Videocon and Supertech Orders: Blip in a Bleak Landscape or Harbinger of Change?
Seven years after the promise of a clean and corruption-free government, some Indians are again drawing faint hope from two judicial orders this week. Are these orders a harbinger of change? Will fear of judicial action prevent wrongdoing? Or will these orders be rendered meaningless as they grind their way through repeated appeals and legal challenges?
 
The National Company Law Tribunal’s (NCLT’s) sweeping order on 30th August to freeze assets of the Dhoot family of Videocon, struck a blow against large corporate defaulters colluding with corrupt bankers and dodgy resolution professions. It asked Venugopal Dhoot for an affidavit listing the family’s movable and immovable property in India and abroad, directed depositories to freeze their shares and called on all banks and tax authorities to disclose and freeze the bank accounts, lockers, etc, of the family, including joint holdings. If implemented correctly, it could potentially unlock hidden wealth and assets siphoned off from the company. 
 
But we probably have to wait before the Videocon order is implemented in spirit. Remember, only on 8th June, the same NCLT (Mumbai) had approved a resolution by banks to accept the Vedanta group’s (through Twin Star Technologies) bid for 13 Videocon companies at a 95.85% haircut. Operational creditors were to get almost nothing in the Rs2,962 crore offer against admitted outstanding debt of Rs64,838 crore of this oil and consumer products group. Fortunately, a dissent and appeal by smaller banks led to a stay from the National Company Law Appellate Tribunal (NCALT). 
 
The NCLAT order came soon after a nationwide furore about collusive deals between banks and bidders to accept haircuts of 90% or more in several bankruptcy resolutions. Also, like the Wadhawans of Dewan Housing Finance Ltd, Ruias of Essar Steel and Sandesaras of Sterling Biotch group, the Dhoot family had approached NCLAT offering to pay about 50% of its dues (Rs31,789 crore settlement) to remove their companies from the bankruptcy process. 
 
When big corporate defaulters dare to make last-minute offers to pay up, it only exposes poor recovery efforts of banks and makes a mockery of the bankruptcy law. Where will the Dhoots get the Rs32,000 crore from? As with the Ruias, Sandesaras and Wadhawans, this question to establish wilful default is neither asked nor answered.  
 
NCLT’s order last week has the potential for sweeping change, if implemented in spirit. An industrialist reacted to it saying, “It is high time we see such action in companies where the outstanding is over Rs1,000 crore and banks are willing to accept a 50% haircut. This alone will instil real fear among defaulters. Currently, promoters collude with the resolution professional and take their money out of the company even in the two or three years it takes for the bankruptcy process to be complete.” Will this happen? After all, collusive and corrupt bankers go scot-free because every political regime is actively involved in these decisions. 
 
Supertech
On the same day as the Videocon order, the Supreme Court of India (SC) ordered the demolition of Supertech’s 40-storey twin towers. Slamming the rampant unauthorised construction in collusion with planning authorities, a bench of justices DY Chandrachud and MR Shah said it needed to be dealt with sternly. Supertech Limited will have to demolish the towers at its own cost within three months, refund home-buyers their booking amount with 12% interest and pay Rs2 crore to the residents’ welfare association for harassment. 
 
We must note that the SC, essentially, upheld a seven-year-old order of the Allahabad High Court (ordering demolition) that was stayed by the apex court in April 2014. Moreover, the NOIDA authority has been asked to supervise the demolition; so perhaps the same corrupt officials who colluded with Supertech may be involved. Since the illegal revision of plans cleared by the NOIDA planning authority came to light in 2009, it is worth pondering if the SC order makes up for a decade of uncertainty and trauma for residents or cover the increase in realty costs in this period? 
 
And what happens next? Will Supertech hire legal experts who find ways to delay implementation through appeals to reconsider the severity of the order? Powerful corporates, with expensive lawyers, do this all the time! It also remains to be seen if Supertech has the resources to make the court-ordered payments or would prefer to file for bankruptcy. Tens of thousands of home-owners have been left in the lurch by a spate of bankruptcies among realty companies. In most cases, there is no solution in sight; some are paying equated monthly instalments (EMI) on loans with no light at the end of the tunnel. The SC has made them financial creditors—pretty meaningless when recovery is a fraction of what these companies owe and most of it will go to secured creditors. 
 
The judgement has again sparked hope among people and is being called a ‘historic decision’ and a ‘wake-up’ call for corrupt builders and officials. Past experience suggests that this is completely delusional. In 1984, a posh 36-floor residential building, Pratibha Apartments, in Mumbai, hit the headlines when nine of its floors were ordered to be demolished, illegally constructed by falsifying the area. The demolition of those floors happened a decade later, after multiple legal challenges, and the entire building was, eventually, brought down in 2019. 
 
