The Hindu Business Line : Justice delayed is justice denied

The average pendency, or the time taken to pass a judgment in a criminal case in India, is estimated at 10 years and for civil cases 20 years. By these estimates, the Special Court's decisions may be quick, but the fact remains that a decade to take a decision in cases of such public value can only erode confidence.

NOTHING highlights the need for judicial reforms as the re-emergence of the scam-tainted stock of 1992. After more than a decade, the 1992 scam is back in news with the custodian beginning to divest the assets of the brokers involved, including Harshad Mehta, Hiten Dalal and others.

Only last week did the courts permit the custodian to take charge of over 8.5 million shares of bluechip companies including, Reliance Industries, Apollo Tyres, ACC and Ranbaxy and dispose them in the market. These shares are considered to be benami, as there have been no claimants to them the last 12 years.

They are also over and above the stock already being disposed off by the custodian, along with assets of the brokers involved in the 1992 stock scam.

Some of the beneficiaries of these off-market sales have been institutions such as Life Insurance Corporation of India, which has acquired bulk shares in pivotal stock and is desirous of buying more, provided the price is right.

At the other end of the spectrum are the Indian banks, which are about to realise the sale proceeds of the stock seized and held by the custodian, which is now being sold to offset the dues to lenders from brokers involved, including Harshad Mehta.

These banks are happy because they would reap benefits, as these loans are already provided for in their books and any settlement now would swell their bottomlines as windfall gains.

Despite all this celebration, there is little discussion on why it has taken the Indian judicial system more than a decade to punish the guilty and settle the dues arising out of these questionable transactions.

Only in January did a three-member Bench headed by Mr Justice M. B. Shah of the Supreme Court dispose off the Harshad Mehta case, upholding the Mumbai Special Court's ruling, imposing a five-year rigorous punishment on the Big Bull and two others for being instrumental for the securities scam. The Special Court had given a ruling only late last year in a case which resulted in an estimated loss of Rs 8,000 crore to the public.

It is significant that during the decade gone by, Harshad Mehta passed away and his co-accused had already served their term, taking the edge away from the ruling.

Even the normal explanations given for delays at the court end cannot hold true in the 1992 scam since the cases were entrusted to a special court, whose job was to look only at the role of the various market participants that led to such a colossal public loss. Not only was a Special Courts (Trial of Offences Relating to Transactions in Securities) Act of 1992, looking at these cases but it was also assisted by the office of a custodian constituted specifically to deal with the scam relates issues. The special court and the office of the custodian would undoubtedly have their explanations for the delay but the fact remains that 12 years to decide on the fate of 8.5 million benami shares is long enough time.

Under the company law, unclaimed dividends can be transferred to the investor protection fund within 7 years. Similarly, bank accounts, etc., have to be revived in case they have not been operated within an even shorter period.

The public has never had the right to question the functioning of the courts, but if one were to really estimate the loss from the 1992 scam, it would go beyond Rs 8,000 crore. Such an addition would come from the erosion of public confidence, which has rendered the primary market moribund, and proves beyond doubt that justice delayed is justice denied. In most neighbouring countries, punitive action is so quick that punishments are meted out within months, if not weeks, of a violation.

That creates an impression of quick and effective redress system and goes a long way in boosting public confidence. Such quick action ensures that while scams may have happened in all markets, the return of the investor is immediate, as the public is confident that the scam is an aberration and the guilty would be quickly punished.

In India, the gap between a violation and action is so distanced that the benefits that could be drawn from a proactive judicial system are being lost. Understandably, thus, the investors who burnt their fingers in the stock market scam of 1992 and three scams thereafter have not been willing to venture into the market.

As a result, the once booming primary market has remained flat, denying companies access to domestic equity and denying investors the chance to participate and gain from the growth in the stock market.

(The author, a freelance writer, can be reached at jayanthiiyengar1@yahoo.com)

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