Month: July

In an attempt to revolutionarise dispute resolution in India that was stalled by the burgeoning traditional Indian Court system and to give contracting parties greater flexibility in choosing their dispute resolution mechanism, India updated its arbitration law in 1996. This was done by replacing the Indian Arbitration Act, 1940 (“1940 Act”) with the Arbitration and Conciliation Act, 1996 (“1996 Act”), which largely adopted the UNCITRAL Model Law on International Commercial Arbitration. The 1996 Act made significant improvements to the existing arbitration regime and has been responsible for the growing popularity of arbitration as the default dispute resolution mechanism in most commercial contracts. While the 1996 Act has been a reasonable effort by the legislature, the judicial interpretation of some of its provisions have made this “alternate” dispute resolution mechanism subject to constant (and often time-consuming) interference by the Courts. This has dulled, to some extent, the sheen and attractiveness of arbitration in India.

The two hallmarks of arbitration, at least, from an aspirational point of view, are: (i) the ability of parties to contractually substitute the regular civil courts with a private tribunal comprising of the parties’ chosen adjudicators whose decision has the force of law; (ii) avoidance of the pitfalls and inconvenience of court litigation including cost, delays, lack of subject matter expertise, inflexible venue, etc.

This Article seeks to identify some of the key drawbacks of the arbitration regime in India and the aspirations this author has from the judiciary, suggests solutions to overcome the same, which could possibly help restore the efficacy of arbitration in India over the coming years. By way of disclaimer, I must also acknowledge that this Article does not propose to be an exhaustive critique of arbitration in India but merely seeks to introduce the mostly common issues that are plaguing the Indian arbitration regime.

1. Refusal to uphold the binding nature arbitration agreements

Arbitration, simply put, is the voluntary submission of a present or future dispute by parties to a private tribunal (as opposed to a civil court) consisting of persons chosen either by the parties themselves, or through a procedure agreed upon by the parties, for final and binding adjudication. Once parties have agreed to arbitration as the dispute resolution mechanism for their disputes, they are expected to be bound by such agreement and cannot resort to civil courts for adjudication of such disputes.

This defining character of arbitration, i.e., exclusion of courts by agreement of parties, finds resonance in numerous provisions of the Arbitration Act. For example, section 5 of the 1996 Act declares that once parties have entered into an arbitration agreement for arbitration in India, “no judicial authority shall intervene except where so provided…”

Section 8 goes one step further. It directs every judicial authority before which an action is brought in a matter that is the subject matter of an arbitration agreement to compulsorily refer the parties to arbitration upon the application any of the parties to the arbitration agreement. The Supreme Court too has viewed Section 8 as a legislative mandate on the Courts that leaves Courts with no discretion or choice in matters where parties have already entered into arbitration agreements. In P. Anand Gajapathi Raju & Ors. vs. P. V. G. Raju (Dead) & Ors1. , the Supreme Court has observed that section 8 is “peremptory” in nature and proceeded to hold as follows:

“It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom.”

Section 8 further clarifies that “notwithstanding that an application has been made u/s/s. (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made”. This further reaffirms the emphasis on the primacy given to arbitration. So even if one party initiates proceedings in Court despite entering into an arbitration agreement, the other party would remain entitled to commence arbitration and the arbitral tribunal can proceed to hear the matter even before the Court decides an application for reference to arbitration.

It is also worth noting that section 8 does not apply only to Courts. It applies to all “judicial authorities” before whom a dispute covered by an arbitration agreement is brought. Accordingly, all other authorities performing judicial functions, including tribunals such as the Company Law Board, are intended to be bound by the mandatory language of section 8.

The Scheme of the 1996 Act, and sections 5 and 8 in particular, make it clear that once parties have entered into an arbitration agreement, they will be held to their bargain and the courts will do permit either side to circumvent the arbitration agreement by commencing judicial proceedings instead of arbitration. But this legislative scheme has been somewhat diluted by three sets of decisions of Indian courts that have allowed Courts to retain control over certain kinds of the disputes even in the face of an arbitration agreement.

1.1. Multiple parties and multiple causes of action
In Sukanya Holdings (P) Ltd. vs. Jayesh H Pandya and Anr.2 , the Supreme Court held that:

…there is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators…

…In our view, it would be difficult to give an interpretation to section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act.

By the above ruling, the Supreme Court has created two exceptions to the mandate of section 8. According to the Apex Court, a judicial authority was not required to refer parties to arbitration u/s. 8 when: (i) the claim involves multiple parties, some of whom are not party to the arbitration agreement, or (ii) if only some, but not all of the disputes among the parties are covered by the arbitration agreement.

It is submitted that this case creates an unnecessary exception to the mandate of compulsory arbitration u/s. 8. First, the decision proceeds on the basis that when multiple claims are involved among the same parties, they must necessarily be pursued by way of a single composite legal proceeding. This, however, is not mandated by the either the 1996 Act or the Code of Civil Procedure (CPC). In fact, Order I, Rule 3 of the CPC only permits (but does not require) a plaintiff to join several disputes or causes of action or sue several defendants in the same Suit. Moreover, Order I, Rule 6 of the CPC actually permits the Court to split up a composite suit if the joinder of the multiple causes of action would “embarrass or delay the trial” or “is otherwise inconvenient”.

