Procedure for Pre-legislative Consultation – a Dynamic Move in Ease of doing business

Introduction

The Ministry of Corporate Affairs (hereinafter referred to as “MCA”) has recently circulated a draft policy called as “Draft Policy for Pre-Legislative consultation and comprehensive review of existing Rules and Regulations” (hereinafter referred to as “the Draft Policy”) which has come into effect from 1st January, 2024. The draft policy aims to conduct public consultation both at the time of framing of the original rules and regulations and also at the time of review with an objective of simplification, ease and reduction in the cost of compliance as outlined by the Finance and Corporate Affairs Minister Nirmala Sitharaman in her Budget speech of 2023-2024.


While currently Rules are framed by the MCA, Regulations are basically within the domain of the respective regulators. Currently, the practice of public consultation for regulation-making is not uniform across all regulators.


Procedure for Pre-Legislative Consultation


The Draft policy has been divided into two paragraphs, Part A and Part B. Part A of the policy deals with consultation at the time of framing of the rules by the MCA and Part B deals with consultation at the time of reviewing of existing rules and regulations.


The Part A of the policy provides that the MCA shall while prepare the draft rule or the draft amendment to the rule with an explanatory note mentioning the issue/difficulty that the proposed amendment seeks to address, rule-making/regulatory practices on the subject matter, manner of implementation of the proposed rule and the manner, process and timelines for receiving comments from the public. After obtaining the approval of the competent authority the draft formulation and the explanatory note may be placed on the Ministry’s website for at least 30 days for public scrutiny and comments. Further, the format for public feedback encourages detailed clause-by-clause responses. This inclusive approach is not limited to the general public but also extends to specific stakeholder groups, field offices, and external experts, ensuring a comprehensive consultation process. A similar process shall be followed when the principal regulations are drafted by the Regulators.


Part B of the Draft Policy deals with the consultation with regard to comprehensive review of existing rules and regulations. The MCA, through the concerned Division, shall comprehensively review each Rule and amend or repeal any rule taking into consideration (a) objectives and outcomes (b) experience of implementation of rules including with right to enforcement and litigation so far (c) rule-making/regulatory practices (d) relevance in current economic environment and (e) any other factor considered relevant by the concerned division in the Ministry. You may look for more information on the recent notification issued by the MCA regarding consultation process for existing rules and regulations on https://www.mca.gov.in/content/mca/global/en/econsultation/econsultation-documents-page.html.


The process of obtaining Public feedback and feedback from stakeholders, experts, and field officers shall be in accordance with the procedure followed in Part A of the policy. The MCA has issued a time frame for which begins on January 1, 2024 and the MCA will be required to undertake a comprehensive review of all extant rules and regulations and initiate necessary consultations using the underlying consultative mechanisms by March 31, 2025.


Conclusion


The main objective of the policy is to rationalize and reduce compliance burden. With the input from various stakeholders, including field experts and specific interest groups, a wide array of perspectives shall be considered. Also, by reviewing the existing rules and regulation, the regulators shall be assured that the rules are in compliance with the existing social, economic, and technological conditions.


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