Menu

Dr Annurag Batra

Dr Batra mugshot

Judicial Terrorism Versus Ease Of Doing Business in India

, , , ,

Is the judiciary singularly leading the charge against business reform in the country?

By Dr Annurag Batra, Chairman and Editor in Chief, BW Businessworld, and Exchange4Media

This morning Indian businesses and professionals woke up to what can be termed the most horrendous to date in a never-ending series of ridiculous criminal legal actions in what should be business disputes. The reason this decision takes the cake though is that an outcome of the due judicial process was summarily garbaged in a cowboy-esque judicial-police overreach of herculean proportions.

Pratip Chaudhari, the venerable and highly respected ex-Chairman of the State Bank of India was arrested by the Rajasthan Police in Delhi without either following due procedure laid down (and ceaselessly repeated) by the Supreme Court, or even informing the local police before acting in their jurisdiction. This was by no means a hot pursuit that inadvertently blurred jurisdictional boundaries but a possibly illegal raid at the home of a retired senior official.

In India, the police, taking advantage of colonial laws designed to enforce the enslavement of the Indian populace in the 19th century routinely exercises its power of arrest. They are further emboldened by the lackadaisical approach of the lower judiciary which routinely rejects bail. This not only prolongs the time spent behind bars by citizens, who in an overwhelming majority of cases are innocent (as clearly proven by NCRB data) but also loads the High Courts & the Supreme Court with the undue caseload. Flimsy reasons for arrest are given by the police, which is endorsed by the judiciary leading to unnecessary incarceration in a persistently blatant violation of human rights of gigantic proportions across the country. For a country that wants to see itself in the company of, and in competition, with the leading economies of the world, the continuing existence of a system originally designed to rule over slaves is a dark reminder of the fact that we are unlikely to ever break the shackles of our primitiveness and find a place alongside the first world.

While there is no denying that every such case of violation of human rights being presided over by the judiciary is a matter of shame for us in the context of our self-proclamation as a haven for democracy, the impact that it has on business only magnifies the downside dramatically. It means that true innovation will never happen in this country – because every entrepreneur who takes a risk and every bureaucrat who makes bold moves will remain at the mercy of the judicial-police-political nexus. The blatant misuse of Section 420 of the Indian Penal Code which holds the dubious distinction of being amongst the sections with the highest charge sheeting rates but the lowest conviction rates is the starkest example of this. Everyday business disputes are ‘sorted’ out by unscrupulous individuals and businesses approaching the police – who are more than happy to apply this non-bailable section with a provision for rigorous imprisonment up to seven years. It means that they can liberally harass the other party; and if not satisfied with the proceeds, or sufficiently pressurized, managed, or greased, by the complainant, arrest the other party at will. The Supreme Court in its 2014 judgment in the Arnesh Kumar case strictly laid down the law on the process of arrest. While the police do pay lip service to this for the sake of adherence in letter (never in spirit), as the current discussion in question shows, where it suits them they are also happy to ignore this altogether.

The judiciary, which emerged as the protector of civilian rights over the past three decades, now seems to have simply switched sides – especially at the lower levels – to aiding & abetting the criminal legal system in these Machiavellian endeavors. Professionals, Entrepreneurs & Company Directors are liberally arrested and denied bail for days on end causing disrepute, business destruction, and impacting careers irretrievably. However, to those in positions of power with ‘secure’ government jobs, this matters least as long as their power and revenue sources remain undisturbed. To them, it does not matter that their patently illegal actions are destroying business value and the global image of India. And the higher judiciary must also take partake blame in this rigmarole – in every order laying down procedure or clarifying citizen’s & business’s rights, while contempt & worse is threatened for the police, bureaucracy & the polity, for the venerable judges a motherly slap on the wrist by way of some vague possibility of departmental inquiry is envisaged. The futility of this is demonstrated by the fact that despite the mess that our judicial system is in, we rarely hear of judges suffering strong disciplinary or penal action, whereas police, bureaucrats, and politicians routinely face this. The citizen of course remains at the apex of the pyramid of suffering.

If one were to take a cursory look at the order of Chief Judicial Magistrate, Jaisalmer against Mr. Chaudhari, it is clearly evident that order is full of holes and absolutely devoid of facts. The fact that he is being personally assailed by the full force of a judiciary gone awry – probably in the pursuit of a meaty slice of the pie that the police system gains from harassment of citizens – in the case of a duly legal proceeding that took place under the aegis of the IBC in itself shows not just the patent illegality here, but also points to the possibility of undue gains and favors.

