Daily Current Affairs : 26th September 2020

Daily Current Affairs for UPSC CSE

  1. Lok Adalat
  2. ‘Faceless Income Tax Appeals’ system
  3. Asian Infrastructure Investment Bank (AIIB)
  4. Retrospective Taxation
  5. Facts for Prelims

1 . Lok Adalats

About Lok Adalat

  • Lok Adalat is one of the alternative dispute redressal mechanisms, it is a forum where disputes/cases pending in the court of law or at pre-litigation stage are settled/ compromised amicably. 
  • Lok Adalats have been given statutory status under the Legal Services Authorities Act, 1987
  • NALSA along with other Legal Services Institutions conducts Lok Adalats. 

Decree of Lok Adalat

  • Under the Legal Services Authorities Act, 1987, the award (decision) made by the Lok Adalats is deemed to be a decree of a civil court and is final and binding on all parties and no appeal against such an award lies before any court of law. 
  • If the parties are not satisfied with the award of the Lok Adalat though there is no provision for an appeal against such an award, but they are free to initiate litigation by approaching the court of appropriate jurisdiction by filing a case by following the required procedure, in exercise of their right to litigate.

No Court Fee

  • There is no court fee payable when a matter is filed in a Lok Adalat. If a matter pending in the court of law is referred to the Lok Adalat and is settled subsequently, the court fee originally paid in the court on the complaints/petition is also refunded back to the parties. 

Members of the Lok Adalats

  • The persons deciding the cases in the Lok Adalats are called the Members of the Lok Adalats, they have the role of statutory conciliators only and do not have any judicial role; therefore they can only persuade the parties to come to a conclusion for settling the dispute outside the court in the Lok Adalat and shall not pressurize or coerce any of the parties to compromise or settle cases or matters either directly or indirectly. 
  • The Lok Adalat shall not decide the matter so referred at its own instance, instead the same would be decided on the basis of the compromise or settlement between the parties. 
  • The members shall assist the parties in an independent and impartial manner in their attempt to reach amicable settlement of their dispute.

Nature of Cases to be Referred to Lok Adalat

  • Any case pending before any court.
  • Any dispute which has not been brought before any court and is likely to be filed before the court.
  • Provided that any matter relating to an offence not compoundable under the law shall not be settled in Lok Adalat.

Levels and Composition of Lok Adalats:

At the State Authority Level –

  • The Member Secretary of the State Legal Services Authority organizing the Lok Adalat would constitute benches of the Lok Adalat, each bench comprising of a sitting or retired judge of the High Court or a sitting or retired judicial officer and any one or both of- a member from the legal profession; a social worker engaged in the upliftment of the weaker sections and interested in the implementation of legal services schemes or programmes.

At High Court Level –

  • The Secretary of the High Court Legal Services Committee would constitute benches of the Lok Adalat, each bench comprising of a sitting or retired judge of the High Court and any one or both of- a member from the legal profession; a social worker engaged in the upliftment of the weaker sections and interested in the implementation of legal services schemes or programmes.

At District Level –

  • The Secretary of the District Legal Services Authority organizing the Lok Adalat would constitute benches of the Lok Adalat, each bench comprising of a sitting or retired judicial officer and any one or both of either a member from the legal profession; and/or a social worker engaged in the upliftment of the weaker sections and interested in the implementation of legal services schemes or programmes or a person engaged in para-legal activities of the area, preferably a woman.

At Taluk Level –

  • The Secretary of the Taluk Legal Services Committee organizing the Lok Adalat would constitute benches of the Lok Adalat, each bench comprising of a sitting or retired judicial officer and any one or both of either a member from the legal profession; and/or a social worker engaged in the upliftment of the weaker sections and interested in the implementation of legal services schemes or programmes or a person engaged in para-legal activities of the area, preferably a woman.

National Lok Adalat

  • National Level Lok Adalats are held for at regular intervals where on a single day Lok Adalats are held throughout the country, in all the courts right from the Supreme Court till the Taluk Levels wherein cases are disposed off in huge numbers. 
  • From February 2015, National Lok Adalats are being held on a specific subject matter every month.

Permanent Lok Adalat

  • The other type of Lok Adalat is the Permanent Lok Adalat, organized under Section 22-B of The Legal Services Authorities Act, 1987. 
  • Permanent Lok Adalats have been set up as permanent bodies with a Chairman and two members for providing compulsory pre-litigative mechanism for conciliation and settlement of cases relating to Public Utility Services like transport, postal, telegraph etc. 
  • Even if the parties fail to reach to a settlement, the Permanent Lok Adalat gets jurisdiction to decide the dispute, provided, the dispute does not relate to any offence. 
  • The Award of the Permanent Lok Adalat is final and binding on all the parties. 
  • The jurisdiction of the Permanent Lok Adalats is upto Rs. Ten Lakhs
  • The Lok Adalat may conduct the proceedings in such a manner as it considers appropriate, taking into account the circumstances of the case, wishes of the parties like requests to hear oral statements, speedy settlement of dispute etc.

