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.