Daily Prelims Notes 12 October 2022
- October 12, 2022
- Posted by: OptimizeIAS Team
- Category: DPN
Daily Prelims Notes
12 October 2022
Table Of Contents
- Environmental path cleared for Great Nicobar mega project
- Legacy Waste: Did mustard gas from World Wars dumped in Baltic cause Nord Stream explosions
- Principle of seniority and ‘5+1’ collegium
- The Kurds
- Right to Information Act (RTI Act)
- Interpol Notices
- UNSC Reform
- Russia’s continued defiance of international law
- India votes against Russia’s demand for secret ballot in UNGA
- Automatic Exchange Of Information (AEOI)
- SARFAESI Act and ARCs
- Flex fuel vehicles
Subject : Environment
- The expert appraisal committee of the Indian Ministry of Environment, Forest and Climate Change has recommended the grant of environmental and Coastal Regulation Zone (CRZ) clearance for a big infrastructure and tourism project in Great Nicobar Island that will lead to the diversion of 15 per cent of its forest area and the felling of 8.52 lakh (852,000) trees in phases.
- The project is being spearheaded by Andaman and Nicobar Islands Integrated Development Corporation under a vision plan conceived by the NITI Aayog.
- The island, mostly covered by forests, has not witnessed large-scale human activity so far.
Project and its timeline–
- The main components of the Rs. 75,000 crore (Rs. 750 billion) project are an International Container Transhipment Terminal (ICTT), with the capacity to handle 14.2 million TEUs (unit of cargo capacity) eventually, a greenfield international airport handling a peak hour traffic of 4,000 passengers both ways, a township and gas and solar power plant.
- The airport would be “developed as a joint military-civil, dual-use airport, under the operational control of the Indian Navy.
- The first phase would extend to 2036 (from 2021), and the second phase would stretch from 2037 to 2051, but the container terminal would become operational around 2027-28.
- A total of 166 square kilometres will be earmarked for development.
- The EAC has imposed specific conditions for wildlife conservation and tribal welfare mainly plans to do with leatherback sea turtles,Nicobar megapodes,saltwater crocodiles and several other species, as well as mangrove restoration,coral translocation and welfare of the local Shompen and Nicobari tribal population.
- The committee noted that three new wildlife sanctuaries had been identified at Little Nicobar (14 square kilometres, for protecting leatherback turtles), Menchal (1.3 square kilometres, for megapodes) and Meroe Islands (2.8 square kilometres, for corals).
Biodiversity of the Island–
- Over 95 per cent of the 911-square-kilometre Great Nicobar island is made up of national parks, protected forests and tribal reserve areas.
- The Great Nicobar Biosphere Reserve covers much of the largely unspoilt island.
- The reserve encompasses two national parks. One of them is the Campbell Bay National Park, and the other is Galathea National Park.
- Forests and dense vegetation cover almost all of the island.
Will the project poses danger to the environment of the Island?
- A long strip of the island predominantly covered by forests has been chosen for the implementation of the project. About 122 square kilometres of the 166 square kilometre project area is made up of forests, and nearly 9 square kilometres, are deemed forests.
- The northern tip of the project area falls well within the biosphere reserve, which means that about 71 square kilometres of the biosphere reserve area would also have to be earmarked for it.
- Galathea Bay, a major nesting site for leatherback turtles, was home to the Galathea Bay Wildlife Sanctuary.
- It was stripped off of its protected status and denotified recently.
- The central components of the project, the ICTT and the international airport are to be constructed in this part of the island.
- The Galathea National Park adjoining the project area will be largely left without a buffer zone.
Though a large part of the immediate project areas adjoining the park has been earmarked for ‘eco-tourism’ where ‘major’ construction projects will not be allowed, the park area is likely to be exposed to the fallout of the large-scale construction and dredging activity that will ensue – about 421 hectares (4.21 square kilometres) of land is to be reclaimed for the port and airport.
- The Nord Stream pipelines carrying gas from Russia to Germany through the Baltic sprang a leak on September 26, 2022, after explosions rocked the area.
- A huge plume of methane, a strong greenhouse gas, subsequently spread across northern Europe before dissipating.
- The United Nations Environment Programme called the leak the biggest emission of methane yet.
The severity of Explosion–
- According to Sweden and Denmark, the ruptures of the underwater gas pipelines were caused by explosions equal to several hundred kilograms of TNT, the equivalent of several conventional aerial bombs used during the last World War.
