Chapter 6

CHAPTER-6

CORRUPTION TRANSPARENCY ISSUES IN CROSS

BORDER MERGERS AND ACQUISITIONS USA AND INDIA

6.1 Introduction
In the previous Chapter India‟s position as an emerging economy in comparison with
other emerging economies and the experience of USA as the leader of developed
economies were discussed. Corruption, Bribery, Fraud and Transparency issues
significantly affect CBMA functioning. In this Chapter, these issues would be
discussed to find out answers to research questions.

USA happens to be the main contributor to CBMAs both in terms of value and in
terms of number of transactions, USA can be taken as a benchmark in the fight
against corruption in the CBMAs arena. Lex Mundi World Ready, under chapter,
„Best Practices in Preventing Fraud and Corruption in Global Business‟ mentions
three main reasons for the problem of corruption in the world.

1. Fast moving competition

2. Pressure on growth and financial performance

3. Rigours of expansion into new markets worldwide

4. Multiplicity of regulations and regulatory authorities and thus creating an

environment of confusion.

“Regulatory authorities in various countries share information with each other more
frequently than ever before are increasingly aggressive about enforcement and
adamant about the expectation of accountability for business conduct around the
world. This is true not only in developed countries but also in developing and
emerging markets.”1

1
[Link] best practice series (Last visited on May 21, 2018)

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6.2 Corruption
“Corruption and fraud are defined fairly consistently by many organisations.
Corruption is technically defined as the abuse of entrusted power for private gain. It is
misuse of public power for private gain. It can include a variety of conducts in both
the private and public sectors. One can categorise corruption into a) public corruption
and b) private sector bribery. Public corruption covers one-sided abuses by officials in
government through the acts of self-aggrandizement amassing wealth and nepotism,
as well as misuses connecting private and public rules and actions through acts of
bribery, extracting, influence peddling, and fraud. Corruption often facilitates criminal
activities such as drug trafficking, money laundering, and prostitution, and it is not
restricted to these activities.”2

“Private sector bribery is an example of corruption by private sector units and refers
to corrupt practices within and between Enterprises... Such as when an employee
accepts the advantage granted to him by a person from outside of a company, without
informing the corporate bodies are persons.”3

In business organisations, favours are sought and sought after favours are paid for.
There can be a further differentiation in the aspect of corruption which is as follows.

1. Against the rule corruption.

2. According to the rule corruption.

If the bribe giver seeks a favour against the rule and against his entitlement then he is
covered by the first category. The second category is witnessed in areas for speedy
payment of pending dues and for which the bribe giver is legally entitled to. One can
call this as no obstruction tax, while one can call the first category has no objection
tax or abdication tax.

2
The US aid Centre for democracy and governance, Handbook on fighting corruption,
(February13, 1999) [Link]
(Last visited on May 21, 2018)
3
Waithera Junghae ,Controversial South Korean anti-corruption law faces further revisions,
GLOBAL INVESTIGATIONS REVIEW, ( July 13, 2016), [Link] [Link]/advocacy-
codes- and rules/ areas- of- work/ corporate -responsibility -and- anti-corruption/ corruption-
explained. (International Chamber of Commerce), (Last visited on May20, 2018).

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Organisation for Economic Cooperation and Development (OECD) in the year 2007
defined “active corruption or active bribery as paying or promising to pay a bribe and
passive bribery as an offence committed by the person receiving the bribe.”4

“Fraud is generally defined in the law as an intentional miss -representation of

material existing fact made by one person to another person with the knowledge of its
falsity and for the purpose of inducing the other person to act, and upon which the
other person relates with resulting injury or damage.”5

6.3 FCPA: USA

The Foreign Corrupt Practices Act (FCPA) has existed for more than 40 years in the
United States. It has been the main plank against foreign corruption. The FCPA
prohibits companies within the United States and individuals from driving the non-
USA officials including employees of government instrumentalities to obtain or retain
business gain an improper business advantage. “The FCPA also imposes affirmative
books and records, internal control requirements on entities that qualify as issuers as
under USA securities laws and on individuals who act on their behalf.”6 The
prosecution under FCPA touched peak in the year 2010 with the help of Department
of Justice (DOJ) and the Security and Exchange Commission (SEC) bringing 744
actions combined in that year.

