Corporate scandals – does really endanger the economic progress of the country? An insight
In recent past country is witnessing huge number of corporate scandals all over the country. Almost with the frequency of 1 to 2 years, at least one corporate scam is coming to light. It is known fact that after Government organisations, public sectors, banks and other Government run financial institutions like LIC, GIC, are playing a dynamic role in advancing the country’s growth economically and industrially. On the other hand, private sectors too contributing maximum to the growth of the country.
The private corporate sector has stretched its tentacles maximum in all fields of public life and grabbing huge public confidence in showing employment, and in providing minimum infrastructure like public health, road transport as well as air transport and also in encouraging savings in the form of shares and paving the way for making huge investments in corporate houses and thereby contributing for the economic and industrial growth of the country to some extent.
The statutory provisions enshrined in our Company’s Act, 2013 as well as the repealed statute allows the private corporate sectors to raise their funds to run their business through the issue of shares and debentures. It means the private corporate sector is completely running its business with public money. When the public raise their investments in these sectors, they be able to grab the profits and can reach to saturation levels at the earliest by throwing some facilities to the public as a pray.
The time when the public are growing their confidence in these sectors, these sectors begin to take advantage of the situation and start to capture the market by adopting malpractices and abusing their powers and positions.
Any private company, at the time when it is flourishing, becomes closer to politicians for certain advantages which are publicly screened. This is actually the time where the people and government have to be vigilant and take initial steps to curb any unwanted and unwarranted risks. But both will not concentrate much during such initial stages until the situation goes beyond clutch. When the risk alarms high, then the people start to realise the reality and starts screaming.
At the initial stages of our independence we used to have socialistic features of economy where complete hold over the land and properties would be in the hands of state and the state was considered to be the owner of all properties. But with the considerable expansion of the country (population wise), the government supplied goods and services since were not meeting the demands of public, inviting the private sector to the public field has become inevitable. Accordingly privatization was introduced successfully in all services. However, the private sectors at the time of their entry into the public life used to be very sincere, serious, dedicated towards their duties and also could reach the expectations of people and also government. Even till today certain big corporate giants like Tat motors, Tata Steel, Reliance, Google India Pvt. Ltd, Forbes Marshall Private Limited etc proved their excellence in their respective fields. It may be a challenging time to prove themselves that they are on par with the government and be able to show security to the public in all fields. But few companies which have taken undue advantage of the situation collapsed the system to some extent.
In this regard, I would like to bring to limelight certain corporate scams, the way they looted the public confidence and just remained as a scar in public minds.
The major corporate scams in recent past are Vijaya Mallya’s King Fisher Airlines case, illegal mining in (Bellary District) Karnataka(Gali Janardhan Reddy’s case), Disproportionate assets case( jayalalitha ex cm of TN), 2G spectrum scandal, Satyam computers Ramalinga raju’s case and so on.
In the light of above scandals, I would like to focus on two points. They are
1. Whether the administrative measures are taken in time?
2. Why the corporate veil could not be pierced at the earliest?
If we look into Gali Janardhan Reddy’s illegal mining case, Bellary district, he was owning OMC since 2001 along with another person Srininivas reddy as its co director. At that time he was minister in BJP ruled government, in Karnataka. During the year, 2009-10, he kept the entire Bellary district with tight security issued 54 gun licences to the so called organised illegal syndicate for protection and looted lakhs of tonnes of iron ore. Though he was minister at that time, why it could not be noticed by the Government? Until the point, where some IT departments conducted raids, why it could not be noticed that the company evaded crores of rupees of taxes. When the same IT department keeps in sending number of notices to ordinary individuals if they fail to pay any dues for one or two years that too very small amount maximum in terms of thousands only. Why can’t they take action when such huge amounts are defrauded? During investigations, it came to be known that he established one dummy company in the name of his wife in Dubai only with sheer intention to avoid tax payment. Though the Karnataka Lokayukta reported that there is a huge scam and 12.57 metric tonnes of iron ore was shipped out from Goan port.