Connection to World War-I and II–
- The explosions took place to the northeast of Bornholm where an estimated 30,000-35,000 tonnes of chemical weapons from World War I and II were dumped from August 1945 to July 1965.
- These chemicals were unused by Germany. Alongside, raw materials and additives used for making them were also dumped under the supervision of British and Soviet authorities in post-World War II Germany.
- Later, the German Democratic Republic or East Germany carried out the dumping.
What these chemicals include–
- These chemicals and raw materials include vesicants, irritants, lachrymogens, vomitants, sternutatories, lung agents, toxics, neurotoxics and blood agents.
- Deadly and infamous products developed by German chemists such as tabun, mustard gas, phosgene and Zyklon B were also among those dumped at the site.
Burns in the Baltic-
- During the pre-laying works for Nord Stream 1 in the Danish Exclusive Economic Zone,four KC 250 mustard gas bombs were discovered between seven metres and 17 metres from the projected route. They were inspected prior to laying in autumn-winter 2010.
- The Danish authorities allowed the bombs to remain where they were as they did not consider them to be a threat to the pipeline.
- They were inspected again in January 2011, after the pipeline was laid. No further damage was reportedly observed.
- But mustard gas has burned people in the area.
The chemicals have severely affected marine life around Bornholm–
- Between 1994 and 2012, HELCOM (Baltic Marine Environment Protection Commission) reports that around 4 tonnes of mustard gas lumps were brought to the surface by fishing gear in the Bornholm area.
- Some 102 children were burnt on a beach in Darlowo, Poland, opposite Bornholm, in July 1955, after recovering a leaking barrel containing mustard gas from the beach.
Some 196 tonnes of fish contaminated in Danish fishermen’s nets with mustard gas particles were withdrawn from the market and destroyed between 1968 and 1984.
- Chief Justice of India U U Lalit has recommended Justice D Y Chandrachud as his successor to the post.
- Justice D Y Chandrachud will take over as the next CJI on November9
- During his two year tenure as CJI the collegium will consist of six members instead of five.
What is the collegium system:
- The ruling in theThird Judges Case,gave legal backing to the current system of appointment of judges and created the collegium of the CJI and four senior-most judges.
- The principal objective of the collegium is to ensure that the best available talent is brought to the Supreme Court Bench.
- The collegium system is not rooted in the Constitution or a specific law promulgated by Parliament.
- The SC collegium is headed by the incumbent CJI and comprises the four other senior most judges of the court at that time.
What the Constitution says:-
- Articles 124(2) and 217 of the Constitution deal with the appointment of judges to the Supreme Court and High Courts.
- The appointments are made by the President, who is required to hold “consultations” with “such of the judges of the Supreme Court and of the High Courts” as he may think is needed.
- For appointments other than the Chief Justice, “the Chief Justice of India shall always be consulted”.
Evolution of the system-
- The collegium system evolved out of a series of judgments of the Supreme Court that are called the “Judges Cases”.
- FIRST JUDGES CASE:
- In SP Gupta vs Union of India, 1981, the Supreme Court held that the concept of primacy of the CJI was not really rooted in the Constitution.
- The Constitution Bench also held that the term “consultation” used in Articles124 and 217 did not mean “concurrence” .
- Therefore though the President will consult these functionaries, his decision doesn’t have to concur with them.
- This judgment tilted the balance of power in favour of the executive.
- SECOND JUDGES CASE:
- In The Supreme Court Advocates-on-Record Association vs Union of India, 1993, a nine-judge Constitution Bench overturned the decision in SP Gupta, and devised a specific procedure called the ‘CollegiumSystem’.
- The verdict in the case accorded primacy to the CJI in appointment and transfers, and ruled that the term “consultation” would not diminish the primary role of the CJI.
- The verdict said that the recommendation should be made by the CJI in consultation with his two senior most colleagues.
- It added that although the executive could ask the collegium to reconsider the matter, if the collegium reiterated the recommendation, the executive was bound to make the appointment.
- THIRD JUDGES CASE:
- In 1998, then President K R Narayanan issued a Presidential Reference to the Supreme Court under Article 143 of the Constitution over the meaning of the term “consultation”.
- The question was whether “consultation” required consultation with a number of judges in forming the CJI’s opinion, or whether the sole opinion of CJI could by itself constitute a “consultation”.
