It was not just the cancellation of 122 odd licenses awarded by a dishonest telecom minister, but was much more than that. In 2012, when the honorable Supreme Court announced revocation of 2G spectrum almost 80 million customers; banks who lent INR 30,000 crore to five firms; companies who shared infrastructure; and foreign investors including Norway’s Telenor and Russia’s Sistema went into a state of anarchy. This is not a single incident that led to an environment wherein stakeholders lost trust in the Indian market. Now criticizing the same does not mean that the same should not have happened. Justice, for sure, is above anyone’s interest or loss. But am I wrong in saying that ‘economy’ is a synonym of ‘country’? And for a stable economy, surety of business is indispensable. The mistake, of course, was committed by the legislatures, but what about the sufferers who followed the prescribed regulations and extended money and labor? I can remember what Justice AK Ganguly, added to his verdict, ‘I am only doing my job’, knowing the ruin that the judgment would do to the Indian corporate sector.
Recent is the Apex Court’s judgment in the Coalgate scam where the honorable judges scrapped 214 coal blocks and ordered auction of the same post 6 months of judgment. Prior to coming to the consequences, let us notice that the court also asked companies to pay INR 295 per tonne of coal they extract and that too with retrospective effect. In case you had prepared the budgets and forecasts for the year, please rework. We are all aware of the scarcity of coal with power plants and the subsequent impact on Indian industrial sector. Also, households are paying hefty charges for electricity. Banks, which extended loans to companies, will suffer from steeply rising bad debt liability (Indian banking sector has an exposure of more than INR 5 lakh crore to the power sector). Of all the banks, the public sector bank, PNB has a peak exposure at 2.6 per cent of total advances to the mining sector. Others are the NBFCs ranging from REC and IDFC to the Power Finance Corporation. Something vital to note from the judgment are the words of the honorable judge, ‘There was no proper application of mind in distribution of coal blocks’. Plus, the court commented on lack of transparency and paramount irregularity.
We all agree that the honorable court accorded supreme place to justice. And integrity, indeed, must prevail. Nevertheless, the pain of those who without any fault fall into the grip of helplessness is something that in case not taken care of can fade away even the tough labors of the new Indian PM. ‘Make in India’ can succeed, but business security is the foremost essential. Even the susceptible stock market has a safety device, Investor Protection Fund to defend investors. Then how can the fund-seeking corporate sector of India prove detrimental to investors who extend substantial capital? But the democratic arrangement places judiciary above all, which in fact is lawful too. Who then is at fault? Yes we all know. They, however, are at fault since decades. Something relaxing, if has happened in the recent past, is the verdict of courts against high-profile politicians, put behind the bars. The rest, however, will learn, is not assured. Another depressing fact is the statement given by S&P’s credit analyst that Supreme Court’s ruling in the Coalgate can hurt significantly improved investor sentiments towards Indian corporate sector.
World Bank has lately predicted India’s economic growth at 6.4 per cent in the FY 2015-16 and has also said that the country is benefitting from ‘Modi dividend’. Share market is bullish and so are the entrepreneurs, but the recent conclusion by the Apex Court in the Coalgate scam has probed many in-house weaknesses. Remember, overseas fund-providers will not just rely on the pluses of the new government at the center. Rather, while finalizing strategic restructuring and investment visions, the due diligence report focuses on all-around factors that can upset the venture in the long-run. The new Act for the corporate sector, as known to all, is packed with gaps and holdbacks. Then we have lack of consensus between the union and state governments. Scarcity of adequate infrastructure is apparent. Then can we also bear the burden of revocation of concluded business deals? INR 2.87 lakh crore, as submitted by private companies, is the amount that they invested in coal extraction projects. Now, the GOI is seeking legal opinion in the matter of annulment of title deeds and forfeiting of bank guarantees. Mess, all over.
Anything we say, the judiciary will do its job, rightful and intact, and this is what we all expect from our honorable wing of democracy. A workable resolution can be agreement between the judiciary and the legislative wing. What about setting a threshold limit for business transactions that involve government and private players as parties, and then placing a supervisory judicial board to assure arm’s length dealing? From the beginning till the conclusion of such business deals, a judicial personality should have the power to administer, and upon completion, such deals should become unalterable. Along with, the government can set up a board, with legislative and judicial members, to prepare a due diligence report of hefty dealings. Once approved, corporate players must have the immunity from being harassed or penalized later. An Investor Education and Protection Fund can be created which shall be funded from the compulsory CSR aid. The Fund will advise domestic and overseas investors beyond resolving grievances and making good any authentic loss to the corporate houses. Let us hope that the new government and the new CJI will think over the prevailing pulls in the Indian market and will curb them.
Lastly, can I request India’s honorable and worthy judges to also notice the pain of the corporate houses, their shareholders, and employees prior to declaring a deal void ab initio? There is no harm in assessing the overall impact of a decision, though we respect the fact that the judiciary bears the burden of uprightness. But righteousness cannot be at the cost of guiltless. Invalidation of deals is untenable. International and indigenous investors, who extended money, labors and time in the 2G and Coal allocation ventures, now stand crumbled. Wouldn’t the milieu be much auspicious in case the honorable court had also awarded compensation, by nationalizing the developed substructure, to make good the loss incurred by investors who followed the prescribed laws? Or at least, an option to pay the amount as per the prevailing market prices so as to carry on operations. Penalize dishonest officials and ministers rather. It is high time that the suffering of business houses be paid apt heed to. A commission, with ministers, fiscal and judicial experts, and veteran judges as members, must develop such a setup that decisions once taken by the GOI, and involving weighty allotments/ sanctions and grant of licenses be made irrevocable guaranteeing stable business atmosphere to investors.