Corporate Scams

“Recent corporate scams have highlighted the necessity for enacting or amending suitable laws to
protect the interests of investors and share- holders.” Give arguments For and Against this view.
Recent corporate bungling in Satyam Computers has triggered
a debate in the corporate circles as well in the government. The attempted move was aimed at benefiting
two promoters of Maytas by more than Rs 7000 crore, by proposing to buy their shareholding in Maytas
Infrastructure in a slip-shod manner, without any transparency. The most startling issue was that the
proposal was only to buy the stake of the promoters and not that of the company as a whole. This was an
overt move to transfer the investors’ money from Satyam Computers to two promoters of Maytas, who
happen to be the sons of the CMD of Satyam Computers, without following any prescribed procedure
under the Companies Act, highlighting the need for amending the statutes to prevent the recurrence of
such incidents.

Arguments For the View

(a) The Companies Act was legislated several decades ago when the trade and industry were in a nascent
stage in the country. At that stage several contingencies, which are obvious now, could not be anticipated.
Hence, with the changing times, the legislation must also be amended suitably.

(b) Fraudulent moves by the corporate houses have been experienced even in the past. It is a matter of
concern, as the lacuna in law has been identified by the law breakers very well. With a view to obviate
such moves in future, it is necessary to plug the loopholes by enacting a new piece of legislation.

(c) It is the responsibility of the government to protect the rights of the small investors. The government
must come out with a new set of legislation or amend the Companies Law suitably. Such a move would
also restore the confidence of the investors in the markets.

(d) By virtue of their shareholding, the promoters are at the helm of affairs of the companies promoted by
them and are actively involved in the decision-making process. Unless there are certain safeguards, such
decisions aimed at benefiting the promoters would continue to take place.

Arguments Against the View

(a) The case of Satyam Computers is an isolated one and cannot be treated as a routine affair. It would be
inappropriate to enact another piece of legislation just because of a mischievous move by one company.
The possibility of similar moves by other companies in future, which are otherwise covered by the
existing laws, is remote.

(b) The existing legal framework is sufficient to tackle frauds. The need is to execute the existing legal
framework efficiently, rather than creating new set of laws and rules.

(c) SEBI has been set up by the government to safeguard the interests of the investors and to ensure that
no company enters in to any unethical practice. There appears to be no need to have new set of laws to
tackle such problems in future.

(d) Deregulation of the economy is one of the objectives of the new economic policy. Under such a
scenario, it would be wrong to enact new laws to regulate the economy further.
Discrimination in Indian Society

“India is not a true democracy but a discriminating society where a few privileged are given
preferential treatment in all walks of life and the common man is ignored.” Give arguments For
and Against this view.

India is basically a traditional society where most of the population is still rural-based and values its old
heritage, culture and traditions. After independence, the framers of Indian Constitution wanted to
transform the Indian society into a modern and liberal one by incorporating the best possible provisions,
like the Fundamental Rights and the Directive Principles. Aim was to bestow all the liberties on the
Indian citizens to make sure that the principle of equality was ensured in the society. Further, under the
Directive Principles, the State is required to adopt such policies as may result in setting up an equitable
society. Under the Directive Principles, the State is also required to take such necessary steps as may be
required to uplift the poorer and the under-privileged sections of the society. These measures are used as
supplements to the politico-legal provisions under the Constitution, with the objective of achieving social
and democratic equality among all the citizens of the country. But the actual practice of democracy in the
last over five decades has made many feel that rather than being a democracy, India is like an Aristocracy
where some privileged categories are given preferential treatment over the common man.

Arguments For the View

(a) Although the Constitution of India provides for equality before law, yet as per actual practice there are
certain categories in the society which have emerged as privileged classes and are given preferential
treatment in all spheres of life. Hence, despite the constitutional provisions the equality has not yet been
achieved in Indian society.

(b) As per the estimates of government of India, about 25 per cent of the population in the country lives
below poverty line. Democracy has no meaning for such poor people who are mainly concerned about
basic needs like food, clothing and shelter. The democratic rights and privileges are left only for some
privileged ones to enjoy.

(c) Political bosses have emerged as a privileged class in Indian society which is using the democracy to
grind their own axe. While the common man votes the politician to power, it is the latter category which
enjoys the power to the utmost. Lack of accountability, rampant corruption in high places and other social
advantages make the politicians a privileged lot in the society.

(d) In addition to the politicians, highly placed government officials also form a privileged class in the
society which enjoys all the facilities but little responsibility and accountability. Be it official functions,
free passes, rest houses, discretionary quotas or financial benefits from the government, this class of
Indian citizens score much above the common man in all these matters and many others.

Arguments Against the View

(a) India is the largest democracy of the world in terms of the number of electorates and has performed
well in the past. It is also one of the most matured democracies in the developing world. It would be
wrong to call it an Aristocracy.

(b) Democratic set up in the country has been ensured through one of the most comprehensive and written
Constitutions. For the last more than five decades, the Constitution of India has delivered very well.

(c) Fundamental Rights are the cornerstones of Indian Constitution and provide for equality before law as
well as equal opportunity for employment under the State. The Constitution does not provide for any
privileged classes in Indian society.

(d) India is a welfare State and under the Directive Principles of State Policy, the government has taken
several measures after independence, which are aimed at the welfare of the underprivileged and socially
backward sections of population. Overall public policy, poverty alleviation programmes, reservation
policy, direct taxation policy, cross subsidisation, etc. are some of the examples of the government policy
aimed at benefiting the poorer and the down-trodden in India.