Only offices specially exempted by the Parliament or by the State Legislature by law should not disqualify the holder of the office. As regards the provision of disqualification for membership, the State Government observed that the existing constitutional provisions did not disqualify Members of Parliament or State Legislature from holding offices under any local or other authority, which incLuded the State Planning Board, District and Metropolitan Planning Committees, ZiLa Parishads, Panchayat Samitis, Municipalities, Notified Area Authorities, Development Authorities etc.

20 1.46 As regards the definition of office of profit the State Government of West Bengal stated that any attempt to define 'office of profit' comprehensively would be extremely difficult ces, which might be created in future. It because there was every chance of Leaving aside offi was their view that the present constitutional position of separately exempting offices from disqualification by law, as provided in Articles 102(1) and 191(1) of the Constitution might continue. On the issue of authority to decide on the disqualification, the State Government opined that while the Governor took decision, the opinion of the Election Commission should not be decisive. They had also submitted that amendment of Articles 103 (2) and 192 (2) should be considered so that the Constitutional Head of the Union or the State Government might take a final reasoned view in consideration of all appropriate legal advice including the opinion of the Election Commission. 1.47 According to the State Government of Tamil Nadu it was for the Courts to explain the significance and meaning of the term 'office of profit' thus the final interpretation rested with the courts and not with the Parliament. It had also been stated that to define the expression 'office of profit', the Constitution had to be amended suitably. As the said term was not specific, it appeared that the framers of the Constitution had not defined the said expression. Further, to prevent disqualification of members from the Board or any other authority for being member of Parliament or Member of Legislative Assembly, a specific provision had to be made in the Legislation itself declaring that the holding of such office should not disqualify its holder for being chosen as and for being a member of either House of Parliament or member of Legislative Assembly, as the case might be. Whether a person held office of profit had to be determined based on the facts and circumstances of each case and considering the relevant statutory provisions. 1.48 Outing their visit to Patna the Committee held discussions with the representatives of the State Government of Bihar. The Government of Bihar were of the view that the subject matter under discussion did not need any debate if federal character of our governance was at all intended to be preserved. The basic structure of the Constitution had to be preserved by giving the States to formulate their own views in consonance with their concept of unity within federal fabric. 1.49 On the question of feasibility of Definition of 'Office of Profit', a representative of the State Government of Bihar stated that it needed no further elucidation. It must be left at the hands of the popular will of the State else every time it would be kept alive for being handled by the party/parties in power at the Centre. According to them the popular will have no other substitute and could not even be replaced by the judicial pronouncements in the present context. So, it would not be appropriate to exhaustively define "office of profit". At best definition might be illustrative only 1.50 Similarly while expressing their views, a representative of the State Government of Punjab during discussion with the Committee stated that "Office of Profit" had not been defined under the Constitution. Hence it should be left open to the concerned Legislature to took into it and to take a decision whether a particular post or office held by the member of the Legislative Assembly/Legislative Council should be termed as an office of profit or not. In their view the scheme of the Constitution was in consonance with this spirit as the position with regard to a particular post/office depended upon the peculiar situation and circumstances prevailing in that particular State and could also differ from time to time. According to them while drafting the Constitution, it might not have been found necessary to specify and define the office of profit

~~21 -44t-~~

and was left open for the concerned Legislature to delve into the situation then prevalent and took a decision thereon in accordance with the constitutional provisions. In the case of State Legislature this power had been specifically provided under Article 191(1) of the Constitution. Therefore, providing for a definition in relation to the office of profit would not be advisable.

1.51 Emphasizing further, a representative of the State Government of Punjab stated that a definition of "Office of Profit" was rot feasible as each State had its own peculiar circumstances. By giving a definition to the expression""Office of Profit" would curtail the freedom which had to be exercised by the Legislature. By providing for a definition all decisions taken by the Legislature in exercise of its constitutional powers would be open to challenge before the Courts, leading to more confusion and uncertainty rather than settling the issue. They again emphasized that there could be some suggestive guidelines to declare an office/post to be an "Office of Profit". But no definition should be given which would bind or curtail the powers/discretion of the Legislature, as there were different circumstances and situations in different States, upon which only the Legislature of that State would be in a position to take a decision thereon. 1.52 In a written ref*, the State Government of Himachal Pradesh furnished the following definition of 'office of profit'

~~Office of profit means an office:—~~

fl (a) which carries with it certain emoluments or the order of appointment and state that the person appcinted is entitled to certain emoluments even if the holder chooses not to receive/draw such emoluments; and (b) which is capable of yielding a profit or pecuniary gain and not whether the person actually obtained a monetary gain

Explanation: For removal of doubts it is clarified that if "pecuniary gain is receivable" in connection with the office, then it becomes an office of profit, irrespective of whether such pecuniary gain is actually received or not.

(ii) the payment of honorarium, in addition to daily allowances in the nature of compensatory allowances, rent free accommodation and Chauffeur driven car at State expense, are clearly in the nature of remuneration and a source of pecuniary gain and hence constitute an office of profit. In other words if the office carries with it, or entitles the holder to, any pecuniary gain other than the office will be an office of profit for the purpose of Article 102 (1) (a) and Article 191 (1) (a) of the Constitution.

1.53 On being pointed out that the definition attempted by the Government of Himachal Pradesh evidently took into account only one of the aspects viz. pecuniary gain and did not address the other criteria involved, a representative of the State Government of Himachal Pradesh during discussions with the JPC at Shimla stated that in such case the definition of expression office of profit circulated to them by JPC was comprehensive in the context of underlying constitutional principles. However, the State of Himachal Pradesh had some reservation on the draft clause OAT proposed to be inserted after existing clause (I) of Article 102 of the Constitution. According to them the manner in which the proposed clause had been drafted, it

~~22 -4~~

had the effect of giving unrestricted discretion to the Legislators to continue in office notwithstanding occurrence of disqualification if he did not resign. In the opinion of the State Government on the face of express provisions of Articles 103 and 192 of the Constitution of India the was no need to insert the proposed clause (1 A).

1.54 They further added that the expression office of profit under the Government in Article 102 (1) and 191 (1) of the Constitution was wider than the expression post or service under the Government because while the relationship of master and servant was essential for the application of Article 309 to 314, there was no need for any such relationship for attracting Article 102 (1) (a) or Article 191 (I) (a). According to them the object of these Articles was to maintain the independence of Members of Legislature from any sort or Government control or influence. Therefore, when Government had a say in the matter of appointment or removal of a person, he should not be allowed to sit in the Legislature, even though by such appointment, the relationship of master and servant was not constituted between such person and the Government. Thus while defining the expression the "office of profit" under the Government this factor had been kept in view in order to prevent disqualification. The expression offices of profit was a technical expression and took in its fold different categories, all of which would not be possible to exhaust by Legislation. Thus keeping in view the existing provisions of the Constitution and the interpretation given by the Apex Court from time to time on expression office of profit under the Government, a welbconsidered Legislation was required in order to avoid unhealthy situations.

1.55 The JPC during their study visit to Chandigarh held informal discussions with the representatives of State Government of Haryana. The representatives of State Government of Haryana were of the view that the exercise of such legislative powers of exemption of offices should be left entirely to the wisdom of respective Legislatures. If any deviation in law was made in this regard then it was Likely to impair the legislative competence of the Legislature and was bound to curtail the legislative powers of the States, which was against the principle of federation as envisaged in the Constitution. Therefore, it should be left to the wisdom of the Legislature to exempt any office of profit for the said purpose. It had further been stated that framers of the Constitution envisaged that there might be certain offices under the Government to which appointment might be made of persons having special qualifications or experience in certain fields and whose service as a member of Parliament and State legislature might also be of value in public interest. Therefore, in the Constitution plenary powers bad been given to Parliament and State Legislature as the case might be, to exempt such offices from the purview of the dis-qualificatory provisions relating to their Houses under Articles 102(1)(a) and 191(1 )(a).

1.56 They were further of the view that in case it was considered necessary to define the office of profit then it should be defined in the light of the judgments delivered by the Horible Supreme Court. It should be added therein that an office of profit was an office, which was capable of yielding a profit or pecuniary gain including honorarium. Therefore, holding an office under the Government would be one to which some pay, salary, emoluments, remuneration or non-compensatory allowance was attached.

1.57 A representative of the State Government of Gujarat appeared before the JPC to tender views on the subject under consideration of the JPC and stated that it was not possible to make an exhaustive definition of the term "office of profit" which could be made applicable to each of the states and Union Territories and it seemed that it was not necessary too because it would be proper for each of the State and Union Territory to consider which office amounts to 23 -Yap--

"office of Profit" separately. According to them whether a particular post was office of profit within the meaning of Articles 102 and 191 of the Constitution of India, could be decided on case- to-case basis considering the nature of the post and the guidelines and criteria laid down by the Supreme Court of India as it was ultimately the court to determine the application of those tests to a particular situation, nor was there any scope to bar the jurisdiction of the Court.

1.58 Considering the vastness and diverse needs of the States, in their written reply submitted to the JPC, the State Government of Madhya Pradesh had also stated that being a federal democratic country it shorld be left to the States to frame their own Laws relating to office of profit. According to them one central law relating to prevention of disqualification of Members of States legislature might not be able to address the requirements of all the States. During evidence before the JPC, a representative of the State Government reiterated that it might not be feasible to draw up a comprehensive enough definition to cover all the situations prevalent in all the States of the Union. 1.59 According to Government of Rajasthan the term office of profit' had been used in various Articles of Constitution like Articles 58, 64, 102, 191 etc. and was germane to determine the eligibility of holder of various constitutional offices and, therefore, the term should have a reasonably clear and exhaustive criteria so as to enable one to determine as to which office was or was not an office of profit. A prior determination of the meaning of term would definitely remove the uncertainty. Therefore, the State Government of Rajasthan was in favour of developing a generic definition that might serve an ultimate guide in determining as to whether an office was or was not an office of profit. 1.60 Simultaneously, the State Government of Rajasthan was also of the view that in democratic nations the question as to what should be the law (including the value judgment) had to be decided by the representative of the people and what was the law was to be decided by the Court. Therefore, what factors would bring an office within the purview of 'office of profit' might be and should be decided by the representatives of people and the decision as to whether the given factors existed in a particular office should be left to the courts. The State Government had neither attempted any definition nor commented upon the draft definition that was presented to them except for suggesting incorporation of several posts/offices in the Part.11 of the exemption which should not be deemed to hold office of profit under the Government.

1.61 On the question of amending the Constitution and making it obligatory for the State Legislatures to be guided by such principles as Parliament may by Law provide in regard to the matter, a representative of the State Government of Rajasthan stated that constitutional amendment should be directed to achieve two objectives. First amendment should define the term 'office of profit' and secondly it should lay down the principles, which might be followed by the States white exempting office of profit under Article 191. These principles might comprise the general elements of the offices holding of which would derogate the position or efficiency of a member as representative of people. 1.62 Similarly, the State Government of Kerala was of the view that some workable definition should be evolved avoiding much scope for judicial intervention, at the same time Leaving to the concerned legislatures to decide the disqualifications through enactments.

~~1.63 On the other hand the State Governments of Goa and Assam were of the view that there was no necessity to define the term "office of profit" under Articles 102(1)(a) and 191(1)(a) of~~

~~24 -'131-~~

the Constitution of India as the said term had been defined by the Hon'hbe Supreme Court in its various judgments on the subject delivered from time to time and the same was binding by virtue of Article 141 of the Constitution of India.

1.64 According to Government of Arunachal Pradesh membership of Legislature in certain bodies, committees and offices pertaining to developmental. activities for the weLfare of the people was essential.. However, such Bodies, committees and offices should be of advisory character and membership thereof shouLd not carry any remuneration except the actual expenditure, which might have to be incurred in discharging their duties. The Members of Legislature being peoples representatives shouLd have their basic right to guide in the field of various development activities for the weLfare of the people for which their membership in various committees, bodies, were felt essential. Accordingly, a definition of the 'office of profit' as weft as comprehensive criteria was required to be evolved for their application to all States and UTs.

145 Towards this end, the Government of Arunachal Pradesh had found the definition of office of Profit, which was circulated to them, to be comprehensive, just and fair for uniform application to all States and UTs.

1.66 The State Government of Manipur had stated that in their State different ethnic mix of population and different tribes had their political aspirations and each tribe expected their leaders to represent them in Government. Therefore, the State Government of Manipur would Like to have its own definition under its own Act and would continue thereunder.

147 In the view of the State Government of Sikkim the issue of office of profit shouLd be governed as per the Laws that would be framed or were being framed by different State Governments and Union Parliament from time to time based on their requirement. It had further been stated that office of profit shouLd be Legally supported on the matter of specific law made by them. It had also been stated that each State should evolve its own legal basis without being governed by any uniform law although on principle there might be uniformity.

1.68 On defining the term 'office of profit' the State Government of Tripura were of the view that a comprehensive definition of "office of profit" be included in the Constitution and the authority of the State LegisLature to make laws relating to the members of State Legislature shouLd remain. The proposal for amending the Constitution to bring about a comprehensive definition of office of profit for uniform application to all States was most needed. However the State Government of Tripura were of the considered view that the power of the State Legislature to make laws in respect of the members of State Legislature under Article 191 of the Constitution should remain with the States to enable them to meet the peculiar requirements of their States.

1.69 Agreeing with the draft definition sent to them, the Government of Tripura had stated that it defined the expression of 'office of profit' comprehensively in the context of the underlying constitutional princi pLes.

1.70 While replying to queries made by the JPC State Government of Meghalaya provided a definition stating that "Office of profit means any office where pecuniary benefits or remunerations whether in the form of salary or honorarium whatever might be called, was paid for holding such office/post but will not include any office/post which was declared not to disqualify the holder of such office/post bylaw made by Parliament or the Legislature of the State/Union Territories."

25 1.71 The State Government of Mizoram had endorsed the draft definition sent to them by JPC and had further advised that the expression Wz."a Minister either for the Union or for such a State" occurring in clause (II) of the Explanation-I may be replaced by the expression Wz. "a Minister either for the Union under article 75 or for such a State under article 164 of the Constitution, so that those who had been assigned the rank or status of Minister may be kept outside."

1.72 Contrary to the views expressed by State Government of Mizoram, the State Government of Nagaland had stated that suggested definition did not define the 'Office of Profit' comprehensively_ According to them, the definition of 'Office of Profit' in the proposed Article was same as the definition of 'remunerative political post' provided in Article 3611 In their view there was no need to define both remuneration and salary in Explanation II. The proposed sub-cLause (IA) in the proposed Article would defeat the constitutional purpose of punishing holders of Office of Profit. Accordingly, the State Government of Nagaland had suggested that Articles 102(1) and 191(1) might be rewarded as follows:—

~~"102 Disqualifications for membership.—(1) A person shall be disqualified for being a member of either House of Parliament,—~~

~~(a) if be holds any remunerative political post;~~

~~Explanation: (1) "remunerative political post' shall have the same meaning assigned to it in Article 36113.~~

~~(2) For the purposes of this clause a person shall not be deemed to hold a remunerative political post by reason only that,—~~

(I) he is a Minister or a Parliamentary Secretary either for the Union or for such State; (ii) as a Minister or a Parliamentary Secretary, he holds any other remunerative political post in ex officio capacity; and (ill) be holds any office in the affairs of either House of Parliament.

Provided that no remunerative political post shall be deemed as such within the meaning assigned to it under Article 3618, if the salary or remuneration, as compensatory in nature, payable in respect of that remunerative political post or posts together, exceeds ten per cent of the total emoluments paid to a person as a Minister or a Parliamentary Secretary or a member per month, as the case may be."

~~1.73 As regards the coinage of the Constitutional term "remunerative political post" and "office of Profit", the State Government of Nagaland in a written reply sent to the JPC stated as under :—~~

"the Government of Nagaland infers that the Union Government while drafting the Constitutional law, sought to deliberately avoid the using of the term "office of profit" in article 361 8 for the reason that when the explanations to Articles 102(1) and 191(1) exempt offices of "Ministers" from being as offices of profit, it would be contradictory to include them while framing article 3618. The Union Ministry might have been in search of a different terminology which includes the office of "Minister" as a prohibited post.

~~26 --ta~~

~~1.74 That being the inference, the Government of Nagaland feels that but for the following three substantial differences, both the terms are substitutable :~~

~~(1) "office of profit' excludes "Ministers" while "Remunerative Political Post" includes "Ministers";~~

(2) Articles 102(1)(a) and 191(I)(a) provides powers to Union and State Legislatures to exempt certain offices from being deemed as offices of profit, while article 3618 does not provide such power; and

(3) Articles 102(1)(a) and 191(1 )(a) apply to both sitting members and contesting candidates while article 3618 applies only to members of Legislatures disqualified under the Tenth Schedule. Almost all the tests laid down by courts to identify an office of profit have already been laid down in article 3618 for identification of a remunerative political post. Indeed, a partial definition (of office of profit) is available in article 3618. Government of Nagaland continues to believe that the term "remunerative political post" is not far different from the term "office of profit". It also believes that the term is quite avoidable and the contents of article 361 B should appropriately be incorporated into the Tenth Schedule of the Constitution itself (without using the words "remunerative political post") The Committee were further informed that there was no office in the executive realm that did not involve exercise of power or influence and, therefore, only "pecuniary benefits" were the only true tests to identify an office as office of profit. Profit is thus quantifiable by remuneration and as given in the model article of the Government of Nagaland, profit should be Limited to 10% of the remuneration of the Minister or a Member, as the case may be The other subjective tests whether the office involved any exercise of power or influence should not be gone through and all office holders (including member of Legislatures) in the Government must be subjected to specific accountability tests." 1.75 Notwithstanding above the State Government of Nagaland were of the view that as anti-defection Law was in place which strictly organized the House on party Lines and thereby the Government, any presumption that the office of profit would all as a lure for members to cross floor was simply anachronistic. Might be before the advent of the anti-defection law, the presumption would have matured into a fact. The idea of office of profit itself bad thus become outdated warranting removal from the Constitution. 1.76 Similarly, in a written reply the State Government of Uttarakhand were of the opinion that a comprehensive definition of 'office of profit' should be introduced. However, in the proposed amendment in Explanation II "After Clause (1), the following Clause subject to the disqualification" should not be inserted otherwise the very purpose of clause (a) of Articles 102(1) and 191(1) would be defeated. 1.77 In the view of the State Government of Uttar Pradesh it might not be feasible to have a workable definition of the "office of profit" because of various factors involved in it. The tests enunciated by the Horrible Supreme Court might be applied in different situations and an opinion might be formed accordingly. The tests for determining whether an office was an "office of profit" or not might be different in different situations and therefore, a blanket definition might not be workable or exhaustive. Instead of having a blanket definition, it would be better to evolve general principles and tests in this regard. 27 1.78 Giving suggestion on the draft definition, they were of the view that the draft definition of the expression of "office of profit" appeared to be relevant and comprehensive but it could not be said to be exhaustive. There might be occasions when the draft definition might not cover the situation. Hence along with such a definition scope might be left to further examine the expression of "office of profit", if a need so arose.

1.79 The Government of Uttar Pradesh were further of the view that the doubts should be cleared conclusively about the expression of "office of profit" so that the representatives of public did not have to face uncertainty about it.

1.80 The JPC visited Mumbai to hold informal discussion with the representatives of State Government of Maharashtra. The views of the State Government have also been considered elsewhere in the report.

1.81 According to State Government of Chhattisgarh "office of profit" means an office held, under Government of India or Government of any State, by a person in any committee or statutory body constituted or framed under any law, or by resolution, notification or direction of the Government of India or State Government and for which salary or remuneration was Payable in lieu of discharging the duty, and included a body subordinate to State Government having effective control over the body for its functioning. But it should not include the post held ex-officio or any temperer, office established or constituted for enquiry or examination not of permanent character.

"Explanation : Remuneration or salary does not include the traveling facility like providing vehicle with driver and allowance, infrastructure facility for office like furniture, computer, stationery, Staff, electricity, telephone or others and fixed honorarium compensatory in nature."

1.82 While expressing their views, the State Government of Orissa in a written reply had stated "it is necessary to define the expression 'office of profit' in unambiguous terms. The definition should first spell out the meaning of the word 'office' and then proceed to explain the expression 'office of profit'." They were of the view that doubts were sometimes expressed whether a Minister holding certain positions in an ex -officio capacity outside the Government Departments could be disqualified on the grounds of holding an office of profit. The new definition should clearly state that all positions held by a Minister in his ex-officio capacity with or without remuneration should be excluded from the purview of the office of profit since by virtue of being a Minister he was already holding an office of profit under the scheme of things of the parliamentary system of democracy.

1,83 As far as MLAs/MPs other than the Ministers were concerned, the law should clearly state whether they could be appointed as Heads or Members of Statutory Bodies with or without remuneration. It should also clarify whether reimbursement of expenditure incurred by MLA/MP for attending meetings and duties of bodies where they were nominated, as Members would amount to holding office of profit. If reimbursement of such expenditure was not to be treated as holding an office of profit, reasonableness of the extent to which such reimbursement was to be permitted might also clearly be defined. Any legislation should not only address the issue in letter but also in spirit.

~~28 cia~~

1.84 A statement showing the synopsis of comments of the State Governments in the context of settled interpretation of the expression "office of profit" in Article 102 of the Constitution and the underlying constitutional principles therein, and suggesting a comprehensive definition of "office of profit" (first term of reference) is enclosed at Annexure V.

Institutions 1.85 During their study visit to Kodata, the JPC also held informal discussions with the representatives of Council for Political Studies, KoLkata. In regard to definition of the term of office of profit, a representative of the Council suggested that by way of constitutional amendment, a new paragraph with the following Lines be added to the explanation following Article 102 (1) and Article 191 (1): "An office, that is, a substantive position independent of its incumbent, under the Union or State Government or any public body under the authority of any of these Governments, carrying any emolument, honorarium or allowance shall be deemed to be an office of profit. However, compensatory allowances attached to such office for meeting the expenses actually incurred for travel, board, lodging and conveyance shall not make it an office of profit."

1.86 They further stated that "the context of other Articles in which the term 'office of profit had been used was completely different from one another So a general definition was not desirable. According to the Council the suggested change might be restricted only to Article 102 (1) and Article 191 (1)."

1.87 Further, there were a large number of offices in the Union and State Governments, which did not find a mention either in the Schedule or Table annexed to the Parliament (Prevention of Disqualification) Act, 1959. Uncertainty would also prevail about the offices that might be enacted in future.

1.88 During their study visit to Bangalore, the JPC, besides holding discussions with the representatives of State Government of Karnataka, held discussion with the representatives of National Law School, Bangalore to elicit their views on matters under reference of the JPC. While deliberating with the Committee, a representative of the University stated that the aspects VIZ. compulsion of coalition Governments both at the Centre as well as in the States, various Local factors/conditions which vary from State to State and private interest of Legislators should be taken into account while evolving definition/generic criteria on office of profit.

1.89 Explaining various issues of offices of profit, a representative of the University, stated that the office of profit disqualification sought to maintain two constitutional principles: (i) the separation of power between the legislature and the executive and the prevention of the possibility of a conflict between duty and interest for an individual who had to perform the rote of the legislator and a member of the executive. The explanation to Articles 102 and 191 created an exception to the blanket application of the separation of powers principle by allowing for Ifinistenal offices to be exempted from the office of profit disqualification to accommodate the Westminster Parliamentary model of Government. Therefore, they had stated that no further definition was necessary and the Parliament might by law include only such offices which were ministerial in character but not in nomenclature. While such an approach did not eliminate ambiguity entirely, when combined with an institutional mechanism that applied these principles in a definitive fashion, a greater degree of clarity could be achieved in this area of law.

~~29 SI-~~

1.90 They had further stated, "the essential feature of an office is that it must exist independent of its holder. However, even if there be no such independent existence, the court may still use a purposive interpretation and hold that on specific facts of the case, the candidate in substance held an 'office of profit',"

1.91 Further submitting their suggestion in regard to definition of office of profit given by the Ministry, a representative of the University stated that definition attempted to crystallize the regal decisions on that issue by putting together criteria to help legislators, the designated authority and the courts to determine offices which might lead to disqualification. Those criteria identified by the court in specific cases, however, were neither complete nor consistently applied. The courts had persistently held that the cases were to be determined on a case-to-case basis where different weights were attached to these criteria to arrive at a cumulative assessment of whether an office was an office of profit.

1.92 The Law School were further of the view that a more elaborate definition of the office of profit was Likely to result in more disputes and arguments about the meaning or phrases used in the definition. Such an approach of a criteria definition was misconceived and to that extent the proposed definition was unlikely to resolve the problems and concerns raised.

1.93 In regard to application of definition restricted to Articles 102 and 191, a representative of the University stated that a uniform definition for the term 'office of profit' to apply to the entire Constitution by including it in Article 366 would be problematic and hence not desirable. Further making a definition of 'office of profit' evolved in context of Article 19, applicable to Article 18 would be to confuse differing policy objectives. The latter sought primarily to ensure that persons under the Government were immune from foreign influence of any kind. Probtems of over-inclusion and under-inclusion might arise as a result of applying the same definition across the Constitution, regardless of specific context.

1.94 On the issue of opportunity for resignation the School was of the view that the Committee might propose to allow a 2 months moratorium period after the constitution of a new House to those elected members who held office of profit to resign these offices. A recommendation to shift the effective date for the assessment of disqualification under the office of profit category from nomination date to adapt 2 months after the constitution of the House might provide all prospective candidates to contest elections and ensure that no unnecessary disqualification took place.

~~Constitutional and legal experts~~

1.95 On the issue of defining the term "office" or "office of profit"—Shri Fag S. Hagman, Senior Advocate submitted aefore the Committee 'I am of the view that to attempt a definition universally applicable to each and every case as it arises is just not feasible. I do not think that the draft definition suggested in the List of points which may be used by the Joint Parliamentary Committee would cover all possible cases that could conceivably arise in future. I am of the opinion that each case must be left to be judged in the light of relevant provisions of the statute in question establishing or creating the "office" and in the light of its own peculiar facts; always keeping in view the overall object of enacting Article 102(1) (a) and Article 191 (1 )(a) which is that there should not be seen to be any conflict between the duties and interests of an elected member. In other words, these Articles are designed to ensure that Parliament and State Legislatures do not have Members who receive from the Executive largesse or benefits in any form—and who

~~30 -91? -~~

may on that account be perceived as being under its obligation, and thus, become amenable to its influence, whilst discharging important Legislature functions. —.This purposive interpretation of Articles 102 (1)(a) and 191 (1)(a) has received acceptance from the Courts ever since the Constitution was enacted—right up to the Leading case of Shibu Soren Vs. Dayanand Sahaay. Any new approach to these Articles would create unnecessary confusion in settled law.'

~~1.96 For overcoming the imbroglios related to the issues, his views were as follows:—~~

"I would recommend the insertion of a specific provision in the Constitution to the following effect viz. that a person shall not be disqualified for being chosen as, and for being a Member of either of House of Parliament or of a State Legislature, only because that person holds an office under the Government of India or the Government of any State, whether it be an office or office of profit or not, so long as that person does not in fact receive or enjoy any benefit. Whatsoever, monetary or otherwise, in connection with the holding of that office."

1.97 Shri Gartman further opined that- _ "it should also be clarified in a sub-clause inserted in article 103 (and incorresponding provision article 192) that where a peperson holds any office (whether an office of profit or otherwise) under the Government of India or the Government of any State, and a question arises as to whether that person has or has not received, or has or has not enjoyed a benefit (monetary or otherwise) in connection with the holding of that office, the burden of proving that he or she has not received or enjoyed any benefit with reference to that office shalt be on the person who holds that office."

~~The above should be in addition to the existing prevention of disqualification law as enacted and as amended.~~

1.98 According to Shri Madman provisions, as suggested above would enable responsible Members of Parliament and responsible Members of State Legislature to freely perform additional public duties that might be entrusted to them by Central or State Government authorities from time to time without any possible risk arising out of a conflict of interest. In other words, it would enable the Centre and the State (in the course of their ever increasing welfare activities) to avail of the services of public-spirited Members of Parliament (and of State Legislatures), without fear of it being perceived by the public as the exercise of some form of control by the Centre (or the State) over its elected representatives in legislative bodies.

~~1.99 As regards proposed definition, Shri Harish Salve, Senior Advocate had put forth his views to the Committee as follows :~~

'The proposed definition of Office of Profit, I find, would be incompatible with the constitutional philosophy underlying Article 102. That is for two reasons. Sir, we are now getting into very grey areas. It will defeat certainty because it excludes very bodies which are wholly or partly owned and the holder of an office which is capable of exercising legislative, judicial and quasi-judicial powers. Again, what is legislative power and power of Legislative character is a very nebulous concept. Price fixation is legislative in character and framing of policy is also legislative in character. What is quasi-judicial power? Anybody who has the power to hire and fire an employee exercises quasi-judicial power. The principle of fairness today has been extended to such an extent by the Supreme Court that quasi-judicial power is, again, a very

~~31 ---- if S. 8 --~~

~~nebulous concept. If the whole idea is to bring certainty in the law, bringing in these will bring in more uncertainty in the law.~~

Secondly, these kinds of exclusions are uncalled-for. A perception of conflict arises not because of the nature of powers you exercise. The perception of conflict arises because you are earning a profit from the Government; you are earning anincome or gain from the Government, and you are now holding that Government accountable for it. This is the perceived conflict. How does it matter what powers you exercise? I think that, even conceptually, these qualifications are totalize uncalled-for.

As far as the definition of profit is concerned, I do not see any reason for it not applying across the board. I am asking this because the basic philosophy is the same, namely, preventing conflict. if the definition comes in, then it is much better if it governs ail these Articles that are quoted, namely, 18, 58, 59, 64, 66, and 102, and puts all of them on par." 1.100 On the issue of identifying an office of profit one of the suggestions, given by Shri Harish Salve, Senior Advocate, had been to classify the agencies and bodies into the following four categories keeping in view the nature of functions and activities being performed by them:—

~~(i) Directly under the Government; (ii) Statutory authorities or Corporations in which Government have the power either to appoint or remove or both;~~

(iii) Public Sector Lndertakings owned wholly or partly by the Government where the Government have the power to appoint or remove; and (iv) 'Other bodies significantly funded by the Government where the Government have pervasive control.

1.101 He had suggested that a List of 'other bodies' at (iv) above, had to be prepared by a designated committee which would decide as to which post/office could be exempted or debarred for its holder for being chosen as and for being a member of either House of Parliament. For the offices under SI.No. 0) to (iii) above, his suggestion appeared to be that those categories of offices should not be included in the exempted list.

1.102 On incorporation of an enabling provision in the Constitution for an elected Member of Parliament to exercise an option to resign from an office in the event of the office he was holding was determined to be an "office of profit" under the Government without Losing his membership of the House, Shri Salve during evidence before the JPC stated as under :-

"...Once you have a List, of course, the person knows if he is joining a prohibited category. But if he is not in the list and you add something to the List, then you must give him a chance that within 3-4 months he should choose whatever is appropriate and whichever he wants to continue." 1.103 The thrust of his argument in favour of having such a clause was that It made perfect sense to have such provision, as after having done all the hard work in getting elected to Parliament or State LegisLature the members should not find themselves on the wrong side of the law simply on account of holding some office/post which otherwise were perfectly aLright unfit

32 they got elected but subsequently turned out to be office of profit under the intense glare of Legal scrutiny rendering them disqualified from being chosen as or being a member of the legislature. And they could not do anything about it. In this connection the Committee also wondered why only membership had to be sacrificed, especially when they had been elected by the people, and not the office/post which was the root cause of the problem.

1.104 In his submission before the JPC Shri Rajeev Dbavan, Senior Advocate had stated that the power of exemption must follow a rigorous procedure to ensure that it was not misused. Any appointment must be for the public interest, and under conditions of transparency and accountability. He had proposed that :—

~~"(a) the system be operated so that appointment are made only in the public interest;~~

(b) the appointments be approved by the Cabinet; (c) A public statement needed to be made that such an appointment is in the public interest with an explanation (a) giving the reasons for such an appointment; and (b) full disclosure of the perks and emoluments;

(d) The public statement must be simultaneously placed before the House concerned; (e) The appointment be for the terms of that Parliament; and (f) All efforts be made to make the appointments on a voluntary and pro bone basis." 1.105 Shri Dhavan had also introduced a concept whereby a distinction had been made between 'being chosen as' and 'for being' a member of the legislature. According to this view currently, article 102 and 191 envisaged an absolute disqualification, i.e. all offices of profit must be given up before the election. However, this absolute disqualification was too wide and unnecessary. According to him there was a distinction between two fundamental principles as to why the 'office of profit' concept was created. Broadly, these prohibitions applied to legislators (a) to prevent undue influence during elections; and (b) to avoid a 'conflict of interest' after elections. For this reasons, he had proposed that (i) the question of undue influence be dealt with under the applicable electoral law on the basis of which 'office of profit' holders must resign all their posts before filing their nominations for elections; and (ii) avoiding the problems posed by conflict of interest could be resolved by an elected legislator resigning his remaining offices of profit after the elections. On the basis of this distinction there might be:—

(a) offices that must be given up before an election; [such persons (civil servant under Articles 310 and 311 and members of Judiciary), must resign their office before becoming candidate in an election. This was in order toensure that (1) undue advantage in the electoral process was avoided; and (2) conflict of interest was eliminated in so far as process of election was concerned] and; (b) offices (under Article 12 institutions or bodies and legislators or some other legislative body or Panchayat) that must be given up after an election but before taking oath as a member of the legislature. 1.106 For this purpose Articles 102 and 191 would require to be amended to categorize disqualifications into those for being chosen as' and for 'being' a Member of the Legislature.

33 The question of a uniform approach to the States was resolved if amendments were made to corresponding Articles in the 'Constitution', for both the Centre and the States. Statutorily this would mean that Section 9A and 10 of the Representation of People Act, 1951 (which provides an absolute disqualification for persons holding government contracts or an officer of a government company), would have to be repealed. However, the parliamentary scrutiny was necessary which could be achieved in the following two ways:— "0) At the beginning of every Parliament, a fuLL declaration must be made by all MPs/ MLAs. The list of offices held by MPs/MLAs could then be scrutinized by the Joint Parliamentary Committee on the basis of the three criteria mentioned above, after which it could determine whether Parliament should validate those offices. (ii) Thereafter, if the Government made any appointment of a legislator to an office, it must be referred to the Joint Parliamentary Committee. The findings of the Committee, although recommendatory, must be taken into account in the final determination by the Election Commission if a question arose under Article 103."

1.107 The Committee pointed out that the Committee had been mandated to suggest a comprehensive definition of the office of profit in the context of settled interpretation of the expression in Article 102 cf the Constitution. It had to take the constitutional scheme as it was. It was not authorized to interpret how Article 103 should be changed. It could not even make distinctions between pre-election disqualification and post election disqualification because Article 102 was committed to that. The same disqualification applied and that was the settled aspect of the matter. Any deviation on that count had to be to through constitutional amendment only. Shri !Mayan however was of the opinion that on the basis of a reading of part (ii) of the terms of reference, it did not restrict the Committee to merely defining an office of profit within the framework of constitutional provisions as they stood but were wider in scope. 1.108 In a written reply to the JPC, Shri K. K.Venugopal, Senior Advocate had stated that any definition of 'Office of Profit' could be introduced only by an amendment to Article 366 of the Constitution as Article 366 defined the phrases and words used in various provisions of the Constitution. Parliament would not be having free hand to pass a law by giving its own interpretation to any word or phrase. The Courts had already examined and analyzed the phrase 'Office of Profit' and had given its own interpretation. 1.109 If an amendment was brought about to the Constitution defining the phrase 'office of profit' in Article 366, an appropdate definition would be: "'Office of profit' means an office which exists independent of the holder and here the remuneration, compensation and perquisites, by whatever name called, would give to the holder of the office some pecuniary gain other than compensation covering out of pocket expenses such as stay, travel and daily allowances." 1.110 Shri RP. Rao, Senior Advocate, Supreme Court of India in a written reply submitted to the JPC had suggested "there is no need to unsettle the settled law in this area. If Parliament feels that certain offices should be exempted from the operation of provisions of Article 102(1) (a) and Article 191(1 Ha), it is open to Parliament to enact a law for this purpose so long as the principle underlying the disqualification is maintained. However, the validity of such a law would be subject to judicial review on the ground that it is unreasonable and arbitrary or amounts to colorable exercise of power."

~~34 -fr~~

1.111 According to Dr. Mahendra P. Singh, former professor Head & Dean, Faculty of Law, University of Delhi, the best solution of the problem lies in adding a definition/explanation of "office of profit" next to the existing explanation in Articles 102 and 191 on the following lines:

Suggested definition: office of profit is an office which provides any pecuniary gain to its holder other than the meeting out of actual expenses incurred in or utilization of any facilities for the performance of the duties of that office.

~~By way of precaution a further explanation may be added to the following effect:~~

For the purpose of this clause a person holds an office under the Government of India or the Government of any State if such appointment is made by the President of India or the Government of the State as the case may be.

~~1.112 Shri J.S. Verma, Former Chief Justice of India in a written reply had forwarded his views as under:—~~

"ii) The underlying constitutional principle debarring the holder of an 'office of profit', 'under the Government' from being a member of Parliament is to insulate the legislature from executive influence and to prevent any conflict of interest in the member must guide the interpretation of the express 'office of profit'. The evolution of the generic and comprehensive criteria which are just, fair and reasonable for uniform application would then emerge from such a meaning.

Di) In India, a unified judiciary with the Supreme Court at the apex level ensures a uniform standard and meaning of the rule of law throughout the country Hence, there would be no scope for conflicting interpretations of the meaning of 'office of profit' after evolution of a generic and comprehensive criteria emerging from it.

(iii) The difficulty arises because of the ambiguity created by the latter part of sub-clause (a) of clause (1) of Art. 102—'other than an office declared by Parliament by law not to disqualify its holder'. The provision while so empowering the Parliament to create exceptions to the disqualification prescribed in the first part, it does not specify the principle to be applied in creating exceptions to the general rule. That being so, the principle governing the exercise of power by the Parliament has to be deduced on the basis of general rules of interpretation, reading the provision as a whole and bearing in mind the avowed object. Any interpretation, which renders the provision otiose by the second part neutralizing the first part, has to be rejected. An interpretation, which empowers the Parliament to destroy the disqualification relating to a basic feature, has to be rejected. If the amending power of the Parliament under Art. 368 cannot destroy a basic feature of the Constitution; it cannot be so done by a law enacted under Art. 102(1) (a).

(iv) In the case of ambiguity, a construction that results in absurdity or anomaly, or which renders the provision otiose has to be rejected and preference must be given to that construction which avoids that result. This is a settled rule of interpretation of statutes. To a Constitution, which enacts principles for application at all times, this rule has greater application to avoid erosion of a constituent principle. 'Absurdity' in this context is 'something which would be absurd with reference to the other words of the statute as to amount to repugnance'. If two views are possible, one, which

~~35 42-~~

results in an anomaly and the other not, it is the latter view which must be taken. A statute must be read as a whole and one part of it should be construed with reference to the other parts so as to make a consistent enactment of the whole statute. It cannot be assumed that the enactment had 'given with one hand what it took away with the other'. These are settled rules of construction. The law enacted by the Parliament under Art.102(1)(a) must be subject to this inherent limitation. The Explanation to clause (1) of Art.102, which exempts the Ministers from (v) disqualification, is relevant as an aid to construction. An Explanation may also serve as a proviso to carve out an exception from the general (vi) rule in the main enacting provision. This is the purpose served by the Explanation to clause (1) of Art. 102, and it is an integral aid to the construction of the whole sub- clause (a) in Art. 102. It follows, that the second part of sub-clause (a) in Art. 102 empowers the Parliament (vii) to make taw exempting offices of profit under the Government like that only of a Minister, and no others. Every office of profit exempted by the Law will have to satisfy the generic test for its validity. Such a construction atone makes sense of the provision read as a who.e. This is also in accord with the nature of our polity.

1.113 In a written response Shri R.R. Singh retired professor, Delhi University had stated that the erected representatives of the people by upholding constitutional norms, in Letter and spirit, should confine theselves mainly to Legislative functions and continuous interactionw ith citizen m dtizens of Other offices (including Oa) should be Left to thehen charge of on nationaL issues. eminence based on an evolved criterion.

Opinion of Attorney General 1.114 In view of the issues discussed in the foregoing paragraphs, the moot point was whether a comprehensive definition of the term "office of profit" could be given on the basis of constitutional provisions and judicial pronouncements made so far. Opinion of Attorney General was sought by the Ministry of Law Et Justice (Legislative Department) in this regard way back in 1994. 1.115 In his reply (dt. 26.10.94) Attorney General opined against laying down any particular criteria defining office of profit as the judgments of the Courts were enough guidelines to profit or not and a workabLe definition determine whether a particular office was an office ire did not appear to be feasible. The Attorney General iterated (on 04.05.2006) his views on expression of "office of profit" and stated:—

"My opinion was sought on the aforesaid proposal in 1994. I had opined against laying down any particular criteria defining 'office of profit' as the judgments of the court were enough guidelines to determine whether a particular office is an office of profit or not and a workable definition did not appear to be feasible vide my opinion dated 26.10.1994. No statutory explanation was, therefore, added. Though a long time has passed and I have re-looked at the entire matter, I have not been able to persuade myself to change my earlier opinion."

~~36 -- y63-~~

~~B. Second Term of Reference~~

to recommend, in relation to "office of profit', the evolution of generic and comprehensive criteria which are just, fair and reasonable and can be applied to all States and Union Territories. (Since the issues of uniform principles/common criteria and evolving a definition on 'office of profit' are interwind and are not mutually exclusive, it is felt that the discussions made under heading A on first term of reference of the JPC should be read with discussions made hereunder to have a better understanding and appreciation of the subject.]

2.1 A large number of Boards, Committees and authorities are set up for carrying out or supervising the myriads of activities undertaken by the Government. It is a principle accepted by all democratic governments that the representatives of the people should be increasingly associated with such activities, which have a bearing on the welfare of the people. The participation of the representatives of the people in the developmental activities makes them more focused and result oriented. Legislatures, therefore, while creating statutory bodies make provisions for the representation of legislators on them. But, innumerable bodies other than these statutory bodies also come to be formed in exercise of the executive powers of the Government for specific purposes. The Legislators are sought to be nominated to such bodies. 2.21n view of the Ministry of Law a justice (Legislative Department) as a matter of strict constitutional position, the power so far as Members of Parliament are concerned is with Parliament and power so far as Members of State Legislatures are concerned is with the respective State Legislatures. According to the constitutional position, Parliament and the State Legislatures have the plenary authority within their allotted fields of jurisdiction under the Constitution as it stands today to enforce any uniformity. A State is free to adopt whatever policy it likes. It is only through persuasion or discussion that it would be possible within the existing framework to achieve some degree of uniformity in this field. 2.3 Under Article 191 of the Constitution, most States have enacted their own respective statutes exempting certain posts from disqualification. The States have followed the approach in the Central statute by specifying the exempted offices in the Act and the Schedule accompanying it. An analysis of the trends of exemption by the States reveals no definite pattern except for the fact that selection of offices of profit qualifying for exemption has been ad hoc and devoid of principled consideration. It has been seen that some Boards/Corporations/Bodies have been given exemption in some States like the Fisherry Boards, Haj Committee or other such boards but similar bodies have not been given exemptions in other States.

Uniform criteria and applicability to States 2.4 A large number of offices under the Government has been exempted from disqualification by several States Removal/Prevention of Disqualification Acts, without taking into consideration their nature of duties or remuneration and that a view has been held that the only feasible method would be to amend the Constitution and make it obligatory for the States Legislatures to be guided by such principles that Parliament mayby law provide in regard to the matter. The Joint Committee on Offices of Profit (JCOP) were of the view that if the real spirit of Articles 102 and 191 of the Constitution is to be maintained sacrosanct, the enabling exemption provision should be kept within its bounds and restricted in its scope both in regard to the areas of operation and Leg islative competence. Otherwise, the object of the imposition of the 37 464--

disqualifications as envisaged will become frustrated. The JCOP, therefore, urged (9th Report-7th LS) the Ministry of Law, Justice and Company Affairs to take necessary steps for bringing legislation to evolve uniform principles in regard to disqualification for holding office of profit under articles 102(1) and 191 (1) of the Constitution in consultation with the Central Government, State Governments and Union Territory Administrations, in the light of the recommendations/observations made in their report. The then Ministry of Law, Justice and Company Affairs invited the comments of the State Governments/Union Territories on the recommendations made by the JCOP. As per ( vide 0.M. 17(9)/2006- replies furnished by the Ministry of Law, Justice and Company Affairs and Kerala, Karnataka LegIII dated 28.12.06) five States (L e. the States of Assam, G Madhya Pradesh) were in favour of having a Legislation evolving uniform principles. Eight States the States of Andhra Pradesh, Haryana, Meghalaya, Mizoram, Orissa, Rajasthan, Sikkim and (i.e. Uttar Pradesh) were not in favour of legislation adopting uniform principles. No specific comments were received by them from other State Governments. In view of lack of consensus, the Ministry and Company Affairs did not reportedly pursue the matter. The States/Union of Law, late heat Justice a Terdtory-wise views reportedly received (as on 01.04.92) by the Ministry of Company Affairs and furnished to the JPC were as under:— The State Government should continue to retain the 1. Andhra Pradesh power of declaring a holder of particular office not to disqualify as envisaged in Article 191(1)(a) of Constitution of India. Thus, there does not appear to be need for any uniformity in the legislation concerning disqualification.

No views. 2. Arunachal Pradesh Agree on the condition that all the provisions of the Assam Assa m State Legislatu re Members (Re movaL of Disqualification) Act, 1950 should be incorporated in the proposed legislation.

In favour. 4. Goa It is not essential to have the law in question in the of the Parliament. 5 Haryana State in consonance with the Law The legislature is competent to frame such taw under the provisions of Article 191(1) of the Constitution.

The practice of Ministers being Chairman of Public 6. Jammu and Kashmir Sector Undertakings have been found to be not affecting incumbents to disqualification. Also, the State Government would be willing to amend its Law on the subject (the JfiK) Legislative (Prevention of Disqualification) Act, 1962 keeping in view any uniform policy that may be evolved for the rest of the country.

~~The view of the Committee are reasonable and may Karnataka be accepted.~~

~~38 A it~~

Toe SLatc C over unsont have accepted The nu-dot/wet S. Kerala suggested by the Joint committee for Members of Legislature and have decided to amend the Kerala Legislative Assembly (Renzdval of Disqualification) Act, 1951 accordingly. / Agrees with the views lie Joint Committee regarding Madhya Pradesh uniform or(nciples iryregard to disquatification. Not in favour of „Uniformity as the Local conditions Meghalaya 10. vary to a considniable extent. In case a uniform policy is to be Laid 0.4wo the matter should be discussed in depth by a ✓the legislatures The Govonnment of Mizoram is not in favour of 11. Mizoram deLegatyig power entirely to Parliament and is inclined to maintain status quo in this regard as at present. The/State Government would prefer a Law regarding 12. Orissa disquatification under Article 191 (1)(e) and not a sDparate law on the subject. / The issue involved have potitical overtones. The views 13. Punjab / of the State Government in correct perspective could / be sent after the revival of legislature and installation of popuLar Government. It should be left to the State Governments to take 14. Rajasthan appropriate action to adopt the principLes which the Parliament by law provide. / The power given to the State LegislareLegislature under r IS. Si kkim Article 191 fat of the Constitution to declare what are not Offices of Profit are the exclusive domain of the State Legislature and A is not open to tamper Aith / / / that poster. The Government of India may frame general guidelines lb. Tripura / , regarding uniformity in the principles to be followed / by Part ament and State Leorslature regarding disquatif i ca lion The State Government will take appropriate decision in the matter thereafter. / Uttar Pradesh Not In favour 17. / The COMITeriS me not mewed. 18 Hmrdchal Pradesh 2.5 Nog/ the Joint Committee to examine the constitutional and regal. position relating to atm on profit has also been mandated to suggest evolution of generic and comprehensoe Prli which are just fair and reasonabLe end can La applied to a'l States and Dri on Territories cr I- Tric/PC took up the issue with the Stet< Goyerrirpor LoLITs besides the political parties/groups ial/zonstitutional experts and invited their considered views in the A Fur lament and other lAt

~~39 -ti6~~~

8. Kerala The State Government have accepted the guidelines suggested by the Joint committee for Members of Legislature and have decided to amend the Kerala Legislative Assembly (Removal of Disqualification) Act, 1951 accordingly.

~~Madhya Pradesh Agrees with the views of the Joint Committee regarding uniform principles in regard to disqualification.~~

10. Meghalaya Not in favour of uniformity as the local conditions vary to a considerable extent. In case a uniform policy 5 to be laid down the matter should be discussed in depth by all the Legislatures.

~~11. Mizoram The Government of Mizoram is not in favour of delegating power entirely to Parliament and is inclined to maintain status quo in this regard as at present.~~

~~12. Orissa The State Government would prefer a law regarding disqualification under Article 191 (1)(e) and not a separate Law on the subject.~~

~~13. Punjab The issue involved have political overtones. The views of the State Government in correct perspective could be sent after the revival of legislature and installation of popular Government.~~

~~14. Rajasthan It should be Left to the State Governments to take appropriate action to adopt the principles which the Parliament by law provide.~~

15. Sikkim The power given to the State Legislature under Article 191 (a) of the Constitution to declare what are not Offices of Profit are the exclusive domain of the State Legislature and it is not open to tamper with that power.

16. Tripura The Government of India may frame general guidelines regarding uniformity in the principles to be followed by Parliament and State Legislature regarding disqualification. The State Government will take appropriate decision in the matter thereafter.

17. Uttar Pradesh Not in favour. Is. Himachal Pradesh The comments are not received. 2.5 Now the Joint Committee to examine the constitutional and legal position relating to office of profit has also been mandated to suggest evolution of generic and comprehensive criteria which are just, fair and reasonable and can be applied to all States and Union Territories. The JPC took up the issue with the State Governments/UTs besides the political parties/groups in Parliament and other legal/constitutional experts and invited their considered views in the matter. 39 --- 1/41 C;

~~STATE GOVERNMENTS 2.6 The views of the State Governments are brought out in succeeding paragraphs.~~

2.7 The State Government of Karnataka were of the view that it would be better to evolve a generic and comprehensive criteria to define 'office of profit' which could be applied uniformly to all the States and Union Territories. They had also stated that the criteria laid down by the apex court in Jaya Bachchan Vs. Union of India could settle the matter to decide whether an office was an `office of profit' or not The decision pronounced in the above case read as under:—

"for deciding the question as to whether one is holding an office of profit or not, what is relevant is whether the office is capable of yielding a profit or pecuniary gain and not whether the person actually obtained a monetary gain. If the pecuniary gain 'is receivable" in connection with the office then it becomes an office of profit irrespective of whether such pecuniary gain is actually received or not. If the office carries with it, or entitles the holder to, any pecuniary gain other than reimbursement of out of pocket actual expenses, then the office will be an office of profit for the purpose of Article 102 (1) tar."

2.BThey had further added that being a cumbersome process to update from time to time the Schedule to the Parliament (Prevention of Disqualification) Act, 1959 to define certain offices which could be exempted from considering in terms of office of profit, it would be better to lay down general criteria to spell out whether an office was an office of profit or not and if need be Articles 102(1) and 1910) of the Constitution be amended suitably to incorporate the uniform principles. The law relating to office of profit could not be different from State to State.

2.9 The State Government of Maharashtra were of the view that it would be more appropriate to have in relation to the "office of profit" a generic and comprehensive criteria which were just fair and reasonable and could be applied to all States and Union Territories on the lines of the recent ruling of the Supreme Court as laid down in Jaya Bachchan's case. As regards, generic and comprehensive criteria which could be applied to States, the State Government were of the view that "the holder of any office of the Government of India or the Government of the State which was capable of yielding a profit or a pecuniary gain, whether the person holding the office actually obtained a monetary gain or not, should be disqualified for being chosen as, or for being a Member of Parliament or Member of the State Legislature."

2.10 The Committee pointed out that a large number of offices under the Government had been exempted from disqualification by several State Removal/Prevention of Disqualification Acts, without taking into consideration their nature of duties or remuneration and that a view had been held that the only feasible method would be to amend the Constitution and made it obligatory for the State Legislatures to be guided by such principles as Parliament might by taw provide in regard to the matter. In a written response to this point, the State Government had stated that it was difficult to agree with the opinion and that it was equally difficult to suggest any method by which the Objective of uniform application to States, of criteria regarding disqualification in relation to "office of profit" could be achieved. However, during discussion with the JPC, the representatives of the State Government of Maharashtra agreed that the only method by which uniform application of the criteria regarding disqualification to all States could be achieved was by a Constitutional amendment.

