Tuesday, June 9, 2015

The murky details of the Essar diaries.... - MoneyLife

The Essar diaries, which are part of an affidavit filed by the Centre for Public Interest Litigation (CPIL) in the Supreme Court of India provides a rare peek into the way influence-peddling by crony capitalists actually works in India. The leak of internal emails by a whistleblower reveals that the top secret Union Budget details were available to Essar in 2012. And why not? The group has enormous funds earmarked to buy these favours. For instance, the emails reveal that Gulfstream jet was sent to Trinamool Congress leaders, including chief minister Mamata Banerjee and a few journalists, at the behest of president Pranab Mukherjee for his swearing-in ceremony.

They indicate that Essar was able to influence the pricing and tax policies of the petroleum & national gas ministry under Veerappa Moily. This is corroborated by a separate investigation and arrests in the ‘corporate espionage’ scandal about purchase of stolen classified documents from the petroleum ministry.

By now it is widely known that the Essar group runs a large public relations (PR) operation to keep key journalists-cum-fixers happy. It generously opened its purse strings to fund a global ‘think-fest’ by Tehelka allegedly as a quid-pro-quo for killing a story against it.

Yet, when successive Reserve Bank of India (RBI) governors express concern at the mountain of bad loans in the system, there is rarely any attempt to plug the brazen manipulation of the system for personal aggrandisement. At the height of Essar’s problems in 1999, the chairman of Bank of India (BOI) sanctioned a fat bailout to a group company on the eve of his retirement. Two months later, he joined the group as an advisor at a fee that was a multiple of his last salary. RBI chose to look the other way and asked no questions.

Soon, every other institution fell in line and wrote off several thousand crores of rupees worth of loans and overdue interest to several group companies.

Again, when Essar Steel defaulted on $250 million floating rate notes it had issued in 1994, it tried hard to force the government to bail it out as though it were a quasi-sovereign default. This was in 1999. Eventually, bondholders received only 24% of the face value of their investment.

One of Essar’s strategies to minimise the public impact of its financial problems is to de-list companies at a low buyback price when there is no more scope to raise funds. In 2010, Essar Energy Plc was listed on the London Stock Exchange at 420p a share.

In 2014, the group bought back the 22% public shareholding at 70p a share, unfazed by the angry backlash. It attempted to de-list Essar Oil and even sent notices to the Indian stock exchanges. Essar Shipping and Essar Ports had also informed stock exchanges that they had the required board approvals to de-list their shares. The group’s shareholders know that Essar Steel was controversially de-listed in 2007 at a low Rs48 per share. Today, when it owes Rs30,000 crore, lenders cannot even hope for an upside by converting loans to equity if commodity prices revive.

The Essar diaries, and leaks, pertain only to a small recent phase, but provide an insight into how this well-oiled system of influence has worked for the past 30 years.  Essar had struck gold with its investment in telecom and had a real chance of cleaning up its act. Instead, it only used it to start borrowing heavily again and run up even bigger debts from Indian banks and institutions.

In fact, telecom and the 2G scandal is the first time that group chairman Ravi Ruia and his nephew Anshuman Ruia are personally facing trial along with several top employees and their three telecom firms—Loop Telecom, Loop Mobile India and Essar Tele Holding. Ravi Ruia, now needs court permission to travel abroad and, on 24th May, an irritated judge asked him not to waste the court’s time with repeated and causal requests for permission.

At the end of April this year, a consortium of 24 banks has a massive exposure of Rs30,000 crore to Essar Steel alone. In May, HDFC Bank decided to take a hit and sold Rs550  crore of its outstanding debt to Edelweiss Asset Reconstruction at a 40% discount. This is a loss of Rs200 crore.

Bank of India’s auditors have asked it to classify its Rs500-crore exposure to Essar Steel as a bad loan. Among its major lenders, State Bank of India (SBI) has an exposure of Rs8,000 crore to Essar Steel and ICICI Bank has an exposure of another Rs6,000 crore.

