The Hindu Business Line : Pitfalls in transition to new legislation

India Inc today faces unprecedented changes in the legal environment. In principle, enacting a fresh Act to replace an outdated legislation is good. However, the big challenge is the smooth transition from the current Act to a new legislation. Necessary safeguards to provide grandfathering of various concessions given and for smooth completion of the existing proceedings under the old legislation have to be in place.

Replacement of the MRTP Act with the Competition Act is the first of the changes that has taken place. If the enforcement of the changeover provision is anything to go by, the corporate world has every reason to feel queasy.

Competition Act

To understand this better, let’s look at the sequence of events: Parliament constituted a committee under the chairmanship of S.V.S. Raghavan in 1999 to work on the new Competition Act, and after evaluation by a Standing Committee, the new Act was passed in 2002. However, because of various intervening litigations, the 2002 Act was amended in 2007 and was implemented from only this September. Within two months of its implementation, an Ordinance to amend some of the critical provisions for smooth changeover was passed without any public debate.

As per the Act, the MRTP Commission was given two years to complete all pending proceedings. This transition period will ensure the efforts and time spent by the Commission and the corporates is not wasted. In fact, this provision was brought in by the 2007 amendments to the Competition Act based on the debate that took place before passing of this Bill by Parliament. Now, the Government has done away with the transition period of two years through an Ordinance. As a result, effective October 14, all proceedings under the MRTP Commission as well as the cases referred to the Director-General will come under the purview of the Competition Tribunal, which is an abnormal legal process. Tribunals are supposed to deal with appeals after a detailed review by the Commission, which is also the structure proposed under the Competition Act for new proceedings.

The sudden withdrawal of the changeover period, within two months of the new law’s implementation, has put the corporate world in a quandary. Also, the process of amendments through Ordinance within a short time of passing the law, that too after elaborate consultation with the Standing Committee, is neither fair or democratic .

If such ad hoc views are taken in implementing new legislation, companies will not only find it difficult to cope with the transition to new laws but will also incur additional costs by way of duplication of legal processes/procedures.

To have a more transparent legal environment, change of law through Ordinance should follow well-laid down procedures and processes.

Exceptions notwithstanding, the Government must ensure adequate time for discussions and feedback before enacting an Ordinance, which will enable it to take a balanced view. Also, in principle, there should be sufficient time lag between enactment of an Act and amendment through Ordinance.

In addition to addressing the confusion created by the Ordinance on migrating from MRTP to the Competition Act, one hopes the Government will enable smooth transition in respect of other pieces of legislation such as the Direct Taxes Code, GST and the new Companies Bill.

(The author is a Corporate Advisor.)

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