Relationship between Business Entities and Law has to be Harmonious for Growth

President Theodore Roosevelt once said, 
“Ours is a government of liberty, by, through and under the law. No man is above it, and no man is below it.” whether the relationship between “Business Entities and Recovery Laws” is really smooth enough for growth?

Today the world is commonly recognized with rapid growth that requires a number of conditions that are not always strictly towards social development but shifting towards economic factor. Business entities and law needs to go hand in hand but are they really effective? It is often believed that India’s regulatory problems are due to the lack of regulatory standards and poor compliance to process. Due to the legal absence of appropriate and enforced legal rules the entire business society has to face the burden as its effect would be seen from corporation sector, banking system to overall each and every large business entity.

The First Pillar should focus on legally binding rules. Such rules are not only known for theory. They are actually enforced by the State on all relevant parties, and are subject to modification pursuant only to previously known procedures.

The Second Pillar must be of appropriate processes through which such rules are made, and through which they are either enforced in practice or are deviated from when necessary. The appropriateness of such processes will obviously differ according to the circumstances of each country. Legal procedure might succeed; however, they did not be arbitrary, and are based on a system of consultation with the people affected by the rules.

The Third Pillar of the legal framework must consist of efficient public institutions that are occupied by trained and dedicated individuals, are transparent and accountable to citizens, are bound by and adhere to regulations, and apply such regulations without arbitrariness or corruption. An efficient and fair judicial system serves as the final arbiter of a functioning legal system.

There is a saying that “Justice Delayed is Justice Denied”, but this applies to each and every case. There is a complete lack of focus on judges and the system. Apart from the overall number of cases (more than 3 crore) the country seems to ignore the loss of time and economy an individual or a business firm is putting. Despite judges working extremely long hours, why is that there is no serious dent being made in the mountain of delays? How long do different types of cases remain in the system and why? How can we maximize judicial time? Answers to these questions are most important to bring about change. However, no systematic effort has been made until recently to collect data that will help obtain the answers to these questions. The dictum ‘Justice should be done’ is satisfied by mere observance of the principles of natural justice. However, the principle does not end here. It extends further. Justice should manifestly be seen to be done. If this is ignored, then the decision would be affected, especially in cases where an allegation of bias or interest or favor is noticed and affording proper hearing is not approaching from the decision.

In the outbreak of Novel Coronavirus, the impact of physical, mental and economic strain can be seen every defaulter or a complainant is facing problem with no proper functioning of court. It’s peculiar to see court’s behavior towards different individual or association; one is receiving preferential treatment like top projects, travel perks and frees time. Meanwhile, the other person discovers that his requests are denied without reasonable explanation. It is nowhere wrong to say that court is equally liable in harassing the complainant or defaulter. A Firm waiting for the judgment but the court keeps on delaying, by the time judgment is given, the Firm has no value in market.

We can see that if you file a case in the Karnataka High Court today, at the very least, you could expect to be in court until the beginning of 2023. In these two years and eight months (969 days), you can expect to go to court about 12-13 times, as the average time between hearings in the Karnataka High Court is 78 days. For instance, regular first appeals (RFAs) constitute seven per cent of the total cases in the Karnataka High Court. On average, RFAs are pending for four years and three months (1,553 days). On the other hand, company petitions, although constituting a mere one per cent of the total cases in the Karnataka High Court, are pending on an average for six years.

Law is a set of rules and regulations drafted for the smooth functioning of the country and if one fails to abide by the rules, one can expect the whole society to fall apart, such as the power of law. This rule book is a way of keeping our justice system fair and ensuring that everyone complies with the law. It not only allows people to understand what is expected of them in their capacities but also sets forth rules for businesses so that they, too, know what is expected of them in their dealings and transactions. The rule of law plays an important role in the business world when setting up a business. Laws determine what type of business it is to become, it sets up reasonable expectations on how the business should operate, it creates an honest environment where consumers and business owners’ interests can be protected and we have ways to solve any disputes that arise Law provides guidance and direction in every area of business. A crucial component in the relationship between businesses and the law is that it creates the regulatory environment within which the business should operate. This means that the law creates rules that govern the business and how it operates from how its relationships between it and its employees are regulated, it would regulate how much and when it should pay tax as well as to whom, as well as how it should promote, sell or advertise it’s goods/services. Government policy highly influences interest rates. Higher rates lead to decreased consumer spending. Lower interest rates attract investment as businesses increase production. Taxation policy is one of the government policies that affect businesses directly because taxation is based on the amount of money earned by all businesses.
The business environment in India has a number of problems that adversely impact business. Aside from persisting bureaucratization leading to delay in approvals and clearances for business and structural factors such as poor quality of infrastructure, there are some policy and legal constraints that affect business. One very important factor is the regulatory framework. The regulatory framework in India, has not been conducive for business, either at the entry stage or during operations. Among the major impediments to the improvement of the business environment are business regulations/legislations originally formulated under the command and control. A plethora of government authorities continue to exercise wide discretionary powers, nailing business from their inception for minor procedural lapses. To illustrate the consequences, on an average starting a business in India takes twice as long as that in the region and because of various rules and regulations, formalities and procedures. Enforcement of these regulations and associated licenses unnecessarily hampers the smooth operation of business, and thereby unnecessarily increases the transaction costs of doing business, thus putting India at competitive disadvantage.

As India is a federal State, taxes are levied and regulated by both Central and State governments. The new system of tax neutrality does not differentiate luxury goods and normal goods which makes it difficult for small businesses to sustain. Under GST implementation, all goods and services pay the same tax which will lead to the rich becoming richer and poor becoming poorer. It is not an ideal situation for small industries and businesses competing against large businesses. In GST Council meeting, it was decided by the ministry that those assessments having turnover of less than Rs 1.5 crores will be assessed by state government and existing Service Tax assessments, irrespective of turnover will be assessed by the Central government as there is lack of expertise with the State Government in relation to Service Tax matters. As a result of this, small traders dealing in both goods and services will have dual administrative control both by Centre and State.

A lawful framework that empowers financial choice, advances moral and sound commerce hones, cuts exchange costs and empowers solid commercial dealings through reasonable contracts is as basic as great framework and sound arrangements. Our standing within the ease of doing commerce rankings is still moo basically since of the delays in our legal framework. Tragically, in spite of the fact that this issue has been decaying for more than a century, the law doesn’t seem to change.

We often talk of getting to be a financial superpower and wish to create our economy reasonable and straightforward. When we know this big business entities are the backbone of economy, yet the functioning of our judiciary fails to build a smooth relationship between business entities and law. An essential prerequisite for accomplishing this is a proficient and straightforward legitimate framework.


“Justice denied anywhere diminishes justice everywhere” – By Martine Luther King Jr.