- In response, the SC laid down nine guidelines which has come to be the existing form of the collegium.
- The SC laid down that the recommendation should be made by the CJI and his four seniormost colleagues instead of two.
- It was also held that even if two judges gave an adverse opinion, the CJI should not send the recommendation to the government.
Why is there 5+1 collegium:
- Generally, one or more of the four senior judges in the collegium would be a potential CJI candidate.
- The next in line is considered important to ensure continuity of decision-making
- But if the situation is such that the successor Chief Justice is not one of the four senior most puisne Judges,then he must invariably be made part of the collegium.
- Since,the Judges to be appointed will function during his term and it is his right that he should have a hand in their selection.
- However, in the two-year tenure of Justice Chandrachud as CJI, a potential CJI candidate is unlikely to be in the collegium until May 2023.
- Hence, Justice Khanna will be the sixth member of the collegium from November9,2022 itself.
- The similar situation happened in 2007 when then CJI KG Balakrishnan took the top office,thecollegium he headed did not have the potential CJI candidate.
Justice SH Kapadia, who was next in line to be CJI, was invited to the collegium as the sixth member.
Subject :International relations
- The recent protests in Iran due to the death of a young Iranian Kurdish woman, the 22-year-old MahsaAmini in the custody of Iran’s morality police have intensified.
Who are Kurds:
- Kurds are an Iranian ethnic groupnative to the mountainous region of Kurdistan in Western Asia, which spans southeastern Turkey, northwestern Iran, northern Iraq, and northern Syria.
- They make up the fourth-largest ethnic group in the Middle East after Arabs, Persians, and Turks.
Religion followed by Kurds:
- Most Kurds are Sunni Muslims who adhere to the Shafiʽi school, while a significant minority adhere to the Hanafi school and also Alevism.
- Moreover, many Shafi’i Kurds adhere to either one of the two Sufi orders Naqshbandi and Qadiriyya.
- Other religions with significant Kurdish adherents are Yarsanism and Yazidism.
History of Kurds Nationalism:
- Kurdish nationalism stirred in the 1890s when the Ottoman Empire was on its last legs.
- The 1920 Treaty of Sevres,imposed a settlement and colonial carve-up of Turkey after World War One, promised Kurds independence. But the accord was broken by Turkish leader Kemal Ataturk.
- The Treaty of Lausanne, ratified in 1924, divided the Kurds among the new nations of the Middle East.
- With the 1946 Republic of Mahabad, a Soviet-backed state stretching over Iran’s border with Turkey and Iraq Kurdish separatism in Iran first bubbled to the surface.
- The 1979 Iran’s Islamic Revolution touched off bloodshed in its Kurdistan region with heavy clashes between the Shi’ite revolutionaries and the Kurdish Party of Iranian Kurdistan (KDPI) which fought for independence.
What are the demands of Kurds:
- The Kurds have never achieved nation-state status,except in Iraq, where they have a regional government called Iraqi Kurdistan.
- The Kurds want to establish their independent nation-station Kurdistan which comprises five different regions southeastern Turkey, northeastern Syria, northern Iraq, northwestern Iran and southwestern Armenia.
- In a recent tussle between the Lieutenant Governor of Delhi and Delhi government on the implementation of the RTI Act in its departments.
What is the Right to Information Act(RTI Act):
- The Right to Information (RTI) is an act of the Parliament of India enacted on 15 June 2005 which sets out the rules and procedures regarding citizens’ right to information.
- It replaced the former Freedom of Information Act, 2002.
Objective of the Right to Information Act :
- To empower the citizens
- To promote transparency and accountability
- To contain corruption
- To enhance people’s participation in democratic process
Key provisions of RTI:
- Section 1(2) : The act extends to the whole of India.
- Section- 2 (f): This section is related to Information which means any material in any form, including Records, Documents, Memos, e-mails, Opinions, Advices, Press releases, Circulars, Orders, Logbooks, Contracts, Reports, Papers, Samples, Models,
- Section- 2(j) :The Right to Information means the right to information accessible under this Act which is held by or under the control of any public authority.
- Section 4 of the RTI Act : Requires suo motu disclosure of information by each public authority.
- Section 8 (1):- It mentions exemptions against furnishing information under RTI Act.