40 2.11 During discussion with the State Government of West Bengal at Kolkata, a representative of the State Government stated that in the absence of any definition of the term 'office of profit' it would be extremely difficult to define generic and comprehensive criteria for such offices. It was their view that holding a whole-time office remunerated either by salary or fees should disqualify the holder of that office and offices specifically exempted by law should continue, as prescribed in the Constitution, since Articles 102 (1)(a) and 191(1)(a) contemplate exemption of offices individually by name.

2.12 According to them offices were to be specifically exempted by law under the Constitution. Since there had to be separate laws for Members of Parliament and Members of State Legislature, it was obvious that there could be no one to one correspondence between the Lists of exempted posts. However, the State Government had no objection for evolution of uniform principles after wide discussion.

2.13 On being asked whether there was any criteria, other than restriction on holding whole time office and remuneration, being followed by the State Government in granting general exemption from disqualification to the offices under the Central Government, a representative of the State Government stated that there was no criteria (other than restrictions on holding whole-time office and remuneration) that had been followed in granting general exemption from disqualification other than those specified in Section 2 01 (a), (b), (c) and (d) of the West Bengal Legislature (Removal of Disqualification) Act, 1932.

2.14 On being pointed out that a view had been held that the only feasible method would be to amend the Constitution and made it obligatory for the State Legislatures to be guided by such principles as Parliament might by Law provide in regard to the matter, a representative of the State Government of West Bengal stated that they did not agree with the said view and opined that the State Legislature should have a free hand to legislate in accordance with specific provisions of Article 191 of the Constitution. However, in their view it was difficult to evolve uniform criteria because each State frames its own legislation taking into account the Local conditions. 2.15 During their interaction with the JPC, the representatives of State Government of Bihar did not agree on evolution of uniform principle. They were also of the view that what offices should not disqualify must be Left within the domain of the State Legislature and no ways and means be devised to put any vertical cap in the name of uniform application to States of criteria regarding disqualification in relation to office of profit

2.16 The Committee also visited Chandigarh and Shimla and held discussion with the representatives of State Government of Punjab, Himachal Pradesh and Haryana on matters under reference of the JPC. The Committee were informed that the Government of Punjab were not in favour of evolving a uniform principle in regard to disqualification from holding Office of Profit under Articles 102(1) and 191(1) of the Constitution. However, they were of the view that there should be some guiding principles which could be suggestive in nature for declaring a particular post or office to be an office of profit and it should be left open ultimately to the Legislature to decide in its wisdom and in exercise of its powers conferred on it under the Constitution to determine whether any office/post is an 'Office of Profit' or not taking all relevant facts into consideration and in case if it was decided that there should be guidelines and principles for declaring a pest/office as an office of Profit, then the only feasible method would be to amend the Constitution. 41 \f‘ S

2.17 According to Government of Himachal Pradesh, taking into account the following suggestion a comprehensive criteria had to be laid down for constituting office of profit without compromising with the object sought to be achieved by the provisions of Artide 191 (1) (a) and Article 102 (1) (a) :—

2/. An office will bean office of profit which isrpable of Welding profit or a pecuniary gain. 2. The holding of office must be under the Central or State Government and State or Central Government must have power of appointment and removal from office.

~~3. The office is attached with some pay, salary, emolument, remuneration or non- compensatory allowance.~~

4. The source of pecuniary gain must be at State expense. 5. If the pecuniary gain h receivable in connection with the office then it will be an office of profit irrespective whether such Pecuniary gain is received or not.

6. // there is re-imbursement of money other than spent from pocketraCtual expenses it will be on office of profit. Where the holder of office exercises executive and financial powers and is in a position. to wield influence and patronage then the holder of office will fall with in the ambit of office of prIt irrespective of the facts he is getting only compensatory allowance."

2.18 Thus if a Member of a body got only compensatory allowance and body exercised merely an advisory functions then no disqualification would arise. But if the allowances given were more than compensatory allowance and/or the body exercised executive and financial powers and was in a position to wield influence or patronage, then its membership could not be excluded from disqualiflcation. That was the only interpretation, which could be placed by applying the test for determining the office of profit. The JPC might evolve a uniform criteria to be applicable in all States because the existing provisions of the enactments in question could not pass the true test of the law Laid down by the Hon'bLe Supreme Court from time to time while interpreting the provisions of Articles 102 (1) and 191 (1) of the Constitution. It was, therefore, necessary to reduce the risk of conflict between the duty and interest amongst members of the Legislature so as to ensure that the concerned Legislature did not come under an obligation of the executive, on account of receiving pecuniary gain or profit, which might render him amenable to influence of executive while discharging his obligation as a Legislature.

2.19 Adding further a representative of the State Government of Himachal Pradesh stated that they were in agreement with the opinion of the JPC that the only feasible method was to amend the Constitution and make it obligatory for the State Legislature to be guided by such principles as Parliament might by Law provide in regard to the matter.

2.20 The State Government of Haryana were of the view that being a Federal System of Governance in the country and in order to preserve and protect this structure, there was no need to evolve uniform principles. The exemption of offices might vary from State to State depending upon varieties of needs and circumstances in each State.

~~2.21 The State Government of Cbbattisgarh were of the view that office of profit from which a person might be saved from disqualification should be provided in the schedule post-wise and~~

42 class of post-wise declaring with it applicability to all States and Union Territories leaving no exception so that it should be applicable uniformly to all States leaving no room for ambiguity. But such office of profit held by a person should not be more than three at any point of time.

~~2.22 Normally a person should not be appointed to any office or post declared by law not to disqualify, if he hold three or more office of profit as ex-officio at any point of time.~~

2.23 The State Governments of Assam, Madhya Pradesh, Gujarat, Manipur and Nagaland were not in favour of evolving any uniform criteria which could be made applicable to all States and Union Territories primarily due to the fact that evolving common criteria would he detrimental to the concept of federalism as envisaged in our Constitution to enable each State to draw its own criteria depending on its own needs including political aspirations and needs of the society.

2.24 On the issue of evolving criteria the State Government of Nagaland were of the view that there was no office in the executive realms which did not involve exercise of power or influence. Again on uniform application of criteria, they were of the view that such uniform principles could be evolved by Parliament only for members of Parliament and not for the members of the State Legislature, as Parliament did not have the legislative competency in view of provisions in article 191(1) of the Constitution. Subsequently, however, on a specific query whether the Parliament had the competency under Article 368 to amend the article 191(1) without effecting suitable legislations for incorporating in so far as office of profit was concerned, the State Government of Nagaland stated that it was possible but having a uniform definition would be difficult. 215 On the other hand, though the State Governments of Andhra Pradesh, Arunachal Pradesh, Kerala, Mizoram, Rajasthan, Tamil Nadu, Tripura, Uttaranchal, West Bengal, Meghalaya and Sikkim were broadly in favour of evolving a uniform criteria keeping in view the local conditions of each State and other required elements involved in deciding an office of profit, they had not furnished any concrete suggestion in this regard.

2.26 A statement showing the comments of the State Governments (as received by the JPC) in regard to evolution of generic and comprehensive criteria, which are just fair and reasonable and can be applied to all States and union Territories, (second term of reference) is at Annexure VI.

~~Ministry of Law and Justice (Legislative Department)~~

2.27 The Ministry of Law and Justice (Legislative Department) opined that without amendment of the Constitution, statutory uniform principles could not be evolved. The uniform principles might be evolved by the JPC, which might be conveyed to the State Governments for their guidance.

2.28 Further the Legislative Department had stated (0.M. dtd. 21.4.08) that technically it would be open to Parliament to lay down principles and guidelines by saying that "if a person is found to be holding an office which satisfies certain principles and guidelines, then the holder of that particular office will stand disqualified." But that might give rise to many practical complications and difficulties. First, that might open flood gates of disputes because the determination of the fact as to whether the holder of any particular office other than the office of profit would fall within the guidelines or principles, would itself be a point of dispute or form

~~43 - --~~

part of that dispute. Second.y, there would be an increase in the reference under Article 103 of the Constitution virtually leading to an enormous rise in the election petitions to be decided by the President and Election Commission, because any number of petitions could be filed then on the basis that a particular person was not disqualified as his case was not covered by the guidelines which were proposed to be laid down. With regard to the guidelines that a member would be disqualified if he held an office where he was in a position to wield influence or distribute patronage, the Ministry were of the view that the trend of Judicial decisions had been to equate profit in terms of money or assess in terms of pecuniary gain. Mere patronage under Articles 102 (1) (a) and 191 (1) would not disqualify.

2.29 The Legislative Department were also of the view LOA. dtd. 6.6,08) that our constitutional scheme recognized federal structure and the States were free to express their views within the constitutional framework. Our Constitution distributed legislative powers between the Centre and States.

2.30 On being asked to elaborate the possible way to overcome the problem if the States were not in favour of uniform criteria being followed by all States, the Legislative Department in their G.M. (dtd. 6.6.08) stated that this problem could be overcome by suitably amending the Constitution on the lines of the Constitution (Forty Second Amendment) Act, 1976. By the Constitution (42nd Amendment) Act, 1976, Article 102(1)(a) of the Constitution was substituted by a new article whereby the Parliament was given power to declare offices which will disqualify its holder. The power was given to the Parliament in respect of membership of Parliament as well as of the State Legislature. As the provisions of Article 102 (1)(a) as substituted by the Constitution 42nd Amendment were repealed by the Constitution 44th Amendment Act, 1978, the traditional exemption route had been followed so far.

~~Institutions~~

2.31 During their study visit to Bangalore, the JPC also held discussions with the representatives of National Law School, Bangalore on the terms of the reference of the Committee. On being asked about the evolution of uniform criteria applicable to all States/ UTs, a representative of the University stated that to achieve uniformity among all State Legislations and the Central legislation, Article 191 be amended to include a principled definition of the office of profit which might be identical to an explanation to Article 102. These definitions would exemplify the present explanation to these Articles and would allow the States to make Laws that specify analogous offices, which might not named to be Minister.

~~Constitutional/legal experts~~

2.32 Expressing his views on the issue, Shri K.K.Venugopal, Senior Advocate in a written reply had stated that the purpose of disqualifying a Member of Parliament/ Legislature holding an office of profit was to prevent the conflict between duty and interest so that the Member could function independently and free of any submergence to the Government. If a liberal view was given to the concept of "office of Profit", It would defeat the purpose and would make the Article 75 (IA) ineffective. Therefore, the Member of Parliament/Legislature should be given additional function attached to any other office on the basis of his background qualifications and experience and should not result in any p ecuniary gain.

~~44 -- to- z~~

Joint Committee on Office of Profit (JCOP) 2.33 The Joint Committee on Office of profit (JCOP) under the Chairmanship of Shri Chandrabhushan Singh, M.P. also submitted a memorandum to the JPC which is reproduced as under:— As far back as in 1984, the Joint Committee on Offices of Profit felt the need to evolve uniform principles in regard to disqualification for holding office of profit under Articles 102 (1) and 191 (1) of the Constitution. After examining the matter in detail, the Committee had noted in their 9th Report (7th Lok Sabha) that members of State and Union Territory Legislatures had been appointed on various Corporations/Boards/Committees etc. set up by the State Governments and the Union Territory Administrations which enjoy wide and excessive powers. By virtue of the provisions contained in most of the State Removal/Prevention of Disqualifications Acts, the members of State/Union Territory Legislatures were exempted from disqualification inspite of holding offices of profit whereas in view of the guidelines followed by the Joint Committee on Offices of Profit, Members of Parliament, if appointed on those Corporations/ Boards/Committees etc. would incur disqualification by virtue of such bodies exercising excessive executive, financial or judicial powers or members' being entitled to draw remuneration more than the 'compensatory allowance' as defined in Section 2 (a) of the Parliament (Prevention of Disqualification) Act, 1959. The Committee strongly felt the need for evolving of uniform principles in regard to disqualification for membership under articles 102 (I) (a) and 191 (1) (a) of the Constitution, and the only feasible method could be to amend the Constitution and make it obligatory for the State Legislatures to be guided by such principles as Parliament may by law provide in regard to the matter. Alternatively, as the State Legislatures are plenary authorities within their allocated spheres, the Committee would like to recommend to the State Legislatures to take appropriate action to adopt the principles evolved by the Joint Committee on Offices of Profit. The Committee were also of the view that the objectives proposed to be served by the Constitutional Amendment could also be achieved to some extent by making a law to that effect by Parliament under Article 191 (I) (e) of the Constitution, whereby it could be provided that holders of offices which enjoy executive, financial judicfaUquasi judicial powers or which would place them in a position where they could receive some patronage from Government or are themselves in a position to distribute patronage or are entitled to any remuneration other than the compensatory allowance, as defined in Section 2 (a) of the Parliament (Prevention of Disqualification) Act, 1959, would incur disqualification. The Committee recommended that exemption from disqualifying holder of an office of profit should be so restricted as to cover only those offices held by members in Corporations/Boards/Committees etc. directly constituted and controlled by the Legislature. The members appointed to Corporations, Boards, Committees etc. whether controlled by Government directly or by statutory or non-statutory agencies created by State, should not enjoy any such exemption. The Committee were of the opinion that free exercise of legislative powers given under article 191 (1) (a) of the Constitution without circumspection or restraint, had greatly undermined the independent functioning of the members of the Legislature in many parts of the country. Offer of blandishment to members through their appointment to various offices of profit in certain corporations/undertakings/boards etc. constituted by the State Governments and exempting those offices from disqualification by legislative enactment without great care were being resorted to freely and increasingly in recent times. The Committee were of the view that if the real spirit of articles 102 and 191

~~45 — Ya3—~~

of the Constitution was to be maintained saanct,cros the enabling exemption provisions should be kept within its bounds and restricted in its scope both in regard to the areas of operation and legislative competence. Otherwise, the object of the imposition of the disqualification as envisaged in the Constitution would become frustrated. The Committee, therefore, urged the Ministry of Law, Justice and Company Affairs to take necessary steps for bringing legislation to evolve uniform principles in regard to disqualification for holding offices of profit under articles 102 (1) and 191 (1) of the Constitution, in consultation with the Central Government, State Governments and Union Territory Administrations, in the light of the recommendations /observations contained in the Report, at an early date. The Ministry of Law and Justice reportedly did not pursue the matter due to lack of consensus among the State/Union Territories, Thus, there is an urgent need for evolving definition of Offices of Profit which should be based on uniform principles.

2.34 On the question of uniform criteria/principle it may be pertinent to mention here that in order to determine whether an office held by a person is an office of profit under the Government, the Joint Committee on Office of Profit, in their Tenth Report 0th Lok Sabha), presented to Lok Sabha on 7 MaY. 1984 laid down the following guiding principles:

"The broad criteria for the determination of thequestion whether an officeheld by a person is on office of profit have been laid down in judicial pronouncements. If the Government exercises control over the appointment to and disiniq fr in the office and over the performance and functions of the office and in case the remuneration or pecuniary gain, either tangible or intangible in nature, flows from such office irrespective of whether the holder for the time being actually receives such remuneration or gain or not, the office should be held to be an office of profit under the Government. Otherwise, the objection of imposition of the disqualification as envisaged in the Constitution will become frustrated. This first basis principle should be the guiding factor in offering positions to a member of the legislature." 2.35 Keeping the above position in view, the Joint Committee on Offices of Profit have been following the under-noted criteria to test the Committees, Commissions, etc. for deciding the question as to which of the offices should disqualify and which should not disqualify a person for being chosen as, and for being a Member of Parliament:—

(i) Whether the holder draws any remuneration like sitting fee, honorarium, salary, etc. Le remuneration other than the 'compensatory allowance' as defined in section 2(a) of the Parliament (Prevention of Disqualification) Act, 1959; (the principle thus is that fa member draws not more than what is required to cover the actual out of pocket expenses and does not give him pecuniary benefit, it will not act as a dfigaalificationl. (ii) Whether the body in which an office is held, exercises executive, legislative or judicial powers or confers powers of disbursement of funds, allotment of lands, issue of licenses, etc. a gives powers of appointment, grant of scholarships, etc. and ; (iii) Whether the body in which an office is held wields influence or power by way of patronage. If reply to any of the above criteria is in affirmative, then, the office in question will entail disqualification.

46 2.36 The Committee generally applies two tests in deciding whether a member of a body ought to be exempted from disqualification i.e. (a) the emoluments and allowances attached to the members; and (le the nature and function of the body.

2.37 If a member of a body gets only compensatory allowance and the body exercises merely an advisory function, then no disqualification would arise. But if the allowances given are more than compensatory allowances and/or the body exercise executive and financial powers and is in a position to wield influence and patronage, then its membership would not be exempted from disqualification.

~~2.38 Based on the recommendations of the Joint Committee, exemptions have been made by adding certain offices to the list from time to time.~~

~~Administrative Reforms Commission~~

2.39 It may be pertinent to mention here that the Hon'ble President of India had set up Second Administrative Reforms Commission (in 2005) under the Chairmanship of Shd Veerappa MoiLy to prepare a detailed report for revamping the public administration system. The Commission submitted their Fourth Report titled 'Ethics in Governance' in January, 2007 which inter-alio include the recommendation of the Commission on 'office of profit'. The relevant extracts are as under:- 2.6.5 there is need to re-examine the definition of office of profit. Articles 102 and 191 of the Constitution relating to office of profit have been violated in spirit over the years even when the Letter is adhered to. As a result, the Legislatures kept on expanding the list of exemptions from disqualification under Articles 102 and 191. For 'nstance, the Act 10 of 1959 listed scores of offices in the exemption from disqualification under Article 102. There does not appear to be a clear rationale to such a list, except perhap the expediency to protect holders of certain offices from time to time. Similar laws ha e been enacted by State Legislature under Article 191, exempting hundreds of offices from disqualification for the State Legislature. Each time a legislator is appointed by the executive to an office, which might be, classified an office of profit, a Law is enacted including that office in the list of exempted categories.

2.6.6 Often, the crude criterion applied is whether or not the office carries a remuneration. In the process, the real distinction of whether executive authority is exercised in terms of decision making or direct involvement in deployment of public funds is often Lost sight of. The Supreme Court's clarification about the appointment and removal being in the hands of the executive branch of Government does not help either, because many appointments made may be in advisory capacities. 2.6.9 Therefore it seems necessary to sharply define office of profit to ensure clearer separation of powers. Legislators who are not Ministers often do have significant expertise from their own personal or professional background. In addition, their experience in public service gives them unique insights and understanding of public policy. Such expertise and insights would be valuable inputs to the executive in policy making. Therefore, Committees and Commissions of a purely advisory nature can be constituted with Legislators. The mere fact of such positions carrying certain remuneration and other perks does not make them executive offices. The Constitution recognized that holding of such offices in expert and

47 advisory bodies does not violate separation of powers and Left it to Parliament and State Legislatures to exempt such non-executive offices from disqualification. But appointment in statutory or non-statutory executive authorities with direct decision making powers and day- to-day control of field personnel, or positions on the governing boards of public sector undertakings or as Government nominees in private enterprises clearly carry direct executive responsibilities and involve decision making powers. Giving discretionary powers to Legislators to sanction or approve public works is clearly an exercise of executive function, whether or not the Government appoints the legislators to a designated office. It is necessary to sharply distinguish executive functions and exercise of executive authority while defining office of profit, irrespective of whether such a role of office carries remuneration and perks.

~~2.6.10 Given these circumstances, it would be appropriate to amend the law on the following lines:~~

• ALL offices in purely advisory bodies where the experience and insights of a legislator would be inputs in governmental policy will not be treated as offices of profit, irrespective of the remuneration and perks associated with such an office.

• ALL offices involving executive decision making and control of public funds, including positions on the governing boards of pubic undertakings and statutory and non-statutory authorities directly, deciding policy or managing institutions or authorizing or approving expenditure shall be treated as offices of profit, and no Legislator shall hold such offices. (Discretionary funds at the disposal of Legislators or the power to determine specific projects and schemes, or select the beneficiaries or authorize expenditure shall constitute discharge of executive functions and will invite disqualification under Articles 102 and 191, irrespective of whether or not a new office is notified and held.)

• If a serving Minister, by virtue of office, is a member or head of certain organizations like the Planning Commission, where close coordination and integration between the Council of Ministers and the organization or authority or committee is vital for the day-to-day functioning of Government, it shall not be treated as office of profit.

~~48 C. Third term of reference~~

to examine the feasibility of adoption of system of low relating to prevention of disqualification of members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty-second Amendment) Act, 1976

3.1 The concept of office of profit originated in the House of Commons in the sixteenth century when the prolonged absence of member due to their preoccupation with the duties of the executive was considered to be inconsistent with a seat in Parliament. It was also felt necessary to exclude the executive officers from the membership of the House in order to reduce the influence of the Crown on Parliament. This concept gained greater strength in the following centuries and a large number of offices came to be treated as disqualifying offices in U.K. A number of Laws were enacted during this long period listing out the disqualifying offices.

3.2 Thus, the concept of office of profit has a history of more than three centuries during which period it has undergone many changes and is yet far from being precisely understood and defined. The confused state of law in this respect and obsolete character of many of the relevant legal provisions are the legacies of the evolution of this idea through different phases of history in the United Kingdom. 3.3 There are three principal phases in the development of concept of office of profit in the United Kingdom on the basis of which the law on the subject developed in India.

(1) The first phase : The "privilege" phase before 1640 The attitude of the sixteenth century House of Commons to the question of holding by its Members office under the Crown first appears in a jealous insistence on its own prior claim to their services. In consequence, the criterion which was applied to an office was not the extent to which the Crown could exert its influence, but compatibility with the physical attendance of the holder on the service of the House. This phase of the Common's attitude to paid office Left a permanent mark on the law in the shape of the common law disqualification of judges and clergy; it also affected the position of sheriff and ambassadors.

(2) The Second Phase: "Corruption" phase - from 1660 In this phase the holding of paid Crown office was made incompatible with the membership of the House of Commons. In this period, the House of Commons enacted two Acts, namely, the Act of settlement, 1701 and the succession to the Crown Act, 1705. The succession to the Crown Act, 1705 re-enacted after the Union with Scotland in 1707, commonly known as the Statute of Anne. Section 24 of that Act provides that no person holding an office or place of profit under the crown created since 25th October 1705 should be able to sit in the House of Commons. A similar absolute disqualification is applied to certain named offices and aLso to persons holding any pension under the Crown. Section 25 of the said Act, however, states that if any person, being a Member, accepts any office of profit from the Crown, his election is avoided and a new writ is to issue, but he is capable of being elected again. The apparent conflict between the two sections has been resolved by applying section 25 to old offices Art, those created before 1705, although it is not so expressly stated. But many other anomalies have arisen in great part as a resuLt of an attempt to draw a distinction between the alternative use of the words "under the Crown" and "from the Crown" in sections 24 and 25 of the said Act 49 (3) The third phase: "the Ministerial responsibilities" phase after 1705.

Although the division into "old" and "new" offices continued to pose many problems in determining the category into which any particular office fell, its force in fostering any nascent theory of separation of powers was soon spent. Neither of the two sections indeed expressed any constitutional distinction between ministerial and other office, yet section 24 by Its veto on the capacity of holders of newly created office to sit in the House could have produced a Government the majority of whose members were outside the House.

2. Thus, it is evident that disqualification of certain office holders from membership of House of Commons has existed since the early seventeenth century. These were previously scattered through public and private Acts and the journals of the House. By the year 1990, the confusion about the actual and intended scope and effect of existing disqualifying provisions, together with fears about the effects on Parliamentary democracy of special war-time appointments of Members, led to the appointment of a Select Committee (Herbert Committee).

3. The Herbert Committee Looked particularly of the law and practice governing the disqualification of those holding "offices or places of profit under the Crown" and the report (HC 120, 14 October 1941) contained recommendations for legislation to replace earlier statutes. After the war and the reconstruction period, work began in 1949 on drafting a Bill to put the Herbert Committee recommendations into effect. However, there was a serious difficulty in arriving at satisfactory Legal expression of some of the concept recommended by the Herbert Committee and it was not until 1955 that a Bill finally went to the House. A Progress was difficult and further a Select Committee, Spens Committee was set up in 1956 to reconsider the Bill. The Committee stated that certain offices are incompatible with membership of the House of Commons, some as involving physical impossibilities of simultaneous attendance in two places some because of possible patronage, and other because of conflict of duties. The Spens Committee examined the Bill after second reading and made several recommendations but the revised Bill was not officially enacted until the 1956-57 sessions. Legislation was finally enacted as the House of Commons Disqualification Act, 1959. This was re-enacted in 1975 when offices disqualifying from the Northern Ireland Assembly were separated out and covered by the Northern Ireland Assembly Disqualification Act, 1975.

3.4 There is not as yet any comprehensive statute on the subject in the United Kingdom. But a Bill known as "House of Commons Disqualification Bill" was introduced in the House in 1955. Thus, the major legislation governing disqualification is consolidated in the House of Commons Disqualification Act, 1975. (see Annexure-VII) The main purpose of disqualification is to ensure that Members are fit and proper to sit in the House, are able to carry out their duties and responsibilities free from any undue pressures from other sources. It is to be ensured that an office held by an individual is not adversely affected by his membership of Parliament. Thus where a member holds some publicly funded position, his performance in that position should not be jeopardized by his role as a Member, either on conflict of interest grounds or because the position might require demonstrable political neutrality. 3.5 The House of Commons (Disqualification) Act, 1975 disqualifies a large number of public office holders. It is the single most important legal measure affecting eligibility for parliamentary candidature. It Lays down six classes of office holders who are disqualified, namely:—

~~(1 Holders of certain judicial offices including High Court and Court of Appeal judges (Law Lords are disqualified already by virtue of being members of the House of Lords)~~

~~50 93t~~

(2) Civil servants, whether established or not, and whether full-time or part-time; (3) Members of the regular armed forces; (4) FuR-time police offices; (5) Members of the Legislature of any country outside the Commonwealth; and (6) Holder of any of the offices listed in Schedules of the Act.

3.6 The Act also limits the number of Ministers who can sit in the House of Commons at a time. The List is set out in Schedule I of the Act and is very Lengthy. Regular updates are published. The Act enables the government to add or vary the list from time to time by Parliamentary resolution and an order in Council. The Judicial Committee of the Privy Council has jurisdiction to decide matters in relation to jurisdiction under 1975 Act provided that an election petition is not pending or that the Commons has not made an order directing that the disqualification should be disregarded.

~~3.7 The law in the United Kingdom in relation to disqualifications however has undergone certain important changes in recent times. These are as follows:~~

~~(i) the enactment of the House of Lords Act, 1999 by which hereditary peers are no longer disqualified from membership of the Commons;~~

~~(ii) the Disqualification Act, 2000 amended the 1975 Act so that members of the legislature in Ireland are not disqualified from being members;~~

~~(iii) the House of Commons (Removal of clergy disqualification) Act, 2001 that removed prohibitions against clergy sitting in the Commons;~~

~~3.8 Importantly, there appears to be no criteria in the schedule for what exactly constitutes an office of profit under the Crown. Some recent amendments to Schedule I are as follows;~~

~~(i) Member of the Immigration Services Tribunal inserted by the Immigration and Asylum Act, 1999~~

(ii) Adjudicator to Her Majesty's Land Registry inserted by the Land Registration Act, 2002. 3.9 one clear merit of the approach followed in the United Kingdom is that there is no ambiguity surrounding whether or not the holding of a particular office would result in disqualification. If an office is listed in the schedule then it would result in a disqualification, and if it is not listed then it would not. The clarity of the position is also evident by the fact that till date no application has been made to the judicial committee of the Privy Council, which has the jurisdiction to decide matters relating to disqualification under the 1975 Act, in relation to a claim that a person purporting to be a Member of the House is disqualified under the Act.

Feasibility of adoption of law relating to prevention of disqualification of Members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty Second Amendment/ Act, 1976

3.10 At present we have the Parliament (Prevention of Disqualification) Act, 1959 which declares certain offices of profit under the Government which do not disqualify or which disqualify holders thereof for being chosen as, or for being members of Parliament. The Act contains 51 5 sections and a schedule, which has two parts containing names of bodies under the Central Government, which disqualify their holders. Section 3 of the Act specifies the offices, which do not disqualify their holders. The Act has been amendedfrom time to time to include offices in the category of exempted offices. Recently in 2006, this Act has been amended to include 55 more bodies in the category of exempted offices. This amendment has been given retrospective effect from 1959 although many bodies which have been so exempted from disqualification through this amendment, dio not exist in 1959.

3.11 The Act of 1959 contains a Schedule, which is in two parts, viz. Part I and Part II. Part I contains statutory or non-statutory bodies under the Central Government as welt as certain State Governments which disqualify the holders of the office of Chairman of these bodies. Part II of the Schedule contains statutory or non-statutory bodies under the Central Government a well as the State Governments of Andhra Pradesh, Bihar, Kerala, Tamil Nadu and Punjab which disqualify the holders of the office of Chairman and Secretary of such bodies. 3.12 These provisions of toe Act make it clear that exemption from disqualification In respect of offices specified in Section 3 is available only when the holders are entitled to not more than compensatory allowance. Compensatory allowance has been defined in the Act as "any sum of money payable to the holder of an office by way of daily allowance (which should not exceed the amount of daily allowance of a member of Parliament), any conveyance allowance, house rent allowance or travelling allowance for the purpose of enabling him to recoup any expenditure incurred by him in performing the functions of that office." Compensatory allowance is the key factor in determining whether the holder incurs disqualification or not Compensatory allowance is treated as an allowance to compensate certain expenditures incurred by the holder of the office in the performance of his duties. However, in the case of offices specified in the Schedule, no such exemption from disqualification is given to the holders of the offices like those of the Chairman and Secretary. 3.13 There are certain basic differences between the Indian Act and the House of Commons Disqualification Act. The House of Commons Act did not adopt the concept of compensatory allowance in the context of office of profit, whereas this allowance is a major factor in the determination of an office of profit in the Indian law. The House of Commons Act specifies the disqualifying offices fairly exhaustively and declares that no other office or place of profit under the Crown shall disqualify the holder for the membership of the House. The Indian law specifies the offices, which disqualify as well as those which do not disqualify. It does not, however, contain any definitive declaration in regard to non-disqualifying offices other than those specified in the Schedule. Further, any office under the Government, which fetches remuneration higher than compensatory allowance, is an office of profit except the offices exempted under the Constitution and the concept of disqualification on the ground of office of profit does not seem to apply to the membership of the House of Lords, which is a House of hereditary peerage. The Indian law applies to both Houses of Indian Parliament and Article 191(1) covers the State Legislatures. The State Legislatures have also enacted laws in this regard.

3.14 Similarly, the Constitution of India exempts all Ministers of the Union Government as well as of the States from disqualification on account of holding an office of profit. The House of Commons law has put a restriction on the number of ministers who can sit and vote in the House.

52 Section 2 of the House of Commons Act says that not more than ninety-five ministers can sit and vote in the House of Commons at any one time. Others will have to wait till a vacancy arises either by death, resignation or otherwise. But this restriction, as can be seen from the Act, is confined to the entitlement to sit in the House and vote. In other words, those ministers in excess of ninety-five who cannot sit and vote in the House are not disqualified for the membership of the House as such. They remain members of the House.

3.15 The term "office of profit" has not been defined either in the House of Commons Act or the Indian Act. The reason is not clean No doubt, the law on this subject was very complex in UK until it was consolidated in the twentieth century. But, that by itself is not a reasonable ground for not defining the term. In India too an attempt by way of constitutional amendment was made in 1976 to adopt the procedure being followed in UK.

3.16 In One with the UK procedure as regard disqualification of members on the grounds of holding Office of Profit, Section 19 of the Constitution (Forty Second Amendment) Act, 1976 amended article 102(1) (a) in the following manner:-

~~19. In article 102 of the Constitution, for sub-clause (a) of clause (1), the following sub-clause shaLL be substituted, namely:—~~

(a) if he holds any such office of profit under the Government of India or the Government of any State as is declared by Parliament by law to disqualify its holder. Similarly, section 32 of the said constitutional amendment amended article 191(1) (a) of the Constitution in the following manner:— 32. In article 191 of the Constitution, for sub-dame (a) of clause (1), the following sub-clause shall be substituted, namely:—

~~(a) if he holds any such office of profit under the Government of India or the Government of any State specified in the First Schedule as is declared by Parliament by law to disqualify its holden"~~

3.17 It may be seen that sections 19 and 32 of the Constitution (Forty-Second Amendment) Act, 1976 aimed to reverse the basis of disqualification by providing that only those offices which are specified by law made by Parliament will disqualify the holder on the Lines of the United Kingdom Law, namely the House of Commons Disqualification Act, 1975.

3.18 The above amendments in 1976 were brought with a view that there should be an exhaustive list of offices by a Parliamentary legislation which disqualify its holder for being chosen, as for or being a member of either House of Parliament or State Legislature. The power to enact Law to declare offices of profit, which would attract disqualification of its holder for being chosen as or being a member of a State Legislature, was also vested in the Parliament. However, the sections 19 and 32 of the said constitutional amendment were not brought into force and the same were omitted vide section 49 of the Constitution (Forty Fourth Amendment) Act, 1978. It was felt in regard to the amendment made by the Constitution (42nd Amendment), Act 1976 that it wouLd jeopardize the independence to Members of Legislatures and would enable the Government of the day to pack the legislature with persons who wouLd hold offices of profit for continuance in which they would be dependent upon Government.

53 119 Now the JPC have also been mandated to examine and recommend whether the present method of declaring an office of profit which would not disqualify its holders from being a member of a legislature is appropriate or a provision as added by the Constitution (42nd amendment) Act which, may provide that an office which is declared would disqualify its holder would be more appropriate. The Committee deliberated on the issue and invited considered views of State Governments, political parties/groups in Parliament, legal luminaries and general public interested on the subject matter. The JPC received diverse views on the issues, which have been brought out in the succeeding paragraphs.

Constitution/legal Experts 3.20 While deliberating with JPC, Shri Rajeev Dhavan, Senior Advocate was of the view that the United Kingdom, under the House of Commons Disqualification Act, 1975 used the method of 'disqualification' rather than the prevention of disqualification. That meant that apart from the holder of an office which was listed under the Act, no other person was disqualified from being a legislator An attempt was made to adopt the U.K. approach through the 42nd Amendment Act. In the definition of 'office of profit' suggested, the Listing of some offices that would disqualify its holder is in accordance with the UK method of 'disqualification' rather than the"prevention of disqualification'.

3.21 Shri Harfsh N. Salve, Senior Adovate, Supreme Court of India during evidence before the JPC was of the view that the UK Law might not be adopted in India as there were stark differences between the ground realities of both the countries.

3.22 During his evidence before the JPC, Shri Fall S. Nariman also stated "we should not go by the U.K. procedure for the reason that United Kingdom does not have a written constitution. There, the Parliament is supreme. Not only it is supreme, as said in Keshav Singh's case, it is the High Court of Parliament. So it exercises even judicial power in England. There Courts do not have power to strike down Laws of Parliament. They can only declare that these laws will not be operative until Parliament otherwise decides. Whereas in India the Constitution is Supreme. Thus, there should not be a negative List as attempted by Constitution 42nd Amendment Act, 1976 which amended Article 102 and Article 191. The provision regarding disqualification as envisaged by Constitution 42nd Amendment should not be reintroduced."

Institutions 3.23 During course of the discussion with JPC, a representative of the National Law School, Bangalore too had stated that despite its effective functioning in the UK, blindly importing the British approach, without consideration of the relevant practice in this regard, in India would be futile.

~~3.24 Similarly, a representative of the Council for Political Studies, Kolkata during their discussion with the JPC obsehved as under:~~

we do not approve revival of the changes in Articles 102 and 191 brought out in by the 42nd (Amendment) Act, 1976. Such changes it may be recalled, were perfectly in tune with the attempt by the said Amendment to vest Parliament with unlimited authority. However, a fully sovereign Parliament does not go with the spirit of the Constitution—the spirit that has been reinforced by the Courts's judgement on the unamendability of the basic structure.

54 He further added that "if Parliament by its Act goes on exempting offices from the bar imposed by Article 102 (1), then it will be an amendability of the basic structure." He further added that "if Parliament by its Act goes on exempting offices from the bar imposed by Article 102 (1) then it will be an unending process. After all, the Parliament at a particular point of time, cannot foresee all the offices that may come up in future." Political Parties in Parliament

~~3.25 The Committee also invited comments of the political parties/groups in Parliament in this regard. Some of the views received from the political parties/groups are as under:-~~

3.26 The National Congress Party were of the view that if a list of disqualifying offices was to be established, it should be done with reference to objective criteria, which could be laid down for uniform application in all the legislative bodies of the country.

3.27 The Rashtriya Janata Dal were of the view that the guiding model for formulating or identifying the concept of 'Office of Profit' for Parliament of India should be the House of Commons Disqualification Act, 1975. According to them a person should be allowed to hold one post and no further change/additions should be allowed in the office of profit already defined. However, in exceptional circumstances only, if amendments were required prior approvaL of Hon'ble Speaker should be obtained alter detailed consideration of the matter by the Committee relating to Office of Profit.

3.28 The RJD had further stated that the House of Commons Act applied only to that House and the concept of disqualification on the ground of office of profit did not seem to apply to the membership of the House of Lords. STATE GOVERNMENTS

~~3.29 The Joint Committee invited comments/views of the State Governments/NW on this issue. The views received from the State Governments are enumerated hereunder.~~

3.30 The State Government of Tamil Nadu was of the view that as per Section 1 (1) of the House of Commons Disqualification Act, 1975 a person who had held any office described in Schedule I of the Act was disqualified from membership of the House of Commons. However, the power to amend the said Schedule I by order had been conferred on Her Majesty after a resolution was passed in the House of Commons to that effect. That was not the procedure adopted in our country. Only by undertaking a legislation, the schedule which forms part of the Act is amended. Therefore, by undertaking a legislation offices might be declared as offices of profit and that the holder thereof would be disqualified for being chosen as and for being a member of legislature. The Government of Tamil Nadu were thus in favour of adoption of system of law relating to prevention of disqualification of members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty-second Amendment) Act, 1976.

3.31 While expressing their views before the JPC during their study visit to Bangalort, a representative of the State Government of Karnataka stated that adoption of system as exist in U.K. was only the best possible source at present in view of the fact that:— (i) no comprehensive definition of office of profit was possible. 00 The holder was certain to know before hand which offices would disqualify him. (iii) If a list of Schedule was provided, a new office could not be included immediately, unless a cumbersome process of amendment was followed.

55 3.32 Adding further on the issue, a representative of the State Government of Karnataka observed "on account of certainty and clarity it was necessary to reintroduce provision regarding disqualification as envisaged in Constitution 42nd Amendment Act, 1976." 3.33 The State of Himachal Pradesh had no objection for the adoption of system of law relating to Prevention of Disqualification of Members of Parliament as existing in the United Kingdom if such Law had stood the judicial scrutiny and had achieved the objective of maintaining the independence of Members of Legislatures from any sort of Government control or influence. 3.34 Similarly, agreeing with the adoption of system of law as existing in UK, the State Government of Haryana was of the view that negative list should be incorporated in the relevant Laws by Parliament or State Government as the case might be. 3.35 As regards adoption of system of Law as existing in U.K. the State Government of Rajasthan were of the view that WK. pattern certainly had the benefit of clarity and certainty and adoption of the pattern would be improvement over our existing Law. However, the power to declare office of profits under Article 191 should remain with the State Legislature. Similarly, the State Governments of Uttar Pradesh and Uttarakhand were of the view that the provisions regarding disqualification as envisaged by the Constitution (42nd amendment) Act, 1976 might be revived and reintroduced because if a negative List of the office is provided, it would certainly bring about clarity about the expression of office of profit. It would also clear all doubts and it would curtail the scope of liberal interpretation of the term. 3.36 In their written replies the State Governments of Andhra Pradesh, Chhattisgarh, Kerala, and Mizoram were conceptually in favour of reintroduction of the provision regarding disqualification as envisaged by the Constitution (42nd Amendment) Act, 1976. 3.37 On the question of reintroduction of provision regarding disqualification as envisaged in Constitution 42nd Amendmen, Act, 1976, a representative of the State Government of Maharashtra during study visit of the JPC to Mumbai stated that there was adequate provision in our Constitution and Parliament had also enacted Members of Parliament (Prevention of Disqualification) Act, 2006 which would govern the entire arena. It would, therefore, not be necessary to adopt system of law as existing in U.K. since U.K. did not have a written constitution. 3.38 The State Governments of Assam, Bihar, Gujarat, Punjab, West Bengal, and Tripura did not favour reintroduction of the provisions regarding disqualification as envisaged by the Constitution (42nd Amendment) Act, 1976 primarily due to the fact that power of the State Legislature as nvisaged under the ArticLe 191 should not be abrogated by the Parliament especially since it Belated to a State subject. Similar-1y, in a written reply the State Government of Nagaland stated that 'It will be too late to go back to the Constitution (42nd Amendment) Act, 1976 the provisions of which were substantially overridden by the Constitution (44th Amendment) Act, 1978. It would not be prudent to set the Parliamentary clock back by three decades. The politicaL, social, economic and constitutional. relevance of those provisions has simply been rendered comatose by mere afflux of time. 3.39 On the other hand the State Governments of Arunachal Pradesh, Manipur, Meghalaya, Sikkim, Jammu Et Kashmir, Goa, Orissa and Jharthand did not furnish any comments in this regard.

56 3.40 A synopsis of the views received from the State Governments and WC in regard to feasibility of adoption of Law relating to prevention of disqualification of Members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty-second Amendment) Act, 1976 (third term of reference) is at Annexure VIII.

3.41 The Ministry of Law Ft Justice (Legislative Department) did not offer their view in regard to adoption of system of Law relating to prevention of disqualification of Members of Parriament as existing in the United Kingdom and considered by the Constitution (Forty-Second Amendment) Act, 1976. D. Any other matter incidental to the terms of reference of the JPC 4.1 Some of the views/comments made by the representatives of various State Governments, experts and the issues that had cropped up during the discussions incidental to the terms of reference of the JPC are as farrows:— (i) In the opinion of Shri Pali S. Nehmen, Senior Adovate and National. Law School, Bangalore and a few others, there should not be any retrospective exemption from disqualification of certain offices of profit by Legislation. Di) Almost all the State Governments are unanimous in their opinion that there shourd not be any authority other than those prescribed in the law to determine whether an office is an 'office of profit' or not. Pip There is no Committee similar to the JCOP in Parliament in any State Legislature. Introduction of negative list on the pattern of U.K. Law would obviate the need for (iv) having a definition of 'office of profit' and evolving of uniform criteria. The Constitution (Ninety First) Amendment Act, 2003 has pieced a ceiling on Council (v) of Ministers in the Union and the States (Articles 75(1A) and 164 (1A)] and prohibited members being disqualified on grounds of defection from hording any "remunerative political post" tiLL they get reelected (Article 361 13). The very purpose of the amendment would be defeated if one were to Liberally interpret the concept of "office of profit" so as to comprehend within its scope for giving exemption to a very )la), circumventing large number of offices from disqualification under Article 102 (1 the provisions of these Articles. Opinion of the State Governments was invited in this regard. Majority of the States have not disagreed with this, although they want the existing provisions of the Constitution to remain as they are for serving the respective intended purpose. 4. Z A summary of views of State Governrnents/U.Ts. on issues incidentaL to the above three terms of the reference is enclosed at Annexure IX.

~~57 PART II~~

~~CONCLUSIONS AND RECOMMENDATIONS~~

the terms of reference of the Joint Committee to examine the constitutional and Legal position relating to office of profit as per the motion adopted in Lok Sabha on 17,8.2006 and concurred in by Rawa Sabha on 18.8.2006 are as follows :- (N to examine, in the context of settled interpretation of the expression "office of profit" in Article 102 of the Constitution and the underlying constitutional principles therein, and to suggest a comprehensive definition of "office of profit";

(ii) to recommend in relation to "office of profit", the evolution of generic and comprehensive criteria which are just, fair and reasonable and can be applied to all States and Union Territories; to examine the feasibility of adoption of system of Law relating to prevention of (iii) disqualification of Members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty-Second Amendment) Act, 1976; and

(iv) to examine any other matter incidental to the above. b. Based on the material placed/evidence tendered before them the Committee have made analysis of each of the above terms of reference. Some of the views/ideas being discussed in the succeeding paragraphs may not strictly be under the terms of reference (i) to (iii) above, but all the same are germane in so far as understanding the issues in right perspective is concerned and are incidental to the terms of reference of the JPC.

(U Need for definition and Its feasibility The constitutional experts including the Attorney General of India were of the opinion 3. that while a definition of 'office of profit' was a theoretical possibility, its application, encompassing the entire gamut on the issues involved, to have the desired results would be very difficult in terms of interpretation of the words/phrases/clauses contained in it which would result in numerous court cases. Therefore, majority of them were not in favour of evoLving any definition. According to the Ministry of Law Ft Justice (Legislative Department), the Attorney General of India had opined against laying down any particular criteria defining office of profit as the judgments of the Courts were enough guidelines to determine whether a particular office was an office of profit or not and a workable definition did not appear to be feasible.

4. The Ministry of Law Ft Justice (Legislative Department) were also of the opinion that evolving of common criteria would open Rood gates of disputes because the determination of the fact as to whether the holder of any particular office other than the office of profit would fart within the guidelines or principles, itself would be a point of dispute or form part of that dispute. Moreover, there would be an increase in the reference under Article 103 of the Constitution

~~58 PART II~~

~~CONCLUSIONS AND RECOMMENDS IONS~~

The terms of reference of the Joint Committee to e ne the constitutional and legal position relating to office of profit as per the motion adr•ted in Lok Sabha on 17.8.2006 and comorred in by Kowa Sabha on 18 8 2006 are as follow

ii) to examine, in the context of settled rpretation of the expression "office of profit" in Article 102 of the Constitution d the underlying constitutional principles therein, and to suggest a comprehensiv definition of "office of profit";

ND to recommend in relation to "offi of profit", the evolution of generic and comprehensive criteria whici are ju fair and reasonable and can be applied to all States and Union Territories; Gil) to examine the feasibility of ad, lion of system of law relating to prevention of disqualification of Members of arliament existing in the United Kingdom and considered by the Constitution Forty-Second Amendment) Act, 1976; and liv) to examine any other matter ncidental to the above.

2. Based on the material placed/ev ence tendered before them the Committee have made analysis of each of the above terms of eference. Some of the views/ideas being discussed in the succeeding paragraphs may not stric y be under the terms of reference (i) to (iii) above, but all the same are germane in so for understanding the issues in right perspective is concerned and are incidental to the terms o' reference of the JPC.

~~(i) Need for definition and its ambilitY~~

3. The constitutional expe 5 including the Attorney General of India were of the opinion that while a definition of Offic of profit' was a theoretical possibility, its applicaton, encompassing the entire gamut on the iss s involved, to have the desired results would be very difficult in terms of interpretation of he words/phrases/clauses contained in it which would result in numerous court cases. The fore, majority of them were not In favour of evolving any definition. According to the Ministry rt Law & Justice {Legislative Department}, the Attorney General of India had opined agoras laying down any particula; criteria defining office or profit as the judgments of the Court were enough guidelines Le determine whether a particular office was an office of profit or nt and a workable definition did not appear to be feasible.

4. The ministry • Law a Justice (Legislative Department) were also of the opinion that evodang of common riteria would open flood gates or disputes because the determination of the fact as to whether he holder of any particular office other than the office of profit would fall wlthin the Dodelir s or prinOples, itself would be a point of dispute or form part of that dispute. Moreover, theremold be an increase in the reference under AT.Ide iO3 of the Constitution

~~58 virtually Leading to an enormous dse in the election petitions to be decided by the President and Election Commission.~~

5. Many of the States were also against any uniform definition, although on different grounds altogether. They had apprehensions that it might go against the federal structure of the Constitution thus curtailing their legislative powers and in the process undermining their authority. Some of them were of the opinion that the definition might at best be illustrative only. Nevertheless a few States had endorsed the draft definition provided by the Ministry of Law & Justice, as according to them it was q uite comprehensive although not exhaustive.

6. The Committee feel that a precise definition is very necessary, primarily because without knowing what constitutes an office of profit and what does not, the exercise of giving exemptions from holding any office of profit seems to be a vacuous one. The Committee do not, therefore, agree with the doubts expressed that it may lead to heavy litigation. On the contrary it will lessen the risk of litigation. The task must, therefore, be performed, however, difficult it may be.

7. If the Parliament or any legislature feels that the definition covers an office that does not really advance the policy and purpose of the Constitution, ad hoc legislation may be resorted to for removing the disqualification in advance or on discovery.

8. As regards apprehensions by the State Governments that enactment of law on definition might go against the spirit of federal structure of the country, the Committee would like to recall the views expressed by the Government of Tripura according to which while the power of the State legislatures to make laws under article 191 should remain with the States, there was a need for amending the Constitution to bring about a comprehensive definition of office of profit for uniform application. Taking the cue the Committee feel that federalism has to survive through some common denominator vis-a-vis the country as a whole. A pointer in this regard is the existing almost identical language and provision of Articles 102(1)(a) and 191(1)(a). The States have the liberty to enact laws on creating exceptions for disqualification from offices of profit but not to define the term 'office of profit' itself, it is felt. In this regard the views expressed by a former Chief Justice of India are also perhaps worth mentioning according to which in India, a unified judiciary with the Supreme Court at the apex level ensures a uniform standard and meaning of the rule of law throughout the country. Hence, there would be no scope for conflicting interpretations of the meaning of 'office of profit' after evolution of a generic and comprehensive criteria emerging from it.

9. On the other hand the fall out of not having a definition of office of profit is there to be seen for all in whatever bad happened in the year 2006 in the run up to the constitution of the Joint Committee to examine the constitutional and legal position relating to office of profit which need not perhaps be elaborated here. 10.10 summarise, the advantages of having a definition of the office of p rofit would inter- a/ia be as follows:— (i) it would impart clarity to a large extent as to what is an office of profit and what is not; (ii) it will reduce the arbitrariness, in such appointments and Governments would be extremely circumspect; 59 (iii) the legislators can make an informed choice before accepting any office under the Government; (iv) chances of litigation would be reduced as (a) constitutional validity of the definition would not be in doubt as this would be largely based on the criteria evolved by the courts themselves through their various judgments, (b) arbitrariness would be vastly reduced in matter of appointments;

~~(v) with overall discipline in the system number of such appointments would fall substantially which is a matter of concern presently;~~

~~(vi) transparency through enactment of law would improve the public image of the legislators which is very important for representatives of the public.~~

~~(ii) Generic Criteria and definition~~

11. The Committee feel that the issues relating to uniform principles/common criteria and evolving a definition of 'office of profit' and their application to various States are inter- linked and are not mutually exclusive. It is also felt that before defining the term 'office of profit it is essential to evolve the principles and generic criteria. The definition would emerge from these criteria. While discussing this aspect the focus has to be on the following issues:— 0) to identify the generic criteria/principles which could determine what would constitute an office of profit and what would not, leading to its definition ; (ii) how this definition could be used uniformly; (iii) what criteria be employed for granting exemptions from disqualification; (iv) exploring the possibility of having one to one correspondence between the offices/posts at the Centre and in different States for exemptions.

12. There is general agreement over the fact that the office of profit disqualification sought to maintain two constitutional principles (i) the separation of power between the Legislature and the executive and (ii) the prevention of the possibility of a conflict between duty and interest of an individual who had to perform the roLe of the Legislator and a member of the executive.

13. The essential feature of an 'office' is that it must exist independent of its holder. An important expression that occurres in article 102(1)(a) of the Constitution is 'under the Government'. The exprew)on 'office of profit' occurres in various Articles viz. 18(3), 18(4), 58(2). 66(4), 102(1), 158(2) and 191(1). The expression has been used in different contexts in different Articles[(in except for 102(1) and 191(1) and nowhere it has been defined. The courts have enunciated the Shivamurthy Swamy Inamdar etc. Vs. Agadi 5anganna Andapa (1971) 3 SCC 8701 certain broad criteria for determining whether a particular office could be termed as an office of profit under the Government for the purposes of Article 102(1)(a) and Article 191(1)(a) of the Constitution. These are as follows:—

(a) Whether Government made the appointment; (b) Whether Government had a right to remove or dismiss the holder of office; Lc) Whether the Government paid the remuneration; (0) What were the functions of the holder of office; and Le) Did the Government exercise any control over the performance of those functions.

~~60 -~~

14. Whether an office in order to be characterized as an office of profit under the Government should satisfy these tests or whether any one or more of them might be decisive of its true nature and even what weightage was to be assigned to each factor had been the subject matter of severat cases decided by the Supreme Court. But no decision appeared to lay down conclusively the character of an office of profit under the Government although the court had no doubt determined in each case whether a particular office involved in the case before it was or was not an office of profit under the Government.