6.4 Example of Major Cases

Siemens Germany paid US $ 800 million as fine to the US authority is in 2008 to
settle anti-corruption charges. In the year 2011, under the Dodd-Frank Wall Street
Reform and Consumer Protection Act, whistle-blowers who alerted Department of
Justice and the Security Exchange Commission about Foreign Corrupt Prevention Act
violations can now collect between 10 to 30% of any government recovery in excess
of US $ 1 million.
4
Organisation for Economic Cooperation and Development, OECD, , Bribery in Public
Procurement: Methods Actors and Countermeasure, (2007)
5
Legal Definitions & Legal Terms Defined, US LEGAL, [Link] (Last
visited on May 22, 2018)
6
FCPA Guidelines , 2012. [Link] (Last visited on
May 22, 2018)

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The whistle-blower report in the year 2013 shows that the number of FCPA related
tips increased almost 30% from 115 in 2012 to 149 in 2013 and is likely to provide
the basis for additional enforcement activity in future. It is interesting to note that
industry-wide FCPA applications move from one category to other, because, multi-
defendant enforcement actions are becoming a norm.

“The reason for the above phenomena is the fact that information from one case of
unreleased to information regarding potential wrongdoing by the other players in the
same industry.”7

According to records available with D.O.J., the following industries witnessed much
of the wrongdoing when compared to others in the CBMAs,
1. Oil and gas
2. Healthcare
3. Pharmaceuticals
4. Consumer products
5. Extractive industries
6. Medical devices
7. Telecommunications
8. Transportation
9. Defense

80% of the largest of the 10 United States Foreign Corrupt Practices Act (FCPA)
enforcement actions against the entities have involved non-US companies in CBMAs
arena. The US enforcers have extradited and criminally prosecuted multiple non-US
citizens in the recent years based on FCPA charges.

6.5. Enforcement in USA

US enforcers have sent an unmistakable signal that the companies and individuals
who conduct business internationally and have any jurisdictional nexus to the US

7
Patrick Stokes, Statement to The Press (2014). [Link]
[Link] (Last visited on April 20, 2018)

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must ensure that they comply with the FCPA. In November 2012, a resource guide
was released by the Department of Justice and Security Exchange Commission which
contain detailed information about the Act and its provisions. It is in the interest of
every prospective participant in the CBMAs with the USA to go through this resource
guide and to familiarise themselves with the general enforcement practices are the
Department of Justice and the Security Exchange Commission.

The differences between USA and United Kingdom is that while United Kingdom has
a Bribery Act of 2011 with many similarities including extraterritorial application, the
key differences among others include that Bribery Act of United Kingdom is purely
commercial and includes strict criminal liability for the corporate offence of failing to
prevent bribery, combined with an affirmative defence for having adequate
procedures in play to prevent corruption.

“The United Nations convention against corruption is one of the most important of the
international anti-corruption conventions which was adopted in the United Nations
General Assembly in 2003 and was enacted in the year 2005 and now there are 170
countries that are parties to it.”8

All the 34 member nations of OECD are signatories to the convention on combating
bribery of foreign officials. Other important conventions are the criminal law
convention on corruption, union convention on preventing and combating, the inter-
American convention against corruption adopted by the Organization of American
States (OAS).

A simple act of throwing a party may appear to be an innocent act in one country but
may be interpreted as an ethical question and an act of corruption in other countries. It
is therefore imperative on the part of all executives of companies involving in
CBMAs to understand the fine print in the law of all the nations in which their
activities are spreading. Otherwise, there is a danger of the employees and executives
getting arrested and prosecuted by the law of the foreign land.

8
United Nations Convention against Corruption, UNODC, http// www. unodc. org./ unodc/ treties/CAC/
signatories. (Last visited on April 20, 2018)

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Transparency International (TI), founded in Germany, comes out every year with
Corruption Perception Index (CPI) and Bribe Payers Index. Between 1999 and 2010
the World Bank publicly sanctioned more than 400 companies and individuals for
fraud and corruption and debarred consultants and contractors that it found to have
engaged in corruption in connection with World Bank-funded projects.

Companies in their own interest need to have clearly articulated corporate standards.
Code of ethics is as important as the business plan because ethics do not change by
time and space. The following practices by the corporates across the world can be
beneficial to all the corporates who are partners to cross-border merger activity.

