Thursday, July 30, 2015

IDFC's disorderly AGM

IDFC conducted its 18th AGM at Kasturi Srinivasan Hall of The Music Academy on 30th July. The Hall was too small to accommodate the shareholders and company officials. The Chairman had the black humour to say that when he entered the Hall, he thought that the place was eminently suited for 'compact' conversation with shareholders.

Many shareholders complained about the smallness of the venue and the unprofessional way in which registration of attendees was handled. It was extremely noisy because of disgruntlement of shareholders outside the hall and whenever the only door to the hall was opened, the meeting was obviously disturbed. But the Chairman Rajiv B.Lall was unperturbed. He was perhaps glad that shareholders would air their grievances about arrangements for the AGM and therefore there would be little discussion on the company's performance. His tactics succeeded. Despite the continuing melee outside the hall which was audible inside, the Chairman did not try to do anything about it even once. If this is the style he follows in the company, the company is doomed.

Several shareholders complained that they did not receive the annual report. This happened last year also. Grievances regarding the company's website were also expressed by many. It is strange that the company's annual report for 2014-15 was not uploaded in the website till the previous day. If SEBI has no guideline on this, it is time SEBI looked at this issue seriously.

Many were pleasantly surprised that IDFC's gross NPA as on 31st March was only 0.7% (Serious deterioration is seen as on 30th June, 2015.)

The Chairman cleverly spent a lot of time speaking on the proposed IDFC Bank. He expected the shareholders to clap / rejoice when he repeatedly mentioned that every single share in IDFC is entitled to automatic allotment of one share in the bank. The shareholders know the difficulties encountered by new banks and therefore there was hardly any enthusiasm among them. Lall then cracked the age-old joke of an economist making a prediction without mentioning when the prediction would come true. (He was trying to say that the bank would do well in the long-run, when we are all dead?) Because of the cheerless atmospherics in the hall, this joke also fell flat.

It must be admitted that Lall was tenacious till the very end and he never gave up the pretence that he was very mindful of shareholders' views. The disarming smile on his face never disappeared. He adopted the same style in the last AGM also. He was the only one who spoke on behalf of the company. Even the Secretary had no role. He could do this because whenever anyone complained about the company, without trying to verify the facts from from his executives, he profusely apologised. Is he so confident about the company's weaknesses? For example, quite a few equity holders complained about the company's telephonic (non-) response. Lall did not care to have this problem verified. After a long time, another shareholder (?) came to the company's rescue and said he did not face any problem. It is noteworthy that Rajiv B.Lall is the 'executive' chairman. In the meeting, one got the distinct impression that perhaps he is too pleasant-mannered and tolerant to be an effective leader.

Wednesday, July 29, 2015

Gopalkrishna Gandhi's misdemeanour

It is regrettable that Gopalkrishna Gandhi has invoked the name of late Abdul Kalam in his request to the President to accept Yakub Memon's mercy petition.

Gandhi is only trying to play an emotional game in misutilising the name of a popular leader whose recent demise the nation is still mourning. His approach does not reflect either the intellect of his maternal grandfather, Rajaji or the moral eminence of his paternal grandfather, Mahatma Gandhi.

As long as the death penalty is in our statute, the President is not expected to acquiesce to a mercy petition from a person who has essentially waged a war against the nation.

There is perhaps a misconception among some 'eminent citizens' that they should uphold the rights of terrorists and other criminals even by violating the ethical rights of society because 'every life matters'. Doesn't collective life also matter?

Justice Kurian Joseph's 'heroic' interpretation of court procedure has been negated by the other four judges who have taken a view on the matter. We can expect Justice Kurian Joseph and his ilk to continue their obduracy.

Tuesday, July 28, 2015

Misplaced sentiments

Every profession demands some qualities from its practitioners. A surgeon, for example, should have no fear of blood. The surgeon should not hesitate to remove the diseased cells. Similarly, a judge should not be afraid of enforcing the law and thereby achieving justice. The judge should not act like a priest whose job it may be to let off the guilty after hearing the confession. There are occasions when performance of priestly duties may amount to abdication of judicial obligations.