Mobile Lok Adalats

  • Mobile Lok Adalats are also organized in various parts of the country which travel from one location to another to resolve disputes in order to facilitate the resolution of disputes through this mechanism.

Powers of Lok Adalats

Lok Adalats under the Legal Services Authorities Act,1987 has the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 while trying a suit in respect of the following matters, namely:

  • The summoning and enforcing the attendance of any witness and examining him on oath;
  • The discovery and production of any document;
  • The reception of evidence on affidavits;
  • The requisitioning of any public record or document or copy of such record or document from any court or office; and
  • Such other matters as may be prescribed.

Benefits of Lok Adalats

  • As there is no court fee and even if Court fee is already paid the amount is refunded if the dispute is settled at Lok Adalat according to the rules. Thus, Lok Adalats provide easy access to justice for all.
  • The basic features of Lok Adalat are the procedural flexibility and speedy trial of the disputes. There is no strict application of procedural laws like Civil Procedure Code and Evidence Act while accessing the claim by Lok Adalat.
  • In a Lok Adalat, the parties to the dispute can directly interact with the Judge through their Counsel which is not possible in Regular Courts of Law.
  • The award by the Lok Adalat is binding on the parties and it has the status of a decree of a Civil Court and it is non- appealable which does not cause the delay in the settlement of disputes finally.   
  • Lok Adalats are boon to the litigating public, they can get their disputes settled fast and free of cost amicably.

2 . ‘Faceless Income Tax Appeals’ system

Context: The ‘Faceless Income Tax Appeals’ system which seeks to honour honest taxpayers of the country and promote transparency in tax collection has come into operation.

Covered under : August 15th Daily Current Affairs

3 . Systemically Important Insurers (D-SIIs)

Context: The Insurance Regulatory and Development Authority of India (IRDAI) has identified the Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC) and The New India Assurance Co. as Domestic Systemically Important Insurers (D-SIIs) for 2020-21.

Domestic Systemically Important Insurers (D-SIIs)

  • Domestic Systemically Important Insurers (D-SIIs) refer to insurers of such size, market importance and domestic and global inter connectedness whose distress or failure would cause a significant dislocation in the domestic financial system. 
  • D-SIIs are perceived as insurers that are ‘too big or too important to fail’ (TBTF).

Importance of D-SIIs

  • The D-SIIs are critical for the uninterrupted availability of insurance services to the national economy.

Parameters used for the identification of D-SIIs

Insurance Regulatory and Development Authority of India (IRDAI) has developed a methodology for identification and supervision of D-SIIs

  1. the size of operations in terms of total revenue, including premium underwritten and the value of assets under management;
  2. global activities across more than one jurisdiction;
  3. lack of substitutability of their products and/or operations; 
  4. interconnectedness through counterparty exposure and macro-economic exposure.


  • This move will help in raising the level of corporate governance
  • It will help in identifying all relevant risk and promote a sound risk management culture.

3 . Asian Infrastructure Investment Bank (AIIB)

Context: Out of the $20 billion in loans issued by the Beijing-based Asian Infrastructure Investment Bank (AIIB), about $6 billion has gone to India.

How has the AIIB been involved in infrastructure projects in India so far?

  • AIIB has supported pipeline projects worth $5 billion in India. AIIB is planning to add another $1 billion in these projects by next year.
  • AIIB is also supporting projects like the Chennai Metro Corridors 4 and 5 and Chennai Peripheral Ring Road, which are at an advanced stage, and the Grand Anaicut scheme to modernise the canal system in the Cauvery delta region which  is being prepared with the government of Tamil Nadu, which will help save almost 20% of water leakages.
  • The Delhi-Meerut Regional Rapid Transit System is a high-speed rail that will reduce travel time from 3-4 hours to within one hour. This is being co-financed with the Asian Development Bank.
  • AIIB has also announced a $750 million loan to India for COVID-19 assistance. 

Other projects which are being considered

  • There are at least two regular investment projects which AIIB can take up to the Board in the next 2-3 months. One is a power transmission line project in Assam which is around $300 million, and the other is the Delhi-Meerut high speed rail which is $500 million.
  • AIIb is also considering two cities in Punjab, Amritsar and Ludhiana, for water supply municipal rejuvenation projects.

Read More : About AIIB

4 . Retrospective Taxation

Context : Permanent Court of Arbitration at The Hague ruled that India’s retrospective demand of Rs 22,100 crore as capital gains and withholding tax imposed on the British telecommunication company for a 2007 deal was “in breach of the guarantee of fair and equitable treatment”. The court has also asked India not to pursue the tax demand any more against Vodafone Group.

What is the case?