1. Compliance to basic rules, standards, and behaviours expected regardless of

GEOGRAPHY or circumstance

2. Fundamental values and principles of the company

3. The position of the company on issues of driving, corruption and facilitation

payments.

4. Rules of the company on competition and entry trust and how they affect
commercial operations and transactions

5. Policies and procedures for business entertainment and gifts.

6. Policies and procedures for political and other donations or grants

7. Policies and procedures for conflicts of interest

6.6. Control Framework and structures

“Effective program to prevent wrongdoing is through an effective control framework.
The following are the three important components of such framework.

1. Clear return designation of authority and accountability for various issues

2. Clear lines of reporting, and well-documented mechanisms for review and

approval of proposal conduct.

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3. Effective accounting and financial reporting procedures that adequately reflect

the company‟s transactions, dealings, and asset disposition.”9

Structures are important in complex businesses in order to have timely information to

be responded to. The following three components are of vital importance to the
structures‟

1. An internal whistle blowing policy that provides anonymity and protects the
whistle-blower.

2. Hotline, ethics line or helpline that provides employees with a safe way to raise
questions and concerns and have them investigated.

3. Special Audit and investigation teams closely supported by the legal and finance
organizations as necessary.

6.7. Compliance programs

Compliance programs certificate should guide by the legal and compliance functions.
Global compliances should recognize that responsibility for complaints must be with
business functions. Right from the top till the bottom all specialized departments must
be part of the same effort which among others includes the following.

1. The Chief Executive Officer (CEO), the Chief Financial Officer (CFO), and the
Chief Operating Officer (COO).

2. Board of directors.

3. Legal functionaries‟ team.

4. Internal audit team.

5. Compliance function.

6. Risk management team.

7. Accounting, financial controls, and treasury.

8. Human resources.

9
website of Lux Mundi as on 20 April 2018. [Link] (Last visited on April
20, 2018)

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9. Corporate Secretary.

10. Text teams.

11. Corporate Communications and government relations teams.

12. Corporate strategy and development.

6.8. Scope of Improvement

Eminent lawyers from expert law firms like Lex Mundi suggest preventive measures
to effective communication which include among others the following

1. Communications and overall messages about complaints are clear and concise
and to be understood by the audience for whom they are meant examples need to
be used and situations to be explained to demystify the Complaints and
encourage an open dialogue.

2. Multiple channels to distribute the message must be used which must include
print and electronic, presentations by and conversations with, teleconferences and
multimedia.

3. Repetition of the same message in various ways and keep it interesting legal
jargon needs to be avoided and one must make sure that qualification is
communicated to the audience and the reason for such classification is also be
communicated should be made known.

4. The topic of complaints communication needs to be adapted to the local Markets

and the cultures and are the examples and situations used needs to be practical
and realistic in the Local setting the local language on the local lingua franca
should be used within the local culture so as to have the maximum effect of
communication.

5. Multiple methods to distribute the messages true business leaders, middle

managers, in-house lawyers, outside lawyers, operation employees must be used.

6. Education training programs must be taken up so as to prevent fraud and

corruption and such measures will be tailor-made with the approach to the
business, value system and the local culture.

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7. A flexible, multifaceted approach with the equal opportunity being accessible to

all product and to reinforce the rules and regulations need to be made available.

8 External and internal resource combinations must be used for education and
education must be a continuous exercise.

9. Webinars, online issues, specific and targeted training, email blast, and individual
certifications and top-down complaints reviews need to be used as new tools of
communication both within and without.

10. Care should be taken in training all those involved especially engaging the third
party because third party transparency also is the responsibility of the main
concern. No company can work all activities through its own employees and it
needs to be decentralized. and employee subcontractors. “It is possible that there
are corrupt elements among the subcontractors who will bring a bad name to the
main company. Therefore, it is essential to train the employees of the company at
the cutting edge so that they will identify the correct elements among the third
parties and expose them before the damage is being done”10.