15.A perusal of Parliament (Prevention of Disqualification) Act, 1959 and other State Governments Acts revealed that in granting exemption from disqualification no specific criteria had been followed except for remuneration in few cases. The Committee noted that there were number of posts bearing the same name with same duties. But while some Boards/Corporations/ Bodies like Fishery Boards, Haj Committee etc. have been given exemptions in some States, similar bodies have not been given exemptions in other States.

16. A propensity of the Government has been seen, be it the Union or the States, to include an ever increasing number of offices under the exemption list. The Committee observe that the Constitution (Ninety First) Amendment Act, 2003 has placed a ceiling on Council of Ministers in the Union and the States [Articles 75( 1A) and 164 (1 and prohibited members being disqualified on grounds of defection from holding any "remunerative political post" till they got re-elected (Article 361 B). Here the Committee would endorse the sentiments of a legal expert that the very purpose of the amendment would be defeated if one were to Liberally interpret the concept of "office of profit" so as to comprehend within its scope for giving exemption to a very large number of offices from disqualification under Articles 102 (1)(a) and 19100a), circumventing the provisions of those Articles.

17. Also according to this expert any definition of 'office of profit' could be introduced only through an amendment of Article 366 of the Constitution, which defined the phrases and words used in various provisions of the Constitution.

18. Again according to the National Law School. University, Bangalore some aspects viz. compulsion of coalition Governments both at Centre as well as in the States, various Local factors/conditions which varied from State to State and private interests of legislators should be taken into account while evolving definition/generic criteria on office of profit.

19.0n the issue of principles, which were to be followed in the matter of office of profit, a former Chief Justice was also of the view that the [(if/Nutty arose because of the ambiguity created by the Latter part of sub-clause (a) of clause (1) of Art. 102—'other than an office declared by Parliament by law not to disqualify its holder'. The provision while empowering the Parliament to create exceptions to the disqualification prescribed in the firse part, did not specify the principle to be applied in creating exceptions to the general rote. That being so, the principle governing the exercise of power by the Parliament bad to be deduced on the basis of general rules of interpretation, reading the provision as a whole and bearing in mind the avowed object. Any interpretation, which rendered the provision otiose by the second part neutralizing the first part, had to be rejected. An interpretation, which empowered the Parliament to destroy the disqualification relating to a basic feature, had to be rejected. If the amending power of the Parliament under Ant. 368 could not destroy a basic feature of the Constitution; it could not be so done by a law enacted under Art. 102(1) (a), he opined. 61 20.The Committee agree with this view in principle. 21. Further some of the experts had opined that the explanation to Clause I of Art. 102, which exempted the Ministers from disqualification was relevant as an aid to construction of any Law thereunder. The National Law School University, Bangalore were of the view that no definition was necessary and Parliament might by Law include only such offices, which were ministerial in character but not in nomenclature. 22.This would perhaps mean that the categories of offices which would not be deemed to be offices of profit should be identified on the lines of existing provision of the Constitution.

23. A Legal expert stated that the power of exemption must have followed a rigorous procedure to ensure that it was not misused. Any appointment must be for the public interest, and under conditions of transparency and accountability. He proposed that— the system be operated so that appointments were made only in the public interest; (a) (b) the appointments be approved by the Cabinet; MI A public statement needed to be made that such an appointment was in the public interest with an explanation (a) giving the reasons for such an appointment; and (b) full disclosure of the perks and emoluments; (d) The public statement must be simultaneously placed before the House concerned; (e) The appointment was to be for the term of that Parliament; pro no (f) AU efforts should be made to make the appointments on a voluntary and basis. 24. Furtheh the Committee noted that there was a Joint Committee on Offices of Profit (JCOP) in Parliament, which was constituted at the beginning of each Lok Sabha. That Committee examined the composition and character of Government bodies from office of profit angle and made suitable recommendations in the matter. The JCOP generally applied two tests in deciding whether a member of a body ought to have been exempted from disqualification i.e. (a) the emoluments and allowances attached to the members; and (b) the nature and function of the body. If a member of a body got only compensatory allowance and the body exercised merely an advisory function, then no disqualification would arise. But if the allowances given were more than compensatory allowance and/or the body exercised executive and financial powers and was in a position to wield influence and patronage, then its membership would not be exempted from disqualification. Based on the recommendations of the JCOP, exemptions had been made by adding certain offices to the list from time to time. There was, however, no such mechanism in place in any State legislatures, the Committee noted.

25. The Joint Committee on Offices of Profit (JCOP) in their report (9th Report 7th LS) were of the view that if the real spirit of Articles 102 and 191 of the Constitution was to be maintained sacrosanct, the exemption enabling provision should have been kept within its bounds and restricted in its scope both in regard to the areas of operation and legislative competence. Otherwise, the object of the imposition of the disqualifications as envisaged would become frustrated. In the wake of recommendations of the JCOP an exercise of Inviting comments/views of the States on evolving common principles/criteria for uniform application was undertaken by the Ministry of Law and Justice. However, the Ministry of Law and Justice apparently did not pursue the matter due to Lack of consensus among the States/ UTs.

62 26. As was found in the past, the current exercise undertaken by this Committee also received almost similar reactions from the various State Governments. While some of the States were amenable to the idea of evolving a common criteria based on certain principles which could be made applicable to all the States, albeit by bringing out constitutional amendment, a Large number of States were against any such move citing diverse needs based on cultural/socio- economic state/region. which was very common at the prevailing time, was also a determining factor. Yet some of the States were in favour of having general guidelines, which might be followed by them instead of fixed definition/common criteria for identifying offices of profit without any legal binding. Mostly it was felt that there should be some guiding principles, which could be suggestive in nature for declaring a particular post, or office to be an office of profit but it should be Left open ultimately to the legislature to decide on the matter. One of the views given by Ministry of Law and Justice (Legislative Department), which found many takers, was that if at all the common criteria had to be evolved, that could be enforced only through constitutional amendment. Here the State Government of Nagaland had sounded a discordant note. According to them such uniform principles could be evolved by Parliament only for members of Parliament and not for the members of the State Legislature as Parliament did not have the legislative competency in view of provisions in article 191(1) of the Constitution. Subsequently, however, on a specific query whether the Parliament had the competenry under Article 368 to amend the article 191(1), the State Government of Nagaland stated that it was possible but having a uniform definition would be difficult.

27. Again the Ministry of Law and Justice (Legislative Department) were of the opinion that evolving common criteria would Lead to several disputes because the determination of the fact as to whether the holder of any particular office other than the office of profit would fall within the guidelines or principles, would itself be a point of dispute or form part of that dispute. Moreover, there would be an increase in the number of references under Article 103 of the Constitution virtually leading to an enormous rise in the election petitions to be decided by the President and Election Commission.

28. On the question of generic criteria it was apparent that only JCOP were employing parameters other than the pecuniary aspect rte. functions, powers, patronage attached with a particular post/office to determine whether or not it was an office of profit. The text of the definition provided by the Ministry of Law and Justice, Government of India for consideration by the Committee which read as under was based on these parameters:—

~~"7n Article 102 of the Constitution, in clause (l)PP the Explanation, the/a/lowing Ey/unctions shall be substituted, namely:—~~

~~Explanation I. For the purpose of this clause— III "Office of profit" means—~~

Any office— plunder the control of the Government of /odic, or the Government of a State, as the case may be, whether the salary or remuneration for such office Is paid out of the public revenue of the Government of India or of the Government of State; or

63 (/0 under a body, whirl, is wholly or partially owned by the Government of India or the Government of any State and the solely or remuneration is paid by such body; and (4) the holder of office under sub-clause 11) is capable of exercising legislative, judicial or quasi-judicial power; (g) the holder of office under sub-clause (10 is capable of exercising powers by means of disbursement of funds, allotment of lands, issuing of licenses and permits or making of public appointments or granting of such other favours of substantial nature. GU A person shall not be deemed to hold an office of profit under the Government of India or the Government of any State by reason only that he N a Minister either for the Union or for such a State," Explanation 11. For the purposes of this clause the expression— (a) 'office" means the permanent substantive position which exists independently of the holder of the office; lb) "remuneration" means any pecuniary gain commensurate with the status and responsibilities attached to the office; le) alary" means salary or pay scale attached to the office whether or not the holder of such an office draws such salary After Clause (1), the following clause shall be inserted, namely :— "11A) Notwithstanding anything contained in sub-clause (a) of clause (1) if a member of either House of Parliament has become subject to any disqualification mentioned in that sub clause he shah' not be so disqualified unless he has not resigned from such office which is the subject to disqualification"

29.The Committee note that the above definition does not specifically address the issue of profit arising out of pecuniary gain. Rather it dwells on the functions, power, patronage etc. The aspect of pecuniary gain, perhaps, also needs to be addressed while evolving a definition. 30. On the other hand, some of the top legal experts, the National Law School University, Bangalore and majority of the State Governments were veering to the idea that the remuneration/ pecuniary aspect should be the major criterion in determining an office of profit as it was the only parameter which could be quantified. ALL other parameters were more or less subjective in nature. In this regard the Government of Nagaland were of the view that there was no office in the executive realms, which did not involve exercise of power or influence. Again according to a Legal expert, perception of conflict arose not because of the nature of the powers one exercised. This perception arose because one was earning an income, a profit or gain from the Government; it did not matter what powers one exercised. An eminent Lawyer went to the extent of recommending insertion of a specific provision in the Constitution to the effect that a person should not be disqualified for being chosen as or for being a Member of either House of Parliament or of a State Legislature, only because that person held an office under the Government of India or the Government of any State, whether it be an office of profit or not, so Long as that

64 person did not in fact receive or enjoy any benefit, whatsoever, monetary or otherwise, in connection with the holding of that office. Further he stated that it should also be clarified in a sub-clause inserted in article 103 (and a corresponding provision in Article 192) that where a person held any office (whether an office of profit or otherwise) under the Government of India or the Government of any State, and a question arose as to whether that person had or bad not received, or had or had not enjoyed a benefit (monetary or otherwise) in connection with the holding of that office, the burden of proving that he or she had not received or enjoyed any benefit with reference to that office should be on the person who held that office. This should be in addition to the existing prevention of disqualification Law as enacted and as amended.

31. On the issue of onus of burden of proof, the Committee feel that the matter perhaps comes under the realm of laws of evidence and/or laws of jurisprudence and accordingly should be left to the Government/Courts to decide. In any case it does not make any material difference to the subject matter being discussed and considered by the Committee.

32. A contrary view has, howeveb been held on the issue of remuneration by the Administrative Reforms Commission. It has held that holding of positions, in the advisory capacity, carrying certain remunerations and other perks did not make them executive offices. According to the Commission, often the crude criterion applied was whether or not the office carried remuneration. In the process, the real distinction of whether executive authority was exercised in terms of decision-making or direct involvement in deployment of public funds was often lost sight of. The Supreme Court's clarification about the appointment and removal being in the hands of the executive branch of Government did not help either, because many appointments made might be in advisory capacities. According to the report, Legislators who were not Ministers often did have significant expertise from their own personal or professional background. In addition, their experience in public service gave them unique insight and understanding of public policy. Such expertise and insights would be valuable input to executive in policy making. Therefore, the Committees and Commissions of a purely advisory nature could be constituted with legislators. The Constitution recognized that holding of such offices in expert and advisory bodies did not violate separation of powers and Left it to Parliament and State Legislatures to exempt such non- executive offices from disqualification. But appointment in statutory or non-statutory authorities with direct decision making powers and day to day control of field personnel, or positions on the governing boards of public sector undertakings or as Government nominees in private enterprises clearly carried direct executive responsibilities and involved decision making powers. Such appointment would undoubtedly violate separation of powers. Giving discretionary powers to legislators to sanction or approve public works was clearly an exercise of executive function, whether or not the Government appointed the legislators to a designated office. It was necessary to sharply distinguish executive functions and exercise of executive authority while defining office of profit, irrespective of whether such a role or office carried remuneration and perks. Accordingly, the Commission has made the recommendations for amendment in the law to define office of profit based on the following principles:

(i) All offices in purely advisory bodies where the experience, insights and expertise of a Legislator would be inputs in governmental policy, should not be treated as offices of profit, irrespective of the remuneration and perks associated with such an office.

~~65 "144_~~

(ii) All offices involving executive decision making and control of public funds, including positions on the governing boards of public undertakings and statutory and non- statutory authorities directly deciding policy or managing institutions or authorizing t, and no legislator or approving expenditure should be treated as offices of profi should hold such offices. (iii) If a serving Minister, by virtue of office, was a member or head of certain organizations Like the Planning Commission, where close coordination and integration between the Council of Ministers and the organization or authority or committee was vital for the day to day functioning of government, it should not be treated as office of profit.

33. The Committee note that the Administrative Reforms Commission do not recommend a blanket exemption for the Ministers to hold any office of profit unlike the existing provision. It says that an office shall not be treated as an office of profit only in cases where a Minister, by virtue of his being a Minister is a member or head of certain organization which is vital for day to day functioning of the Government. This is a new concept In as much as it seeks to curb the hitherto unrestricted access to offices of profit enjoyed by the Ministers, ostensibly to cater to the westminister model in which executive (Council of Ministers) is drawn from the legislature. However, the Committee feel that incorporating it in the definition, disturbing the status quo, would create serious imbalance in the overall scheme of things as it stands today. 1955 had also echoed almost the same sentiments. 34. The Bhargava Committee appointed in As per Bhargava Committee (report presented in flov.1955), members of Parliament should be encouraged to serve on such Committees, which were of an advisory character and represent the Local or popular point of view, in a manner, which would effectively influence the official point of view. Members of Parliament by virtue of their membership were in a position to say and represent certain matters with some authority and confidence, and their views were likely to go a long way in influencing the view point of officials. But at the same time, it felt that consistent with the above view expressed, Members of Parliament should not be permitted to serve on committees, commissions etc. which jeopardized their independence or which would place them in a position of power or influence or in a position where they received some patronage from Government or were themselves in a position to distribute patronage. • On the issue of identifying an office of profit one of the suggestions given by a Senior 35. Advocate was to classify the agencies and bodies into the following four categories keeping in view the nature of functions and activities being performed by them:—

(i) Directly under the Government; Statutory authorities or Corporations in which Government have the power either to appoint or remove or both: liiil Public Sector Undertakings owned wholly or partly by the Government where the Government have the power to appoint or remove; (iv) 'Other bodies' significantly funded by the Government where the Government have pervasive control. 36.So far as the first three of the above categories of offices are concerned, the import of the suggestion was that Legislators should not hold these offices. As regards the fourth category of bodies, exemption from disqualification etc. should be made on the basis of recommendations of a designated Committee following due procedure.

~~66 -V 1r-~~

~~37.For the purpose of office of profit, yet another two categories of offices of different genre had been identified by an eminent lawyer which are as follows:—~~

~~(I) Offices in the judiciary) and~~

~~(ii) Legislators of some other legislative body or Panchagat,~~

38.On the question of definition of office of profit, a new concept was introduced by State Government of Nagaland, which envisaged rewording of Article 102 on the pattern of Article 361B which dealt with 'remunerative political post'.

39. The State Government of Nagaland were of the view that the proposed definition given by the Ministry of Law and Justice (Legislative Department) did not define the 'Office of Profit' comprehensively. According to them, the definition of 'Office of Profit' in the proposed Article was same as the definition of 'remunerative political post' provided in Article 361B.

40.The Committee feel that although the idea propounded by Government of Nagaland seems to be bit interesting, there does not appear to be overwhelming reasons for making or even perceiving that Article 102(1)(a) or 191(1)(a) are almost analogous to Article 361B, which otherwise, embody entirely two different concepts, philosophy and ideals. The canvas for 'office of profit' is much larger than the 'remunerative political post', it is felt.

41. After analyzing the issue threadbare, the Committee feel that any definition of office of profit has to be the sum total of every conceivable ideas/opinions including court judgments reduced in terms of parameters/criteria such as salary, remuneration, functions, patronage, powers including that of disbursement of funds, issue of licenses etc. as it is not known as to which element in terms of weightage would precisely render an office into an office of profit in a given circumstance under legal scrutiny. At the same time the Committee can not be oblivious of the observations made by the Ministry of Law and Justice (Legislative Department) according to which any comprehensive definition of the term "office of profit" which cast the net so wide that all our citizens with specialties and know-how offering some voluntary services in para-official, statutory or like projects run or directed by Government or controlled by the State are inhibited from entering elected organs of public administration may be detrimental to the democracy itself. Accordingly, the Committee strongly feel that while defining an office of profit, it is also essential to identify the generic criteria of the offices/posts which would not constitute offices of profit or in other words which would not be deemed as offices of profit. And this aspect has to be the part of the definition itself. Accordingly, the Committee have identified the following three categories of offices which should not be deemed to be offices of profit:—

~~(1) Minister for the Union or for States; (2) Office in Parliament or State Legislatures; (3) Advisory offices in Union or States.~~

42.The rationale for identifying the above three categories is deal h n the succeeding paragraphs. 67 Minister for the Union or for States he to account for the Westminister 43. This is as per existing provision of the Constitution model in which the executive (Council of Ministers) is drawn from the legislature.

~~(1/ Office in Parliament or State Legislatures and Advisory offices in Union or States~~

44. These generic criteria have been identified to account for the very spirit and soul (sanctum sanctorum) of the provisions of Article 102(1) (a) which, it is felt, needto be bracketed under a separate category, as in case of item (I) under paragraph 41 above, through positive assertions of the lofty ideals, philosophy on which the article is based in so far as evolving the generic criteria for keeping outside the purview of office of profit is concerned. This would also impart clarity and teeth to the definition of the office of profit sought to be inserted in the articte.

45. Many experts and National Lary School of India University, Bangalore are of the opinion that the explanation to clause I of Article 102 which exempts the Ministers from disqualification is relevant as an aid to construction of any law made thereunder and Parliament may by law include such offices which are ministerial in character but not in nomenclature.

46. Also there appears to he a clear consensus, as brought out in the reports of Joint Committee on Office of Profit (JCOP), Administrative Reforms Commission, among experts and cognoscenti that in a parliamentary democracy services of the representatives of the people having proven expertise, skill, vision, perspicacity etc. in various spheres of public importance should be utilized in the nation building process, policy formulation and governance, besides law making activities, by associating them in various government bodies, committees etc. in advisory and honorary capacity utilizing their core competence.

47. Again for vibrant and smooth functioning of parliamentary democracy certain posts/ offices directly connected with the Parliament/State Legislatures such as office of Leader of Opposition in Parliament, office of Leader and Deputy Leader of Party and recognized Parties/ groups in Parliament, the Chief Whips, Deputy Chief Whips or Whips in Parliament/State Legislature etc. are needed to be kept outside the purview of the office of profit. From perusal of 1959 Act as amended till date it can be seen that these categories of offices are already intruded in it. Given the Lofty ideals behind the provisions of Article 102 (l)la), these exemptions perfectly fit into the scheme of things.

48. other exemptions suggested in the Act, although may fall under some generic nature, do not seem to fit into 'not be deemed to hold an office of profit' category going by above yardsticks and may be dealt under office declared by Parliament by law not to disqualify its holder'.

49. In view of the above, the Committee suggest the definition of office of profit as follows:- "Office of profit" means any office— (1) under the control of the Government e f India, or the Government of a State, as the case may be, whether or not the salary or remuneration for such office is paid out of the public revenue of the Government of India or of the Government of State; or

68 00 under a body, which is wholly or partially owned by the Gov rn ent of Melia or the Government of any State and the salary or remuneration is paid by sod, body; and (A) the holder of which is capable of exercising executive powers delegated by the Government including disbursement of funds, allotment of lands, issuing of licenses and permits or making of public appointments or granting of such other favours of substantial nature; or legislative, judicial or quoshfudicial functions; and/or (B) the holder under (0 or (Nis entitled to chowsalary or remuneration irrespective of whether he actually receives it. A person shall not be deemed to hold an office of profit under the Government of India or the Government of any State by reasons only that-

(i) he is a Minister for the Union or for such a State; (ii) he is holding an office in Parliament or such a State Legislature; (iii) he is holding an advisory office for the Union or for such a State. Explanation (a)"ornces in Parliament and Statelegislature" means the offices which are directly connected with the discharge of legislative functions in Parliament or in a State Legislature e.g. office of Leader of Opposition in Parliament, office of Leader and Deputy Leader of Party and recognized Parties/groups in Parliament, the Chief Whips, Deputy Chief Whips or Whips in Parliament/State Legislature etc.; (b)"salary" means salary or pay scale attached to the office whether or not the holder of such an office draws such salary; (c) "remuneration" means any pecuniary gain commensurate with the status and responsibilities attached to the office, but shall not include the expenditure incurred on staff and infrastructure for running office; (d)"compensatory allowance" means any sum of money payable to the holder of on office by way of daily allowance (such allowance not exceeding the amount of daily allowance to which a member of Parliament is entitled under the [Salaries and Allowances and Pensions of Members of Parliament Act, 1954 (30 of 1954ff any conveyance allowance, house rent allowance or travel/Mg allowance for the purpose of enabling him to recoup any expenditure incurred by him in performing the functions of that office; (e) "Advisory office" means any office (by whatever name called) which is as sadated with purely giving counsel or recommendation on any particular subject/policy, in respect of any matter of public importance/interest and no salary or remuneration except for compensatory allowance is attached with it.

50.The general principle that emerges from the above definition is that virtually all offices under Government are offices of profit until stated otherwise. The Committee feel that this would amply clarify the concept of office of profit without much ambiguity.

~~69 Exceptions from disqualification~~

51. In regard to creating exceptions from disqualification declared by law which is quite distinct from exceptions made in the definition under the 'not to be deemed as office of profit' category, the Committee feel that the pecuniary aspect could be one of the criteria. In fact this criteria has been the mainstay of the Union and most of the State Acts.

~~(iii) Opportunity for Resignation~~

52. As regards incorporation of an enabling provision in the Constitution for an elected member of Parliament to exercise an option to resign from an office in the event of the office he was holding being determined as an "office of profit' under the Government without losing his membership of the House, the majority of the State Governments were in favour of such a provision subject to modification in the definition incorporating such a clause proposed by the Ministry of Law and justice (Legislative Department), Government of India which read as under:—

71)W Notwithstandesg anything contained in sub-clause (a) of clause (I) if a member of either House of Parliament has become subject to any disqualification mentioned in that sub-clause he shall not be so disqualified unless he has not resigned from such office which is the subject to disqualification."

53. It has been the opinion of many of the State Governments that the manner in which such a clause has been drafted, it has the effect of giving unrestricted discretion to the legislator to continue in office notwithstanding occurrence of disqualification if he did not resign.

54. It was felt that the issue of resignation clause needed to be dealt with in the light of opinion expressed by a few experts and National Law School, Bangalore that there should not be any retrospective exemption from disqualification from certain offices of profit by legislation. For having proper appreciation and correct perspective of the matter, the views expressed by one of these experts in this regard (on resignation) could be summoned here. The thrust of his argument was that it made perfect sense to have such a clause, as after having done all the hard work in getting elected to Parliament or State Legislature the members should not find themselves on the wrong side of the law simply on account of holding some office/post which otherwise were perfectly alright until they got elected but subsequently turned out to be office of profit under the intense glare of legal scrutiny rendering them disqualified from being chosen as or being a member of the legislature. And they could not do anything about it. In this connection the Committee also wondered why only membership had to be sacrificed, especially when they had been elected by the people, and not the office/post which was the root cause of the problem.

55. The National Law School University, Bangalore, however, thought otherwise. According to them such a clause in the proposed definition would defeat the constitutional purpose of punishing holder of office of profit. Alternatively, they had given a suggestion that a 2-month moratorium might be allowed after constitution of the new House to the elected members holding office of profit to resign those offices, which would ensure avoidance of unnecessary disqualification.

56. Further, an expert has introduced a concept whereby a distinction was made between 'being chosen as' and"for being' a member of the legislature. According to this view currently, articles 102 and 191 envisaged an absolute disqualification, i.e. all offices of profit must be given up before the election. However, this absolute disqualification was too wide and unnecessary.

~~70 t1 -~~

According to him there was a distinction between two fundamental principles as to why the 'office of profit' concept was created. Broadly, these prohibitions applied to legislators (a) to prevent undue influence during elections; and (b) to avoid a conflict of interest after elections. For this reason, he had proposed that (i) the question of undue influence be dealt with under the applicable electoral law on the basis of which 'office of profit' holders must resign all their posts before filing their candidacy nominations for elections; and (iii avoiding the problems posed by conflict of interest could be resolved by an elected legislator resigning his remaining offices of profit after the elections. On the basis of this distinction there might be:

(a) offices that must be given up before an election; [such persons (civil servant under Articles 310 and 311 and members of Judiciary), must resign their office before becoming candidate in an election. This was in order to ensure that (1) undue advantage in the electoral process is avoided; and (2) conflict of interest was eliminated in so far as process of election was concerned] and (b) offices (Article 12 institutions or bodies and Legislators or members of some other legislative body or Panchayat) that must be given up after an election but before taking oath as a member of the legislature.

57. For this purpose Articles 102. and 191 would require to be amended to categorize disqualifications into those for 'being chosen as and for 'being' a Member of the Legislature. The question of a uniform approach to the States was resolved if amendments were made to corresponding Articles in the Constitution, for both the Centre and the States. Statutorily this would mean that Sections 9A and 10 of the Representation of People Act, 1951 (which provides an absolute disqualification for persons holding Government contracts or an officer of a Government company), would have to be repealed. However, the parliamentary scrutiny was necessary which could be achieved in the following two ways:

(i) At the beginning of every Parliament, a full declaration must be made by all MPs/ MLAs. The List of offices held by MPs/MLAs could then be scrutinized by the Joint Parliamentary Committee on the basis of the criteria mentioned above, after which it could determine whether Parliament should validate those offices; (8) Thereafter, if the Government made any appointment of a legislator to an office, it must be referred to the Joint Parliamentary Committee. The findings of the Committee, although recommendatory, must be taken into account in the final determination by the Election Commission if a question arose under Article 103.

58.The Committee, however, are of the view that they have been mandated to suggest a comprehensive definition of the office of profit in the context of settled interpretation of the expression in Article 102 of the Constitution. They have to take the constitutional scheme as it was. They are not authorized to interpret how Article 103 should be changed. They can not even make distinctions between pre-election disqualification and post-election disqualification because Article 102 was committed to that. The same disqualifications apply and that was the settled aspect of the matter. Any deviation on this count has to be through constitutional amendment only. 59.Coming to Article 103 the Committee note that with reference to a query whether there could be any authority other than those provided under the existing law for deciding 71 whether a particular office was an office of profit or not the overwhelming view among the experts and the States was that the existing scheme in this respect should not be tampered with. 60. The Committee feel that the objective behind the proposed resignation clause may have some merit. However, with the evolution of the definition of office of profit, which would clearly indicate, as to what is an office of profit and what is not deemed to be an office of profit, and also which office is exempted from disqualification under the law, clarity to a very large extent would be available before the persons intending to contest the elections. Accordingly they may make an informed choice before filing nomination papers. This clarity is presently not available. Thus, the main reason for which the resignation clause was intended to be inserted would now be addressed by the definition. On the other hand the proposed insertion of resignation clause may cause some disputes in regard to identifying the offices in the respective categories viz. the offices which are to be resigned before election and those which are to be resigned after election, even within the ambit of articles mentioned above. Moreover this move may not be consistent with the constitutional principles and may not stand judicial scrutiny. In this regard the Committee also nose the apprehensions expressed in some quarters about inserting this clause as it would defeat the very purpose of provisions of disqualification on account of holding office of profit. Accordingly, the Committee feel that aresignation clause may not be necessary after having defined the office of profit. 61. Regarding appointment of a Committee for scrutiny of offices of profit, while the concept envisioned by some of the experts may be a laudable one, the proposal does not, perhaps, fit into the overall perspective of the Committee and also constitutional scheme of things vis-a-vis Article 103. In any case, the Committee feel that the existing JCOP are addressing the issue to a large extent. (iv) Uniform application of the criteria and definition in Union and State Governments/ Union Territories 62. On perusal of Parliament (Prevention of Disqualification) Act, 1959 and other State Government Acts the Committee found that in granting exemption from disqualification no specific criteria bad been followed except for, in few cases, remuneration. In not having any Criteria, except for remuneration, it seemed that the States too had given exemptions on similar lines/pattern of exemptions given to certain posts/offices in the Central Act. 63. Now that a definition of office of profit has been worked out and a criterion for giving exemptions from disqualification has been identified, it is only Logical that for having the desired results the Central and the State taws are brought on equal footing, as is the existing position. Accordingly the Committee suggest that the Article 102(1 ha) should be amended on the following lines:— Article 102(1) A person shall be di➢qualified for being chosen as, and for being a member of either House of Parliament (a) If he holds any office of profit under the Government of India or the Government of any State, other than an office declared by Parliament by law not to disqualify its holder I. Provided that the holder of such office should not draw any salarYffeffuneration except for compensatory allowance:

~~72 COI --~~

II. Provided further that a person shall not be deemed to hold an office of profit under the Government of India or the Government of any State by reasons only that- (i) he is a Minister for the Union or for such a State; (ii) he is holding an office in Parliament or such a State Legislature; (iii) he is holding an advisory office for the Union or for such a State. Explanation :For the purposes of this clause 0 "Office of profit" means any office- 10 under the control of the Government of India, or the Government of a State, as the case may be, whether or not the salary or remuneration for such office is paid out of the public revenue of the Government al Indio or of the Government of State; or (ii) under a body which is wholly or partially owned by the Government of India or the Government of any State and the salary or remuneration is paid by such body; and (A) the holder of which is capable of exercising executive powers delegated by the government including disbursement of funds, allotment of lands, issuing of licenses and permits or making of public appointments or granting of such other favours of substantial nature; or legislative, judicial or quasi-judicial junctions; and/or (e) the holder under (I) or (10 is entitled to draw salary or remuneration irrespective of whether he actually receives it. (b) "offices in Parliament and State Legislature" means the offices which are aYrectly connected with the discharge of legislative functions in Parliament or in a State Legislature e.g. office of (coder of Opposition in Parliament, office of Leader and Deputy/00M of Party and recognized Parties/groups in Parliament, the Chief Whips, Deputy Chief Whips or Whips in Parliament/State Legislature etc. "salary" means salary or pay scale attached to the office whether or not the holder of such an office draws such salary (d) "remuneration" means any pecuniary gain commensurate with the status and cesponsibilitfes attached to the office, but shall not include the expenditure incurred on staff and infrastructure for running office- (e) "compensatory allowance" means any sum of money payable to the holder of an office by way of daily allowance (such allowance not exceeding the amount of doily allowance to which a member of Parliament is entitled under the [salaries and Allowances and Pensions of Members of Parliament Act, 1954 09 of 1954)j any conveyance allowance, house rent allowance or travelling allowance for the purpose of enabling him to recoup any expenditure incurred by him in performing the functions of that office. If) 903,isory office" means any office (by whatever name called) which is associated with purely giving counsel or recommendation on any particular subleot0010, in respect of any matter of public importance/interest and no salary or remuneration except for compensatory allowance is attached with it 73 •- 11:11-

64.The Committee are also of the opinion that in order to maintain uniformity in the provisions of Articles 102(1)(a) and 191(1)(a), as is the position at present, Article 191(1)(a) may also be amended on the similar lines. This would in no way take away or curtail any existing legislative rights of States, as has been apprehended in some quarters. Rather this would smoothen the implementation of the provisions of the Constitution thereby imparting clarity, certainty and uniformity to a large extent in identifying offices of profit and reducing arbitrariness in its application. Thus, the States would simultaneously retain the right to legislate for seeking exemptions from disqualification of offices keeping in view the overall national perspective as well as the local factors/compulsions, keeping the federal fabric intact. For example, Manipur Government have stated that there are more than 33 different communities of tribes and more than 7 non-tribal communities speaking different languages which need to be given representation in the Government. As a natural corollary the Committee, therefore, feel that there cannot and need not be a one to one correspondence between the offices exempted from disqualification under the Union and various State laws, in absolute terms, even while agreeing on common principles/criteria.

(v) U.K.Law and revisiting 42nd Amendment 65. The Committee note that the conundrum thrown up by the existing system had necessitated in having a serious rethinking on its efficacy in dealing with the seemingly intractable problems on the issue of office of profit. This had opened up a search for an alternative method which was in the form of examining the feasibility and exploring the possibility of adoption of system of taw relating to prevention of disqualification of Members of Parliament as was existing in the United Kingdom and considered by the Constitution (Forty-Second Amendment) Act, 1976. It was felt that introduction of negative list on the pattern of U.K. law could obviate the need for having a definition of 'office of profit' and evolving of uniform criteria.

66. It was observed that The House of Commons (Disqualification) Act, 1975 disqualifies a Large number of public office holders. It was the single most important Legal measure affecting eligibility for parliamentary candidature. It laid down six classes of office holders who were disqualified which were as under:—

~~(1) Holders of certain judicial offices including High Court and Court of Appeal judges (Law Lords are disqualified already by virtue of being members of the House of Lords);~~

(2) Civil servants, whether established or not, and whether full-time or part-time; (3) Members of the regular armed forces; (4) Full-time police offices; (5) Members of the Legislature of any country outside the Commonwealth; and (6) Holder of any of the offices Listed in Schedules of the Act.

67. The Act also Limited the number of Ministers who could sit in the House of Commons at a time. The Act enabled the government to add or vary the List from time to time by Parliamentary resolution and an orderin Council. The judicial Committee of the Privy Council had jurisdiction to decide matters in relation to jurisdiction under 1975 Act provided that an election petition was not pending or that the Commons had not made an order directing that the disqualification should be disregarded.

~~79 68. Importantly, there appeared to be no criteria in the schedule for what exactly constituted an office of profit under the Crown.~~

69. One clear merit of the approach followed in the United Kingdom was that there was no ambiguity surrounding whether or not the holding of a particular office would result in disqualification. If an office is listed in the schedule then it would result in a disqualification, and if it is not listed then it would not.

70. There are certain basic differences between the Indian Act [Parliament (Prevention of Disqualification Act, 1959)] and the House of Commons Disqualification Act. These were (1) The House of Commons Act did not adopt the concept of compensatory altowance in the context of office of profit, whereas this allowance was a major factor in the determination of an office of profit in the Indian Law. (ii) The House of Commons Act specified the disqualifying offices fairly exhaustively and declared that no other office or place of profit under the Crown should disqualify the holder for the membership of the House. The Indian Law specified the offices, which disqualify as well as do not disqualify. It did not, however, contain any definitive declaration in regard to non-disqualifying offices other than those specified in the Schedule. (CO Further, under the Indian law any office under the Government, which fetched remuneration higher than compensatory allowance, was an office of profit except the offices exempted under the Constitution. (iv) the concept of disqualification on the ground of office of profit did not seem to apply to the membership of the House of Lords, which was a House of hereditary peerage. The Indian law applied to both Houses of Indian Parliament and Article 191(1) covered the State Legislatures. The State Legislatures had also enacted laws in this regard. (v) The Constitution of India exempted all Ministers of the Union Government as well as of the States from disqualification on account of holding an office of profit. The House of Commons law put a restriction on the number of ministers who can sit and vote in the House.

~~71. There was, however, one similarity. The term "office of profit" had not been clearly defined either in the House of Commons Act or the Indian Act.~~

72. Sections 19 and 32 of the Constitution (Forty-Second Amendment) Act, 1976 aimed to reverse the basis of disqualification by providing that only those offices which were specified by law made by Parliament would disqualify the holder on the lines of the United Kingdom law, namely the House of Commons Disqualification Act, 1975.

73. The above amendment in 1976 was brought with a view that there should bean exhaustive list of offices by a Parliamentary legislation which disqualify its holder being chosen, as or for being a member of either House of Parliament or State Legislature. The power to enact law to declare offices of profit, which would attract disqualification of its holder for being chosen as or being a member of a State Legislature, was also vested in the Parliament. However, the sections 19 and 32 of the said constitutional amendment were not brought into force and the s were omitted vide section 49 of the Constitution (Forty-Fourth Amendment) Act, 1973. It was felt in regard to the amendment made by the Constitution (42nd Amendment), Act 1976 that it would jeopardize the independence of Members of Legislatures and would enable the Government of the day to 'pack' the legislature with persons who would hold offices of profit for continuance in which they would be dependent upon Government.

~~75 —ray,~~

74. While many of the States were in favour of adoption of system of Law relating to prevention of disqualification of members of Parliament as existing in the United Kingdom and reintroduction of provision as envisaged in Constitution (Forty-Second Amendment) Act, 1976 as it (negative List) provided certainty and clarity regarding the offices/posts holding of which would attract disqualification, some of the State Governments and prominent experts had advised against the same as according to them United Kingdom did not have a written constitution. There, the Parliament was supreme. It even exercised judicial power in England. There Courts did not have power to strike down laws of Parliament. They could only declare that these Laws would not be operative until Parliament otherwise decided. Whereas in India the Constitution was Supreme. Moreover, there were stark differences between the ground realties in both the countries.

75.The Committee finds that one clear merit of the approach followed in the United Kingdom is that there is no ambiguity surrounding whether or not the holding of a particular office would result in disqualification. If an office is listed in the schedule then it would result in a disqualification, and if it is not listed then it would not

Notwithstanding the advantages of having such a negative list as exists in U.K. and as 76. attempted in Constitution 42nd Amendment Act, 1976 in so far as they give clarity and certainty in identifying an office of profit which should not be held by a legislator, the Committee feel that this may not be suitable for the Indian system as here all the laws made by Parliament are subject to judicial review whereas in U.K. the Parliament is supreme which even exercises judicial powers. In Indian system, there will be a plethora of litigations involving the left over offices/posts, which have not been included in the negative list and otherwise are available for occupancy by the legislators on which nevertheless the shadow of office of profit will always loom large as these would not be protected under any law. Further, any office under the Government of India, which fetches remuneration higher than compensatory allowance, is an office of profit except the offices exempted under the law and the concept of disqualification on the ground of office of profit does not seem to apply to the membership of the House of Lords, which is a House of hereditary peerage.

77. The Committee finds that in fact in the U.K. law the actual use of the phrase 'office of profit' is not used while placing various offices/posts in the negative list and there is no bar in holding any office outside this list. Whereas in India, Article 102(1)(a) specifically uses the phrase 'office of profit'. The changes as proposed in the 42nd Amendment Act will also not be adequate in providing the real solution just because the offices/posts outside the negative list will still not be safe as these would be subject to the vagaries of 'office of profit' tests which will be determined and decided by the court of law on the circumstance and merit of each case.

70. In this regard, the Committee also note that the reason given by the Ministry of Law a Justice (Legislative Department) for dropping the 42nd Amendment Act, 1976 through 44th Amendment Act, 1978 in the context of office of profit was that it would jeopardize the independence of Members of Legislatures and would enable the Government of the day to 'pack' the legislature with persons who would hold office of profit for continuance in which they would be dependent upon Government.

76 79. Most importantly, the Committee feel that the 42nd Constitution Amendment Act sought to vest all the powers in the hands of Parliament for declaring office of profit for disqualification, both at the Centre and the States. This, according to many States is not desirable. Here, the Committee note the observation made by the Council for Political Studies, Kolltata according to which "a fully sovereign Parliament does not go with the spirit of the Constitution—the spirit that has been reinforced by the Courts' judgment on the unamendability of the basic structure." 80. The Committee, therefore, do not feel the need for adoption of the U.K. law or revisiting the 42nd constitutional amendment in the matter. This is more so as a solution has been worked out under the existing system, albeit, sprucing it up.

~~77 AN NEXU RES~~

~~S-06~~

~~ANNEXGRE~~

~~THE PARLIAMENT IPR lONFODISQUALWCATION ACT, 1959 G 59)~~

~~148 Apr11, 19591~~

~~far bang thosen as, or for being, members of Fothiment~~

~~BE it enacted by Porliament En the Tenth VLSI of the RepublO of India as follows:-~~

~~1. ghost tidy -This Act may be called the Parliament Othevenbon of DIsthathcation) Act, 1959.~~

~~2. Delblitions. - In this Act. miles& the context otherwise requires. -~~

a) "compensatory allowance meths row sum of money payable to the holder rif an office by v.ray daily allowance /such allowance not moceeding the amount of daily allowance to which a member of Parliament mffiled under' [the Salary, Anoevances and Pension of Members of ffirfialnenE Act, 1954 930 of 195401 any cool-wane, EdE0Wanee, house rent allowance or travelling allowance for the purpose or enabling him to recoup any thpenditUre 111Curred by him in performing the fUndiOnS, of that Office,

~~(b) 'Statutory body" means any corporation, committee. conomissien, council. board Or Other body of persons, whether incorporated or not established by or under any law for the lime being in force,~~

~~fel 'non-statutory body means any body of persons other than a statute/Et body.~~

certffin offices of profit not th alb.- It is hereby declared that none of Vie folloffing offices, in so fax as Et is an office of profit under the Government of India or the Goternment of any State, shall disqullify the holder thereof for being chosen as, or for being, a member of Fathom:en t. namely:-

~~PI any office held by a Minister, banister of State or 0 effith Minister for the Almon or ter any State,~~

3 loth the office of a Leader of the Opposition in Panhthoentn lab) the office of Deputy Chairman. Planning Commission:I las) the office of 'leach Mader and deputy leader] of a meow:Zed puro and recognised group in either Ho seof Parb arnenth NI the offs e of Chief W hip, Deputy Chief Whip or Whip in Parliament or of Parhamentary Secretory. Opal the Mee of Chaerperson of -

~~I the National Commission for Miniffilies con sutured under section 3 or the National Commission for Minorities Act. 1992 II9 of 13924~~

~~clause (II r snide 333 of the Constitution:~~

~~I1 the National Commission roe Women constituted under secemn a of the !Tetanal COMMI&SIOn for Women A .1990 (20 of 199081~~

lc) the Gni c of member of auy form raised or maintained undo the National Cadet Corps Act. 1948 PI of 19081 the Territonal Army Act, 1908 E56 of 19481, or the ReeerVE and Auxiliary Air Forces Act, 1952 E52 of 19321. (di the office or a member of a Home Guard constituted under any law for the time being in force in any Slate, the office of Werth En the city of Bombay, Calcutta or Madras; Ill the office of chairman or member of the syndicate, senate, executive committee, council or court of a uniyersiffi or sny other body connected with a universith 'filth If r b y tl g ti t t d l d by th a f y p mal Poopeoe;

~~• Ins by Fa 5 or 1909, S~~

~~80 A~~

~~—pa -~~

~~ANNEXL/RE /~~

~~Parliament (Prevention of Disqualification) Act 1959 (PART IV.—Law Relating to Removal of Disqualification)~~

(11) the office of chairman or member of a committee (whether consisting of one or more members), set up temporarily for the purpose of advising the Government or any other authority in respect of any matter of public importance or for the purpose of making an inquiry into, or collecting statistics in respect of, any such matter, if the holder of such office is not entitled to any remuneration other than compensatory allowance;

1((i) the office of chairman, director or member of any statutory or non-statutory body other than any such body as is referred to in cLause (h), if the holder of such office is not entitled to any remuneration other than compensatory allowance, but excluding (1) the office of chairman of any statutory or non-statutory body specified in Part I of the Schedule, (ii) the office of chairman or secretary of any statutory or non-statutory body specified in Part II of the Schedule;] (D the office of village revenue officer, whether caged a Lambardar, maLguzar, patel, deshmukh or by any other name, whose duty is to correct Land revenue and who is remunerated by a share of, or commission on, the amount of Land revenue coLLected by him, but who does not discharge any police functions.

~~2[Explenation l].—For the purposes of this section, the office of '[Chairman, Deputy Chairman or Secretary] shag include every office of that description by whatever name called.~~

4[Expiatiatioy 2].—In clause (ea), the expression "Leader of the Opposition" shall have the meaning assigned to it in the Salary and Allowances of Leaders of Opposition In Parliament Act, 1977 (33 of 1977).

5 [Explonation 3.—In cLause (ac), the expressions 'recognised party" and "recognised group" shall have the meanings assigned to them in the Leaders and Chief Whips of Recognised Parties and Groups in Parliament (Facibties) Act, 1998 (5 of 1999).] 4. Temporary suspension of disqualification in certain case.—If a person being a member of Parliament who immediately before the commencement of this Act held an office of profit declared by any taw repealed by this Act not to disqualify the bottler thereof for being such member, becomes so disqualified by reason of any of the provisions contained in this Act, such office shall not, if held by such person for any period not extending beyond a period of six months from the commencement of this Act disciuatify him for being a member of Parliament.

Subs. by Act 51 or 1997, 5.3, for a. (1) nue., 29.77993a • Explanation numbered as Explanation 1 thereof by Act 33 of 1977, s. 12 nue./ 1.11.19771. • Subs. by Act 51 or 1993, a 3, for certain words Ina/ 27.019931.

~~• Ins. by Act 5 of 1999, s. 5. 81 ---~~

5. Repeals.—The Parliament (Prevention of Disqualification) Act, 1950 (19 of 1950), the Parliament Prevention of Disquatification Act, 1951 (68 of 1951), the Prevention of Disqualification Act, 1953 (I of 1954), and any provision in any other enactment which is inconsistent with this Act are hereby repeated.

THE SCHEDULE [See section 3011 PART I BODIES UNDER THE CENTRAL GOVERNMENT Air India International Corporation established under section 3 of the Air Corporations Act, 1953 (27 of 1953). Air Transport Council constituted under section 30 of the Air Corporations Act, 1953 (27 of 1953). Board of Directors of the Export Risks Insurance Corporation 1""Limited. Board of Directors of the Heavy Electricals I'Limited. Board of Directors of the Hindustan Cables l'""Limited. Board of Directors of the Hindustan Insecticides "'Limited. Board of Directors of the Hindustan Machine Tools i'Limited Board of Directors of the Hindustan Shipyard Limited. Board of Directors of the 2[Flindustan Chemicals and Fertilizers Limited] Board of Directors of the National Coat Development Corporation (Private) Limited. Board of Directors of the National °[Industrial] Development Corporation 4. Limited. Board of Directors of the National Instruments i'm Limited. Board of Directors of the National Small Industries Corporation s'" Limited. Board of Directors of the Neyveli Lignite Corporation (Private) Limited.

Board of Directors of the Sindri Fertilizers and Chemicals 4"' Limited. Board of Directors of the State Trading Corporation of India 466 Limited. Central Warehousing Corporation established under section 17 of the Agricultural Produce (Development and Warehousing) Corporations Act, 1956 (28 of 1956). Coal Board established under section 4 of the Coal Mines (Conservation and Safety) Act, 1952 (12 of 1952). Coat Mines Labour Housing Board constituted under section 6 of the Coat Mines Labour Welfare Fund Act, 1947 (32 of 1947).

The brackets and word "(Diva Ce)" omitted by Act 58 of 1960, S. 3 and ale Second Schedule. Subs. by Ac 58 of 1960, s. 3 and the Second schedule, for "Nangal Fertilizers and chemicau (Prate) Li chi 3 Ins. by s, 3 and the Second Schedule, mid 4 The brackets and word "(Private)" omitted by s. 3 and the second schedule, ibid.

~~82 Commissioners for the Port of Calcutta. Committee for the allotment of land in the township of Gandhid ham.~~

Company Law Advisory Commission constituted under section 410 of the Companies Act, 1956 (1 of 1956). Cotton Textiles Fund Committee constituted under the Textile Funds Ordinance, 1944 (Ord. 34 of 1944). Dock Labour Board, Bombay, established under the Bombay Dock Workers (Regulation of Employment) scheme, 1956, made under the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948).

Dock Labour Board, Calcutta, established under the Calcutta Dock Workers (Regulation of Employment) Scheme, 1956, made under the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948). Dock Labour Board, Madras, established under the Madras Dock Workers (Regulation of Employment) Scheme, 1956, made under the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948). Forward Markets Commission established under section 3 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952). Indian Airlines Corporation established under section 3 of the Air Corporations Act, 1953 (27 of 1953). Industrial Finance Corporation of India established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948). Licensing Committee constituted under rule 10 of the Registration and Licensing of Industrial Undertakings Rules, 1952, made under the Industries (Development and Regulation) Act, 1951 165 of 1951). Mining Boards constituted under section 12 of the Mines Act, 1952 (35 of 1952).

~~National Co-operative Development and Warehousing Board established under section 3 of the Agricultural Produce (Development and Warehousing) Corporations Act, 1956 (28 of 1956).~~

Rehabilitation Finance Administration constituted under section 3 of the Rehabilitation Finance Administration Act, 1948 (12 of 1948). Tariff Commission established under section 3 of the Tariff Commission Act, 1951 (50 of 1951).

~~Trustees of the Port of Bombay.~~

Trustees of the Port of Madras. Trustees or Commissioners of any major port as defined in the Indian Ports Act, 1908 (15 of 1908), other than the Port of Calcutta, Bombay or Madras. 83 BODIES UNDER STATE GOVERNMENTS

~~Andhra Pradesh~~

~~Agricultural Improvement Fund Committee constituted under section 3 of the Hyderabad Agricultural Improvement Act, 1952. Co-operative Agricultural and Marketing Development Fund Committee.~~

Livestock purchasing Committee. Assam Adhi Conciliation Boards constituted under section 2A of the Assam Adhiars Protection and Regulation Act, 1948. Assam Evacuee Property Management Committee constituted under section 12 of the Assam Evacuee Property Act, 1951. Assam Text Book Committee. Bihar

~~Mining Board for Coal Mines. Text Book and Education Literature Committee.~~

~~Bombay~~

Alienation Committee (Allopathic) under the Employees State Insurance Scheme. Allocation Committee (Ayurvedic) under the Employees' State Insurance Scheme. Board to conduct over-all supervision of the business and affairs, of the Narsinggirifi Mitts, Sholapur. Bombay Housing Board constituted under section 3 of the Bombay Housing Board Act, 1948. Bombay State Electricity Board constituted under section 5 of the Electricity (Supply) Act, 1948 (54 of 1948). Bombay State Electricity Consultative Council constituted under section 16 of the Electricity (Supply) Act, 1948 (54 of 1948). Medical Service Committee under the Employees' State Insurance Scheme.

Pharmaceutical Committee under the Employees' State Insurance Scheme. Regional Transport Authority for Ahmedabad, Aurangabad, Bombay, Nagpur, Poona, Rajkot and Thane constituted under section 44 of the Motor Vehicles Act, 1939 (4 of 1939). Saurashtra Housing Board constituted under section 3 of the Saurashtra Housing Board Act, 1954. State Transport Authority constituted under section 44 of the Motor Vehicles Act, 1939 (4 of 1939). Vidarbha Housing Board constituted under section 3 of the Madhya Pradesh Housing Act, 1950.

89 Kerala Board of Examiners appointed under rule 8 of the Travancore-Cochin Boiler Attendants Rules, 1954. Panel of Assessors constituted under rule 63 of the Travancore-Cochin Boiler Attendants Rules, 1954. Panel of Assessors constituted under the Travancore-Cochin Economiser Rules, 1956. Madhya Pradesh Madhya Pradesh Housing Board constituted under section 3 of the Madhya Pradesh Housing Board Act, 1950. Mahakoshal Housing Board. '[Tamil Nadu] Committee to select Books for Study for 5.5.L.C. Examination. Landing and Shipping Fees Committees for Minor Ports. Local Committee constituted under regulation 10A of the Employees' State Insurance (General) Regulations, 1950. Madras Board of Transport.

9[Tamil Nadu Electricity Board] constituted under section 5 of the Electricity (Supply) Act, 1948 (54 of 1948). Madras State Electricity Consultative Council constituted under section 16 of the Electricity (Supply) Act, 1948 (54 of 1948). Port Conservancy Boards. Port Trust Boards of Minor Ports. State Board of Communications. Text Books Committee. 11(arnataka] Board of Management, Mysore Iron and Steel Works, Bhadravathi. Board of Management of Industrial Concerns. Orissa Appeal Committee under the Board of Secondary Education. Orissa Board of Communications and Transport. Regional Transport Authority constituted under section 44 of the Motor Vehicles Act, 1939 (4 of 1939). State Transport Authority constituted under section 44 of the Motor Vehicles Act, 1939 (4 of 1939).

Subs. by the Madras State (Alteration of Name, (Adaptation of Laws on union Subjects) Order, 1970, (or "Madras" (we./ 14.1.1969). Subs., :bid, for "madras State Electricity Board". Subs. by the Mysore State (Notationof Mame) (Adaptation of Laws on union Subjects) Order. 1974, Mr "Mysore" (ntenn 1.11.1973).