The matter pertains to a term loan & CC limit sanctioned by the SBI in January 2008. The loan was subsequently restructured in January 2009 and became an NPA in June 2010. A recall notice of INR 33.93 crore was issued in November 2012, and ultimately a DRT suit was filed in July 2013. Notice was served under the SARFAESI Act but no action could not be taken as the CJM sat actionless on the bank’s application. Finally, the bank assigned the loan to Alchemist ARC for a consideration of INR 25 crore in March 2014, thus recovering its entire principal.

Subsequent to this assignment, the ARC continued to take action for the recovery of the loan including taking the DRT case forward as well as action under the SARFAESI Act. The borrower continued to aggressively litigate at every stage. After having exhausted all options, the ARC invoked the IBC Act, the application for which was admitted in March 2017 after a long period of litigation at NCLT, NCLAT, and going up to the Supreme Court.

The promoters filed false a FIR against the RP, who was arrested and had to seek protection from the Courts. The Court, in that case, gave a landmark order that criminal complaint can only be filed by IBBI against RP.

Both NCLAT and the Supreme court have passed strictures against the promoters in their orders for filling applications to delay the process. The promoters did not hand over the vehicles of the company to the RP, who had to go to court. The RP invited resolution plans in a public announcement. COC found the plan submitted by JFC Finance most suitable. NCLT approved the plan. Promoters tried to delay by filing a frivolous application.

Yet in all of this, it is also stark that the top Courts in the country & the state have failed to draw a line in stone about treating business disputes as separate from criminal matters. It is a matter of sadness that instead of laying the law that criminal action should ideally be the the outcome of judicial or tribunal observation of the occurrence of fraud or other criminal action, courts throughout the country have been allowed to function in the wild west in such matters. While there is no question that a business dispute may have a criminal angle in cases, case law allowing the admittance of criminal cases without investigation or proof has emboldened unscrupulous operators to create an environment of fear. This is nothing but judicial terrorism directed at the destruction of the country’s business environment. The eradication of corruption is essential – the guilty must be punished swiftly, but swifter than that must be the sifting of the good from the bad, in a fair manner, and in a way that ensures that the jurisdictional maxim of ‘innocent until proven guilty’ is followed diligently.

It is clear in the extant case that the entire process was transparent. The Bank legally sold its financial asset, and that has no relation with the value of the security. The subsequent sale of the business by the RP was through due process as per IBC. None of these facts are discussed in order. The promoters are known to have a track record of managing government officials, filing false cases, and intimidating officials by filing FIRs. There is no scope of any wrongdoing by any Bank official in the entire story let aside Mr. Chaudhuri who was no longer holding office when the loan was assigned to the ARC. The passing of such an order ex-parte against the former Chairman of the biggest bank in the country only goes to show how bad the mess has become, and clearly means that there is no hope for true reform in the business environment of the country till the approach changes.

As the government drags its feet on the long-pending criminal law reforms and leads the charge against the reformative order of the Supreme Court mandating blanket CCTV coverage across all police stations & facilities of all investigative agencies with the power of arrest, there is little that can be achieved by all the reform that is being pursued. It is time for the government to take bold steps to bring India out of its colonial judicial mindset to unshackle its citizens and truly create ease of doing business. And the press also has a major role to play in this by applying its mind to the core of the issue and pushing for reform, instead of – as was seen in this case – mindlessly sensationalizing the reporting of such a critical issue as a scam. The victory over tax terrorism was a great shot in the arm for business and has been visible across the spectrum. Now it is time to tackle judicial terrorism. The higher judiciary has remained highly progressive, but it is time to throw out the colonial mindset summarily to ensure that not even one small case of this nature is repeated.

Dr Batra mugshot

The Man Who Acquired Nothing… But A Dubious Reputation

, ,

In life, when you are looking for something ‒ be it a life partner, or a mentor, or an investor ‒ you meet a lot of wrong people before you meet the right one… Dr Annurag Batra shares his experience of meeting one such ‘conman non-funder’

By Dr Annurag Batra, Chairman and Editor in Chief, BW Businessworld, Exchange4Media

Through their journeys, entrepreneurs are known to take leaps of faith multiple times in their dealings across the spectrum of stakeholders? Investors, bankers, investment bankers, media, regulators, policymakers, and even senior management within their own companies.

This ability to deal with the unknown, to trust others as well as collaborate internally and externally, makes them leaders in the world of business. Entrepreneurs take bets – some work out and some don’t. But as long as the ones that work out are strategic and at scale, they help build a business and create wealth. I have been a first-generation entrepreneur for 21 years now. Neither my parents nor my elder sister ever ventured into business. All three have been academics and that has given them happiness and a livelihood. I grew up in a family where you kept a commitment once you made it. It was always considered the most normal thing to do. I saw the honesty, sincerity, and simplicity of my parents? they say what they mean and mean what they say. So, I learned to take people at face value. That attitude has extended to business and it has made me believe in what people say – even though it has at times, resulted in taking some knocks in business.