Though innocent lives need to be protected, it is not the duty of a judge to stave off the gallows for the fiendish criminal at any cost. Sympathy for the undeserving amounts to cruelty for the innocent. Religious sentiments may require liberal treatment even for the most obnoxious and the cruel. These sentiments are out of place in the realm of law and justice.

Attempts by a judge to convert the court of justice into a place for dubious sermons are despicable. Such errant judges are an insidious threat to dispensation of justice. The judge claims that 'after all, law is for man' as if this is a justification to throw justice to all the remaining men to the dogs. Perverted sentiments may satisfy one's desire for oneupmanship, but are not conducive to delivery of justice.

Such are the thoughts that come to one's mind on reading the following report in The Hindu:

"After all law is for man, and law is never helpless and particularly the Supreme Court, which is the repository of high powers and protector of life, shall not be rendered powerless," Justice Joseph observed.
Staying the death warrant, Justice Joseph said the apex court did not follow the mandatory rules of procedure while constituting the bench of judges which dismissed the curative petition.
Justice Joseph observed that the Supreme Court committed serious procedural violation under Order 48, Rule 4 of the Supreme Court Rules, 2013 by not including all the judges, including himself, who heard Memon's review petition in the subsequent curative process.
Dismissing Attorney General Mukul Rohatgi's argument that this was only a technical hitch, Justice Joseph said this procedural lapse almost cost a man his life and would lead to miscarriage of justice.
He said a prisoner, especially a death row convict, is entitled to the due process of law under Article 21 of the Constitution.
"The curative petition (of Memon) requires to be considered afresh in terms of Order 48, Rule 4 of the Supreme Court Rules, 2013," Justice Joseph held, stalling the case."

When enthusiasm becomes subversion

 Yakub Memon's case was taken up by a Division Bench of the Supreme Court consisting of Justices A.R.Dave and Kurian Joseph on 27th July. This petition has been filed after the normally available judicial remedies , that is Review Petition and Curative Petition, were dismissed by the Supreme Court.
According to "Supreme Court of India: Practice and Procedure", a curative petition has to be circulated among three senior most judges and such serving judges who were members of the Bench which passed the judgement / order, subject matter of the petition. The relevant extract is given below:

"F. Curative petition:
As laid down by this Court in the case of Rupa Ashok Hurrah
vs. Ashok Hurrah 2002 (4) SCC 388, even after dismissal of a review
petition under Article 137 of the Constitution, Supreme Court, may
entertain a curative petition and reconsider its judgment/order, in
exercise of its inherent powers in order to prevent abuse of its process,
to cure gross miscarriage of justice and such a petition can be filed
only if a Senior Advocate certifies that it meets the requirements of this
case. Such a petition is to be first circulated, in chambers, before a
Bench comprising of three senior most judges and such serving judges
who were members of the Bench which passed the judgment/order,
subject matter of the petition."

There is no reference to Curative Petition in our Constitution. This additional judicial remedy has been introduced by the apex court. Objective of this provision is to prevent miscarriage of justice and not to use this tool as a dilatory weapon.

The extract given above is clear that any curative petition has to be circulated, apart from three senior most judges, among members of the Bench which passed the judgement which is the subject matter of the petition. The reference here is not to the judgement on the review petition, but the judgement on the original petition.

It is easy for an enthusiast to get carried away. This is what happened to Justice Kurian Joseph. In the process, justice was inadvertently subverted. Justice Dave made a desperate observation that such interpretations as made by Justice Kurian Joseph will only lead to inconclusive judicial proceedings. (Justice Kurian Joseph was not in the Bench that dealt with the original petition, he was only in the Bench that took up the Review Petition.) Justice Kurian Joseph's contention is both substantively and technically incorrect, enabling, albeit unintentionally, a tragic abuse of the judicial process.

Consequently, the case is being referred to a larger Bench. Division Bench consisting of two judges has of late become dysfunctional leading to dilatoriness because of contradictory views of two judges. A fair judicial system needs to ensure that proven criminals do not enjoy some imaginary rights at the cost of natural justice to the victims. No judge, howsoever enthusiastic or rebellious, has a right to torpedo this salient principle.

Sunday, July 26, 2015

Clemency for Yakub Memon?