6.9. Vicarious Liability/responsibility and CBMA

“Under the US Foreign Corrupt Practices Act (UFCPA) the corrupt practices of the
third party can responsibility on the part of a principal. Third parties include
individuals are companies in almost any type of relationship with the principal
including an agent, representative, consultant, distributor joint venture partner,
contractor, broker, finder, or a professional service provider.”11

The criminal liability of the principal is through wilful negligence also if not actual
connivance. Informed lawyers call this as Head in the Sand approach. The foreign
corrupt practices act expects pre-engagement due diligence on a prospect to the third
party by every principle and to eliminate or adequately mitigate any red flags that may
arise. The principles are expected to maintain oversight of the activities of a third
10
Halliburton Paying $29.2 Million to Settle FCPA Violations, U.S. SECURITIES &
EXCHANGE COMMISSION, (July 27, 2017) [Link] releases/2017-
133 (Last visited on May 20, 2108 )
11
Blog of a Low, Lucinda of Steptoe and Johnson LLP, the Lex Mundi member for USA from the
District of Columbia

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party and to respond to any red flags that are presented during the course of
performance or doing a termination of the relationship. It must be understood that
even after the termination of the relationship and setting up the account, the
responsibility of the principal in increasing a third party cannot be evaporated.
Vicarious responsibility will be that of the principal for all times and climes. There is
a compendium of manuals available pointing out the best standard operating
procedures to deal with the third party engagements in preventing corruption.

6.10. Anti-corruption due Diligence and Critical Examples

Anti-corruption due diligence is of great importance in CBMAs because of the simple

reason that the target company might have been involved in anti-corruption litigation
which may not be known to the acquirer and post-integration, the acquirer also will be
suffering from the litigation and prosecution. This syndrome is termed correctly as
successor reliability for anti-corruption violations. Some examples will illustrate this issue.

1. Halliburton 2008, Halliburton is an oil company in Texas, USA. “It was charged
for violation of books and records in Angola operation and was fined US $ 29.2
million.”12

2. eLAND/alandi applications/LATIN NODE 2009

3. RAE systems 2010

RAE -systems entered into joint ventures in China with two Chinese companies
through a foreign holding company. Both joint ventures engaged in business dealings
with Chinese government agencies. It was discovered later by Adi that one of the
Chinese companies had previously engaged improper payments to Chinese officials.
RAE ultimately agreed to pay a fine of US $ 3 million and disgorgement in addition
to adopting stringent internal controls.

4. Pfizer in 2012 entered into an agreement with Security Exchange Commission for
Foreign Corrupt Prevention Act violations attributed to corrupt payments made in
China, Indonesia and Pakistan.

12
[Link] releases/2017-133

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The FCPA mandates the companies to follow GAAP standards in accountancy. The
FCPA violations are severe and the penalties imposed are extreme.

1. Fine of US $2to 25 million for each book and records and internal controls
violation and felony convictions.

2. Felony convictions for individuals may be 20 years of imprisonment and 5 years

of imprisonment for each bribery violation.

Apart from an inescapable imprisonment, there may be fines on individuals and loss
of reputation and goodwill in the market and thus the ignorance or the risk becomes
fatalistic. Therefore, the expansive reach of the FCPA coupled with the aggressive
enforcement of the US government compels every partner of Cross-Border Merger
activity to take notice of the same.

In the year 2012, FCPA resource guide was issued. Among others, the resource guide
has a special chapter on mergers and acquisitions. Major points are that “it places a
significant emphasis on the importance of due diligence. Companies should conduct
due diligence prior to an acquisition to the greatest extent possible, and if effective
diligence is not possible prior to the acquisition, it should be done as quickly as
possible after the acquisition in order to try to protect the successor company.
Nevertheless, the guide indicates that an enforcement action may still be brought
against the producer company even if it exists now only in its new form as a
subsidiary of the acquirer. Although acquiring a company that was not previously
subjected to the FCPA does not make the FCPA apply to the target retroactively, the
acquiring company should make sure to implement effective complaints controls and
training to ensure that there is no unlawful activity following the acquisition.”13

6.11. Effectiveness of FCPA Implementation

Under the aegis of FCPA, it is impossible to escape prosecution of any wrongdoing.
Hence, in order to avoid the penalties of wrongdoing, it is better to adopt the Anti-
Corruption Programs and make it part of the corporate culture for due diligence.