  • In May 2007, Vodafone had bought a 67% stake in Hutchison Whampoa for $11 billion. This included the mobile telephony business and other assets of Hutchison in India.
  • In September that year, the India government for the first time raised a demand of Rs 7,990 crore in capital gains and withholding tax from Vodafone, saying the company should have deducted the tax at source before making a payment to Hutchison.
  • Vodafone challenged the demand notice in the Bombay High Court, which ruled in favour of the Income Tax Department. Subsequently, Vodafone challenged the High Court judgment in the Supreme Court, which in 2012 ruled that Vodafone Group’s interpretation of the Income Tax Act of 1961 was correct and that it did not have to pay any taxes for the stake purchase.
  • The same year, the then Finance Minister, the late Pranab Mukherjee, circumvented the Supreme Court’s ruling by proposing an amendment to the Finance Act, thereby giving the Income Tax Department the power to retrospectively tax such deals. The Act was passed by Parliament that year and the onus to pay the taxes fell back on Vodafone. The case had by then become infamous as the ‘retrospective taxation case’.
  • The ruling in favour of Vodafone signals a setback for the country’s retrospective taxation policies. It also raises the possibility of other cases under arbitration being decided on similar lines.

What is retrospective taxation?

  • As the name suggests, retrospective taxation allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed.
  • Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes. While governments often use a retrospective amendment to taxation laws to “clarify” existing laws, it ends up hurting companies that had knowingly or unknowingly interpreted the tax rules differently.
  • Apart from India, many countries including the US, the UK, the Netherlands, Canada, Belgium, Australia and Italy have retrospectively taxed companies, which had taken the benefit of loopholes in the previous law.

What happened after India passed the retrospective taxation law?

  • Once Parliament passed the amendment to the Finance Act in 2012, the onus to pay the taxes fell back on Vodafone. The amendment was criticised by investors globally, who said the change in law was “perverse” in nature.
  • “The retrospective amendment that overturned the decision of the highest court of the land was badly drafted in its wide generalities and carried a perverse sense of vindictiveness,” said Nigam Nuggehalli, Dean of the School of Law at BML Munjal University.
  • Following international criticism, India tried to settle the matter amicably with Vodafone, but was unable to do so. After the new NDA government came to power, it said it would not create any fresh tax liabilities for companies using the retrospective taxation route.
  • By 2014, all attempts by the telco and the Finance Ministry to settle the issue had failed. Vodafone Group then invoked Clause 9 of the Bilateral Investment Treaty (BIT) signed between India and the Netherlands in 1995.

What is the Bilateral Investment Treaty?

  • On November 6, 1995, India and the Netherlands had signed a BIT for promotion and protection of investment by companies of each country in the other’s jurisdiction.
  • Among the various agreements, the treaty had then stated that both countries would strive to “encourage and promote favourable conditions for investors” of the other country. The two countries would, under the BIT, ensure that companies present in each other’s jurisdictions would be “at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other”.
  • While the treaty was between India and the Netherlands, Vodafone invoked it as its Dutch unit, Vodafone International Holdings BV, had bought the Indian business operations of Hutchinson Telecommunicaton International Ltd. This made it a transaction between a Dutch firm and an Indian firm.
  • The BIT between India and the Netherlands expired on September 22, 2016.

What did the Permanent Court of Arbitration at The Hague say?

  • One of the major factors for the Court of Arbitration to rule in favour of Vodafone was the violation of the BIT and the United Nations Commission on International Trade Law (UNCITRAL).
  • In 2014, when the Vodafone Group had initiated arbitration against India at the Court of Arbitration, it had done so under Article 9 of the BIT between India and the Netherlands.
  • Article 9 of the BIT says that any dispute between “an investor of one contracting party and the other contracting party in connection with an investment in the territory of the other contracting party” shall as far as possible be settled amicably through negotiations.
  • The other was Article 3 of the arbitration rules of UNCITRAL, which, among other things, says that “constitution of the arbitral tribunal shall not be hindered by any controversy with respect to the sufficiency of the notice of arbitration, which shall be finally resolved by the arbitral tribunal”.
  • In its ruling, the arbitration tribunal also said that now since it had been established that India had breached the terms of the agreement, it must now stop efforts to recover the said taxes from Vodafone.

5 . Facts for Prelims

G – 7 Countries

  • The G-7 or ‘Group of Seven’ are Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States
  • It is an intergovernmental organisation that was formed in 1975 by the top economies of the time as an informal forum to discuss pressing world issues. 
  • Canada joined the group in 1976, and the European Union began attending in 1977.
  • The G-7 does not have a formal constitution or a fixed headquarters. 
  • The decisions taken by leaders during annual summits are non-binding.
  •  The rise of India, China, and Brazil over the past few decades has reduced the G-7’s relevance, whose share in global GDP has now fallen to around 40%.

Leave a comment

error: Content is protected !! Copying and sharing on Social media / websites will invite legal action