~~85 a- -~~

~~Punjab~~

~~Punjab State National Workers (Relief and Rehabilitation) Board. Rajasthan~~

~~City Improvement Trust, Kota, constituted under the City of Kota Improvement Act, 1946.~~

~~Excise Appellate Board, Ajmer. Rajasthan State Electricity Board constituted under section 5 of the Electricity (Supply) Act, 1948 (54 of 1948). Urban Improvement Board, Jaipur. Uttar Pradesh~~

Government Cement Factory Board. Local Committees for Agra, Kanpur, Lucknow and Saharanpur appointed under section 25 of the Employees' State Insurance Act, 1948 (34 of 1948). Sub-Committee to select books for Educational Expansion Department. U.P. Sugar and Power Alcohol and Labour Housing Board constituted under section 10 of the U.P. Sugar and Power Alcohol Industries Labour Welfare and Development Fund Act, 1950. West Bengal Licensing Board constituted under the regulations made under rule 45 of the Indian Electricity Rules, 1956. West Bengal Housing Board constituted under the West Bengal Devetopment Corporation Act, 1954. BODIES IN UNION TERRITORIES

Delhi Development Authority constituted under section 3 of the Delhi Development Act, 1957 (61 of 1957). Delhi Electricity Power Control Board constituted under section 5 of the Bombay Electricity (Special Powers) Act, 1946, as applied to Delhi. Delhi State Electricity Council constituted under section 16 of the Electricity (Supply) Act, 1948 (54 of 1948). PART II BODIES UNDER THE CENTRAL GOVERNMENT Advisory Committee for the Air- India International Corporation appointed under section 41 of the Air Corporations Act, 1953 (27 of 1953). Advisory Committee for the Indian Airlines Corporation appointed under section 41 of the Air Corporations Act, 1953 (27 of 1953). Central Silk Board constituted under section 4 of the Central Silk Board Act, 1948 (61 of 1948). 86 Coffee Board constituted under section 4 of the Coffee Board Act, 1942 (1 of 1942).

~~Coir Board constituted under section 4 of the Coir Industry Act, 1953 (45 of 1953).~~

~~Development Council for Acids and Fertilizers established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Alkalis and Allied Industries established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Bicycles established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Drugs, Dyes and Intermediates established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Food Processing Industries established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Heavy Electrical Engineering Industries established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Internal Combustion Engines and Power Driven Pumps established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Light Electrical Engineering Industries established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Machine Tools established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Non-ferrous Metals including alloys established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Oil-based and Plastic Industries established under section 6 of the Industries (Development ant Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Sugar Industry established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Textiles made of artificial silk including artificial silk yarn established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Development Council for Textiles made of wool including woolen yearn, hosiery, carpets and druggest established under section 6 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).~~

~~Durgah Committee, Ajmer, constituted under section 4 of the Durgah Khwaja Saheb Act, 1955 (36 of 1955).~~

~~Indian Central Arecanut Committee.~~

~~87 Indian Central Coconut Committee constituted under section 4 of the Indian Coconut Committee Act, 1944 (10 of 1944).~~

~~Indian Central Cotton Committee constituted under section 4 of the Indian Cotton Cess Act Act, 1923 (14 of 1923).~~

~~Indian Central Jute Committee.~~

~~Indian Central Oilseeds Committee constituted under section 4 of the Indian Oikeeds Committee Act, 1946 (9 of 1946).~~

~~Indian Central Sugarcane Committee.~~

~~Indian Central Tobacco Committee.~~

~~Indian Lac Cess Committee constituted under section 4 of the Indian Lac Cess Act, 1930 (24 of 1930).~~

~~Rubber Board constituted under section 4 of the Rubber Act, 1947 (24 of 1947).~~

~~Tea Board constituted under section 4 of the Tea Act, 1953 (29 of 1953).~~

~~BODIES UNDER STATE GOVERNMENTS~~

~~Andhra Pradesh~~

~~Market Committee constituted under section 4 of the Hyderabad Agricultural Market Act No. II of 1339 F.~~

~~Market Committee constituted under section 4A of the Madras Commercial Crops Markets Act, 1933.~~

~~Bihar~~

~~Bihar State Board of Religious Trusts.~~

~~Bihar Subai Maps Ayala'.~~

~~Bodh Gaya Temple Advisory Committee constituted under section 15 of the Bodh Gaya Temple Act, 1949.~~

~~Bodh Gaya Temple Management Committee constituted under section 3 of the Bodh Gaya Temple Act, 1949.~~

~~Kerala~~

~~Administration Committee for Coir Purchase Scheme.~~

~~Malabar Market Committee constituted under section 4A of the Madras Commercial Crops Markets Act, 1933.~~

~~Tapioca Market Expansion Board.~~

~~BB •—sis•-•~~

I [famil Nadu] Area Committee for Hindu Religious and Charitable Endowments constituted under section 12 of the Madras Hindu Religious and Charitable Endowments Act, 1951. Madras State Wakf Board Constituted under Section 9 of the Wakf Act, 1954 (29 of 1954). Punjab State Marketing Board constituted under section 3 of the Patiala Agricultural Produce Markets Act, 2004.

~~Subs. by the Madras State [Alteration of Name} (Adaptation of Laws on Union Subjects) Order. 1970, for~~

~~WM1III omitted by Act 54 of 1993. 5. 4 {we! 19 7.19931.~~

~~89 ANNEXURE II~~

~~ACTS OF PARLIAMENT ON THE OFFICES OF PROFIT Act Year Offices Added~~

~~2 3~~

Parliament (Prevention of 1959 • any office held by a Minister, Minister of State or Disqualification) Act Deputy Minister for the Union or for any State, whether erofficia, • or by name; • the office of Chief Whip, Deputy Chief Whip or Whip in Parliament or of a Parliamentary Secretary;

• the office of member of any force raised or maintained under the National Cadet Corps Act, 1948 (31 of 1948), the. Territorial Army Act, 1948 (56 of 1943), or the Reserve and Auxiliary Air Forces Act, 1952 (62 of 1952);

~~• the of fice of a member of a Home Guard constituted under any law for the time being in force in any State; • the office of sheriff in the city of Bombay, Calcutta or Madras;~~

~~• the office of chairman or member of the syndicate senate, executive committee, council or court of a university or any other body connected with a university;~~

~~• the office of a member of any delegation or mission sent outside India by the Government for any special purpose;~~

• the office of chairman or member of a committee (whether consisting of one or more members), set up temporarily for the purpose of advising the Government or any other authority in respect of any matter of public importance or for the purpose of making an inquiry into, or collecting statistics in respect of, any such matter, if the holder of such office is not entitled to any remuneration other than compensatory allowance;

~~90 2 3~~

the office of chairman or member of a committee (whether consisting of one or more members), set up temporarily for the purpose of advising the Government or any other authority in respect of any matter of public importance or for the purpose of making an inquiry into, or collecting statistics in respect of, any such matter, if the holder of such office is not entitled to any remuneration other than compensatory allowance; the office of chairman, director or member of any statutory or non-statutory body other than any such body as is referred to in clause (h), if the holder of such office is not entitled to any remuneration other than compensatory allowance, but excluding (i) the office of chairman of any statutory or non- statutory body specified in Part I of the Schedule, (ii) the office of chairman or secretary of any statutory or non-statutory body specified in Part II of the Schedule; the office of village revenue officer, whether called a lambard5r, malguzar patel, deshmukh or by any other name,whose duty is to collect land revenue and who isremunerated by a share of, or commission on, the amount of Land revenue collected by him, but who does not discharge any police functions.

Parliament (Prevention of 1977 (a) the office of a Leader of the Opposition in Disqualification) Parliament; Amendment Act The Amendment also added the Explanation I and II to Section 3 of the Act. Explanation I says that for the purposes of this section, the office of Chairman, Deputy Chairman or Secretary shall include every office of that description by whatever name called. Explanation II says that "Leader of the Opposition" shall have the meaning assigned to it in the Salary and Allowances of Leaders of the Opposition in Parliament Act, 1977.

Parliament (Prevention of 1993 • The office of the Deputy Chairman, Planning Disqualification) Act Commission; • The office of the Chairperson of the National Commission for Minorities constituted under Section 3 of the National Commission for Minorities Act, 1992 (19 of 1992);

~~91 -s78--~~

~~2 3~~

• The office of the Chairperson of the National Commission for the Scheduled Castes and the Scheduled Tribes constituted under Clause Or of the Article 338 of the Constitution; The office of Chairperson the National Commission for Women constituted under Section 3 of the National Commission for Women Act, 1990 (20 of 1990)

Leaders and Chief Whips of 1998 • The office of each leader and deputy leader of a Recognised Parties and recognized party and recognized group in either Groups in Parliament House of Parliament. (Facilities) Act Parliament (Prevention of 2006 • The office of the Chairperson of the National Disqualification) Advisory Council constituted by the Government Amendment Act of India in the Cabinet Secretariat vide Order No. 631/2R/2004-Cab., dated the 31st May, 2004;

~~• The office of Chairperson or trustee by whatever name called) of any trust, whether public or private, not being a body specified in the Schedule;~~

• The office of Chairman, President, Vice-President or Principal Secretary or Secretary of the Governing Body of any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law relating to registration of societies, not being a body specified in the Schedule.

~~• The office of Chairman, Deputy Chairman, Secretary or Member (by whateverame n called) in any statutory or non-statutory body specified in the Table (Inserted by the Amendment Act);~~

~~The Table 1. The Tripura Khadi and Village Industries Board, a body constituted under the Tripura Khadi and Village Industries Act, 1966.~~

~~2. The Uttar Pradesh Development Council~~

~~3. The Irrigation and Flood Control Commission, Uttar Pradesh. 4. The Indian Statistical Institute, Calcutta.~~

~~92 ns-~~

~~2 3~~

The West Bengal Handicrafts Development Corporation Limited. 6. The West Bengal Small Industries Development Corporation Limited. 7. The West Bengal Industrial Development Corporation Limited. The Sriniketan Santiniketan Development Authority, a body constituted under the West Bengal Town and Country (Planning and Development) Act, 1979 (West Bengal Act No. 13 of 1979). The HaLdia Development Authority, a body constituted under the West Bengal Town and Country (Planning and Development) Act, 1979 (West Bengal Act No. 13 of 1979).

~~10. The West Bengal Minorities Development and Finance Corporation, a body constituted under the West Bengal Minorities Development and Finance Corporation Act, 1995.~~

~~11. The Hooghly River Bridge Commissioners, constituted under the Hoag* River Bridge Act, 1969 (West Bengal Act No. 36 of 1969).~~

~~12. The Board of Wakf, West Bengal, a body constituted under the Wald Act, 1995 (43 of 1995). The State Fisheries Development Corporation Limited, West Bengal.~~

~~14. The West Bengal State Haj Committee, constituted under the Haj Committee Act, 2002 (35 of 2002).~~

15. The Asansol Durgapur Development Authority, West Bengal, a body constituted under the West Bengal Town and Country (Planning and Development) Act, 1979 (West Bengal Act No. 13 of 1979). 16. The West Bengal Pharmaceutical and Phytochemical Development Corporation Limited. 17. The West Bengal Handlporn and Powerloom Development Corporation Limited. 18. The West Bengal Khadi and Village Industry Board.

~~93 2 3~~

19, The Society for Self-employment for Urban Youth, a society registered under the West Bengal Societies Registration Act, 1961 (West Bengal Act No. 26 of 1961). 20. The Tiromala Tirupathi Devasthanams Board.

21. The Agricultural and Processed Food Products Export Development Authority, an authority constituted under section 4 of the Agricultural and Processed Food Products Export Development Authority Act, 1985 (3 of 1986). The National Agricultural Co-operative Marketing Federation of India Limited (NAFED).

~~23. The Indian Farmer Fertilizers Co-operative Limited (IFFCO).~~

24. The Krishak Bharat' Co-operative Limited (KRIBHCO). 25. The National Co-operative Consumers Federation of India Limited (NCCF). 26. The Auroville Foundation established under sub-section (1) of section 10 of the Aurovilte Foundation Act, 1988 (54 of 1983).

~~27. The National Commission of Enterprises in the Unorganised Sector.~~

28. The Planning Board (Asiatic Society) established under sub-section (1) of section 8 of the Asiatic Society Act, 1984 (5 of 1984). 29. The Delhi Rural Development Board. 3D. The Manna And Education Foundation_

31. The Indira Gandhi National Centre for the Arts. 32. Dr. Ambedkar Foundation. 33. The Bihar State Board of Religious Trust, a body constituted under the Bihar Hindu Religious Trust Act, 1950 (Bihar Act No. 1 of 1951). 34. The Research and Information System for the Non-Aligned and Other Developing Countries.

~~94 2 3~~

~~35. The Indian Institute of Psychometry.~~

~~36. The Uttar Pradesh Film Development Council. 37. The Uttar Pradesh Provincial Co-operative Federation.~~

~~38. The Uttar Pradesh Co-operative Federation Limited. 39. The National Co-operative Union of India. 40. The Uttar Pradesh Krishi and Gram Vikas Bank.~~

~~41. The Uttar Pradesh Cooperative Bank Limited. 42. The Indian Council for Cultural Relations. 43. The Board of Control-1. Sinha Institute of Social Studies, Patna.~~

~~44. All India Council for Sports. 45. The Howrah Improvement Trust.~~

~~46. The Dalit Sena, 12, Janpath, New Delhi. 47. The Social. Justice Trust, 12, Janpath, New Delhi. 48. The Bahujan Foundation (Charitable Trust), Lucknow, Uttar Pradesh.~~

~~49. The Bahujan Prerna Charitable Trust, Delhi. 50. The Central Wakf Council, established under section 9 of the Wakf Act, 1995 (43 of 1995).~~

~~51. The Nehru Memorial Museum and Library (NMML). 52. The Jalianwala Bash Memorial Trust. 53. The Has Committee of India constituted under section 3 of the Hai Committee Act, 2002 (35 of 2002).~~

~~54. The Mallickgbat Phoolbazar Parichalan Committee. 55. The West Bengal Fisheries Corporation Limited.~~

~~95 •- ,r)• 2 •-•~~

~~ANNEXURE II/~~

~~LIST OF ENACTMENTS OF STATE LEGISLATURES ON OFFICE OF PROFIT~~

~~1. The Andhra Pradesh Payment of Salaries and Pension and Removal of Disqualification Act, 1953.~~

~~2. The Arunachal Pradesh Legislature Members (Prevention of Disqualification) Act, 1977.~~

3. The Assam State Legislatures Members (Removal of Disqualification) Act, 1950. 4. The Bihar Legislature (Removal of Disqualification) Act, 1950. The Delhi (National Capital Territory of) Members of Legislative Assembly (Removal of Disqualification) Act, 1997.

~~6. The Goa, Daman and Diu Members of the Legislative Assembly (Removal of Disqualification) Act, 1982.~~

~~7. The Gujarat Legislative Assembly Members (Removal of Disqualification) Act, 1960.~~

~~8. The Haryana State Legislature (Prevention of Disqualification) Act, 1974. 9. The Himachal Pradesh Legislative Assembly Members (Removal of Disqualification) Act, 1971.~~

~~10. The Jammu and Kashmir State Legislature (Prevention of Disqualification) Act, 1962.~~

11. The Karnataka Legislature (Prevention of Disqualification) Act, 1956. 12. The Madhya Pradesh Vidhan Mandel. Sadasya Nirharta Nivaran Adhiniyam, 1967. 13. The Maharashtra Legislature Members (Removal of Disqualification) Act, 1956. 14. The Manipur Legislature (Removal of Disqualification) Act, 1972.

~~15. The Prevention of Disqualification (Members of the Legislative Assembly of Meghalaya) Act, 1972.~~

~~16. The Mizoram Union Territory Legislature Assembly Members (Removal of Disqualification) Act, 1975.~~

~~17. The Nagaland State Legislature Members (Removal. of Disqualification) Act, 1964. 18. The Orissa Offices of Profit (Removal of Disqualification) Act, 1971.~~

~~19. The Pondicherry Member of the Legislative Assembly (Prevention of Disqualification) Act, 1994.~~

~~96 20, The Punjab State Legislature (Prevention of Disqualification) Act, 1952. The Rajasthan Legislative Assembly Members (Removal of Disqualification) Act, 1956.~~

~~22. The Sikkim Legislative Assembly Members Removal of Disqualification Act, 1978. 23. The Tamil Nadu Legislature (Prevention of Disqualification) Act, 1967.~~

24. The Tripura State Legislature Members (Removal of Disqualification) Act, 1972. 25. The Uttar Pradesh State Legislature (Prevention of Disqualification) Act, 1971. 26. The West Bengal Legislature (Removal of Disqualification) Act, 1952.

~~97 ANNEXIIRE IV~~

COMPILATION OF DECISIONS OF THE COURTS AND TRIBUNALS ON OFFICES OF PROFIT SE No. Me of Case Decision of Nature of Office Test Applied Authohty/InstitUtron 1 1 3 4 Hansa Jeevrat Mehta v The office of the Vice Chancellor of Appointment and removal test: Election Tribunal, Inclubhat B. Amin ft Ors. University of Baroda, an honorary Whether the appointment and removal Bamda (1952 ELR; P 171) officer who is appointed by the of a person torn office is vested with Government is an office of profit under the Government irrespective of the the Government. fact that his salary Is drawn from some source other than the Government?

Biter] Singh v Prabhu Patel', a perwn sewing under the Appointment and removal test: Election Tribunal, removal !Worn Dayal Chaubey 0952 ELR Government appointed for the Whether the appointment and performance of duties under the land is vested vdth the Government? Vol.II; P. 325) revenue systems is an office of Profit under the Government. Mahendra Sahu K Pura The office of Sarbarkar, i.e. the i. Whether the Officeisheritable? Election Tribunal, Raul ft Others (1953 EN Revenue Officer, appointed by the ti. Whether Mad is paid on every Cuttack Vol. III: p. 1171 State is not an office of profit under appointment? the State. iii. Whether the interest in land granted to him is a tenancy interest enjoyed on payment of rent: iv Whether the source from which he gets Ms commission is not the general revenues of the State but the collection from tenants from out of which he pays the revenue?

4. Shivarama Karant Member of the South Kanara Area Compensatory allowance is not a Election Tribunal, Venkataramana Gowda a Committee appointed under the Madras profit: Reimbursement of out- o( Bangalore, after Others 0953 ELR Vol. III: Hindu Religious and Charitable pocket expenses does net constitute acceptance of nomination by p. 187) Endowments Act, 1951, does not hold rem neraton and the person receiving an office of profit, a is therefore not it is not holding an office of profit. Returning officer disqualified. Chandernath K Kunwar Member of the District Yarn "Profits dam not necessarily mean any Election Tribunal, Jaswant Singh Et Others Committee, Bikaner constttuted by the remuneration in cash but it certainly Bikaner means some kind of advantage or gain p. 1471 Government of Rajasthan for the (1953 ELR Vol. III, which is tangible or which can be purpose of distnbuting the controlled perceived,

~~98 (iC.~~

~~3 4~~

commoditun such as foodgrains, sugar cloth etc. is not an office of profit as contemplated by Ankle 191 of the Constitution of India and as such did not incur any disqualification. So long as the office enables the Lahin Sigh v Attar Singh beadier in a Government School in the Election Tribunal E Others (1953 FLA State of Pepsu is an office of profit holder to make profit irrespective of Vol III; p. 409 and disqualified under Article whether he makes it or not, the holder 191(13(a). will incur disqualification. Election Tribunal, Yograj Singh Shankar Singh Merrier of the Bombay Legislative Appointment and Removal Test: Bombay Farther Sitaram Assembly, getting a monthly salary of Whether the member of legislature is Hirachand Birla ft Ors. lb, link though holding an office of holding an office of profit under the

(1953 ElE Vol. III; p. 4391 profit is not holding it under the Government or not should be decided Government and therefore not according to whether he is appointed disqualified to contest an election by the Government or whether he can soce legislators are not subject to the be dismissed by the Government. disoplinary powers of the Government.

Jagannath v Pa ndurang ft Pate. of village appointed by When there was no valid appointment Election Tribunal Ors. (5953 ELR Vol. IV; an order of the Deputy Commissioner there could not have been any holding p.168) was not in accordance with riles and of the office and hence there is no thus bad in law and hence no question office of profit. of holding the office arises. Whether compensatory allowance not RendentialReference 9. 33ndhira Pradesh Assembly Office of membership of the District to the Election Members (1953 ELR Advisory Council appointed by the being a profit becomes profit in the Commission of India Vol. IV: p.442) Government of Vindhya Pradesh is not hands of resident members' an office of profit normally but it is for its opinion km resident members receiving the same travel allowances and daily allowances as that of the non? menters. Government control and Election Tribunal, 10. Had Das v. Hira Singh Pal Employee of University of Punjab is administration test: Whether the Himachal Pradesh not a holder of office of profit under E Others (1953 ELR Government has any hand in the Vol IV; p 4681 the government. ti of theeUniversity Appointment and Removal test: The appointments and removals other than those of the Chancellor and Vice Chancellor are made by the University and not by the Government. II. Pandit Hansh Chandra v. The holder of a Government license is Whether the person was holding any Election Tribunal Ors. not an office of profit since it is no office and the mere fact that he Raja Man Singh a recewed allowance is not tantamount (IR 1953; Vol. tf; p. 129) office at all. of holding an office.

~~99 2 4 5~~

12. Maharaja Anand raid Privy purse hider is not an office of A member of the House becomes Preudertal Reference 11953 ELR Vol. V; p. 191) profit. subject to disqualification after he is to the Election elected as such member. Commission of India for its opinion

Election Tribunal, IL Potwar Lal v Rhartendra An assessor of a sessions court does Compensatory allowance is not a Kota after rejection Singh and Others [PLR Vol. not hold an office of profit. source of Profit. by Returning Officer

14. Hakikatullah v, Nathu Chairman of a Municipality is an Office I. Appointment and removal test, Election Tribunal, fingh and Others (ELR Vol. of profit. after rejection by V; p. 10 1953) i. Government Control and Returning Officer administration test. i. Appointment and Removal Test Election Tribunal Pholanath v. Krishna Offme oi a member of legislature i. Disciplinary action test: Chandra Gupta (1952 ELR not an office of profit. Whether a member of Vol. VI, p. 1041 Legislature is subject to disciplinary powers of the Government?

i. Whether he is an appointee of Election Tribunal, 16. Gulab Chasid Chordia v An IsumrardaD a holder of a perpetual the State? Ajmer Thar Narain Singh and farm or lease upon grant of a lined is a Whether the office carried Others 1953: ELK Vol. VI; not an office of profit. emoluments payable mostly p, 397) periodically? iii. Whether the office is for a limited period? iv. Whether it is terminable? v. Whether a is assignable or not? N. Whether it is heritable or not?

17 Said Ram v. Manphool Lambardar's brother is not holding an It is only the holder of the office Election Tribunal, Singh and Others (PLR office of profit though Lambardan isa who will be disqualified under Rajasthan 1952; Vol. VII; p. 411 joint family property. Article 191(1)(a) and not the other members of his family,

~~It. Isher Singh K Matit Ender An assessor of a court is not en office Compensatory allowance is not a Election Tribunal Singh and Others afl of profit. source of profit. 1953; Vol. VII, p. 90)~~

19. Krisfinappa v, Narayan A teacher in a grant-in-aid school does Appointment and removal test was Election Tribunal, Singh and Others (KR not hold an office of profit. applied. Nagpur 1953; Vol. p. 2941

~~100 5 1 2 3 4~~

20. Govind hialaviya mkturall A lawyer engaged by a Government, i. Whether the relationship of Election Iffiblinffi, master and servant existed Uttar Pradesh Manohar E Others but rot being paid any retaining lee is rELR1953; Vol. VIII; p. 84) not holding an office of profit. between the lawyer and the Government. n. Whether the office is of a permanent nature, which has an existence independent of the person who filled it.

~~Mahesh Datta v. The office of Patel is an office of Appointment and removal test was Election Tribunal, Muralidhar and Others profit. applied. Gwalior 11953 MAU. VII; p.154)~~

R. ashen Lar Hamror v. Assessorship of the Railway Rates Whether the person was 'holding' any Election anbUnai Madan Singh Et Others Tribunal is not an 'office' and a person officer (ELR X,1954; p. 491 Mc ins been appointed as an Assessor is not holding any office.

23. UM, Deshpande and The office of a Deputy Minister is not Remuneration is attached In some way Hyderabad High Others v. State of an office of profit. or the other to an office of profit. Court Hyderabad E Others (SLR Vol. Xi P. 101) 14. (hiked Reaffirm Naidu v. Member of the Railway Users Outsofspocker expenses arena profit. Election Tribunal Vyncherla Chandran Consultative Committee is not an Chandmany on (Ea Vol. office of profit. XIII; p. 66) 25. Simians Abdul Shakoods v. htohatmin (Manager) of the Madrasa Appointment and removal test was Supreme Court after Rothab Chand and Others Durgsh Khwaja Sahib *bad Is not an applied. rejection by Election (AIR 1958 SC 51); office of profit under the government. Tribunal (Supreme Court of India- XIII ELR 149) 15. Dr. Deorao Lakshman Insurance Medical Practitioner, Remuneration is attached in Bombay High Court Anande Keshav appointed under the Employees' State some way or the other to an after rejection by Lakshman Corker Insurance Act 1948 is an or fice of profit office of profit. Election Tribunal (ELR Vol. XIII; P. 334) under the Government. Appointment and removal. test Disciplinary action test. Whether the contract or agreement of service is Mt the Government. 27, G. Narayanaswamy Nadu A slaried employee of the Life Appoint and removal test. Madras High Court after the Tribunal v C. Knshnamurthy and Insurance Corporation cannot be said Source of remuneration, being others (ELR Vol. XIV; declared the electEn to he holding an office of profit under distinct from the Govenffient. p 21) void E that the the Government respondent was not holding en office of profit under the Covemment

~~101~~

~~5 2 3 4~~

Rajasthan High Court 28, Hod Lal v. Raj Bahadur An Office of Oath Commissioner is an Government to be given widest interpretation and it includes the (ELR Vol. XV; p. 55) office of profit under the Government. Executive, the Legislature and the Judiciary and an office of profit under any of these would be an office of profit under the Government.

29. M, Ramappa's w Sangappa Patels and Shanbhogs bold offices of i. Appointment and removal test. Supreme Court of and Others iEL17 Vol. XV; profit under the Government, i. Government Control and India setting aside p. 475) supervision test. the order of the High iii. Remuneration paid by the Court and restoring Government. the Returning Officer's order of rejection

30. Shirur Veerabhadrappa Mali Patel of a Taluk is an office of Transfer of dicfim attached to an office Election Tribunal Veerappa V. Shankara profit. of profit by the office holder to a Gouda Basangouda deputy does net terminate the office MLR XVII; p. 117) of profit.

31. Raghunath Mishra V. The office of iarbarkar is an office of Appointment and removal test was High Court overruled Kishore Chandra Deo profit under the State. applied as the most conclusive test. the decision of the Bhanf and Others Election Tribunal (RR nil; p. 3211

32. Prabhunath Tiwary v. Mukhia of a Gram Panchayat does not I Appointment and removal test Election 'faunal Janardhan Singh Et Others hold an office of profit. was applied. p Ew II7) ii. Gain, in order to be construed as profit, must be determined and real and attached to the office. 33. Ramdayal Ayodhya Masai Member of the State Electricity The office of profit was one, which Election Tribunal, Gupta v. K.R. Pail and Consultation Council. enabled him to make a profit, Hagpur Others [ELR p. 378 irrespective of whether the holder of 1958) himself made profit. 34. Lachman Singh v. Convener of Ludhiana Detect Prof The holder of theofficeshould recmve Punjab High Court Implementing Committee is not money for personal use not connected after the Tribunal Harprakasb Kaur [ELR 19; 411; PunjabHigh(ourt, office of profit. with official work. declared it an office 1958) of profit 35, Bhairon Cal o "Beene Bare Gaon", a tenure holder The office al profit cannot be Rajasthan High Court noongarsidas and others rendering sereces to save the payment assignable or heritable . (ELR 20; P. of land revenue in cash is not an office 157; Dec. 1958) of profit

~~102 2 4 5~~

36. Karu Lail and another v Inspector of minor inigation wraps is Allowancespaidto meet outiof pocket High Court of Patna MX Hussain and another not an office of profit. expenses do not make the office an (ER MI 37. Radri Kampen Singh c Ghat/eel) tenure is on office of profit 4 Performance of public duties, High Court of Patna Kamdeo Prasad Singh under the Government. namely in the nature of police MLR 21; p. 64; March and military duties. 1959) B. The office is not heritable x assignable.

38. dkati Hargobind Prasad Ghatwals are persons holding offices i. The Government makes Supreme Court of Singh c Smt. Phatdani of profit under the Government. appointment of successors. India lq.mari [AIR 1952 SC 38 at ii. Remuneration is attached Mine p. 41) office. ii. Performance of public duties, namely in the nature of police and military duties.

39. ]ryXI Prasad UpadhYaYa v. A Vice,Chancellx of a University is Appointment and removal test Allahabad High Court Kalka Prased Shatnagar not bolding an office of profit under applied in relevance ynth decision that after refection by (AIR 1961 All 128) the Government. the Governor appoints the Vice Election Tribunal, Chancellor in his capacity as Uttar Pradesh Chancellor of the University and not in exercise of the execAive power of the State. Supreme Court of 40. Guru Govind Pax v. Auditor of the Insurance Corporation i. An office of profit does not Shade( Prasad Glioshal of India is an office of profit. necessitate the mistence of a India. man tereser vent relationship (EIX 25; p. 77; 1963) between the Government and the office holder. if Appointment and removal test was also applied.

41. In Re. Shri Edouart A mayor does not hold an office of I. Appointment and removal test. Election Commission Goubert lELR 26: 297) profit under the Government B. Government Control and supenision test.

A non-official Director of a i. Appointment and remoni test. Election Commission MX, Madras, CUVol.2X Covmnment company is held to bean B. Government Control and p. 212) office of profit. supervision test.

43, Shri Ram Harbhan /thanker A Deputy Minister of a State is not an A Deputy Minister is construed to he Bombay High Court v. eladhusuduan Atmaram office of profit under the Government exempted under Article 191(1). Vitale lE(.9 29; p. 171) and does not incur disqualification uncle( Article 191(1).

~~103 r ? •~~

~~1 2 3 4 5~~

44, Mott, Singh V. Ithaffyalal The office of Vice President of a Zilla I. Source of remuneration test, a Bombay High Court (ER 29; 215) Parishad is not an office of profit wider n. Government control test were the Government. applied. 45. Vishvanath a Vishetwar The Pramukh of a 2014 Prashad is not f. Appointment and removal test Hleh Court Path (SLR 29; 1967 p. 306) an office of profit under the State is the most derisive test. Government. U. Government Control and supervision test. Andhra Pradesh High 46. Range Rao v. Komaran The post of Extra-Departmental All i. Appointment and removal test. Court Ramona (ER Vol. 30 of Gamer under the Postal Department N. Remuneration is attached to the 1967, p. 52) of the Government of India is an office office. of profit under the Government. fit A resignation letter sent but not accepted has the effect of the incumbent continuing inservice.

Upendra Tat v. Smt. District Honorary Family Planning i. Pecuniary advantage is an High fart of Mathya Narainee Devi Ma Leader under the Government is not essential element of office of Pradesh MLR Vol. 30;1967, p. 372) an office of profit. profit, irrespective of the quantum. ii. Reimbursement of out-or-packet expenses does not cosotitute remuneration and the person receiving it is not holding and office of profit.

48, Niranjan Let Sharma v. Chairman of Janpad Sabha constituted i. Appointment and removal test. High Court of Madhya Rajkumar Aganyal under the Municipalities Act, 1961 is 5. Government Control and Pradesh Others )EtR Vol. )00011, not an office of profit. Supervision test. 724) Oh Source of Remuneration test.

49. Kamta Prasad Upadhya K A teacher is a Government Primary A resignation letter sent but not High Court of Madhya thaw Prarad wart and School is an office of profit. accepted has the effect of the Pradesh Others tail Vol. %XXV, incumbent continuing in sernce. P. 1) it The resignation could not be retrospectively accepted as to remove the ()squall/matron already earned by the person.

50, Ishvarappa Sidningappa Membership of: An ex-officio membership by a High Court of Mysore Ghattarla v Pampakavi i. Mysore State Development Council. member e the legislature is not an aayappa Velgall (ELR Vol h. Bijapur District Development office of profit ruder the Government thaLY, p. 110) Council. operating as a disqualification. iii. Jamkhandi Taluk Development Board does not constitute offices of profit under the Government.

~~104 S3,~~

~~3 4 5~~

51. Umrao Singh v. Darbara Chairman of Panchayat Samiti Compensatoryallowance in the nature Supreme Court Singh and Others (ELR an office of profit. of travel allowances and daily upheld the High Vol. REM, p. 3401 allowances is not a source of profit . Court's decision of rejecting the election petition

51. Ghulam Hassan a Gbulam A permanent teacher in a Government A resignation letter sent but not High Court of Jammu Nabi Wani and Another High School is bolding en office of accepted has the effect of the and Kashmir (40 ELR Vol.11p, 1) profit. Incumbent continuing in send.

53, Mahadeo v Shantthhai and A person holding the folbedng offices i. The office of profit was one, Supreme Court Others (40 ELR Vol. XL, of profit: which enabled him to make a concurred with the p, 81) i. Inclusion in the panel of lagers profit, irrespective of whether High Court's derision prepared by the Central and the bolder himself made profit. western Railway Administration. it Office means a fined position ii. Presidentrmember of a tribunal for performance duties, constituted under M.P. Town Improvement Must Act, 1960. iii. Office of Professor of law in the Madhav college, Ujjain do not constitute of of profit under the Government 54, Bapurao v. Sidramappa Chairman of Market Committee and i. Compensatoryallowance in the High Court of Mysore and Others (ELR Vol. XLI, member of food Advisory Committee nature or out-of-pocket p. 83) do not hold offices of profit expenses is not a source of profit O. The offices mentioned in Parliament (Prevention of Disqualification) Act,1969 need not necessarily be offices of profit.

55. D.R.Gurushantappa v. Superintendent of Steel Works in the Appoint and removal test it source of Supreme Court Abdul Khuddus Anwar rt Mysore Imo and Steel Works, Ltd. is remuneration test were applied. upheld the High Others MLR Vol. XLI, p. not an office of profit. Court's decision 153)

56. Chandan 1121 p Ram Dass Mere appointment of an Agricultural A person cannot occupy an office unfit Supreme Court of and Another (ELR Vol, WI, Assistant at the Government he enters upon the office and the India 20 Agricultural farm does not amount to entry upon that office is not holding an office of profit . necssarilye simultaneous with the appointment to the office. 57. Unreel Singh Dhabanya v. Theoffice of a Zilla Promukh is not an i. Appointment and removal test, High Court of Ihshwant Singh Mahar rnd office of profit under the State . h. Government Control and Rajasthan Others KU WI. X114 p. 1Z6) superdsion test.

~~105 f32- •-~~

~~2 4~~

~~iii. Soiree of Remuneration test. iv. Nether- theholder of theoffice performs his functions for the government?~~

58. Kanta IKathuria v. M. Special Government Pleader appointed Meller the office is of a penmanent Supreme Court //anal Chand Khuaraoa, to assist the Government Advocate it nature, which has an existence decided in a 3:2 11969) 1 SCC 268 an Arbitration matter does not hold independent of the person who filled majority decision an office of profit. it? overmling the High Court's decision

59. Shivamurthy Swami Membership of the Tarok Development Appointment and removal test. Supreme Court of Inamdar v. Veerablia. Board, District Development Council, Government Control and India drama Veerappa (RR Rhadi and Village Industries Beard and supervision test. Vol. AM p. 119) Chairmanship of Agricultural Produce iii. Source of Remuneration test. Marketing Cooperative Societe do not le Compensatory allowance in the constitute offices of profit. nature of out-of -pocket expenses is not a source of profit.

60. Gurugobinda Basu v Comptroller and Auditor General was Appointment and removal test. Supreme Court of Shankan Prasad 6hoshal held to a holder of an office of profit U. Government Control and India MR 1964 SC 254 under the Government of India. supervision test. M. Source of Remuneration test. w. Whether the holder of the office perlorms his functions for the government?

61. Surya Kant Roy v. Ifeamul Chairman of the Mines Board of Health Government control and Supreme Court of Hak Khan AIR 1975 SC appointed by the State Government supervision test. India 1051: 0975) I SCC 531 was not an office of profit under the e. Source of Remuneration test. State Government.

62. New Prakash v Kultar Chairman of the Board of School In the absence of any profit accruing Supreme Court of Chand Rana AIR 1975 SC Education, Himachal Pradesh cannot be to [[beholder as a result of the holding India agreeing unfit 1067 said to hold an office of profit. of the office it cannot be said that he the High Court was Adding an office of profit. dismissed the petition 63. Madhukar G.E. Pankakar A Medical Practitioner working as a Whether the office is of a permanent Supreme Court v. Jaswant Chobbildas panel doctor appointed under the nature, which has an existence Rthani and others 0977, Employees' State Insurance Scheme independert of the person who filled 1 SCC 70) does not hold an office of profit. it? 64. Gurugobinda Basu v. A chartered accountant, a partner of i. Appointment and removal test. Supreme Court of Madsen Prasad Choshal a firm of auditors of two companies, II Government Control and India MR 1964 SC 254 which were owed by the Government, supervision test.

~~106 4 5~~

~~amounts to an office of profit under in. Source of Remuneration test. the Government iv. Whether the holder of theoffice performs governmental functions?'~~

65. Ashok Kumar Phattachana Accointentm-charge of the Agarmla i. Government control and Supreme Court u Ahoy hums and others Municipality is not an office of profit supervision test . dismissed the appeal (1985) 1 SCC 151 under the Government. e. Whether the holder of the office against the Gujarat performs governmental High Court. functions( in. Source of Remuneration test. iv There should not be any conflict between the dunes and interest ofthe elected member. dd. Biharilal Dobray V. Assistant teacher of a basic primary Appoint and removal test was applied Supreme Court of Bohan La( Dobray 09841 school run by UP Board of Basic India. I SCC 551 Education is an office of profit under the Government.

67. Bhagwati Prasad Disk A Me.nber of Parliament drawing salary i. Appointment and removal test. Supreme Court of Ghoshal v. Rajeev Gandhi cammt be said to hold an office of B. Government control and India. AIR 1986 SC 153 profit. supervision test. Supreme Court of 68. SatnxharlaChandrasekhar A teacher in a Ornery Edged run by There should not be any conflict Paju v. VeincnalaPradeen the Integrated rdbal Development between the Sins and interest of India. Burner Dev and another Agency RTDA) does not hold an office the elected member. AIR 1992 SC 1959 of profit under the Government.

69. liethamreddi Venkata A Lecturer in a private college i. Appointment and removal test. High Court of Ancnire Ramona Reddi v. affileted to a University receiving n. Government control and P-adesh. Government of Andhra gran)in-aid from the State cannot he supervision test. Pradesh and other said to hold an office of profit under (AIR 1985 AP 71) the Government.

70. flongthombam lbomcha Speaker of aLegislativeAssemblydoes Removal of Disqualification Act, 1915 Supreme Court of Singh v. lesangthem not hold en office of profit under the (Manipur Act 1 of 1975) with dia. Chandramani Singh and Government. retrospective effect is valid. others (AIR 1977 SC 6821 71. laineshear Bora and A contractor under the Public Works I. Appointment and removal test. High Court of ochres a Returning Officer, Department does not bold an office of n. Disciplinary action test. Gantlet'. Panning-at Rai Elections, profit under the Government. llowsong and others (AIR 1975 Gauhati 61( 72. Sivadasa lemon V. Sunni A Receiver appointed by Court is not L Whether the office is of a High Court of Kerala Sahib (AIR 1977 Ken 187) holding an office of profit under the Permanent nature, vhich has an Government.

~~107~~

~~(1 -■1 •--S3 e-~~

~~4 5~~

~~ktelice independent of the person who filled it? B. Appointment and removal text. M. Whether Me holder of the office performs public duties? iv. Source of remuneration test.~~

71, Conga Mood inveni Rai Directors of UM. Agro Industrial Whether the State Legislative Election Commission and Ram Mut Anchal Corporation Ltd. a Government Assembly has power to declare yrith upon reference frOM [71 (55 SLR 161)1 company were exempted from retrospective effect that an office the Governor of UM disqualification as offices of profit shall not disqualify its holder from under the Government by an being a member of the State amendment to the UM State Legislature? Legislature (Prevention of Disqualification) Act, 1971, which was upheld by the Election Commission.

74. Divya Prakash V. Kuhr The post of the (Mimeo of the Board Whether the appointment camed any Supreme Court of (hand Rana, 1975 2 of School Education of the State is not remuneration? SCR 749 an office of profit. 75. Radha Krishna Visharad K A person in service of a college Government control and supervision Supreme Court of COI Judge, Aligarh Et Ors. receiving grant-in-aid from the test was applied. India reversed the 1961 Mt U. MO Government is said to hold an office High Comb's decision of profit under the Government. and affirmed the Returning Officer's derision. 76 D.S. Awasthi and others Chairman of D.P. Legislative Council i. AppOilltnellt and removal test. Mlahabad High Court. v. Virendra Swaroop, does not hold an office at profit under if. Government control and (AIR 1976 MI 26) the Government. supervision test. 77. Aamnarainv. Ramchandra, Member of the Legislative Council is Appointment and removal test was Bombay High Cort, (AIR 1958 Boo. 325) not a person holding an office of profit applied as the decisive test. under the Government. 78. Ruston Satin v. Chairman of the U.P. Legislative Appointment and removal test was Bombay High Court. or Sampoornanand 09591 Council does not hold an office of applied. 20 RA 221. profit under die Goomment. 79. Thivamorthy Swami v. Chairman of Legislative Council does Appointment and removal test. Supreme Court of Agath Somalia Andansppa, not bold an office of profit under the P. Government control and India. 1197111 SCC 870 Government supervision test. Source of Remuneration text iv Performance of governmental functions test.

~~108 --f~~

~~2 3 5~~

W. Aklu Ram Matto v. A Thalasi and a Meter Reader under Appantrneet and removal test. Supreme Court of Rajendra Mahto FAIR 1999 the employment of the Bohm Steel Source of Remuneration test . India upheld the SC 1259) Plant belonging to the Steel Authority decision of the High of India do not hold offices of profit Court. under the Government. 81 Rabindra Kumar lc An Assistant Public Prosecutor holds Whether the office is of a Supreme Court of Collector, Ma ytethant, an office of profit . permanent nature, which has an India. Onssa (MR 1999 SC 1110) existence independent of The person who filled it? Whether income or profit accrued from that office?

82. Shri Magavandas Sehgal v. The office of Chairman of the Amhara i. Appointment and removal test. Supreme Court of State of Haryana a others ImprovementTrust is an office of profit A. Source of Remuneration test. I ia. (AIR 1974 SC 2355) under the Government. Pradyut Sordoloi v. A clerk Cradek in Trap Colliery, North i. Appointment and removal test. Supreme Court of Swapan Roy (AIR 2001 SC Eastern Coal Fields under the Coal ii, Disciplinary action test. 296) India Limited is not an office of profit under the Government, 84. Shibu Soren K Dayanand Chaeman of interim Markhand Area Mere use of the word 'honorarium' The Supreme Court Whey ft others 12001)1 Autcnowous Council is an office of cannot take the payment net of the of India. SCC 425 profit under the Government pureed of profit, if there is some pecuniary gain for the recipient.

85. MAC Rajasekharan The One Man Commission appointed by Remuneration other than The Supreme Court others V. Vatal Nagaraj the State Government to study compensatory allowance is profit. overruled the High (AIR 2002 SC 792; 12002) prodems of Kannadigas is held to be Court's decision. SCC 704 an office of profit under the Government.

86. In Re: Disqualification of A Special Representative holds an The office of profit was one, which Supreme Court upon ShrI R. ,Wehanarangam office of profit under the Government. enabled him to make a profit, a Presidential Pale. irrespective of whether the holder rence. himself made profit.

87. Sint. Jaya Bachchan v. Chairperson of the Film Development i. Whether the office is of a Supreme Court Thorn of India and Ors. Council is an office of profit under permanent nature, Wnich has an uphelde thenpn n (2006) 5 SC( 266 the Government . existence independent of the o he Ee o person who filled it? Commission of India. ii. Appointment and removal test. The office of profit is one, capable of Welding a profit or pecuniary gain. 88 Thntrant v. Vasantrao and The Government Contractor does not Whether the State Government is supreme Court of Ors. (20051 2 SCC 682 hold an office of profit. different from local or other India authorities under the State.

~~109 AMVEVURE V~~

~~JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~FIRST TERM OF REFERENCE~~

TO EXAMINE IN THE CONTEXT OF SETTLED INTERPRETATION OF THE EXPRESSION "OFFICE OF PROFIT" IN ARTICLE 102 OF THE CONSTITUTION AND THE UNDERLYING CONSTITUTIONAL PRINCIPLES THEREIN, AND TO SUGGEST A COMPREHENSIVE DEFINITION OF "OFFICE OF PROFIT"

~~SI.,No. Name of Sb Feasiailib,, of Denition of Office of Roht Opportunity for definition (a) Oates definition of Office of Profit resignation' (b) Opinion on suggested definition" 1 4 5~~

1. Andhra Pool eJi Innm or of defining Ike of Prof t Pal No, definition given. However, the Rate In favour. ovemmEnt is of the mothat the word 'office of Profit' be defined keeping in view the observatios of the Hindle supreme Court.

~~(b) Suggested definition is comprehensive.~~

Z. AmnachalRadesh Workable definition does rot appear la) No dthwillon sulPstei In favouE to be feasible. IN) Suggestei definition is comprehensive, jtst fair for uniform appliotion to all States/1Es. Assam No need ny dNlmem. 121 No definition suggested. In lawn lb) No opinion offered (No need f or such definition).

~~4. Mar Ma favwr of defining Office of RIM definition suggested. In favoto Prorn (b) No reed Inc such definition.~~

~~5. Otattogarh In favouc 01 No definiton suggested. In favour of providing option Wm (b) In agremnitmth the suggested deflotioo.~~

~~7. Gujarat No need f or definition. [a) No deflnitto suggested Not in Is/air.~~

IN Not in favour of any deYitlfioit. Resort scheme of the Constitution be continued. B. Haryana No need ddinitim (a) Although no definition is given, the Mate In favour. Government is in favour of insertion

~~110 4~~

of f ollovnng clause while evolving the definition:- 7.0n office can be an Office of Profit based on the profit or pecuniary gain obtained from it. Word rHonoradurn. should also he added in the definition of Office of NAL."

~~(b) No comments offered.~~

9, Himachal. Pradesh In favour la) No Comprehenske definitio has been prodded. Not in incur. Its Suggested definitinn deft is cam p 50555155re. However, the State Government Is of the new that the poposS clause (IA) is not necessary.

10. Jammu eel 11. Jharldaid R. Ilarnataka No comprehensive definition of /a) No definition given. However, the State In f var.. Of lice of profit is feasible (.ovemment is of the new that any definition should incorporate the Meet of pecuniary gain.

~~15) No specific retilY~~

9. Kerala In favour (al No definition suggested. In !favour.. Its Has given opinion only alone roped. The State Government is of the view that in order to avoid ambiguities and judicial interference, honorarium, sitting fee, daily allowances, etc should be specifically excluded from remuneration'

~~adhya Pradesh~~

~~IS Paha/miff ra Worlinble definilicti not feasible. la) No definition suggested. Not in favour.~~

~~i.b) Except the resignation clause (IA), the suggeSted definition defines Office of Prat corivrthensiVely In DinteXt of the underlying~~

~~56 Manipur Wakable rfenfiilon not feast]. fa) No definition suggested. However, State n favour. Government has desired to have its own ddmition under its own Act (131 lb comments offered.~~

17 Meghalaya In favour of provrding definition. (a) Slate's definition—Tflice of Profit means any In favour. oilier where pecuniary benefits or remunerations whether In the form of salary a honorarium xbatever may be called, 5s paid faholdrig such office/post hut will rnt include any othce/pos xhian...9II have been declared

~~I 1 1 not to duqualify the holder of oath office/ post by law made by Parliament or the Legislature of the State/Unice Terdtories.N~~

~~IN) No specific reply offered but has offered their own definition.~~

In favous IN. Mizoram In favour of comprehensive fa) State's definition—No definition offered. statutory defifiltion. However, the Rate Government is of the opinion Mat definition be based co the tests formulated by Supreme Lout

~~(b) The GIVeMnient of Momm has endorsed the suggested definition and has given oggestion:—~~

"Thank, miasma viz. a Matter either for the ilataa a ja wrAC State Gaming la Swat) f the frplaaationg moy be replaced by the expression [la "A Atwater either for the Union under oak 75 or farad? a State un a article IN of the (anstittedont, so that thosehove bran assigned the tad or StalOof Nattier may he kept aura." 19. galand Have attempted a definition and (a) Ardcle 102{1) and 19101 may be reworded as Notit huh suggested rewording of euplanatiw to primes 101(11 and 191(1) may "I01. 0lyuabfcations for membership.— be reworded. (1) a person shall be disqualified for being a member of eitluer Hume of Parliament,—

~~(a) if he bold> any reramerative political pot;~~

~~Explanation: 0) "remunerative political. post" shall have the same meaning assayed to inn article 361 B.~~

~~(e)For the purposes of this dame a person shall not be deemed to hold a remunerative political pmt by~~

~~Ii) he is a Minister or a Parliamentary Stifretaul either for the Union cc for such State,~~

~~as a Witter or a Parliamentary secretary, he holds any other remunerative political post in es Ono capacity; and~~

~~Idol he holds any office in the affairs of either House of Parliament.~~

~~Promded that no remunerative political post shall be deemed as such within the meaning assigned to it under Article 361B, if the salary e( remuneration, eempensatow In nature, payable in respect of~~

~~112 2~~

~~that remunerative political post or posts together, exceeds ten per cent of the total emoluments paid to a person as a Minister or a Parliamentary Secretary ea a member per month, as the case may be."~~

fo) The suggested ceffaitIon does nut define the 'office of Profit' comprehensively. The definition of 'Office of Profit.' in the proposed Article is as same as the definition of temucerat.o political pat' proyided in Article 3610. There is no need to define both rammeration and &grill Explanation II. The proposed scloclausel1A) edge proposed artide will defeat the constitutional purpose of punishing holders of Office of Profit.

~~Mss e~~

II. Punjab Not in favour of definition. (a) Definition not feasible es each State has its In favour, own peculiar ClICUMSta2KCS and depending co the situation the Legislature in its wisdom declares as per the provisions of the ConstiWtlo whether a paticular Office is an office of profit. By providing to the term, the freedcm I 'h Leo-9 11 be tailed.

~~(b) No specific reply. Not in favour of any definition.~~

~~U. Rajasthan In favor. la) No definition suggested. In fan.~~

~~lb) Suggested incorporation of MIMS offices under Part 01) of the Erplanation of suggested definition for all practkal purpose lean general exemption.~~

~~23. Sildom Ho specific Neu. lal No definition suggested . Not in favour.~~

~~IN No spcocle comments offered . 24. Unit Nadu No nem offered la) No definition suggested. In favour.~~

lb) No views offered on the definition. However, the State GUMMI( is of the view that whether a person holds an office of Profit has to be determined based on the facts of circum:lances of the each case and relevant statutorY procisiom. 25 inpura Comprehensive definition of 'Office (a) Stales del inition.No definition suggested. of Profit' may be included cothe constitution. State legislature (b.1 In faccrur of suggested definition. should have the authodty to make its oym laws.

~~119 0~~

26 Uttar Pradesh No definkEn given Not in favour. 27. LIttaranchal In favour. (a) (b) The definition of the °Office of Profit" should be comprflensive. But the proposed amendment in ['planation II 'Alter Came (I), the following Clause...subject to of disqualification' should not be inserted othendse. the vay pUrpOse of Clause (a) of Article 18211) 191(1) Al be defeated. is favour. 28. West Bengal Comprehensive definition not (a) No dertdon sUggestei feasible. lb/ Definition too restlictive...