 Essar Steel’s outstanding of Rs30,000 crore is after it was made to raise Rs4,850 crore through a sale of assets and the promoters were made to pump in Rs1,300 crore under pressure from lenders. It is interesting to note that the money that was allegedly brought in by the promoters is twice its meagre net profit of Rs648 crore in the past financial year.

When the group’s strategy itself is to live off public funding, its financial problems are not limited to Essar Steel. Essar Shipping is also making losses and has reported a consolidated net loss of Rs159.69 crore for the quarter ending 31 March 2015. Essar Ports is also out there seeking relaxed loan terms from its bankers on its existing Rs6,000 crore outstanding to banks and wants money for a fresh investment of Rs3,000 crore.

This does not include the undue benefits running into hundreds of crores of rupees that ‘friendly’ officials gave the group over the years. Here is only one instance. A 2013 report of the CAG (comptroller and auditor general of India) on public sector undertakings lists multiple counts on which Gujarat Petronet officials favoured the group and passed on undue benefits running into hundreds of crores of rupees collectively to Essar group companies—Essar Steel, Essar Power Gujarat Ltd. The amount was over Rs650 crore.

For over a year now, Care Ratings has had a ‘default’ rating on Essar Steel but do you hear the government ordering a forensic audit into how the funds were used or diverted? Any such order can only be an outcome of the Supreme Court litigation filed by CPIL. That Essar’s outstandings can wreck the profits of major banks ensures that they are again working at ‘restructuring’ its loans with tacit support from the government. This is a sordid story of crony capitalism, first leeching off public shareholders and then public sector banks.

The Modi government claims to be keeping businessmen at arm’s length. Prime minister Narendra Modi told a newspaper a few months ago that “my government will make policies, if you fit into it, come on board, or stay where you are. My job is not to spoon-feed anyone.” It is ironic that public sector banks, owned by the government, are continuing with impunity to work at bailing out businesses houses like Essar.

Author- Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism.
Source- http://www.moneylife.in/article/what-the-essar-diaries-mean/42144.html

Thursday, June 4, 2015

Misuse of Law by a Educationally well Qualifed to claim Alimony Deprecated!

The Mumbai family court has pulled up a highly qualified woman for seeking maintenance from her estranged husband.

The court, presided over by principal judge Dr Laxmi Rao, said that the woman was trying to take undue advantage of the law and using it as a shield against her husband.
Its six-page order, given out recently, said that women cannot sit idle and expect money from former partners.

The woman in question was highly qualified, had pursued her MBA, and was working with a private firm as a human resource personnel.

 In 2014, she approached the court seeking a permanent monthly alimony of Rs 25,000 and an equivalent amount of maintenance under Section 24 of the Hindu Marriage Act. The woman claimed that she was forced to leave her job.

Her argument was that since she was not working and was dependent on her parents and her brother, she was bound to get maintenance.

Her husband, who was an engineer, earning a monthly salary of Rs 25,000, opposed her claim. He claimed that the woman deserted him in 2012, filed for divorce in 2013 and approached the court for maintenance in 2014.

For two years, she sat idle, despite being highly qualified, and this was not acceptable, he said.

The Court relied on a Madhya Pradesh High Court judgment in 2000, which had pulled up a woman, who, in spite of being efficient enough, had sought maintenance.

The Mumbai family court judge said: "According to me, Section 24 has been enacted for the purpose of providing monetary assistance to such spouse who is incapable of supporting himself or herself. If the spouse is well qualified, s/he is not expected to remain idle to squeeze out the other... The law does not expect the increasing number of such idle persons, who, by remaining in the arena of legal battles, try to squeeze out the adversary by implementing the provisions of law suitable to their purpose," the court said.

"A lady who is fighting matrimonial petition filed for divorce cannot be permitted to sit idle and put her burden on the husband for demanding pendentelite alimony from him during the pendency of such petition. Section 24 is not meant for creating an army of such idle persons who would be sitting idle waiting for a 'dole', to be awarded by her husband who has got a grievance against her and who has gone to the court seeking relief against her," concluded the order.