- Section 8 (2):-It provides for disclosure of informationexempted under Official Secrets Act, 1923 if larger public interest is served.
- Section 13 of the Act:-It sets the term of the central Chief Information Commissioner and Information Commissioners including salaries, allowances and other terms of service.
- Section 22 of the RTI Act:-It states that the provisions of the act will have effect notwithstanding anything that is inconsistent with the OSA.
Functioning of Right to Information Act:
- A three-tier structure for enforcing the right to information has been set up under the RTI Act 2005.
- Public Information Officers: The first request for information goes to the Assistant Public Information Officer and Public Information Officer, designated by the Public Authorities.These Officers are required to provide information to an RTI applicant within 30 days of the request.
- Appellate Authority: It caters to the appeals against decisions of the Public Information Officer.
- State Information Commission or the Central Information Commission : Their major function is to listen to appeals against the order of the Appellate Authority.
RTI Amendment Act,2019:
- The RTI Amendment Act,2019 amended Sections 13, 16, and 27 of the RTI Act.
- The tenure of CIC and IC will be notified by the central
- The act alsoamended salaries, allowances, and other terms and conditions of service.
The act also brought the status of the Central Information Commissioners (CICs) on par with the Election Commissioners and the status of State Information Commissioners with the Chief Secretary in the States.
Subject :International Relations
- Recently Interpol rejected India’s second Red Corner request for Khalistan separatist Gurpatwant Singh Pannu on terror charges.
- Gurpatwant Singh Pannu is Canada-based founder and legal advisor of pro-Khalistan outfit Sikhs for Justice (SFJ).
What is Interpol:
- Interpol is an international organization that facilitates worldwide police cooperation and crime control.
- It is Headquartered in Lyon, France and is the world’s largest international police organization, with seven regional bureaus worldwide and a National Central Bureau in all 195 member states.
- It was formed in 1923 as the International Criminal Police Commission, and started calling itself Interpol in 1956.
- India joined the organization in 1949.
- B.I is the nodal agency for coordinating with INTERPOL in India.
What is Interpol Notices:
- An Interpol notice is an international alert circulated by Interpol to communicate information about crimes, criminals, and threats by police in a member state to their counterparts around the world.
- There are eight types of notices, seven of which are colour-coded by their function i.e red, blue, green, yellow, black, orange, purple and the eighth being the special noticeissued at the request of the United Nations Security Council.
- The Notices are issued in any of the four official languages of Interpol i.e English, French, Spanish, and Arabic.
Types of Interpol Notices:
- Red Notice: It is issued to seek the location and arrest of wanted persons for prosecution or sentencing.
- Yellow Notice: To help locate missing persons or to help identify persons who are unable to identify themselves.
- Blue Notice: To collect additional information about a person’s identity, location, or activities in connection with a crime.
- Black Notice: To seek information on unidentified bodies.
- Green Notice: To issue warning about a person’s criminal activities, in case the person is considered a possible threat to public safety.
- Orange Notice: To warn about an event, a person, an object, or a process that poses a serious and imminent threat to public safety.
- Purple Notice: To collect or provide information on modus operandi, objects, devices, and concealment methods used by criminals.
- INTERPOL–United Nations Security Council Special Notice: Issued for groups and individuals who are the targets of the UN Security Council Sanctions Committees.
Subject : International relations
- UNSC is considered the nucleus of the UN system.
- It is the only body of UN which has teeth to bite. It has a major say in all critical appointment in UN
- Chapter VI of the UN charter gives a mandate to UNSC to settle disputes peacefully through mediation and secure a ceasefire through peacekeeping force.
- Chapter VII of UN charter give power to UNSC to impose military and economic sanctions
How will it be reform?
- The UNSC reform requires an amendment to the Charter of the United Nations.
- In the first stage, the UN General Assembly must approve the reform by a two-thirds majority.
- After approval from the UNGeneral Assembly, the amended Charter must then be ratified by at least two-thirds of the member states, including the five permanent Security Council members.
- According to Article 108of the Charter all the permanent members of the Security Council must ratify the amendment otherwise it will not be accepted.
Subject :International relations
- In the recent war against Ukraine Russia has defied all international laws.
- The UN Resolution of March 2022 which was adopted by 141 countries in the United Nations General Assembly demanding that Russia immediate and unconditional withdrawal from Ukraine, Moscow brazenly continued with its illegal military offensive against Kyiv.