'Opportunity for resignation—Incorporation of an enabling provision in the constitution for an elected Member of Parliament tO exercise an option to resign from an office in the event of the office he Is holding is determined to be an "Office of profit" under the GOVefilleelle without losing his membership of the House. "Suggested definition—A definition of office of profit has been attempted in some quarters which reads as under:—

Pin article 102 of the constitution, in clause II) for the Eantaestion, the following Esplanations shall be substituted, namely:— Explanation Intl the purpose of this clause— (I) "Office of profit" means any oflice- lil under the control of the Government of India, or the borer cent Of State, as the case may de whether the salary ar remuneration for suit office is paid out of the public revenue of the Government of India at of the Government of State; or lin under a body, which is wholly or partially owned by the Government of India✓ or the Government of anyState and the salary or remuneration is paid by such Muff and (Aline holder of office under sob-clause10 b capable of arefelseo legislative. judicial or quasi-judicial power; SI the holder of office under sub-clause lin is capable of exercising Power's by means Of disbursement offends, allotment of lan* issuing of licences and permits or making Of Public aPPalatments oF Slanting of non offer femurs of substantial onto's. (III) qperson shall not be deemed to hold an office of profit under the Government of India or the Government of ato State by reason only that he is a Miniff er either for the DM an or for such a State" nmlanation 2 For the purposes of this clause the expression— la) 'Wire" mean the permanent substantive position which exists independently of the holder of the office; 0) "reneuneratIon" means LW pecuniary gain commensurate with the status and responsibilities attached to the office: lc) "salary" means meaty Or pay scale attached to the o//ice whether or not the holder of such an office draws such salary After clause (1), the fallowing clause shall be inserted namely:— MielheetwIthstandnie anYthIng CO/named In Sahmlause Ita of douse Ip lf a member af either House of Parliament M105 become subject to any disquolificotion mentioned In that sub cl he shall not be so disqualified unless he has not ftSittnEd from such Office which is the subject ditiOlEigicE°Effjause

~~114 -~~

~~AIVNEXURE yr~~

~~JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~SECOND TERM OF REFERENCE~~

~~TO RECOMMEND, IN RELATION TO "OFFICE OF PROFIT", THE EVOLUTOIN OF GENERIC AND COMPREHENSIVE CRITERIA WHICH ARE JUST, FAIR AND REASONABLE AND CAN BE APPLIED TO ALL STATES AND UNOIN TERRITORIES~~

51..No. Name of State (item followed by State Desirability for uniform Catena to be adopted Desirability of bang Government: In granling [terra ing constitutional exemThon amendments in Art. On Ft 191 of the Comtitution

~~2 1 5 6~~

Andhra Fradegh No crItena followed while In favour. No criteria SLIggeSled. inms givrng exemptions. Anmachal PadeSh No speck criteria has tem In IMUI No criteria suggested. In favour of antend• followed mein .

ASSditi Ho specific criteria apart Not in favour. Vatter should be left to State Not in favow from part time clause. Government as per present Exemptions given on ow proviso:as of the CWALIF(1011 brave bass Bihar No specific criteria Not in favour. Matter should be left T State Not in favour. Lavemments. Chhattsgarh No specific critera. In recur. However, the No uditeria suNested In fassir. State Government has desired that States most be consulted before evaMog such psis pies/ catesa

Goa Gryarg.t No criteria (Wowed other Uniform pnnople not Each and every cove related to Not m four than pecuniary aspect in practical. 011io of profit he decided oat the some Wei basisalit wait End circumstances. Haryana No criteria has been Ho aeed to evolve No criteria suggested. Not in WM( ollowed However, uniform oitelia if the against the cooceptof exemptions srt given after comept of federallwnis federalism duedeliberationon the floor to be protected. of the Rune.

~~115 I 3~~

In favour of amend 9. Himachal Pradesh No specPk criteria has been In favour The State Government has stated. suggested follovnng comprehensive meat. criteria for constityting 'Office of Profit" without compYomising with the ObjKI sought so he achieved by be provisions of Article 191111 NI and Article 102 (1) (a).:— . recumary considerations. The holder of the office should not meld any financial and executive power and patronage

3. Jammu and Kashmir II. Jharhhand 1E. Xamataka No specific criteria has been In favour. Criteria (pecuniary aspect) laid in favour. stated. Exemptions are down by the Supreme Court in Jaya being given on the lines of Bachan V. uoi can be the guiding Parliament Ad. factor.

13. Kerala Remuneration is the general In favour. Po crireda suggested. No new offered. criteria farmed for grating exem p lion. However, considering aye importance, necessity and nature of duties and obligations, certain specific hires have also been declared exemPted without considering the remuneration aspect.

~~19. Madhya Pradesh th. Maharashtra General exemptions In favour. Pecuniary gain or any land of profit In favour. prodded. obtained by the Holder of Office of Prone.~~

16 Manipur Ethnic and tribal interest Not in favour Each State should determine its own No comments offered. along with the needs of criteria depending on its ovm needs other-seams of the society including political aspirations and are taken care of. needy of the saietry 17. Meghalaya General exemptions In favour. Criteria be decided only al ter In favour of constitut pnovided thdepth study as each State may lanai amendment have its own peculiar needs. and has desired that all provisions of Prevention of Disqualification

~~116 0-1113--~~

(Members of Legislative Assembly of Negholagal Act] 1972 be inclUded In favour of amend umam No other cdteda other than In favour. No specific criteria suggested. must part.time clause and not remunerated either by salary or fees has been followed while giving exemptions. Noneedfor constit- No criteria suggested other No need for wifo nkna ggest 19. Nagaland Asisi smendment. than pecuniary aspect. criteria.

11. Orissa Not in favour. 11. Punjab Criteria followed- Not in favour. There should be some guiding pdndples that can be suggestive in State independence 0) Part.tirne office nature for declaring a particular post should remain. (HI office ts which no or office lobe an Office of Profit and regular salary is finally it should he left open to the attached. Legislature to decide whether an office/post is an 'Office of Profit' or not taking into consideration the svallable relevant fasts.

ASasNan Xn criteria followed In favour. No criteria suggested. In favour of bringing constitutional amendments and has desired that general prindplei be laid which may be followed by the States While exempting office of profit under ankle 191. These principles may comprise the general elements of the offices holding of which would derogate the petition or efficiency or a member as representative of people.

~~117 5 2~~

In general, principles may be No comments offered. Sathim No specific criteria ha In favour uniform. However, the other details followed ..mgr or criteria be decided by state Government. NDcommentsoffered. In favour No particular criteria suggested. 24 Tama Hada No spedfic criteria has bean followed in granting exemption from &aqua icatica to the offices in corporatons,i Boards, Committees, Bodies etc. appointed by the State GOYMIllelli and the relevant Ads are amanded accordingly. In favour of bmigIng 21 Tripura No specific criLena. In lama. No clean suggested =taut-alai amend. mats 110WeVerStale Legislatures should have authority to make laws under Article 191 26. Utter trades!, In favour 27. Uttaranchal No specific cntena In favour. Na criteria sugLaSted. In favour of uniform Thocgh Nis difficult to evolve Present System of 28. We Bengal No criteria (other than Constitution be restrictions on holding criteria but uniform uniform aftena, however, if it is continued. whole time office and attena not so easy to implemented local conditions be remuneration) has been be implemented and taken into account because each followed sbould be Seed only State forms its own legislature. afterlaade deliberation.

~~118 ANNEXIIRE VII~~

~~HOUSE OF COMMONS DISQUALIFICATION ACT, 1975 (1975 Chapter 24)~~

~~[8th May 1975]~~

An Act to consolidate certain enactments relating to disqualification for membership of the House of Commons. Be it enacted by the Queens most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:- 1. Disqualification of holders of certain offices and places—(1) Subject to the provisions of this Act, a person is disqualified for membership of the House of Commons who for the time being— (a) holds any of the judicial offices specified in Part I of Schedule 1 to this Act; (b) is employed in the civil service of the Crown. Whether in an established capacity or not, and whether for the whole or part of his time; (c) is a member of any of the regular armed forces of the Crown;

(d) is a member of any police force maintained by a police authority; (e) is a member of the legislature of any country or territory outside the Commonwealth; Or (f) holds any office described in Part II or Part III of Schedule 1. (7) A person who for the time being holds any office described in Part IV of Schedule 1 is disqualified for membership of the House of Commons for any constituency specified in relation to that office in the second column of Part IV. (3) In this section— "civil service of the Crown' includes the civil service of Northern Lreland, Her Majesty's Diplomatic Service and Her Majesty's Overseas Civil Service; "Peke authority" means any police authority within the meaning of the Police Act, 1964 (1964 c.48) or the Police (Scotland) Act, 1967 (1967 c_77) or the Police Authority for Northern Ireland; and "member" in relation no a police force means a person employed as a full-time constable; "regular armed forces of the Crown" means the Royal Navy, the regular forces as defined by section 225 of the Army Act, 1955 (1955 c.18), the regular air force as defined by section 223 of the Air Force Act, 1955 (1955 c.19), the Women's Royal Naval Service, Queen Alexandra's Royal naval Nursing Service and Voluntary Aid Detachments serving with the Royal Navy.

119 (4) Except as provided by this Act, a person shall not be disqualified for membership of the House of Commons by reason of his holding an office or place of profit under the Crown or any other office or place; and a person shall not be disquaLified for appointment to or for holding any office or place by reason of his being a member of that House. 2. Ministerial offices.—(1) Not more than ninety-five persons being the holders of offices specified in Schedule 2 to this Act (in this section referred to as Ministerial offices) shall be entitled to sit and vote in the House of Commons at any one time.

(2) If at an / time the number of members of the House of Commons who are holders of Ministerial offices exceeds the number entitled to sit and vote in that House under sub-section (1) above, none except any who were both members of that House and holders of Ministerial offices before the excess occurred shall sit or vote therein until the number has been reduced, by death, resignation or otherwise, to the number entitled to sit and vote as aforesaid.

(3) A person holding a Ministerial office is not disquaLified by this Act by reason of any office held by his ex officio as the holder of that Ministerial office. 3. Reserve and auxiliary forces, etc —(1) Notwithstanding section 1(1) (C) above-

- (a) a person who is an officer on the retired or emergency list of any of the regular armed forces of the Crown, or who holds an emergency commission in any of those forces, or belongs to any reserve of officers of any of those forces, is not disqualified as a member of those forces; and (b) a naval, army, marine or air force pensioner who is recalled for service for which he is liable as such is not disqualified as a member of the regular armed forces of the Crown. (2) A person is not disqualified under section 1(1)(c) above by reason of his being an Admiral of the fleet, a Field Marshal or a Marshal of the Royal Air Force, if he does not for the time being bold an appointment in the naval, military or air force service of the Crown.

(3) A person is not disqualified under section 1(1) (b) above by reason of his being a member of the Royal observer Corps unless he is employed as such for the whole of his time, 4. Stewardship of Chiltern Hunderds, etc For the purposes of the provisions of this Act relating to the vacation of the seat of a member of the House of Commons who becomes disqualified by this Act for membership of that House, the office of steward or bailiff or her Majesty's three Chiltern Hunderds of Stoke, Desborough and Burnham, or of the manor of Northstead, shall be treated as included among the offices described in Part III of Schedule 1 to this Act, 5. Power to amend Schedule 1.-1 at any time it is resolved by the House of Commons that Schedule 1 to this Act be amended, whether by the addition or omission of any office or the removal of any office from one Part of the schedule to another, or by altering the description of any office specified therein, Her Majesty may by Order in Council amend that Schedule accordingly. (2) A copy of this Act as from time to time amended by Order in Council under this section or by or under any other enactment shall be prepared and certified by the Clerk of the Parliaments and deposited with the rolls of Parliament; and all copies of this Act thereafter to be printed by Her Majesty's printer shall be printed in accordance with the copy so certified.

~~120 6. Effects of disqualification and provision for relief.—(1) Subject to any order made by the House of Commons under this section,—~~

(a) if any person disqualified by this Act for membership of that House, or for membership for a particular constituency, is elected as a member of that Nouse, or as a member for that consituency, as the case may be, his election shall be void; and

~~(b) if any person being a member of that House becomes disqualified by this Act for membership, or for membership for the constituency for which he is sitting, his seat shall be vacated.~~

(2) If, in a case falling or alleged to fall within sub-section (1) above, it appears to the House of Commons that the grounds of disqualification or alleged disqualification under this Act which subsisted or arose at the material time have been removed, and that it is otherwise proper so to do, that House may by order direct that any such disqualification incurred on those grounds at that time shall be disregarded for the purposes of this section.

(3) No order under sub-section (2) above shall affect that proceedings on any election petition or any determination of an election court, and this sub-section shall have effect subject to the provisions of section 124(5) of the Representation of the People Act, 1949 (1949 c.68) (making of an order by the House of Commons when informed of a certificate and any report of an election court). (4) In any case where, apart from this provision, the Speaker of the House of Commons would be required to issue during a recess of that House a warrant for a new writ for election of a member, in the room of a member becoming disqualified by this Act, he may, if it appears to him that an opportunity should be given to that House to consider the making of an order under sub-section (2) above, defer the issue of his warrant pending the determination of that House. 7. Jurisdiction of Privy Council as to disqualification.—(1) Any person who claims that a person purporting to be a member of the House of Commons is disqualified by this Act, or has been so disqualified at any time since his election, may apply to Her Majesty in Council, in accordance with such rules as Her majesty in Council may prescribe, for a declaration to that effect. (2) Section 3 of the Judicial Committee Act, 1833 (1833 c.41) (referency to the Judicial Committee of the Privy Council of appeals to her Majesty in Council) shall apply to any application under this section as it app lies to an appeal to Her majesty in Council from a court. (3) Upon any such application the person in respect of whom the application is made shall be the respondent; and the applicant shall give such security for the costs of the proceedings, not exceeding E 200, as the Judicial Committee may direct. (4) For the purpose of determining any issue of fact arising on an application under this section the Judicial Committee may direct issue to be tired—

~~(a) if the constituency for which the respondent purports to be a member is in England or Wales, in the High Court;~~

~~(b) if that constituency is in Scotland, in the Court of Session; (c) if that constituency is in Northern Ireland, in the High Court in Northern Ireland; and the decision of that Court shall be final.~~

121 (5) A declaration under this section may be made in respect of any person whether the grounds of the alleged disqualification subsisted at the time of his election or arose subsequently but no such declaration shall be made—

(a) in the case of disqualification incurred by any person on grounds which subsisted at the time of his election, if an election petition is pending or has been tried in which his disqualification on those grounds is or was in issue;

(b) in the case of disqualification incurred by any person on any grounds, if order has been made by the House of Commons under section 6(2) above directing that any disqualification incurred by him on those grounds shall be disregarded for the purposes of that section.

8. Relaxation of obligation to accept office.(1) No person being a member of the House of Commons, or f or the time being nominated as a candidate for election to that House, shall be required to accept any office or place by virtue of which he would be disqualified by this Act for membership of that House, or for membership of that House for the constituency for which be is sitting or is a candidate.

~~(2) This section does not affect any obligation to serve in the armed forces of the Crown, whether imposed by an enactment or otherwise.~~

9. Interpretation.—(1) In this Act—"Minister of State" means a member of Her Majesty's Government in the United Kingdom who neither has charge of any public department nor holds any other of the offices specified in Schedule 2 to this Act or any office in respect of which a salary is payable out of money provided by Parliament under section 3(1) (b) of the Ministerial and other Salaries Act, 1975 (1975 c. 27):

"Parliamentary Secretary" includes a person hording Ministerial office (however called) as assistant to a Member of Her Majesty's Government in the United Kingdom, but no having departmental responsibilities.

10. Consequential amendment, repeals and saving.—(1) Schedule 2 to the Representation of the People Act, 1949 (1949 c. 68) which contains Parliamentary Elections Rules shall be amended by substituting, for paragraph (2) of Rule 9 of the Parliamentary Elections Rules, the following paragraph--

f(2) A candidate's consent given under this rule shall contain a statement that he is aware of the provisions of the House of Commons Disqualification Act, 1975, and that, to the best of his knowledge and belief, he is not disqualified for membership of the House of Commons."

(2) The enactments specified in Schedule 4 to this Act, are hereby repealed, so far as they apply in relation to disqualification for the House of Commons, to the extent specified in the third column of that Schedule.

(3) Nothing in this Act shall be construed as affecting the enactments relating to the disqualification for membership of the House of Commons, of priests in holy orders or ministers of any religious denomination.

~~122 s~~

(4) Nothing in the definition of "regular armed forces of the Crown" in section 1(3) above shall be taken to alter the law in force immediately before the passing of this Act in relation to disqualification for membership of the House of Commons.

~~11. Short title and extent.(1) This Act may be cited as the House of Commons Disqualification Act, 1975.~~

~~(2) This Act extends to Northern Ireland.~~

~~SCHEDULES~~

~~Schedule '1~~

~~Offices Disqualifying for Membership~~

~~PART I~~

~~JUDICIAL OFFICES~~

~~Judge of the High Court of Justice or Court of Appeal.~~

~~Judge of the Court of Session.~~

~~Judge of the High Court of Justice or Court of Appeal. in Northern Ireland.~~

~~Judge of the Courts-Martial Appeal Court.~~

~~Chairman of the Scottish Land Court.~~

~~Circuit Judge.~~

Sheriff Principal. or Sheriff (other than Honorary Sheriff) appointed under the Sheriff Courts (Scotland) Act, 1907 (1907 c. 51), or Temporary Sheriff Principal or Temporary Sheriff appointed under the Sheriff Courts ( Scotland) Act, 1971 (1971 c. 58).

~~County Court Judge or Temporary County Court Judge in Northern IreLand within the meaning of the Government of IreLand Act, 1920 (1920 c. 67), or the deputy of such a Judge.~~

~~Stipendiary Magistrate within the meaning of the Justices of the Peace Act, 1949 (1949 A 101). Stipendiary Magistrate in Scotland.~~

Resident Magistrate appointed under the Summary Jurisdiction and Criminal Justice Act (Northern Ireland), 1935 [1935 c. 13 (N. L)] or the Magistrates' Court Act (Northern Ireland), 1964 0964 c. 21 (N.I.)]

~~Chief or other National Insurance Commissioner.~~

~~Chief or other Marione Insurance Commissioner for Northern IreLand.~~

~~Umpire or Deputy Umpire appointed for the purposes of section 43 of the National Service Act, 1948 (1948 c. 64).~~

~~123 PART II~~

~~BODIES OF WHICH ALL MEMBERS ARE DISQUALIFIED~~

The Advisory Board for the Research Councils. The Agreement Board. The Appellate Tribunal constituted under the provisions of the National Service Act, 1948 relating to conscientious objectors. An Area Electricity Board in England and Wales. The Attendance Allowance Board. The British Airports Authority, The British Airways Board. The British Film Fund Agency. The British Gas Corporation. The British Railways Board. The British Steel Corporation. The British Transport Docks Board. The British Waterways Board. The Central Council for Agricultural and Horticultural Co-operation. The Central Electricity Generating Board. lte Channel Tunnel Planning Council. The Civil Aviation Authority. The Civil Service Arbitration Tribunal. A Colonial Currency Board. The Commission for Local Administration in England. The Commission for Local Administration in Wales. The Commission for the New Towns. The Commonwealth Development Corporation. The Community Relations Commission. The Council on Tribunals. The Covent Garden Market Authority. The Crofters Commission. The Crown Agents for Oversee Governments and Administrations. The Crown Estate Commissioners. The Development Commission established under the Development and Road Improvement Funds Act, 1909 (1909 c. 47). A development Corporation within the meaning of the New Towns Act, 1963 (1965 c. 59) or the New Towns (Scotland) Act, 1968 (1968 c. 16).

~~124 A Development Council established under the Industrial Organisation and Development Act, 1947 (1947 C. 40).~~

~~The Eggs Authority. The Electricity Council. The Foreign Compensation Commission.~~

~~The Forestry Commission. The Freight Integration Council. The Gaming Board for Great Britain. The General Practice Finance Corporation.~~

~~The Health and Safety Commission. The Health and Safety Executive. The Herring Industry Board. The Highlands and Islands Development Board.~~

~~The Home-Grown Cereals Authority. The Housing Corporation. The Immigration Appeal Tribunal.~~

An Independent Schools Tribunal constituted under Schedule 6 to the Education Act, 1944 (1944 c. 31) or Schedule 7 to the Education (Scotland) Act, 1962 (1962 c. 47). The Independent Broadcasting Authorit y. The Industrial Arbitration Board. An Industrial Court established in Northern Ireland. The Industrial Estates Corporations constituted in accordance with the Local Employment Act, 1972 (1972 c. 5). The Industrial Injuries Advisory Council. The Intervention Board for Agricultural Produce and every committee of the Board performing functions of the Board. A Joint Planning Inquiry Commission constituted under Part III of the Town and Country Planning (Scotland) Act, 1972 (1972 c. 521. The Lands Tribunal. The Lands Tribunal for Northern Ireland. The Lands Tribunal for Scotland_ The Law Commission. The Local Government Boundary Commission for England.

~~125 fir~~

~~The Local Government Boundary Commission for Scotland.~~

~~The Local Government Boundary Commission for Wales.~~

~~The Location of Office Bureau. The Manpower Services Commission.~~

The Maplin Development Authority. The Meat and Livestock Commission. A Medical Appeal Tribunal constituted for the purposes of Part III of the Social Security Act, 1975 (1975 c. 14) or Part In of the Social Security (Northern Ireland) Act, 1915 (1975 C. 15), including any panel constituted for the purposes of any such Tribunal.

A Medical Board or Pneumoconiosis Medical Board constituted for the purposes of Part III of the Social Security Act 1975 or Part Ill of the Social Security (Northern Ireland) Act, 1975, including any panel constituted for the purposes of any such Board.

A Medical Practices Committee constituted under section 34 of the National Health Service Act, 1946 (1946 c. 81) or section 35 of the National Health Service (Scotland) Act, 1947 (1947 c. 27). • The Medicines Commission and any Committee established under section 4 of the Medicines Act, 1968 (1968 c. 67). A Mental Health Review Tribunal constituted under the Mental Health Act, 1959 (1959 C. 72).

~~The Mental Welfare Commission for Scotland.~~

~~The Metrication Board. The Ministry of Defence (Army Department) Teachers Selection Board.~~

~~The Monopolies and Mergers Commission. A National Broadcasting Council.~~

~~A National Bus Company.~~

~~The National Coal Board. The National Dock Labour Board. The National Film Finance Corporation.~~

~~The National Freight Corporation. The National Health Service Staff Commission.~~

~~The National Insurance Advisory Committee.~~

~~The National Ports Council. The National Radiological Protection Board. The National Research Development Corporation.~~

~~126 The North of Scot[and Hydro-Electric Board. The Northern Ireland Electricity Service.~~

The Occupational Pensions Board. A Panel of Chairmen of Re-instatement Committees constituted under section 41 of the National Service Act, 1948 (1948 c. 64). The Panel of Official Arbitrators constituted for the purposes of the Acquisition of Land (Assessment of Compensation) Act, 1919 (1919 c. 57). The Parole Board constituted under section 59 of the Criminal Justice Act, 1967 (1967 c. 80).

A Pensions Appeal Tribunal. The Performing Right Tribunal. A Planning Inquiry Commission constituted under Part III of the Town and Country Planning Act. 1971 (1971 c. 78). A Planning Inquiry Commission constituted under Part III of the Town and Country Planning (Scotland) Act, 1972 (1972 c. 52). The Post Office. The Price Commission. The Property Commission for Scotland established under section 224 of the Local Government (Scotland) Act, 1973 (1973 c. 65). The Race Relations Board and any conciliation Committee constituted by the Board under section 14 of the Race Relations Act, 1968 (1968 c. 71). The Red Deer Commission. The Reserve Pension Board. The Restrictive Practices Court.

The Review Board for Government Contracts. A Rural Development Board. The Scottish Committee of the Council on Tribunals. The Scottish Land Court. The Scottish Law Commission. The Scottish Transport Group. The South of Scotland Electricity Board . The Staff Commission established under section 85(5) of the London Government Act, 1963 (1963 c. 33). The Staff Commission for England established under section 257 of the Local Government Act, 1972 (1972 c. 70).

127 The Staff Commission for Scotland established under section 218 of the Local Government (Scotland) Act, 1973 (1973 c. 65). The Staff Commission for Wales established under section 258 of the Local Government Act, 1972. The Sugar Board. The Supplementary Benefits Commission. The Traffic Commissioners for any area (ineeding the Commissioner for the Metropolitan Traffic Area). The Transport Tribunal. The Tribunal established under Part II of the Wireless Telegraphy Act, 1949 (1949 c. 54).

~~The United Kingdom Atomic Energy Authority.~~

~~The University Grants Committee.~~

A Value Added Tax Tribunal. The Water Resources Board. The Welsh National Health Service Staff Commission. The White Fish Authority constituted in accordance with section 1 of the Sea Fish Industry Act, 1970 (1970 c. 11) and the Committee constituted in accordance with section 2 of that Act.

~~PART III OTHER DISQUALIFYING OFFICES~~

~~Account of Court appointed under section 25 of the Administration of Justice (Scotland) Act, 1933 (1933 c. 41). Adjudicator appointed for the purposes of the Immigration Act, 1971 (1971 c. 77).~~

~~Agent for Northern Ireland in Great Britain. Ambassador representing Her Majest's Government in the United Kingdom.~~

Assessor of Public Undertaking (Scotland). Assistant Commissioner appointed under Part IV of the Local Government Act, 1972 (1972 c. 70). Assistant Commissioner appointed under part II of the Local Government (Scotland ) Act, 1973 (1973 c. 65). Attorney General of the Duchy of Lancaster. Auditor of the Civil List. Auditor of the Court of Session. Boundary Commissioner or Assistant Boundary Commissioner appointed under Part I or Part II of Schedule 1 to the House of Commons (Redistribution of Seats) Act, 1949 (1949 c. 66).

128 Chairman or Deputy Chairman of an Administrative Board constituted for the purposes of any scheme made, or having effect as if made, under section 2 or 5 of the Industrial Injuries and Diseases (Old Cases) Act, 1975 (1975 c. 16). Chairman or Vice-Chairman of the Advisory Committee on Distinction Awards. Chairman of the Advisory Committee on Distinction Awards in Northern Ireland.

Paid Chairman of an Area Transport Users Consultative Committee established under section 56 of the Transport Act, 1962 (1962 c. 46). Chairman or Member of a Panel of Deputy-Chairmen of an Agricultural Land Tribunal. Chairman of an Appeal Tribunal constituted under Schedule 3 to Ministry of Social Security Act, 1966 11966 c. 20) or Schedule 3 to the Supplementary Benefits Et C. Act (Northern Ireland), 1966 [1966 c. 28 (N.I.)]. Chairman or Director-General of the British Council. Paid Chairman of the Central Tribunal Consultative Committee for Great Britain established under section 56 of the Transport Act, 1962.

Chairman of the Cinematograph Films Council. Chairman of the Countryside Commission for Scotland and any other member of the Commission in receipt of remuneration. Chairman or Vice-Chairman of the Dental Estimates Board or member of that Board appointed at an annual salary. Paid Chairman of an Economic Development Committee. Paid Chairman of a Health Board constituted under the National Health Service (Scotland) Act, 1972 (1972 c. 58). Chairman of a Health and Social Services Board established under Article 16 of the Health and Personal Social Services (Northern Ireland) order, 1972 [Si 1972/1265 (N.I. 14)].

Paid Chairman of an Industrial Training Board constituted under the Industrial Training Act, 1964 (1964 c. 16) or of a Committee appointed under that Act or paid Deputy Chairman of such a Board. Chairman, Vice-Chairmaa or member of the executive Committee of the Land Settlement Association Limited appointed at a salary. Chairman of the Local Government Staff Commission for Northern Ireland. Chairman of a Local Tribunal constituted under section 94(2) of, and Schedule 10 to, the Social Security Act, 1975 (1975 c. 14) or under section 94(2) of, and Schedule 10 to, the Social Security (Northern Ireland) Act, 1975 (1975 c. 15).

Chairman or Deputy Chairman of a Local Tribunal constituted under the provisions of the National Service Act, 1948 11948 c. 64) relating to conscientious objectors. Chairman or Reserve Chairman of a Military Service (hardship) Committee constituted under Schedule 3 to the National Service Act, 1948.

~~129 -c 6-~~

~~Chairman of the Mining Qualifications Board. Paid Chairman of a National Economic Development Council Working Party.~~

~~Chairman in receipt of remuneration of the National Gas Consumers' Council or any Regional Gas Consumers' Council. Chairman or Vice-Chairman of the National Seed Development Organisation Limited.~~

~~Chairman, or other member appointed by a Minister, of the National Water Council.~~

~~Chairman of the Northern Ireland Central Services Agency for the Health and Social Services.~~

~~Chairman of the Northern Ireland Council for Nurses and Midwives.~~

~~Chairman of the Northern Ireland Staffs Council for the Health and Social Services.~~

~~Any Chairman of the Plant Varieties and Seeds Tribunal.~~

~~Chairman of the Post Offices Users National Council.~~

Chairman of a Regional Economic Planning Council Chairman in receipt of remuneration of any Regional Health Authority, Area Health Authority or Area Health Authority (Teaching) or of any special health authority.

Chairman of a Regional Water Authority. Chairman of the Scottish Dental Estimates Board or member of that Board appointed at an annual salary. Chairman, Deputy Chairman or member of the Council of Management of the Scottish Special Housing Association, appointed at a salary. Chairman of the Staff Commission for Education and Library Boards in Northern Ireland.

~~Chairman of the Tribunal constituted under section 463 of the Income and Corporation Taxes Act, 1970 (1970 c. 10) Chairman of the Welsh National Water Development Authority.~~

~~Chief Electoral officer or Deputy Electoral Officer for Nothern Ireland.~~

~~Clerk of the Crown and peace in Northern Ireland.~~

Clerk of the Peace in Scotland. Clerk or Assistant clerk of Petty Session in Northern Ireland. Assistant Commissioner appointed under Part II of the Local Government (Scotland) Act, 1973 (1973 c. 65). Commissioner or Assistant Commissioner appointed under section 50(1) or 2) of or Schedule 4 to, the local Government Act (Northern Ireland 1972), [(1972 c. 9 (NTT].

~~The Commissioner appointed by Her Majesty's Government in the United Kingdom under Article 3 of the Agreement confirmed by the Nauru Island Agreement Act, 1920 (1920 c. 27).~~

~~130 -fie_~~

~~Commissioner or Assistant Commissioner of Police of the Metropolis_ Commissioner of the City of London Police_~~

Comptroller and Auditor General. Comptroller and Auditor-General for Northern Ireland. Constable, Lieutenant or Major of the Tower of London. Correspondent appointed by the Commissioners of Customs and Excise. Counsel to the Secretary of State under the Private Legislation Procedure (Scotland) Act, 1936 (1936 c. 52). Crown Solicitor for Northern Ireland. Delegate for Her Majesty's Government in the United King dom to the Central Rhine Commission. Director of the Agricultural Mortgage Corporation Limited nominated by a Minister of the Crown or government department. Director of the British Petroleum Company Limited nominated by a Minister of the Crown or government department. Director of the British Sugar Corporation Limited appointed by the Ministers as defined by section 17 of the Sugar Act, 1956 (1956 c. 48).

~~Director of Cable and Wireless Limited.~~

~~Director of the Cereals Committee Limited appointed by a Minister of the Crown or government department.~~

~~Director of the Commonwealth Institute.~~

~~Director of the Compagnie Financier, de Suez et de [Union Parisienne appointed by a Minister of the Crown or government department.~~

Director of any company in receipt of financial assistance under the Distribution of Industry Act, 1945 (1945 c. 36), the Distribution of Industry (Industrial. Finance) Act, 1958 (1958 c. 41). The Shipbuilding Industry Act, 1967 (1967 c. 40), the Local. Employment Act, 1972 (1972 c. 5) or Part II of the Industry Act, 1972 (1972 c. 63). being a Director nominated by a Minister of the Crown or government department.

Director nominated by the Secretary of State of any company in respect of which an undertaking to make advances has been given by the Secretary of State under section 2 of the Highlands and Islands Shipping Services Act, 1960 (1960 c. 31), and is for the time being in force.

~~Director of the Holding Company referred to in the Transport Act, 1962 (1962 c. 46).~~

~~Director appointed at a salary of Industrial Advisers to the Blind Limited.~~

~~Director of International Computers (Holdings) Limited nominated or appointed by a Minister of the Crown or government department.~~

~~Director app ointed at a salary of the National Building Agency.~~

~~131 Cre~~

Director appointed at a salary of the National Institute for House-craft (Employment and Training) Limited. Director of the Peterhead Bay (Management) Company Limited. Director, or Deputy Director, of Public Prosecutions for Northern Ireland. Director appointed at a salary of Remploy Limited. Director of S.B. (Realisations) Limited nominated or appointed by a Minister of the Crown or government department. Director of the Scottish Agricultural Securities Corporation Limited nominated by a Minister of the Crown or government department. Director General of Fair Trading. Distributor of Stamps appointed by the Commissioners of Inland Revenue for the Stock Exchange at Manchester or Glasgow.

Examiner or member of a board of interviews appointed by the Civil Service Commissioner. Examiner for entrance examination to, or member of a board of interviewers for entrance to, the civil service of Northern Ireland. General Manager or Secretary of the Scottish Special Housing Association. Governor of the British Broadcasting Corporation. Governor, Deputy Governor or Director of the Bank of England. Governor, Lieutenant and Secretary, or Captain of Invalids of Chelsea Hospital. Governor) Medical Officer or other officer or member of the staff of a prison to which the Prison Act (Northern Ireland) 1953 [(1953 c. 18 (N.I.)] applies. Health Service Commissioner for England. Health Service Commissioner for Scotland. Health Service Commissioner for Wales. High Commissioner representing Her Majesty's Government in the United Kingdom. Industrial Assurance Commissioner or Deputy Industrial Assurance Commissioner appointed under the Industrial Assurance Act (Northern Ireland), 1924 [1924 c. 21 (Ni)]. Judge Advocate of the Fleet. Judge Advocate General, Vice Judge Advocate General, Assistant Judge Advocate General or Deputy Judge Advocate. Lay observer appointed under section 45 of the Solicitors Act, 1974 (1974 c. 47). Local government officers, the following— Clerk or deputy clerk of a district council in Northern Ireland; County clerk or depute county clerk of a county in Scotland; Clerk or deputy clerk of a district council in Scotland; Town clerk or deputy town clerk of a burgh in Scotland.

~~132 -~~

~~Lyon Clerk.~~

Lyon King of Arms. Member of an Agricultural marketing Board appointed by the Minister under Schedule 2 to the Agricultural Marketing Act, 1958 (1958 c. 47). Member of an Agricultural Marketing Board appointed under section 2 of the Agricultural Marketing Act (Northern Ireland), 1933 [1933 c. 22 (NW)] or section 3 of the Agricultural Marketing Act (Northern Ireland), 1964 (1964 c. 13 (NTT. Member appointed by the Minister of Agriculture, Fisheries and Food of the Agricultural Wages Board for England and Wales committee established under the Agricultural Wages Act, 1948 (1948 c. 47), or Chairman of such a committee. Member appointed by the Secretary of State of the Scottish Agricultural Wages Board.

~~Member appointed by the Head of the Department or Minister of Agriculture for Northern Ireland of the Agricultural Wages Board for Northern Ireland.~~

Any member of the British Library Board in receipt of remuneration. Any member in recipt of remuneration of the British Tourist Authority, the English Tourist Board, the Scottish Tourist Board or the Wales Tourist Board.

~~Any member of the Countryside Commission in receipt of remuneration.~~

~~Member appointed by the Secretary of State of the Horserace Betting Levy Board.~~

Member of the Council of the National Computing Centre appointed at a salary by a Minister of the Crown or government department. Any Member of the Nature Conservancy council in receipt of remuneration.

Member of a panel of valuers appointed at an annual salary under section 4 of the Inland Revenue Regulation Act, 1890 (1890 c. 21). Member of the permanent Joint Hops Committee appointed by a Minister of the Crown or government department. Member of a Wages Council or Central Co-ordinating Committee appointed under paragraph 1 (a) of Schedule 2 to the Wages Councils Act, 1959 (1959 c. 69). Chairman of a Committee appointed under paragraph 1 (1) (a) of Schedule 3 to that Act or member of a Commission of Inquiry appointed under paragraph 1 (a) of Schedule 4 to that Act.

Member of a Wages Connell or Central Co-ordinating Committee appointed under paragraph 1(a) of Schedule 1 to the Wages Councils Act (Northern Ireland), 1945 [1945 c. 21 (NW)] or Member of a Commission of Inquiry appointed under paragraph 1 (a) of Schedule 2 to that Act

~~Northern Ireland Commissioner for Complaints.~~

~~Northern Ireland Parliamentary Commissioner for Administration. 133 .0■. car) Oa~~

Officer of the Board of Referees appointed for the purposes of section 26 of the Capital Allowances Act, 1968 (1968 C. 3). Officer or servant employed under the Commissioner of Police of the Metropolis or the Receiver for the Metropolitan Police District.

Officer or servant of the Crown Estate Commissioners. Officer or other member of the County Court Service within the meaning of the County Courts Act (Northern Ireland), 1959 [1959 C. 25 (Hid]. Officer, clerk or servant appointed or employed under section 20 of the greenwich Hospital Act, 1865 11865 c. 89). Officer of the Supreme Court within the meaning of sections 115 to 120 of the Supreme Court of Judicature (Consolidation) Act, 1925 (1925 c. 49). Officer of or attached to the Supreme Court of Northern Ireland to whom section 76 of the Supreme Court of Judicature Act (Ireland), 1877 (1877 w 57) applies.

Parliamentary Commissioner for Administration. President, or member of a panel of chairmen, of Industrial tribunals established under section 12 of the Industrial Training Act, 1964 (1964 C. 16). Principal Clerk of Justiciary appointed under section 25 of the Administration of Justice (Scotland) Act, 1933 (1933 c. 41). Procurator fiscal or procurator fiscal depute appointed under the Sheriff Courts and Legal Officers (Scotland) Act, 1927 (1927 c. 35).

~~Public Works Loan Commissioner.~~

Receiver for the Metropolitan Police District. Registrar or Assistant Registrar appointed under section 18 or section 19 of the County Courts Act, 1959 (1959 c. 22). Registrar or Assistant Registrar of Friendly Societies.

~~Registrar of the Privy Council. Registration Officer appointed under Part Ill of the Local. Government Act, 1972 (19)2 c. 70).~~

~~Sheriff Clerk or sheriff clerk depute. Solicitor in Scotland to any department of Her Majesty's Government in the United Kingdom.~~

~~Standing Counsel to any department of Her Majesty's Government in the United Kingdom.~~

~~Substitution Officer of the Roy al Air Force. Technical Adviser to the Commissioners of Customs and Excise. Under-Sheriff appointed under section 1 of the Sheriffs (Ireland) Act, 1920 (1920 c. 26).~~

~~134 (a/~~

~~PART IV~~

~~OFFICES DISQUALIFYING FOR PARTICULAR CONSTITUENCIES Offing Constituency Her Majesty's Commissioner of The Cities of London and Westminster. Lieutenancy in the City of London.~~

~~Her Majesty's Lieutenant for Greater London. Any constituency comprising any part of Greater London.~~

~~Her Majesty's Lieutenant for a County Any constituency comprising the whole or in Great Britain. part of the area for which he is appointed.~~

Governor of the Isle of Wight. The Isle of Wight. The High Sheriff of Greater London. Any constituency comprising any part of Greater London. High Sheriff of a County in England and Any constituency comprising the whole or Wales. part of the area for which be is appointed.

~~Schedule 2 Ministerial Offices~~

~~Prime Minister and First Lord of the Treasury.~~

~~Lord President of the Council. Lord Privy Seal. Chancellor of the Duchy of Lancaster. Paymaster General. Secretary of State. Chancellor of the Exchequer.~~

~~Minister of Agriculture, Fisheries and Food. President of the Board of Trade. Minister of State. Chief Secretary to the Treasury.~~

~~Minister in charge of a public department of Her Majesty's Government in the United Kingdom (if not within the other provision of this Schedule). Attorney General. Lord Advocate. Solicitor General.~~

~~135 Solicitor General f or Scotland.~~

~~Parliamentary Secretary to the Treasury.~~

~~Financial Secretary to the Treasury.~~

~~Parliamentary Secretary in a Government department other than the Treasury, or not in a department.~~

~~Junior Lord of the Treasury.~~

~~Treasurer of Her Majesty's Household.~~

~~Comptroller of Her Majesty's Household.~~

~~Vice-Chamberlain of Her Majesty's Household.~~

~~Assistant Government Whip.~~

~~Schedule 3 Repeals Gaoler Short Title Extent Repeal~~

~~5 a d Eli: 2, C. 20 The House of Continua Disqualification The whole Act, except section MI Act, 1957.~~

~~5 a 6 EIIL 2, c. 411 The Electricity Act, 1957. In Schedule 4, in Pan II, the entry relating to the House of Commons DbqualifIcarion Act, 1957.~~

~~657 Ht. 2, c. 16 The Commonwealth Institute Act, 1958. Section 7 (I). 6 a7 Elie. 2, c.71 Tine Tribunals ft Inquiries Act 1958. The Wriole Act, so far as unrepealed.~~

~~667 flit. 2, c. 71 The Agriculture Act, 1958. Section 8 (2). In Section 11(2), the wards "except cob section it) of section dght therbor.~~

~~7 a 8 Ebb 2, c 40 The Deer (kollandi Act, 1959. In the section 37(2) the words from "except" to "Act, or. le Schedule I, MEMO I.~~

~~788 HE 2, C. di The new Towns Act, 1959. Section 2 (fib. In section 14, in sub-se(tion Pi the ;Ms /NM 'bereft" co "Comae" and in sub-section 13) the words "except the said proyisisof.~~

~~Scdedule I, paragrarb f Ital.~~

~~7 Et 8 Ehz. 2, C. 69 The Wages bounds Act, 1959. Sedice In section 27(3) the weds "save as °theorise expressly~~

~~7 Et 8 Elie 2, c. 72 The Mental Health Act, 1959. Sector 3151. Insea-Es ISO ard 152 the worth Huh sedico (I of section three".~~

~~The Local Employment Act, 1960. Section II.~~

8 1 9 Elis. 1, c. 58. The Cliadties Ae, 1960 In section Grp (a) the words from tit amends" to I1957' 8 a 91@. 2, c 61 The Mental Health (Scotland) Act, 1960. Seam 2161 In sections 114 and lid Pe words Hub-smile') 161 or section 1 3

9510 Elm 2, c.17 The Betting Levy Act, 1961, The Ade Act, so f ar as unrepealed. 1 ft 10flh. 1, 3. 49 The Covent Garden Market Aµ 1961. Section 47. 10 6 II Eliz. 1, c. 46 The Transport Act, 1961. seam BS In Part I nI Schedule II, the Words "sectan etghty-frie" and the words "and the House of Gunman DisquallffatIon

1961 c. 13 The Lawirn Government Act, 1963. Section 91. In section 94, in sub-section 13) She words "and sectfon 92" and the wads from and the repeals" to "Act 1957" and In nib-sett-al 141 the words from de beginning to "said repeals' and the mods "other than this subsection".

Ma a. 38 The Water Resources Act, 1963. In sectien 137, in sub-sectim 12) the words "and paragraph 4 of Schedule 6 thereto' and in sub-section (3) the words" Incept praagraph 4 of Schedule 6)", In Schedule 6, paragraph 4.

1961 r.40 The Comnrowealth Development Act, 1963 Section 1143 1964 C. 14 The Plant Varieties and Seeds Act, 1964. In Schedule 4, paragraph 4. 1964 c. 16 The Industrial Training ACt, 1964. Section 15. In section 19 II) the words "except section I?.

1964 c 15 The War Carnage Act, 1964. Retool 1314( 1961 c 43 The Harbours k41964. In section 63(1) the words "extent paragraph 7 of Schedule I, In Schedule I, paragraph 7. 1964 C. 42 The Administration of Justice Act, 1964. In section 41, in sub section I6), the words from I'and so" to "Act 199' and in sub.section (7 thewordsfrom "enzept" to "Act 1957". In Schedule 3, in Part It, paragraph D.

1964 c 56 The Housing Act, 1964. In section 109(33 the words "except Paragraph 3110) of Schedule 1". In schedule 1, paragraph 2110). 19641. 98 The Ministers oil the Crum Act, 1969. Sector 3. In section 5, subsections (1) to 13) Schedule 2. 1965 C. 10 The Superannuation [Amendment) Act, 1965 In Schedule I, the entry relating co the House of [canons Disqualification Act, 1957. 1965 c 14 The Cereak Matheting Akt, 1965. In Schedule I, paragraph 12 1965 C. 16 The Airports Authccity Act, 1965. In sectoln 2512), the words "except paragraph 5 of Schedule I " In schedde I, paragraph 5. 1965 c. 21 The Law Carnmnslons Act, 1965. Sect 6113 1965 c. 46 lx Highlands and Islands Devdopment In section 19(2) the words No "except" to Act I (Seolland) Act, 1965. In Schedule I, paGagraph 6.

~~137 CV,~~

1965 c. 6 The National' Insurance Act, 1966. Section 13(2). 1984 C. 8 The Naticoal Health Service Act, 1966. In the Scheduler panagnaPh 8. 1966 C. 20 The Ministry of Social Security Act, 1964 In sectoin 40)4) the words "the House of Commons rilsopalif Hellion Act, 1957", In Schedule 1, paragraph 7. In khedule 6, paragraph 15.

~~1966 c 34 The Industdal Development Act, 1916. In section 2116), the words from 'except" to 'Odisquablicaticar. insedocitanotenty3res1(7e),ced paragraph (b) and the words 'ands~~

~~In Schedule 3. In Pert II, the entry relating to (he House of Commons Usquolification Act, 1957.~~

~~1967 c9 The Parliamentary Commissioner Act, 1967. Secton I HI) 1967 C. 17 The Iron arid Steel Act, 1967. Penton 118) In section sda, the was 'except Sed1011 1)8) (thereof)",~~

1967 c 18 The Local Government (termination of In section 3(211the words from the beginning to 'Act 1937P Resiews) Act, 1967. 1967 rill The Agriculture Act, 1967. Section 71 1967 c 80 The Criminal. Justice Act, 1967. In Scneclule 2, paraoraph 3. 1967 c 86 The Countryside iScotland) Ac, 1967. Section 1(7) In section 79)2) the words from 'excepts to "Act 195r

1961 c. 24 The commonwealth Telecommunications Section 21b) Act, 1968. 1968 Cd1 The Countryside A4196.1968 Section 1(6). In section 50, cub-section )4) and in sub.sectiso (5) the words "and (4)" and "subject to SUb.SeCtiOn (4) above'.

~~1968 c 65 The Gaming Act, 1968. Section 10(4) In snction 5017) the woofs "except soction 10(4r.~~

~~19613 T 67 The HedcHnes Act, 1968. Section 20). 196B c, 71 The Race Relations Act, 8968. In woordsulcom "except" to "Act 1957s. In Ssechaeidanule281(,4)PothraeEra In Schedule 4, paragraph~~

~~1968c 71 The TrannpoT Act, 1968. secttan 155. th Schedule 17, in Part I, the words "155° and the words from and so far to 'art Ills.~~

~~1969 C. 30 The Town and Country Planning In section 108[3S, the words from "and except' to "Act IScolland) Act, 1969 195r.~~

~~1969 C. 35 The Transport (Lando) Act, 1959 In section 47141 the words from the Peginning to 'Act 1957'.~~

~~138 2 3~~

~~1949 c. 46 The Pest Off ace Act, 1969. Section 14(10). InScMule I, paragraph 6.~~

~~1969 c. 51 The Development of Tourism Act, 1969. Section 115). In senton 21(4) the words "except secdon IN".~~

~~1970 c. 40 The Agriculture Act, 1970. In Schedule 1, paragraph O.~~

~~1970 c. 46 The Radiological Protection Act, 1970. in Schedule 1, paragraph 6.~~

~~1970 c. 51 The National. Insurace (Old persons' In section 10)3), the wads 1and End windows' persions and attendance In Schedule 2, in Part 1, paragraph I. allowance) Act, 1970.~~

~~1971 c. II The land Commission (Oissolution) Act, 1971. In section 7(4) the words from "except" to "Act 1957".~~

~~1911 c. 23 The Courk Act, 1971. Seaton I7(5). In section 5915) and Id), paragraph (8).~~

~~1971 c. 58 The Sheriff Courts (Scotland) Act, 1971. Section II. In section 47(31the words from "and section' to "Act 1957".~~

~~1971 C. 71 The Social Security ALI, 1171. In section 10(2), the words Iand".~~

~~1971 c.. 75 The Civil Aviation Act, 1971 Section 115). Section 77(5).~~

~~1971 c 77 The Immigration Act, 1971. In Schedule 5. paragraphs 4 and 10.~~

~~1971 c. 70 The Town and Country Planning Ad, Section 17157 1371. In section 795(7) the words from "relates to" to 'Act 1957~~

~~1977 c. l Tie Ministerial. and other Salaries Act, In section 1(6) the words from the beginnin3 to the end 1972. of paragraph R.) and the words 'and" immediately following that paragraph.~~

~~1972 C. 41 The Finance Act, 1971. In Schedule 6, paragraph 8.~~

~~1977 C. 51 The Town and Country Planning SeCtion 44(5). (Scotland) Act, 1972. Section 47(5), In section 281(3) the words from and to 'Act~~

~~1972 0. 54 The British Library Act, 1977 In the Schedule, paragraph 6.~~

~~1977 C. 50 The National Health Strike (SColland) Section 42(4), Act, 1971. In section 6591) end (4) the words "4214.1" In Schedule I, paragraph 6.~~

~~1972 C. 60 The Gas Act, 1972 In section 50(1) the isevds from 'and the" to "Schedule r In Schedule 3, paragraph 4. In Schedule 6, paragraph 7.~~

~~1922 C. 62 he Agriculture (Miscellaneous In sectim ➢(5)(h1 the words 'to the lime of Commons Pnvisions) An, 1971. Disqualification Act, 1957"~~

~~139 3~~

1972 c 68 Tlw Eurcpean Communities Act, 1972 In Schedule 4, paragraph 3(6). 1971 c. 70 She theal Goverment Act, 197E. Section 268. In section 174 in stkesection 12) the words "section 268 above" and the words from "and the repeals° to "that Ads and in subsection 111 the woods tram the beginning to

1973 c. 9 The Counter-Inhation Act, 1973. In Schedule 1, paragraph 9. 1973 e 32 it National Health Service Reorganaation In Schedule 4, paragraph 79 and in paragraphs 147 and Act, 1971. 148 We tkures 111214r. 1971 c. 37 The Water Act, 1971. In section 40, in subsection 141(d) the figures "69" and In subsection (5) the words "and paragraph 69 of Scheduler In Schedule S, paragraph 69. 0973 c 18 The Swial Security Act, 1913. Section 4 (3)- Section 71151. In Schedule 7, paragraph 2. In Schedule E7, paragraph 10. 1977 c. 39 The Statute Law (Repeals) Act, 0977. In Schedtee 2, paragraph 3. 1977 C. 41 The Fair Trading Act, 1973. In Schedule I, paragraph 4. 1973 C. 50 The Employment and Trading Act, 1917. In section WM, the figures "4" where It frst occurs In Schedule 3, paragraph 4. 1973 C. 54 The Nature Conservancy Act, 1973. In section 5(3) the wards "and paragraph 19 of schedule 3 aho eget& to Nathan Ireland". In Schedule 3, paragraph 19. 1973 c 64 The Alaplin Development Act, 1973. In Schedule 1, paragraph 5. 1971 c 65 The Local Government 1Soatland) A41971. Sestion 281 15). Section 224 15). In section 28313) the words hem "and except" to "Act 1957". In Schedule 4, paragraph 7. 1974 c7 The Local Government Act, 1974. Insection43(6) the words from the beginning to "Act 1957". In Sthedule 4, paragraph 12. 1974 c 21 The Ministers of the Crown Act, 1957 Section E. Sectsen 3111. 1974 C. 24 The Prices Act, 1974. Section 613). 1974 c. 37 The Health and Salety at Nods etc. Act, In section 841111b), the words "2 and" 1974. In Stehle. 9, paragraph 2. 1974 c. 47 The Sasso:ors Act, 1974. In section 90(4E). the word, "paragraph 5 of Schedule 3'. In Schedule 3, paragraph 5. 1974 c. AB The Rallevays Act, 1974. Section 914 1974 C. 52 The Trade union and [goal Relations In section 31(5j, the words the Mouse of Commons Act, 1974. Wsqualification Act, 1957". In SeSedule 3, paragraph 6. 1957 IS The Said. Security 1Ccesequened. In Schedule 2, paragraph 12. Provisions) Act, 1957.

~~190 AAWEVURE ✓ill~~

~~JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~THIRD TERM OF REFERENCE~~

TO EXAMINE THE FEASIBILITY OF ADOPTION OF SYSTEM OF LAW RELATING TO PREVENTION OF DISQUALIFICATION OF MEMBERS OF PARLIAMENT AS EXISTING IN THE UNITED KINGDOM AND CONSIDERED BY THE CONSTITUTION (FORTY-SECOND AMENDMENT) ACT, 1976.

~~SI.No. Marne of State Reintroduction of disqualification Adoption of the U.K. House of provisions as in 42nd Amendment Act Commons (Disqualification) Act, 1975~~

~~1 2 3 4~~

~~1. Andhra pradesh In favour of reintroduction, however the Conceptually in favour. State Government has desired that the guidelines of the Supreme Court be incorporated in it.~~

2. Arunachal Pradesh No comments offered. No comments offered. 3. Assam Not in favour. No specific comments offered. However, it can be inferred that the State Government is not In favour of adoption of U.K. Law as it is against reintroduction of 42nd Amendment Act which is on the pattern of U.K. law.

