One of the initiatives of this government is ‘Swachh Bharat’, or a Clean India. The clean up should not only be of garbage in the streets but also other things. Bank balance sheets are, for example, sought to be cleaned up of their non-performing assets. The banks have been armed with new laws such as the Bankruptcy Code, through which they can compel a recalcitrant borrower to proceed on the road to bankruptcy.

This toughness has led to what could arguably be one of the biggest sales of corporate assets in India, in order to have the funds to repay bank loans. A corporate ‘Swachh Bharat’.

There are, however, some leaks to plug. Indians are known for ‘jugar’, or gaming the system. The cases referred to NCLT under the Bankruptcy Code are sent to a professional, who determines, after consultation with all, the amount payable by the company taken into bankruptcy by creditors. The first case, of Synergies-Dooray Automotive, resulted in an award asking the company to pay 6 per cent of its outstandings. This has unnerved banks, and asset reconstruction companies who have bought stressed assets from banks.

Shell companies

The Swachh Corporate Bharat is also being hampered by the discovery, no, make that realisation (because the authorities long knew about it but didn’t care, thanks to slippery palms), of the misuse of ‘shell companies’. Fraud is committed using a shell company, behind whose corporate veil the crooks hide. Sadly everyone, the authorities, the media and even the judiciary, appear to feel (incorrectly) that the corporate veil should never be lifted, encouraging crooks to continue promoting shell companies.

As long as government interest was not damaged (e.g. in NSEL or Sarada it is private investors who lost money, so who gives a damn?) officialdom blinked at the misuse of shell companies to hide behind. Nobody sang ‘choli kay peechay kya hai’ (what is hiding behind the veil?). But when PSU bank interest was affected, the government acted! Some 2 lakh directors of such shell companies are disqualified from becoming directors. Is this Corporate Swachh Bharat or a knee-jerk reaction? Time will tell.

Even as the large corporate borrowers are being treated with kid gloves the smallest of errors by a law abiding individual results in a hard rap on the knuckles. A tax officer in AP has fined a trader ₹20,000 for his failure to pay ₹15 as GST in a bill!. This is clearly iniquitous and will be struck down. But juxtapose this with the lugubrious pace of investigation against former politicians accused of disproportionate wealth.

A Swachh Bharat movement must also encompass clean governance, else it is a sham. News reports that the ruling party is considering political alliances with politicians who have been charged of things such as corruption, or of aiding Ponzi schemes, simply for political motives, is very distressing.

Swachh Bharat is more about keeping our governance clean.

(The writer is India Head — Finance, Asia/Haymarket. The views are personal.)

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