A bitter PIL

CSR seems to be the answer to everything in India. (See here for a discussion on CSR in India.)

The Supreme Court of India has made a remarkable order in Shashank Deo Sudhi v. Union of India & Ors. about private hospitals/ labs needing to provide free Covid-19 tests.

A public interest litigation (PIL) petition asked the court to make all testing free, challenged the price of the test fixed by the Indian Council of Medical Research (ICMR) at Rs. 4,500 (USD 59) and asked the court to direct the government to only allow “NABL accredited Labs or any agencies approved by WHO or ICMR” to conduct the tests. (NABL is an accreditation organization in India.)

Currently there are designated government and private labs conducting the tests. While the government labs conduct free testing, the private labs charge Rs. 4,500 as fixed by ICMR.

The Supreme Court has accepted the petitioner’s argument that not all Indians could afford to pay Rs. 4,500 and ordered the government of India to “issue necessary direction to accredited private Labs to conduct free of cost COVID-19 test.” Whether these private labs would be reimbursed for the expenses incurred in this regard is something the court has said it will consider later.

It is shocking that the court has asked private labs to conduct free testing on the basis of the petitioner’s argument that not every Indian could afford to pay the fixed amount, when such persons are free to avail of the tests in government labs at no cost.

The court’s reasoning is this:

The private Hospitals including Laboratories have an important role to play in containing the scale of pandemic by extending philanthropic services in the hour of national crisis.

Philanthropy is a tall expectation at this crisis ridden hour when many companies including healthcare establishments are facing financial troubles. (There is also the technical problem that philanthropy by definition, cannot be imposed on someone.)

Most importantly, the government alone cannot conduct the required number of tests and needs to co-opt the private sector. Asking them to conduct tests for free will mean that very few private labs will participate. This is totally counterproductive to what is currently required. As Kiran Mazumdar Shaw of Biocon has rightly said, the decision is not practical because the private labs in question are not large enough organizations to be able to conduct free tests and wait to get the reimbursements at a later date. Such reimbursements (if the court decides they are even necessary) would take time to make their way to the private labs.

It is high time that the Supreme Court of India stops giving policy directions to the government.

 

 

SCRAP EXAMS FOR INDEPENDENT DIRECTORS – COVID-19 COULD BE THE EXCUSE

Speaking of unnecessary hoops we make professionals jump through, and getting back to the theme of this blog, lets talk directors’ exams. That’s right. In November 2019, India’s Ministry of Corporate Affairs introduced a new eligibility requirement for independent directors – they had to register themselves in a data bank and also within a year of registration, write an exam and score at least 60%. Failure to write the exam and score at least 60% would result in the director being struck off the data bank, thus becoming ineligible to serve as an independent director. The exam is to cover “companies law, securities law, basic accountancy and such other areas relevant to the functioning of an individual acting as an independent director”.

With the government announcing a slew of rule-relaxations for companies to help deal with the Covid-19 situation, it is time this pointless requirement of an exam is thrown out or at least temporarily relaxed. The PHD Chamber of Commerce and Industry (an industry body engaged in research and advocacy) has already called for an extension of both the registration and exam requirements for independent directors.

Coronavirus crisis or not, this requirement was an unnecessary imposition with little upside. An exam is not likely to make directors exercise independent judgement. The Rules also exempt people who have already served as independent directors in a large public company for at least 10 years. This would mean that the performance of all such experienced independent directors has been exemplary – which is clearly not true.

Such unnecessary hoops would discourage many qualified people from serving as independent directors. Around 170 directors were reported to have resigned from the boards of listed companies in early 2020. While not all of these resignations can be blamed on the registration and exam requirements, it provides some indication of how the new rules have been received.

The coronavirus crisis should give the government an excuse to do away with these requirements altogether.