Secondly, the decision is prone to misuse by parties  that wish to back out of an arbitration agreement. For instance, two contracting parties having several transactions with each other may very often have several disputes and claims against each other, only some of which are covered by an arbitration agreement. A party who is keen on escaping the rigors of arbitration can do so quite easily by merely raising claims that are not covered by the arbitration agreement. Since the Court will not examine the merits of the substantive dispute at the initial stage of determining whether or not the matter should be referred to arbitration, a party can escape arbitration by raising even a frivolous claim that falls outside the scope of the arbitration agreement. Similarly, a person can also avoid an arbitration agreement by cheekily raising claims against other persons who are not party to the arbitration agreement. In fact, a person need not even raise an actual claim against such third parties. He can implead them in the Suit as “proper” parties so long as they have some reasonable connection with the subject matter of the Suit.

1.2.    Matters covered by special laws
It is reasonably well settled across most jurisdictions that a dispute affecting rights in rem (i.e., matters affecting the world at large) cannot be the subject matter of arbitration. So matters involving criminal offences, winding-up of companies or suits for foreclosure of a mortgage are generally considered as matters in which the public at large has an interest and are therefore non-arbitrable. The Supreme Court, however, has extended this logic to certain cases that involve nothing more than the personal rights of the disputing parties and has allowed Courts to interfere even when parties have consensually submitted certain disputes to arbitration.

In Natraj Studios (P) Ltd. vs. Navrang Studios3 and Mansukhlal Dhanraj Jain vs. Eknath Vithal Ogale4, the Supreme Court held that all matters falling within the ju- risdiction of the Small Causes Courts, including disputes between a landlord and tenant and matters between a licensor and licensee relating to recovery of possession, could not be the subject matter of arbitration. The Su- preme Court reasoned that in so far as landlord-tenant and licensor-licensee disputes are concerned, the Small Causes Court was vested with the exclusive jurisdiction to try such cases under the Presidency Small Cause Courts Act, 1882.

Although the above two cases were decided before the 1996 Act came into force, their dicta continues to be followed by the Bombay High Court5. As a result, even when a landlord-tenant or a licensor-licensee enter into  a written agreement to refer all disputes between themselves, including disputes relating to recovery of possession, to arbitration, either party can avoid the arbitration agreement by claiming that the Small Causes Court has exclusive jurisdiction to try such matters.

Presumably, this reasoning can be extended to all matters where designated courts and tribunals have been vested with jurisdiction try certain specific type of cases. In fact, in several cases, the Company Law Board has also taken a similar view and assumed jurisdiction over shareholder disputes even when there was an arbitration clause between the shareholders. For instance, in the case of Rajendra Kumar Tekriwal vs. Unique Construction Pvt. Ltd.6, the Company Law Board held as follows:

“…the test to determine as to whether the matter in a petition u/s. 397 & 398 is to be relegated to arbitration or not, one has to examine whether the allegations  of oppression/mismanagement contained therein can be adjudicated without reference to the terms of the arbitration agreement. In the present case, this Board can examine the allegations purely on the basis of the Articles. If it can be, then the question of referring the matter to arbitration does not arise even if assuming that there is an arbitration agreement and the agreement covers the same matter. In the present case though there is arbitration agreement, the matter relates to oppression and mismanagement directly relating to the rights of or benefit to shareholders in their capacity as members of the company arising out of the provisions of the Act, Articles or on equitable grounds. Assuming that the matters are covered under the arbitration agreement yet, since the same is covered under the Articles also, this Board can determine the allegations only with reference to the Articles and without recourse to the arbitration agreement.”

This line of reasoning, it submitted, not only dilutes one of the objectives of the 1996 Act, viz. to reduce the burden on the judicial system, but also flies in the face of the plain language of section 8. There is nothing in the 1996 Act which suggests that merely because a dispute falls within the exclusive jurisdiction of a special Court or Tribunal, such dispute is incapable of being determined by arbitration. On the contrary, section 8 deliberately uses the words “judicial authority” instead of “civil court”. A reasonable interpretation of section 8, especially in light of the object of the 1996 Act, would suggest that the legislature deliberately used the wider term “judicial authority” to ensure that the section 8 covers all judicial bodies, including special Courts and Tribunals such as Small Causes Court and Company Law Board.

1.3.    Fraud and other complicated matters
The third set of cases, which has further diluted the sanctity of a binding arbitration agreement between the parties, are the decisions where the Court has held that an arbitral tribunal is not equipped to deal with matters involving complicated questions of fact or law or disputes where an allegation of fraud is has been made.

Under the old arbitration law7, the Court was not bound to refer parties to arbitration even when parties had entered into an arbitration agreement. The Court could, for “sufficient reason”, refuse to relegate parties to arbitration and instead decide the dispute itself. But the language of section 8 of the 1996 Act, as explained above, is mandatory and leaves the Court with no discretion.

