Commentary/Dilip Thakore
ITC's directors have committed offences that
certainly don't warrant peremptory arrest and the denial of bail
I just can't believe it.
Despite the kangaroo court trial and conviction of two former
chairmen and several directors of the cigarette, hotels, and
paper blue-chip company ITC by the Enforcement Directorate and
the media, I find it difficult to swallow the proposition that
they are guilty of any acts of moral turpitude.
Though I am willing
to concede that they may be guilty of infringing laws relating
to unauthorised foreign exchange transactions, in my not-so-humble
opinion ITC and its directors are at best guilty of technical
violations of a law more honoured in the breach than the observance.
In this connection I am dismayed by the naivete and gullibility
of media, especially press, personnel. According to a World Bank
study, Indian nationals have salted away an estimated $ 100 billion
in numbered accounts in Swiss banks to get around India's farcical
and wholly unnecessary foreign exchange control laws.
Which means
that virtually every business enterprise and businessman of any
standing is probably unauthorised transacting great or small business
in foreign exchange in violation of the Foreign Exchange Regulation
Act, 1973. And when everybody is breaking the law, singling out
the directors of one company for condign punishment is a course
of action which should invite suspicion of conspiracy, vendetta
and/or worse.
For a start, I find it very difficult to summon up indignation
or become judgemental about businessmen engaged in exports, imports
and international trade building a nest-egg abroad. The provisions
of FERA and the rules and procedures relating to the control of
foreign exchange are so time-consuming and paper-work intensive,
that a businessman who doesn't have a bank account abroad from
which he can make quick payments and transfers could be accused
of being foolish and imprudent.
If you believe that international
businessmen who electronically transfer millions of dollars round
the world in a matter of minutes are inclined to wait for Indian
businessmen to obtain clearance for every transactions from the
slow-moving and generally business illiterate babus of the Reserve
Bank of India, then you are as ignorant of on-the-ground business
realities as the bureaucrats who drafted FERA.
The plain truth is that in international trade, especially in
the commodities and securities trades, speed in effecting payment
and closing transactions is a necessary condition of success.
And contrary to what bureaucrats and babus back home in India
believe, foreign businessmen are not sympathetic to the foreign
exchange control and regulation problems of Indian businessmen.
On the contrary they are impatient and irritated by them. This
is why most successful businessmen have a stand-by emergency fund
tucked away abroad.
While advancing this apologist argument for businessmen who transgress
the nation's duly - even if foolishly - enacted laws, I don't
deny that in recent times the rigours of FERA have been considerably
diluted consequent upon the partial conversion of the rupee on
the trade account and the liberalisation of the laws relating
to the purchase of foreign exchange for overseas travel.
But old
habits die hard and attitudes relating to the scarcity and inaccessibility
of foreign exchange which became part of the mindset of Indian
businessmen who had to suffer chronic delays and harassment relating
to the purchase of foreign currencies from the Reserve Bank,
will take a while to change.
In my own case I recall with great
bitterness the tension and anxiety caused on several occasions
when permits to purchase small amounts of foreign exchange when
I had to go abroad on work for a few days, were delayed to the
last possible moment and I had to make repeated pleading telephone
calls to RBI babus for whom I wouldn't otherwise have the time
of the day. Therefore I can well imagine the plight of businessmen
who have to purchase much larger amounts of hard currency from
the RBI which does precious little to earn it.
Let's face it: In most countries of the world including neighbouring
Pakistan, the acts of omission and commission of ITC managers --
retaining money abroad and discharging business debts with
it -- is not an offence at all. The universal law is that if you
earn dollars or pounds you have the right to retain your earnings
in the currency of your choice though there is a legal and moral
obligation to declare such earnings for assessment of income tax.
Unfortunately for almost five decades the Union government has
created an artificial shortage of foreign exchange by compelling
immediate repatriation of head currencies which is then forcibly
exchanged for rupees at rates decreed by the RBI. Thereafter even
star exporters who earn millions of dollars in hard currency have
to line up like mendicants before the babes of the RBI and re-purchase
it (though most RBI babus behave as though they are giving it
away) at inflated prices.
Given this absurd and unworkable regimen,
I am not at all surprised that the hard currency hoard of Indian
citizens in Swiss banks (not to speak of other banks around the
world) exceeds $ 100 billion - enough to discharge the entire
foreign debt of the country.
Moreover in this particular case, far from being involved in acts
of moral turpitude, the much-maligned ITC directors acted honourably
to discharge a business debt and commitment.
In so far as I understand them, the facts of the case are that
in the mid-eighties inspired by the phenomenal success of the
Bukhara restaurant in the ITC-owned Maurya Sheraton hotel in
New Delhi, the directors of the company took a decision to set
up a chain of Bukhara restaurants in the US.
Rather than go through
the long rigmarole of applying to the RBI for permission and foreign
exchange, the then ITC management persuaded a group of NRI doctors
in the US to ante up the capital. It seemed like a sure thing
and Jagdish Sapru, the then chairman of ITC, informally agreed
that ITC would underwrite the doctors's investment in the venture.
Surprisingly and for reasons unknown, the restaurants didn't pan
out and suffered heavy losses. In any other country not burdened
by FERA-like laws, the venture would have been written off as
a business loss by the board of directors. After all for a Rs 52 billion (sales) company
like ITC, such a loss is like a flea bite.
But then India is not any other country. Misguidedly, but with
honourable intentions, two successive chairmen of ITC and some
of the company's directors took the usual option of under-invoicing
exports and over-invoicing imports to build up a nest-egg abroad
to pay off the doctors.
And in the process they got mixed up with
the Chitalia father-son duo who after acting as a conduit
for the company (probably on the prompting of BAT which is desperate
to increase its 33% shareholding in ITC to 51%) ratted on the
ITC management to the Enforcement Directorate. In return for immunity
from prosecution, of course.
Strangely, even experienced media pundits don't seem to understand
that violations of economic laws such as FERA are not of the same
gravamen as public officials accepting bribes, cheating and stealing
from banks and government treasuries.
The latter are acts of moral turpitude involving betrayal of the
public trust and are tantamount to snatching bread from the mouths
of the poor and disadvantaged. Unless it can be proved that ITC's
directors defalcated some of the funds accumulated abroad for
their personal benefit (and not for the furtherance of the company's
business and reputation), their offences are lesser gravity and
certainly don't warrant peremptory arrest and the denial of bail.
It's a pity that media and particularly press personnel have failed
to distinguish between technical violations of ill-conceived and
largely disobeyed laws like FERA and acts of politicians and bureaucrats
which involve grave moral turpitude. By equating the two, they
have fallen into a trap set by the nation's slippery politicians
hell-bent upon proving that corruption is a universal phenomenon.
Dilip Thakore is the founder-editor of Business India and
Business World and former eidtor of Debonair.
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