This made no dent on rampant corruption, collusion and brazen illegality in Mumbai, the most expensive real estate market in the country. The scam of the tony Adarsh Housing Society (built on land illegally taken from the Indian Navy to build homes for war widows), largely owned by bureaucrats, politicians and defence personnel), which came to light in 2010, is an example. Enormous public money has been spent on multiple investigations by different authorities, arrests, judicial commissions, etc. And, yet, after a Supreme Court stay in 2018, Adarsh Society, which was ordered to be demolished, still stands. 
 
The Campa Cola Compound’s illegality was happening even as Pratibha’s demolition made headlines. Between 1984 and 1989, builders constructed 35 illegal floors in collusion with municipal authorities which turned controversial 20 years later. Residents bought illegally constructed buildings, probably expecting the builder to be able to ‘regularise them’ as was the norm. The SC ordered demolition of the illegal buildings, but public sympathy was clearly with the residents who were duped by the corrupt builder-official nexus and were being ordered out of their homes after living in them for over two decades. The Court eventually allowed a compromise but various matters continued to be heard until 2018 by which time the media lost interest.
 
Politicians and bureaucrats were quick to take advantage of the Campa Cola Compound episode, to formally ‘regularise’ illegal constructions and flouting of land use rules, etc, by paying a fee. Even in the Supertech case, the apex court has not punished the NOIDA officials who colluded with the builder. In scam after scam, whether it is the stock market, real estate or dubious bank loans, the singular reason why corruption remains unchecked is that the officials in charge, failed supervisors, corrupt policemen, private organisations with fiduciary responsibility (rating agencies and statutory auditors) and politicians, who sign off on dubious policies, are rarely held accountable or punished. 
 
Public records would show that all punitive action against litigants who can afford expensive legal representation drags through the judicial system and is eventually diluted or rendered meaningless. A recent news report said that “212 corruption cases probed by CBI pending trial for more than 20 years as on Dec 2020.” Is there any chance of meaningful action after this time? Would it even be fair? 
 
In July 2019, I wrote that the clean-up of corporate India may have begun in earnest in the NDA government’s second term. Two years later, there is very little headway in any of the cases I mentioned. Instead, action against statutory auditors and rating agencies has been diluted. There are more broker defaults and losses to investors and none of the corporate fugitives who fled India have returned or seem likely to do so anytime soon. 
 
As long as faceless and nameless official enablers are not punished quickly and litigation drags on for decades with multiple dilutions, new laws or draconian amendments will remain political gimmicks to harass those who follow the rules. It will make no dent on the monumental corruption that is dragging India down.
 

Comments
M J SHAH
2 months ago
I hv heard that Mr Anil Agarwal wanted acquire Videocon Inds because he wanted the semi conductors business of Videocon Inds ? Can we expect shareholders like LIC & Bennett , Colemann co to help retail investors trapped due to delisting ?
vaibhavdhoka
3 months ago
In India liaisoning is best profession the advocate who gets favourable order by his liaisoning is best advocate.Public is always fooled by justice system.
rmuraliraghavan
3 months ago
NCLT accepting a haircut of 95.85% has made a mockery of the honest taxpayers and has exposed the corrupt system prevailing in the country. Although NCLT has been a successful story but at what cost. Most of the cases are decided on huge haircuts which only shows the rot in the system.
Gupta10
3 months ago
Fair points made here. But if cases drag on, how much can we blame the government for it? They are anyway labelled undemocratic, can they really take away the right of a corrupt businessman to file cases to delay matters? It is upto the courts to penalize such frivolous suits with more than a slap on the wrist to change the behaviour. Unfortunately, our courts claim to be holier than thou, but there is a decent layer of corruption running in that organisation too. We as a country have institutionalized corruption in Indira Gandhi's time to the point that the system is too smart now to evict good people who enter it and retain only the crooks (most of the time). No individual action or planning is required, the system works on its own. Call it Artificial Intelligence embedded in our government procedures that were framed by the Nehru / Indira combo, who were way ahead of their times in terms of planning and foresight, sadly used in the wrong areas.

Looking at it more objectively, yes, the current government might have its own hands dirty with some corporate corruption. But that's kind of unavoidable in a set up where individuals don't fund or donate to political parties and elections are an expensive proposition. How could anyone ever win an election without money power and caste power when the vast majority of population looks at the last name of the candidate or how much liquor he was offered to decide who to vote for. Its a sad truth, but we get what we as an average or median of the population represent our character as a country.