Despite the clear difference between the provisions of the two legislations, the Madras High Court, in the case of Oomor Sait HG vs. Asiam Sait8, has taken the view that even under the 1996 Act, the Court continues to retain the “time-tested” power of deciding whether or not to refer the dispute before the Arbitrator.

The Supreme Court, in the case of N. Radhakrishnan vs. Maestro Engineers & Ors.9 has upheld this view and held that when there are serious allegations of fraud or malpractices or manipulation of finances such matters cannot be properly dealt with by an Arbitrator. Such issues should, “for the furtherance of justice”, be tried in a court of law which would be “more competent and have the means to decide such a complicated matter…”. This reasoning has been followed in several subsequent cases.

It is submitted that this is an artificial exception that has been carved out despite there being no legislative backing for it under the 1996 Act. In fact, it appears to be a hangover from the early days of judicial mistrust of arbitration when the Courts felt that arbitration, as a means of adjudication, was rife with short-comings10. But this exception creates to the rule that an arbitration agreement is binding on the parties and the Court, creates a virtual black-hole. A party who does not wish to submit to arbitration can  do so by merely raising an allegation of fraud and claiming that such an issue cannot be adjudicated upon by an arbitrator. Unless the Supreme Court changes its view, it would be difficult for any civil Court or High Court take a different view and they would find themselves compelled to ignore the arbitration agreement in every matter where there is an allegation, howsoever far-fetched of fraud.

2.    Pre-arbitration litigation
The other problem plaguing the arbitration regime in India is the lengthy and expensive pre-arbitration litigation that is required when one party (usually the party disputing the claim) refuses to participate in the arbitration process. U/s. 11 of the 1996 Act, if parties to an arbitration are unable to agree on the arbitrators or if one party refuses to participate in the appointment of an arbitrator, then the Chief Justice of the relevant High Court (or his designate) is empowered to appoint the arbitrator.

A plain reading of the section suggests an innocuous procedure whereby designated Judge will perform a routine task of merely naming an arbitrator and relegate the parties to the arbitration by such a court appointed arbitrator. The Supreme Court, however, in the landmark case of SBP has held that the Chief Justice’s power u/s. 11 is not an administrative task that can be carried out summarily but is matter far more exhaustive. The Court has defined the role of the Chief Justice u/s. 11 as follows:

“Obviously, he has to decide his own jurisdiction in the sense, whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appro- priate to leave that question to be decided by the arbitral tribunal on taking evidence, along with the mer- its of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary.”

As a result of the above interpretation given by the Supreme Court, appointment of an arbitrator is by no means a straightforward process. A person who seeks appointment of an arbitrator, is first required to prove through affidavits and detailed arguments the following: (i) existence of a validly executed arbitration agreement; (ii) that the claim is a long dead one; (iii) that there has been no accord or satisfaction. This entails filing of detailed pleadings and exhaustive oral arguments and it could be several months before the High Court makes a decision and appoints an arbitrator. Even if the High Court chooses to exercise its power in favour of arbitration and appoints an arbitrator, this appointment can be challenged by way of a Special Leave Petition before the Supreme Court under Article 136 of the Constitution.

CONCLUSION
The 1996 Act, as it stands today, is a reasonable effort at promoting arbitration. But the manner in which several of its provisions, especially section 8 and section 11, have come to be interpreted by the Courts, somewhat takes away from this effort. It is submitted that as a result of the colour given to these provisions if the 1996 Act by the various rulings of the Supreme Court, the hallmarks of arbitration, viz. mutual agreement to avoid courts, and expeditious decision making, continue to remain aspirational and serious re-thinking is required, preferably judicially, to correct this dichotomy.

The Supreme Court has in the past two years started taking a more liberal view of arbitration and has been less eager to assume control of matters when parties have agreed to exclude the jurisdiction of Indian courts. In the case of BALCO vs. Kaiser Aluminium12 the Supreme Court boldly overruled its long criticised decision in Bhatia International13 and held that Indian Courts have no role to play when the seat of arbitration is outside of India, even if parties or the property in dispute is in India. Furthermore, in World Sport Group vs. MSM Satellite (Singapore) Pte. Ltd.14, the Supreme Court has rejected the contention that an arbitral tribunal is incompetent to deal with allegations of fraud. But since this was a matter relating to an arbitration taking place outside of India, it does not apply to arbitrations held in India, which continue to be governed by the law laid down by the Supreme Court in N. Radhakrishnan’s15 case.

Both these decisions suggest that the Supreme Court has recognised that a strong push is required from the judiciary to correct the gap that exists between the legislative intent and judicial interpretation of Indian arbitration law. It is hoped that the Court continues this trend over the next few years and smoothens out the remaining creases, including the ones highlighted in this Article, by relooking at the law laid down in some of its previous decisions. !

No, you read it right. It was 8th June 2014 and not 8th June 2004. Why people are so excited over something that they should have had at least 10 years ago, befuddles me! Mumbai generates 5% of India’s GDP, but our infrastructure system is in shambles! Roads are potholed, traffic situation is pathetic, trains, buses are unimaginably overcrowded and people spit, shit and litter anywhere, without a care! We have to bribe through our noses to get our work done and we are still struggling to get decent internet connectivity. Above all, every once in five years we are prepared to get attacked by terrorists. We may be an alpha world city, but it is shameful that we are lagging far, far behind our western counterparts. And what’s true for Mumbai, is truer for India.

