Aditi Deshpande

Principal Associate, J Sagar Associates

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The COVID-19 pandemic is changing the world as we know it, not only in terms of public health, but also in the social, economic, and legal terms. Several countries have invoked emergency powers to access resources and assume wide-ranging executive powers to counter the growing pandemic within their borders.

The COVID-19 pandemic is changing the world as we know it, not only in terms of public health, but also in the social, economic, and legal terms. Several countries have invoked emergency powers to access resources and assume wide-ranging executive powers to counter the growing pandemic within their borders. To this end, India has invoked various provisions available under the law to protect its citizens. Section 144 of the Civil Procedure Code, 1973 has been implemented in several states, prohibiting public gatherings; directions /notifications have been issued under the Epidemic Diseases Act, 1987 to take virus control measures; and a nationwide lockdown has been imposed under the provisions of the Disaster Management Act, 2005.

Another reality that cannot be ignored is the impact of the lockdown on businesses across sectors. The closure of businesses is leading to disruptions in the global supply chain, resulting in the unprecedented economic slowdown. Governments across the world are announcing a slew of measures to protect businesses from the far-reaching impact of the pandemic, including realignment of laws and regulations to address the emerging economic uncertainty.

In India, the Central Government, State Governments, and independent regulators have issued several notifications/circulars to provide relief to businesses in financial distress. For instance, the Central Government has announced relaxations in respect of various income tax provisions and compliances. The Central Government has also introduced insolvency relief measures by increasing the threshold for invoking insolvency from Rs 1 lakh to Rs 1 crore and has provided for adjustment in the timeline specified for any activity that could not be completed because of the restrictions imposed by the official lockdown. The Reserve Bank of India (RBI) has permitted a moratorium of three months on repayment of loans outstanding on March 1, 2020. The Competition Commission of India has released an advisory on how collaboration between competitors to tide over the current crisis need not be assessed unfavourably. The Securities and Exchange Board of India has provided certain reliefs in the nature of reduction in compliance norms for market participants and listed entities as well as relaxation of compliance norms under the Takeover Code. While all these measures are welcome in this hour of need, it may be worthwhile considering a more systematic and consolidated approach in providing these reliefs in order to ensure complete clarity on the prevailing law, and easy access and efficiency in implementation. In this regard, India could perhaps consider following in the footsteps of Singapore, which appears to be the only country in the world to have passed a codified law to tackle several foreseeable concerns arising on account of the impact of COVID-19 on trade and business.

The Singapore Model

The COVID-19 (Temporary Measures) Act 2020, (“Act”) was passed by the Singapore Parliament on April 7, 2020 and came into force in phases. On April 20, 2020, Part 2 of the Act was enacted along with the COVID-19 (Temporary Measures) (Temporary Relief for Inability to Perform Contracts) Regulations, 2020, (“Regulations”). The Act essentially deals with the enforcement of certain contracts and commercial disputes in Singapore for the next 6 to 12 months, and the procedural and operational aspects of the Act are prescribed in the Regulations. The Act provides for temporary relief from the inability to perform contractual obligations under certain contracts in the event that such inability is materially caused by a COVID-19 event. In this regard, the Act categorically sets out the types of contracts covered, the timing of the contract and of its performance, and the reason for non-performance as qualifying conditions for availing reliefs under the Act. Interestingly, the Act also makes a provision for ‘notification for relief’ where the party unable to perform the contract is required to serve a notification for relief upon the other contracting party or to the guarantor/surety of such party or to any other person prescribed. On service of the notification, the other party is prohibited, under the Act, from taking any action in relation to the non-performance until a specified period as set out in the Act.

Further, the Act cogently enumerates all the actions a party is prohibited from taking on service of a notification for relief which is exhaustive and is appropriately supplemented with examples wherever necessary. By way of illustration, the prohibited actions include enforcement of security over immoveable property and moveable property used for trade, business or profession, termination of contract where the inability is non-payment of rent or other monies, making an application of winding up / bankruptcy against the defaulting party or its guarantor/ surety. The Act also deals with the extension of the period of limitation prescribed under any law or contract. In addition, the Act revises thresholds for bankruptcy and corporate insolvency, provides for alternate arrangements for the conduct of meetings and court hearings, requires landlords to pass on COVID-19 tax rebates in full to their tenants, and provides for COVID-19 control orders to be made by the Minister of Health. 

Therefore, it has to be said that a statute of this nature ensures that all amendments and reliefs available to businesses and individuals with respect to COVID-19 are accessible in a consolidated and organized whole, enabling a clear understanding of the prevailing law and its applicability which is the essence of any law. Having said this, the different systems of government in India and Singapore cannot be simply overlooked. Therefore, adopting the Singapore model, which is based on a unitary form of government, may not be entirely feasible for the federal structure present in India. However, its basic principle of consolidation, clarity, and ease of access could certainly be adopted. Perhaps the Central

The government could consider promulgating an ordinance that encapsulates all reliefs and relaxations provided by way of amendments/notifications/advisories under Central legislations as well as by various regulators established by acts of Parliament.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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