NATIONAL LAW UNIVERSITY, JODHPUR

A REPORT TO ADVISE THE DEPARTMENT OF INDUSTRIAL POLICY

AND PROMOTION, GOVERNMENT OF INDIA TO ENABLE INDIA TO

IMPROVE ITS RANKING TO TOP 50 COUNTRIES IN NEXT YEARS

WORLD BANK DOING BUSINESS ASSESSMENT.

DATE OF SUBMISSION

JANUARY 31, 2017

SUBMITTED BY:

SUBMITTED TO:

SAHIL BANSAL

DR. AJAY KR. SHARMA

ROLL NO. 1130

ASST. PROFESSOR OF LAW

SEMESTER- VIII NATIONAL LAW

UNIVERSITY, JODHPUR

B.A.LL.B. (BUSINESS LAWS HONS.)

CERTIFICATE OF ORIGINALITY

I hereby declare that this submission is my own original work except as

specified in footnotes and to the best of my knowledge and belief, it
contains no material previously published or written by another person.

2
 Signature

INTRODUCTION

World Bank, in their Doing Business Report, 2017 (the report), ranked
India at 130 out of 190 economies.1 In the report, Indias ranking is given
on the basis of performance in 10 specific areas (in Delhi and Mumbai)
namely resolving insolvency, trading across borders, enforcing contracts,
paying taxes, starting a business, dealing with construction permits,
registering property, protecting minority investors, getting electricity and
getting credit.2

In the report, India currently ranks in the top 50 economies in the world
on three of the ten indicators namely getting credit, protecting minority
investors and getting electricity but at the same time, it has a three digit
rank in the other indicators.3 However, if India wants to improve its
aggregate ranking to top 50 countries in next years World Bank Doing
Business assessment, the necessary law and policy reforms below-
mentioned are required in the 10 specific areas mentioned above.

[I.] RESOLVING INSOLVENCY

As per the report, India is ranked 136 in the category of resolving

insolvency4 with no change in rankings from the last year. The problem

1 World Bank. 2017. Doing Business 2017: Equal Opportunity for All.
Washington, DC: World Bank. DOI: 10.1596/978-1-4648-0948-4. License:
Creative Commons Attribution CC BY 3.0 IGO (The Report), p. 7.

2 The report, p.1.

3 The report, p.213.

4 The report, p. 213.

3
seems to be with the recovery rate of the creditors 5, time to resolve
insolvency6, costs involved7 and the strength of insolvency framework8.
However, for the rankings, the report did not take into account various
reforms introduced/implemented by India after 1 June, 2016.9 For
instance, the implementation of Insolvency and Bankruptcy Code, 2016
(Code) with an objective of less time in resolution, lower losses in
recovery, higher levels of debt financing across a variety of debt
instruments10 and cross border insolvency matters.11 Apart from the
Code, measures such as the Corporate Debt Restructuring, the Joint
Lenders Forum and the Strategic Debt Restructuring scheme are out-of-
court mechanisms to restructure loan contracts with debtors which will
cut the time and costs to resolve insolvency. 12 Also, in June 2016 the S4A
Scheme was introduced by the RBI as an optional framework for the

5 The report, p. 213. (The creditors in India recover about 25.7 cents on the
dollar compared to 80.4 cents in the USA. (Rank 7 in the Doing Business Index))

6 The report, p. 213. (It takes 4.3 years to resolve insolvency in India whereas in
the USA, it is 1.5 years.)

7 The report, p. 213. (In India, the costs are 9 percent of the estate whereas in
the USA it is 8.2 percent of the estate.)

8 The report, p. 213. (Indias score in strength of insolvency framework is 6 on a

scale of 16 whereas the score of the USA is 15 on the same scale.)

9 Ease of doing business: Indias brush with reality, Live Mint, published on 28
October, 2016, online available at <
http://www.livemint.com/Opinion/iwNkJN2L8QFtJIZCB2bJtI/Ease-of-doing-
business-Indias-brush-with-reality.html> last accessed on 20 January, 2017.

