About justice & conspicuous consumption

When a crime is committed, everyone seems to have a view on who has done wrong, and regardless of judicial outcome through due process of law, theories of how justice was done or not done mushroom
By Somasekhar Sundaresan
The Allahabad High Court has set aside the conviction of the Talwars in the tragic twin of teenager Aarushi Talwar and domestic help in The High Court ruled that the evidence was not adequate to secure conviction of the parents. The trial itself could have well qualified for mistrial in other jurisdictions going by the media coverage fed by the investigators and prosecutors, but that is now par for the course with any trial in India.

 

The same public drama that unfolded during trial has erupted all over again. There are those who have no doubt that the parents are guilty of murdering their child. They have come up with cynical arguments such as: “Therefore, nobody killed Aarushi.” Or, “The court has only said evidence is inadequate. They are of course guilty.” Or, indeed, with statements such as “What a successful peddling of innocence through a book and a movie!”

 

Others, with a contrary disposition, make arguments such as: “How could one even dream of accusing parents of murdering their child to begin with? There was no case here.”

 

In short, society is divided largely between those who believe the Talwars were guilty and those who believe they could never be guilty. Almost everyone has a certainty of belief stronger than what any eyewitness could harbour. Of course, there was none in this case.

 

hile this is a physical criminal case involving murder, in the corporate-business-financial sector, such an approach of society is consistently universal. In every single case, everyone in society has a clear view on who has done wrong, in what manner, and regardless of the judicial outcome through due process of law, theories of how was done or was not done mushroom.

 

In most financial sector laws, the enforcement folks do not even have to convince a court of of their story — they themselves can pass orders indicting an accused. In appeal, it is the defence that is on trial — the appellant has to convince the relevant tribunal that the order is not sustainable. Justice, in such circumstances, has become a matter of conspicuous consumption. It is easy to assail a victorious appellant as someone who got away for want of proper evidence — an alias for saying society will treat an accused as guilty even if courts do not believe her to be guilty.

 

Add to the mix, the practice of passing ex parte orders (orders passed without even a hearing) with clear and firm conclusions even before investigations are completed. A regulator can take a public position, however wrong investigations may subsequently prove them to be, and pass orders imposing restraints on the suspect. Having done so, the process of a “post-decisional hearing” and the suspect’s efforts at getting the restraints removed necessarily entails the defence being put on trial. The regulator gets a lot of mileage by attacking the credibility of the defence, without caring to first demonstrate the basis and validity of the unilateral ex parte order in the first place. In the eyes of society, that the state machinery has found fault with someone and believes that she has done wrong, is enough to make the suspect a convict.

 

Little wonder then that colourful use of language often seeks to make up for absence of articulated reasons in such orders. Indeed, even in the Aarushi case, the trial judge who wrote the order buying into the prosecution story, is reported to have taken pride in an interview with Avirook Sen (author: Aarushi; the interview is set out in Sen’s book on the case) in how he flew down his son, whose command over English was put to use to write a good quality order.

 

No one can really predict what will eventually happen to the Talwars in the judicial process. A further appeal is likely to follow — it may or may not succeed. The Supreme Court will eventually rule. That court is necessarily right because it is final. It is not final because it is right. Regardless of judicial outcome, sections of society have very clear and firm views on their guilt or on their innocence.

 

Worldwide, even after final rulings by supreme courts, convicts have been pulled out of prison or even out of death row because of relentless efforts by journalists and television documentaries, whose intrigue about a case refuses to let them accept what meets the eye and what is dished out to selective ears. That a book even got written on this case in India, with an independent resolve to probe facts rather than re-hash the versions given by prosecutors, is the Indian media’s saving grace.

 

That a movie-maker even took interest in a story of this nature to risk a commercial film on it is also not common. For a movie like Talvar, that is accused of influencing the outcome in the appeal, there has also been a movie such as No One Killed Jessica, which spoke about accused being wrongfully absolved (unwittingly, the name has laid down a popular expectation that when there is a crime, if the accused has not done it, the crime never took place). That movie too followed meticulous journalistic work proving how witnesses had lied during trial.

 

Somehow, the sight of a specific person going to prison for a crime seems to warm many an Indian heart as compared with the sight of seeing the evidence stacked up against an accused just not withstanding judicial scrutiny. There is a nice coinage that has been developed for this concept: “collective conscience”.The concept was, for example, relied on to confirm the death sentence for an accused in the case involving the attack on Parliament, even while acknowledging that the evidence and the quality of trial was weak.

 

In other words, if a case shakes up society well enough to have its attention rivetted, the standard of would practically vary. Therefore, the incentive for prosecutors and regulators is perversely weighed in favour of scandalising a case strongly enough for society’s attention to stay rivetted to the lurid details dished out, leaving it open to ignore facts and evidentiary standards. Of course, whether someone going to jail or someone being let off is more acceptable for a society’s collective conscience is a pointer to what kind of society we are as a collective.