While the government is doing all it can to get back Nirav Modi or Mallya, we cannot help the UK government's rules which provide a safety net to international criminals. The Indian Govt can do nothing about it. And it remains a fact that there are good number of bad examples in the IBC process, but it is also true that for the first time ever, so many corporate promoters and bankers (CEOs) have been put in jail and many others even in the private sector like those in ICICI and Axis lost their jobs and reputation forever. I see these in the positive light and hopefully it is a step in the positive direction that deserves a pat on the back.
sundar_ramang
3 months ago
Corruption is all pervasive in India(politicians,buraucrats, municipalities,builders et alland in some cases even judiciary)I see no hope for India.We will stumble along the same way for decades
DND
3 months ago
There is a nice scam going on in Mumbai for decades now. BMC "fines" a builder for violation. Builder "cannot pay", so BMC "confisticates" a certain number of flats and then "auctions" them to recovover the dues. The auction isnt public. Mostly someone from BMC purchases the flat at a nice discount to market rates, or someone related does it. Builder gets to keep a proportionally higher number of flats after "regularisation" . BMC employees earn their cut by buying some flats cheap. BMC gets lower fine than they should. If you have a BMC employee for a neigbour , it could very well be from this process.
murthypgk
3 months ago
Undue delay on the part of INVESTIGATORS, Judicial and other systems tantamount to STATE SPONSORED CORRUPTION.
anant.9196
3 months ago
Kudos to your continuing incisive coverage! I am sure it is making a difference even if the pace of impact is slow. Keep up the good work!
In the mess that general media is you bring a breath of fresh air through your 360 degree perspective of important issues like these!
anilkt57
3 months ago
Videocon should have been allowed to continue. Actually, Videocon is a Shiv Sena ally and Venugopal's younger brother a Shiv Sena MP. It's all Modiji's vendetta. Thousands of workers have lost their jobs. A Government monitoring committee should have managed the company and seen that loans get paid back
sonusonawane206
Replied to anilkt57 comment 3 months ago
I agree with you, As most of people lost job due to shut down of videcon, also corona is adding problem to get jobs, videcon matter is pending since last 4 years, quick decision on resolution plan needed, it is very funny that nclt approving and ncalt staying order, why the authority are not able to solve issues since 4 years, government should looked into matter and modi sarkar should solve issue on priority. Because many people are dependend on that company for their livehood. Government should not waste theri time on corona and think about how to increase industrilization and jobs
Gupta10
Replied to sonusonawane206 comment 3 months ago
"waste" their time on corona? If you are referring to the useless data that they keep trumpeting to show how well the government is performing, I would agree, but if it is a general comment, you should think again if that is really a waste of time!
As of Videocon, yes it has significant employment and other impact, but government has made a law and to some extent the so called super smart judges of India need to take ownership from there about why every decision of NCLT keeps getting reversed by NCLAT and why courts do not take into cognizance the impact of these significantly delayed decisions. In India, a court can sleep for 50 years over simple cases, but governments can be lectured about their incompetence even by a corrupt district judge. There is zero accountability of judicial system to anyone in the country.
sinhaacte
Replied to anilkt57 comment 3 months ago
Do not agree.
good.shah999
3 months ago
The most corrupt (lower levels definitely) or inefficient and unanswerable of all the so called pillars of democracy is the judiciary. Does the so called honourable high court judge not know that all this is not possible without the involvement of the local authority and bankers. Why do they not take actions. The biggest bane of the country is the judiciary. Inefficient to the core and at lower levels corrupt to the core. Sitter judgements where there is nothing to judge, they take years.
umeshs62
3 months ago
When a corrupt government servant is nabbed for his act of commission or omission in the corruption, he is either denied promotion or increment. In the best case scenario, he is fired. But every Tom, dick & Harry knows that it is peanuts for him. He would have made so much money out of his corrupt act that he can laugh at those punishment. Even the government and judiciary knows it. There is a clear lack of political will to correct this.

As for Dhoot, once upon a time he was a MP from Rajya Sabha thanks to NCP ????
adheer
3 months ago
I have not read the SC judgement, it is unclear whether the SC has ordered framing of charges against the corrupt Noida officials ?

When the SC has reached a conclusion that there was collusion and corruption between builders and Noida officials it implies that evidence of the same has been brought of record of the court.

Letting the corrupt babus scot free in travesty of justice.
What happens if Supertech files for bankruptcy because it is unable to pay back the home-owners ? Another NCLT drama ?
virendrajain174
3 months ago
After reading your above article with mixed feelings, aptly summed up by you, i re-read your 2019 article mentioned above: "The Clean-up of Corporate India Seems To Have Begun in Earnest!
Sucheta Dalal 04 July 2019. " After going through it, whatever hopes were aroused by Supertech and Videocon Orders were visibly dimmed. Alas reality dawned. I don' intend to sound and spread despondency, but at the same time i would like to refrain from creating a self-illusion of a pipe dream also. Anyway, its great and fearless reporting by our iconic journalist & crusader: Virendra Jain
veereshmalik
3 months ago
So the visible question arises - what is responsible more - private sector or government corruption?

Meenal Mamdani
Replied to veereshmalik comment 3 months ago
No doubt the government is primarily responsible.
Capitalism allows those owning capital, the private sector, to make a profit. This profit should be allowed if it is made legally.
The govt is the policeman who ensures that laws are followed and the profit is legal.
If the govt is itself lawless, then the third branch, the judiciary, must hold the govt officials responsible and bring them to justice, SWIFTLY. The last word is the most important in India.
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