10 Rekha Misra, Rajmal and Radheshyam Verma, Determinants of Recovery of

Stressed Assets in India- An Empirical Study, Vol. LI, No. 43, p.66, Economic
and Political Weekly, published on 22 October, 2016, online available at <
http://www.epw.in/system/files/pdf/2016_51/43/Determinants_of_Recovery_of_St
ressed_Assets_in_India_0.pdf?0=ip_login_no_cache
%3D32892c3689acb3b95d5016bf96aaf9ce> last accessed on 20 January, 2017.

11 Ss. 234 and 235, Insolvency and Bankruptcy Code, 2016.

12 Supra note 10.

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resolution of large stressed accounts. 13 As the requisite law and policy
changes have already been made by the government, the in toto
implementation still seems to be an issue. For instance, the provision
dealing with the Voluntary Winding up in the Code (section 59) has not
been implemented yet and still the lengthy procedure under Companies
Act, 1956 is applicable. So, the speedy implementation of the
abovementioned laws and schemes is suggested.

[II.] TRADING ACROSS BORDERS

In the category of Trading across borders, India got 143 rd position in the
report, one position ahead of what it got last year. 14 In the report,
broadly there is an attempt to capture three types of costs - documentary
compliance, border compliance and domestic transport, where cost
defined both as time taken and money spent. 15 The report recognised the
implementation of the Single Window Interface for Trade (SWIFT) by the
Central Board of Excise and Customs (CBEC) which provides e-filing
services to the trade and cargo carriers and other clients of Customs
Department.16 (Via an e-commerce portal ICEGATE) At present, about
24,000 users are registered with ICEGATE who are serving about 6.72
lakhs importers/exporters.17 Despite that, there is not much improvement
in the standings of Trading across borders from the last year. The major
problems include too many unorganised and unregistered players;

13 First S4A debt recast gets approval, The Hindu, Published on 05 November,
2016, online available at < http://www.thehindu.com/business/Industry/First-
S4A-debt-recast-gets-approval/article16437605.ece> last accessed on 21
January, 2017.

14 The report, p. 213.

15 Bibek Debroy, Smallness at the Border, The Indian Express, published on 22

December, 2016, online available at
<http://indianexpress.com/article/opinion/columns/india-ease-of-doing-business-
world-bank-report-4439182/> last accessed on 21 January, 2017.

16 The report, p. 176.

17 Supra note 15.

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registration, regulation and accreditation by too many agencies under
too many statutes/orders; too many heads for levying charges; and non-
standardised formats for documents.18 It is advised that SWIFT should
integrate assorted government agencies and standardise documents,
declarations and forms. Moreover, the government should put all the
regulations under one statute to curb the time lag and cost issue. It is
also advised that the government should include strategical steps to
improve the rankings in Trading across borders in its eight-point
strategy19 to improve rankings in doing business.

[III.] ENFORCING CONTRACTS

In the category of Enforcing contracts, India got 172nd position in the

report.20 As per the report, resolving commercial disputes via courts, or
contract enforcement takes 1,420 days, costs 39.6% of the value of the
claim.21 The report also acknowledges that India has made enforcing
contracts easier by creating dedicated divisions to resolve commercial
cases22 but Indias rank is still far behind. The major problems include
the service of notice that takes extraordinarily long time; 23 delays in the

18 Report on End-to-End Logistics & Costs for Shipping through Ports, Indian
Institute of Foreign Trade, Published in June 2016, online available at <
http://nsb.nic.in/upload/files/latest/Reportt.pdf> last accessed on 21 January,
2017.

19 Government takes various measures to raise Indias ranking in Ease of

Doing Business to top 50 in the world, Press Information Bureau, Ministry of
Finance, Government of India, published on 20 December, 2016, online
available at < http://pib.nic.in/newsite/PrintRelease.aspx?relid=155667> last
accessed on 22 January, 2017.

20 The report, p. 213.

21 The report, p. 213.

22 The report, p. 176.

23 Seventy Seventh Report, Law Commission of India, Delay and Arrears in

Trial Court, published in November 1978, online available at
<http://lawcommissionofindia.nic.in/51-100/Report77.pdf> last accessed on 22
January, 2017.