Despite that, I continue to take people at face value till proven wrong. For me, a person’s word matters. In fact, it is the only thing that matters. If there is something one couldn’t do, then the “no” comes faster than the “yes”. That’s how I have been these last 21 years. I founded the exchange4media group and by God’s grace, we did quite well, barring minor hiccups here or there that any business may go through. I acquired BW Businessworld eight years ago and did raise some growth capital at the time of acquisition. However, as the capital requirements scaled, I struggled to raise it for various reasons that I shall certainly write about someday. As I went about raising capital, my friends introduced me to a financial service professional, investment banker Sanjeev Sinha. Sanjeev has an impeccable track record, having worked with venerable financial services giants across the globe. Sanjeev in turn introduced me to a would-be investor by the name of Laxmi Prasad, or to be precise, Palyapu Laxmi Prasad, Chairman of the US-based, Interps.

Sanjeev also advised me that we should do the transaction on merit and provided everything is in black and white. While the transaction did not happen, Sanjeev and I became very close friends. I found Sanjeev to be a true professional and a great human being.

Sanjeev mentioned before the first meeting that the man did have a chequered past, which he would himself explain. It was at an exchange4media event at ITC Parel in Mumbai and we met at the top floor board room of the hotel. Laxmi Prasad showed up with a lady associate and began explaining away his accounting misdemeanours.

Prasad claims to have $10 billion worth of retirals under management in his US firm, Interups, mostly of Indian expats. Indian records show a history of allegations and litigations against him for fraud in general, although each different issue has its own specifics. For the past few years, Prasad has been popping up at boardrooms and media features with pervasive regularity. His raison d’etre is his supposed penchant for buying stakes? ranging from a significant minority to complete majority? in a slew of companies across the spectrum. In retrospect, we are all experts.

But let me tell you, when in life you are looking for something? be it a life partner, or a mentor, or an investor? you meet a lot of wrong people before you meet the right one. Being a first-generation entrepreneur, I have always trusted people and learned from my own first-hand experiences. I believe that even as we go through a few disappointments, the right person will emerge. So I take chances? half-chances? even quarter chances.

There were two red flags with Laxmi Prasad:

First, he shared his past from the USA, which should have been enough for me to get alarmed and abort our discussions.

Second, he was from Hyderabad. Let me be very clear – I have no prejudice against Hyderabadis; some of my very close friends are from there and they are good, honest human beings who always keep their word. But without prejudice, I must mention something a now 65-year-old billionaire who starting from the age of 20 has gone on to build a multibillion-dollar conglomerate told me. He warned me against working with operators from Hyderabad as it was very common for frauds to emanate from such sources. He even wrote me an email asking me to be cautious.        

But I took a chance with Laxmi Prasad. We must have had, maybe, 10 or 12 meetings, to be able to finally arrive at a term sheet. The last few meetings that we had were at The Leela in Mumbai, with the venerable Mr. Vivek Nair as the host. Prasad told me he was investing over Rs 3,000 crore in Mr. Nair, and so Leela was rolling out the red carpet for the man, for the group needed the funds to tide over rough weather. Mr. Nair was known to me through a common friend, Mr. Moses Manoharan, a media man across three decades. Mr. Nair and the Leela Group were kind enough to provide us the Leela Palace complimentary for the launch of BW Hotelier – a magazine that has gone on to become the undisputed leader in the hospitality media domain. In retrospect, I realize that I should have checked with Mr. Nair, and possibly, he should have done the same with me. But neither of us did. So here was Laxmi Prasad enjoying the unparalleled Leela hospitality, extra red carpet thrown in. And we all now know that Mr. Nair could not raise monies and the Leela group was ultimately acquired by Brookfield.

Mr Nair possibly depended completely on Laxmi Prasad. A man who was of course, fake.

Why do I say, of course, a fake?

It was sometime in early 2018 that we signed the deal one early morning at Leela Mumbai over breakfast. And Laxmi Prasad was for a change, offering breakfast to my colleagues and me. Laxmi Prasad had agreed to be an investor in BW Businessworld and its associate media entities. It was a big term sheet – a multimillion-dollar deal. And then he pretty much disappeared after signing the deal. I kept following up for a couple of months and when he did care to respond, he kept assuring me it would happen.

Even when I was signing the deal, I knew the chances were 50:50. But as an entrepreneur you need monies; you stay hopeful and believe in miracles. This had happened once before to me and I thought to myself that God is kind to me, so maybe this time God has sent me a genuine person. I truly believe in God and place my faith in the hands of my Lord Rama.