 

This column was published under the title Without Contempt in the Business Standard editions dated October 19, 2017

Between what’s said and left unsaid

If at the end of reading this piece, you feel it is an “impractical” and “theoretical” approach to “Indian realities”, you may not be alone. Yet, the following has to be said: Our policymakers just demonstrated doublespeak in relation to market integrity. They have flinched in making truth available to financial markets, a vital element for informed market decisions.

A terse one-line press release, appropriately drafted in passive voice, was issued by the (Sebi) on September 29, 2017. It read: “It has been decided to defer implementation of Sebi circular no CIR/CFD/CMD/93/2017 dated August 4, 2017, until further notice.”

The press release is significant for what it did not say rather than for what it did. What the circular being deferred was about, when it was meant to take effect, what weighed with the regulator in introducing it and what weighed with the regulator to indefinitely defer its introduction, what transpired in the time between the two events were all left unsaid.

This column is not another iteration of lawlessness in the process of law-making. Indeed, pre-legislative consultations are to be expected only for measures that the regulators are reluctant to introduce or repeal. On measures that could beget bouquets or brickbats, it is normal not to expect any pre-consultations.

Back to the circular that has been put off. On August 4, 2017, Sebi issued a circular to provide that effective October 1, every listed company would have had to disclose within one day, the occurrence of any default in payment of interest or principal on the due date. A simple measure that would have brought cleanliness and transparency to financial markets, it would also have spurred the solvent but indolent to buck up and ensure they did not inadvertently err in servicing financial obligations.

The measure was vital for integrating the with the rest of the financial market system. That a company is unable to meet its obligations when due could be material information that would inform investors’ decision on what to pay for or what to expect for the securities of that company. The disclosure obligation was introduced on this premise. However, the known inability to pay would make it clear to the market for banking and financial services that a company, which is unable to pay its debts when due, is borrowing from the system. This would enable a clearer profiling of the risk in dealing with such a borrower.

When the circular was issued, a retiring whole-time member of Sebi spoke about its virtues at length in public interviews. Sebi was happy to take credit for being the harbinger of a game-changing measure. The withdrawal, on the other hand, has been made in a whimper.

However, it seems these are not good times for dissemination of bad news.  Perhaps it was felt that a spate of disclosures of defaults would follow, lending credence to the gnawing belief that the economy is in a spiral, headed for a hard landing. Inexplicably, without any articulation of the cause for change of heart, the regulator has given credence to that assumption.

“India is not ready for it” is an argument one usually hears in relation to any inconvenient policy reform measure — for example, making an open offer to acquire all the residual shares during a takeover of a listed company; and getting every listed company to publish a prospectus-type document to bring material information about the state of affairs into the public domain even without a securities offering being involved.

This circular had also imposed a statutory obligation on listed companies to inform credit rating agencies about such defaults. Virtually every credit rating agency of relevance is facing proceedings with Sebi for not having downgraded a certain listed company’s debt-servicing capacity. When this company’s inability to service debt was discovered, the effect was so severe that a certain mutual fund with exposure to that debt had to shut the gate for redemption of units. If the regulator now believes that full and clear transparency to rating agencies is not in public interest, surely it should stop making fall guys out of them.

Sebi is quick and prone to lashing out with premature actions against alleged insider trading. Even bank accounts get impounded for periods longer than the law permits in the garb of securing proceeds of insider trading. The introduction of an obligation to make timely disclosures would have served the regulatory war against insider trading. It would have prevented wrongdoing and obviated punishment — the quicker the dissemination of material information, the lesser the scope for those in possession of it, thereby reducing the ability to trade ahead of the rest of the market, without fear of also violating the law mandating dissemination.

The leadership at Sebi has been actively involved in a policy game changer in the financial system — the introduction of the Insolvency and Bankruptcy Code, a legislation that has so far largely received a resounding endorsement from the higher judiciary. World markets were looking at this circular as a game changer in aiding the effectiveness of this new law. Now, it is not to be.

If media reports are to be believed, the circular was considered to be utopian enough to make many in the banking system chicken out. If we send a signal that bringing out the full truth would be unpalatable not only for listed companies but also for banks that have exposure to such listed companies, it would mean that we are happy to let the truth — not just about borrowing listed companies but also listed banking companies — be shoved under the carpet.

“Being practical” is in itself a dangerous phrase. Many a social problem today ranging from domestic violence to female foeticide has been compounded by living in denial and enforced silence. Perhaps, we just got the financial markets version. If inadvertent payment defaults by solvent companies sending avoidable panic signals to the markets was what the Sebi was worried about, it could have tweaked the timing of the mandatory disclosure to the date on which the cure period for the default expires without the default getting cured.

 

This column was published as Without Contempt in Business Standard editions dated October 5, 2017