6
filing of written statement and calling of witnesses, tendering of evidence
and delivery of judgment makes the process of enforcing contract very
lengthy.24 It is advised that the notices should be allowed to send via
social media i.e. Facebook, Whatsapp etc. following the footsteps of
countries like New Zealand.25 Moreover, it is also advised to enact the
provisions for compulsory arbitration for commercial disputes coming
straight to courts to cut down cost and time. Though the government has
added the initiative of e-Courts that should be expedited for electronic
filing of complaints, summons and payments especially in the
Commercial Court26 but for the existing physical courts, it is advised to
recruit more number of judges.

[IV.] PAYING TAXES

In the category of Paying taxes, India got 172 nd position in the report.27
Though the report acknowledges that India made paying taxes easier by
introducing an electronic system for paying employee state insurance
contributions28 but still the Indian tax regime is characterised by high tax
rates, massive build-up of tax disputes and arbitrary interpretations. The
major problems include high tax rates (60.6 percent of profit) 29 as
compared to the countries like UK (30.9 percent of profit) 30 and USA. (44
percent of profit)31. Moreover, unprecedented increase in litigation and
long pendency of adjudicating proceedings dents the confidence of

24 Ibid.

25 Axe Market Gardens v Craig Axe, CIV: 2008-485-2676.

26 Supra note 19.

27 The report, p. 213.

28 The report, p. 176.

29 The report, p. 213.

30 The report, p. 248.

31 The report, p. 248.

7
investors, transfer pricing issues and inadequate technological
infrastructure.32 Therefore, it is suggested that to make India an
attractive business destination, the government should consider
reviewing and lowering the tax rates in the phased manner. It is also
suggested to make a progressive tax regime that lead to efficient
resource allocation. This includes reduction in the number of levies and
simplification of their nature. In this regard, GST is one of the immediate
recourse which should be implemented without any delay (resolving
allocation issues raised by the states immediately) as it could address the
existing indirect tax system like tax cascading complexity and poor
infrastructure along with high cost of compliance. Moreover, the near
implementation of General Anti- Avoidance Rules in 2017, emphasised on
getting the tax base right would help India in getting a high rank in
paying taxes.

[V.] STARTING A BUSINESS

In the category of Starting a business, India got 155 th position in the

report. However, the Ministry of Finance, in its eight point strategy to
raise Indias ranking in Ease of Doing Business to top 50 in the world,
has taken the major decisions to improve the rankings under the heading
of starting a business.33 But the major problem may include the issues
regarding timely approval of projects, lack of transparency in the
working of government agencies and corruption issues. However, the
global best practices could be adopted to improve the rankings under

32 Govt not to challenge TP rulings in Vodafone, other cases, The Financial

Express, published 28 January, 2015, online available at <
http://www.financialexpress.com/economy/government-not-to-appeal-against-
bombay-hc-order-in-vodafone-case/36110/> last accessed on 24 January, 2017.

33 Supra note 19. (It includes (i) e-Biz portal shall be mandated for starting a
business which shall include three services of Ministry of Corporate Affairs,
Registration for PAN and TAN and also for EPFO & ESIC. (ii) Ministry of
Corporate Affairs, CBDT, Ministry of Labour & Employment will work towards
reducing the number of procedures for starting a business to 4 and the number
of days to start a business also to 4. (iii)Shram Suvidha Portal shall be the only
portal for filing returns, challan and making online payment for EPFO & ESIC
contributions as well as other filings and payments.)

8
this heading. For instance, Guatemala introduced Mi Negocio which is an
online system through which entrepreneurs can register with the
Commercial Registrar, the Tax Authority, the Social Security Institute and
the Ministry of Labor through the system and it helped reduce the
number of procedures and time taken by more than half. 34 Apart from
that, it is suggested to create a Single Window Clearance Mechanism like
one stop shop35 where all the processes necessary for starting a business
should be moved online on a single platform. Moreover, the costs
involved for starting a business (13.8 percent of per capita income) are
high and need to be significantly brought down. Also, for grievance
redressal, a dedicated agency or team within the departments is
essential to address entrepreneur concerns. Apart from that, the
government should not discourage the new business or start-ups from
doing business.36

