In the past few years, ripples on the financial front stemming from anomalies like high handedness have been in the limelight spelling bad news for the investment climate. Who can call retrospective tax regime and forced corporate mergers in tune with policy consistency and transparency in administration?
While the government deserves appreciation on rolling back EPF, there is an urgent need to remedy the Vodafone tax issue and to send out signals that we respect corporate governance as much as any other nation. Like Vodafone, the government is missing the trick again with the proposed merger of NSEL with its parent company, 63 moons. The move has stirred up financial circles for a horde of reasons—from lack of any real rationale to flouting of corporate governance laws and limited liability. Going above and beyond, the executive ordered the merger between the two private sector entities, in direct violation of the Companies Act. This would not only pave an escape route for subsidiaries in a similar situation but also brutally crush the concept of limited liability itself. Furthermore, it cannot be expected of the 63,000 shareholders of 63 moons to pay for brokers and market-men transgressions. Both, 63 moons and NSEL are autonomous bodies and it is discriminatory on the part of the government to burden 63 moons, a company with cash reserves of Rs. 2000 crore, with liabilities worth Rs. 5600 crore. The move erodes the net worth of the company and makes it commercially unviable to say the least. Also, any benefits/profits/losses arising from the balance sheet of a company is a legal right of its shareholders and the government has no business taking it away from them, unless by an act of legislation. This not only vindicates Jignesh Shah’s stand but also indicates a probable recourse whereby the actual defaulters are made to pay instead of burdening innocent people with the sins of others. This is an undesirable message we are conveying across to the world and is not good for our Make in India dreams.
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September 2020
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