The Hindu Business Line : `Supportive legal system vital for economic growth'

THE Director of National Judicial Academy, Bhopal, Dr N.R. Madava Menon, has said that a supportive legal framework and a regulatory mechanism can help in the economic development of the nation.

He was delivering the Foundation Day lecture on "Law and economic development in a globalising environment" at the corporate office of Corporation Bank here today.

Dr Menon said that legal instruments such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 and the Competition Act 2002 have provided a framework for healthy economic development.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act is a bold step to devise innovative legal instruments to sub-serve economic goals. The Act incorporates a multiple action system to enable lenders to take possession of assets of defaulting borrowers and dispose them of, he said. The Act also enables the establishment of an asset reconstruction company and transfer of non-performing assets to it for appropriate disposal and realisation of proceeds for enforcement of security interest without intervention of normal courts.

He said that the Competition Act 2002 aims to curb anti-competitive agreements, prohibits abuse of dominant position by companies, and regulates controlling group of companies or combination of enterprises through acquisition, merger or amalgamation. The Competition Commission is a powerful institution to bring about economic outcome through free market processes, he said.

The Acts such as Foreign Exchange Management Act, the Prevention of Money Laundering Act, the Patent Act and the Securities and Exchange Board of India Act have led to "new economic reforms", he said.

Dr Menon said that new independent regulatory systems with quasi-judicial powers are now being evolved to negotiate economic development while keeping the system within the framework of Constitution and the law.

For a transitional economy like India, independent regulatory mechanisms with market and government participation are better suited.

The Telecom Regulatory Authority, the Insurance Regulatory Authority and other such bodies promote development in various sectors of the economy while evolving the principles that are fair, just and reasonable.

He said that international trade under WTO agreements warrants a new brand of inter-disciplinary scholarship of which law and economics are the principal partners. "The marriage of law and economics is good not only for both the disciplines but also to the societal goals they are serving in the development process," Dr Menon said.

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