The disclosure a few days ago in the Indian media about the huge bank loan defaults by a number of well-known companies should not have been a major surprise. One of the major English dailies carried a news-item that prominently mentioned the names of the top defaulters. In fact, a few months earlier, the All-India Bank Employees Association, the apex trade union of bank employees, originally established by the undivided Communist Party of India (CPI) in 1946, had released its detailed list of the principal defaulters of bank loans. According to this document, the bad loans that were written off, between 2001 and 2013, by banks in India, including private banks and foreign banks, amounted to Rs 2.04 lakh crores. The AIBEA report also gave a list of the top 400 bad loan accounts of Indian banks.

Although, after 2G and other scandals of the previous bunch on Raisina Hill, Indians have become quite blasé about figures that run into hundreds of crores, the AIBEA data is astounding. Not surprisingly, Vijay Mallya’s Kingfisher group is among the prime defaulters in the list.

How is it that such high profile defaulters manage to sit on our funds and get away with their defaults for years?

Yes, the money of the PSU banks, which comprise an overwhelming majority of the victims of this kind of misuse of the Banking System, belongs to the Republic’s citizens and tax-payers.

Why are corporate and economic crimes so common in our shores?

The short and sweet answer is that the defaulters are hundred percent sure that they will get away scot-free. Not only will they spend little time in jail, before some top legal honcho manages to get them bail from a pliant judiciary, the fruits of their economic crimes will remain untouched. For all time to come, their descendants will continue to enjoy the ill-gotten and illegal proceeds of their misdeeds.

If one were to go deeper into this subject, the other significant fact that stares us in our faces is that all the major institutions in the country are guilty of complicity in the encouragement of economic crimes and in hushing them up after they have been committed. In my opinion, they all rank pari passu (a favourite jargon of the legal boys, meaning equal in all respects or in the same degree or proportion) in their connivance and guilt. These include the politicians (netas), the bureaucracy (babus), the statutory agencies (like SEBI, RBI, Department of Company Affairs etc.), the auditors, the judiciary and the 4^th Estate. It is a futile exercise to try and rank the above wrongdoers according to their guilt. We are back to the old model of corruption that has been studied extensively in the literature – the Indian criminal triumvirate of the babu, the lala and theneta, except that we have to now factor in the judiciary, the auditors and the presswalahs.

Let us now look at the whole scenario in some detail. The main pieces of legislation that govern the country’s corporate sector are the Companies Act, the Banking Companies Act, the SEBI Act and the Income-Tax Act. In most of the cases, individual companies are subject to the provisions of more than one legislation. For example, the IT Act is applicable to all corporate bodies. Similarly, if a company is listed on a stock-exchange, it will be governed by the SEBI Act, as well as the Companies Act. There is the bizarre case where one of the largest companies in the country (IFFCO) is governed only by the Cooperatives Act, though this is clearly an exceptional instance.

Along with different pieces of legislation, there comes the problem of multiple regulatory agencies, each with highly-inflated notions of its turf privileges. Therefore, we have SEBI, the Department of Company Affairs, the RBI etc. all involved in some way or the other when a corporate crime like misuse of bank loans is concerned. Some quasi-official organisations like the Institute of Chartered Accountants also jump into the fray when it comes to crimes and offences on the part of auditors of companies.

Our statutes, laws, rules and regulations are generally not at fault. As is the perennial problem in this ancient land, it is the implementation and monitoring of the extensive  and  complicated  framework  that  is  woefully inadequate and outright venal. Instead of preventing corporate crimes and punishing the transgressors, after the crimes are committed, the lumbering regulatory behemoth in our shores allows the criminals to take advantage of the internecine warfare and the loopholes in the entire apparatus. Then comes the icing on the cake in the form of the judicial and court system in India, which, of course adds another dimension altogether to the problem and the malaise.

Let us take just two examples from the recent past. One is the Satyam scam that broke in January 2009 and the curtain on which is yet to be drawn after more than five years. The whole affair was exquisitely designed – simple in its scope and mind-boggling in its audacity. An information-technology company that was a household name in India and abroad, whose public-relations machinery worked overtime to showcase its manifold successes, Satyam was actually a sinking ship, a modern-day Titanic. In this case, there was no iceberg that was causing the structure to capsize. It was an internal suction machine operated by the Rajus (the controlling family of shareholders) that was doing the damage. They were siphoning off funds on a massive scale but showing completely fraudulent and bogus income inflows, so that the books of account looked respectable. Clearly, the statutory auditors of the company, the internationally-renowned firm of Price Waterhouse Coopers (PWC), were involved in the fiddle and signed off on patently false balance sheets.

As the magnitude of the disaster unfolded, it became obvious that Raju and his family had been spiriting cash out of the company since 2001, if not earlier, by using an elaborate structure, including forgery, inflated expenses, stripping of assets, and manipulating income, inventory value and profits. In an interview to one of the United Nations organisations that tried to understand the affair, I made it clear in January 2009 that

And the saga still continues. After numerous twists and turns in the story that would have made Alfred Hitchcock proud, we are now informed that the designated Hyderabad court which is trying Ramalinga Raju, some of his family members and two employees of PWC (the auditors), has decided  that it will (now hold your breath) announce on July 28, the future date on which it will pronounce judgement. It is only in India that a court of justice can set a date when it will announce the future date for pronouncement of its decision. If this is not Alice in Blunderland, nothing is.

As far as seeing the end of the tunnel in this case is concerned, and given the multiple legal avenues that are available to the accused if they are held guilty, I would not be surprised if it takes another 10 years or so for the law to take its course (as they say so grandly in Indian legalese).

The case of Vijay Mallya’s Kingfisher Airlines case is more or less the same in terms of the sheer chutzpah. It is alleged that huge amounts of money were taken out of the coffers of the flagship company, Kingfisher Airlines, and used for questionable purposes. If anything, the intricacies of the Kingfisher Airlines case deserve the use of the new branch of accounting expertise that is called ‘forensic accounting’, which is now being used frequently in the US and Europe.

While the employees of Satyam were very fortunate that the Mahindra group acquired the company and revived it successfully, the unfortunate employees of Kingfisher Airlines make up the saddest chapter in this sordid spectacle. While many of them are living a hand-to-mouth existence, there is no such deprivation for its promoters the Mallyas.

These two case studies are apt samples of the crony capitalism that has bedevilled the Indian economy for decades. Earlier, the criminals were the British mercantile houses in Calcutta, then the desi business class and now even technocrats. The AIBEA list includes Moser-Baer (set up by first-generation technocrats), whose investors include IFC, the World Bank’s private investment arm. The company was a pioneering manufacturer of recording media and was hailed as an Indian technocratic success story.

There are no easy categories and criteria through which we can define the new corporate offenders. However, one thing is sure. If we do not stop this all-pervasive roller coaster structure of crime and malfeasance, we are in for very troubled times.