There is a lot of demand from articulate sections that the death sentence on Yakub Memon should be commuted to life sentence.  There is unanimity that he is guilty, but these articulate persons are of the view that he is not guilty enough to face the gallows.

Mr.B.Raman, a former RAW official, had opined that Yakub Memon's life should be spared because he was co-operative and with his assistance, we could make headway in cracking the case.

Some advocates of leniency have put a spin on Raman's plea and have concluded that Yakub Memon had surrendered of his own volition and that there was a deal between him and the government that he would not face death sentence. Facts seem to be otherwise. Memon was taken into custody in Kathmandu by the Nepalese security forces because of his suspicious behaviour and after investigation, he was packed off to Delhi. Given this fact, any 'deal' with the government of India was unnecessary and unlikely.

It is note-worthy that he did not refer to any such understanding in the court proceedings at any stage.

Mr.Raman based his plea for clemency on the basis of Yakub Memon's co-operation. In a dastardly crime, co-operation of the guilty is not a ground for leniency. A murderer is not entitled to lesser punishment simply because of confession and enumeration of crime details.

It is true that many persons on the death row have obtained relief from the court. Each case is unique and cannot act as an unexceptional precedent for others.

Shouldn't an opportunity be given to Yakub Memon to reform himself and turn a new leaf? This argument is fallacious because he is too well-educated to have been unaware of the consequences of his action. Ancient Indian jurisprudence required a more deterrent punishment for the educated criminals.

It is pleaded that he is sought to be executed because he is a brother of Tiger Memon who was the brain behind the bomb blasts and who is now absconding. The Supreme Court has judged him on his conduct and not as a brother of Tiger Memon. Relationship with the latter cannot conveniently be trotted out as a mitigating factor.

Pearson exits Financial Times

In a surprising development, the Nikkei group of Japan has bought the Financial Times (FT) from the Pearson group. FT has a well-known reputation as a purveyor of business and financial news. Nikkei is already in financial services industry and therefore it makes sense, at least superficially, for it to diversify into a foreign newspaper with established credentials.

The Japanese press has a subservient relationship with the Japanese business. When a huge financial scandal occurred in Olympus, a Japanese company, in the early part of this decade, the news broke through FT and not through any Japanese medium. Of course, no one credits FT with robust editorial independence. Recently, some former FT editors have called for a more formal separation of editorial and commercial interests at FT. It is however moot whether Nikkei will maintain even the existing editorial freedom in the newspaper. It will be a pity if it doesn't.

The Pearson group is now in education and financial information services. It has ownership stakes in The Economist newsmagazine and also in the Penguin Random House publishers. It has already sought to exit from The Economist. At present, The Economist is owned by Pearson, the Schroders, the Cadburys and the Rothschilds. This newsmagazine has an enviable independent culture in its editorial space. For this very reason, it may be difficult to find a buyer for Pearson's stake. One hopes that editors at The Economist will not succumb to business pressure anytime soon.

Absence of Chinese interest in either FT or The Economist is noteworthy though not surprising. The Chinese with their financial muscle can easily 'lenovo' them . Despite their Confucian legacy, the Chinese continue to be more interested in things tangible and physical and less so in matters soft and light. These hard-nosed business strategists would have realised that any less than accommodative media are not their cup of tea.

Saturday, July 25, 2015

Indian Financial Code: Defanging RBI?

FINANCE MINISTRY has released a revised Draft of Indian Financial Code (IFC) seeking response from the public. Proposed IFC is an offshoot of recommendations made by Financial Sector Legislative Reforms Commission. The clauses dealing with Monetary Policy function have attracted media attention with critics arguing that Finance Ministry is trying to emasculate RBI in the latter’s exercise of its authority to regulate monetary policy.
Part XI of the Draft deals with RBI. There are 5 chapters (chapters 64 to 68) in this Part. These chapters contain 36 clauses (cl 250 to cl 285). Clauses relevant for this discussion are detailed below with brief comments on their implications.
Clause 250: “The objectives of the Reserve Bank under this Part are to,
(a) formulate and implement monetary policy; and
(b) carry on other activities of a central bank, including ——-“
Comment: Formulation and implementation of monetary policy do not constitute objectives. These are the functions of RBI.  RBI’s objectives ought to be in the nature of, say, maintaining domestic price stability or external value of the rupee.
Clause 252: “The quorum for a meeting of the Reserve Bank Board will be half the total number of members of the Reserve Bank Board, –
(a) at least one of whom must be the Reserve Bank Chairperson; and
(b) in the absence of the Reserve Bank Chairperson —–“
Comment: At present, RBI is headed by the Governor. Is the position likely to be re-designated as Chairperson? (Bank of England has a Governor and the Federal Reserve Board of the US has a Chairperson). What is meant by ‘at least’ one of whom? Is the Ministry envisaging multiple Chairpersons? This seems to be an oversight. ‘At least’ needs to be deleted.
Clause 255: “Determination of inflation target:  Inflation target for each financial year will be determined in terms of the Consumer Price Index by the Central Government in consultation with the Reserve Bank every three years.”
Comment: It is a moot question who should determine the inflation target, the government or the monetary authority?