At 24, me and my generation have become responsible for the future of our country. We have our sights on the global leadership throne, but we have inherited an onerous, corrupt kingdom. Well, since we are intent on becoming world pioneers, we have set out to reform our own nation first; we are going to cleanse it, bring it up-to-date and then lead it.

We have already taken our first steps towards this goal by bringing to power a government that takes our lofty aspirations seriously and is committed to help us achieve it. Together we shall take India to the heights billions before us have dreamt of! And now to war! A war for upliftment of the poor and the illiterate! A war for saving the dignity of our nation! A war against the mediocrities that have far too long plagued our country!

We shall evolve, leaders.

“Achche Din Aane Wale Hain.”
The entire country is gushing over this one statement of divine prophecy. Mere five words have made the stock markets go tipsy. Some are saying that this is the start of a new era for India! This is all very endearing except for the one single problem that I have: Why aren’t the achche din here already?

Our country makes me mad. The oldest civilization in the world and we are still a developing nation! 5,000 years of history that we are proud of, but a shameful present and a stumbling future! 30 crore Indians are illiterate. That is the entire population of the United States of America! 15 crore are poor. That is more than Japan’s entire population. And by the way, the international poverty line is Rs. 90 per day. Which means that when I sponsor dinner to my friends, I spend more in one hour than what my poor brother earns in a month! It is 2014, and India has not been able feed, clothe and house all her citizens. In a completely unrelated story, India has the 6th highest number of billionaires!

While we are talking about citizens, let us take a few questions from the people of my generation.

“Why do I feel scared of getting out of my house alone at 10 in the night even if I stay in the capital of the largest democracy in the world?” asks a 22 year old Delhi resident, Aditi.

“What is electricity? Is it a toy? I have never seen it!” says 8 year old Shivappa who resides in a small village called Makki in Karnataka.

“Why do I have to pay chai-pani everytime I have to get my file removed in the Income Tax Office?” asks 20 year old Rajesh, a budding CA hailing from Patna.

All these questions, my predecessors have left unanswered! And now it is upto me to answer them.

At 24, I have come to a stark realisation that the future of our country has fallen squarely on my and my generation’s shoulders. And we have inherited an outdated, bureaucratic and debauched state from our predecessors. The present government, like each of its forerunners, has promised the sky; but then again, has there ever been a dearth of promises in our land? Where the previous one’s have consistently and cumulatively floundered is backing up those promises with tangible efforts.

The onus therefore to make amends rests completely and unequivocally with my generation. It is now our responsibility to ameliorate the past, augment the present and accelerate the future. And thankfully, all is not lost. Our country still retains the proverbial silver lining in the form of educated and motivated young population, large domestic demand base and high savings rate. Fortunately, these are the exact things we could not have worked without.

Global leaders at everything. That’s what we aim to become. Be it trade or sports or education or technology. We want to edify the next Einstein, build the next Burj Khalifa and grubstake the next Google. We want to outdo China at the Olympics and end tiger poaching. We want to be the next startup hub, the next global tourism hub and the next healthcare hub. We want LTE connectivity in each village and a dream job for each citizen. We want be at the top, of the top.

Naysayers shall complain that we are being immature, materialistic and we don’t know what the realities and the difficulties are. No offence sir, but we don’t care. Yes, it is a steep, treacherous road. It is going to be a dogfight and we know it. But we don’t just dare to dream, we dare to live our dreams. Frankly, it is not just our dream. Billions before us had the same vision. But we shall be the torchbearers to an advanced Indian state!

Chris Gardener, the motivational American entrepreneur wrote that “if you don’t take the necessary steps to make them happen, dreams are just mirages that mess with your head!”. We have already taken the first steps towards achieving our dream! Over 2 crore first timers, 18 and 19 year olds, a record participation, voted for the rehabilitation and reform of the Indian economy. We voted for CHANGE. We voted for a government with a track record of fulfilling promises. And believe you me, we require this government to make good on some pretty big promises.

Our first mandate to this government is that they need to very clearly understand that they are a government to my generation. We are an impatient bunch of people. We have an attention span of 140 characters or lesser, so we’d be grateful if you make your point quickly. We are practical and result oriented. We value guidance, but we value quantifiable efforts more; what we don’t value is futile vote bank politics and bureaucratic processes. We are motivated to achieve our goal and we require you to be equitable enablers so that we can partner in making India the global superpower it should be!

To play out your role of being facilitators of growth, progress and development, we have a four point agenda where the government needs to immediately ring in definitive reforms. Special focus needs to be given to rural areas – where most our country’s resources reside.

Infrastructure
While we may live in a modern day society, our infrastructure is severely medieval. How else would it be possible that almost 25% of our population lives without electricty! Why is agriculture still dependent on natural rainfall and animal resources? The infrastructure sector is the backbone of all investments into our country, therefore it is critical that this sector gets the much needed shot in the arm.