International Laws Russia claimed to use in its favour:
- Article 51 of the UN Charter: It provides for self-defence against an armed attack.
- Article 1 of the Charter: The right of self-determination of the people of annexed regions.
- Article 1 of International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights: It provides that a group of people can freely determine their political status.
Rules on occupation:
- Belligerent occupation under the Hague Convention of 1899: Article 43 of the Convention states that if the authority of the legitimate power over territory has passed into the hands of the occupant, the latter shall take all steps in his power to re-establish and ensure public order and safety.Furthermore, while doing so, the occupant shall respect, unless absolutely prevented, the domestic laws of the country whose territory it has occupied.
International Laws with respect to Nuclear threats:
- Treaty on the Prohibition of Nuclear Weapons: Neither Russia nor Ukraine has signed the Treaty.
- UN charter: It provides the right of individual and collective self-defense.If Russia launches a nuclear attack, not only Ukraine but also its allies can launch a counter-attack on Russia in collective self-defense.
UN Security Council Chapter VII : Charter empowers the Security Council to take action even in the case of threat of use of nuclear weapons.
Subject: International Relations
- India voted to reject Russia’s demand for a secret ballot in the UN General Assembly on a draft resolution to condemn Moscow’s illegal annexation of four regions of Ukraine, with New Delhi favouring a public vote on the text along with over 100 other nations.
- The 193-member UN General Assembly voted on a motion by Albania that action on the draft resolution that would condemn Russia’s illegal so-called referendums and attempted illegal annexation of the Donetsk, Kherson, Luhansk and Zaporizhzhia regions of Ukraine be taken by a recorded vote.
- Russia had demanded that the resolution be voted upon by secret ballot.
- A recorded vote on Russia’s appeal was held and India was among the 100 nations who voted against the challenge made by Moscow.
- Russia then sought reconsideration of the decision to adopt the motion submitted by Albania for a recorded vote.
- The General Assembly decided not to reconsider the motion after 104 nations, including India, voted against such a reconsideration, while 16 voted in favour and 34 abstained.
- Moscow’s demand for a secret ballot was rejected after 107 UN member states, including India, voted in favour of a recorded vote.
- Only 13 nations voted in favour of Russia’s call for a secret ballot while 39 abstained. Russia and China were among the countries that did not vote.
- After the motion to hold a recorded vote was adopted, Russia appealed against the ruling of the president of the general assembly.
- The 15-nation UN Security Council had voted on the draft resolution on Illegal So-Called Referenda in Ukraine, hours after Russian President Vladimir Putin in a ceremony in the Kremlin had signed treaties to annex the Ukrainian regions of Luhansk, Donetsk, Kherson and Zaporizhzhia.
- The resolution failed to get adopted as permanent UNSC member Russia vetoed it.
- Of the 15-nation council, 10 nations voted for the resolution and China, Gabon, India, as well as Brazil abstained.
- India has abstained on votes on the Ukraine conflict in the UN General Assembly and the Security Council.
- United Nations resolutions are formal expressions of the opinion or will of United Nations organs.
- A United Nations General Assembly Resolution is a decision or declaration voted on by all member states of the United Nations in the General Assembly.
- General Assembly resolutions usually require a simple majority (50 percent of all votes plus one) to pass.
- However, if the General Assembly determines that the issue is an “important question” by a simple majority vote, then a two-thirds majority is required;
- “important questions” are those that deal significantly with the maintenance of international peace and security, admission of new members to the United Nations, suspension of the rights and privileges of membership, the expulsion of members, operation of the trusteeship system, or budgetary questions.
- Although General Assembly resolutions are generally non-binding towards member states.
Consensus vs unanimity
In the GA, a decision made by consensus does not require a vote. A unanimous decision is a decision on which all Member States present vote the same way
GA resolutions and GA decisions
- GA resolutions and GA decisions have the same legal status.
- GA resolutions reflect the views of the Member States, provide policy recommendations, assign mandates to the UN
- Secretariat and the subsidiary bodies of the GA and decideon all questions regarding the UN budget.With the exception of decisions regarding payments to theregular and peacekeeping budgets of the UN, GA resolutions/decisions are not binding for Member States. The implementation of the policy recommendations contained in resolutions/decisions is the responsibility of each Member State.Most resolutions are recurrent, i.e., they are adopted everyyear or in a multi-year rhythm under the same agenda item.GA decisions are divided into “elections” and “otherdecisions.” Most “other decisions” pertain to proceduralquestions and are generally very short
- A draft resolution/decision can be adopted by consensus or by a vote. Decisions in the GA are taken by simple majority or by a two-thirds majority.