13
The FCPA Guide, The United States, DEPARTMENT OF JUSTIC, (November 2012),
[Link] (Last visited on May 19, 2018)

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Monitoring of the employee behaviour is vital so that no employee will become a prey
to any possible corrupt practices. In case such knowledge is available with the
organisation, it shall immediately share with the Regulatory Agencies and thus
making a friendly relationship with the regulatory authorities in order to make the
reputation of the company irrefutable. Cobus de Swardt, Managing Director,
Transparency International, so eloquently articulated the efficacy of anti-corruption
measures in the following words.

“ By taking a strong stance on promoting transparency and fighting corruption,

companies not only mitigate reputational risk, but they also live up to their
responsibility as corporate citizens and can take an active part in the emerging
solutions to some of the greatest issues facing the world today.”14

6.12. Critical Examples of Anti-Corruption Prosecution in CBMA

Recently a company named Alere which is a public company that manufactures and
sells Diagnostic test equipment have resolved the security exchange Commission that
it was stated its revenue and bribed government officials in Columbia and India. Alere
agreed to pay US $ 3.3mn in disgorgement interest about US $ 95000 and a penalty of
US $ 9.2 million. One is not sure whether there is any parallel investigation by such
enforcement agencies in India. The FCPA of USA mentions in its issue of volume
number 6 number 17 dated 6th September 6 2017 that there are 101 names to
corruption they were referring to an article by name 10 tips for performing effective
anti-corruption investigations in India dated May 24, 2017. In this article, they
mention the following names, which are mangoes, cheese, bonbons, boost, courtesy
payment, motivation amount. Risk needs to be mitigated regarding corruption when
one acquires companies in high risk jurisdiction. Despite uncertainty, dealmakers
avoid the fallout from global factors. Private equity groups and corporations will
continue to look for growth in new and emerging markets.

14
Transparency International, [Link]
index_2017?gclid=EAIaIQobChMIiNbgvcuF3AIVUgwrCh1MqATTEAAYASAAEgIkb_D_B
wE (Last visited on 20 April 2018)

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Mondelez International Incorporation has settled anti-corruption allegations with

Security Exchange Commission stemming from subsidiary, Cadbury Limited
expansion of a chocolate plant in India. US based Cadbury, which acquired UK based
Cadbury in 2010, agreed to pay a civil penalty of US$ 13 million to settle the
allegations concerning payments made to a third party agent returned by Cadbury
India. “The deal is notable for its elimination of acceptable levels of Pre-acquisition
diligence and the fact that only civil penalties for incurred with no mention of
disgorgement. This is as per the FCPA report.”15

“The US enforcement authorities announced 3 FCPA resolutions arising at least in

part from conduct occurring in India.”16

1. “The Embraer maid a resolution with Security Exchange Commission and the
Department of Justice, in part, because of the company‟s payment of US $ 5.1
million to an agent, to illicitly secure the sale of 3 aircraft to Indian Air Force.”17
“A former Air Chief Marshal has been arrested in India country in connection
with Augusta Westland case and his name is S.P Tyagi.”18

2. AB in Bev resolution arose out of payments made by an Indian affiliate

company to the third party sales promoters who, in turn, have made improper
payments to the Indian government officials, to increase brewery hours,

3. Cadbury/ Mondelez resolved its FCPA matter with Security Exchange

Commission, which was based on the company allegedly paying US $ 100,000
for anything to assist securing permits and approvals for its factory expansion in
India.

15
Anti Corruption Report, Vol. 6 , Issue Number 2 (February 1, 2017) [Link]
(Last visited on 20 April 2018)
16
David w Simon and Sherbir Panag mention the 10 tips for performing effective anti corruption
investigations in India. The authors maintain that doing business in India continues to present a
complex challenge for US companies.
17
Richard L. Cassin, Embraer pays $205 million to settle FCPA charges, THE FCPA BLOG,
[Link] , (October 24, 2016)
18
Devesh K. Pandey, Former Air Force chief Tyagi arrested by CBI in Agusta Westland case, THE
HINDU, (MAY
19,2018)[Link]
chief-tyagi-arrested-by-cbiin-augustawestland-case/[Link]/amp, (Last visited on
May 19, 2018)

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The FCPA Anti-Corruption report clearly brings out that it has to make an end India
specific consideration because of the peculiar nature of corruption that exists in India.
“While the basic approach to internal investigations remain the same across
jurisdictions, we have found it useful to modify our investigation strategy to tackle
and to take into account India specific considerations, and have compiled the
following 10 tips for conducting those investigations.”19

1. Amidst the political noise and euphemistic allegations the main issue is likely to
be hidden and hence the investigators shall never miss the real issue.

