Something About The Law

Musings Pertinent to Law and Society

The Apex Court and the Right to Information

Posted by Aditya On January - 21 - 2009

I learnt today that apparently the Chief Justice and his office do not constitute a ‘public authority’ under the Right to Information Act.

This, after the Supreme Court petitioned the Delhi High Court against an order passed by the Central Information Commission asking the CJI to disclose as to whether the judges of the Supreme Court were disclosing their assets to him.

In a brief background to the situation, a resolution was passed on May 7, 1997 requiring every judge to declare to the CJI assets including properties or any other investment in the name of their spouse and any person dependent on them.  Earlier petitions regarding the disclosure of assets of judges under the RTI were dismissed on the ground of such information not being in the ‘public domain’. However, in this order, the CIC did not ask for the disclosure of assets but as to whether the practice set out in the resolution of 1997 was still being followed.

In the petition before the Delhi High Court, the Supreme Court (as a petitioner) stated that this practice was only’informal’ in nature and that there was nothing in the Constitution or any other law ‘mandating’ the judges of the Supreme Court to disclose their assets to the CJI. I now know that the Delhi High Court has issued a stay on the CIC order and the next date of hearing is set on 12th February 2009.

Questions are raised when the most powerful organ of the Government sheds and denies any degree of accountability upon itself. In Association of Democratic Reforms v. Union of India, the Court had asked candidates standing for elections to disclose their assets stating that in a democracy, those in power must behave responsibly and know that they ultimately work at the behest of the people. Much earlier, it had asked IAS officers to disclose their assets and ordered authorities to keep a check on them.

At both the above instances, the Court judged on the basis that the Right to information was a constitutional and fundamental right of the citizens; thus holding that in the case of the legislature and the executive, this right must not be denied to the citizens. The Right to Information Act was passed to give effect to this constitutional right.

However, when the Apex Court denies this responsibility upon itself and ensures its performance among other organs of government, it is using double standards. There is a tint of supremacy of the Court over the Constitution here which I would say is no where mandated by the Constitution. In the Hamlyn Law Lectures, MC Mehta had stated,

“there is no theory of judicial supremacy in India, but that of Constitutional Supremacy”.

So if there does exist a theory of Constitutional supremacy in India, surely the Court should not place itself above the Constitution. If the argument is that the Right to Information Act does not look upon the Court as a public authority, surely under the rights guaranteed by part III, this disclosure of assets can be achieved; just as done in the case of the executive and the legislature (In both cases, the RTI Act did not exist).

V Venkatesan of Law and Other Things wrote a post here on the CIC decision that was passed on the 6th of January 2009. He says;

“Although the decision pertains to the RTI question on the declaration of assets by the Judges of High Court and the Supreme Court, it has set an important precedent to make the Higher Judiciary truly accountable. It will be unfortunate if the Supreme Court appeals against the decision in the High Court, in which case, the Judges hearing the appeal may not be able to decide the appeal objectively in view of the apparent conflict of interests.”

I will not be faltering when I say that I share the same concern. 

 

Corporate Governance: Satyam’s Year-End Woes.

Posted by Arun On December - 24 - 2008

As the year is fizzling down to an economically weak finale, Satyam Computers has found itself in a deep mire, with the Maytas acquisition deal coming under strict scrutiny.  In an unrelated development, the World Bank later announced its intention to snap all business and development ties with Satyam following allegations of data theft in one of the Bank’s projects managed by the latter.

Many might be wondering why this seemingly plain-vanilla private sector transaction is figuring in a blog that addresses larger policy issues. However, the Satyam-Maytas deal throws critical aspects of efficient and ethical corporate governance into relief. Before I venture to speculate on the  Big Picture, here’s a primer on what really happened.

On December 16,  Satyam Computer Services, India’s fourth largest IT services provider, proposed to acquire Maytas Properties and 51 per cent stake in Maytas Infrastructure for a consideration of 8,000 Cr (Approx.). The deal, which surprised analysts and shareholders alike, was held out as a plan to ‘de-risk the core IT Business’ in the face of the ongoing economic downturn. On the other hand, it was no State secret that the Maytas (a palindrome for Satyam!) Group was controlled by the sons of Mr. Ramalinga Raju, Satyam’s Chairman. The proposal and its justification raised many eyebrows as the financial crunch was yet to show a perceivable impact on the software/IT industry.

Well, eyebrows were pretty much the only things raised by this deal, because every other financial index of Satyam plummeted. The next day, the ADR (American Depository Receipts) of Satyam Computer in the NYSE tumbled by over 50 per cent. In India, the scene was less dramatic, but the stock continued to be flat, indicating little interest from the shareholders. Consequently, Satyam was forced to call off the deal, all within a span of 24 hours. Mr. Raju said,

We have been surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition.

Thus, the shareholders and investors in the company were quick to shift gears into activist mode, evoking an incident hitherto unseen in Indian corporate history. From the outset, it was clear that the deal had thrown caution to the winds, materializing without any respect to shareholder sentiments. Despite the enormity of change proposed through diversification, Satyam failed to factor in public opinion on the matter that, prima facie, seems like a family affair.  The appalling lack of transparency has forced SEBI and the Ministry of Corporate Affairs to take note of the matter and the watchdogs will certainly examining the nuances of this deal.

The issue brings the role of independent directors of a Company to the forefront; their opinion on such matters is expected to echo the views of a rational shareholder and not merely the interests of the promoter.
Business Line has an exceptional piece on the matter and the author goes on to say,

Questions will be raised rightly about the role of independent directors in issues such as this. The standards of corporate governance were sought to be raised when the stock market regulator insisted that independent directors should be in the majority on the boards of listed companies. Companies have in general complied with the rules, but the nagging doubt was whether independent directors appointed by a body of shareholders dominated by promoter can at all remain independent. The Satyam saga has brought the issue to the fore yet again.

Transparency in corporate governance is crucial as India is opening her markets to major foreign players.  If our domestic  segments cannot set an ethical example to its shareholders and investors, retail and institutional confidence is going to take a hit. Lifting the corporate veil in such cases is integral to sustain the company’s reputation and shareholder trust.

For the average shareholder/investor, the Satyam fiasco presents yet another reminder of the need to be activist and informed. The economic crisis might generate a number of transactions which are intended to be a quick-draw shortcut to ease monetary repercussions. Nonetheless, those at the receiving end have to be cautious, adopting a rational approach to the ‘lucrative’ deals that present themselves. The $50 billion Madoff fraud has left investors reeling; corporate accountability must be preserved to ensure a fair disposition of rights.