Source: http://www.dnaindia.com/mumbai/report-don-t-misuse-law-to-squeeze-out-estranged-huband-court-to-woman-2091027

Wednesday, June 3, 2015

CCF - Interview with Ms Gill Miller

Exclusive in-house Q&A with Gill Meller, Legal Director and Secretary of MTR Corporation


I was inspired by Portia in The Merchant of Venice

Other than my family - who told me to be the best that I could be at whatever I chose to do in life - the senior partner of my first (and only) law firm and my predecessor as legal director at MTR would be the people I find myself quoting the most

When my team get the recognition they deserve

When I had to sing (in Chinese) on stage in front of 1700 people at an annual awards dinner

The tangible nature of the work and the opportunity to get involved in the business

My strongest characteristics - energy, resilience and an ability to get on with people

My worst trait? That my ability to sing falls far short of my enthusiasm for singing!

Work hard, value experience - watch and listen to people who've done it before - and take risks in your career

The challenge - companies are constantly evolving, the legal and regulatory environment around the world is getting more complex all the time and, increasingly, the public has an expectation that companies will "do the right thing" - and we have to give advice in that context

An understanding of who we are and what we do, and not just by the partners - I want to meet the people who are going to be doing the work and I want them to have that understanding

By turning up late and blaming the trains...

That we have an easy life!

A project in India, where we had to climb over a cow to get in the office some mornings and onto the roof (through the chairman's toilet) to make international calls on a satellite phone!

Never say never...

If I tell you that I have a shoe cupboard in my office that might give you an idea...

I try not to be in the office at midnight very often

Now, this is the most difficult question... I would say (in no particular order) American Pie, The Gambler (you've got to love a bit of Kenny Rogers), She Bangs the Drums (showing my Northern roots), Honky Tonk Women, You Shook Me All Night Long (sorry...), Vissi D'Arte from Tosca (to add a bit of culture), Mr Brightside and Damien Rice's The Blower's Daughter

Source http://www.ccf-hongkong.com

Sunday, May 31, 2015

The Supreme Court of India Defends the Village Commons | David Bollier

The Supreme Court of India Defends the Village Commons | David Bollier

While common lands and waters are being stolen by investors and developers the world over, the Supreme Court of India decided it was not going to look the other way. In a bold, surprising ruling, the Court made a sweeping defense of the commons as commons.

In the January 28 decision, the Court held that the enclosure of a village pond in Rohar Jagir, Tehsil, in the State of Punjab, by real estate developers was a totally illegal occupation of the commons. The developers, who were appealing a lower court ruling, had filled in the pond with soil and started building houses on it. The Court ruled in unmistakable terms that the pond/land must revert to the commoners immediately and the illegal occupiers must be evicted. Even more remarkable, the Court held that similar enclosures of common lands elsewhere in India must be reversed even if they have been in effect for years. 

You can read the 12-page decision by Markandey Katju here [pdf file]. Given the ideological capture of American jurisprudence, it is astonishing and inspirational for me to encounter a no-nonsense affirmation of the rights of commoners by the highest court of any nation.

The Indian Supreme Court started by recognizing the ancient history of the commons in India and its vital importance (the paragraphs are numbered in the style of legal documents).

3. Since time immemorial there have been common lands inhering in the village communities in India, varioiusly called gram sabha land, gram panchayat land (in many North Indian States), shamlat deh (in Punjab etc.), mandaveli and poramboke land (in South India) Kalam, Maidan, etc., depending on the nature of the user. These public utility lands in the villages were for centuries used for the common benefit of the villagers of the village such as ponders for various purposes, e.g., for their cattle to drink and bathe for storing their harvested grain, as grazing ground for the cattle, threshing floor, maidan for playing by children, carnivals, circuses, ramlila, cart stands, water bodies, passages, cremation ground or graveyard, etc. These lands stood vested through local laws in the State, which handed over their management to Gram Sabhas/Gram Panchayats. They were generally treated as inalienable in order that their status as community land be preserved. There were no doubt some exceptions to this rule which permitted the Gram Sabha/Gram Panchayat to lease out some of this land to landless labourers, and members of the scheduled castes/tribes, but this was only to be done in exceptional cases.

