by Pratik Datta and Ajay Shah, ajay shah blog
Last week, the Ministry of Finance notified the Depository Receipts Scheme, 2014 (‘2014 Scheme'). This replaces the 1993 Scheme with respect to depository receipts. The key materials on this subject are:
The 2014 Scheme improves upon the 1993 Scheme in two dimensions: economic thinking and legal drafting quality.
Improved economic thinking
The 1993 Scheme was a haphazard set of interventions by the government in the working of the economy, without a clear rationale. The 2014 Scheme is logical and clear in the role of the government. Every policy intervention is viewed from the standpoint of market failures. If there are demonstrable concerns about consumer protection, micro-prudential regulation, systemic risk or resolution, they motivate interventions. Where there are no market failures, there is no case for intervention by the government.
As an example of the improved economic thinking underlying the 2014 Scheme: the 1993 Scheme embeds industrial policy with names of many industries. The 2014 Scheme eschews industrial policy.
Improved drafting of law
Everyone interested in law and finance should print the 1993 Scheme and the Depository Receipts Scheme, 2014 and compare them, side-by-side.
Occam's razor can be adapted to the field of law with the idea that when there are multiple ways of drafting a particular policy choice into the law, the simplest should be preferred. The most sophisticated law is that which is the simplest. Simplicity, clarity and reduced legal risk have been achieved in the 2014 Scheme through many strands of thought.
Word count. The first test of simplicity is the word count. The 1993 Scheme (paragraphs 1 to 11) had 2984 words, while the new 2014 Scheme (paragraphs 1 to 11) has 1659 words – a reduction of 44.4% in usage of words. However, this difference is overstated as the previous Scheme dealt with FCCBs also while the new Scheme does not.
