india's evolution & sanctity of contracts

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India’s Evolution and Sanctity of Contracts

&Can India Afford an Unequal Society ?

Presented By

Mr. Harry Dhaul Director General, IPPAI

Harry Dhaul, Director General, IPPAI

Harry Dhaul, Director General, IPPAI 2

The Mauryan Empire ( An Equal or Unequal Society?)

The Mauryan Empire was one of the world's largest empires in its time, and the largest ever in the Indian subcontinent. Under Chandragupta and his successors, internal and external trade, agriculture and economic activities, all thrived and expanded across India thanks to the creation of a single and efficient system of finance, administration, and security. The rules of Manusmriti was prevalent during this era. The society was essentially not equal. (Cont..)


The Divine Right of Vaishyas( An Equal or Unequal Society?)

The Arthashastra ( circa 350 BCE) says usury is the Vaishya’s right. The Manusmriti ( circa 150 CE) goes further and suggests a sliding scale of interest rates : 2 per cent per month for Brahmins, 3 per cent for Kshatriyas, 4 per cent for Vaishyas and 5 per cent for shudhras. On an annual basis , the Brahmin was to pay 24 per cent interest, and Shudra and Dalit 60 per cent.


However, in spite of caste divides, before making the statue of Goddess Durga, for the Durga Puja, the Brahmin has to follow a unique tradition. Soil from the homes of local prostitutes is collected and is mixed with that being used in making the statue which is worship by all the nine days. This tradition is followed since centuries, not only by the Brahmins but also by the prostitutes and is also a reflection of the indispensable integration among the upper and lower castes in the social strata.

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Alexander’s Advent in India 327-325 BC(An Equal or Unequal Society?)

Alexander’s invasion of Indiawas the beginning of the eraa large number of invasionsthat the Indian subcontinentwitnessed thereafter. What came with him was the Western philosophy centered around the idea of one life and it came for the first time in contact with the contrasting idea of multiple lives and rebirth.


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The Kushan Empire (An Equal or Unequal Society?)

The Kushans were of Chinese origin. Formed in the early 1st Century CE, the Kushan Empire reached its peak under Buddhist Emperor Kanishka and was known for the incredible spread of Buddhism across several parts of Asia. Between the mid-first century and the mid-third century, Buddhism extended to China and other Asian countries through the Silk Road. Through Buddhism was spread the early values of moderation and equality that formed the basic tenet of the religion. Harry Dhaul, Director General, IPPAI

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An Equal or Unequal Society ?


St Thomas’ arrival in India around 52 AD was the beginning of the era of Evangelism in India and the idea of punishment and reward for compliance as well as it brought the concept of Judgment Day. Contrary to the prevalent system in the Indian society, under Christian philosophy interest income from lending of money was banned.

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The Era of Islamic Conquest of the Sub-Continent

(An Equal or Unequal Society?)

Muslim conquests of the Indian subcontinent mainly took place from the 12th to the 16th centuries. Spread of Islam initially started with violence. However, Islam's impact was most notable in the expansion of trade that resulted in more compliance and acceptance of the faith. Islam gave the scope and right to even a lower caste Shudra, having converted to Islam, to stand beside a billionaire and pray together. The concept of Zakat or charity for the poor further helped the spread of Islam. Zakat stood in direct contrast to the subjugation of lower castes as it amounted to a mandatory sharing of wealth, and the charging of interest against lending was Haram. The narrative thus changed again as it brought in concept of sharing of wealth and equality and the narrative changed again.


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Initial Periods of Plunder • The 11th and the 12th Century witnessed an era

of plunder, loot and destruction of cultural centers by Islamic Invaders. All that it achieved was the wiping out of the past and all the heritage, knowledge, and culture associated with it. It is similar to what the Greeks did in Europe or the Persian Empire did in West Asia during their rule

• That era in India is essentially known as the Ghaznavid era when Mahmud of Ghazni launched seventeen expeditions into South Asia. This was followed by similar era of plunder by Shahāb-ud-Din Muhammad Ghori , an Afghan conqueror from the region of Ghor in Afghanistan and that of Bhaktiyar Khilji and his destruction of Nalanda University


http://en.wikipedia.org/wiki/Ghor

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The Mughal Era of Cultural Assimilation in the Sub-Continent

(An Equal or Unequal Society?)