The GA Rules of Procedure list “important questions” requiring a two-thirds majority:
- maintenance of international peace and security
- the admission of new members
- the suspension and expulsion of members
- all budgetary questions.
The GA decides by a simple majority to include additional issues among the “important questions.” A majority is calculated based on the number of “members present and voting” (i.e., casting an affirmative or negative vote).
United Nations General Assembly (UNGA):
- The General Assembly is the main deliberative, policymaking and representative organ of the UN.
- All 193 Member States of the UN are represented in the General Assembly, making it the only UN body with universal representation.
- The President of the General Assembly is elected each year by assembly to serve a one-year term of office.
India gets the 4th set of Swiss bank account details of its nationals and organisations as part of an annual information exchange–AEOI 2022.
- Switzerland has shared particulars of nearly 34 lakh financial accounts with 101 countries (with the 74 of these 101 countries, the information exchange was reciprocal).
- The information shared about Swiss bank account holders includes their name, address, country of residence, and tax identification number, among other details.
- It aims to bring in transparency and restrict money laundering.
Automatic Exchange Of Information (AEOI):
- Automatic Exchange of Information (AEOI) provides for the exchange of non-resident financial account information with the tax authorities in the account holder’s country of residence. It reduces the possibility of tax evasion.
- AEOI is the exchange of information between countries without having to request it.
- The guidelines and parameters for the AEOI are set by the Paris-based international body, the Organisation for Economic Co-operation and Development (OECD).
- In 2014, the OECD developed the Common Reporting Standard (CRS) which allows every country to obtain data from Financial Institutions (FIs) and “automatically” exchange it with countries with which AEOI agreements are in order every year.
- According to the OECD’s guidelines, no details of the quantum of funds or the names of account holders are to be published.
- The annual exercise of AEOI exchange is strictly meant for “tax only” purposes.
- The information is kept under the custody of and for action by the Central Board of Direct Taxes (CBDT).
- India presently shares bulk financial and banking information with 78 countries and receives the same from 107 countries.
- CBDT set up a network of Foreign Asset Investigation Units (FAIUs) in 14 of its investigation wings, to which the information of that region which has reached India via the AEOI route is transmitted in a secure manner.
- It is the FAIUs that do the follow-up probe of the FI data, and to begin with, investigate whether the taxpayer has declared the foreign bank account/s in tax returns or not.
- India and Switzerland have entered into an Automatic Exchange Of Information (AEOI) agreement in January 2018.
- The first such exchange with India took place in 2019.
The Reserve Bank of India (RBI) has allowed asset reconstruction companies to act as resolution applicants under the Insolvency and Bankruptcy Code (IBC).
- ARCs can now operate as resolution applicants, which is not allowed under the SARFAESI Act.
- To qualify as an RA, the companies need to have a minimum net owned fund of ₹1000 crore and a board-approved policy to take up the role of an applicant.
- It should have a committee comprising a majority of independent directors for submitting resolution plans under the IBC
- The ARCs should also make additional disclosures in their financial statements on assets acquired under IBC.
- Non-complying ARC shall be subject to supervisory action, including prohibition on undertaking incremental business till it reaches the required minimum NOF
- RBI has also raised the minimum capital requirement for setting up ARCs to ₹300 crore from the existing ₹100 crore
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act of 2002
- The act was framed in order to address the problem of Non-Performing Assets (NPAs) or bad assets of banks/financial institutions through different mechanisms.
- It allows only secured creditors (lenders whose loans are backed by a security such as mortgage) to take possession over a collateral security if the debtor defaults in repayment.
- After giving a notice period of 60 days to the defaulting borrower, banks/financial institutions can:
- take possession of the pledged assets of the borrower,
- take over the management of such assets,
- appoint any person to manage them or
- ask debtors of the borrower to pay their dues too, with respect to the asset.
- The act provides procedure for registration and regulation of asset reconstruction companies (ARC) and allows them to carry out the business of :
- Asset reconstruction:
- It is the activity of converting a NPAs or bad assets into performing assets.