Transportation, energy, telecommunication, education and healthcare are amongst the most vital sectors requiring impetus. All the villages have to be connected by a network of roadways, railways and basic amenities like electricity and water. Innovative automation, especially in the agriculture industry, e.g. computer controlled ploughing or schemes like ‘e-Choupal’ which empower the farmers needs to be introduced. The new government has to reduce bureaucracy and usher adequacy, accessability and reliability to strengthen investor confidence.

Education
Education system today, is down in the dumps. It is unequipped, outdated and ridiculously inadequate. Just to give a perspective, children born today shall retire in the year 2080! Is it even distantly possible for us to provide them with the skills to survive and thrive that long? Al- ready today, there is a sharp disconnect between the educated skills and employable skills.
The need of the hour is to reengineer our education curriculum so as to embed employability into courses and forge stronger links between business and academia. Teacher education system has to be rebuilt, grounds up. Partnering with foreign institutions offering specialisation programmes shall upgrade the Indian education system to global standards. It is imperative for the new govern- ment to increase spending on education to 5% of GDP.

CORRUPTION
With the parallel economy running at $ 700 billion per year or 40% of our GDP, corruption is the biggest reason for inequitable wealth distribution in our country. It is literally killing our nation. Unfortunately, the canker doesn’t stop at illicit monetary transactions. Our biggest cause of worry is the corruption of moral and ethical values.

The new government has to put an end to corruption. Immediately. Permanently. Stringent anti-corruption framework and comprehensive education to impart discipline consistent with a national code of conduct for good citizenship shall act as strong deterrents to corruption. Policy makers may implement the Nordic model of governance which practically eradicated corruption in some developed Scandinavian countries. But most of all, Indian citizens need to realise that corruption can only be completely evicted from within, not without.

ECONOMY AND GOVERNANCE
Our economy is dithering due to high levels of inflation, instable currency and the alarming levels of fiscal deficit. The zooming stock markets are nothing but a heightned sense of exuberance, the fundamentals beneath the dizzy heights are yet to improve. Also, with only 3% of the entire population paying taxes, the government has to take some hard calls to increase public revenues, improve economic factors and bring sanity back to the land.

Softer issues like casteism, communal disharmony, gender inequality and rampant crime are still affecting our society Despite living in the 21st century it is deplorable that a woman is raped every 20 minutes in India. We, as a society, are self-conceited megalomaniacs. Freedom of expression is trampled on regularly and intolerance is  an instinct embedded deep within the Indian psyche. It has become necessary now to attack this malaise from  a national platform. Women empowerment has to be a agenda item. Implementation of radical and stringent penal practices has become a necessity. Governance has to be redefined to mean Minimum government, Maximum governance!

HOW CAN CHARTERED ACCOUNTANTS HELP?
While as a member of Young India I am responsible to contribute towards India’s growth and progress, being a qualified chartered accountant makes me doubly account- able to achieve my generation’s goal for India. Our qualification gives us the skills and the access to almost any industry we choose. It charges us with the responsibility of being ombudsmen to our society to ensure enhanced transparency and accountability. But how do we dispose these responsibilities? What measures do we take to en- sure that CAs are at the forefront of all professionals?

Contributing towards rural and semi urban development Growing investment in agriculture, relocation of manufac- turing base to tier II and tier III cities and acceptance of the concept of inclusive growth shall generate consider- able requirement of financial administration, risk manage- ment, tax planning, accountancy, legal advice and better governance in rural and semi urban areas. The time is ripe for CAs to increasingly set up proprietorships and partnership firms here. We can assist the local panchay- ats in areas of governance, taxation and finance planning. One more area of contribution may be compliance to the latest Corporate Social Responsibility provisions, where- by companies shall be able to uplift rural and backtroden areas.

CONTRIBUTING TOWARDS GLOBALISATION
According to a United Nations Conference on Trade and Development (UNCTAD) survey in 2012, India is the second most important foreign direct investment (FDI) destination for transnational corporations after China. Further, the new government’s focus on improving strategic ties with key foreign powers and its determination to simplify the investment process shall propel FDIs in our country.

There is therefore, a burgeoning requirement of CAs in the areas of double taxation avoidance, transfer pricing and corporate laws. IFRS, sustainability reporting, UK Bribery Act and SOX are also becoming a compliance necessity for Indian multinational conglomerates. Specialising in these areas shall help us better align with these requirements and supplement the global India case.

CONTRIBUTING TOWARDS AUTOMATION
Technology is slowly permeating and disrupting every sphere of business. The risk landscape of various sectors like banking, insurance, capital markets, telecommunication, etc. has undergone a paradigm shift with increased dependence on internet and technology. Also, with the proliferation of Enterprise Resource Planning (ERP) solutions, organisations today have lesser control over data integrity, privacy and reliability. There is an urgent need for CAs to enhance their risk management expertise by equipping themselves with skills necessary for identification, assessment and mitigation of IT risks.

CONTRIBUTING TOWARDS CEASING CORRUPTION IN INDIA
Being CAs we are always precariously treading the thin line between tax evasion and tax planning. Similarly, cor- porations today are always trying new ways to ‘improve’ their financial statements. It is imperative therefore, that we ensure real compliance with various provisions of the taxation laws and reporting standards, that we steadfastly uphold our ethical values and moral standards and ensure that we neither allow nor abet any act of malfeasance.