Clause 256:
(1) The Reserve Bank must constitute a Monetary Policy Committee to determine by majority vote the Policy Rate required to achieve the inflation target.
(2) The Monetary Policy Committee will comprise –
(a) the Reserve Bank Chairperson as its chairperson;
(b) one executive member of the Reserve Bank Board nominated by the Reserve Bank Board;
(c) one employee of the Reserve Bank nominated by the Reserve Bank Chairperson;
(d) four persons appointed by the Central Government.”
Comment: By virtue of this clause, the Central Government usurps RBI’s existing authority to decide on Repo Rates. Four out of seven members of the Committee are appointed by the Government and so the majority decision means the Government’s decision.
The rationale for vesting the power to decide on Policy Rates with the central bank is that it will be more objective than the government and it will be guided more by economics than the popularity of its decisions.
Clause 262:(1) The Reserve Bank must provide all information to the Monetary Policy Committee that may be required to achieve the inflation target.”
Comment: This may land RBI in an embarrassing situation. Very often we come across situations where relevance of any particular information becomes known only after the decision is taken and its consequences felt. Therefore it is better to stipulate that RBI must provide all information that is required by the Monetary Policy Committee.

Relationship between Finance Ministry and RBI is fragile even during the best of times; Finance Ministry need not further stir up the hornet’s nest by amateurish attempts to weaken RBI. 

If this Draft is accepted, the consequences will be a) the Finance Ministry will decide on the inflation target, b) the ministry and its proxies will decide on policy rates and c) RBI will be held accountable for ensuring that inflation targets are achieved. RBI will have accountability without authority.

Thursday, July 23, 2015

Market's quirks

News number 1: "Bajaj Auto Ltd has announced the following Unaudited Standalone results for the quarter ended June 30, 2015 

The Company has posted a net profit after tax of Rs. 10148.00 million for the quarter ended June 30, 2015 as compared to Rs. 7399.80 million for the quarter ended June 30, 2014. Total Income has increased from Rs. 54716.80 million for the quarter ended June 30, 2014 to Rs. 60503.00 million for the quarter ended June 30, 2015."

News number 2:  "Bajaj Holdings & Investment Ltd has announced the following results for the quarter ended June 30, 2015 

The Unaudited Standalone results for the Quarter ended June 30, 2015:

The Company has posted a net profit of Rs. 1230.80 million for the quarter ended June 30, 2015 as compared to Rs. 1476.10 million for the quarter ended June 30, 2014. Total Income has decreased from Rs. 1693.00 million for the quarter ended June 30, 2014 to Rs. 1633.10 million for the quarter ended June 30, 2015."

These were released on 23rd July. People would have expected Bajaj Auto scrip to flare up in comparison to Bajaj Holdings. But what really happened was Bajaj Auto responded by crashing 5.02% to Rs.2487.75 and Bajaj Holdings shot up by 2.92% to Rs.1425.65.

Such are the odd ways of the stock market. Of course, there are always explanations flowing liberally. Bajaj Auto disappointed the market's expectations and the other company beat the expectations by a mile. Irrational expectations and unreasonable prices have become standard market behaviour.

Tuesday, July 21, 2015

Pachauri is back at TERI, what a shame!