- The ARCs can acquire financial assets (NPAs) from banks and try to recover dues through measures such as:
- the proper management of the business of the borrower, by changing or taking over the management
- the sale or lease of a part or whole of the business
- rescheduling of payment of debts payable etc.
- It is the process of conversion of existing loans into marketable securities by ARCs through issue of security receipts.
- Creation of a Central Registry: by the Central Government for the purposes of registration of transaction of securitization and reconstruction of financial assets and creation of security interest.
- Application against measures to recover secured debts:
- can be filed by borrowers/lenders with Debt Recovery Tribunal (with appeal to Debts Recovery Appellate Tribunal) established under Recovery of Debts due to Banks and Financial Institutions Act, 1993.
- Provisions of this Act not applicable to:
- any security interest created in agricultural land
- any case in which the amount due is less than twenty percent of the principal amount and interest
- any security interest for securing repayment of any financial asset less than one lakh rupees.
- Thus, the Act provides three alternative methods for recovery of non-performing assets, namely:
- Securitisation-Securitization is the practice of pooling together various types of debt instruments (assets) such as mortgages and other consumer loans and selling them as bonds to investors.
- Asset Reconstruction-Asset reconstruction is the activity of converting a bad or non-performing asset into performing asset with the help of Asset reconstruction companies.
- Enforcement of Security without the intervention of the Court-If the borrower defaults, the bank may enforce security interests by:
- Take possession of the security;
- Sale or lease or assign the right over the security;
- Appoint Manager to manage the security;
- Ask any debtors of the borrower to pay any sum due to the borrower.
Asset reconstruction companies (ARCs)
- Asset reconstruction is defined as the acquisition of banks/financial institutions right or interest in any financial assistance by an ARC for realization of such financial assistance.
- ARCs or bad banks are the specialized agencies which facilitate bad loan resolution for banks by buying the debtors of the bank at a mutually agreed value and attempting to recover the debts or associated securities by itself; making its own profit by selling the loan at a price higher than what it paid to acquire the loan.
- In India, ARCs are incorporated under the Companies Act and registered with RBI under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI), Act 2002.
- ARCs need to maintain a minimum NOF (Net Owned Fund) of Rs 100 crore (raised to 300 cr) and a capital adequacy ratio of 15% of its risk weighted assets.
- Asset Reconstruction Company (India) Ltd or Arcil, was the first ARC of India set up in 2002 by four banks SBI, ICICI Bank, PNB and IDBI Bank.
|SARFAESI vs IBC|
The auto sector is testing many new technologies to reduce carbon emissions. Flex fuel is one technology that has gained currency
What are flex fuel vehicles?
- Like traditional vehicles, flex fuel vehicles have an internal combustion engine, but instead of regular petrol, it can run on blended fuel—petrol with ethanol or methanol.
- The ethanol mix can vary between 20% and 85%.
- India has set a target of 20% blending rate for 2025.
- An FFV is a modified version of vehicles that could run both on gasoline and doped petrol with different levels of ethanol blends.
- The vehicle has additional sensors and different programming of the engine control module to assess the blend of the fuel and adjust accordingly.
- Unlike electric hybrid vehicles, no bulky parts need to be added to the basic gasoline vehicle architecture.
- Upgrading existing vehicles to run on high blends of ethanol fuel, however, is possible but expensive and not considered feasible.
Disadvantages/challenges of using FFVs:
- Customer acceptance will be a major challenge since the cost of ownership and running cost are going to be very high compared with 100 per cent petrol vehicles.
- Running cost (due to lower fuel efficiency) will be higher by more than 30 percent when run with 100 percent ethanol (E100).
- Flex Fuel Engines cost more as ethanol has very different chemical properties than petrol.
- Ethanol has very low (40 per cent) Calorific value as compared to Gasoline, very High Latent heat of vaporization causing cooling of charge/combustion etc.
- Ethanol also acts as a solvent and could wipe out the protective oil film inside the engine thereby could cause wear and tear.
Flex Fuel Strong Hybrid Electric Vehicles (FFV-SHEV):
- When flex fuel vehicles-FFV is integrated along with strong hybrid electric technology, it is referred to as FFV-SHEVs.
- Strong hybrid is another term for full hybrid vehicles, which have the capability to run solely on either electric or petrol modes.
- In contrast, mild hybrids cannot run purely on one of these modes and use the secondary mode merely as a supplement to the main mode of propulsion.