Public and government sector have recently been riddled with scams like 2G and Commonwealth. CAs have to ensure transparency, by making the government accountable towards the country and its citizens for the utilisationof citizens funds through exhaustive public audits.

CONTRIBUTING TO ENTREPRENEURSHIP

Our nation is becoming increasingly entrepreneurial. There has been a huge spurt in the number of startups in the recent years and the trend is going to be an up- swing. With a huge demand for support areas like market research, venture funding, financial modeling or business value chain implementation, CAs have to hone the skills they already have to be at the forefront of this bull wave!

THE NEED TO REINVENT OURSELVES

It is evident that there is a lot of opportunity for us, CAs,to make our mark in India’s next decade of advancement. However, it is now inevitable that we reinvent who we are! Whether in practice or industry, we can no longer solely remain financial stakeholders of companies. We have to become business stakeholders!

It’s going to be an uphill task, history and tradition are against us, but it can be achieved. What we need is a catharsis! A step back to realign our interests with those of our nation. We need to innovate some of the core elements of our present day qualification so as to make it more attuned to the present day scenario. For instance,
•    The current curriculum and the examination pattern needs to be revisited. Inputs should be drawn from industry, practices and international institutes so that the curriculum ensures employability and equips our students to have an equal standing with their global counterparts. Special attention should be awarded to cross functional training since today, MBAs, cost accountants, financial analysts, etc. have started replacing CAs, even in core areas like finance and taxation.

•    Is an audit firm oriented articleship the only option for practical training? Why can’t students gain industrial training for the entirety of their tenure from some of the top companies of India? We need to realize that the students have two diets of careers to choose from, practice firms and industry. It is imperative that a solution is derived for the blinkered audit based training approach.

•    Partnering with foreign institutions has become the need of the hour. With CA students opting for multiple degrees, the institute should ensure that the skills developed by the CA institute are not put to waste. Collaboration, not competition is the way forward. Also, with multiple professional degrees, what matters is that CAs continually update themselves in their area of work and remain relevant. However, it is doubtful whether the present CPE norms ensure continuous education. A bitter pill that needs to be swallowed and worked upon.

•    Most importantly, the ICAI needs to ensure that it remains strongly in control of the central elements of our profession – accountancy, taxation and audit. It needs to retain relevance by producing quality CAs, and work against becoming an exam conducting body generating dignified accountants!

It is imperative therefore, that CAs allineate themselves to the big picture. This nation is now in the hands of a new generation, our generation. Fearless and unafraid, we are the custodians of India’s advanced future. The revolution has already begun. And we will emerge victorious. We shall evolve, leaders!

Achche din are here!

The requirements of a younger nation differ radically from aging countries like Japan or even China, for that matter. By 2020, India is set to become the world’s youngest country with 64% of its population in the working age group. A UN HABITAT report states that while income levels in cities may appear to be higher, the cost of living is also constantly increasing, resulting in shrinking savings, inadequate access to health care and lack of quality education.

And so, I believe that our young, growing country demands a progressive, result-oriented transformation-and a nation that can cater to theaspiration and temperament of the young population. India 10 years from now will be more intelligent, more informed, less tolerant of incompetence and regressive practices. I believe that we are growing more aware as a nation.

I believe that a decade from now, we will be a more transparent, and accountable nation-where change and progress will get more apparent. I don’t believe that a radical transformation would be required-but stable, steady and sustainable growth is more desirable and will perhaps, be delivered.

Dr. APJ Abdul Kalam’s book, 2020 – A Vision for the New Millennium, examines in depth the weakness and the strength of India, as a nation, and offers a vision of how India can emerge to be among the world’s first four economic powers by 2020. This is a goal post that we can all agree, is desirable and on everyone’s agenda.

However, I believe that there is another critical component to development in the country. Inclusive growth and a green economy are the government’s guiding principles for its development agenda. Sustainability-economic, environmental and social can provide a balanced approach to the development of the nation.

The UN Environment Programme’s Green Economy Report demonstrates that green economies are a new engine of growth, generate decent jobs and are vital to eliminating persistent poverty.

And so, while I hope for a stable and progressive country in the decade to come, I also hope that our economic social and environmental goals will align with sustainable ideals.

My Profession
As a Sustainability and Green Building Consultant, I am currently part of some of the most topical conversations with regard to environment, renewable energy, energy efficiency, technology etc. Sustainable solutions mean meeting our lifestyle and existential requirements in a manner which is harmonious with the environment and does not jeopardise the future of our existence on this planet.

Sustainability is no longer a buzzword but reflects an indispensability as our survival depends on it. India, aspiring to be an opinion leader and increasingly emerging as one, especially in the aftermath of the recession, needs to be at the vanguard of this movement and lead from the front.
Indians have realised the importance of making their residences compatible with environment, and regulators have also become active. If environmental activists continue to be as vociferous as they are now, I would like to believe that Consulting on Green building will probably have ended-I am going to have to find something else to do! It will be passé, as projects will be designed to be more efficient through inherent design, effective resource consumption and innovative technologies.