[VI.] DEALING WITH CONSTRUCTION PERMITS

In the category of Dealing with construction permits, India got 185 th

position in the report. In India, the major problem pertains to Complex
regulatory framework, multiple laws/rules and authorities; coordination
requirement with several State/Central-level departments; inadequate
information and user unfriendly interface; lack of transparency and
corruption; high transaction costs; and environmental concerns.
However, back in 2014, the high level committee headed by TSR
Subramanian suggested that Parliament could enact a law titled
Environment Laws (Management) Act (ELMA) for constituting the
authorities for both centre and states, both comprising experts in

34 The Report, p. 23.

35 The Report, p. 14.

36 For instance, on 30 August 2016, the Securities and Exchange Board of India
(SEBI) issued a press release titled SEBI Cautions Investors where it
questioned the validity of online platforms facilitating equity crowd-funding
which is not a move that encourages the start-ups to grow. Online available at
<http://www.sebi.gov.in/sebiweb/home/detail/34568/yes/PR-SEBI-CAUTIONS-
INVESTORS> last visited on 25 January, 2017.

9
different fields, which will deal with applications for clearances and
permissions under environment related laws at the Central and State
level respectively thus making it a single window. 37 A fast track
procedure for linear projects (roads, railways and transmission lines),
power and mining projects and for the projects of national importance
has also been prescribed in the new mechanism. 38 Adoption and
successful implementation of these reforms can do much to ease
obtaining necessary environment clearances for undertaking
construction. Also, government should significantly invest in capacity
building and training of its personnel to efficiently exercise technical and
administrative regulation of the construction sector.

[VII.] REGISTERING PROPERTY

In the category of Registering property, India got 138 th position in the

report39 with no change in the rankings from the last year. However, in
Delhi, all sub-registrar offices have been digitized and sub-registrars'
records have been integrated with the Land Records Department and in
Maharashtra all property tax records have been digitized which will
overcome the cumbersome and time consuming paper work for
registering properties.40 Still, Indias rank is far behind. The major
problems include lack of electronic database for checking the
encumbrances, lack of electronic database for geographic information
system, no national database to verify the accuracy of identity documents
37 Nawneet Vibhaw, Just suggestions junked, The Hindu, published on 14
August, 2015, online available at <
http://www.thehindu.com/opinion/columns/just-suggestions-
junked/article7536205.ece> last accessed on 25 January, 2017.

38 Report of HIGH LEVEL COMMITTEE to review various Acts administered by

Ministry of Environment, Forest & Climate Change, Government of India
November 2014, online available at <
http://envfor.nic.in/sites/default/files/press-releases/Final_Report_of_HLC.pdf>
last accessed on 27 January, 2017.

39 The report, p. 213.

40 Central Government Initiatives, Ease of Doing Business, online available at <

http://www.makeinindia.com/eodb> accessed on 27 January, 2017.

10
and no equal access to property to men and women. 41 Therefore, it is
advised to lower down the number of procedures and time. (By providing
single window clearance mechanism and in this regard an electronic
application or online portal for all the procedures could be developed)
Moreover, reforms should also be made to cut the cost for registering
property which is also relatively high. In addition to that, the electronic
databases for checking the encumbrances over the property and a
nation-wide database to verify the accuracy of identity documents is
required as well. Also, requisite changes in law should be made to give
equal ownership rights to the property to men and women. In this
direction, a Uniform Civil Code is also recommended.

[VIII.] PROTECTING MINORITY INVESTORS

In the category of Protecting minority investors, India got 13th position

in the report42, much higher than its overall rank. Under the heading of
protection of minority investors indicator, the report measures the
protection of shareholders against directors' misuse of corporate assets
for personal gain and the rights and role of shareholders in corporate
governance43 The reason for such high rank is Indias continuous changes
in Companies Act, 2013 bringing Indian firms in line with global
standards, particularly in corporate governance practices and corporate
social responsibility requirement.44 But in the recent past, the
government has proposed some of the changes in the name of ease of
doing business by compromising the corporate governance. For instance,

41 Online available at <

http://www.doingbusiness.org/data/exploreeconomies/india/registering-
property> last accessed on 28 January, 2017.

