Subrata Roy’s true story unfolds

Can an Indian be jailed in advance?

Today there is plenty of private business, big and small. It was not so before the 1991 reforms. Big business was under government control, and not very different from the government. An educated young man had the choice of two bureaucracies. The difference was that if a business failed or if it did not like someone, he could lose his job.

One of my friends found himself out of a job. He did not have much money, but he had a brain. He found a strange new opportunity. Most small businesses were family firms. They were liable to get into trouble. The owner may die without an heir, or without a will. There may be too many claimants for the business. And while they quarreled, the business would go to the dogs. He made an offer to such people: he would manage the business professionally till they got over their troubles, and would hand it over to whoever succeeded. In the meanwhile, they could have the profits he made; he would only charge a commission on the profits. He recruited young IIM graduates, and put them in charge of the businesses. They got experience, he got his commission, and the failing businesses prospered.

However, his services were available only to businesses big enough to afford them; what about smaller businesses? Small businesses bear even greater risks. Banks do not like them, so they have to borrow from non-banks, also known as moneylenders. They too, like my friend, would want to make sure that the businesses were managed competently. So they would collect information about their borrowers, meet them frequently and get accounts from them.

Such a business is labour-intensive: collecting money from a lot of small kabuliwallahs and raddiwallahs is a lot of work. But there are richer fellows who need the same service. A girl from a Himachal village may learn to pose by watching television and rise to be a film star. She may suddenly find herself earning lakhs with no clue about how to invest them. If she finds someone competent and trustworthy to manage her money, she may continue to rely on him even after she becomes Deepika or Katrina.

sahara-india272__373758030Subrata Roy was one of these informal investment bankers. Famous actors did not turn up at his parties simply because he had a toothbrush moustache or  dressed smartly; they came to him because he gave them a valuable service, competently and honestly. He grew so big that he could afford a palace. They lent him so much money that he had to diversify his investments into expensive property. He could do this because the 1991 reforms created the business opportunity.

But the reforms did not abolish the old establishment. Manmohan Singh went up and up; he and his likes continued to control the public sector. They continued to promote and reward Sinhas and Banerjis. Judges joined sessions courts, and rose slowly up the ladder to the Supreme Court. They just refused to believe that a business like Sahara’s could be legitimate. This Roy was too flashy, too handsome; he had to be up to something shady. It must be hawala, tax evasion, sex ­— whatever an imagination run riot could grasp.

So they set their running dog Sebi after him. It asked him for documents. How to show them documents of thousands of little borrowers? He took truckloads of them to Sebi. Without looking closely at the business, it decided that he was a crook, and took him to court. The courts were not impressed by its lack of evidence, so it appealed all the way to the Supreme Court. The Supreme Court summoned him. When he did not respond quickly enough, it sent him to jail for ten days.

Why 10 days? When someone misbehaves in court — not out of court — a court very occasionally sentences him to stay in his seat until it rises. Ten days’ jail for lese majesté is simply unprecedented. I must stop here because displeasing a court can be very costly, as Roy has illustrated. But from what I have said, it follows that the judicial process in his case has been less than perfect. And it is not just the judiciary, but also the government, in the form of Sebi.

(This story was published in BW | Businessworld Issue Dated 21-04-2014)


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