However, as this deal fell through, it ended up with me struggling without growth capital for three years. And my existing investors kept wondering and enquiring about when the money would come in. After a while, I had to tell them the story with absolute transparency. I even ended up borrowing money in the hope that the investment would come in. But the deal never did happen, and I tried to forget Laxmi Prasad. Albeit, he is really unforgettable (and not in the Nat King Cole way).

And yet, I had pretty much forgotten about him till Air India was put on the block? and lo and behold ? in a leading Indian print daily I see Laxmi Prasad on the front page. I shook my head in disbelief that he could be a bidder for the national airline. I called my friend and colleague, Prasar Sharma, who had worked on the deal with me. We had a good laugh, seeing him back at his game! I remember joking that Laxmi Prasad couldn’t possibly buy an Air India economy plane ticket on his own, let alone the airline itself. I wanted to tell my friends who matter, but then I said that I should let Laxmi Prasad’s karma be his own. I did not want to play God, and talk about or write about this. And in the end, Air India did return home safe to the Tatas.

And once more I forgot about Laxmi Prasad till this last Saturday, the 30th of October. Per chance, I bumped into Mr Pavan Ruia of Dunlop, a businessman and entrepreneur from Kolkata, while at lunch with friends and colleagues. Mr Akhil Reddy of MEIL was with us and as we got talking, they both realised that they have been run down the alley by the same man ? Laxmi Prasad. As soon as they mentioned his name in their casual conversation, I jumped right in.

And now I realised that I was not the only one Laxmi Prasad had promised money to and delivered nothing. Mr Vivek Nair was another who had suffered because he trusted that man. And then there was Mr Ruia and Mr Reddy. I was told he also misled the HCC founder and creator of Lavasa, Mr Ajit Gulabchand. And just as with Air India, he was one of the suitors for the Shipping Corporation of India. I was told of multiple businessmen who have gone through the same experience or worse. I decided that I had to write this article ? and then to top it all ? today as I spoke to the MD of a large Mumbai-based NBFC about my upcoming article, he named the subject of my article, without even naming the man.

The great irony is that despite claims of multi-billion dollar AUMs and bids on everything, there seems to be not a single bid to this man’s name. And while one could possibly account for some of those under qualification criteria (read Air India) or tough competition (insolvency bids), there remain umpteen examples where he has been the only player in the game,  seemingly always coming in last in a one-horse race. And in (many) more than one case, he has left a house on fire in a condition worse than when he came in.

I believe that Laxmi Prasad needs to be exposed so that no one trusts him the way I and so many others did. I want to make sure he does not play with the lives of people. I need to warn entrepreneurs so that they don’t fall into Laxmi Prasad’s trap. There are many Laxmi Prasads out there and entrepreneurs need to be careful.

So this does beg the question as to why I am writing this column with real names and baring it all?

1.    I hope Laxmi Prasad is checked and he redeems himself. It’s never too late to do the right thing for the right reason in the right manner.

2.    I hope entrepreneurs like me seeking funding, are more diligent and ask the right questions.

3.    I know entrepreneurs live on hope and expect miracles and a lot of times entrepreneurs are a product of miracles. However, hope is not a plan.

4.    I also want to say that entrepreneurs should check with one another.

When Laxmi Prasad duped me of time, energy hope and the money I spent on him, I castigated myself for it. My family and my friends told me I am not wise. But Laxmi Prasad also cheated many other seasoned entrepreneurs who were not first-generation enterprisers like me. In a way, I felt a sense of relief that even seasoned entrepreneurs are human and live on hope and trust just as much as the new ones. The silver lining though is that as my search continued, I met more than a few amazing individuals who have more than made up for the likes of Laxmi Prasad.

Eventually, it all did work out for me but I still wanted to pen this so that other young entrepreneurs or those inspiring to take this route would not be misled and can learn from my experience.

I hope Laxmi Prasad is brought to book. And I do hope my next column about a conman from Hyderabad next week,   doesn’t stereotype my friends from Hyderabad. And to make sure that no prejudices or stereotypes can come out of these, I will also soon write about the committed and honest entrepreneurs I have met from that great city.

In conclusion, I would like to say that we land up with a man who seems to be trumpeting himself with aplomb in media, while many genuine entrepreneurs regularly end up at the receiving end of hit jobs on the pretext of some routine business issues being twisted out of proportion and context. We have a man who seems to have access to almost a bottomless pit of cash, but keeps losing every bid, including as mentioned above, myriad examples where he has been the only bidder! We have a man who claims to have the capability and thirst to acquire everything, but when the dust settles after each deal, what we ultimately have is THE MAN WHO ACQUIRED NOTHING!