After what seemed an eternity at least to homebuyers who had paid large sums with the hope of securing a roof over their heads, the Supreme Court has finally acted against Amrapali, the NCR-based real estate company. The court order to cancel Amrapali’s Real Estate Regulatory Authority (Rera) registration along with all of its land leases was followed swiftly by the Enforcement Directorate filing a money laundering case against the group and its promoters who have diverted nearly ₹3,500 crore of buyers’ money to their personal accounts using it to buy lavish homes and cars, while buyers have waited for years for the elusive homes.
The company’s promoter Anil Sharma and its other directors could well be looking at lengthy jail terms now, joining other high-profile Indian promoters who face a similar predicament for deliberately and cynically defaulting on their financial commitments. After years of cocking a snook at lenders and customers, they are now finding that the laws of business apply equally to the mighty and the meek.
It hasn’t been like that though as over the last few decades, company owners in India were able to get away with murder, thanks to their connections. Independent India started its tryst with big business in the right spirit, determined to uphold the law. The first successful trial of a financial scamster in independent India took place in June 1957 and involved the Calcutta-based businessman Haridas Mundhra who had conspired with senior officials to get the public-sector Life Insurance Corporation (LIC) to invest in his dud companies. A one-man commission of inquiry headed by former chief justice M.C. Chagla quickly put an end to that and Mundhra was sent to cool his heels in prison, while the then finance minister T. T. Krishnamachari was forced to resign.
But things went steadily downhill after that as Indian business owners formed a nexus with politicians and bureaucrats that kept the law at bay.
No wonder then that in 1985, when the Rajiv Gandhi government with V.P. Singh as its finance minister arrested an old and ailing S.L. Kirloskar on charges of under-invoicing (though he was out on bail almost immediately), the act made it to the pages of a distant New York Times whose India coverage at that time wasn’t exactly prolific.
If these moves against defaulting businessmen were unusual for their time, not much changed over the subsequent decades as powerful Indian businessmen got away with white collar crimes while those on the margins quaked in fear even when they received an income tax notice.
Thus, in 1995, the so-called Cobbler Scam was unearthed, with Sohin Daya, son of the former sheriff of Mumbai, and owner of Dawood Shoes, along with Rafique Tejani of Metro Shoes, and Kishore Signapurkar of Milano Shoes arrested for creating several fake leather co-operative societies. Nearly 25 years later, that case is still dragging on with conviction nowhere in sight.
A breakthrough against corporate crime came in 2009 when, following his dramatic confessional, Satyam promoter Ramalinga Raju was sent to prison on charges of cooking the company’s books to siphon cash out of it. Since then many more businessmen including Subrata Roy of Sahara, Sanjay Chandra of Unitech and Sudipto Sen of the Saradha group have found themselves on the wrong side of the law and what’s more discovered that there are consequences for breaking it.
It has been a long journey. Many of India’s best-known business tycoons have exploited every loophole in the legal system to defraud the general public as well state institutions. In 1956, the government appointed a commission of inquiry into the administration of Dalmia-Jain Companies, one of the leading business groups in India. Here’s an observation noted in the report submitted by the committee headed by justice S.R. Tendolkar: “The favourite method was to bring the company to voluntary liquidation; appoint a willing liquidator who fell in with the scheme, get a scheme of arrangement sanctioned by the courts, hand over all the assets and records and books to a purely R. Dalmia concern in which the directors were the fools of R. Dalmia, and then get the transferee company to destroy the books and records so that traces of the frauds and manipulations were destroyed."
Nearly 58 years later, another gentleman, this time then governor of the Reserve Bank of India Raghuram Rajan, made similar remarks. In his November 2014 Dr Verghese Kurien Memorial Lecture at IRMA, Anand, Rajan warned against “the uneven sharing of risk and returns in enterprise, against all contractual norms established the world over—where promoters have a class of ‘super’ equity which retains all the upside in good times and very little of the downside in bad times, while creditors, typically public sector banks, hold ‘junior’ debt and get none of the fat returns in good times while absorbing much of the losses in bad times."
While men like Harshad Mehta, Ketan Parkeh and Abdul Karim Telgi rightfully belong to the rogue’s gallery of India’s corporate scamsters, many others whose crimes were equally grim have hitherto got away, thanks to their pedigree or their political patrons. It is time the law is applied equally to commoners and crown princes.
Sundeep Khanna is an executive editor at Mint
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