I would like to believe that the profession of a sustainability consultants will disintegrate into creating impactful policy level decisions to ensure sustainable growth in the country-regardless of the sector-agriculture, healthcare, real estate etc. I would also like to believe that sustainability consultants can use their experience to think as innovators to solve solutions of environmental degradation- in all fields.

Expectations
Transparency. Responsibility. Accountability. These are the expectations from our government.

We as citizens, understand that we are stakeholders in the issues pertaining to the country’s development and growth. We would like to understand our responsibility and the manner in which progressive policy formulation is done. There needs to be transperancy in this regard.

For this to happen, I believe that governments need to respect and understand the role of sustainability, for growth and superior long term returns. As US President, John F. Kennedy once said, “There are risks and costs to a program of action. But they are far less than the long-range risks of comfortable inaction.”

Organised action toward sustainable growth with measurable outcomes is expected. For example: strategies to manage resources like water, and energy must be measured and regulated in a responsible manner. Corruption with regard to regulation of other natural resources must be stopped. Education at large, and an emphasis on sustainability will allow ups to be equipped for future needs and requirements. Progressive policies on agriculture and even urban farming to mitigate long-term environmental risks and hazards is key. Furthermore, policies that require us to measure, monitor and regulate carbon emissions at large, across all industries and domestic sectors is critical.

The Indian private sector, known for its resilience and entrepreneurship, is ideally placed to lead this movement and the government’s policies in this regard, although not adequate as of now, are at least encouraging and reflect the right intentions. A combination of entrepreneurship and adequate policies has the potential of making India a role model for many to follow and emerge as a true super power, as only a high GDP growth rate is not the sole criterion in today’s scenario to be considered a superpower.

Most importantly, I believe that sustainability needs to be a way of life for it to become a reality. Our present state of excesses and skewed development is against the very grain of sustainable development. It needs to be community driven to not only provide everyone an incentive to be a part of the movement but also ensure equitable distribution of resources. The focus on rural areas is inevitable as two-thirds of the country lives in villages and small towns. They need to be made a part of the movement and made to see the benefits of the same before they are bitten by the ‘so-called development’ bug. The lifestyle and culture of an average person in such areas is conducive to this movement and all these attributes can be dove-tailed to fulfill the needs of Indians in a sustainable manner.

After all, as explained in a quote from Lakota, “We do not inherit the Earth from our ancestors; We borrow it from our children.”

On 26th May 2014, Mr. Modi was sworn in as the 15th Prime
Minister of India. The first steps of the new government have been
positive thus far and irrespective of one’s views on Mr. Modi, there is
an undeniable feeling of optimism about the country and excitement for
the good times to come or as goes the BJP’s election campaign song,
“acchhe din aane wale hain”. One of the key reasons for the victory was
the effective use of social media and the strong focus on development
and good governance in its campaign which allowed the party to reach the
youth in a way never done before. The “Abki baar Modi sarkar” as well
as similar messages flooding the social media space in the months
leading to the election were specifically designed to attract the youth.
Not surprising given that almost 65% of the Indian population is below
the age of 35 today, with India having the largest youth population.
This youth-centric campaign that made development a key agenda also
played a crucial role in India registering its highest ever voter
turnout of 66.4%. The mandate was clear: Focus on the youth to shape
India’s future.

Acknowledging the fact that the future of India
is inextricably linked to the future development of India’s youth, the
Bombay Chartered Accountants’ Society has, in the special issue to its
prestigious Bombay Chartered Accountant Journal, chosen the
theme“Imagining India from the eyes of young professionals”.

A
common question in job interviews is: “Where do you see yourself in the
next 10 years?” While most of us have chartered a path of where we want
our careers to be after 10 years, not many of us have thought, “Where do
I see my country in the next 10 years?” Admittedly, I too was one of
them and therefore, thank the Society for giving me this opportunity to
stop thinking from a micro level perspective and start thinking on a
macro level. Coming to the question at hand, I for one, like millions of
my fellow young professionals, am very optimistic.

I am sure
that a decade from now, India will be a super power, economically as
well as intellectually. It is no secret that this country is brimming
with talent. Millions of hard working and supremely talented people
proudly call this country their home. Yes, it has been hit hard by scams
in the recent past and many foreign investors have lost their
confidence in the economy. However, as the perennial optimist Harvey
Dent says in the movie, The Dark Knight, “The night is the darkest just
before dawn!” One can only hope that India has turned the page on one of
the darkest periods in its post-independence period and the dawn is
just around the corner.

It is only a matter of time before the
investor confidence is reposed in the Indian economy with the new
government hinting at steps to do the same by having a clearer tax
system and negating the element of uncertainty in the taxes that the
foreign investors are wary of today. Numerous foreigners awaited with
bated breath, the results of the recently concluded Indian elections as
though their future plans as well as their existing plans to invest in
the country depended upon it. Agreed, that it is not much to go on.
However, this has provided the new government a platform to give a
confidence boost to these potential investors and welcome them with open
arms.

