C&B Mid Term

Assignment

Ayush Nigam
27.11.2021
IPM 21-26, DoMS NALSAR University of Law
Q1

Welfarist outlook argues that government intervention is necessary not when a firm is having
internal conflicts, but when the firm is affecting the industry as a whole. This way, we give firms
the autonomy to function within the boundaries of their organization to their liking but maintain
the equilibrium in the market at the macro level. Here, the priority is given to the consumers,
since the autonomy given to the companies prohibits the government from unnecessarily
intervening in the day-to-day administration of the firm.

Looking at the situation objectively, we have the case of inefficient management by Mr. Kumar,
backfiring advertising campaigns with interlinked political agendas, trickling workforce, and
diminishing margins. Fundamental aspects, from the face of the organization to the very
finances, are in shambles. Plus, the added cost of litigation, both financially as well as the
reputation of the company will be dire, leading to a vicious cycle of the same and in the future,
bankruptcy.

Therefore, by keeping the interests of the consumers in mind, we can by default help out
Burrowing Pvt Ltd to a great extent. Since the firm is positioned as a Private Company, it is
governed by the Companies Act, which allows relative autonomy and non-disclosure allowances.
One of the first solutions would be to help it out by Joint Ventures with either a Private firm or
with a corresponding Public Sector Undertaking, requiring disclosures and mandates which
rectify roadblocks in management, while giving them insights into how successful businesses in
that market segment work. Since its construction business has amassed losses and presumably,
debt, clearing the same with the help of government bailout may help give the firm a fresh start.

Additionally, slashing the delinquent employees and revamping the workforce with special focus
on re-training is an idea worth pursuing, since Mr. Kumar can further liquidate his (alleged) 12%
investment to pump money into the company. The company has to now look for new partners as
well, since the existing diagnostic tests are not functioning, and neither is the medical
practitioner workforce to a large extent. Further on, the consumer outlook of the company is

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abysmal; opening up charitable foundations and giving back to the community once the company
becomes profitable is definitely a path that can further be looked into.

Q2.

Irrespective of subjective biases, he has been prominently shown as the face of the company and
often the spokesperson for the firm as well; giving out interviews (the 12% conundrum) as well
as being present in advertisements. As far as management of the firm is concerned, one can
deduce that his performance has been less than optimal; not being able to hold employees and
running the construction business aground by reporting three fiscal years’ worth of consecutive
losses.

Mr. Navin played a part in the transition between two industries, wherein the already bleeding
corporation (financially and employee strength-wise), had to now undergo a massive overhaul;
fundamentally changing everything about their business. However, since his share percentage is
diluted and the constitution of the business looks like that of a Board of Directors in a private
firm, logically, all the direcros and top level management should be held liable.

Economically, the liability will be divided in this scenario, and only to the extent of capital
contribution. However, since Mr. Kumar has had a personal interest in the same shown by his
social media handles and advertisements, he should be held personally liable as well. This should
send out a message to the industry to elect their leaders more rationally and logically, and not on
the basis of lineage.

Q3.

Since Burrowing Pvt historically distributes shareholding among its employees, it is highly likely
that the practitioners own a part of the company too. Therefore, their sub-optimal performance in
practice further incriminates them to have legal and financial liability aside from professional
liability. The term ‘medical practitioners’ itself coagulates a number of professions, from
surgeons to nurse-midwives. The loose definition invites trouble as well, since it gives the firm
flexibility to wrongly correlate the needs of one to the other. Having over 600 complaints in two
months simply verifies their inability to carry out their job.

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Therefore, reporting the medical licenses of the most delinquent practitioners, while re-training
the others in soft skills is a possibility, apart from revamping the complete employee ecosystem.

Q4.
The fact that the legislators had a vested political and personal interest behind the creation of the
said advertisement is indisputable. Their presence in the same can be a form of political speech,
wherein they’re essentially lobbying industrialists to have a safer financial backing. Their mere
presence shows that the state government endorses this product, which in turn would convince
their voters that, one, this product is trustworthy and two, the government has done due checks
before making this announcement. Both of those arguments are likely to have been loopholes
that invalidate the reason behind the advertisement.

Therefore, setting up an inquiry into the creation of the promo as well as creating a Department
under the government to look into such wrongdoings, apart from the ongoing litigation against
them should set a viable precedent.

Q5.

A track record in a certain industry is no indicator of the fact that the company is likely to do
well in a second industry as well. True, that the management style and employee-employer
relations are some of the topics that can be held as a constant while transitioning, but the
grassroots level reality of what goes into a business in a given industry expands beyond those
confines.

Therefore, rather than targeting specific companies for diversification, if the government can
ensure that their business plan is solid and their strategy can withstand tremors, there should be
no immediate problem. Company stability, employee satisfaction, and the profit margin are
short-term concerns that need to be looked at before moving towards setting a long-term venture.

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Q6.

The whole distinction between public and private firms is in the form of management,
disclosures, and shareholders; private firms can work under a regulatory veil that allows them to
grow to a level before (if) they go public. Intermixing the two would make the ecosystem much
more lethal and unforgiving, since losses in a given fiscal year can drive down the public
outlook, whereas disclosing the balance sheet at the end of the year might give the firm a fighting
chance.

On the contrary, established private firms abuse this to escape disclosure. Therefore, if we limit
the disclosure exemption for new start-ups until 10 years of their existence or reaching unicorn
status (whichever comes first), we will be one step closer to creating a more understanding
ecosystem.

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Research
 Burrowing PVT LTD  construction (commercial, residential)
o Contracts from private parties  apartment complexes, commercial buildings,
showrooms
o Tue ups with contractors  raw materials, labour and transport facilities
o Firm struggling to remain viable  3 fiscal years consecutive losses (construction)
 Demonetisation
 Lockdown

 Family owned  Private Company (pvt ltd)

o Distributed shareholding among employees
o Shareholding pattern not disclosed to Registrar of Companies (RoC)
o Kumar family owns 12% (can’t be checked)

 Navin Kumar
o Vocal supporter of ruling party, praises present political leadership
o Commercial speech interlinked with political speech

 Employees
o Financial transactions, and interaction with government officials for clearances
o Some left for personal projects and start-ups
o Those who stayed, given shares
o Under new venture
 Facilitating diagnostic tests, delivery of medicines, processing payments

 New business  Online Healthcare Services

o Entering contracts with private medical practitioners  advice to registered customers
through website
o (Employees under new venture)
 Advertisements
o Navin Kumar + Legislators from the ruling party
o Endorsements from serving legislators  vouched for the quality of services

 Complaints and Litigation

o 127 formal complaints  inexperienced, ineffective communication skills of
practitioners (no-where mentioned doctors)
o Diagnostic Services were deficient, led to further complications
 Every test has a success rate of around 90%, but this had abysmally low rate
o 260 – September, 346 – October
o Legal notice to the firm sent stating they would file cases in civil courts to seek monetary
compensation
 Deficiency in services
 Misrepresentation in advertisements

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