42 The report, p. 213.

43 The report, p. 139.

44 India ranks 13th in protection of minority investors, PTI, Published on 26

October, 2016 (published by indiatoday.in) inline available at <
http://indiatoday.intoday.in/story/india-ranks-13th-in-protection-of-minority-
investors/1/795879.html> last accessed on 29 January, 2016.

11
the proposal of Universal object clause 45 for the companies where there
is no need to specify the object of the business by the company. This
could go against the minority investors/shareholders as the board may
involve in diversion of funds to any other business because the object is
not defined. (Subsequently, no remedy under section 241-242 of the
Companies Act, 2013 for diversion of funds) It is advised not to
incorporate such amendments as it dilutes the transparency and
corporate governance. Moreover, the provisions regarding whistle-blower
policy should be incorporated within the Companies Act, 2013 to report
the mismanagements in the company.

[IX.] GETTING ELECTRICITY

In the category of Getting electricity, India got 26 th position in the

report.46 The report recognizes that India made getting electricity faster
and cheaper by streamlining the process of getting a new commercial
electricity connection.47 Indias good performance in this head is because
of the reforms that led to the ease of procedure and time & cost cutting.
For instance, in both Delhi and Mumbai, the distribution companies have
stipulated that electricity connections would be provided in 15 days and
the number of documents required to obtain an electricity connection
have been reduced to only 2.48 Online application for connections above
100 KVA have been made mandatory in Delhi and Mumbai. 49 This will
reduce procedures, cost and time taken to obtain an electricity
connection significantly.50 However, it is advised to make changes in the

45 Section 4 (1) (c), Companies (Amendment) Bill, 2016.

46 The report, p. 213.

47 The report, p. 176.

48 Central Government Initiatives, Ease of Doing Business, online available at <

http://www.makeinindia.com/eodb> accessed on 30 January, 2017.

49 Ibid.

50 Ibid.

12
tariff structure of the electricity provided to the commercial
establishments as the rates are higher than what is charged from
households. Moreover, accountability and transparency mechanisms are
required to stop the red-tapism.

[X.] GETTING CREDIT

In the category of Getting credit, India got 44 th position in the report.51

The Ministry of Finance, has already stated that Department of Financial
Services and Ministry of Corporate Affairs shall work towards integrating
Central Registry of Securitization Asset Reconstruction and Security
Interest (CERSAI) database with ROC Registry of Charges to create a
single registry of assets.52 Apart from that, Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
(SARFAESI), (Central Registry) Rules, 2011 have been amended. The
amendment modifies rule 4 to include additional types of charges,
including: "security interest in immovable property by mortgage other
than deposit of title deeds"; "security interest in hypothecation of plant
and machinery, stocks, debt including book debt or receivables";
"security interest in intangible assets, being know-how, patent, copyright,
trademark or any other business or commercial right of similar nature";
and "security interest in any under construction residential or
commercial building or a part thereof". 53 This amendment will also allow
uploading of data pertaining to security interests created on all types of
properties covered by the definition of property in Section 2(1)(t) of the
SARFAESI Act, 2002 i.e. immovable as well as intangible. However, the
processing charges, delay in the procedure, on-site examination, tedious
scalar chains have made it difficult for people to avail credits from a
financial institution. It is even more important to get credit in the wake of

51 The report, p. 213.

52 Supra note 19.

53 Online available at <

http://www.doingbusiness.org/data/exploreeconomies/india/registering-
property> last accessed on 30 January, 2017.

13
demonetisation. It is advised that Small Finance Banks such as Micro
lenders should be promoted more for credit purpose in rural areas. The
interest rate on the loans should also be lowered in the aftermath of
demonetisation.

CONCLUSION

Indeed, a herculean task lies ahead to achieve the governments goal of

breaking into the top 50 rankings in order to make the country a
favoured investment destination for foreign capital and spur domestic
enterprise but a guided movement along workable reforms or good
practices in its weakest ranked areas can be attempted to advance it
towards the frontier. The reforms suggested above are not only important
for enhancing Indias ranking in the Doing Business report but equally
important for the Make in India campaign and Start-up India campaign.
However, for the sole objective of increasing Indias rank in Doing
Business report by the World Bank report, speedy implementation of the
prescribed reforms is required.

14