Page 201 - ES 2020-21_Volume-1-2 [28-01-21]
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184     Economic Survey 2020-21   Volume 1



               T + 1430      • Follow-up with income tax department, RoC and IBBI, confirm receipt of NCLT order
                  to        and request for their timely response
               T + 1515      • Address queries raised by respective authorities

               T + 1515      • Scheduled date of second hearing of NCLT
                             • Bring on record the reports/ reply from income tax department, RoC and IBBI
               T + 1515      • Pass the order for dissolution of Corporate Debtor, subject to satisfaction of reports/
                  to        replies submitted by income tax department, RoC and IBBI
               T + 1540
               T + 1540      • File copy of order for dissolution of Corporate Debtor with RoC vide Form INC 28
                  to         • RoC to strike-off the name of Corporate Debtor from Register of Companies
               T + 1570

             Source: QCI study for Economic Survey
             Note: *  Procedures are applicable only in case of an Indian subsidiary of foreign company.

             THE INEVITABILITY OF INCOMPLETE REGULATIONS
             6.7  The problem of over-regulation stems from not recognizing the inevitability of incomplete
             contracts  and regulations  in a world of uncertainty. Real  world contracts  are inherently
             incomplete  because  of  three  key  reasons  that  reinforce  one  another’s  influence.  First,  as
             Herbert Simon has highlighted in his the Nobel-prize winning work, humans are boundedly
             rational because the future comprises of “unknown unknowns.” Note that radical uncertainty
             of “unknown unknowns” is fundamentally different from the notion of risk as defined by Frank
             Knight. Second, as another Noble-prize winning work on incomplete contracts by Oliver Hart
             highlights, complexity in framing contracts arises from the difficulties involved in anticipating
             and specifying all obligations for all parties in full across all possible contingencies. In fact, with
             radical uncertainty, it is impossible to know the possible characteristics of all the future states of
             the world. Therefore, writing complete contracts that will efficiently fit every future situation is
             inherently impossible in the real world. Finally, because of these two features, a third party may
             be able to observe outcomes ex-post but cannot verify ex-ante decisions unambiguously.

             6.8  Incomplete  regulations become inevitable  when the reality  of incomplete  contracts is
             acknowledged . In theory, regulators and policymakers  can choose to invest entirely  in the
                           5
             drafting process by identifying every possible state of the world that might materialize and by
             specifying an appropriate solution to each state. But, in reality, they confront a vexing problem:
             the future is unknown and unknowable. As a result, when faced with uncertainty, it simply costs
             too much to foresee and then describe appropriately the contractual outcomes for all (or even
             most) of the conceivable states of the world. Thus, the reality of incomplete contracts leads to
             inevitability of incomplete regulation. This makes some discretion unavoidable.

             6.9  In a complex and uncertain world, moreover, the actual outcomes or situations do not fit in
             the neat boxes assumed in the regulation; hence the supervisor has to exercise some judgment.
             There is a widespread belief, however, that ever more detailed regulations reduce discretion. On
             the contrary,  complex rules and regulations create more discretion because of the multiple ways
             5.  A large literature in economics focuses on how incomplete regulations evolve from incomplete contracts. We
               refer the reader to Laffont (2005) for a comprehensive overview of the same
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