2. Scoping in the initial stages of the complaint and the complainant is important and
this activity needs to be carefully piloted through the services of enable Indian
local Counsel.

3. Under Indian law, there is no attorney-client privilege for the in-house lawyers.
This is not the case with the experiences of the United States with other developed
countries. If the privilege is important, it is better to retain outside counsel to lead
the investigation.

4. It is important to consider the local Counsel of India since India is a vast country
with 22 official languages. While a skilled counsel at the Metropolitan cities is an
asset, the local language knowing local Counsel sometimes is necessary.

5. Protecting the identities of the reporter is essential because there were cases
wherein whistleblowers or complainants were brutally murdered. It is prudent to
take extra steps to avoid sharing The Identity of the reporter with other employees
is of the Indian subsidiary. Even for companies with robust anti-retaliation
policies, whistle-blower retribution is unfortunately common in India and can
obviously aggravate an already emotionally and legally precarious situation.

6. Law enforcement action need to be prepared for, during investigation process

itself, law enforcement in the United States and in India work on two different
paradigms. The law enforcement objective in India is focused on securing the
Convection of individual wrongdoers bribery investigations can move quickly

19
FCPA report, 1 (May 14, 2017). [Link] (Last visited on May 20, 2018)

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resulting in press and media coverage. Such events obviously can change the
fundamental calculus of Investigation, including the issue of self-disclosure in the
US. Therefore, there is a need to have a contingency plan in the place readily.

7. One must be careful about the possibility of all the conversations either video or
audio recorded in India. Smartphones are very innovatively used in India.

8. One should have a careful observation regarding cash management by the

investigated organization. When conducting internal investigations in India, one
should pay special attention to any cash expenditure, whether or not they are
related to the transaction in question. Cash is often not as critical to the operation
of the business as Indian managers are claiming. Cash expenditures can often
signal potential bribery.

9. The third party intermediary expenditures must be carefully examined. Improper

payments in India are very often made through agents, consultants, and other
intermediaries.

10. One must keep a watch for Red Flag terms, “some of which are given below.

a. Brokerage charges or fees

b. Consultancy charges

c. Covering charge

d. Management fees

e. Documentation charges

f. Managing expenses

g. Out of pocket expenses

h. Protection fees

i. Special expenses

j. Expenses for obtaining licence

k. Expenses for liaising

l. Expenses for clearances

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m. Expenses for getting no objection certificate

n. Expenses for obtaining approvals

o. Expenses for any other grammatically awkward or vague reference on

invoices like for example motivation amount.”20

To conclude, it is worthwhile to mention here that the highest ranking Air force
officer was arrested after the investigations in the United States were made public and
that too due to investigations by the FCPA. Upholding of the value of truth demands
that India is nowhere near the ethical standards and the investigation capabilities of
organizations like the FCPA. The Serious Fraud Investigation Office of India is no
match nor the Central Bureau of Investigation has any capability or match matching
skills of organizations like the SEC, FCPA and the Department of Justice of United
States of America. The empirical evidence to support the above claim is that there is
no document available of a parallel nature of India on USA. A lot more remains to be
done to catch up to the global standards and the Global organizations with reference
to India. It is suggested here that since the work is already being done in an open
environment by American organizations, nothing should prevent the bureaucrats of
India to learn lessons from their counterparts in the USA.

This study hence proposes the establishment of Central Bureau of Financial Security
to cover cyber/bank/money laundering/foreign corrupt practices in India to work
under the supervision of Chief Justice, Supreme Court of India.

6.13. Transparency and Evaluation of Indian CBMAs

Another proof of India, not being till recently, in the pink of colour of reforms on par
with the global standards and a recent beginning is being made can be proved from
the recent article in The Economist dated 19th April 2018, the following are the
highlights of the write up in The Economist.