It is unfortunately a fact of Indian life that the rich and the powerful can commit any misdeed and get away with it. Swaminathan S Anklesaria Aiyar laments in The Economic Times today:

"Police investigations and trials take forever in India. Virtually no famous or resourceful person is convicted beyond all appeals. Probably Pachauri will die of old age before the cases against him reach final conclusion."

It is disgusting to know that R.K.Pachauri has resumed his charge as Director General of TERI. TERI's board members have shamefully abstained from taking any action against this sexual predator. Swaminathan Aiyer's desperate questions must be haunting them every waking moment:

"Why do we not hear fireworks from Teri’s distinguished board members? Naina Lal Kidwai, you have won awards for defying gender biases to get to the top of HSBC, one of India’s biggest banks in India. Why are you not lashing out against a man who typifies male terrorism? Kiran Mazumdar-Shaw, you are famous as India’s top female entrepreneur. You must know how prevalent male harassment is in Indian business. Why are you not screaming your head off in this case? Deepak Parekh, you have long epitomised ethics and corporate responsibility. Why are you silent? It’s time to go on the warpath."

Monday, July 20, 2015

The Greek drama

Prof.T.T.Ram Mohan of the Indian Institute of Management has an interesting blog that discusses many events passionately and at times dispassionately ( Regarding the Greek crisis, the professor has argued that the lenders must agree for partial waiver so that the country can be back on its track.

This view attracted the following comment:
"Will debt forgiveness not amount to incentivisation of indolence? Greece entered Euro Union by faking its financials. The basic moral and legal principle that fraud should give no advantage to the fraudster cannot be transgressed. Waivers now will snowball into major disasters in future. The choice is not between forgiveness and failure, but between discipline and disaster."

Mr.Ram Mohan responded as follows:
" Whatever Greece's original sin, the rise in the debt to gdp ratio is the result of austerity policies forced on it. Debt has to be reduced for growth to resume. Do we want to punish Greece for its past sins or do we want a way out of the present problem?"

The professor has presented the problem as past vs present. Are we to focus on past sins or present problems? 

We may arrive at a different answer if we frame the problem as one confronting the present and the future. Do we want a temporary way out of the present problem and get into a bigger soup in future or do we want to painfully negotiate the present and evolve a better future? Pandering to the Greek greed for serial bailouts is not a panacea for its ills; on the contrary, it only serves to defeat its aspirations for a better future.

Monday, July 13, 2015

Indo-Pak relations

India and Pakistan are distant neighbours. They view each other with a lot of suspicion and perhaps hatred too. This approach is costing them both heavily. Yet, the historical baggage is such that no solution appears to be in sight, however long-sighted one is!

The summit meetings between the two prime ministers do not really break ice. The atmospherics of such meetings has become predictably boring and of a set pattern. Joint statements will be issued with a slight advantage for one side after one meeting and one can be sure that the next joint statement will marginally favour the other side. It does not matter who is in power in either country.

Once the leaders get back home, they will give a different spin to the statements and the significance of joint statement will be totally lost. In case the relationship between the two nations is normalised and moves away from bellicosity, the GDPs of both nations will head northwards.

Sunday, July 12, 2015

Prodigal delinquency of Greece

Greece is forcing Europe to test the untravelled path by openly violating the unwritten principles behind the Euro currency. Fiscal discipline is the foundation of a common currency. Flagrant aversion to austerity is an open invitation to economic armageddon. Why should the disciplined resourceful continue to subsidise the deliberately reckless?

Greece has tried to enjoy the best of both worlds: a common currency and an uncommon liberal pension system. The Greek approach encourages abstinence from hard work and indulgence in indolence. Even an individual cannot carry on with this culture for a long time. When a whole country espouses this harmful  ethic, its lurch down the precipice is certain.

The German Chancellor, Angela Merkel said it right: "We have lost a valuable currency namely 'trust'".

Wednesday, July 08, 2015

Personal liberty vs public good

Alan Rusbridger, a former Editor-in-Chief of The Guardian posed a very significant question while delivering a lecture in Chennai on 'Journalism after Snowden'. Is the threat of terrorism today big enough to sacrifice the accumulated values of freedom and individual liberty? He implied it is not so. Not all may agree.