All cases related to illegal transportation of iron ore from ports in Mangalore, Karwar, Krishnapatnam and Goa have been disposed of due to lack of evidence. How much these are reliable and justifiable's Vishnu Kamat, one of environmental activist commented regarding the case CBI has taken a stand for the reasons known to itself not to appeal against the discharge of Lakshmi Aruna wife of Gali janardhan reddy.
The Karnataka High Court discharged Janardhan Reddy and his companies two months ago on a technicality that the ED had not used the correct provisions of law and instead used wrong provisions of the law in pursuing the case. Surprisingly, the ED has not pursued an appeal, and some activists have sought to file a complaint in the Supreme Court. So finally the 35000 crore illegal mining cases appeared to be quietly a burial by investigating agencies both at centre and state.
Similarly, the King Fisher Airlines’s case, Vijay Mallya faces several court cases in India, including Rs9,000 crore in loan defaults by Kingfisher Airlines, tax evasion and money laundering.
In July 2015, the Central Bureau of Investigation (CBI) registered a case in the loan default case based on a complaint lodged by IDBI Bank.
The Enforcement Directorate registered a money laundering case against Malya and Kingfisher Airlines chief financial officer A. Raghunathan in connection with the IDBI Bank loan default case in March 2016.
In 2011-12, the service tax department had issued a notice to Kingfisher Airlines for dues of Rs87.5 crore, which the airline had likely collected from passengers but not deposited with the department. he Serious Fraud Investigation Office (SFIO) is investigating the irregularities since 2015.
Similarly GMR, Hyderabad, Income tax department filed cases against Mallya for various defaults.
The DRT, Bangalore allowed the creditors to recover the debts amounting to 9000 crores.
Finally the Supreme court accepted the plea of consortium of banks led by SBI group requesting it from restraining Mallya from escaping from our country but the efforts gone in vain. Despite all these allegations we are watching him in enjoying in UK today. whether we are tying our hands for ourselves by being spectators or we are tied, it is left to one’s judgment.
Similarly Satyam computers case The Satyam Computer Services, scandal was a corporate scandal affecting India-based company Satyam Computer Services in 2009, in which chairman Ramalinga Raju confessed that the company's accounts had been falsified. Similarly Jayalalitha’s disproportionate assets case went without any convictions after 18year run litigation.
My point is as and when there is a little apprehension that there is a suspected scam, quick administrative remedial measures are to be resorted to and can see that the situation is not crossing our hands.
For example wherever there is a hint that something malpractice is doubted, immediately on being noticed the concerned board of directors are to be replaced with the new ones, regular auditing with transparency must be done to yield the desired purpose. Even if judicial actions are taken, they must be continued till the culprits undergo the punishments without letting them to escape from judicial clutch.
If in all the corporate scandals, the accused persons are getting acquittals in spite of having sufficient evidence on record, what type of signals it be passing to the public both nationally and internationally?
If the above situations are recurring day by day without proper control or measures, the zeal of investors to make investments will get completely hampered. It directly affects the financial positions of the companies and in turn production be declined and in turn affects employment, and in turn affects our per capita income and finally affects our GDP. This decline of GDP rate is again a negative indication to the foreign countries and will not show much interest in dumping their investments in our country. Therefore, our ambition in inviting foreign investments under the slogan Make in India of our beloved Prime Minister Midi’s may become a nightmare.
In the light of above, we need to be very careful in seeing that the foreign eye on the Indian Market is not getting erased in making productive investments and it must be instead welcoming. We have to be vigilant in setting up the corporate entities because Corporate sectors do contribute maximum to country’s growth and can yield huge purposes to all people in all fields provided if they are properly safe guarded with frequent scrutiny and random checks so as to be out of the hands of bureaucrats. Otherwise these scandals will definitely endanger our progress economically and industrially. Let us all beware of the situation and do contribute something for the productive growth of our country.