~~Bihar Hot in favour. No specific comments. However it can be inferred that the State Government is not in favour of U.K. Law.~~

~~Ghhattisgarh In favour of reintroduction. No specific comments. However, it can be inferred that the State Government is conceptually in favour of U.K. Law.~~

~~6. Goa~~

Gujarat Not in favour. Not in favour. a. Haryana Conceptually in favour Conceptually in favour. A Himachal Pradesh No specific comments offered. However, In favour. it can be inferred that the State Government is conceptually in favour of reintroduction of disqualification provisions as in 42nd Amendment Act.

~~141 -16R-~~

~~2 3 4~~

10 Jammu and Kashmir 11 lharkhand 2. Karnataka In favour. In favour. 13. Kerala In favour. No specific comments offered. However, it can be inferred that the State Government is conceptually In favour of U.K. Law.

~~14. Madhya Pradesh 15. Maharashtra Not in favour. Not required there are adequate provisions inour Constitution and Prevention of Disqualification Act.~~

16. Manipur No comments offered No comments offered. 17. Meghalaya No new offered. No view offered. 18. Mizoram favour. In favour 19. Nagaland No need for reintroduction. No need for adoption. 20. Odssa

~~21. Punjab Not in favour. Not in favour. 22. Rajasthan Conceptually in favour In favour. But the power to provide exemption under Article 191 should remain with the State Legislature.~~

~~23. Sikkim No comments offered. No comments offered. 24. Tamil Nadu In favour. In favour. 25. Tripura Not in favour. No need for adoption. En Uttar Pradesh~~

~~27. Dttaranchal In favour. Conceptually in favour. 28. West Bengal No need for reintroduction. Conceptually not in favour.~~

~~142 C6S~~

~~ANNEXURE IX~~

~~JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~FOURTH TERM OF REFERENCE~~

~~TO EXAMINE ANY OTHER MATTER INCIDENTAL TO THE ABOVE~~

SI No e of Exisktce of any Committee Need 101 designated authoriq to General ViEWS of State in State Legislature similar to detennine whether a particular Government .ICOP in Parliament Olfice Is an Office of Profit. 3 4 5

I. Andhra PradEsh No such Committee in Mara In favour of hanng a desigoted authority State Government has desired to have a Raderli Legislature. oaeultatim vox the Speaker of the Joint Committee on Office of Profit on Legislative Assemily and the Chairman the lines of Joint committee in the of Ire Legislative Cowcil Parliament.

2. Arunathal Pradesh No curio Committee in Arunachal In favour ol designated authority and has to spoilt view. Pradesh Legislature. proposed constittition of a Commission like that of Election COMMISSial headed by a retired Judge of the Supreme Court or High art.

3. Mourn No such Committee in AMA, No need for designated autha4 Such Exemption of "Offices of Pmfie from Legislature. matters are decided by courts. disqualification should he left to the Slate Governments. 4. BEliar No such Committee in Bihar No need for designated authaity. Exemption of "Offices of Profit" Iran Legislature. discualif eaten should be left to the State Govemments

5. Chhattissash No such Committee in No other authority required. Courts are Office of Profit must be sPedfleallY ChhatkisgLil Leidalure. suffident to decide the cass. mentionedin the Schedule of exemption sPecIfying the specific pat, exempted from the purview of disqualification leaving no loom for the court to Intepret

Goa Gujarat No such Committee in Guiar. No reed for designated authodly. The No Teak view. Legislature Central/State Government should consider the case and thereafter decide whether a particular office under the Government d an Office of Profit

~~143~~

~~2 1~~

8aria No such Committee Haryan As the Constitution has appropriate The exerdse of legislative powers of Legislature. proesions in this regard, thew is no need exemption of offices shoted be entirely for designated authority. left to the wisdom of respective Legislahres. II any de4atiw in law is made m this regard, then it is likely to impair We legitlative competence of the Legislature. Furthe, it will militate against and curtail the legislative pot% of the State which is against the principle of federalism in the Constitution which is haft feature of Constitution.

9 Himachal Pradesh No ouch Committee. Not in fatter of CreatiNg new autteetY The issue whether a person belds an Other than the existing ones. GlfiCe of Profit is required to be interpreted in a realistic manner hating regard to the facts and drcumstancet of each case and relevant statutory pnovisione. The expression office of wet should be interpreted with the lissom of reality bearing in mind the object for enoctrtnot kale10/0)W) and 191(1110.

~~10. Jammu and Kashmir 11. hatband 11. Karnataka Xo such Comn- coneN KoratehaIto authority other than- the ednmg aws No other ed Legislature. as envisaged in the Constitution Is required.~~

II. Ned@ No such Committee in Kerala No toiew offered. In matters related to diewmlification and Legislature. scope of term of Office of Profit be restricted to Supreme Court interpretation and gutdelinn. 14. Madhya Pradesh

15. eltharashtra No such C or mitt ee in Ito need for tkeegnated authohty. In favour of lair and reasonable generic Maharashtra Legislature. and comprehen2ve cetera which can be made applicable to all States/Oh as laid down by supreme Coon in Jaya gachthane case

18. eampur No such Committee in Manipur Governor of the State shoWd he the Ito other New Suggested. Legislature. designated authority. 17 tleghallaya No such CommKtee in Meghalaya Ho need f or any mat authority as churls Present arrangement as in the Legislature. are suff inent to decide 14W:dd. eases. Constitution be continued.

~~144 3 4 5~~

No such Gmmil intllmmm In favwr of haying a designated authority The expression 14z 'Other than an office LegIS[gUre in respect if post-election cases. Hon' hie declared by Parliament by law not to Speaker of the Loh Sabha or Hon'We disqualify its holder, as ocaming Chainan of the Rajya Sabha w Honible tub Claus (al of clause (I) of artide Speaker of a State Legislature, as the 104 could rather have been "other than case may be, may be the designated an office declared by Parliament by law auchally for the pmpose. not In he the of lice of profit for the PszPoSet of this clause'. Same is for sub.classe (a) of clause (II of article 191.1n that case, the laws ctotemplated to he made Bider these articles weld confine to declaring the offices Mich would heap longer the offices of profit irrespective of its holders. As of now, these laws use out and declare those offices which are admltedly the offices of profit hut the holders thereof are declared not to he disqualified for no spelt.cut reason or justificatns given in such lam. 19 nd No sash Ocourortee in Nagaland No authority required. • The idea of "Office of Profit" in Legislative Assembly Indian situation has to be abolished;

• A member of a Legblature should hId his position as member of diet Legislature on full time basis. Doctors, lawyers, actors and other professionals most stop their practice and every member must tabs a oath in Oh regard and Sation of such oath mint be Punishable by a huge pecuniarz Penalty per day by law. The organizations that entertain the members cilLegIslattues pracbong before, or for, them, should also he punshed under law

• In place of the emsting artides in the Constitution relating to of fice of profit which need to be Scrapped, a Constitutional provision banning all members of Legislatures to take up any other office except the offices in the legislatme like, Speaber, OeputY

~~145 e- f3~~

~~2 1 5~~

Speaker, chairman, Deputy Chairman, members of Panel of Chatmliii, Leader of Opposition, Leaders of Legislature parties, Chairmen of Committees etc. Any addition to this tot must he by Constitutional amendment. The list should be ahnlicable both to the members of Pallidalellt and members of Rate Legislatures. The office of Ministers should, however, be exempted. hay foie who holds any ober office should he disqualified not f or holding office of profit but for holding ay other office along Ivilh the office of the Legislator that hinders devoted and full-ffedged service to the constituents. • The concept of 'remunerative political poor in article 362 should also be abolished along with the hoe of Office of Profit • As antiderection law is In place which strictly organizrs the House on party lines and thereby the GOVeMMent, arry presumption that the office of profit would act as a lure for members to cross floor is simply anachronistic. May be before the advent of the anti.def ection law, the presumption would have matured into e lad. The idea of office of profit Itself has thus become anachronistic harranting removal from the Constitution. 20. One

21 Punjab No such Committee in Punjab If a definition to the term 'Office of Since Office of Profit has not been Legislature. Prof it' Is provided in the I oratitati °lea defined In the ConstiWtion, the State the designated authority tan be the Legislatute should decide whether a Governor who shall obtain the opinica of particular office can be classified as 1:1* Election Commission and shall act Office of Profit. accordinglht Pis is the misting system).

~~196 1 1 3 5~~

RD n No such Commigee m Rajasthan No need for designated authontlb Cou VThat factors tell bring en office withn Legislature. are sufficient to decide the cases the purview of office of profit' May and should be decided by- the - - representanve or people and the • ' - decision as to ssflether the given factors exists in a particular office should k leR to the Oggt.

➢. Skim No such Ommiflee In Aram Courts are ultimately CO decide the case. Issue of Wriceof Profit may be governed Legislature. However, if any other authority is by the laws framed by different State reclined, it could be manned byaJulia Governments and Union Parliament from officer of tie rank of Distal Judge at tine to time based on the recuirements. the State Inel either serving or retired.

24 Tamil Nadu No such Committee in Tamil No need for designated authority as No other !flew. Nadu LegiSlatufe Articles t03 and 192 of the Constiwton provides that should be decided by the President/Governor based on the cpinrco of the Election Cammisston Os is the exist* Prof iSion)

~~25. Illpura No seth Committee in in No need for designated Mho, Legislature~~

~~26. Uttar Pradesh~~

~~17. Ifitaranchal No such Committee in Not in rancor of creating new authority. No specific view. Uttaranchal Legdature Won are the best fa um which on give dedsive [Olen.~~

~~4 West Bengal No such Committee in West No other authority required. Courts are Ito other comments. Bengal Legfslature. best to profide dedsive opinion on the matter.~~

~~147 APPENDICES APPENDIX I~~

~~MOTION (Moved in Lok Sabha on 17 August, 2006)~~

"That a Joint Committee of the Houses to be called the Joint Committee to examine the constitutional and legal position relating to Office of Profit be constituted consisting of fifteen members, ten members from this House to be nominated by the Speaker including the Chairperson of the Joint Committee and five members from the Rajya Sabha to be nominated by the Chairman, Rajya Sabha. 2. That the terms of reference of the Joint Committee shall be-

0) to examine, in the context of settled interpretation of the expression 'Office of Profit" in article 102 of the Constitution and the underlying constitutional principles therein, and to suggest a comprehensive definition of "Office of Profit".

~~(ii) to recommend, in relation to "Office of Profit" the evolution of generic and comprehensive criteria which are just, fair and reasonable and can be applied to all States and Union territories;~~

(iii) To examine the feasibility of adoption of system of law relating to prevention of disqualification of Members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty-second Amendment) Act, 1976; and

(iv) to examine any other matter incidental to the above. 3. That in order to constitute a sitting of the Joint Committee, the quorum shall be one-third of the total number of members of the Joint Committee.

~~4. That the Joint Committee shall make a report to this House by the first day of the Last week of the next session of Parliament.~~

~~151 APPENDIX II~~

~~JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~LIST OF PERSONS FROM WHOM WRITTEN MEMORANDA WERE RECEIVED~~

~~Name/Address~~

~~1 2~~

~~Shri Rustom S. Gee, Senior Advocate, Former Law Secretary to the Govt. of India, Sagar Apartments 6, TiLak Marg, New Delhi-110001~~

~~Dr. R.K. 3alasubramanian, Chief Executive, Bureau for Parliamentary Work, 30, Chitrakulam North, MyMoore, Madras-4~~

~~Shri P.R. Singh, Retired Professor and Head (Department of Social Work), Delhi University Et Former Director, Tata Institute of Social Sciences~~

~~Shri Sitaram Aggrawal, 109-A, Adrash Nagar, Ajmer-305002~~

~~Shri Raj Kanwau R/0 Viii. a P.O.-Kohand, Dint. KarnaL, Haryana~~

~~Shri RaVTIldel Kumar, President to Rashtriya Mukti orcha, 37, Angad Nagar Extension, Delhi-110092.~~

~~Shri Prosenjit Das Gupta, Flat G2, 206/1 N.S.C. Bose Road, KoLkata-700047~~

~~152 Sob~~

~~Shri P. Sakthivel, Shri D. Shanmugam, Dr. S.K. Palanisamy, Shanthi CLinical Laboratory, Kandappa Aldan Lane, Opposite to Telephone Mayan, Brough Road, Erode-638001~~

~~Shri Hayed var Khan 5182, BalLimaran, Chandnf Chowk, Shahjahanabad, Delhi-110006~~

~~10. Shri Ashoke Kr. Singh', Dr. S.P. Mukherjee Road (Dfribuzar) P.O. Et Dist. JaLpaigud~~

~~11. Shri Harsh Shrivastaya, H-26, First Floor, Jangpura Extension, Delhi-110104~~

~~12. Shri Bhanwar Lail Sharma, Near Ramgadiyo Dharamshala, Sujangarh-331507, Dim. Churn (Rajasthan)~~

~~13. Shri Milan Choraria, 13-5/52, Sector-7, Rohini, Delhi-110085.~~

14. 5110 Sudhir Kumar, 0-11115, Satya Marg, Chanakyapuri, New Delhi-110021. 15. Shd N.H. BadLani, Rat No. 69-B; Pocket-I, =shad Garden, Delhi-95. 16. Sh. N. Haridas, District Judge (Rtd.) T.C. 9/802, V J Lane, Sasthamangalam P.O., Thiruvananthapuram-10 17. Sh. N.C. DeY, J.P. Road, Handooni, Jamshedpur, lharkhary1-831002,

~~153 2~~

~~18. Dr. Satyabrata Duna, C/o Prof. (Di. S. SeilB5939a, President, Council for Political Studies, 140/20 B, Soputh Sinthee Road, Kolkata-50~~

~~19. Shri S.A. Shukla, IAS (Retd.) Advocate, General Secretary, Lok Prahari, B-7, NiraLa Nagar, Lucknow-226020~~

~~20. Ds Sivasamy "sivasamy sivasamy" dr [email protected]~~

~~21. Shri Derrick D'souza, F-1, Jayraj Nagar, Ambadi Road, Vasai (W)-401202~~

~~Shri Vidyadhar 'Vidyadhar svidyadhaitsai1@gmail_com>~~

~~23. "Vijai Kumar Sahny" [email protected]. 24. "Kishen Sharma" frm_patriotsasia2006Gyahoo.co.in>~~

~~25. "Benoy Gopat Chakraborty"~~

~~26. Dr. (Prof.) Kalipada Basu, "Chiaruprava", 153, Joraghat Lane, Chinsurah-712101 Cristt. Floogly, West Bengal (India)~~

~~27. 5hri Pritis Chandra Majumdar, 1/30 B Chittaranjan Colony, 2nd Floor, Kolkata-700032~~

28. Prof. Subhedar Surve, President, Sadgum Sainath Ed. Society (Regd.) Sanchalak—Sai Theater Academy (Mumbai) Vatsala Tal Naik Nagar Primary School, Near Signal., Kuria (E), Mumbai-Z1 144/4904, Nehru Nagar, [Nina (E) Mumbai-24

~~29. Shri Jagdish Prazad Aggrawal, Advocate, Grampost—Chadra, Pin-303509 Tehsil—Sikrai, Dosa DN. Rajasthan~~

~~154 1~~

~~30. Min Satyanarayan Datta, Advocate, High Court and Supreme Court, 7-B, Kiron Sankar Royroad, 4th Floor, Kolkata-700001~~

~~31. Shn Ganesh Latta, Analyst (Management), Trinetra, Parisamvad Parishad, C-21, Lal Kothi Shopping Centre, Near Lanni Mandi Cinema, Tonk Road, Jaipur, (Rajasthan)-302015~~

~~32. Mai Paras Singh Bhansali, 672, Sardarpura, 12/C Road, Jodhpur342003~~

~~33. Shri Prasanta Chouduri, P.O. a RA—Tamluk, Ward No. 15, Distt.—Midnapur (E), Pin-721636~~

~~34. Shri Satyaranjan Das, C/o Krishnagopal Smak, Basantia Schlock Bazar, Basantia, P.S. Contai, Distt. Purba Medinipur (West Bengal)~~

~~35. Shri P. Ranjan Sandhi, Convenor, Forum for protection and promotion of articles 19 EL19, St. Martin Road, Paladvattom, Cochin-682025~~

~~36. Shri Debendra Benerji, 86/A, Nilmoni shame St., Bhadrakati, Hooghle, West Bengal-712232~~

37. Shri A. Anadam, Sreeji Appartment, H.No. 10-3-32/9/1/109/110/1, Flat No. G-3, Nehru East marredpalty, Behind Vidyasagar Primary School, Sec'bad, A.P.-500026 38. Min Sudha Gouranga chaltrabarti, 92, Khirkee Lane, Chmsurah, Hooghly-712101 (WB)

~~155~~

~~1 2~~

~~39. Raja Vikram Nair, Raipur (C.O.), I'Brijkishor" kishoraypOyahoo.com~~

~~Shri Ajit Chandra Roy, 50 DD Tewari Road, FokotaLhat, F.O. Nutangani, Distt. Burdwan, West Bengal-713102~~

~~41. Shri Manoj Kumar T., X/1258, Rajgarh Colony, Gandhi Nagar, Delhi-110031~~

~~42 Shri Joganath Das, Puri-BSSR, Orissa~~

~~43. Shri C. Krishnarao Laxmanrao ChinchamaLatpure, 290/9, Wadia Estate, Bait Bazar, Kuria, Murnbai-400070~~

~~44. Shn Ganesh Bad~~

~~45. Shri Ajay Mathur, Vice-President, Jan-Hit Residents Warfare Association, 1-62-A, Diahad Garden, Delhi-110095~~

~~46. Shri Ranjit Kumar Hazra, R.G.S. Road, AsansoL-3, VIII a P.O. Ushagrani, Distt. Bhrdwar (West BengaL), Pin Code-713303~~

~~47. Shri Kuberan G., 58, Kamarajan Nagar, Padikuppam SaLai, Annanagar, West Extension, ghermai.40~~

~~48. Shri J.K. Pathanic/Shri A.K. Gupta, President, Service Institute, Air Force Station, Agra~~

~~49. Shtl Kamata Prasad, Teacher (Physics), Village-Alipura, Post Babrai, Distt. Mahoka (Uttar Pradesh)~~

~~156~~

~~S-g"~~

~~50. Sh. V. Roman Joseph James, OCEANIC-A/22, 2nd Floor, Roshan Park, Naigaon (West), Vasai-401201~~

~~51. Shri Achintya Mahanta, Rampur, Bankura, West BengaL722101~~

~~52. Shri Raj Kumar Ajmera, 13, Keshav Nagar, Civil Lines, Jaipur, Rajasthan~~

~~53, Sh. Kushwaha, Retch General Manager, 117, Q/611 A, Sharda Nagar, Kanpur~~

~~59. Sh. V. Veerathadrappa, 2133, T.G. Extn. Hosakota, Bangalore~~

~~55. Shri Raghu Thakur, National President, Loktantrik Samajwadi Party, 27A, DDA Flats, Mata Sundri Road, New Delhi-110002~~

~~56, Shri Ravi Kumar Mishra, House No. 10944, Gat) No. 11, Kotmangat Singh Nagar, Ludhiana-141003 Punjab~~

~~Shri Manoj Kumar Jha, Inspector, Central Excise and Customs AF-12/Gustoms Et Central Excise Colony, M.O.G. Lines, lndore-452002, Madhya Pradesh~~

~~157 -SW --~~

~~APPENDIX III JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT (Witnesses examined)~~

~~St.No. Name of Organisation/ Date on which Evidence Page No. Association/Individual was taken~~

1. Shri Fat' 5. Nadman 17.11.2006 Senior Advocate Supreme Court of India and Ex-Member of Rajya Sabha 2. Shri Rustam S. Gae Senior Advocate Supreme Court of India and former Secretary, Ministry of Law a Justice Government of India Shri Rajeev Dhawan 01.12.2006 Senior Advocate Supreme Court of India Shri Harish N. Salve Senior Advocate Supreme Court of India Representatives of Ministry of Home Affairs, 20.03.2007 Government of Puducherry and NCT of Delhi Representatives of State Government 23.0E2007 of Gujarat Representatives of State Governments of 31.101007 North Eastern States Representatives of State Government of 27.11.2007 Rajasthan Representatives of State Government of 28.041008 Uttar Pradesh 10. Representatives of State Governments of Orissa 05.06.2008 11. Representatives of State Government of 20.08.2008 Madhya Pradesh 12. Representatives of State Government of Kerala 09.09.2008

~~158 APPENDIX W~~

~~MINUTES OF THE FIRST SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1500 hrs. to 1630 Ms. on 14 September, 2006 in Committee Room No. 53, Parliament House, New Delhi.~~

~~PRESENT~~

~~Shri lqbat Ahmed Saradgi — Chairman~~

~~MEMBERS~~

~~Lok Sabha~~

~~2. Shri V. Kishore Chandra S. Deo 3. Shri Santosh Gangwar 4. Shri A. Krishnaswamy 5. Shri Madhusudan Mistry 6. Shri Mohammad Salim 7. Shri Rajesh Verma~~

~~Rajya Sabha~~

~~8. Shri Virendra Bhatia 9. Shri Arun Jaittey 10. Shri Ram Jethmalani 11. Shri Sitaram Yechury~~

~~SECRETARIAT~~

~~1. Shri P.D.T. Achary Secretary-General 2. Shri J.P. Sharma Joint Secretary 3. Shri A. Louis Martin Director~~

2. The Joint Committee first held an internal meeting to discuss the programme of work of the Joint Committee. At the outset, the Chairman welcomed the Members of the Joint Committee to examine the constitutional and legal position relating to Office of profit. Then the Committee held discussion among themselves regarding the concept of office of profit.

~~159 3. Thereafter the representatives of the Ministry of Law Et Justice (Legislative Department) were called in for a briefing. The following officials represented the Ministry:—~~

~~Dr. N.N. Chaturvedi — Secretary (Legislative Department) Shri N.L. Meena Joint Secretary and Legislative Counsel~~

Before the Joint Committee proceeded to hear the views of the representatives of the Ministry, the Chairman drew their attention to the provisions contained in the Direction 58 of the Directions by the Speaker.

4. Thereafter, the representatives of the Ministry briefed the Joint Committee on the subject matter under reference. The Joint Committee sought clarifications on some points and desired that the information on points, which was not readily available with them, might be furnished subsequently to the JPC for their information and use. •

~~The witnesses then withdrew:~~

5. Thereafter the Committee after some internal discussion decided that a press communique be issued in all national dailies in English and Hindi inviting memoranda from constitutional/legal experts, academicians, law institutes, Bar Councils, public bodies or individuals on the subject matter under consideration of the JPC.

6. The Committee also decided to seek the views of all the Parliamentary Parties/Groups, constitutional and legal experts and State Governments on the subject and decided to seek the approval of Hon'bLe Speaker to invite information from State Governments.

~~A verbatim record of the proceeding of the Committee was kept.~~

~~The Committee then adjourned.~~

~~160 Ow' e.,~~

~~CONFIDENTIAL~~

~~MINUTES OF THE SECOND SILTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF REPORT~~

~~The Joint Committee sat from 1130 hrs. to 1230 hrs. on 19 October 2006, in Committee Room No. '8', Parliament House Annexe, New Delhi. PRESENT~~

~~Shri lqbal Ahmed Saradgi — Chairman~~

~~MEABERS Lek Sabha~~

~~2. Shd Santosh Gangwar 3. Shri Madhusudan Mistry 4. Shri Ram CORM Yadav Rajya Sabha~~

~~5. Shri Ram Jethmalani~~

~~SECRETARIAT~~

1. Shri J.P. Sharma Joint Secretary 2. Shri A. Louis Martin Director 2. At the outset, the Chairman apprised the members of the action taken in pursuance of the decisions taken by the Committee at their first sitting on 14.9.2006. The Committee had decided to issue a Press Communique inviting views/suggestions from the public and also decided to seek the views of all parliamentary parties/experts and State Governments. He informed the Committee that communications were sent to the Chief Secretaries/administrators of all the States/Union Territories, 41 Parliamentary Parties and 25 legal and constitutional experts and that Press Communique was issued in 19 local (Delhi) dailies and 73 regional newspapers and was broadcast/ telecast in ALL India Radio, Doordarshan and Lok Sabha TV Channel and also displayed on website of Lok Sabha.

3. The Chairman further informed the Committee that 56 memoranda were received from public and there were responses from 7 experts viz. (1) Sarvashd P.P. Rao, (2) The Director, Indian Law Institute, (R.N. Chandra Sekharan Pigm), (3) Mahendra Pratap Singh, (4) J.S. Verma, (former Chief Justice of India) (F) Fall S. Madman, (6) Harish Salve, and (7) Shri Shaw Pratap Mehta (Centre for Policy Research). There were also responses from the Union territory of Lakshdweep and three Parliamentary Parties namely RJD, NW and Shiv Sena. 161 4. Copies of all the memoranda/responses received till then and replies from the Legislative Department of the Ministry of Law and Justice had been circulated to the members of the Committee.

~~5. The Committee authorized the Chairman to shortlist experts who might be asked to appear before the Committee for oral evidence.~~

~~6. Thereafter, the representatives of the Ministry of Law Er Justice (Legislative Department) were called fn. The following were present:—~~

~~Dr. K.N. Chaturvedi Secretary (Legislative Department) Shri N. L. Menna Joint Secretary and Legislative Counsel~~

After some discussion, the Committee desired the Ministry to furnish written information on certain points which include meaning of one of the terms of references viz_ 'to examine in the context of settled interpretation of the expression office of profit" and State-wise list of posts of offices of profit attached with perks and facilities. The Committee directed that State-wise List of offices of profit be collected by 5th November, 2006.

~~Record of verbatim proceeding kept.~~

~~The Committee then adjourned~~

~~162 .5%~~

~~COAT/DENT/AL~~

~~MINUTES OF THE THIRD SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF REPORT~~

The Joint Committee sat from 1500 hrs. to 1730 hrs. on Friday, 17 November, 2006 in Committee Room TV, Parliament House Annexe, New Debi to have personal hearing of two constitutional/Legal experts. PRESENT Shri TOM Ahmed Saradgi — Cho/anon Mammas Lob Sabha

~~2. Shri V. Kishore Chandra G Den 3. Shri Santosh Gangwar 4. Dr. Satyanarayan Jatiya 5. Shri Raghunath Jha 6. Shri A. Krishnaswamy 7. She Madhusudan Mistry Rajya Sabha~~

~~8. Shri Virendra Mate. 9. Shri Arun Jaitley 10. Shri Sitaram Yechury~~

~~SECRETARIAT~~

I. Shri P.D.T. Achary Secretary-General 2. Shri J.P. Sharma Joint Secretary 3. Shri A. Louis Martin Director 2. The Committee first held the hearing of the constitutional/legal expert Shri Fah S. Nariman. At the outset, the Chairman welcomed Shri Nariman and apprised him of Direction 58 of the Directions by the Speaker. Thereafter, the Committee heard views/suggestions of Shri Nariman on the matters under reference to the Committee and heLd discussion. The witness then withdrew 3. Thereafter, Shri Rustom S. Gae, Former Law Secretary and Senior Advocate was called in. The Chairman welcomed him and apprised him of Direction 58 of the Directions by the Speaker. Thereafter, the Committee heard views/suggestions of Shri Gae on the matters under reference to the Committee and heLd discussions. A verbatim record of proceedings was kept. The Committee then adjourned 163 ft 4 0-

~~MINUTES OF THE FOURTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1500 hrs. to 1655 hrs on 1 December, 2006 in Committee Room No. 63, Parliament House, New Deihl to have personal hearing of two constitutional/legal experts.~~

~~PRESENT~~

~~Shri lqbal Ahmed Saradgi—Chairman~~

~~MEMBERS~~

~~Zak Sabha~~

~~2. Shri V. Kishore Chandra 5. Deo 3. Simi Santosh Gangwar~~

~~4. Dr. Satyanarayan Jatiya 5. Shri Raghunath Ala~~

~~SAO Sabha~~

~~6. Shri Virendra Bhatia 7. Shd Ram Jethmalani 8. Shri Sitaram Yechury~~

~~SECRETARIAT 1. Shri J.P. Sharma Joint Secretary 2. Shri A. Louis Martin Director~~

At the outset, the Joint Committee noted that the current session of Parliament is upto 19 December, 2006 and that the term of the Committee would expire on the first day of the last week of the current session. The Committee observed that views and suggestions were awaited from as many as 24 State Governments/D.T. Administrations and 31 parliamentary parties, whose views are necessary for the JPC to arrive at their recommendations as the criteria that might be evolved by the Committee are applicable to all States and Union Territories. It is after receipt of views from majority of State Governments and political parties, the Committee might complete oral evidences of all concerned. The Committee, therefore felt that it might not be possible for them to complete the work and present their report by the stipulated date and proposed to seek extension of time upto the first day of the last week of the Budget Session, 2007.

164 3. The Committee felt that the issues regarding criteria in relation to "office of profit" applicable to the States and Union Territories needed to be discussed with State Governments and Union Territories before formulating their views. The Committee, therefore, proposed that subject to extension of their term, approval of Honible Speaker might be sought to undertake study visits to some States/UT5 for holding informal discussion with them.

4. The Committee further noted that one of the terms of reference of the Committee is to examine the feasibility of adoption of system of law relating to prevention of disqualification of Members of Parliament as existing in the United Kingdom and considered by the Constitution (Forty-Second Amendment) Act, 1976, The Committee felt that it would be necessary to undertake a study visit to UK and Australia to study their existing Laws on the subject before finalising their report.

5. Thereafter, Shri Rajeev Dhavan, Senior Advocate was called in. The Chairman welcomed Shri Rajeev Dhavan and apprised him of the Direction 58 of the Directions by the Speaker. Thereafter, the Committee heard views/suggestions of Shri Dhavan on the matters under reference to the Committee and herd discussion. The witness then withdrew

6. Thereafter, Shri Harish N. Salve, Senior Advocate was called in. The Chairman welcomed him and apprised him of Direction 58 of the Directions by the Speaker. Them the Committee heard views/suggestions of Shri Salve on the matters under reference to the Committee and held discussion. A verbatim record of prcceedings was kept. The Committee then adjourned.

~~165 MINUTES OF THE FIFTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1500 hrs. to 1600 hrs. on 20 March, 2007 in Committee Room 'A' Parliament House Annexe, New Delhi.~~

~~PRESENT~~

~~Shri lqbal Ahmed Saradgi — Chairman MESEERS~~

~~Lek Sabha~~

~~2. Shri Santosh Gangwar 3. Shri Raghunath Jha 4. Shri Madhusudan Mistier 5. Shri Mohammad Salim Rajya Sabha~~

~~6, Shri Ram Jethmalani 7. Shri Sitaram Yechury~~

~~SECRETARIAT~~

~~1. Shri J.P. Sharma Joint Secretary 2. Shri R.S. Mishra Director 3. Shri K. Jena Deputy Secretary 4. Shri R.D. SiLawat Deputy Secretary~~

2. At the outset, the Chairman welcomed the members of the Committee and briefed them about the progress of work done by the Committee since its constitution. He informed the Committee that apart from hearing the views of some of thelegal luminaries, the Committee undertook two study visits covering four States namely Maharashtra, Karnataka, West Bengal and Tang Nadu. The Chairman emphasized the need to visit major remainingmai States also, as the Committee has to recommend in relation to office of profit, a generic and comprehensive criteria applicable to all States/UTs.

3. Some of the members drew the attention of the Chairman regarding one of the terms of reference of the Committee te to examine the feasibility of adoption of system of Law relating to prevention of disqualification of members of Parliament existing in the United Kingdom. The

~~166 Committee reiterated their earlier decision to undertake study visits to U.K. and Australia to study their laws on the subject in detail.~~

~~4. Thereafter, the representatives of Ministry of Home Affairs, NCT of Delhi and Union Territory of Pondicherry were called in. The following were present:~~

~~Ministry of Home Affairs~~

~~1. Shri Vinay Kumar Additional Secretary 2. Shri B.A. Coutinho Joint Secretary~~

~~National Capital Territory of Delhi~~

1. Shd Ramesh Narayanaswami Chief Secretary 2. Shri B.S. Mathur Pr. Secy. (Law, Justice and Legislative Affairs) 3. Smt. Shakuntala D. Gamlin Secretary, GAD 4. Shri Ajay Chagti Deputy Secretary (GAD/Services)

~~Union Territory of Pondicherry~~

~~Shri John Claude Pompei Law Secretary Mariadassou~~

5. The Chairman welcomed the representatives of Ministry of Home Affairs, Union Territory of Pondicherry and NCT of Delhi and drew their attention to the provisions contained in Direction 58 of the Directions by the Speaker. The Committee held discussion with them on the genesis of granting exemption to certain offices under the relevant Acts of Pondicherry and NCT of Delhi. The Committee further desired that note on certain points on which information was not available might be furnished subsequently.

~~A verbatim record of proceedings was kept.~~

~~The Committee then adjourned~~

~~167 MINUTES OF THE SIXTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1500 hrs. to 1530 hrs. on 9 May, 2007 in Committee Room `E' Parliament House Annexe, New Delhi.~~

~~PRESENT Shri Jai Ahmed Saradgi — Chairman~~

~~MEMBERS Lob Sabha 2. Shri V Kishore Chandra S. Deo 3. Shri Santosh Gangwar 4. Dr. Satyanarayan Jatiya 5. Shri Mohammad Salim~~

~~Cafro Sabha 6. Shri Virendra Bhatia~~

~~SECRETARIAT 1. Shri J.P. Sharma Joint Secretary 2. Shri R.S. Mishra Dissector 3. Shri K. Jena Deputy Secretory 4. Shri Kushal Sarkar Under Secretary~~

At the outset, the Holible Chairman, Joint Committee to examine the constitutional and legal position relating to office of Profit welcomed the Members of the Committee to the sitting and briefed them about the progress of work done by the Committee since its constitution.

Then, the Florible Chairman apprised the Members about the informal discussions the Committee had with the representatives of the respective State Governments and others during study visits to Mumbai-Bangalore and Kolkata-Chennai during the months of January and February 2007 respectively The Members emphasisedh te need to visit the other rema ining major States roM RajasthaE Bihar, Uttar Pradesh, Gujarat, jharkhand, Punjab, Himachal Pradesh, North-Eastern States, etc. which could not be visited by the Committee due to election in Uttar Pradesh and other inevitable reasons, to ascertain their views/suggestions on the subjects under reference besides hearing some more constitutional/legal experts.

Recalling one of the terms of reference of the Committee Wz. to examine the feasibility of adoption of system of law relating to prevention of disqualification of Members of Parliament as 168 existing in the United Kingdom and considered by the Constitution (42nd Amendment) Act, 1976, some of the members desired that the relevant material on the subject might be obtained from Canada, Australia and other countries where parliamentary system of government exist through the Ministry of External Affairs. The Committee also reiterated that the feasibility of visiting U.K. in order to have wide discussion/interaction with House of Commons cm the subject may be

explored. In view of the aforementioned voluminous task involved before finalizing their report, the Committee felt that it might not be possible for them to complete the work and present their by the first day of the Last week of Budget Session, 2007. The i.e. reportCommittee, by the therefore, stipulated proposed date to seek extension of time f Or presentation of their report up to the first day of the last week of Monsoon Session, 2007. The Committee then adjourned.

~~169 MINUTES OF THE SEVENTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1500 hrs. to 1610 hrs. on 23 August, 2007 in Committee Room No. 63, Parliament House, New Delhi.~~

~~PRESENT~~

~~Shd lqbal Ahmed Saradgi—Chairman~~

~~MEMBERS~~

~~Zak Sabha~~

~~2. Shri V. Kishore Chandra S. Deo 3. Shri Santosh Gangwar 4. Shd Madhusudan Mistry 5. Shri Mohammad Salim 6. Prof. Ram Gopal Yadav~~

~~Rasa Sabha~~

~~7. Shrt Virendra !Mafia 8. Shri Arun jaitley 9. Slid Ram Jethmalani 10. Simi Sitaram Yethury~~

~~SECRETARIAT~~

~~1. Shd PAC Grover faint Secretory 2. Shri R.S. Mishra Director 3. Shri K. Jena Deputy Secretory 4. Shd Kushal Sarkar Under Secretory~~

~~Representatives of State Government of Gujarat~~

~~1. Shri H.D. VXas Secretary Department of Legislative and Parliamentary Affairs 2. Shri I.A. Parmar Joint Secretary Department of Legislative and Parliamentary Affairs~~

~~170 spy~~

Representatives of Ministry of Law and Justice (Legislative Department) 1. Dr. B.A. Agarwal Additional Secretary 2. Slid N.J. Meena Joint Secretary and Legislative Counsel 2. At the outset, the Chairman welcomed the members of the Joint Committee to examine the constitutional and legal position relating to Office of Profit and apprised them in brief about the work done by the Committee since its constitution. The members thereupon, discussed among themselves on the terms of reference of the Committee and other related issues. The Committee also felt the need to undertake an on-the-spot study visit to North Eastern States to elicit their views on the subject under reference of the JPC.

3. Thereafter the representatives of State Government of Gujarat and the Ministry of Law and Justice (Legislative Department) were called in. Ho-1't Chairman welcomed the representatives to the sitting of the Committee and drew their attention to the provisions contained in Direction 58 of the Directions by the Speaker. d. Thereafter, the Joint Committee held informal discussions with the representatives of the State Government of Gujarat. The Joint Committee sought clarifications on some points and desired that the information on the points, which were not readily available with them, might be furnished subsequently in writing to the Committee for their information and use

~~The witnesses then withdrew.~~

~~A verbatim record of the proceedings of the Committee has been kept.~~

~~The Committee then adjourned.~~

~~171 rsr_~~

~~MINUTES OF THE EIGHTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~RoomThe No. Joint 62, CommitteeParliament House,sat from New 1500 Delhi. hrs. to 1530 hrs. on 5 September, 2007 in Committee~~

~~PRESENT Shri lqbal Ahmed Saradgi—Chairman~~

~~MENERS Lok Sabha 2. Shri V. Kishore Chandra S. Deo 3. SIM Santosh Gangwar 4. Shri Raghunath Jha 5. Shri Madhusudan Mistry 6. Prof. Ram Gopal Today~~

~~Rajya Sabha 7. Shri Virendra Dhotis 8. Shri Arun Taitfey 9. Shri Ram Jethmalali 10. Shri Sitaram Yechury~~

SECRET/LESS' 1. Shri P.K. Grover — 2. Shri R.S. Mishra Joint Secretary — 3. Shri K. Jena Dtrerto c — 4. Shri Kushal Sarkar Deputy Secretory — Linr Secretary At the outset, the Hon'ble Chairman, Joint C legal position relating to Office of Profit welcomed theommittee Members to examine of the Committee the constitutional to the sitting and and bdefed them about the progress of work done by the Committee since its constitution. Thereafter the Committee deliberated over the work done by the Committee particularly the views obtained from constitutional and legal luminaries and suggestions obtained from various States on the terms of reference of the Committee. The Committee desired to visit North-Eastern States and Uttar Pradesh from 25 to 27 October 2007 to ascertain their views on the terms of reference of the Committee. Some members also emphasized the need to have a subCommittee for drafting the Report and further deliberation on it.

In view of the aforementioned task involved before finalizing their report felt that it might not be possible to complete the work and present the report the Committee date i.e. by the first day of the last week of the Monsoon Session, 2007. Theby the Committee, stipulated Wintertherefore, Session, proposed 2007. to seek extension of time for presentation of their report upto last day of

The Committee then adjourned. 172 OF THE JOINT COMMITTEE TO DWAINE THE SITTING MINESUT OF THE NI A LEGAL POSITION RELATING TO OFFICE OF PROFIT NSTTIONALNTHND CO ITU The Joint Committee sat from 1140 hrs. to 1315 hrs. on 31 Octobek 2007 in Committee

~~Room Shr Parliament House Annexe, New Delhi. PRESENT~~

~~Shri Ighal Ahmed Saradgi—Chairman /ADAMS Lok Sabha~~

~~2, Shri V. Kishore Chandra S. Deo 3. Shri Santosh Gangwar 4. Shri Raghunath Jha MN Madhusudan Misery 5. Verma 6. Shri Rajerh 7. Slut Ram Gopal Nadav Rory° Sabha~~

8. Shri Ram Jethmalani 9. Slid Sitaram `lechery SECRETARIAT Joint Secretary — 1. Shri P.K. Grover Director — 2. Shri R.S. Mishra Deputy Secretary 3. DM Kushal Sarkar and Justice (Legislative Department) Law Representatives of Ministry of — Secretary ry ri K.N. Chatuedi 1. Sh — Joint Secretary Slid N.L. Deena ry 2. Eastern State Governments Representatives of North TRIPURA Law Secretary Shri Swapan Chandra Bose MIZORAPA

~~— Secretary, Slid P. Chakraborty Parliamentary Affairs Department 173 0-15~~

ARUNACHAL PRADESH I. Shri K.K. Sharma Chief Secretary 2. Shri C.P. Mansai Secretary (Law and Parliamentary Affairs) ASSAM 1. Shri P.C. Sharma Chief Secretary 2. Shri P.K. Chaudhary Principal Secretary Parliamentary Affairs Department NAGALAND Shri R. Kothandaraman Secretary Parliamentary Affairs Department MANIPUR Shit Saichhuana Additional Chief Secretary SIKKIM Shri R.K. Purukayastha Secretary Parliamentary Affairs Department MEGHALAYA Shri L.M. Sangam Joint Secretary, Parliamentary Affairs Department. At the outset, the Chairman, JPC welcomed the members of the Joint Committee to examine the constitutional and legal position relating to office of profit and apprised them about the reasons for postponement of the study visit of the JPC to Guwahati fixed for 25 and 26 October, 2007. Further, the Committee reiterated the need to visit some of the States wiz. Uttar Pradesh, Madhya Pradesh and Bihar etc., to obtain their views and suggestion on the terms of reference of the Committee before finalizing their report. The Committee also deliberated among themselves the need to draw and discuss threadbare terms of reference-wise views/suggestions received from various quarters to arrive at their conclusions. In view of the above task involved before finalizog their report, the Committee felt that it might not be possible for them to complete the work and present their report by the stipulated date i.e. by the last day of winter Session, 2007 keeping in view the fact that the ensuing Winter Session, 2007 may be for a short duration. The Committee, therefore, proposed to seek another extension of time for presentation of their report upto the first day of the East week of Budget Session, 2008. Thereafter, the representatives of the North Eastern State Governments were called in Before the Joint Committee proceeded to hear the views of the representatives of the North Eastern State Governments, the Chairman drew their attention to the provisions contained in Direction 58 of the Directions by the Speaker.

Thereafter the Committee heard the views of the representatives of the North Eastern State overnments and sought clarifications on some points and desired that the information on points, Ghich was not readily available with them, might be furnished subsequently to the JPC for their information and use.

~~The witnesses then withdrew Verbatim proceeding of the sitting have been kept on record. The Committee then adjourned 174 ---~~

~~MINUTES OF THE TENTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1505 hrs. to 1535 hrs. on 27 November, 2007 in Committee~~

~~Room 'D', Parliament House Annexe, New Delhi. ■■■ PRESENT~~

~~Shri lqbal Ahmed Saradgi — Chairman Magus Lok Sabha~~

~~2. Shri Santosh Gangwar Rojya Sabha~~

3, Shri Ram Jethmalani 4. Shri Sitaram Yechuni Seam-Apar Joint Secretory 1. Slid P.K. Grover Director 2. Shri R.S. Mishra Deputy Secretory 3. Shri K. Jena Deputy Secretory 4. Shri Kushal Sarkar Representatives of Ministry of Law and Justice (Legislative Department)

Secretary 1. Shri K.N. Chaturvedi Joint Secretary 2. Shri N.L. Meena Representatives of Government of Rajasthan Additional Chief Secretary 1. Shri A.K. Pande Law Secretary 2. Shri Mahesh Bhagwati At the outset, the Chairman, Joint Committee to examine the constitutional and legal position relating to Office of Profit welcomed the members to the sitting of the JPC. Thereafter, the representatives of the Government of Rajasthan were called in. Before the Joint Committee proceeded to hear the views of the representatives of the State Government of Rajasthan, the Chairman drew their attention to the provisions contained in Direction 58 of the Directions by the Speaker. 175 Then, the Committee heard the views of the representatives of the State Government of ajasthan and sought clarifications on some points and desired that the information on points, R which was not readily available with them, might be furnished subsequently to the JPC for their information and use.

~~The witnesses then withdrew Verbatim proceedings of the sitting have been kept on record.~~

~~The Committee then adjourned~~

~~176 ---~~

~~MINUTES OF THE ELEVENTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1510 hrs. to 1615 hrs. on 28 April, 2008, in Committee Room 'C', Parliament House Annexe, New Delhi.~~

~~PRESENT Shri lqbaL Ahmed Saradgi—Chairman~~

~~MCWERS~~

~~Lok Sabra 2. Shri V. Kishore Chandra S. Deo 3. Shri Santosh Gangwar 4. Shri Madhusudan Mistry 5. Shri Mohammad Salim~~

~~SECRETARIAT~~

~~1. Shri P.K. Grover Joint Secretory 2. Shri R.S. Mishra Director 3.Shri Kushal Sarkar Deputy Secretory~~

~~Representatives of Ministry of Law and Justice (Legislative Department) Shd N.L. Meena Additional Secretary~~

Representatives of State Government of Uttar Pradesh 1. Slid P.N. Mishra Chief Secretary 2. Shri Pradeep Dubey Secretary, Parliamentary Affairs 3. Shri Atul Kumar Gupta Commissioner, Industrial Development 2. At the outset, the Chairman, Joint Committee to examine the constitutional and legal position relating to Office of Profit welcomed the members to the sitting of the JPC. Thereafter, the representatives of the Government of Uttar pradesh were caged in. Before the Joint Committee proceeded to hear the dews of the representatives of the State Government of Uttar Pradesh, the Chairman drew their attention to the provisions contained in Direction 58 of the Directions by the Speaker.

~~3. Then, the Committee heard the views of the representatives of the State Government of Uttar Pradesh and sought clarifications on some points. The main points discussed during the~~

~~177 ..--60 ,-~~

meeting were the desirability of evolving a uniform criteria and definition for the'office of profit' applicable uniformly to all States; the criteria followed for exempting certain offices from the purview of 'office of profit' in the State of U.P.; the need for the public representatives to be associated with the developmental process. The Committee desired that the information on pointy which was not readily available with the witnesses, might be furnished subsequently to the JPC for their information and use.

4. The witnesses then withdrew. Verbatim proceedings of the sitting have been kept on record. 5. Thereafter, the Committee held discussion among themselves. Hontle Chairman apprised 6. the Committee that replies from most of the States/UT Governments have been received. However, out of 41 political parties/groups which were asked to give their considered views on the reference of the Committee, replies from only 14 parties/groups had been received. The Committee felt that it is after receipt of views from the remaining States and Political Parties that the Committee would be able to complete their examination of the subject. Thereafter, the Committee would hold discussion with the administrative Ministry i.e. Ministry of Law and Justice (Legislative Department) to elicit their views/clarifications on the various points raised by the F. Governments and others. Thereafter, the Committee would hold sittings to have States/U./ detailed discussion among themselves on the views so received from various quarters to arrive • at their conclusions. In view of the above, the Committee felt that it would not be possible for them to 7. i.e. Last day of complete the task before them and present the Report by the stipulated time the Budget Session, 2008. The Committee, therefore, decided to seek extension of time for presentation of the report upto the last day of the Monsoon Session, 2008. The Committee then adjourned

~~178 MINUTES OF THE TWELFTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1110 hrs. to 1245 hrs. on 5 June, 2008 in Committee Room No. 62, Parliament House, New Delhi.~~

~~PRESENT Shri lobe Ahmed Saradgi—Chairman~~

~~MEMBERS Lot Sabha 2. Shri V. Kishore Chandra S. Deo~~

~~Stye Sabha 3. Shri Abhishek Menu Singhvi~~

~~SECRETARIAT~~

~~1. Shri R.S. Misra Director 2. Shri Kusal Sarkar Deputy Secretary Representatives of Ministry of Law & Justice (Legislative Department)~~

~~1. Shri K.D. Singh — Secretary 2. Shri N.L. Meena — Additional Secretary~~

~~Representatives of State Government of Chhattisgarh~~

1. Shri R.S. Sharma Law Secretary 2. Shri A.K. Samantrey Addl. Law Secretary Representatives of State Government of Orissa 1. Shri B.K. Hayek Principal Law Secretary 2. Shri K.C. Petra Joint Secretary, Party. Affairs 3. Shri S.K. Panda Joint Resident Commissioner

2. At the outset, the Chairman, Joint Committee to examine the constitutional and legal po ition relating to Office of Profit welcomed the members to the sitting of the JPC. Thereafter, th, representatives of the Government of Chhattisgarh were called in. Before the Joint Committee pr needed to hear the views of the representatives of the State Government of Chhattisgarh, the Ch irman drew their attention to the provisions contained in Direction 58 of the Directions by Ni- Speaker.

~~179 60.1~~

Then, the Committee heard the views of the representatives of the State Government of 3. Chhattisgarh and sought clarifications on some points. The main points discussed during the meeting were the desirability of evolving a uniform criteria in relation to office of profit which can be applied to all States and Union Territories; feasibility of adoption of system of law as existing in United Kingdom; definition of 'office of profit' and the criteria followed for exempting certain offices from the purview of Office f„rofit in the State of Chhattisgarh. The Committee desired that the information on points, whicwas not readily available with the witnesses might be furnished subsequently to the JPC for their information and use.

4. The witnesses then withdrew. Thereafter, the representatives of Government of Orissa were called in. The Joint Committee 5. held informal discussions with the representatives of the State Governments of Orissa on matters Under reference of the JPC. The main points on which the PC sought views of the officials of the State Government of Orissa were the need to evolve generic and comprehensive criteria applicable to all States and Union Territories; the need for public representatives to be associated with the developmental activities; the need to evoLve suggestive general guidelines/principles to declare an office/post to be an 'office of profit'; the feasibility of adoption of United Kingdom Law on the subject; conflict between duty and interest of members holding two offices simultaneously. The Committee sought clarifications on some points and desired at the information on the points, which were not readily available with the witnesses, might be furnished subsequently in writing to the Committee for their information and use. The witnesses then withdrew

Verbatim proceedings of the sitting have been kept on record. Thereafter, the Committee held discussions among themselves. The Committee fell the 6. need to visit Dehradun in the month of June, OB to hold discussion with the officials of the State Government of Uttarakhand to ascertain their views on matters under reference of the JPC. The Committee then adjourned.

~~180 MINUTES OF THE THIRTEENTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1500 hrs. to 1545 hrs, on 20 August, 2008 in Committee Room 'D', Parliament House Annexe, New Delhi.~~

~~PRESENT Shri IqbaL Ahmed Saradgi-Chairman~~

~~MEMBERS~~

~~Zak Sabha 2. Shri Santosh Gangwar 3. Shri A. Krishnaswamy 4. Shri Madhusudan Mistry 5. Shri Mohammad Salim~~

~~Rajya Sabha 6. Shri Sitaram Yechury~~

SECRETARIAT 1. Shri P.K. Grover Joint Secretary 2. Shri Kusal Sarkar Deputy Secretary-/I Representatives of Ministry of Law ft Justice (Legislative Department) Shri K.D. Singh Secretary Shri N.L. Meena Additional Secretary Representatives of State Government of Madhya Pradesh Shri Rakesh Sahni Chief Secretary Shri Nip Mehra Principal. Secretary, Parliamentary Affairs Department Shri Naresh Kumar Gupta Principal Secretary Law a Legislative Affairs Department

2. At the outset, the Chairman, Joint Committee to examine the constitutional and legal position relating to Office of Profit welcomed the members to the sitting of the JPC. Thereafteh the representatives of the Government of Madhya Pradesh were called in Before the

181 Government Joint Committee proceeded to hear the views of the representatives of the State of Madhya Pradesh, the Chairman drew their attention to the provisions contained in Direction SS of the Directions by the Speaker. 3. Then, the Committee heard the views of the representatives of the State Government of Madhya Pradesh and sought clarifications on some points. The main points discussed during the fit' and the Criteria followed for meeting were the feasibility of definition of 'offices of pro exempting certain offices from the purview of 'office of profit' in the State of Madhya Pradesh; feasibility of adoption of system of law as existing in United Kindom; deSirabitityates of evolvingynd Union a in relation to office of profit which can be applied to all Srea criteria dil uniformTerritories; The Committee desired that the information on points, which was noty available with the witnesses, might be furnished subsequently to the JPC for their information and use.

