Jailed Subrata Roy is paying the price for arrogance of power

Firstbiz Jagannathan 9 Sep 2014

That are the lessons we can learn from the fall from grace of Vijay Mallya and Subrata Roy?

While the former is battling the banks after being declared a “wilful” defaulter by the United Bank of India, a declaration which could cost Mallya all his board positions, the latter completed six months in jail this week for what we should call “wilful” defiance of a Supreme Court verdict. The verdict, delivered as far back as 31 August, 2012, asked Roy to return all the money raised through two illegal issues of optionally fully convertible debentures (OFCDs) to Sebi – for onward dispatch to genuine investors. Roy went to jail only on 4 March this year after stringing the Supreme Court along for 18 months.

Some 10-15 years ago, it would have been a fair bet that neither Mallya nor Roy would have been hauled over the coals for “wilful” transgressions of their loan conditions or the law. A political system of cronyism that ensured that the big fish always got away would have come to their rescue.

Now, no one can be sure. The reason is simple: all democratic institutions have been damaged and compromised so much by rampant cronyism – the executive, the legislature, the investigative agencies, the regulators, the judiciary, and the media – that they are now fighting hard to regain the credibility they have lost.

The courts, damaged by allegations of cronyism and corruption, are unwilling to be seen as handmaidens to the corrupt. They are over-reaching to prove they are clean.

The media, in an effort to redeem itself, is making extra efforts to chase every crook – real or imagined. Despite efforts by sections of the media to tone down coverage of wrongdoing when it involves their own commercial interests or owners, the media as a collective is sparing no effort to prove its worth.

The investigative agencies and the regulators see the nailing of big names as key to their own future credibility.

The banks, under fire for lending money to all kinds of unviable projects under pressure from politicians and through corrupt practices, are tightening up their act and going after defaulters.

The regulators, Sebi and RBI among them, long seen as kowtowing to the powerful, are also refusing to yield an inch where earlier they would have been open to compromise.

Big fish in net

Mallya and Roy are some of the first big fish to be caught in the net when all institutions are trying to re-establish their independence – both to themselves and the public at large.

So, if Mallya is trying to wriggle out of his “wilful defaulter” status by appealing to the higher courts on technicalities, he is likely to face severe resistance from the judiciary. The Calcutta high court, for example, refused to hear his plea to let a lawyer represent his company before United Bank of India (UBI) in the case; on Tuesday (2 September), the Supreme Court refused to humour him too, as this Hindustan Times report says.

In Subrata Roy’s case, where a bail could easily have been granted so as to enable him to negotiate the sale of his assets and pay Rs 10,000 crore, the Supreme Court steadfastly refused to play ball. Instead, all the court would allow was to let him use the conference room at Tihar jail to conduct negotiations to sell his hotels abroad. The court knows that the entire OFCD issue could not have been made to legitimate investors. Parts of it could have been benami. This was probably why it could not let him do his deals independently.

Arrogance vs contrition
Mallya and Roy are paying the price because they chose to show defiance at a time when all democratic institutions are trying to re-establish their damaged credibility by looking beyond the technicalities of the law and going after the powerful.

Both Mallya and Roy failed to understand that when it was time to show contrition, they showed arrogance.

India’s institutions are in internal reform mode, and powerful people are not going to get away lightly by pretending they can buy their way out with just the help of smart-talking lawyers.

There are lessons here not just for Mallya and Roy, but all of India’s powerful politicians and businessmen.