Should we wait till terrorism achieves a critical mass before we set limits on personal liberty? What is also implied in the question raised by Rusbridger is the painful acknowledgement that liberty is not absolute and that there could be circumstances warranting curbs on freedom.

In a different context, the comedian Bill Cosby's attorneys argued in a U.S.District Court that his right to privacy meant that the records pertaining to his sexual abuses should not be made public. The judge, Eduardo Robreno, had zero tolerance for this argument in the light of the "stark contrast between Bill Cosby, the public moralist and Bill Cosby, the subject of serious allegations concerning improper and perhaps criminal conduct".

Criminals should be named and shamed. Terrorism should be fought even at the cost of personal liberty. Else, it may be too late.

The Maggi controversy

The Food Safety and Standards Authority of India (FSSAI) has banished the Maggi noodles from the Indian market, at least for the present. Should the Indian consumers thank FSSAI for safeguarding their health or should they curse FSSAI for unreasonably going into overdrive and playing spoilsport?

This issue becomes relevant since the food regulators in Singapore, the UK, Australia, New Zealand and Canada have declared the product as fit for human consumption. FSSAI has tested the product for presence of lead and monosodium glutamate (MSG) whereas regulators in other countries test only for lead. The Indian regulation focuses on parts per million (ppm) and regulatory authorities in other countries look at grams per kilogram. Therefore honest differences are possible.

Nestle, the producer of Maggi, asserts that the same product that was sold in India is exported abroad. Only the packing is different to meet various regulatory requirements. If this is true, FSSAI has gone overboard especially when viewed in the context of Maggi having been a regular household snack for a long time. The question obviously arises as to what FSSAI was doing all along? Has it suddenly become conscious about our health?

On the contrary, if it is found that Nestle maintained different standards for domestic and export consignments, the government should claim condign compensation from the company for hurting the health of unwary consumers in India. BP has recently agreed to pay $ 18.7 bn in the Deepwater Horizon case for causing environmental damage.

Unfortunately, going by past events, it is clear that neither FSSAI nor Nestle will ultimately be held to account. This too shall pass!

Added on 10th July:

It is argued by some that the government has acted recklessly in banning Maggi noodles which has caused heavy losses to Nestle India in the form of loss in revenue, earnings, image and market capitalisation. If it is proved that there was lack of application of mind by FSSAI / government, the company should be compensated in tune with natural justice. If Nestle India fights it out in the court, we will have occasion to test whether the government , in  exercise of its duty,  has any immunity against compensatory claims. Vistas of interesting arguments would then open up. 

Saturday, July 04, 2015

Gujarat Model?

Amartya Sen, the Nobel-laureate, had famously pronounced that democracies would not witness famines because any developing food crisis would receive a lot of media-attention and the government being democratic in character would be forced to take preventive steps to negate the possibility of a full blown famine. The same logic should apply to any health crisis like severe malnutrition.

But, Sen could not foresee the emergence of Narendra Modi’s style of democracy.  Government of India and UNICEF together conducted a state-wise study on nutritional standards of children and women. The study was completed and the report was ready in October, 2014. GOI is yet to release the report for public consumption.

However, The Economist magazine has managed to obtain the report christened the Rapid Survey on Children and has made it available at The report shows that the state of Gujarat fares very poorly in various parameters relating to child nutrition. The proportion of hungry children in this comparatively wealthy state is as high as 33.5% . 42% of children in Gujarat are stunted (that is, short for their age) and 18.7%  weigh too little for their height. These statistics obviously are not an effective advertisement for the Gujarat model of development. At the same time, this cannot be the reason for withholding the eye-opening report from the public.

It is a shame that we need to know about ourselves from a foreign magazine.

Added on 5th July:

 Following additional statistics taken from The Economist are revealing:

1)Underweight children (aged under 5 years, % of total)
    Gujarat: 34%, All India: 29%, Maharashtra: 25%, Tamilnadu: 23%, Kerala: 19%

2)Stunted children (aged under 5 years, % of total)
    Gujarat: 42%, All India: 39%, Maharashtra: 35%, Tamilnadu: 23%, Kerala: 20%

3)Immunisation (children aged 12 months to 23 months, % of total)

    Gujarat: 56%, All India: 65%, Maharashtra: 77%, Tamilnadu: 76%, Kerala: 83%