Sahara and the Super Cops, and how politicians weakened SEBI
Sahara and the Super Cops
Arun Mohan Sukumar | March 6, 2014 11:06 am
Growing up as I did reading The Hindus sports pages, I was taken by the phrase pyrrhic victory. Clearly, the papers sports desk was too: it made the headlines an impressive number of times, usually to describe dead rubber Ranji matches. Since then, it has been among my unstated goals as a writer to deploy the phrase without sounding a cliché. This has been an unfulfilling enterprise in these minimalist times, where victories are hard to come by, let alone those laced with failure.
Until now. Last week, when Seemanto Roy, scion of the Sahara Parivar, read out a message from his father Subrata describing his recent arrest as the Best Honour My Country Could Give Me, I knew I had my phrase.
At the end of a long, and in the words of the Supreme Court, outrageously ridiculous cat-and-mouse game with Sahara, the Securities and Exchange Board of India (Sebi) has won a pyrrhic victory. Between 2009 when it first sensed something fishy about Saharas fund-raising methods for its Prime City project and now, Sebi has been thrown under the bus by the government and courts alike.
Each time it emerged, bruised but relentless in its pursuit of wrongdoing by the group. When it finally managed to get Roy arrested, the Sahara chief simply turned the tables on the watchdog, suggesting he had surrendered wilfully, having been made a scapegoat despite his stellar contribution to the Indian economy. In its victorious battle to haul up a major conglomerate for twisting the law, Sebi had lost the plot.
Sebis uphill struggle against Sahara underlines why it has been difficult for institutionalists to defend regulatory regimes from the usurpatory and activist tendencies of the India Against Corruption movement. Watchdogs statutorily designated to tackle malpractice have been unable to function effectively on account of political interference, not because they need a super-cop to assist them. It is inconceivable Roy would have had the gumption to pooh-pooh the most recent SC directive had he not been guaranteed political support.
Indeed, Sahara built its entire case on the premise that it was the ministry of corporate affairs (MCA) and not Sebi that had jurisdiction over his unlisted companies. The governments current top solicitor previously lent a veneer of legitimacy to Saharas claim, in response to a request from the MCA. The law ministry endorsed this opinion. Even the SC, after its landmark ruling of August 2012 asking Sahara to refund Rs 24,000 crore to investors, slackened off, extending the deadline for payments.
When Sebis lawyer argued that the same bench that asked Sahara to refund investors should also decide extensions, none other than the chief justice of India intervened, refusing to place the lawyers objection on record. The SC later witnessed the unprecedented spectacle of its Bar Associations president asking the CJ, in open court, to stay away from the Sahara case.
Sebis woes are hardly confined to its investigation of Sahara. Political response to the regulators request for greater powers mainly to tackle ponzi schemes and illegal diversions of investor money has been lukewarm. Legally speaking, Sebi has lived a hand-to-mouth existence, thanks to emergency laws. It was granted statutory powers in 1992 through a hastily conceived ordinance: Singapore-based scholar Shubankar Dams excellent new book on presidential legislation chronicles how even the chairman of Sebi then had no clue what the boards new powers were, as the government hadnt supplied a copy of the ordinance to him.
As Dam notes, the finance ministry retained both direct and supervisory control over policies, leaving Sebi toothless. After the Satyam fraud was unearthed, many expected the UPA to come through on the Kania Committees recommendations to arm the regulator, only to be disappointed. Early last year, in the wake of the Saradha chit fund scam, the government rushed through an ordinance to enhance Sebis investigative powers.
That ordinance had to be re-promulgated in September, and has now lapsed, because the Congress was unable to pass it during the monsoon and winter sessions of Parliament. Just as Sebis troubles dont end with Sahara, regulatory concerns dont end with Sebi. The board at least had an ordinance to help its work, albeit for a few months.
The coal regulator recently created by the Union cabinet, on the other hand, has no statutory backing whatsoever. In its purely advisory role, the entity will frame principles and methodology around the fixing of coal prices. Pitched against the monopolistic hold of PSUs in the coal market, it needs no punditry to proclaim this regulator will be ineffective.