Tansen in Akbar’s Court

Integration & inter-religious marriage was initiated during Mughal era. It was for the first that an attempt was made towards acceptance of a multi-cultural, multi-religious and multi-plural society. At a later stage most of the courtiers in Akbar’s Darbar were indigenous people. Sufism also reached its peak during this era. Harry Dhaul, Director General, IPPAI


Treaty of Tordesillas and its relevance for India

The Treaty of Tordesillas signed at Tordesillas on 7 June 1494 divided the newly discovered lands outside Europe between Portugal and Spain along a meridian 370 leagues

west of the Cape Verde islands (off the west coast of Africa). The lands to the east would belong to Portugal and the lands to the west to Spain.

On 4 May 1493 the Spanish-born Pope Alexander VI decreed in the bill Inter caetera that all lands west and south of a pole-to-pole line 100 leagues west and south of any of the islands of the Azores or the Cape Verde Islands should belong to Spain, although territory under Catholic rule as of Christmas 1492 would remain untouched.

http://en.wikipedia.org/wiki/Tordesillas

http://en.wikipedia.org/wiki/Azores

http://en.wikipedia.org/wiki/Portuguese_Cape_Verde


The Rise of Protestant As a reaction to this decree, the Protestant Movement was started which led to the creation of a new church and emergence of new sea powers which also resulted in bringing modern concepts like liberty, modern education, tolerance and free speech which brought a concept of democracy to India.


European Settlements in IndiaAn Equal or Unequal Society?

From the 15th Century onward the subcontinent witnessed many such sea powers of Europe settling down in India. Be it the Dutch, the Portuguese, the French as also the British were making their own fiefdoms in India with indigenous people becoming second class citizens in theirown country.

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The Rule of the CompanyAn Equal or Unequal Society?

Company rule in India refers to the rule or dominion of the British East India Company on the Indian subcontinent. It was a privately owned company which was established to create profitable trade with countries in the region of Asia called the "East Indies". Granted a Royal Charter by Queen Elizabeth in 1600, it became one of the most powerful mercantile organizations in the world.

The rule of British East Indian Company commenced in 1757, after the Battle of Plassey and lasted until 1858. It led to the establishment of a new class system in the subcontinent which included the Britons and the Anglo Indians at the top of the echelon followed by the Indians with their own caste hierarchies, at the lower end.


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The Era of British Raj from 1858

1909 Map of the British Indian Empire in pink and the princely states in yellow


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The British Raj and the

Imposition of English Contract Law in India



English Contract Laws in IndiaAn Equal or Unequal Society?

The Concept of ‘Raghu Kul Reet Sada Chali Aayi Praan Jaye Par Vachan Na Jaayi,’ the eternal tradition (reet) of the lineage of Lord Ram (Raghu Kul)to honor one’s word (vachan), even at the cost of one’s life (praan)

It was replaced by the idea of ‘ I have as much right to enforce or renege on my contract as long as I make a profit.’ The value of ‘word’ was replaced by the concept of profit’

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The Partition of India, 1947 An Equal or Unequal Society?

From an era ofCulturalAssimilation to an era of Partition,the narrative in the Indian Subcontinentchanged again



The Partition of India, 1947 An Equal or Unequal Society?

It did not matter anymorewho you are but what matteredwas what your religion was.


The Partition of India British India was divided on religious lines

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Narrative from 1947-2014 Nehruvian Socialism (An Equal or Unequal Society?)


• From 1947 onward, Nehruvian Socialism has been the hallmark of India’s development model where the state played the pivotal role in social and economic issues and attempted to create an equitable society by using the state as the main driver of economy.

• However, increase in population and rising aspirations, combined with decrease in state’s resources as a proportion to the population increase led to a situation of rising level of frustrations.

