Thursday, October 16, 2014

SEBI in India – It is right to be wrong


Thomas Hobbes' theory of justice depends on certain observations on human nature – doubting our ability to come to some agreement about what is just.  I agree.  Indians must give up the search for the Summum Bonum – Cicero’s concept of the highest political good or perfect justice.

An Indian company, DLF Ltd, was found guilty on Oct 13 2014, of not disclosing complete information in its Initial Public Offering (IPO) of 2007. Great. It takes Securities and Exchange Board of India (SEBI) seven years to figure this.  Let us now look at the punishment meted out to the company – The Company and some of the key staff are barred from accessing capital markets for three years.

In other words, a person walks down to the bank and fraudulently withdraws money from an account.  The punishment for this person is that he must not enter a bank for three years!  Is this not great?  I mean wow!  What a relief!!

The stock lost 30% the next day.  Essentially SEBI punished the investors and not the company.  What kind of a twisted justice is this?

The above incident clearly shows the lacuna in the concept of justice in India.  Organizations and institutions are more happy to be seen to be delivering justice THAN ACTUALLY DELIVERING JUSTICE.

The Law commission is currently in the process of repealing some 300+ antique laws in India.  Come On!  Is this the best that one can do with his / her time? There is no dearth of laws in India - what we need is modern laws and their implementation. Let us say all these 350+ laws are repealed – will it make an iota of difference in our lives?  The average citizen becomes aware of these laws only when the media reports that they will be repealed!

In the concept of Justice as a natural law, Justice is similar to the laws of physics - Newton's law of Motion requires that for every action, there must be an equal and opposite reaction.  Well justice too requires that defaulting individuals / groups to get what they actually deserve.

Theories of retributive justice are concerned with punishment for wrongdoing, and need to answer three questions:

Why should we punish?
Punishment is the infliction of an unpleasant but appropriate penalty upon an individual or a group by law enforcement agencies in response to behavior that an authority found to be in violation of existing laws.

Who should be punished?
The answer here is clear – we punish the company, the lead managers, and all those associated with concealing the material information

What punishment should they receive?
Ah! Here lies the rub!  The answer here lies in the concept of restorative justice.  Restorative justice focuses on the needs of victims and offenders, instead of satisfying the law.  Offenders are forced to take responsibility for their actions and this type of justice shows the highest rate of victim satisfaction.  This concept was eulogized in the 1972 Indian Film “Dushman”

Lady Justice depicts justice as equipped with three symbols: a sword symbolizing the court's coercive power; a human scale weighing competing claims in each hand; and a blindfold indicating impartiality.  Well, the coercive power it is, but the poisoned blade found its way to the wrong person - the investors.

Talking of poisoned blades reminds me of Hamlet and Shakespeare. “This above all: to thine own self be true.”   I wish India wakes up.  Is this what our freedom fighters dreamt of – A hypocritical India?

But, there are no fighters here now, are they? Do you know why?

“Conscience doth make cowards of us all.”


© Nitesh Kotecha

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