18 October 2019

Guest Article-Capacite

Fast forward

 

NARAYAN NEELAKANTESWARAN examines the movement on the ‘Ease of Doing Business’ front in the case of construction permits and enforcement of contracts.

 

India’s overall rank in ease of doing business has risen to 130 in the latest World Bank report. However, with the rank of 183, India is at the bottom of the list in respect of dealing with construction permits. There are 40 procedural steps in the report for Mumbai as listed in Table.

Construction Permits

No.

Construction Permits

1

Submit application and design plans and pay scrutiny fee

2

Receive site inspection from Building Proposal Office

3

Apply for no-objection certificate (NOC) from Tree Authority

4

Apply for no-objection certificate (NOC) from Storm Water and Drain Department

5

Apply for no-objection certificate (NOC) from Sewerage Department

6

Apply for no-objection certificate (NOC )from the Hydraulic Engineer Department (water supply)

7

Receive inspection from Tree Authority

8

Receive inspection from Storm Water and Drain Department

9

Receive inspection from Sewerage Department

10

Receive inspection from the Hydraulic Engineer Department (water supply)

11

Obtain NOC from Tree Authority

12

Obtain NOC from the Storm Water and Drain Department

13

 Obtain NOC from Sewerage Department

14

Obtain NOC from Hydraulic Engineer Department (water supply)

15

Request and obtain NOC from Electric Department

16

Request and obtain NOC from Traffic & Coordination Department

17

Request and obtain NOC from Chief Fire Office

18

Obtain Intimation of Disapproval and pay fees

19

Obtain plinth commencement certificate from sub-engineer and pay development charges

20

Request and receive inspection of plinth

21

Request and obtain further commencement certificate

22

Request completion NOC from the Storm Water and Drain Department

23

Request completion NOC from the Sewerage Department

24

Apply for provisional water connection from Hydraulic Engineer

25

Request completion NOC from Traffic & Coordination Departmen

26

Request completion NOC from Chief Fire Office

27

Receive inspection from Storm Water and Drain Department

28

Receive inspection from Sewerage Department

29

Obtain water connection from Hydraulic Engineer

30

Receive inspection from Traffic & Coordination Department

31

Receive inspection from Chief Fire Office

32

Obtain completion NOC from Storm Water and Drain Department

33

Obtain completion NOC from Sewerage Department

34

Obtain the completion NOC from Traffic & Coordination Department

35

Obtain the completion NOC from Chief Fire Office

36

Submit letter stating completion of building works to obtain occupancy certificate and certificate of completion

37

Receive final inspection from Building Proposal Office

38

Obtain occupancy certificate from Building Proposal Office (sub-engineer)

39

Obtain final NOC from Hydraulic Engineer (Water) Department

40

Obtain completion certificate

 

 

In contrast, the average number of procedures for dealing with construction permits in high income countries is only 12 and the average time period required is also much less. India has lot to do to reduce the procedures and time required forgetting construction permits. The processes listed by the World Bank pertain to construction permits only and do not cover a number of other approvals and clearances to be secured for development of an urban property.

 

Soon after the report was published by the World Bank, the Central Government decided to come out with necessary notifications for streamlining approvals for construction projects in urban areas so as to enable time bound and hassle free clearances for projects.

 

The Ministry of Environment and Forests & Climate Change has committed to simplify the process for according Environmental Clearances including by way of regulations at State or Local Body level so that the Ministry need not be approached for such clearances.

 

Construction projects near airports require clearance of Civil Aviation Ministry and to make the process hassle-free, Colour Coded Zoning Maps of Airport areas have been uploaded on the website enabling urban local bodies to accord approvals without the applicants going to the Ministry of Civil Aviation. Where required, NOC process has been made online to minimize human interface and to expedite the clearance. Similarly, the Ministry of Culture has come out with an online approval system for clearances near monuments and heritage areas. The Ministry of Defence is coming out with similar measures such as zoning based guidelines and time bound clearances.

 

The National Building Code is being updated to enable quick approvals with minimum human interface. Model Building Bye-laws have been prepared by the Ministry of Urban Development incorporating the simplified guidelines of the Ministry of Environment and Forests.

 

The above steps mark a major shift towards a risk based approval system that places the onus on the applicant for any violation of undertaking given in respect of compliance with guidelines.

 

With the Central Government taking these measures in quick time, the onus has shifted to the State Governments and the local bodies for simplifying the procedure in obtaining construction permits.

 

In an era of competitive federalism, every State has to compete in attracting investment and it is essential in this context to create a favourable ecosystem for businesses to flourish. Mumbai is setting the benchmark in improving the business environment for the rest of India to follow.

 

ENFORCING CONTRACTS

 

In respect of enforcing contracts however with a rank of 178, India is at the bottom of the list. The considerations involved in assessing the enforcement of contracts are time, cost and quality of judicial processes. It takes an average of 4 years to resolve a dispute through litigation in India whereas the time period is less than 1½ years in case of high income countries as per the report.

 

This is not surprising considering the fact that many construction companies have suffered due to prolonged and sequential litigation process involving dispute resolution boards, arbitral proceedings and subsequent challenges in the District Courts, High Courts and the Supreme Court. The opportunity cost of timely settlement of disputes and improvement in cash flow in consequence thereof is immeasurable. The loss to contractors due to delay in dispute resolution is irreparable.

 

The cost of dispute resolution eats away 40 per cent of the dispute settlement, twice the proportion in high income countries. Attorney fees constitute bulk of this cost, as per the report. The poor performance in respect of these two parameters has dragged down the rank substantially to the bottom. There is an urgent need to expedite the dispute resolution process so as to bring the cost of litigation down as well. The quality of judicial processes index measures whether each economy has adopted a series of good practices in its court system in four areas: court structure and proceedings, case management, court automation and alternative dispute resolution.

 

Even though India has a well-structured framework in place for dispute resolution, the performance in the category of ‘case management’ is poor, resulting in low score.

 

The Central Government has responded quickly to amend the Arbitration & Conciliation Act besides initiating the process for establishment of special commercial courts for expeditious dispute resolution of business entities. A conscious effort to increase electronic mode of transactions is also being made.

 

Exclusive Commercial Courts to be set up

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act has been enacted to provide for the constitution of Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of specified value and matters connected therewith or incidental thereto. Commercial Courts are a courts equivalent to District Courts and will adjudicate commercial disputes. The Act provides for a wide definition of commercial dispute and time bound disposal of disputes/appeals.

 

PROCESS SIMPLIFICATION

Mumbai has swung into action quickly, cutting down the number of approvals and clearances from 119 to 58. Parallel processing of approvals has been enabled so that the overall time period is reduced from over 365 days to 60 days flat. Number of payment windows for various permits have been collapsed from 89 to 1. Self certification for some services and certification by consultants for MEP works have been permitted now. These measures will result in expeditious approvals for new projects, reflecting an improvement in the ease of doing business, thus boosting investor confidence.

 

Arbitration & Conciliation Act amended

  • The amendment to the Arbitration & Conciliation Act enables fast track resolution as even court interventions in addition to the arbitral proceedings have to be wrapped up within specified time frames.
  • "Public policy" is no longer a broad ground to resist enforcement of an arbitration award. It is limited to circumstances where there has been fraud or corruption, or contravention of "the fundamental policy of Indian law" or "the most basic notions of morality or justice". The Indian courts will not review the merits of the dispute when considering a public policy argument.
  • Scope for court intervention in arbitral proceedings has been limited under the amendment, which also caps the fees payable.

 

The author is Whole Time Director, Capacit’e Infraprojects




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