India's Evolution & Sanctity of Contracts

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 1

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.

Alexander’s Advent in India 327-325 BC
(An Equal or Unequal Society?)
Alexander’s invasion of India
was the beginning of the era
a large number of invasions
that the Indian subcontinent
witnessed 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.

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 6

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.

The Era of Islamic Conquest
of the Sub-Continent
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.

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

The Mughal Era of Cultural
Assimilation in the Sub-Continent
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 10

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 leagueswest 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.

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 India
An 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 their
own country.

The Rule of the Company
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.

The Era of British Raj from 1858
1909
Map of
the
British
Indian
Empire
in pink
and the
princely
states in
yellow

The British Raj
and the
Imposition of
English Contract
Law in India

English Contract Laws in India
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’

The Partition of India, 1947
From an
era of
Cultural
Assimilation
to an era of
Partition,
the narrative
in the
Indian
Subcontinent
changed
again

The Partition of India, 1947
It did not matter
anymore
who you are but
what mattered
was what your
religion was.

The Partition of India
British India was divided on religious lines

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.”

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?

‘Sabka
Saath
Sabka
Vikas’ as
the new
Mantra of
Equality

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

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

India's Evolution & Sanctity of Contracts

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