4. The protection of commons rights of the villagers were so zealously protected that some legislation expressly mentioned that even the vesting of the property with the State did not mean that the common rights of villagers were lost by such vesting. [Editor’s note: This is essentially the same legal principle as the “public trust doctrine” in American environmental law.]

5. What we have witnessed since Independence, however, is that in large parts of the country this common village land has been grabbed by unscrupulous persons using muscle power, money power or political clout, and in many States now there is not an inch of such land left for the common use of the people of the village, though it may exist on paper. (emphasis in original) People with power and pelf operating in villages all over India systematically encroached upon communal lands and put them to uses totally inconsistent with its original character, for personal aggrandizement at the cost of the village community. This was done with the active connivance of the State authorities and local powerful vested interests and goondas. This appeal is a glaring example of this lamentable state of affairs.

The justices proceed to note that the appellants [the real estate developers] “are neither the owner nor the tenants of the land in question,” but “are in fact trespassers and unauthorized occupants of the land…. [who] appear to have filled in the village pond and made constructions thereon.”

When the enclosure of the village pond was brought to the attention of the village Collector, Patiala, he “surprisingly held that it would not be in the public interest to dispossess them,” the Court writes. Instead, the Collector told the commoners to “recover the cost of the land” from the trespassers. “Thus, the Collector colluded in regularizing this illegality on the ground that the respondents have spent huge money on constructing houses on the said land,” the Court writes.

Later in the ruling, as if to emphasize the crime of enclosure, the Court revisits the timeless importance of the commons and the morally offensive, ecologically harmful results of enclosure:

17. We wish to say that our ancestors were not fools. They knew that in certain years there may be droughts or water shortages for some other reason, and water was also required for cattle to drink and bathe in etc. Hence they built a pond attached to every village, a tank attached to every temple, etc. These were their traditional rain water harvesting methods, which served them for thousands of years.

18. Over the last few decades, however, most of these ponds in our country have been filled with earth and built upon by greedy people, thus destroying their original character. This has contributed to the water shortages in the country.

19. Also, many ponds are auctioned off at throw away prices to businessmen for fisheries in collusion with authorities/Gram Panchayat officials, and even this money collected from these so called auctions are not used for the common benefit of the villagers but misappropriated by certain individuals. The time has come when these malpractices must stop.

In the end, the Indian Supreme Court struck down the enclosers’ appeal with a clear declaration that the commons must revert to the commoners:

We find no merit in this appeal. The appellants herein were trespassers who illegally encroached on to the Gram Panchayat land by using muscle power/money power and in collusion with the officials and even with the Gram Panchayat. We are of the opinion that such kind of blatant illegalities must not be condoned. Even if the appellants have built houses on the land in question they must be ordered to remove their constructions, and possession of the land in question must be handed back to the Gram Panchayat. Regularizing such illegalities must not be permitted because it is Gram Sabha land which must be kept for the common use of villagers of the village…. We cannot allow the common interest of the villagers to suffer merely because the authorized occupation has subsisted for many years.

The Court’s ruling is a welcome affirmation of the commons, of course, but its implications for enclosed commons throughout India are uncertain. As a knowledgeable Indian friend of mine noted, rich and poor alike have enclosed common lands in India. In the cases where the rich have built homes on those lands, it may be very difficult as a practical matter to evict them at this point, notwithstanding the Court’s statement, “Long duration of such illegal occupation or huge expenditure in making constructions thereon or political connections must not be treated as a justification for condoning this illegal act or for regularizing the illegal possession.” The politics of actualizing the Court's ruling represents a major challenge.

Still, one could have worse problems. For once, the value of the commons and the rights of the commoners have been upheld by the highest court of a major nation. That's amazing. If this ruling catalyzes better management of the commons for the commoners -- and a recognition that the commons has affirmative value, and should not be dismissed as a mere "wasteland" -- it will be a significant achievement.