A decade from now, we will see the economy being opened up
and moving towards becoming a free-market economy with minimum
regulation required. With trade flowing across the country, flowing
freely from all over the world, one would also see the strengthening of
economic ties with economies, such as China and Japan, allowing India to
position itself at the top for free trade with some of the largest
global players.

Such free trade would also result in an increase
in employment. The Prime Minister has already stated that inclusive
growth is the goal of the new government. Further, the Food Security
Bill and the Mahatma Gandhi National Rural Employment Guarantee Scheme,
if properly implemented, could drive the way towards eradication of
poverty. Creating employment would result in more disposable income in
the hands of more Indians, leading to an increase in demand for consumer
products. Further, the increase in disposable income in the hands of
the middle class Education reforms especially in rural India can spur
the improvement of the quality of education. It is only with quality
education that one hope to make India an economic power house. The first
67 years of the country’s independence have witnessed a high occurrence
of brain drain, especially in the information technology sector with
the Satya Nadellas and Rajeev Suris heading top corporations of the
world. However, the next decade consisting of free-market and a booming
economy would witness a reversal of the brain drain, where Indians
working abroad would return to India for better professional
opportunities and to serve their country. This phenomena has already
started with various foreign companies setting up businesses in India
and asking Indian employees already working abroad to return and work
from these Indian subsidiaries and branches in the initial stage.
Subsequently, one would witness many start ups beginning their journey
in the country and soon we would have our very own Silicon Valley. This
would be supported by the advancement of infrastructure and technology
in the country.

A recent tweet from the Prime Minister has
suggested that infrastructure does not only mean highways but also optic
fiber networks or ‘information highways’. A recent study shows that
India is currently 3rd in the world in terms of number of users of
internet! It is only a matter of time that it would have the highest
number of users in the world.

In terms of infrastructure, one
would also witness the improvement in the infrastructure in the country
in the coming decade with the Golden Quadrilateral (highway network of
roads) and the railways connecting every corner of the country.

In
respect of the chartered accountancy profession, I am of the firm
belief that we are in for exciting times ahead during the next decade.
With the three main laws, relating to the Companies Act, the Income Tax
Act and the Goods and Service Tax, undergoing an overhaul, it is back to
the drawing board for most of us in the profession.

Firstly, the
next decade would see chartered accountants moving away from the
traditional areas of practice such as audit and tax and towards
unexplored territory such as investment advisory, valuations, mergers
and acquisition advisory, transfer pricing, corporate law advisory,
securities law advisory, foreign exchange law advisory, management
consultancy etc. This in turn would lead to more opportunities being
available especially in unchartered areas. Further, with laws undergoing
major changes, clients would look up to the chartered accountants to
guide them for compliance with these new laws. One would therefore, see a
shift of focus from the attestation function to an advisory function.

Further, the Companies Act requires appointment of independent directors in case of certain companies. Who better than chartered accountants to be appointed as independent directors. It is common knowledge that a chartered accountant knows the business of his client, right from the efficiency in operations, accounting, finance and taxation aspects.

The free-market approach of the government leading to the increase in inbound investments would lead to an in- crease in the demand for chartered accountants as the foreign investors would not have knowledge of the laws applicable in India.

Secondly, the next decade would also see the rise in super-specialisation in the case of chartered accountants. The free-flowing trade and investment in India resulting in increase in the demand for chartered accountants would lead to higher occurrences of complex transactions and would require an expert in the field to understand such transactions. This would lead to chartered accountants specialising in certain fields thereby creating a niche. A ‘jack of all trades but king of none’ chartered accountant may not be able to survive in a highly competitive environment and therefore, eventually everyone will move towards super-specialisation. Super-specialisation would also lead to a higher bargaining power for the purposes of fees.

At the same time, many clients would prefer going to a one-stop shop i.e., a CA firm which would provide all the services that would be required by the client. This would lead to multiple chartered accountants or firms providing services in different niche areas merging or combining into one and working together and therefore providing various super-specialised services under one umbrella.

Thirdly, another major area where the chartered accountants will flourish in the next decade would be in assistance in policy making. This election has made one realise that there are many chartered accountants who have an interest in playing an active role in society. Chartered accountants would play an active role in the policy making of the government and would be instrumental in guiding the government on various economic as well as social aspects of governance.

The government is expected to give weightage to the suggestions and recommendations of the chartered accountant community as more often than not, a chartered accountant knows the ground reality about the implementation of the law , and therefore the best judge in formation of various economic policies.

Fourthly, another change in the profession in the next decade would be the realisation of the importance of communication and presentation skills. This would help the members of the profession to position themselves better in the market.

Finally, with the advancement of technology, borders between countries are slowly fading and the world is becoming one large global village. This has also resulted in the work moving towards a virtual world with diminishing requirement for a personal interaction. A chartered accountant of the future would have a far greater reach in terms of providing services due to this advancement of technology and would enable growth.

Only time will tell whether the India that I have imagined and the state of the profession that I have dreamt about will become a reality. However, one does feel extremely optimistic about these exciting and game-changing days ahead and a chartered accountant of the future would most certainly have a big role to play in society.