“The nature of India capitalism is changing how long it my last the article dated 19th
April 2018 says that for decades personal connections have provided a well-trodden

20
FCPA Anti-Corruption Report on India). [Link] (Last visited on May 20,
2018)

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path to success in India‟s business. State one banks provided cheap financing for
organisations whose success often rested on winning official approvals. If a venture is
lost, the taxpayer frequently ended up being left to shoulder losses. There are plenty
of gifted business people in India but cronyism not competition has been the shortest
route which is even after the partial dismantling of the license Raj nearly three
decades ago in the year 1991. A large number of struggling tycoons face the prospect
of having their business seized from them. The fate of 12 troubled large concerns is
due to be settled within weeks and another 28 cases are said to be resolved by
September 2018. Between them, these organizations account for about 40% of loans
that Bank themselves think are unlikely to be repaired. For enforcing a bankruptcy
system that is usually scripted by those with the connection, the Government of
present time deserves much credit. yet the job is far from being done.”21

“Industries such as mining, power generation, telecom, and infrastructure require

large chunks of capital and lots of interactions with the government. Here,
unfortunately, the core competence was not in the industry but in the manoeuvrability
and the management of the connections to arrive at a favourable decent by paying
money through channels of corruption and sharing the luggage with the political-
bureaucratic Nexus. Mene tycoons good count on ministers to put in a word with a
recalcitrant banker. If things went every the banker‟s would frequently extend
repayments, if only to preserve their own blushes. Overburdened courts were unequal
to the task of enforcing contracts.”22

“The corrupt among the Businessman exploited their contacts with the political-
bureaucratic Nexus and further resulted in the bankruptcy of banks. The core
competency of many of them was not in running businesses but in forging contacts
through contracts and exploiting their connections by awarding lucrative contracts two
forms control by the family members in order to make reap huge windfall profits.”23

“The Economist further maintains that this system is under three-pronged assault. The
first is reformed bankruptcy code that makes the seizure of business easier. New setup

21
THE ECONOMIST , 3- 5 (April 19, 2018).
22
Ibid.
23
Ibid.

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dedicated quotes, backed by God of installs insolvency professionals, is to hand is on

hand to help banks says Assets and sell them to fresh owners. To focus the minds of
both bankers and borrowers, if no deal can be cut within 9 months the organisation is
shut down and its equipment is sold for scrap. This is a point in the pro being reached
by the first 12 defaulters.”24

“The second trip to the tycoons is degree view state of the state owned banks. Since
the nonperforming assets have ballooned to the tune of nearly 720000 crores of
Rupees the authorities now tired of recurring bailouts are forcing them to recognize
which rooms are unlikely to be repaired, and to initiate insolvency proceedings in
double quick time. Thirdly most tycoons have lost influence in Delhi, as politicians
from the Prime Minister down realize the toxicity of being seen to be in cahoots with
bollygarches.”25

“The Economist mentions that to ensure permanent change will require deeper
reforms. If wholesale ministerial corruption is reportedly much reduced, there is still
little clarity how political parties are financed.”26

“Making India less bureaucratic would also be a boon. A certain brand of tycoons has
arrived because getting things done requires sharp elbows and sharper business
practices. Magnets who are politically connected will still have an edge if knowing
how to dodge a price cap imposed on the ministerial win, for example, is a sure guide
to success than knowing how to run a factory. On the implementation front, this
corrupt practice is still going on,”27 according to The Economist.

“Reforming these state-owned banks is the most important task of all. Their balance
sheets are where you find 70% of loans and nearly 100% of the problems. Ensuring
banks make commercial lonely realistically be achieved by privatizing at least some of
them. The salary structure of CEO compensation also needs to be on par with the best
Global practices in order to ensure full dedicated important for state-owned banks.”28

24
Ibid.
25
Ibid.
26
Ibid.
27
Ibid.
28
Ibid.

307
 Chapter 6

“The Economist concludes in the following words a decent financial system is the
best defense against cronyism. Sadly, this kind of Reform still seems to be anathema.
The prime minister has made his thought on tackling the tycoons. But if he is to
entrance revolution in Indian capitalism, he must do more.”29

6.14. Conclusion
Corruption kills and absolute corruption kills absolutely. Transparency is tool for rule
of Law. CBMA has to be ethical anywhere and everywhere. Issues related to
corruption, bribery, fraud in a comparative environment brought out clearly lacunae in
India. In the next Chapter, a few remedial initiatives by Indian Government would be
discussed in order to find answers to research question.

29
Ibid.

308