~~The witnesses then withdrew~~

~~Verbatim proceedings of the sitting have been kept on record. The Committee then adjourned.~~

~~132 --- 606--~~

~~MINUTES OF THE FOURTEENTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1500 hrs. to 1530 hrs. on 9 September, 2008 in Committee Room 'B' Parliament House Annexe, New Delhi.~~

~~Mahaaps Shri V. Xishore Chandra S. Deo—Acting Chairman~~

~~Lok Sabha 2. Slid Ganesh Prasad Yadav 3. Shri Madhusudan Mistry 4. Shri Rajesh Verma~~

~~Mayo Sabha 5. Shri Sitaram Yechury~~

ShcRETARraii 1. Shri P.K. Grover Joint Secretoryor 2. Shri R.S. Mishra Director 3. Shri Kusal Sarkar Deputy Secretary.// Representatives of Ministry of Law ft Justice (Legislative Department) Shri T.K. Vishwanathan Secretary Shri S.R. Dhaleta Joint Secretary Et Legislative Counsel Representatives of State Government of Kerala Snit. Neela Gangadharan Additional Chief Secretary, Parliamentary Affairs Department, Government of Shri B.R. Mohan Kumar Kerala Law Officer 2. In the absence of the Chairman, the Committee chose Shri V. Kishore Chandra S. Deo, to Lokact Sabha.as Chairman under rule 258(3) of the Rules of Procedure and Conduct of Business in

3. At the outset, the Chairman welcomed the members to the sitting of the JPC. Thereafter the representatives of the State Government of Kerala were caged in. Before the Joint Committee proceeded to hear the views of the representatives of the State Government of Kerala, the

~~183 604~~

~~Chairman drew their attention to the provisions contained in Direction 58 of the Directions by~~

the Speaker. Then, the Committee heard the views of the representatves of the State Government of 4. Kerala and sought clarifications on some points. The main points discussed during the meeting were the criterion being followed for granting5. exempdon from disqualification and the factors other than remuneration being considered for giving exempdons by the State Government of Kerala; need for evolving a uniform criteria in relation to office of profit which can be applied to all States/1qt feasibility of definition of office of profit; and provging for an enabling provision in the Constitution for exercising an option by an elected member to resign from an office in the event of the office he is holding being determined to be an off,ce of profit. The information on some of the points was not available with the vgtnesses. The Committee, therefore, desired that the information as asked for during the discussion might be furnished subsequently by the State Government of Kerala to the JPC for their information and use. The witnesses then withdrew

~~Verbatim proceedings of the sitting have been kept on record. The Committee then adjourned.~~

~~i84 --~~

~~--- 608~~

~~MINUTES OF THE FIFTEENTH SITTING OF THE JOINT COMMITTEE TO EXAMINE THE CONSTITUTIONAL AND LEGAL POSITION RELATING TO OFFICE OF PROFIT~~

~~The Joint Committee sat from 1510 hrs. to 1600 hrs. on 16 December, 2008 in Committee Room No. '62' Parliament House, New Delhi.~~

~~Shd lqbaL Ahmed Saradgi — Chairman~~

~~htemeos tot Sabha 2. Shri V. Kishore Chandra S. Deo 3. Shri Santosh Gangwar 4. Or. Satyanarayan Jatiya 5. Shri Ganesh Prasad Singh 6. Shri Madhusudan Mistry 7. WI Mohammad Salim~~

~~Rajya Sabha 8, Shri Virendra Matta 9. Shri Arun Jaitley ID. Skin Ram Jethmalani 11. Shd Sitaram Yechury~~

SECRETARIAT 1. Shri P.K. Grover Joint Secretary 2. Shri R.S. Mishra Director 3. Shri Kusal Sarkar Deputy Secretary-II 2. At the outset, the Hon'ble Chairman, welcomed the members of the Joint Committee to examine the constitutional and legal position relating to office of profit to the sitting. 3. The Committee then considered and adopted the draft report with minor modifications. M The Committee authorized the Chairman to present the report and lay the evidence on the Table of the House. record of

5, The Committee decided that two sets of memoranda containing comments/suggestions received by the Committee might be [staged in Parliamentary Library, after the Report has been presented, for reference by the Members of Parliament.

~~185 601~~

6, The Committee also placed on record their deep appreciation of the hard work done and valuable assistance rendered by the officers and staff of the Lok Sabha Secretariat to facilitate the work of the Committee. The Chairman while associating himself in thanking the above mentioned officers, also thanked7. the members of the Committee for extending their full cooperation to him in conducting the proceedings of the Committee in a most congenial atmosphere. The members of the Committee also placed on record their high appreciation and thanks to the8. Chairman PS lqbal Ahmed Saradgi) for very ably and impartially conductng the proceedings of the Committee and guiding their deliberations. me Committee then adjourned.

~~186 CORRIGENDA~~

Par e No. Para for 6 read 1.72 rewarded Jne 14 from ob reworded 68 48 Otherexemptions e W from below Other exemptions suggested in the suggested in the Act Parliament (Prevention of Disqualification) Act 1959 Thirteenth Finance Commission

~~2010-2015~~

~~Volume I: Report~~

~~December 2009 CHAPTER 1 Summary of Recommendations~~

Finances of Union and States it) The operational modalities are oudined in pares 5.36 to 5.41. The Ministry of Finance (Mop) shot& ensure that the finance accounts fully reflect HT Toe proposed agreement between the the collections under cesses and surcharges Cenue and states, with contingencies for as per the relevant heads, so that there are changes, is in paras 5.49 to 5.51. no inconsistencies between the amounts iv] The disincentives for non-compliance released to states in any year and the are described in Para 5.52. respective percentage shams in net central v) The implementation schedule is taxes recommended by the Finance described in paras 5.57 to 5.59. Commission for that year . (Para 4.331 ) The procedure for Maiming compensation is in Para 5.6O. The states need to address the problem of (Para 5.48) leases in the power sector in a fime-bound 6. Any CST model adopted must be consistent (Para 4 38) with an the elements of the Grand Bargain. To incentivise implementation of the Grand 3 Initiatives should be taken to reduce the Bargain, this Commission recommends number of Centrally Sponsored Schemes sanction of a grant of Rs. sommo crore. The ((SS) and to restore the predominance of grant would be used to meet the formula-based plan transfers. compensation claims of State Governments (Para 496) for revenue losses on account of implernentadon Of GSTbettmen -Foams and AmhbrafidaMtsfiateufrorntheescpancionarY 2014-43, consistent with the Grand Bargain. fiscal stance of 2008-09 and 2003-ir should Unspent balances in this pool would be be the main agenda at the Conti, distributed amongst all thestares, as per the devolution formula, on n January 2015. (pares 5.54 and 5.55) Goods and Services Tax The Empowered Commit-ea of State Finance 5. Both the Centre and the states should Ministers (BC) should be transformed into conclude a Grand Bargain to implement the a statutory council. The compensation Model GST. The Grand Bargain comprises should basis bursedm quanerlyinstalments six elements; on the basis of the recommendations by a i) The design of the Model GST is three-member Compensation Committee suggested in parse 5.25 IC. 5.35. comprising of the Secretor:, Department of Phhven th Finance Cornmissfon

Revenue, Government of India:Secretary to uJ The states should use the flexibility' the EC and chaired by an eminent person provided by the Comptroller and MM experience in public finance. Auditor General (CLAW to clear the badolog of PSU accounts. (Para 5.60) Ofira 7-95: 8. In the unlikely event that a consensus ssiOn iii) All stat need to draw up a roadmap for regard t= implementing Atheelementsof the re of non-working PSIA by March Grand Bargain cannotPe achieved and the 2prt. Divestment and privatisation of GST mechanismfinall fillyy adopted is difierent PSUs should be considered and actively from the Model GST suggested by A, this pursued. Commission recommends that this amount (pares 9.95 and Z 90) of Rs. 90,000 crore shall not be disbursed_ (Para 5.62) n) TheMil-1150C aeCappmateAkamsshomd closely monitor the compliance of state The states should take steps to reduce the and central Pest's with their statutory tirmait time of cargo vehicles crossing their oolleations borders by combining chcckposts with (Sara 96) adjoining states and adopting user-friendly options like electronicthy issued passes for v) A taskforce maybe constituted to design eared traffic. a suitable strategy for dismstestment/ pnvatisabon and oversee the process A Standing Committee on restructuring Union Finances may be consfituLed under the cpacinaushrp of the Chief Secretuk to in. The pelicy regarding use of proceeds from operabonfithe the recommendations of mm17/fitment needs -Abe. liberalisedto also toe task AAAAnindependentap techmea: ade capital expenditure on anti ca t secretariat may he states Infrastmcnre and MA ens-mann-Ant the finance departments ut states on (Para 6-06) restnfikfilfige disinvestment proposals Records of landholdings of PSELs need robe (Para 790) properly maintained to ensure that this With re femme to the power setter scam resource is puL to productive use, or made evadable for other public Prolems, rl Reduction of Transmission ar else, sold Distribution (MAD) losses should be (bars 6{8) attempted through metering, feeder separation,Intreduction of HighVollage State Finances Distribution Systems (HfiDS) metering of dish- but= transformers and strict The practice of diverting plan assistance to anti-theft m easures Distributing meet on plan Reeds of special category franchising and Electricity Services states should be Is cont.nucd Company (ESCO) based structures (Para should be considered for efficiency With reference to public Actor improvement. undestafingst (Para 7 tifi it All states should aatm/our to ensure Unbundling needs to be earned out on clearance of the accounts of all their priority basis and open AAA to Public Sector Undemalfings (PRA) transmassson s,rengthen ri Governance (Para T. 95) should be improved through State Load -----6IY

~~lnaDter 1: Summary of Recommend° bons~~

Dispatch Centres (SLO) and this publicamount and the consolidated fund hould eventually be made amofunction su s should be provided as a separate annoy to the finance accounts of the states (Parm.131) id) Proper systems should be put in place iii) Public expenditure through creation of to avoid delays in completion of luttro projects fluids outside the consolidated fund of the states needs to be discouraged. (Para 7.117) Expenditure through such funds and iv) Insteadofpurangupthermalpowerpluits from civil deposits should be brought in locations remote from sources of coal. under the auditjudsdietion of the C&AG statesshouldeonSiderjOintventnaS (11.$) m or near the coal-rich statea. iv) The follossing statements need to be (Para 119) provided with the finance accounts of v) Case r bid process should be extensively states; men to avoid vukievabaity to high-cost a) Comprehensive data on all subsidies. purchases doling peak demand periods. (Para natal (Para 7.120) b) Consolidated information on the I() Regulatory institutions should be number of employees at each level, strengThened through eapaaty building, along mth Mecommitment on salary musumer education and tariff reforms Thjs statement should also include lie Multi Year Tariff (MET). Best information on employees and Mem practices of corporate governance should salary where such expenditure is be introduced in power utlitics. shown as grants or booked under (Para yam) nmu IP I e. V. Migration to the New Pension Scheme needs (Para 7.136 & 2.137) to be completed at the earliest. 0) Details of maintenance axpenditure.

(Para 7.138) If. Statesmath largo cash balances should make efforts towards utilising these before Sharing of Union Tax Revenues resorting to flesh borrowings. 18. The share of states in net proceeds of shareable central taxes shall be ea per f Ent in each of the financial years from 2010-II 17. With reference to accountng reforms. tO 2014-ts. Under the Additional Dunes of it The Government of India (GoI) should Excise (Goods of Special Importance) Act ensure unifol miry in the budgetary 1957, all goods were exempt.fiumpaymen cl assification code across all states. The of duty from r March 2006. Following this, Du of appendices to the finance accounts the Centre had adjusted the basic dunes of of states also needs to be standardised. excise on sugar and tobacco products, In . yiew of these developments, the statesishare In the net proceeds of shareablecentral taxes u, Details of contra entnes as wed as the shall remain unchanged at fiz per tent, even summary of transactions between the in the event of states leutang sales tax (or

~~bit~~

~~Thirteenth Finance Comm(~~

~~Value Added Tax ;VAT)) on these Shalle of share Of comntonilles. State' Shareable Tase9 Bente Tux~~

(pares 8.17 and S18) Tamper allot) In she event of notification of the 88° kmenament to the Constitution and S. 085 enactment of any he gistathon follovang svh II 089 the notification, it should be ensured that 2489 revenue accruing to a state under are less than theshare egislation sho not Dc ccrue to it, bad the ecnre, 100,3 seat wframe 0 781 sortaceL tax been part of the shareable poo. of central taxes. (Para 8.a9)

~~The Central Government should review the letfa of ceases and satcharges with a anew to its gross tax revenao o 405 reducing their Share1e (Para ,.2o) 0 338~~

The WA:Cave ceiling on overall [musters to 9. -411 pates on therevenaeuxotuttmaybe setat 39 s oar acatu ofgoss reverullreceirts of theCanue (Para 21) Gear ?raSesh 1128 The share of each state in the net proceeds of all shareable centraa taxes in each of the \hest BesSS All Siofr-s -33 be as specified in Tables I. less than 25 portent of GDP. by 2014 (pans 38 and 8.39) The Medina, Term Fiscal Plan (MTFP) Revised Roadmap for Fiscal should be refamand and made a statement , Consolidation of commitment rather than a statement or . requEren The menue deficit of the Centre needs to latent Tighter Integration Ir 23 ssively reduced and eliminated, between the raaltnnear framework provided be progre nxercise. followed by emergence of a revenue sonplus by MITI' and the annual budget (Para g88) by 2034-93 (pares 9.18 and 9 31) o. The tanning disclosures shoald be made Catargetof 68percent of GDP'ortre combined Sur-libthe annual central Budget/31TR' debt of the Centre and states should be 0 Dled breakup of grants to states fiscal consotialatano Legorn of non-plan achllved by 2014-1i The under the overall ca- and plan grazis augmented deot cc& of the CentrotO 45 per cent of GDP by 2 Gallas and of the slat to -616-

~~CThapter I. Summary ofReeommandnd ons~~

a) Statement on tax expenditure to be Finance Commission tax devolution formula systematised and Inmethodolop-lo o be for finer se made pool.cit distributnn between states (Para 9.42) (Para 9.63) ifi) ComplianceOasis of major tax proposals 31. Scrunurn shocks such as arrears arising out to be reported. of Pay Commission awards should be (Para 9-43) avoided by, in the case of arrears., making the payaward commence from thedateonwhich iv) Revenue Consequences of Capital ins accepted . Enendigire (RACE) to be projected in AI TFP. (Para 9.64) 32. (Para 9.46) An independent renew mechanism should sct-up by the Centre to evaluate its fiscal v) Fiscal impact of major policy changes to rem run process. The independent review be ineorporand In LAITTP. mechanism should evolve into a fiscal (Para 9.46) council nth legislative backing over time. ii) Public Private Parnenbig (PPP)liabigges to be reported along ivi1h IATFT, (papas 9.63 and 960 (pares 9.48 and 9.49) 33. Given the exceptional circumstances of D08-o9 and vii) NITFP to make explicit the values of sao, the .cal consolidation process of the states was parameters underlying projecgons for disrupted. is expected that states would receipts and expenditure and the band be able to get back to their fiscal correction within which they can vary while , path by zon-12 allowing for a year of remaining consistent with targets. adjustment in aolosn. (Para 9-61) i) States that inclined zero revenue deficit surpLu should eliminate a 27. Transfer of disinvestment receipts to the n raven deficit by public account to be discontinued and all 20w-12 and maintain revenue balance disinvestment receipts he maintained in to or attain a surplus thereafter. Other consolidated had states should eliminate revenue deficit (Para 9 52) (pans 9.69 to 972) Gol should hit ali public sector enterprises if) The General Category that yield a lower rate of return on asnls -States that attained Nan a norm to be decided by an expert a znorevenue deficit or a revenue surplus committee in.200.7-08 should &Mere a fiscal deficit of 3 per rent of Gross State DOmestie (Para 9 52) ?induct (GSDT)byponin andMairtan 9 The FR/324 Act needs to spent, the nature such thereafter. Other general category of shocks :hat weird require a relaxation of states need to achieve 3 per cent fiscal FRAM targets. deficit by 2013-14. (Para 9.62) 30. In case of macroeconomic shocks instead of relaxing the states' borrowing limits and Pi) Ail spec al category states with base letting them bow ow more, the Centre should fiscal deficit of less than 3 per cent of bonny and devolve the resources using the GSDP in goop-08 could incur a fiscal deficit of 3 per cent fn 2011.12 and

5 Th:ROMILF FMCMCC Lamrns unable to rake mans weak status t thereafter Manipur maintain from the market and Intaralchand to Nan aldan , SlIit dnin (Para 9.114) redlce thei: fiscal deficit tO 3 per cent of Ina state: that nave not availed the benefit GSM' by 2013-In 41 (pgras 9.-9 and 9.8r) oe consolidation under the Debt SOnsolidation and Relief Facility (DCRF), Jammu &Nash:nit and difizolam should the facilips limited to consolidation and deficit to 3 per cent of he lit) 1mit their fiscal interest rate reduction, should Gaff be add4-I5 extended, subject to enactment of the (Para 9.80) FRBM Act. stade should amendienaet FRBM Arts to (Pam 9.115) build in the fiscal :enema path worked out or a The benent of interet relief on N.SSFC and State-specific grants recommended 42 be made available to Gate should be released upon Co nessiance the Write-42i should - states only Dine bring about the necessary (Pam 8o) amendments/enactments of rinimring m eela sensible (pare 9 116) Independentp review, o 5 :gonad be set ) under the FREM Acts Local Bodies (Para 9.84) Article niSu (31 Sob) Se (e) of the Constitution . on Poidowinglimite for dates to be worked out should be amended such that the words 36 recommendations of the by flog using the fiscal reform, path, thus the basis of the or Finance Commission of the State' are anima as an enforcement mecuarnsm changed to 'after taking into consideration fiscal col-rename by states. the reclommendatione of the Finance (Para 9.85) COmrnieSicn of the State'. Loans to states from nations) Small Sabengs (Para to 130) Fund (NSSP) contacted till 2006-07 and be isle 243(i) of the Coustetutioushouldi otstendingu atthe end of noon-in to be reset 4 a per cent rate of interest sulnect to amended to include the phrase or earlier at conditions prescribed after the words `every Efth year'. (Para 9.106) are 10.125) e National Small Savings Scheme to be The quantum of localbody grants should b 38 - The geralbakeen reformed into a market-aliened sciheme. State Governments are atho requ.red to arant as well as the special areas basic gram

undertake relevani redeems at then ledel =should be allocated amongst states as specified. The statc-wise eligibility for these Cures edit and 9.1121 granmtseace ates and administered 39. Loans from Got to st (Para. dok5p) by minisniesedepartments other tam lion. e outstanding as at the end of 2009-10 to be State Governments wadi be eligible for the . ^6 specialal aninen off, subject to condinonsprcscnbed general performance grant and the formance grant oing if they comply mare 9114) areas per withtue presibd stipuiations.These grant. A window for borrowing from the Central creduaethe manner specaped. the disbure Government needs to be available for Innate 40

~~6 6~~

~~Chapter Summary of RecommendaPons~~

statewsise eligibility for these grants isplaced in annexes en isb and to aid. snare a portion of this income with those local Cares 10 101 to 10174) bodies in whose jurisdictionjurisdiction such incomeanses The states should appropriately allocate a portion of their share of the general basic (Para ea RR) sR grant and general performance grant, to the State Governments should ensure that the special areas in proportion to the populadon recommendations of State Finance of these areas This allocation Rill be in Commissions (SFCs) are implemented addition en the special area basic grant and wInout delay and that the Action Taken special area performance grant Report (AYR) Is promptly placed before the recommended by us legislature (Para io ise) State Governments should appropately so, ate should consider adopting the template strengthen their local fund audit departments through capacity building as well as peisonnel augmentation (Para 10.127) 55- 13odies. similar to the 57C should be set up (Para 167) to states which are not covered by Part TX of I he State Governments should in eentisise the Constitution revenue collection by local bodies, through methods such as mandating some or all local (Para 10.160) 56 taxes as obligator:eat non-zero rates of levy Local bodies should consider implementing thydeducting deemedown revenue collectim; the identified beet practices. from transfer entitlements of local bodies, (Para eo.79) cc theougli a system of matching grants 57 A portion of the grants provided by us to (Para swiss) urbanRealbodies be used to revamp the fire sercces P•itarp their jurisdiction, To buttress the accounting system, the rinance accounts should include a separate (Para 10.172) statement indicating head-I/Ise details of 58 Decal Bodies should be associated with eiR actual expenditures under the same heads planning functions wherever ()the: ase used in the budget forboth Panchayati Raj development authorities are mandated this Rstitutions (PRIG) and Urban Local Bodies function. These authondes should also share DSOs; IAD recommend that these changes them resenues with local bodies. be brought into effect Rom 31 March 11012. (Para lo 168) The development plans for civilian areas The Government of India and the State within the cantonment areas (excluding Governments should issue executive areas under the active control of the forces d -) instructions so that their respective should be brought before the district eparbnentspay appropriateservicecharges planning committees. to local bodies. (Para 12169) fio State GRernments should laydownRaidebnos Given the increasing income of State for the consonston of magas panchayats Governments from royalties, they should (Para mass)

~~7 613 --~~

Commis3ion Thirirenth l -1 of disasiers lobe coon-ed.under the scheme financed threugh SC grants shoruhrd Disaster Relief . 00u es , Usna In as it exists today The National Calamity Contingency ,Rund mansmade disasters of high-intense, may nce seSCCF) should be merged into the Moon NDRP funding, o s Sj- be considered for ceiz ..D.Lisaster Response Fend (NDRF) and the Pormshavebeen stpulated andtneeeD Calamity Relief Fund SCRF) into the Stare additional allocations made to them Response Funds (SORB) of top isash et (Fara is so()) respective states. Consignation to the SO_ ctea should be shared benseen the Centse enc. les DdashiagAl , The administrative mechanism I .ent stares hithereto of 7539 for geilera.cateoon under relief to be as prescribed the stales and goon for soecial category states. National Disaster Managents‘e e , the Executive nathonth (NOCIA) 'Nati'Dnaland the Comm (NEC) at the Centre APPS !..S1R Disaster Management vel. CRCs and the NCCF should be tranuerse Executive Conn) (SEC) at the state le . with batthee to Incmeresseethe SDSYS and NOR? Financial matters to be dealt operas og and n.931 h dinghy nfrinaace as perthe erastiengra (pans 11505 and 106) pros-Loose for the NURF :seed to 6h3, ms snoala be be Inked to expendimte ofthe prelean year o, presmb a punting nor 3. subsumed froth the ned with cesses being adhered to for the continuance of cen ra on introduction ef the Gob; aneroutIve assistance to the Sniffs sources ornuaacme, need to be 'destined (Para th 951 (Raga mad) Grans-nsaid to States The total sue of she SURF has been uroed 61 WIC-) and Performance Incentige raho glum above, usth an addmona. grant o Total nosplan revenge grant og Rs. of Rs 525 crate for capacity °undue 71. d pepesoori d oreis recommegeed over the awar for eight states (Table 12.41. .lusistanee of Rs ego crore to be given to the (Rata 12.127 65 National Disaster Response Force to A performance grant of Rs. 1500 crore is maintain an Inventory of items required for daemmendedfor three special catagorystate_ immediate relief plcnRevecue (Fara n10.11 whohaveggaduatedfrorna llom Deficit (SPAR) sithatioa. Pronsinss relatng to the District Disaster (Para coh3) Resonse ns ID DRF) In the nuaster DPI, Act may he. renewed and Management( Elenserstano Educe-6ml settles up of these funds left to thedm:Sou ya A g eatofigs 24,068 Crete is recommended of the Indeednil states for elementary education over the award Para n 961 period Tara 32.23) tihogailonandiesonsecadonactsetes should oi s -bolceproht once schemes fenced through FC The education graRegel be an additionaliS Idegelonment plar 71 e states fgr sfu thandm etcuta foverh to the normal expenditure of texpenditure tes - fundss of re Cetnds e a d esta elementary education The Tara as RR!

~~S Cho. ter Summary of Recommendateon~~

(plan - non-plan) under elememary and achieving the normatively assessed statuspecia recovery of water charges. head-or, exclusive of grants recommended, should grow by at least 8 per cent annually daring 20:0-15 Water sector grants should be an additionality to the normal maintenance expenditure to be undertaken by the states and shall be released and monitored in ex. An amount of Rm ono0 crore is accordance with the eonditionaliciea in recommended as forest grant for the award period (Para 12.58) (Para 1226) Improving Outcomes 76. Grants for the first two years are untied but ptiority should be given to the preparahon 82 States should be Incentivised m enroll such of working plans. Release of grants fur the of their residents who participate in welfare last three years is linked to progress in the schemes within the Unique Identification number of approved working plans (UID) programme. Agrant of Rs. 2989 crone is proposed to be given InStateGovernments in this regard, as indicated in Annex ¢ 9. three years are for preservation of forest (Para12.70) wealth These grants are over and above the 83. States slicuId be iucentivised to reduce their non-plan revenue expenditure on forest:. Infant Morality Rates (IMR) based upon and wildlife (major head-206) and shall be their performance beyond 3: December subject to the condilionalities given inAnnex 2009. A grant of Rs g ocio crore 12.3 Seventy five per cent of the gams recommended for this purpose the last three years can be used by states for development purposes. (Para 1275) (Para 12.a) A giant of Es. socto core is proposed to 78. An incentive grant of Rs. uood core is support improvement in a number of facets recommended for grid-connected renewable in the administration ofjusOce.Theseinctude energy based on the slates' achievement in operation of morning/even:rag courts reneveabi'e energy capacity addition from a promotion of Alternate Dispute Resolution April 2012 to 3t March oola The (ADP) mechanisms. enhancing support to performance of states in this regard needs LokAdnlatr, as well as legal aid and I:milling to be reviewed on the basis of datapubluhed by Col cc capacity addition by states 85. A grant of Rs 20 encre is recommended for promotion of innovation by setting up a Centre for Innovation in Public Systems recommended as water sector management (CIPS) to identify, document and promote gant far mm innovations in public services across states. of the award period. The second grant of Rs. is rore per district is ref) ecreation of a Disexict Innoyadon Fund (Para 1.2 gs) CDI aimed ati ncreasing the efficiency of Bo. Release of watetsectorgrantsisouldbe subject the capital assets already created. to setting up of a Water Regulatory Authority

ThIfte44th Firnl nee CO ion Seism of the stase-sPecfic grants the quality' of statistical yes 56 To enhance glee's In 'Paige n 6 is one; indicatfie, we recommend a grant of 16s.61 6 fibre to] states may communicate tress requfied 1 wore Slate Goseinmerts at tag rate of Ra. phasing to the Central Government the , such. um Mr mem. dlstrict ts fill in =tat grant may be releaeed in a mann of infrastructure gaps .n areas not addressed two Instalments per yea r. the India Stabsucal Project (1ST) n) ficcoords shall hemaintained and (ham 12.101) Cfillsenon Certificates (hies)/

Agrant of Rs to groretefilbe profidedto each Statement= of Expenditure (SOLO 3" Finance Rules category state and Rs. h Lorereeach provided as per General esnesat venal categcry state to se Iva nemplosees (GER) 2005 e also urge Gol (Pare -2 324) penoners'fi data to set W to =hate a para➢ci ears for prepanng a data base for its con employees and pensioners Marte1:7ring (Pars 12.108) ge. The High Level Monitoring Committee headed by the Chief Secretary to renew th. e utilisation of grants and to sake conssefive higineenfisee of Roads and fridges measures, set up as per the recommendation An amount Of Pe5 ag 93o erase has been 68 of FC-X11, should continue. recommended as grant for maul:cumin of four years (houtsz to (Para se 326) roads andbridges tor vorega of our award period . The total grants-In-sad recommendedfor the 93 (Para 12.1m) stares over the award perold are given in

8e. The maintenance grants for roads and States bridges wdlbe an additionalityto she normal Table I me Grants-In-Aid IQ vs afire; rstenanee expenditure to he incurred by 47519 the states Release of this grant and I Local mfies expenditure will be subject to the Dbasee ebe efeeleme4 for cape an condstionalitles indicated in Annex 12.17. III P222; 21tvol2thon t(222-p:22. 51500 1500 44069 V Elementary Caveat= Shatetspeeilie Needs 14000 V4 E1122170.2211222 2,25Es go. A total grant or Re. 28.946 store is ■a) 22222226212. ±22 Th7ercs 5'2012 recommended for state specific needs CO) Re:10105:e Veler Secteefceiegereentr 3000 3) I Ineree iaole 52.6) Imereetheg Obiconees 1 Le leefeer Merle in addition to the stpulatons described in (2) R2d222i0 5000 ef) epouement Sappb f,.ot ee 58 state-specific grants are 2989 pares g ge and .9. Earentiueler unes Se6 sagest to the follossing conditioualtheg (de astreftlebboace Feed Sc) fmprefement cifebusdoel 417teens it No funds from any of the state-specific 616 ar State cad D1-9 tF IC: Leeel 225 grants may be used for land acguisifien Essefigee ceg gesfiss Data acts 1993e by the states. Wherever land is required vm afisenages ef Roses and tingem for a project: construcfion, suchlordmay IX Stele eptc.fie IK ereplementaten or boael 051 be made available by the State 418434 Government

~~10 a62, Z. a~~

~~Chapter 1 Summary of Recommendabons~~

~~ith ICM V jay L. Kelicar Chairman~~

~~.7, v-64, B.K. Chaturvedi Indira Rajaraman Member Member~~

~~Atul Sarnia Sanjiv Misca Member Member~~

~~New Delhi 29, December 2009~~

I lush to record my deep appreciation of the outstanding support and cooperationprovided by all Members of the Commission. This report is a joint endeavour, with each Member contributing immensely with their profound knowledge and deep professional commitment. I also want to put on record the Commission's appreciation of the services rendered by Shri Sumit Bose, Secretary to the Commission. He has been a friend, philosopher and guide to this CommLS:1011. The Commission greatly owes to him for its high efficiency and meticulous work. He has been an outstanding leader of a talented team of professionals which assisted the Commission.

~~Vijay L. Kellar New Delhi Chairman 29. December 2009~~

~~11 62-3- 6 AJoirl -114 Cecc-no-yLasib,~~

Introduction India (Gol) indicated in Feb Tooy that a roadmap 5r. This Commission isrequired to consider 'the for introduction of destination-based CST in the impact of the proposed implementation of Goods county; by e April 2010 would be prepared in and Services Tax with effect from it April 2020 consultation with the Empowered Committee (EC) including its impact on the countys foreign trade', of state Finance Ministers. This commitment was while formulating its recommendations. The reiterated in February 2008 and July 2005. The changeover to the Goods and SeMce Tax 1G3I wdl origin-based Central Sales Tax (CST) was be a game-changing tax refomi measure which will successively reduced firmto 3 per cent and 2 per significantly coamibute to the buoyancy of ax revenues and acceleration of growth, as well as this reform process. In November 2007, a Joint generate many Posibve externalities. Three other Working Group consisting of representatives of the items of consideration in our Terms of Referecc e Empowered Committee and the Government of 5 India am (t) ...estmanon of the resources of the repose on Me changeover to GST. CenTal and State Governments': (ii)....the objective This report was discussed by the EC, which then of not on/y balancing the receipts and expenditure prepared M Model and Road Map for Goods and on the revenue account but also to generate Service Tex in India' in April 2008. The model and surpluses in the capital account: and (iii) to roadmap, while recommending that a dual GST be improve thetax- gross domestic product ratio ofthe put in placu alsoproxtded preliminarytiews on the Center and the States' will also be influenced by the state and central taxes to be subsumed within the GST. This Commission therefore recognised the GST. The model detailed the operational issues need to holistcalfy examine all the issues relating which needed to be addressed, including the to the implementation of Gat number of rates, the exemptions and exclusiOns from GST, as 5.2. The firstphase of reform of indirecttmation well as the treatment of intemstate occurred when the Modified Value Added Tax mansactions. The roadm. ap outlined the legal and administrative steps which needed to b y as introduced for selected e commodities at the central level in rug6, and than order to comply with the April 2010 time line. The gradually extended to all commodities through Government of Indils response to this document Central Value Added Tax (CENTAT.). The formed the basis of the second round of discussions introduction and integration of service tax into and reviews. This culminated in the release of the CENTAT deepened this effort. Reform at the state 'First Discussion Paper on Goods and &mice Tax level occurredthrough introduction of ValueAdded in India' in November zoom This discussion roper provides details of the taxes to TaxMeNdaloyall the states in the countryin aphesed be subsumed,me while manner between April root and January 2008. at the same time, outlining the modalities of Buoyed by the success of VAT, and mindful of the implementation of the tax. It also makes need for further improvement the Government of reeconmendariOns on a number of building blocks of the CST, including taxation of inter-state trade, -61A-r

~~Tririnenth Fuguece antimonies~~

provision of Cnn-pcnsatinn.treatm cot of area based Views of Slate Governments schemes and the additional steps required to be taken. It however, does not provide any guidance views on the structure of GET as well as its on the Revenue Neutral Rates (RAR) which need implementation modalities to the Commission to be adopted at the central and state level. This during nos state visits. Nine State Governments discussion paper is expected to spark a public gave their views in their respective memoranda and debate, leading to posaiHe modification of the some expressed their views through letters to die design and implementation modalities of the GET. Commission. While all the itatesbroadlysupported 59 Commendable progress has been made over the introduction of GST the major concerns the past three years in generating a national expressed by them are detailed hereunder. consensus on CST. Agreement on the broad framework of this Lax has now been reached. GET Governments pointed to the importance of will be a dual tax, with both central and state CET accurately assessing the tax base that would be som ponents levied on the same tax base. All goods available to them under GET They noted that isith and services, excluding the agreed upon regard to service tax figures presently available exemptions. will be brought into this base. No were those pertaining to the point of collection, distinction between goods and services will he rather than to the point of incidence. Ns oThe rules made, with a common legialafion applying to both. of supply for senices have not yet been finalised . However, a number of issuesremaintobe resolved. States viblch presently have a high tax effort These need to be addressed carefully. Only if a apprehended that the RNA finally agreed upon model GET is put in place, can all its potential would not be Subduable to them. Manufacturing benefitsbe fully exploited. Given the large positive states would suffer additionally due to the abolition economic and fiscal externalities of the GET of CST. They suggested that the CST rates should, reform. puttingin place an incentive structure to therefore, be used as a floor rate. motivate all stakeholde rs to design and implement such a model GST was, therefore, a prime concern 5,6 Low income states argued that as their of the Commission. A number of State consumption base was low, and they had increased Governments and industry associations their tax effort significantly after implementing communicated to the Commission their concerns VAT, there was little scope for them to increase their on the design and implementation of GET. To revenues under the proposed GET regime. adch co thethesem and other GET related issues 5.7 Reviles linthaUince:It was apprehended that including the andve in our Tab the GOMM iusion the GET could possibly accentuate the vertical sponsored three independent studies. One, imbalance in fax of the Centre through a undertaken by tile National Council for Applied proportionally larger Central Goods and Services Economic Research (NCAER) studied the impact Tax (COST) ate and access to a larger consumption an dGET on international trade.(TV The second was base. hitherto unavailable to the Centre. unertaken by a task force ) which examined 5.5 Store anionoeny: The CST requires a the whole gamut of GET-related issues. from commitment to a stable rate structure, This will design to implementation and made suitable compromise the fiscal autonomy of State recommendations. Both these studies have been Governments and deprive them of theonly lever ot published on the website of the Finance macrosecononiic policy available to them. Commission:We review below their main findings and recommendations after briefly highlighting 5.9 Single rare: A single GET tax rest would be the concerns expressed by the State Governments. regressiie, with the tax levied on items of cornmon

~~Cop my.) t of thc th d =May ual at...”-erl at III,. time n~~

64 Chapter s Goods and Se consumption increasing, while providing needless 5 x9. The CST Act should be abrogated such that relief to the higher taxed luxury goods. the Pminion for notifying declared goods is not mailable to the Centre 5.10 Cwnpensa Orin mechanism: Some states recently having a high tax effort noted the possibtlipt ot suffering losses upon implementation should be finalised expeditiously, in an objective of MST. They reqmsted that an objective manner. Fat Menthe modalities forlevying GST on compensation mechanism to support suchlossesbe imports, textiles and sugar should be agreed upon. also in place. Compensation on loss of CST should the Central Government also be pat t of this package. Views of 5.21. During our consultations with the Central 5.11 Smell enterprises: Small enterprises Government, they expressed concerns about the ma nufa Laing specified goods with an annual turnover of less that. Rs. 5 crore are presently following issues: exempt from excise. The GST will bring them into i) The recommendation in the Discussion the tax net, rendering them uncompetitive and Paper that GoI maintain the CGS11 threshold enhancing their compliance cost. at Rs. 1.520 while the State Goods and Secesni Tax (SCSI) composition threshold 5.12 Cesses and surchargos . All ecsses and world he Rs. 40 lakh. swoharges levied lay both the Centre and the states should be subsumed into the CST. ii) The importance of agreeing upon a uniform and limited list of exempted items for the 5.13 Taxes to be Excluded from GST: Electricity duties; purchase tax; and taxes on crude oil, motor Centre and for all the states. spirit (MS), high spout Mosel (MSD), alcohol and iii) The criticality of promoting the power sector tobacco should be excluded from the per and the importance of subsuming electricity of GST duty into UST.

5.14 Compliance mechanism . The GST law iv) The need to subsume purchase Lai into GST should be subject to rigorous compliance and to ensure that 11. remains a C01151.1Mption- deviations should not be permitted. Changes should based to and is not exported across tax be made only with the consem of all the states. jurisdictions

Selectwe rollout: States should be given the 5.15 Impact of CST on Foreign Trade option to adopt GST at their convenience and the possibility of implementation of (LAT in only some 5.22. A NCAER study, commissioned by us, states should he incorporated in the design. evaluates the possible impact of GST on India's international trade in a Computable General 5.16 Dispute Re soh) nom An independent dispute Equilibrium (CGE) framework. It notes that the resolution mechanism should be put in Place. differential multiple tax regimes across sectors of 5.1- imp Amont ado?, modalities: All tax returns, production are leading to distortions in the assessment and audit procedures should be allocation of resources as well as production Inefficiens. Complete offsets of taxes are not information technology (IT) based inMasnnetui e being provided to exports, thus affecting their should ho put in place to back inter-state taper s. It es timatcres that implemntatione transab ions of a comprehensive GCSEa oss goods and secures s.iS Adecuate prepa-alion for the changeover, will enhance the nation's GIOSS Don estE2 Pia duct rather Lnall ear arblhaiy fixed schedule should be (COP) by between () 9 and t.^ pet cent This works the sole criterion tor deciding the Inning for 2009-10. Such Intl eduction of Mail crore on the basis of GDP figures for 55 EA-6a-

hene9t5 would ammo. every year. It would also bad Sp erthaally, stamp duty, taxes on vehicles, to efficient allocation of the factors of production, tuxes on goods andpassengers and taxes and with a fall in the overall prke level. The report duties on electe o ty should besubsumed m to identifies a number of sectors which would directly the GST benefit from the implementation of GST Th e study di) Transmission fuels, High Speed Diesel estimates the gain in exports to vary between 3.2 (MUD). Motor Spirit (MS) and Aviation and 6.3 per cent Imports are emmeted to gain Turaine Fuel (ATF)shouldbe brought under between 24 pet end e..9 per cant, Mar a dual levy, of GST and an additional levy, improving the trade balamxe. with no input tax credit available on the 573. The study estimates the revenue-neutral additional levy. This would protect the GST rate across goods and services to he between existing revenues from these sources. 0.2 and 9.2 per cent, depending upon the However, all other petroleum products assumptions made. This value was conservatively should be brought within the ambit of the arrived at, ignoring the existence of tax thresholds GST, as should natural gas. and composition limits. The study assumes that iv) The sumptuacygoods of tobacco and alcohol the GSTadopted will be a truly consumption based should be taxed through GST as well as an tax which will: (0 eliminate all origin based taxes; adddionallevy, with no input tax credit being (ii) subsonic all the other presently levied indirect provided on the additonal levy. taxes on goods and suffices. (excluding customs) and (iii) will not be exported across tax 5) The entire transportation sector should be jurisdictions. To exploit the benefits of GST fully, included in the GST base, and taxes on we also need to ensure that ax compliance costs vehicles, goods and passengers should be are low and tax credits are available seamlessly subsumedintothe057 Simnaftr, the po wee across tax jurisdictions. Apart from uniform taX sector should be included in the tax base and rates, this will also require harmonisation of electricity dub, subsumed. procedures for levy, assessment. appropriation ve) The real estate sector (both residendal and and even @Licht, beLween the states and the Centre, connuercial) should be included in the tax as well as amongst the states themselves. This is base and stamp duty levied by State hes: done through a model CST, the characteristics Governmallts should be subsumed into GST. of which are outlined in Para 5.25. A threshold of Rs. an leldi in this regard will permit exemption of small residential and Report of the Fe. -XIII Task Fiume business proper es. 5.24. The task force, appointed by this vii) The entire financialservices sector sho old be Commission, eon] prehens ively analyzed all Cwqr brought under the MST tax base. related issues and madea number of reconneemlations. The Task Force Report is viii)Capdal goods should be treated like all other available on the Commission's website. The key goods and services, whh no restrictions on points are summarised below: awailment of input tax creditat purchase, and a corresponding liability for GST on Follouing the present VAT, the GST should subsequent sale . be lexied on consumption andcomputed on thebasis of the invoice credit method . ix) No exemptions ehoold be allowed, except for a comon list applicable to all statesas well ii) All major indirect taxes (excluding customs) as the Centre, which should only compnse and all cusses and surcharges should be (a) unprocessed food [terns: (b) public subsumed into the central and state GST services provided by all governments

~~66 Thirteenth Finance Cornmission~~

Dug. The SGST portion would subsume the desirable that these limits be applied to COST as following taxes; well. Sales of goods of local importance Dill fall within these threshold limits. thus keeping them out 0 Value Added Tax of the ambit of GST. ii) Central Sales Tax d.fir Dealers with turnover below Rs t.s crorc di) Entry Tax, whether in lieu of octroi or were previously exempt from OCNVAT. .As otherwise thresholds need to be consistent across SGST and iv) Luxury Tax COST, such edemptio as should no continue.11nder the OST regime, dealers with turnovers between Rs. v) Taxes on lottery, betting and gambling nu lakh and Rs. 40 laith will have to payboth COST vi) Entertainment Tax and 5051. Their compliance burden will increase . vid Purchase Tax This issue can be addrased if both COST and SGST DifiState Excise Duties are lobed and collected from such dealers by a single agency, Viz. the State Government, which would ix) Stamp Duty then remit the CGST portion to the Central x) Taxes on vehicles Government. State Govemment will he responsible xi) Tax on goods and passengers for assessment. levy, collection and audit, with Central Government retaining it right to exercise ail) Taxes and duties on electricity these functionsin respect of COST inspecific eases xiii)All state cess es and surcharges State Governments could he reimbursed the collection charges for this effort. Wherever the Special itiVOISiOnS foe- Cern.n Conde additional lefivis likely to came hardsh ip. a scheme 5.08 The taxation of petroleum products and for reimbursement to economically vulnerable natural gas would be rationalised by including them dealers could he considered by the government. in the tax base. HSD, MS, andATII could be charged 5.3e The present area-based exemption schemes GST and an additional levy byboth the Central and arc Rot consistent across the states where they are State Governments. No input credit would he applicable. They differ in the admissibility of available against either COST or SGST on the CEXVAT credit as well as the sunset clause. Since additional lets. A similar treatment would be it would be difficult to subsume these schemes into provided to alcohol and tobacco. Such an the CST struence, it is recommended that they be arrangement would ensure protection of existing terminated. The existing schemes should not be revenues while taking care of environmental grandfathered Alternative options like refunding taxes paid by industries in these locadans could be considered Edemidi in as 5E9 No exemptions should be allowed other than Toidmard a cornm on list applicable to all states as well as the 533 All transactions across tax jurisdictions Centre, which should only comprise; 0) should be free from tax. While exports will beer unprocessed food items: (ii) public services rated, in estate transactions should be effectively p ro sided by an governments excluding railways, zero-rated so as In ensure that the tax is collected by communications and public sector enterprises and die consuming state consistent with the destination serfice transactions be[wee» an employer and pit] ciple. Therefore, any model adopted mast allow employee (iv) health and education servces. accuratedeterminationand efficient transfer of input 5.30 A threshold of Rs. to lalbt. add a composition tax credit across taxjurisdictionsFurther, the model limit of Re. 40 latch have been agreed upon by the should not impose any undue restrictions on tax FC for SGST in the first discuision draft. It is credit set-off or increase in comphance costs

~~68 Chapter .5: Goods and Sentes Tax~~

uniformlyiformly incentivise all Gates to partici pate inand contributetothe verification system needs to be put of supply' naps for send era need in place. Alternately, one central agency could be to be oteNlly flamed to ensure consistency and charged with maintaining this system. The existing credibWtmlt dmuld be based un international best TINA:SYS infrastructure should he updated and practice. strengthened . GST on imporis 6.35 Imports from outside the nanny would be Ruling Mechanism subject Lo GST nn the destination prineinl y This >33 An effective efficient and uniform system for will require that proof of consumption at a pre- _ edressal of anomalies in the legislation should be determined destination state should he provided. put in place. This could be an independentand quasi The procedure for collection and a pnropriadon of Judicial authority with full powers to look into all this tam needs to be put in place. Rules for disputes related Lo CST i rnplem entation, both at the transferring this tax burden in the case of importers Centre and. tate l ewl. Such an authority could issue who sell to a C011511111C1' in a third state after the timelines, administer and enforce agreement import is made, need to be clarified beaween states and the Centre, and between the tates Lheasselees. A common Advance Ruling Operational Modalities Authority for both the Centre and the statesshould 536 To reduce compliance costs and increase lso be put in place. collection efficiency, all state CST laws should be harmonised. All stages of the taxation chain, from Rqhozeis :evy of the tax to its assessment, collection and 39 Prompt refunds form the core of an effective appropriation, should be similar acrass states This CST framewaik, especially as crossAtilisation of would involve similar rules across states, dealing nput tax credit across CGST and SCSI, are not not only wither ssessments, audit and refunds, but nvisaged. Delayed payment of refunds enhances also with more basic isaues like registration, filing the cost of dealer operations and reduces the ofremrus, ohm of goods, etc. flicioney of the Lax velem. The experience with 5.37 While CST will be reduced to zero, the wfunds under the VAT re me is notot reassuring, necessity of stipulating documentation for inter- even though VAT laves in a number of states state trade needs to be carefully examined The mandate payment of interest for delay State model for taxing inter-state sales finally adopted Governments must adopt a more effective refund should provide clarity on the jurisdiction of states •ystem They could consider an electronic system while facilitating inter-state trade and stock where refunds are Nicely credited to the eligible transfers. Given the volume of such transactions, dealer's bank account. this system necessarily has to he IT-hased.Sueh Selene we Rollout IF naive Ws should enable the sharing of information between states system sl: theplugging of revenue 5.40 VAT was introduced in a phased manner by leakages. A syste to facilitate inter-state State Governments over a period of nearly three verification of dealers and transactions is also years, between April zoos andde:luny 2006 VAT ne corn Ther em sen t system, vi z. Tax Information dealt purely with the treatment of intra-state sales Fochange Sys e (TINXSYS), does not appear to and states were not explicitly disadvantaged if they be fully operational across all states There are did not implement VATfirransactionsbeween VAT asymmetric benefits to states in putting in place and non-VAT states did not warrant special such infrastructure and this appears to be affecting treatment However, OW changes the rules of the their incentives to do so. A system which will game. It requires inter-state trade to be eel° rated.

