Mr. Swraj Paul’s bid to take over two leading north Indian companies has been frustrated, at least for the time being. But while he does not appear to be willing to reconcile himself to this defeat and look for ways of pulling out, his future strategy is far from clear. Though he has made any number of statements, it is impossible to infer his likely course of action from them. Since first Escorts and then DCM refused to register shares bought on his behalf, it has been open to him to go to a court in India or appeal to the Company Law Board. He has not exercised either of these options. Instead in his statement in Calcutta on Thursday he has said that he might make an “international case” out of the issue by initiating proceedings against the two companies in a British court. On the face of it, this does not appear to be a tenable proposition. It does not look that the actions of Indian companies are open to review by a court in another country even if they can be said to have violated any Indian law. As it happens, no such charge can be made against DCM and Escorts. For the Indian Companies Act specifically provides that a board of directors can refuse to register shares without assigning any reason.
This provision in the act is clearly intended to help a company avoid takeover bids by individuals or firms its directors object to. DCM and Escorts have done no more than take advantage of this provision. In this particular case, it is also far from clear that Mr. Swraj Paul has fulfilled the conditions laid down by the government of India regarding investment in Indian companies by persons of “Indian origin”. The Reserve Bank has looked into this matter. The report has not been published so far, but it appears from the finance minister, Mr. Pranab Mukherjee’s statement in Parliament earlier this week that Mr. Paul may not have fulfilled the stipulated conditions. Moreover the government itself has yet to decide whether the thirteen companies (belonging to Mr. Swraj Paul) which have bought DCM and Escorts shares are to be treated as one company or 11 companies for the purpose of investment in India. And if they are to be treated as one company, what happens to the shares bought by them in excess of the stipulated five per cent? It may also be open to doubt that the shares were bought before May 2 when the limit of five per cent was fixed by the government and announced by Mr. Mukherjee in Parliament.
We have taken the view that the government has been ill-advised to extend to people of “Indian origin” the concessions it has granted for attracting investment by nonresident Indians. We hold that these concessions should not be available to individuals who hold foreign passports for the good and obvious reason that they are not subject to Indian laws and investigation by Indian agencies. But while we can put aside this issue for the time being we find it extraordinary that a British passport holder (Mr. Paul) should cast himself in the role of reforming Indian industry. Indian industry has grown up in Indian conditions. It has been subject to Indian laws. There can be, indeed there are, genuine differences of opinion on whether these laws have been designed to promote rapid industrial growth along healthy lines. Industrialists have, for example, consistently argued that the taxes have been too high and controls too vexatious and time-consuming. Similarly, it has been open to question whether the nationalisation of banks and insurance, two major sources of funds for industry in non-communist societies, has not made industry willy nilly dependent on public financial institutions because none other is available. And issues have been raised regarding concentration of wealth in too few hands and malpractices in trade and industry – issues which the monopolies and restrictive trade practices commission is intended to look into.
It cannot be claimed either that Indian industry is above reproach or that it has operated in ideal conditions. But these are problems for the government and the people of India, including those engaged in industry, to cope with and solve to the best of their ability. Neither the government nor the people of India are looking for a Don Quixote from abroad to deliver them from their woes. Hectoring lectures would have been unwelcome from a foreigner with a more distinguished record than Mr. Paul can claim either in India or abroad. Coming from him, they appear particularly bizarre. When he took up British citizenship, he took a deliberate decision to give up Indian citizenship and the rights and obligations that go with it. He should at least not ignore this reality, nor the fact that he is an interested party.