To trap the big fish rather than minnows, India needs a more liberal application of US-style laws that provide for immunity to suspects of a crime, provided they come up with incriminating evidence about bigger accomplices. As much as the businesspersons involved, toxicity is generated by high-level politicians and officials, who connive at fraud and who share in the loot of public institutions. If more such accomplices in high positions get outed, the faster will be this country’s trajectory towards a transparent and ethical system of governance. In the case of an individual who has been in the news these days, Vijay Mallya, the former boss of UB is known to be a perfect host. Those ministers, ex-ministers, officials and former officials, who have been his guests in any of the idyllic residences he (directly or otherwise) owns, return with smiles on their faces caused by Mallya’s exquisite hospitality and charm. After such an experience, who can blame them for signing cheques worth thousands of crores of rupees to fund shaky enterprises, especially if the money is not theirs but the taxpayer’s? India is presumed to have an independent media, which is why it is a surprise that thus far there have been no reports giving a comprehensive list of the political and official notables who have been regulars at the court of the King of Good Times.
Now that Vijay Mallya is in London, a city that has as much respect for billionaires as Zurich, he can stay put and look after the foreign businesses in his control, including many in the UK. He could exchange his India passport for that of one of the many countries that offer citizenship for the right price. An absent Mallya will be missed in India, but as most of his friends are frequent flyers, they will continue to have the opportunity of attending the get-togethers that he will continue to host abroad. Should he surprise his critics and return to India, he should reveal the identities of those who helped persuade the banking system to wear the garb of Santa Claus. If he furnishes proof of VVIP mischief, Vijay Mallya merits leniency, as would Lalit Modi, should the IPL founder agree to tell all. These individuals have already done what damage they could. Should they now atone by helping clean up the resultant debris by providing proof of the illicit help given by VVIP accomplices, it may even make sense to give them immunity on the US model.
Simply sending a businessperson to jail will not fill the gap in bank funds caused by his activities. Take the case of Subrata Roy, now entering his third year in prison. It may perhaps be easier for the former tycoon to come up with the moneys demanded of him should he operate out of prison, a location less than ideal in which to hammer out a satisfactory business deal. Of course, such a release seems unlikely, for India is a country in thrall to colonial values, and where prison is the default option to a huge number of transgressions, real or imagined. Except to members of the Communist parties of India, who in India at least are steadfast in standing by the doctrines which resulted in the collapse of the USSR, sending a businessperson to prison seems of less value to the country than getting back the moneys lost. Hence the focus needs to be on innovative ways in which such a recovery of moneys can take place. Recently, the Ministry of Corporate Affairs ordered the forcible merger of a spot exchange (NSEL) with a cash-rich company (FTIL), on the grounds that both were managed by the same individual. Interestingly, while this individual was—understandably—hit with the full rigor of the law following a meltdown in the spot exchange founded by him, none of the brokers and defaulters involved in suspect transactions seems to have been troubled by SEBI or other agencies. Surely a single individual could not have committed such mischief by himself. So why no action has been taken against any of the others involved in the meltdown of that particular exchange remains a mystery. Two months from now, the brokers suspected of having sold defective products to investors to make a killing will be able to erase evidence of those transactions under the Three Year Rule for keeping such records. Should SEBI permit this rather than undertake in time a comprehensive forensic audit of the suspect transactions in the now defunct spot exchange, the CBI will need to ask why. With its innovative decision on NSEL-FTIL, a novel precedent (of forced merger of two companies) has been set by the Corporate Affairs Ministry. A social activist, Madhu Kishwar, has suggested that the same route be followed in the case of Kingfisher Airlines through a merger of that entity with United Breweries. Indeed, such a coming together of the two would ensure that the airline revives. The merger precedent should be repeated in the case of UB and Kingfisher to save an airline that had a level of passenger comfort that was better than most competitors. Not just in the case of Kingfisher, but in other cases of loan default with commercial banks that involve financial recklessness rather than simply caused by adverse market conditions, similar mergers should be enforced on the NSEL-FTIL model so as to reduce NPAs without burdening the exchequer. Even if the profit-making units were technically foreign-owned, laws in India could be tweaked to get them merged with units run by the same managements as have wilfully defaulted on domestic bank loans.
Finance and Corporate Affairs Minister Arun Jaitley needs to expand the precedent set by his ministry in the case of the spot exchange company by ordering a similar merger of other units responsible for bank defaults to others linked to those who for too long have used the banking system in India as a personal piggybank. This, rather than further burdening the taxpayer, should be the way the Narendra Modi government nurses the banking system back to health through significant reductions in the NPAs now filling bank ledgers.
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