25 MAY 2018
The Russian ride
On Modi’s meeting with Putin
PM Modi’s meeting with the Russian President signals a necessary recalibration
With his visit to Sochi to meet Russian President Vladimir Putin for a day-long “informal summit”, Prime Minister Narendra Modi appeared to set a new normal in his foreign policy outreach. As was his Wuhan meeting with Chinese President Xi Jinping, the Sochi visit was aimed at resetting and rebalancing bilateral ties that have weakened over the past few years. The special understanding between India and Russia has frayed, with India drifting closer to the U.S. and Russia to China. The personal touches — hugs, handshakes, a boat ride on the Black Sea — projected the impression of two strong leaders addressing each other’s concerns “man to man”. Substantively, Mr. Modi’s visit was premised on a number of new realities facing India. First, India’s existing dependence on Russian military hardware, with orders for about $12 billion more in the pipeline, must not be jeopardised at any cost. These have been made more difficult by a new U.S. law (Countering America’s Adversaries Through Sanctions Act) that would hit India’s big-ticket hardware purchases and energy deals from Russia, and Mr. Modi would have wanted to reassure Mr. Putin that India will not bow to such pressure. Second, Russia’s recent military exercises and helicopter sales to Pakistan as well as its outreach to the Afghan Taliban have been viewed with deep concern by India, which has sought to extract assurances that this would not in any way hurt its national security interests. Third, the new push to strengthen ties is driven by the global instability that the Donald Trump administration has set off. India appears to have decided it can no longer depend on consistency in the U.S.’s foreign policy.
As a result, the recalibration of Mr. Modi’s foreign policy from its perceived Western tilt to a more even-handed approach of aligning with all in India’s interests is welcome. Informal summits of the kind in Sochi and Wuhan are also useful to break the ice and reset relations when needed. But a comprehensive shift in foreign policy must be accompanied by greater transparency. If India is contemplating a turnaround from its earlier postures with world powers, it needs to explain the change of course. The secrecy surrounding Mr. Modi’s dashes to Wuhan and Sochi is intriguing since he is already scheduled to meet both Mr. Xi and Mr. Putin at least twice in the next two months, at the Shanghai Cooperation Organisation summit in Qingdao and the BRICS summit in Johannesburg. Even more curious are the official outcomes of the informal summits that India and China will cooperate in Afghanistan, while India and Russia will coordinate on the Indo-Pacific. Both have hitherto only been referenced in India’s ties with the U.S. and its allies, Europe, Japan and Australia. Without clarity, at a time of global flux India may appear to be attempting to travel in two boats at once.
Homebuyers and Bankruptcy Code
The proposed change to the Bankruptcy Code must treat homebuyers a step above lenders
Homebuyers parted of their money by real estate developers have some relief coming their way. The Union Cabinet has cleared an ordinance amending the Insolvency and Bankruptcy Code (IBC), a law which came into force in November 2016 to hasten the process of winding up failed businesses. While the government refused to divulge specific details of the amendment, the change to the law is expected to help offer better treatment to homebuyers when it comes to recovering their dues from bankrupt companies. A 14-member panel formed by the Ministry of Corporate Affairs had recommended last month that homebuyers should be treated as financial creditors during the bankruptcy resolution process. It is yet to be known whether homebuyers will be treated better or worse than banks and other financial lenders under the amended law. But there is a sound reason to treat them a step above these traditional lenders. Economically speaking, homebuyers are not creditors but only customers to real estate developers. Unlike traditional creditors such as banks and institutional investors, they do not offer their money in expectation of excess returns. Homebuyers simply want the delivery of a good that was promised to them. It is thus unfair to push homebuyers, who did not choose to risk their money on an uncertain venture in the first place, down the pecking order when it comes to sharing the spoils of a bankrupt entity.
Until now, homebuyers have had to knock on the doors of the courts to uphold their rights, while other stakeholders benefited significantly at their cost. The travails of several homebuyers in the Jaypee insolvency case, in which the Supreme Court had to intervene in favour of homebuyers in the bankruptcy resolution process, is a case in point. The amendment, if it meets expectations, could also reduce the inconsistencies between the IBC and the Real Estate Regulation Act (RERA). While RERA was introduced with the goal of protecting the rights of buyers by ensuring the timely and honest delivery of homes, they have had to be content with a relatively low status among the various stakeholders in a bankruptcy proceeding. In fact, buyers have been treated as unsecured creditors. The removal of this inconsistency can help courts deliver better justice to homebuyers in the future. Along with RERA, the proposed amendment can go a long way in stopping unscrupulous real estate developers from fleecing homebuyers with promises that they cannot really keep. While upholding homeowner rights could cause pain to wayward real estate developers and large creditors like banks, it will help in the development of a transparent and more efficient real estate market.