It is at best a mediator between Coal India Limited and its buyers, not a dispute settlement body. Meanwhile, the original Coal Regulatory Authority Bill, 2013, we can safely assume, will gather dust. Some of the biggest controversies in this sector, such as diversion of coal from the Sasan Ultra Mega Power Project and the allegedly irregular allocation of captive coal mines from 2004 to 2009, have been on account of poor regulation, not discernible corrupt practices. Rather than curbing government discretion, this regulator would simply widen it because it answers to the Union cabinet.
The investigative agencies assisting these regulators have fared no better. If the government had no qualms trying to influence the CBIs status reports on coal allocation, its sincerity in setting up independent regulators is moot. To have its way in the appointment of a CBI additional director, the UPA rode roughshod over the recommendation and legitimacy of another watchdog, the Central Vigilance Commission.
There is no surprise, then, that the IAC and the Aam Aadmi Party have tapped into popular demand for a tough watchdog. The Jan Lokpal wishes away the problems of regulatory and investigative agencies by insulating it from political interference, at least on paper. Its functional autonomy thanks to a dangerous combination of investigative, prosecutorial and enforcement powers may make it appear an effective agency. But as the recent controversy surrounding appointments to its selection panel highlights, even a Lokpal is not free from politicking.
Unless the governments inordinate discretion in their appointment and functioning is curbed, there can be no independent regulators in the truest sense. The Lokpal debate is merely a distraction. For now, Sebi may have scored a rare victory against Sahara but at each stage of this dispute, its political masters chipped away at the boards legitimacy, leaving it weakened for battles ahead.
- There are so many so called "tycoons" like Roy who are roaming outside, probabily Roy is the first to be caught!! How soon he will be out depends on his limit for string pulling with the poweres that be!! UP government and the powers that be of UP were and are in the pockets of Roy!! The kingdom of business is a hollow one without any foundation!! It in all probability is built on funds of government which politicians in the company of "trusted Sahara" siphoned out!! RIL, Kingfischer and most other business tycoons projected as being worthy of emulating are all belonging to this category! Kejriwals saying that BJP and Congress are in the pockets of RIL is very apt!! If any one in the government sincerely take up these issues seriously we will find that our business foundation (which is tom tomed as one of the growing economies as nothing to substantiate!
- Iam told that "Sahara Empire" employs 2 lakhs of people all over the world. Can the author of this message tell us what will happen to all of them and to thenational economy in general. Does he want the Sahara industries to be taken over and by whom? There are many aspects of this case that puzzle me -yes. obviously roy pumped in lot of unaccounted money and therefore is unable to answer SEBI and the Supreme court. But if black money comes back into the industry, is it good or bad
- Between the devil and the sea!
When AAP's Arvind first raised the issue of gross irregularity in the gas pricing for RIL inflating to a phenominal $8.4 it went thro' like a lightining flash in me about the unfortunate predicament of millions employed by RIL!
It is something like a builder putting up a number of additional floors in a building in exess of what is permissibel and after selling and realising all the money and the public servant have had their share it is pointed out that there is total violation of rules!! The public who paid the money for their flats by putting in their lives' savings fight the case and get a regularisation of order, of course by agains paying under the table!!
The employees, unknowingly or knowingly, becomes a part of the corrupt system making both ends meet getting pittance for theirwork to'sustain' the company built o a corrupt foundation!!
The arena of corrupt practises provide employment to millions, middlemen, lobbyists and their agents and making a living by non righteous means!! Assuming that these establishments should be closed down the unemployment figures projected by the authorities must be just a farce!! Unemployment figure should be anywhere between 30 to 40%, needless to mention that even among employed the income many receive is not enough even to run 1/3rd of their minimum needs!! MNRGA provides 100 days employment on records but many may not even be getting any thing!! It is only the attendance registe, bills and challans and no delivery possible to be traced!!!