Jinnah’s Landmark Statement…and today’s idea of Bhartiyata

In a landmark inaugural address before Pakistan’s constituent assembly on August 11, 1947, Jinnah declared that, “ in the course of time, Hindus would cease to be Hindus and Muslims would cease to be Muslims, not in the religious sense, because that is the personal faith of each individual, but in the political sense as citizens of the state.” Harry Dhaul, Director General, IPPAI


Jinnah’s Landmark Statement…and today’s idea of Bhartiyata

About a year later, in its commentary on his death, Time Magazine lamented, ‘ the inflammatory preachings of Jinnah the agitator would live on, but the occasionally restrained hand of Jinnah, the politician, has been removed.

Bharatiyata in today’s context……..• Is the Narrative on the Cusp of Change Again ?

• Does Narendra Modi’s stupendous victory signify something more than a mere change in Government?

• Is the ‘Idea of India’ taking its ideal shape?


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‘Sabka Saath Sabka

Vikas’ as the new

Mantra of Equality


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However, Can India Have an Equal Society without Equal Representation?

In 2006, the CSDS did a survey on the social profile of New Delhi’s media elite. Of the 315 key decision-makers surveyed from thirty- seven Delhi-based Hindi and English publications and television channels, almost 90 per cent of the decision makers in the English language print media and 79 per cent in television were found to be ‘upper caste’. Of them 49 per cent were Brahmins, Not one of the 315 was a Dalit or Adivasi; only 4 per cent belonged to castes designated as Shudra and 3 per cent were Muslims.



Is it an Unequal Society?


Sanctity of Contracts in Indian Infrastructure & Power Sector Context

• The depleting resources of the state necessitated more of private investments in public utilities

• This resulted in the creation of Public Private Partnership Model (PPP) and the debate between Public Good vs Private Profit

• The importance of the sanctity of contract is supreme specially in capital intensive long term projects such as infrastructure

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CASE STUDY – 1• Delhi Airport Metro Express Private Limited (DAMEPL) was awarded

contract in January 2008, for constructing and running the Airport Metro route in Delhi , on the basis of their highest quote for annual concession fees to be paid to DMRC.

• However Passenger volumes on the line fell far short of the estimated target.

• In October 2012, DAMEPL served a termination notice, which was rejected by DMRC. The matter went to arbitration.

• As problems mounted and became irreconcilable, DAMEPL’s principal sponsor, bailed out. DMRC took over the operations of the line with effect from 1 July 2013.




Case Study- 2 The Mundra UMPP was conceptualized by the Government to be run

on imported coal. Tata Power commissioned 4,150 mw Mundra ultra-mega power project (UMPP). The Adani Group commissioned 4,620 mw of generation capacity at Mundra, near Tata Power’s UMPP to cater to various states.

The Mundra Project was bid on a single bid tariff model.

CERC had prescribed the methodology for determining the rates of escalation. The PPAs do provide for a domestic 'change in law' scenario, but not outside India.



• After the Projects were set up, the developers approached the CERC.

• The CERC ruling says says there is neither force majeure nor change in law. However, the CERC allowed compensation.

• Eventually (CERC) allowed compensation of Rs 830 crore (Rs 8.3 billion) to Adani Power and Rs 329 crore (Rs 3.29 billion) to Tata Power from state-owned distribution companies in five states. The relief has been granted to compensate for higher costs of imported Indonesian coal.



Five states that purchased power from these plants had appealed against the CERC order at the Appellate Tribunal for Electricity (APTEL)

APTEL upheld the order of the Central Electricity Regulatory Commission (CERC).

This verdict opened a Pandora’s Box and now every long term contract has lost its sanctity.

There was no force majeure in the verdict.


Sanctity of Contracts in Indian Context

The Core Lesson from these two cases

and the WAY FORWARD…


LET THE DELIBERATIONS BEGIN KEY ISSUES TO BE DISCUSSED IN THE CONFERENCE• Can India afford an unequal society?• Sanctity of Contract – Rule of Law• Democracy Vs. Development• Managing Fuel Supply & Price Uncertainty• Strategies for Successful Distribution Reforms• Transnational Trade of Electricity• Geopolitics of Energy Security• Issues in PPP – Power, Telecom, Infrastructure• Future of Hydro Power in India• Transparency, Competition & Consumer choice - Need of the Hour