~~69 Thirteenth Fulance Commrssion~~

It empowers states by including senfices as well as i) The NCAER study computed the present the manufamming stage in their tax base. It thus value of GNP-reform induced gains in GDP creates an uneven balance betsveen states which as the present value of additional income implement osr and those which do not. Goods and stream based on the discount late of 3 per services sold between complying and non- cent representing the long-term real rate of complying states would thus require Lo be treated L The presenbet be of total gain in differenfiy In the wake of selective implementation GOP is estimated as between Rs. 1+69 Tall of GST. If csr were to continue to apply in non- erotic and Rs. 28.81 latch crore. The complying shates, inter-stme sales would become corresponding dollar alms are US $325 further complex. Goods passing through a non- billion and $632 Wilton. This represents complying state, to be finally sold in a complying between 25 and 2r) per cent of the 2.209-12 state, would be burdened by a cascading tax which GDP gainedthrough this raven'taa reform would adversely affect the price to the final The all-government tax revenue will also coosnmer The seamless flow of Input Tax Credit increase by about chfio per cent of GDP. a inter) on inter-state transactions would be significant increment to revenues through interrupted. Further, rate mismatches may Implementation of the model ORT encourage trade diversion and cost of compliance ii) The Task Rome report estimated that sucE would become extremely high for inter-state a GOT would have a tax base of around dealers This would discourage economies of scale. 31No ocio mote.lt further estimated that We, therefore, feel that the model GST should be this would require a revenue-neutral rate of implemented by all states and Lhe Centre at one only 12 per cent (5 per cent for the Central time, and not be partially implemented in some GST ands per ant for the State GST). This states. It is for this reason that we recommend that is a substantial decrease from the present proper preparation for the CST and generating of a 2o.5 per cent (8 per cent for =VAT and consensus amongst all states is a greater priority 12,5 per cent for VAT). This should be the then complihng fiith the solo deadline. However, as hasbeensuggested in somequarters,it is possible iii) Adoption of such a model CST would make for the Centre alone to transform fhe CENVAT into India a dynamic common market and also GST ihe manufacturing stage at any time. IL result in generation of positive extemahLies. could unify the CENVAT rates and impose a general Despite lower levels of taxes, the revenue of tax on all services, while adopting a common the Union and the states will be buoyant. threshold. As mentioned earlier i a dual tax on Sulasumation frail rnaior indirect axes will petroleum products, tobacco and alcohol could be result in removal of inefficient taxes. Our levied—a GST component and an additional levy manufactures will become more comfictiftve component with no input Credit being PIRMded on and consequently exports will grow- the latter. Provision ofseamless input tax credit acro as all transactions will amid tax cascading, eliminate double taxation and improve N. A r umbel of transitional issues will arise resource allocation. It will foster a common Plovisionsto address such issue. moat he consistent market across the county, reorient supply with the model (MG Mains and remove the present bias towards baclofiard integration. Further, it will also fifsimnio firma sop2ortif)5 Om modal CMG inhibit Lax inducM migration of investment. 5,42 This ( ommission suppotts the It will, thus, suppott the growth of lagging implementation of a model GST for the following reasons across all goods and services will eliminate Chapter 5' Goods end Services Tax

classification disputes and make tax fiscal headroom available. They can impose assessment mole predictable. The an additional levy on transmission fuels as harmomsaton of tax assessment, levy and well as sumptuary goods and the authority collectionprocedures across states proposed lest' temporary ceases and surcharges in under the fist blill reduce complia Ref costs, case of emergencies, remains. They can also limit evasion, enhance transparency and Continue to lent: user charges for services improve collection efficiency. provided to eitynns Expenditure policy will continue to remain as a powerful fiscal iv) Successful implementation of (ET also offers Mstrument. Further, the strengthening of the possibility of strengthening the revenue their fiscal base 'dll improve their access base of local bodies that form the third tier to capital markets, enhancing their of government. borrowing capacity. v.) The inclusion of real estate in the GST tax ii) The Lax base of State Covertunents will base trill constrain the parallel economywith significantly increase with the inclusion of consequent positive spillovers into governance and le development of land the tax on services as well as the tax on ma nutacture. The tax base of the Centre, on markets. Ibe uthe I hand. will increase only to the vi) The NCAER model suggests that GSM could extent of taxon sates. Thus, it cannot be said lead to better eirbronmental outcomes. that the vertical imbalance will increase in favour of the Centre. Concerns of State (Thvernrneu iii) States will benefit from the abolition of the 5.45 We address below the principal concerns of ceases and surcharges presentlybemg levied states relating to revenue from certain products, bythe Centre, as the size oldie divisible pool 'toss of autonomy in a GST framework, possibilities will rise Presently this amounts to about 15 of states catering CS-5 in a phased manner and per cent of the divisible pool. treatment of entail Thorp., inns. iv) Tax policy is Lax admimstratm n and RCvenRC from Certain Products signif ion nt scope exists for improving tax collection efficiency through 5.44 The model CST will accommodate the implementation of GST. concerns of governments with regard to maintenance of their revenues from transmission v) The GSM grant recommended by this fuels and sumptuary goods by allowing Commission compensates for the Seeinlitg the imposition of an additional leyy over and limitation in fiscal autonomy by enhancing above the GST. expenditure autonomy through compensation payments and additional Dilution of Fiscrd Autonomy of States formulaic transfers. 5-05 Concerns have been enpressed by some state vi) rhe CST will be a landmark effort by the governments that the GST regime will constrict states and the Union to further cotopertive their fiscal autonomy and further tilt the vertical federalism with all stakeholders contributing imbalance. Ilowever, this argument should be to national welfare by accepting its viewed in the following perspective: framework i) Whilethe states will normally not be able to Compensation Mechanism deviate from die nationally agreed model fur the CST. such constraints will apply to the 5.a6 An objective compensatim u echanism Centre as well Further, the states still have incorporated in the Grand Bargain weal provide

~~71 Thuteenth F enance Commission~~

eassurance to both the Central and State model GST. Keeping the experience of the GOvnMentser This has been pmposed in Pals 5.60. unplementation of VAT in mind, we suggest :hat the sig elements of the Onnd Bargain comprise. CO the Chetkposfis design plebe GST: (ii) its operational modalities:PUS binding agreement between Centre and states with Most states have put in place a system of .1.4- contingencies for change in rates and procedures; checlsposts ontheirborder mads.Thex area number (iv) disincentives for non compliance; (v) the ot reasons for putting In place such paysical barriers implementation schedule and (Li) the procedure for to trade.Phese includeOilenforcementof state excide, states to claim coins ® ion. The design of the market ceni, forest and vehiclefitness regulations 00 model (ST is suggested in pares 5.a5 to 5.35. Tao applicabilipt el lower taxes en inter-state trade than operational modalities air outlined in pares 5.36 to on insist-state trade (nil there being oo tax on stock 5.41. The proposed agreement between the Cenhe hansfers (iv) levy of entry tax on speTined goods (v) and states, with contingencies for changes in the leset of octal by some municipalities and (vi) internal security. The onset of GST vall not obiiate all these disincentives for non-ccmpliance are descbed in reasons, and therefine, check pubis on state borders pans 5.52. The implementation schedule is e recognised that may remain. However, it must' described in paras 5.57 to 5.57. The procedure for such checkposts. by the very nature of them claiming compensation is at Para 5.60. operations, generate enormous delays inroad traffic. The arrangement also encourages rent-seeking Binitaxg iagreemenf between Centre and behaour.lt may he &Insult to eliminate cheritposts, Stales given the valid concerns of State Governments. But what appears to be egregious is that the same vehicle 5.49 Coen plm ace of states with the previously has to pass through non chechonos-Meet sperting agreed upon guidelines for VAT has not been very state's oil ed:post and the Ire porting state's uniform. Anumher crIstates have deiiatedfrom the checkpost-while crossing one border. Roth these three-tier VAT rates, thus indlcatIng the need to put eheckpoats are often located within a couple of in place an enforcement mechanism. Prates are kilometres of each other and a transport vehicle has equally apprehensive that the Centre may to spend considerable time at botin Perhaps. it may unilaterally saiie tax rates without consulting them. he possible for both states le put up a combined The Constiabi on does not envisage sharing of tax checkpini Officials of both states could sit together bases. Taxation powers are listedeither in the Stem and conduce theirveil:ion-ions in a singlechockpost. List or i n tie Central hist, but not in the Concurrent Alternately. one state could handle baffle in one List For the first time since the Constitutionwas direction and the other state in the other direction. enacted, a tax base is Proposed to be shared between essentially ensuring that there would he only one the Centre and the states. it is. thus, necessary that check per boric for a goods vehicle Such an a firmarrangernc»t be pu I. in place for angement would significantly reduce travel time implementing the OS T To prevent deviations from and we recommend it for conspleraion. There is an the agreed upon model by either the Cenire or the overwhelming ere vale for minimising delays and states thus re during transaction rests. States could be 5.50 One option is the possibility of a encouraged to consider user-friendly options like Constitutional provision to facilitate a tax eleshbuically issu ed passes for transittraffic in order agreement between the CennT and the states on the to [educe truck transit time through their states. lines of the et stwhile Article 278. One suggestion 3

The Grand Bargain Notwithstanding anything in this Constitution the 548 We propose that both the Centre and the Government of a state may enter into an agree ststes conclude a Grand Rarealn to implement he with the government of any other state or the union

~~72 ThtnOCtIth Fin 0 77CC Commission~~

GPI compensation and Incentive provided the sysmm of this country initiated in 1986: with the model GST i implemented before 31.3.2013. introduction of the hIODVAT. All stakeholders Unspent grants at the end of a year will he carried stand to gain from a swift comprehensive forwa• to the next year if GST is implemented changeover to the GST. To tbe extent the switchover hefore 31.3.2013. If GST is implemented during is staggered, the potential gains from the 2243-14 the grant will he rest:toted to Rs am (zoo comprehensive GST outlined in Para 5.42 would more. If CST is implemented during 201445, the remain unrealised. Thenefore, we recommend that grant will be restricted to Rs 30,000 enure. all the elements of the model GST should be implemented comprehensively at one Stance. 5.56 To be eligible to draw dorm this grant, all the elements of the Grand Bat gain outlined in Para 548 will need to he adopted. If the GST framework elements of die model have not yet been formally adopted isnot consistent with this, then this discussed by the states and consensus needs to he Commission recommends that this grant of built before they are adopted. These are the Rs. 50,000 cross not be disbursed. Thus, if the inclusion of stamp duty in the GST tax base to Grand Bargain is not concluded, this grant will not enable the taxation of real estate and the use of a mean any net fiscal outgo. If a model GS: is single rate in the GST framework. More time may implemented and the grant is disbursed, then the be required for these elements La be included in the rimultant increase in GDP and tax revenuer Efully CST Ram moult. Given that the terminal year of the finance it. If the Grand Bargain is not put in place, then the giant lapses. There are, thus, no fiscal risks 15, we propose as follows. g round necessary, the Mal this grant— only advantages. CST maybe miYallyimplementedwithout thesetwo elements provided that Implementation schedule of the Model :I At the time of its implementation, the road GOT map for their inclusion in the framework 5.42 We recognise that building consensus on before yi December Rom is announced. Implementing the model GST may be an involved h) The GST is introduced with nut more than process but equally appreciate that the tearylrem cot of a good design is paramount and should not he subordinatedtoa deadline. Intemad onal experienca iii) Properties other than individually owned telk usenet flaws in design are extremely difficult to residential properties are brought into the corm:subsequentlyWe thereforerecommend that ambit of GST within two years eats marginal rescheduling of the timetable for implementation . implementation shou/d be acceptable if the design This contingency does not preclude the possibility adopted is consistent with die model CST. of the Centre implementing SST at an accelerated 558 Theobjectiveof the model CaSlis to optimise pace. tax collection with minima Ieconomic distortio»s. Modalities for Disbursing Compensation The Model CST should, inter alga, comprise of (i) a on ileum rate for goods and senices (ii) a uniform 560 As mentioned in Para 5.1o, states had rate across states (iii) a zero rate for exports and requested that an objective compensation (iv) for all other goods and services a single late, mechanism to supportpossible revenue losses after excluding the rate for precious m etals. There could implementing GST be put in place. We recommend be two possible approaches to the implementation the following of the Model GST: the Mig-bang approach and the i. The present Empowered Committee be 'incremental' approach. The introduction of the GST transformed into a statutory Council of is the last mile in the reform of the indirect tax Finoncc Minis Ler] with representation from

~~74 Thirteenth Finance Commission~~

122.50,000 cure which will taper down to Its.40,000 564 The model, the modalities as well as the core and Rs. 20,000 Dore if GET is implemented timing of implementation of the GET have not yet been Climbs ed. Me king projections over a five-year after 1.4-2015 and would be used for meeting thecompensationclams period, assuming twou mplemeationld of the GET of State Governments fur revenue losses on account during this peliod, wo, be hazardous exercise. of GET implemented, consistent with the Grand This CommisPon has, thus, tor the puipose of our Bargain, between awo-11 and 2014-15. Unspent financial projections, assumed that the impact of GET will be revenue-neutral and that the gross balances in this pool would be distributed on 1 January 2015 amongst all the states as per the revennee of theCentre and states w.II no tbe lower than those projected even after GET is devolution formula (panes 554 and 5 554 implemented. 5.67 The EC should be given formal authority. The compensation should be disbursed in quarterly Summary of instalments on the basis of the recommendatiOns Recommendations by a three-member CompensetiOn Committee 5.63 Both the Centre and the states should comprising of the Secret/ay, Department of conclude a Grand Bargain to implement the model Revenue, Government of India; Secretaryto the BC GET. The Grand Bargain comprises five elements: and chaiceel by an eminent person PR experience (:)the design GRID modeIGST is suggested in paras in public finance to be appointed by the Central 5.25 to 395; 69 the operational modalities are Government (Para 5601. In pacts 5.26 to 5.41; the proposed outlined 68 In the unlikely event that a consensus to agreement between the Centre and states with implement all the elements of the Grand Bargain contingencies for changes is at caras 549 Lo 5 51; cannot be achieved and the GET mechanism finally (iv) the disincentives for non-compliance are adopted is different from the model GET suggested described in par as 5.52 (v) the implementation by us, this grant Rs. 50, coo pore shall not be schedule is described in papas 5 57 to 5.59 ein) the procedure for claimingcompensationisat Para 5.60 disbursed. (Para 562). gars 5.48)- 5.69 States should lake steps to reduce the transit by 566 Any GET model adopted must be consistent time of cargo vehicles crossing its bcrdel s combining ebeckposts with adjoining states and with all the elements of the Grand 'Bargain. To adopting user friendly options like electronically incentivise implemn of the Grand Bargainthis issued passes for transit traffic (Para 5.42). Conunksion recommends the sanction of a grant of 63 9

~~Chaptur 5. Goods and Services Tax~~

the Centre and states. A GST Compcnrafion 5.62 We recognise that the process of generating Fund should be created under the a consensus to implement the Grand Bargain as administrative control of this Council ou Liked by us may be difficult and involved. However, we believe that such a consensus can, and TheCentral Government shell transfer to the should be, generated to fully cnIdoit the potential GST Compensation Fund amounts as of GST and reap the benefits of its positive indicated in Table 5e and subject to the externalities. While we would like to support this conditionalities indicated in pares 5.55 model CST, which is fully consumption based, has provision for scentless credit and imposes low hi. The amounts in the Fund should be used for compliance cost, we must allow for the possibility compensating states for any revenue loss on that political economy considerations may will account of adoption of the model !USD and otherwise. In the unlikely event that such a the Grand Bargain as indicated above. The consensus cannot be achieved and the GST balancedt any, renaming on a Jannaly 1015, framework finally adopted is different from the will be disn ibuted amongst the states on the Grand Bargain suggested by us. bask of the devolution formula indicated in this Commission recommends that the grant Chapters of our 'ppm L.used for distributing amount of Rs. 5o,ono more shall not be disbursed. resources in the divisible pool amongst states. Impact of GST on Projections made by the Finance Commission The amount will be disbursed in quarterly instalments on the basis of the 5.63 Though CST requires that all ceases and recommendations made by a three-member surcharges be abolished, and this Commission recommends that GST be implemented as early as Compensation Committee comprising of the Secretary, Department of Revenue, possible. we have, in our projections, assumed Government of IndD; Secretary to the EC continuing revenue fur the Central Government from ceases for the period 2010-15. This has been and chaired by Cr. eminent person with done for the following reasons. experience in public finance. This person would be appointed by the Union fgnoring the positive enternalides of CST. the Government. Commission has conservatively assumed that 051 will be revenue-neutral.'hus, income The Way Forward from ceases and stuchatnes will he included 6.6r A number of legal and administrative steps in We compu Lliti011 of Rd7R. In the scenario need to be taken prior to No implementation of when GST is implemented, the aggregate GST. These include stakeholder consultations, revenue figures in ourprojeetions will remain amendments to the Constitution and state taws, unchanged. though the accounting heads administrative reorganisaboD preparation of GST under which they are reported may change. Since the catalysing effect of GST on the registration, assessment and audit manuals, staff economy has not been factored in our training and conduct of awareness campaigns projections.they can be seen as consewative. amongst stakchold US. We 2VC not touched upon these milestones in our discussion, but arc aware t. An umber of critical sectom including roads, Nat these processes may take substantial time. This edmatimmn, and calamity relief, are being is also a reason why we Itave earlier recommended funded from the proceeds of ceases levied by that the putting in place an excellent design and the Government of India Theransifi ton plan operational fl:IITIcavork for the GST should be given to the GST must ensure tha t budget priority, even if this implies rescheduling the provisions are made to support such previously announced implementation timetable. initiative&

75 Chapter .5: Goods and Service government with respect to the levy and collection implementation modalities does not include some of any tax or duty leviable by them, and dining the of the maim clement, of the model GST outlined period such agreement ism fame, the power of sueh above. In our vieon. any major deliation from the states andsnion as the case may be to make laws concept of the model CST would dilute its positive to impose any Lax shall he subject to the terms of etterna Tien, significantly reduce its benefits and such agreement: It has been argued that such a reduce the incentivetoswitchovenFor the reasons poohsiOn will eliminate the need to amend the fusing powers entrusted to the Union and the states urges that any CST model adopted be consistent through Schedule VII of the Constitution. with the Grand Bacain deactled in Para 5.45. To incentivise implementation ot sucha Grand Bargain 5.51 Such an agreement (between the 28 states between the states andthe Centre, this Commission and the Centre is narfi)could specify the tax rates recommends the sanction of a grant of Rs. ;coon adopted as wen as the conditions under which the crore to be provided to an states in the aggregate, agreed tax rates can be changed.The agreement can subject to the CST framework adopted being be made pint of Goods and Senice Tax laws which consistent with the Grand Bargain. We recognise the Center and all the states tern separately enact. that whileCST on theThole will be revenne neutral, The agreement will, amongst other things, specify there may be some v..inners and losers during the the rates to he adopted in these enactments and The initial years of jinni ernentation. This giant will implementation schedule. For amending Setiset accommodate claims for compensation from the subsequently, it is proposed that atetates would adversely affected states and balance will be need to agree to a prep coal to decrease rates. Only distributed amongst states at per the devolution throe quarters of the number states would need formula. to agreeif the rates have to be increased.The Centre would have a veto pow es AE amendments to the 5.54 The grant of Rs in,00n crave would be used agreement should he consistenntith (i) maintaining for meeting the compensation claims of State the integrity of the UST base; OD Providing for Governmenra between xis - and administrative simplicity and (el minimising Unspent balances in this pool would be dish ibuted compliance costs tor taxpayers The agreement will amongst all the states as per the devolution need tube monitoredby the Empowered Committee formula, on t To allow for the which could be transformed after the possibility of implementation of CST doling 2010- implementation of GST into a Council of Fin anCe IT we propose that the grant be initially allocated Ministers wail, statotone backing. as given in Table 21

Ilitinnentiyass for Non Compliance Table 5.2- Scheduling of CST Grant 5.52 Keeping in mind theexperience under VAT Rs ipoo nine it may become necessary to deter violations of agreement by visiting a penaltls On la omnamplYing Rs Imo) crore rower ecommend that Finance Commission's 2 D13-14 Rs n250 cora state specific grants and the state's share of Gne CST 20H-15 incentive grant be withheld for the period durin, which a stale is in violation of the agreemenLate .55 We see this allocation as substantial for two state is in violation for only part of a year, its grant reasons. First. the Task Force estimation of MGT should be reduced to a proportionate extent provides assurance that such a level of coin pens atiun may not be required. Second, the Compensa ti on/In centive Grants amount of compenSafion required inildependupon 5.53 1TL Cimimission is aware that the tenor or the year in which OST is implemented. The total the ongoing discussions on the CST model and :mount of Rs scoop more may be earmarked for

~~73 -636-~~

~~Chapter 5 Goads a nd Servirec Tax~~

excluding railways, communications, public Table 5.1: Estimates of the Tax Base of .G.S1' by sector enterprises; (c) service transactions Diffm.ent Approaches between an employer and emphyee and (d) lidaith and education services (Rs. noire) 1. Subtraction Method x) 'Flora OF supply' wilesfor goods and services a. Consumption Method should he based on international best 37,43.037 p] 'a etice, and be carefully framed to ensure b. NCAKR Meths/ consistency. credibility and relevance 3. Shame Index Meth, id a. Ramona Method xi) An exemption threshold of Irs.10 latch should Average be adopted, with a composition limit of Rs. do lakh, above which GRIE would be and 6 per cent for SGS7). MK excludes the mends torily applicable. The present excise ad ditional Lehes whichwouldbeimposedon exemption upto Rs. 15 crore should be petroleum and sumptuaity goods. The task withdrawn However, in the case of certain force has recommended that all goods and high value goods comprising: fit gold, silver services should he subject to Lax at the single a iidplatinum ornam entS; Precious hones positive CST rate of 12 per cent (that is, 5 and (iii) bullion the dealers may, subject to per cent for COST andy per cent for ROST) the threshold limit of Rs. jo PIM but without other than exports. the ceiling of Rs. 40 lalch, also he allowed to opt for the composition scheme. The Model OSI Area-based exemptions should be Outline of the Model GIST withdrawn and the tax paid reimbursed wherever considered necessary. 5.25. Keeping in mind the recommendations of the task force, we outline the design and modalities Mir/Inter-state transactions should he treated of anumel GSLIL law. Such a model CST would not through a mechanism which permits tel distinguish between goods and services. IL should iI one state to charge RUST from buyers in be levied at a single positive rate on all goods and another state. The seller shall furnish the services Exports should be zero-rated. Tax tra inaction related information and compliance costs should he low and tax credits composite payniert of tax in respect of both should he available seamlessly across tax intra and inter state transactions. to nodal Jurisdictions. The other design and operational bank.ThisSGSTshould then be immediately moda Li rice of a model GST are outlined below. credited to the consuming state by the hank where such payment is made. huies to be .Subsennect

Tic) harmonisation shade] he ensured in 5.26 For the (1ST to be purely consumption based, registration, :eta m filing, assessment, and all related indirect taxes and cesses should be audit across states subsumed into it. Thus. the Central GST coition won id subsume the following taxes: ire) 'rue 057 tax base has been estimated at R5.31,25,525 crore.ntis is the average of fire I) Central excise duhr and additional excise different as timations of th e tax base obtained duties byfollowing as many approaches. These a; Service Fax estimates are given in Table 5 L. iI) Additional Customs t) (Countervailing mii)The consequent Revenue-Neutral Rate Duet ) works out to n per cent (5 percent for COST iv) Al! surcharges and ceases

~~67 .%)~~

Thu teenth Finn ice Corr 515510c desirable that these limits be applied to COST as e 549 The SGST portion would subsume th well. Sales of goods of local importance will fall following taxes: within th ese threshold limits,Shus keeping them out i) Value Added Tax of the ambit of GST uj Central Sales Tax 5-31 Dealers with turnover below As n5 Gore lieu of aches o exempt from CENVET. As iii) Entry Taw whethe r were previously need to be consistent across SGST and otherwise COST such exemptions should not continue. Crider he) Mesury '(Si the GST regime, dealers with tmrnovers hoEseenlis v) Taxes on lottery, betting and gambling so lakh and as. 40 1MMwillhave to pay both COST and SGST. Their compliance burden will increase. ail Entertaiument Tax This issue canbe addressed itboth CGST and SUET vii) Perchase Twx arelevied a d collected fro m suchMaimsby a single which would viii)State Excise Dories agency, viz nLhe State Government, then remit Me COST portion to the Central ix) Stamp Cary Government State Government will be responsible x) Taxes on vehicles xi) Tax on goods and passengers Central Government retaining it right to exercise rsedases. sii) Taxes and duties on eleetncite these functions in respect of COSTr eimbu e the State Governments could he xiii)All state ceases and surcharges collection charges for this effort. Wherever the additional levy islikelyto cause hardship, a scheme Mr reimbursement to economically vulnerable 5.56 The taxation of petroleum products and dealers could be considered by the government. natural gas scout d be raEon alised includiug them in the tasbase.IMD,M$, andATE eouldbe charged 5,32 The present area-based exemption schemes GST and an additional lem.by both the Central and are no L conastent across the states where they are applicable. They Mffer in the admissibility of State Governments. No input credit would be ince available against either SGST oa SGST on the CENVET credit as well as the sunset clause. S en additional le,y A similar treatment would be it would be difficult -to subsume theses that they be rovided to alcohol and tobacco. Such an th e GEST structure, it is recommended p terminated The existing schemes should nor he arrangement would ensure protection of existing revenues while taking care of environmental grandfathered. Alternative options Eke refunding tams paid by indusnies lm theselocations couldbe considered Imeni p' ions prinerr-strite Sa esemptions should be allowedother than TrP1111)7(VII 529 a commonlist applicable to allstates well as the 5.33 All transactions across tax jurisdictions Centre, mach shouid only comprise b) should be free from Mt. While exports %MI be zero unprocessed food Gems, ED Publle semfees rated, inter-state transactions should be effeetvely pervaded by all governments excluding railways, ZeTo-rated so as to ensilre that the tax Is collected by communications and publc sector enterpdses and the consuming state consistent with the desfinaaon principle Therefore, any model adopted must allow (II] swarm transaction= between an employer and emplasee 0.Ghealth and eaucation services accurate determination sod efficienttransfer of input credit across tax]dirisdi cthom- Further,the model pobs:stido es. LAX 590 A threshold of Rs ro ' agnrededa soo.pmon should not impose any undue restrictions on Lax Imul of Rs 40 lakh have been a credit set-off or increase in compliance casts. EC for aGEI in the first discussion daft It is

~~GE -.39~~

~~Chapter S. Goods and Services av~~

Event:erten IIt uniformly incentivise all states to participate in and 5.35 The 'place of supply rules for services need contribute to the verification system needs to be put to be carefully framed to ens re consistency and in place. Alternately, one central agency Could be credibility. It should be based on inter national best charged with maintaining this system. The existing ctice. TlffiffaSYS in should be updated and strengthened. Agac /i■IpOrIS Dispute Resolution ail Advance 5.35 Imports from outside the county would be Ruling Mechanism Aubject to @ST on the destination principle. This will require that proof of consumption at a pia- 5.38 An effective, efficient and uniform system for determtoed destination state should be prortded. redressal of anomalies in the legislation should he The procedure for collection and appropriation of puffin place. Tbis could be an independent and quasi this tax needs to be put in place. Rules for judicial autbed Ay with full powers to look into all transferring this toiburclen in the case of importers disputes related to CST implementation, both at the who sell to a consumer in a third state after the Centreandstatele-LetSu& an authorityconld issue import is made, need to be clarified. guidelines, administer and enforce agreement beffivcen states and the Centre, and between the Opera tit mai Modalities states themselves. A common Advance Ruling Anthodty for both the Centre and the states should 5.36 To reduce compliance costs and increase also he put in place collection efficiency all state CST l aws should be harmonised. All stages of the taxation chain, from ftelemet levy of the tax to its assessment, collection and appropriation. should be similar across states. This 5.99 Prompt refunds form the tore of an effective weak] involve similar rules across state= dealin CST framework, espenally as cross utilisation of n• t only with assessments, audit and refinids, but across COST and SCSI; are not also adds more basic issues likc registration, riling erleteegel Delayed payment of refunds enhances of returnsyreatment of ti ansportation &Roods, etc. the cost of dealer operations and reduces the efficiency of We tax system. The experience with 5.37 While CST will be reduced to zero, the refunds under the VAT regime is not reassuring, necessity of sfipuftting documentation for inter- even though VAT laws in a number of states state trade needs to be carefully examined. The mandate payment of interest for delay. State model for taxing inter-state sales finally adopted Goa ernments must adopt a more effective refund shoald provide claRly on the tuns don of stoc k system. tr ey could consider an electronic system whiff facilitating inter-state trade and stock where refunds are directly di-edited to the eligible transfers Given the volume of such transactions. dealer's bank account this saiffem necessarily has to he IT-based Such an IT network should enahle thesharing of information *Input Rollout betweenstatesand assist in theplugging of revenue 5.40 VAT was introduced in a phased ma nnei by leakages. A system to facilitate inter-state State Governments over a period of nearly three wrification of dealers and transactions is also ys, between April eon 3 and danuao, wog VAT The plysent system, via. Tax Information dealt purely affig the treatment of int/a-state sales Exchange System (TINXSYS), does not appear ,co and states were not explicitly disadvantaged if they he to ily op era tional across all statew There are didnot implement VAT TransactionsbetweenVAC asymmetric benefits to states in putting in place and non-VAT states did not %reliant special such infrastructme and this appears to be affecting treatment However, (War chnages the rules of the game. It requires imei -state trade to be zero rated .

69 Commisszon Thi rteent i. Frionce i) The :POWER study computed the present It empowers states by including senices as well as value of GST-reforsn induced gains in GDP Che manufacturing stage in their tax base It thus as the present value of additional incense creates an uneven balance between states which stream based on the discount rate of 3 pet imuletmen GST and those which do nat.Goods and cent representing the long-term real rate of services sold between complying and non- interest. The present value of total gain in complying mates would thus require to be treated GIP' estimated as between KT wfifi lake differently in she wake or selective implesnentation crore and Rs. 28.81 lakh crore. The of GST. If CST ware to continue to apply in non- responding dollar values are OS $325 complying states. inter-state sales would become billion and $637 billion. This represents farther complex. Goods passing through a non- between 25 and so percent of the coos-ro complying state. to be finally sold in a Complying GDP gained through this major tax reform. whim state, would be burdened by aascacascading taxt The all-government tax revenue will also would adverse'y affect the price to the final increase by about 0.20 per cent of GDP, a consumer. The seamless Clow of Input Tax Credit sSgnificant increment to revenues through (ITC) on inter-slate transactions would be implementation of the model GST interrupted. Further, rare mismatches may ii) The Task Force report estimated that such encourage trade diversion and Cosi of compliance a GST would have a tax base of around would become extremely high for inter-state ale Rs. siocrono pore.It further estimated that dealers. This would discourage economies of sc this would require a revenue-neutral rate of We. therefore, feel that the model GST should be only 12 per cent (5 per cent for the Central implemented by all states and the Centre at one GST aud 7 per cent for the Slate PIT). This time, and not be partially implemented in some is a substantial decrease from the present states It is for ME reason that we recommend that 20.5 per Cent (FS per cent for CENVAT and proper preparation for the (CST and generating of a 12.5 per cent for VAT). This should be the consensus amongst all states Ss a greater prSrairy than complying with the um to deadline. However, target. as barkeep suggested in some quarters,it is possible AdOptlOn of such a model GST would maim for theCentre alone to transform the CCINWAT into India a dynamic common market and also facturisir mare at any time. It It in eneration of positive externalities eoof could uniirtbeCENVAT rates and impose a genera] Despite lower levels of taxes, the tax on all services, while adopting a common the Union and the states will he buoyank threshold. As mentioned earlier, a dual tax on Subsumation of all major indirect taxes rrib. petroleum productk tobacco and alcohol could be result in removal of inefficient taxes. Our levied—a GS: component and an additional lev) manufactures %MTh acme morecompetitive component rvith no input credit being prov merl on and consequently exports will grow. PrOvisiOn of seamless lnput tam credit across the latter. all transactions will avoid tax cascading, eliminate double taxation and improve Tirscribm, I's imusin, resolute allocation. It llfOster a Mmalon P 41 k number of tunsmonabssues will ense market across the country, reorient supply PrOmnlOnntoaddress soon IssuES most be consistent chains and remove the present bias towards with Me model GST backward integration. Further, St will also inhibit tax indoced migration of investment. genetic, Dons Suppriritng the Model OS' It MS, thus, support the growth of luggSem gnu This Commission sopports the but resource-rich regions A single rate nnplementatson of a model GST for the follorung across all goods and services rvill eliminate reaacms

~~70 --640 --~~

~~Chapter • Goods and Services sax~~

classification disputes and make to fiscal headroom available They can impose assessment more predictable. The an additional lehy on transmiesion filet as harmonisation of at assessment, leGv and well as sumptuary goods and the authority collection procedures across slates proposed to levy temporary ceases and surcharges in under the CYST v411 reduce compliance costs, case of emergencies, remains. They can also limit evasion, enhance transparency and continue to levy user charges for services improve collection efficiency. provided to citizens. Expenditere policy will iv) Succe.esfu) impleinenta lion of GST also offers continue to remain as a powerful fiscal the possibility of strigthening the revenue instrument. Further, the strengthen log of base of local holes that form the third tier their fiscal base cdl improve their access of government. to capital marIcets, enhancing their Lamming capacity. v) The inclusion of real estate in the GST tax basewillconstraintheparallel economyttith ii) The tax base of State Governments will consequent positive spillovers into significantly increase with the inclusion of governance and the development of land the tax on services as well as Ito tax on markets. rnanufactare. The tax base of the Centre, on the other hand, will increase only Lo the vi) The NCAER model suggests that GST coihd extent of tax onsalesTines, it canna t he said lead to better envfionm mita' outcomes that the vertical imbalance will increase in Concerns of State Governments iii) States will benefit trom the abolition of the Gates relating to revenue from certain products, cesses and surcharges presently being levied loss of autonomy in a CST framework, possibilities bythe Centre, as the size of the divisible pool of slates entering GST in a phased manner and ell] rise. Presently this am to about is tenement of small enterprises. per cent of the divisible pool. iv) Tax policy is tax administration, and Revenue from Certain Prodtletn significant scope exists fur Improving 544 The model GST will accommodate the tax collection efficiency through concerns of governments with regard to implementation of GST. maJntenance their revenues from transmission v) The CST grant recommended by this fuels and sumptuary goods by allowing Commission compensates for the seeming the imposition of an additional IAA' over and limitation in fiscal autonomy by enhancing above the GS7. expenditure autonomy through Compensation payments and additional Dilution at Fiscal .1 tau earay of States formulaic transfers.

vi) The GST till be a landmark effort by the governtnents that the CST regime will constrict states and the Union to further co-lapel-live thew fiscal autonomy and further tilt the vertical federalismhitt allstakeholders contibuting unbalance. However, this argument should be to national welfare by accepting its dev.wd in the following Perspective: train ework. i) While the states Mil normally not he able to deviatefromthenationallyagreed model for the GST, such constraints will apply to the 544 An objective compensation mechanism Centre as well. Futter, the states still have incoiTolated in the Grand Ra rga in' will pro tide

~~71 Tie emeriti? Fin trace Corns? SSTs~~

model CST. Keeping the experience of the reassurance to both the Central and State implementation of VAT in mind, we suggest that the GOVefliMelltS.This has been proposed in Para 5.60. x elements of the Grand Bargain comprise: (0 the design of the CST; Cd) its operational modalitiesfiiii) Cbc clap outs binding agreement between Centre and states. with 547 Most states have put in place a system of contingencies for change in rates and procedures; cheat-postsonthenborder thads.There are a norther Kith disincentives for non. co rem Ii a n (v) the of reasons for putting inplacesall physical barriers implementation schedule and (su) the procedure for trade.Thesei ncude l (0 enormentf ce o statef excise, states to claim compensation. The design of the market cclC, forest and vehicle filnew. regulationsMI model GST is soggested paces 4.25 to 5.44. The applicability of lower taxes oninter-statetradethan operational modalities are outlined in pares 4.3fi to ta on sock ontrtra in trade M ere b 5.44 The proposed agreement between the Centre ansfer-alevyofOentrytaxonnenfiedxgoods (v) and states, with contingencies for changes in the letholocmoibysomc municipalites and(M) Internal agreement, is described in pares 549 to 5.51. The security. The onset of GST will not Olthate all these disincentives for non-compliance are described in reasons, and thereth re, check posts on state borders pares 5.52. The implementation schedule is may remain. However, it must be recognised that described in pares 547 to 5.59. The procedure for such checkposts, by the very nature of thou claiming compensation is at Para 4.60. operations. generate enormous delaysin mad traffic. The ana n gem en also encourages rent-neeleng Binding Agreement he tweet]Centre and belt aviourth maybe difficaltto eliminate cheelthosts, States given the valid concerns of State Governments. MIL SA Compliance of states with the previously what appears Lobe egregiousisthat the same vehicle agreed upon guidelines for VAT has not been very -the exporting has to pass through two chedepufis uniform. mnumber of states have dehiatedfrom the state's checkpoint and the importing state's three.tier VAT rates, thus indicating the need to put [—while crossing one border. Both these e in place an enforcement mechanism. States are cheer:posts are often located within a couple ot otrally apprehensive that the Centre may kilometres of each other and a tracsport vehicle has unilaterally raisetax rates without consulting them. to spend confider:tic time at both. Perhaps, It may g of tax The Constitution does not emthage sharin be possible for both Gates to put np a combined basem Taxation powers are lis fed either in the State ebeckpost. Officiatn of both states could sit together List or in the Central listi but rust in the Concurrent and conducttlicir vetifications in a sin& check post List. For the first time since the Constitution was Alternately, one Latecould handle traffic in one enacted, atexhase is proposed to besharedbenthen direction and the other state in the other direction, the Centre and the states. It ismbus, necessary that essentially ensuring that there would he only one a !inn arrangement be put in place for check per border for a goods fehicle. Such an implernenfing the CST to prevent deviafions from arrangement would significantly feduce travel time the agreed upon model by either the CEL4r4 or tine and we fthrthIll end it fin considmation. There Is an ovethhehning cc tionale for minimising delays and states thus redo ring transaction costs. States could be 50 One option is the possibility of a encouraged to consider user-friendly options like Constitutional provision to facilitate a tax electronically issuedpassestin ans traffic in order agreement b etheen the Centre and the states on to reethe [Rich nansit time through their states. fines of the erstwhile /Glide alb. One suggestion is that the new Article 270 cuald read: The Grand Bargain 'Notwithstanding anything in this Constitution, the 5.45 We propose that both the Centre and the Government of a state may enter into an agreement government of any other state or the union siates conclude a 'Grand fiargair i to implement the with We

~~72 Chapter Sr Goods and Sery sces Tax~~

government with respect to the ley and collectio • implementation modalities does not include some of any tax or duty leviable by them, and during tic • of the major elements of the model GST outlined periodsuch agreement is in fiirce, the power of suc above. In our view any major deviation from the stales and union as the case maybe to make Inao concept of the model GST would dilute its positive to impose any lay shall be subject to die terms o f externalities, signi such agreement.' It has been argued that such ficantly reduce its benefits and a reducetheincentiveto switch over For the reasons provision will eliminate the need to amend th • ootlthed in Pala 5.42 this Commission strongly taxing powers entrusted to the Union and the states through Schedule VII of the Constitution. urges that any GST model adopted be consistent with the Grand Barg= described in Pars 5.48. To 5.51 Such an agreement (betiveen the 28 states mccianise imp] amen Cation of such a Grand Bargain and the Centre as parties) could specify the tax rates between the states and the Centre, this Commission adopted as well as the conditions under which the recommends the sanelhon vita grant of Rs negate agreed tax rates can be changed. The agreement ran crone to he provided to all states in the aggete. he made part of Goods and Service Tyelaws which subject to the CSI framework adopted being the Center and all the states will separately enact consistent with the Grand Batsmn. We recognise The agreement will, amongst other things, spectiG that while CST on Me whole will be revenue neubel, the rates to be adopted in Giese enactments and the there may be some winners and losers during the implementation schedule. For amending the rates mom of implementation. The grant will an ha ego ent/y. it is proposed that all states would accommodate claims for compensation from the need to agree to a proposal to decrease rates. Only adversely affected states and balance will he three quarters of the number of states would need distributed amongst states as per the devolution to agree if the rates have to be increased. 'the Centre formula. would have a onto power. All amendments to the agreementshouldheconsistent1/210GO maintaining the integrity of the COST base; (ii) providing for for meeting the compensation claims of State administrative simplicity and (c) rninhnising compliance costs for taxpayers The agreement will Unspentbalances m this pool would be evoluti on need to be monitoredlythe Empowered Committee amongst all the states as per the devolution which could be transformed after the formula, on 1 'January 2015. To allow for the implementation. of GST into a Council of Finance possibili tic of implementationof CST during 2010- Ministers with statutory backing. LI, we propose that the grant be initially allocated as given in Tabled2; Disincentives for Nun Compliance Table 5.2- Scheduling ofleuST Grant 5.52 Keeping in mind the experience under KAT it may become necessary to deter violations of Rs soon cram agreement by visiting a penalty on non-complying Rs 11,25 o crate states We recommend that Irina nee Commission's state specific faants arid the state's share of the CtiT incentive grant be with held for the period during Jolliet]. a state is in violation of the agreement. If a state is in violation for only part of a year, its grant 5.33 We See this aleeetion as substantial for two should be reduced to a proportionate extent. reasons. First, the Task Force estimation of MR provides assurance than such a level of Com wens atins/Incentive Grants compensation may eon he required Second, the smallrit of compensation required win depend upon 5.5s This Commission is aware that the tenor of the year in which Chic is implemented. The the ongoing dis ants ions on the CST inn del and total amount of tic. 50,000 crone may be earmarked for

~~73 -643-~~

~~Thirteenth unwire Commission~~

system of this country initiated in 1286 with the GST compensation and incentive provided the rr. All stakebonlars . 3d. introduction of the mouvA model GST is implemented before 21.3.201 stand to gain from a edii comprehensive j Unspent grants at the end of a year will be came changeover to the GST.Tuthe extent the switchover Forward to the next year if GST implemented is staggered, the potential gains from the before 31.3.2013. If GST is implemented during GSTOeI P'Sm 'o ,at 2223-14, r sin unreal hed. Therefore, we recommend 11 all the elements of the model GST should oe grant will be restricted to its 30, 00 crore. implemented comma ensiveD at one instance 5.56 To be eligible to draw down this grant, all 5.59 However, we are aware that two essential the elements of tbe Grand Bargan outlined in Pala elements of the model have not yet been formally 5.48 la need to be adopted. If the Garl frameworD dismissed by the states and consensus needs lobe f. adopted is not consistent with this, then this built before they are adopted. These are the Commission recommends that this grant o inclusion of stamp duty in the GST tax base to Rs. 50,000 crore nD be disbursed. 'Chas, if the enable the taxation of real estate and thuuse ofa may Grand Bargain is not conclude& this grant will not sing e rate in the G31 framework More wme. mean any net fiscal outgo. If a model &ST is be required for these elements to be included In the implemented and the grant is disbursed, Men Me USTframework. Given that the terminal year of the resultant increase ra GDPn and taxrevenue &Manly Period covered by ou: recommendations is 2014- rad Bargain thus[ put in prnwe, 12, we propose as follows. found necessary, the finance it. If the G GST the grantlapses.Th ere are, thus, no fiscal f Gt.& initially implementedwithouttbese two M with this grant— only advantages. elenients provided that i7 At the time of its impJementation, the road implementation sob c del e of the Model map for their inclusion in the Da meworb CST before 31 December co 14 W announced. ii) The GST is introduced with not more than =plainwiling the model UST may be an inwhed processbut &away appreciate Nat the requirement of a good deign is paramount and should not be ai) Properties other than individually owned subordinaterito a deadline. International expenence residential properties are brought into the tells us that flawsindesign De extremely draicultto ambit of GE& within two years of is correct subsequently Wetherefore recommend that implementation. marginal rescheduling of tae timetable for This contingency does not preclude Die possibility implementaGon should be acceptable if the design of The Centre implementing DGI at an accelerated adopted is consistent with the model GST. pace. 5.58 Theobjectiveof the model GST is to optimise Modalities For DiNbursing CompensatiOn taix collection with minimal economic distortions. The Model GST should, inter alia, comprise of (i) a 5.60 As mentioned in Para 5.to, states Dad uniform rate for goods and scrams (n) a uniform requested that an objective compensation rate a GOSS Gates a zero sate for exports and mechanism to support possible revenuelosses atter (iv) for all nther goods and senices a single rate, implementing GST be put in place. We recommend excluding the rate for precious metals. There could the lollop-in& be two pogircle approa rhes to the implementation i The present Empowered Committee be or the Mode CST: the 'big-haus' approach and Die into a statutorn Coon CII of jncremental appro. ch. The IntlodUction ofthe Girt ansf Milled Fhlanee MiO‘sters with representation from is the last mile in the reform of the indirect tax ChapterS. Goods and Services Toy

the Centre and states A GST Compensation Fund should be crested under the 5 6a We recognise that the process of generating administrative control of this Council conseimus to implement the Grand Bargain as outlined by us may be difficult and involved . The Central Government shall transfer to the Dowel er, we believe that such aconsensuscan, and CST Compensation Fund amounts as should be, generated to fully exploit the potential indicated in Table 5 and subject to the of CST and reap the benefits of its positive conditionalitics indicated In pares 5.55 externalities. While we would like to support this and 5.55 model CST, which is fully consumption based, has iii. The' mounta in the Fond should be used for provision for seamless credit and imposes low compensating states for anyrevenue loss on contphance cost, we must allow for the possibility account of adoption of the model GST and that political ecollonD considerations may will the Grand Bargain as indicated above. The otherwise In the unlikely event that such a balance, if any, remaining on TIanualy 2015. consensus cannot be achieved and the GST will be distdbuted amongst the states on the framework finally adopted is different from the basis of the devolution formula inthcated in Grand Bargain suggested by us, this Commission Chapter 8 ofourreport, used for distil buting lecommends that the grant resources in the divisible pool amongst amount of P.s. 50000 creme Mall not be disbursed. states . Impact of GST on Projections made by iv The amount will be disbursed In quarterly the Finance Commission instalments on the basis of the 5.63 Though CST requires that all ceases and recoinmendations made by a three-member surcharges be abolished, and this Comp cnsa lion Committee coraprising of die CODIMESSILIJI recommends that CST be implemented as early as Secretary, Department of Revenue, possible, we have, in our projections, assumed Government of India; Secretary to the EC continuing for then for the Central Government and chaired by an eminent person from resses Dr the period with 2010-15 This has been experience in public finance This person done for the following reasons. be appointed by the Union Governwould ment. Ignoring De positive externalities of CST, the Commission has conservatively assumed that The Way Forward DST will be revenue-neutral. Thos, income from cesses and sucharges will be included 5.6C A number of legal and adminishiansie steps in the computation of RM. In the scenario need to be taken prior to the implementation of when CST GST. is implemented, the aggregate These inrIudc stakeholder consultations, revenue figures in our projections w remain amendments to the Constitution and state laws, main unchanged, though the accounting heads adntinistrative reorganisation. P reparation of GST under which they are reported may change registration, assessment and audit manuals, staff Since the catalysing effect of CST on the training and conduct of awareness campaigns economy has not been factored in our amongst stakeholders, We have not touched upon ptojeCtions, they can be seen as couser/alive. these milestones in our discussion but are aware that these processes may takesubs ntial time. This ii. A number of critical sectors, including roads, is aim a reason why we have earlier recommended education and calamity relief, are being that the putting in place an excellent design and funded from the proceeds of ceases levied by die Government of e' operationalframework for the CST should begiven sued tramtion plan priority, even if this implies rescheduling the to the GDP must ensure that budget previously announced implementation tit actable, oviaions are made to support such

~~75 Tr, irtee^th Flnenm Camelanon~~

64 The model, the modalities as well as the crave and les. 30,000 core if GST is implemented riming of implementation of the CST have rot yet -yea been finalised.Mulfing proleeltons aver alive wouldbeusedfor meeting the compensation claims period, assuming The Implementaton of the OST of State Governments for revenue losseson account dining this period, would, be abazardous exercise. of GST implemented, consistent with the Grand This Commission has, assonedthus, for the purpose of our Bargain, beaveeo 2o end 2054L` Coepent that the Impact of on Snancial projections, balances it this pool would be distlibuted l he revenue-neutral are that the gross GaT wil Januar,. 2015 amongst ah the states as per the revenues of ihe Centre and states will not be lower than thorre prosected even after GM' Is GM implemented conipensation should be disbursed in quarterly commendations Summary of instalments on the basis of meats Recommendations by a tbreemember Compensaton Committee comprising of the Secretary Department ef 65 Both the Centre and the states should 5 ndia; Secretary to the EC cesselude a Grand Bargain to ripple:sent the model Revenue, Governmeminent and chaired by an eminen person with experience -Throes five elements GST The Grand Bargain poi in public finance to be appointed by the Centi al (0 the design of the model CST Is suggested in pans 5 25 to 5 35 lei) the operate:1nel modalities are Government (Para 5.6s). outlined m patina a 36 to Oath full the proposed 5.68 In the unlilrely event that a consensus to agreement between the Celittc and states, with implement all she elements of the Grand Bargain r the CSTmechanismfinally contingennes for changes is at peras 5 els to 5 51; cannotbe achievedand, c s Ow)es the disincentives for non-compliance a adopted is different from the me e lamentation by us, this grantof las. so. 000 Crore shell nothe schedule is described in paths 5 f to s ss Sea) the disbuised. ss 5-62) plocedure for doming compensation is at Para 5 fio 5.69 States should take steps to redace the sanW. (Pan s eS). time of cargoh vehicles crossing its borders by 566 Any am model adopted must be consistent obeckp uses rah adjoining states and Conibrning lly with all tb 1 s of the Grand Barga.n ro adopting user friendly options like electronica inCentuireimpleinentation Ofthe Grand BR-gamthis Issued passes for transit traffic (Para 5.476 Commission recommends Ore sanction of a giant of

~~-646- 9r-vtlrir 915 Mira The Gazette of Jndta~~

~~MIRAORIMEARY vm 55-vrm 3-3Z-Zrn 00 FARTII—See11w3--Sub-Aelion(ii) -91-55tv rata PUBLISHED RY ALTHORITY It MI nfr 2, 2013.44 12, 1934 No, 301 , NEW OELH4 WPONESDAY, JANUARY 7, 70131PALRA 12,134~~

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~~ama~~

~~CFL A 10(2)-t (R-TO/2012] 31. iad itati ITivaV (Z)~~

~~LID it—cfas )1~~

~~MINISTRY OF FINANCE (Department of Economic Affairs) NOTIFICATION Now Delhithe 2nd January, 2013~~

~~S.O. 31(E)._. The following order made by the President published for general information:-~~

ORDER • In pursuance of clause (1) of article 280 of the Constitution read with the provisions of the Finance Commission (Miscellaneous Provisions) Act 1951 (33 of 1951), the President is pleased to constitute a Finance Commission consisting of Or 13V.Reddy, former Governor Reserve Rank of India, as the Chairman and The following four other members, namely: -

1. Prof Abh9it Sen Member, Planning Commission (Part Time) 2. Ms.Sushma Nab Member - Former Union Finance Secretary - 3. Dr.M.Govinda Rao Member Director, National Institute for Public Finance and Policy, New Delhi 4. Dr.Sudip(o Mundle Member Former Acting Chairman, National Statistical Commission Slid Ajay Narayan Jha shag be the Secretary to the Commission. 3. The Chairman and the other members of the Commission shall hold office from the date on which they respectively assume office unto the 31st day of October, 2014.

~~4. The Commission shall make recommendations as to the namery:- following matters,~~

(i) the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between.them under Chapter I, Part XII of the Constitution and the allocation between the States of the respective shares of such proceeds; PSI 1E—SD: 3(nti TIM GAZETTE OF INDIA : EXTRAORDRMAY

~~the principles which should govern the grants-in-aid of the revenues of the~~

~~(ii) States out of the Consolidated Fund of India and the sums to be paid to The~~

~~States which are in need of assistance by way of grants-in-aid of their~~

~~revenues under article 275 ol The Constitution for purposes other than those~~

~~specified in the provisos to clause (1) of that &fide; and~~

(il)the measures needed to augment the Consordated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State recommendations made by the Finance Commission of the on the basis of me

State. finances, deficit and debt The Commission shall review the state of the 5levels of the Union and the States, keeping in view, in particular, the fiscal Commission, and consolidation roadrnap recommended by the Thirteenth Finance suggest measures for maintaining a stable and sustainable fscal environment suggestions to amend the Fiscal consistent with equitable growth including Responsibility Budget Management Acts currently in force and while doing so, theof in thshale torn Commission may consider the effect of the receipts and expenditure also ission t grants for creation of capital assets on the deficits; and the Comm consider and recommend incentives and disincentives for States for observing the

~~obligations laid down in the Fiscal Responsibility Budget Management Acts.~~

~~In making its recommendations, the Commission shall have regard, a. among other considerations, to —~~

~~the resources of the Central Government, for five years commencing on 1st~~

~~(1) April 2015, on the basis of levels of taxation and non-tax revenues likely to be~~

readied during 2014-15; rticular, on the demands on the resources of the Central Government in pinte arnal and (ii) account of the expenditure on civil administration, defence, border security, debt-servicing and other committed expenditure and liabilities,

~~the resources of the State Governments arid the demands on such resources~~

~~(iii) under different heads, including the impact of debt levels on resource~~

~~availability in debt stressed states, for the five years commenong on 1st April~~

~~2015, on the basis of levels of taxation and non-tax revenues likely to be~~

~~; reached during 2014-15~~

~~the objective of not only balancing the receipts and expenditure on revenue~~

~~(iv) account of all the States and the Union, but also generating surpluses for~~

~~capital investment; PM II-a a 1 (th )~~

(v) the taxation efforts of the Central Government and each State Government and the potential for additional resource mobilisation to improve the tax-Gross Domestic Product ratio in the case of the Union and tax-Gross State Domestic Product ratio in the case of the States;

~~(vi) the level of subsidies that are required, having regard to the need for sustainable and inclusive growth, and equitable sharing of subsidies between the Central Government and State Governments:~~

(vii) the expenditure on the non-salary component of maintenance and upkeep of capital assets and the non-wage related maintenance expenditure on plan schemes to be completed by 31st March, 2015 arid the norms on the basis of which specific amounts are recommended for the maintenance of the capital assets and the manner of monitoring such expenditure;

~~(vii) the need for insulating the pridng of public utility services like drinking water, Irrigation, power and public transport from policy fluctuations through statutory provisions;~~

~~(a)the need for making the public sector enterprises competitive and market oriented; listing and disinvestment; and relinquishing of non-priority enterprises;~~

~~(x) the need to baled. Management of ecology, environment and climate change consistent Whh gAtalnable economic development; and~~

~~(xi)the inpact of the proposed Goods and Services Tax on he finances of Centre and :dates and the mechanism for compensation in case of any revenue loss.~~

7. In making its recommendations on various matters, the Commission shall generally take the base of population figures as of 1971 in all cases where population is a factor for determination of devolution of taxes and duties and grants- in-a id, however, the Commission may also take into account the demographic changes that have taken place subsequent to 1971.

8. The Commission may review the present Public Expenditure Management systems in place including the budgeting and accounting standards and practices; the existing system of classification of receipts and expenditure; linking outlays to outputs and outcomes; best practices within the country and Internationally, and make appropriate recommendations thereon.

9. The Commission may review the present arrangements as regards financing of Disaster Management with reference to the funds constituted under the Disaster Management Act, 2005(53 of 2005), and n-zke appropriate recommendations thereon.

~~THE GAZETTE OF USIA: EXTBAORDINARY [PART. II—SEC. NM~~

~~10. The Commission shall indicate the basis on which it has arrived at its findings and make available the State-wise estimates of receipts and expenditure.~~

~~11. The Commission shall make its report available by the 31" October, 2014, covering a period Of five years commencing on the 1st April, 2015,~~

~~-1st January, 2013 New Delhi, Dated the SHR1PRANAB MUKHERJEE President~~

~~No.10(2)-B(S)/2012] Dr. RAJAT BHARGAVA, A Secy. (Budget)~~

~~NAG air 6.01~~

~~AS INTRODUCED IN LOK SABRA~~

~~Kth~~

~~110INo. 22 of 2006~~

~~THE DRUGS (CONTROL) REPEAL BILL, 2006~~

~~MEL~~

~~;0 repeal the Drags (Co torol)Ace. 19511~~

BE it enacted by Parliament in the Fifty-seventh Year of Me Republic of India as follows: I. Ms Act may be called the Drugs (Conrrol)RepeMAM 2006. 2.The t)nms (Conaol) Act. M50 is hereby repealed. RAptral al Act 16 of 1950 . STATEMENT OF OBJECTS AND REASONS

~~The Drugs (Control) Act, 1950 was enacted by Parliament in order to ensure that certain essential imported dins and medicines were sold at reasonabk prices in the Chief Conunissioner's Provinces.~~

2. After the enactment of the Essential CommodmesAct,1955 (10of 1955)(ECA0) and the 'drugs' having been declared as an Essential Commodity wider the EC Act, the Drugs (Price ConunI)Ordersare being issued fromdme to time since 1970, undersection 3 &the EC Act. Norio this. price orders were issued in 1963,1966 and 1968 ander the Defence of India Act. Presently, the Drugs (Price Control) Order, 1995 (DPCO), is in force. Thus, prices of some of the drugs are being controlled mifonnly for the entire country. The National Pharmaceutical Pricing Authority (NAPA) was constituted in September, 1997 to fix and control prices of the drugs under the provisions of DPCO, / 995.

~~3. Since price control is being done underthe Essential CorrunoditierAcp, he Drugs (Control) Act, 1950 has become redundant and, therefore, it has been decided to repeal the~~

~~4 The Bill seeks to achieve the aforesaid object.~~

~~NEW DELHg RAM VOSS ?ASWAN. The 37Th February, 2006.~~

~~2 LOK SABHA~~

~~to repeal the Drugs (ConlyOBAO,19541~~

~~(SFr, Ram Vitas er Oxemwah and Fertilizers step of Steel))~~

~~MGIOARND-60 391S (5-5)--06 032006.~~