BJD, Bankruptcy Code and Cronyism Charges

Raman Swamy

There is nothing new in the Modi government being accused of crony capitalism and loot of public money. But when the charges are made on the floor of Parliament by a party like the Biju Janata Dal (BJD) and that, too, from a member like Bhartruhari Mahtab,  it is worthy of a closer look.

Bhartruhari Mahtab is generally regarded as a man who chooses his words carefully. Just a month ago he was awarded the Sansad Ratna 2018 award at a ceremony at which Union Parliamentary Affairs Minister Arjun Ram Meghwal was present on-stage. Mahtab had won the award last year too as well as the Outstanding Parliamentarian award in 2017.

He belongs to a party, BJD, which prides itself on being balanced and fair and usually steers clear of being clubbed with the rest of the Opposition parties in Parliament. Just last Friday, its 19 Lok Sabha MPs staged a walkout before the vote on the No-Confidence Motion – bringing smiles to the Treasury because it effectively brought down the numbers required to defeat the Motion. 

Verbally, however, the BJD had criticized the BJP-NDA government. As the senior leader, Bhartruhari Mahtab had lambasted the Modi government for “failing to safeguard the interests of Odisha”. His contention as that both the previous Congress-led government and the present BJP-led regime had “done injustice to the State”. His logic was that the No-Confidence debate “is not going to help Odisha and therefore we are not going to participate".

On Monday, in contrast, Bhartruhari Mahtab breathed fire and brimstone at the BJP government for wanting to amend the Insolvency and Bankruptcy Code. Much to the embarrassment of Piyush Goyal, the acting Finance and Corporate Affairs Minister, who had piloted the Bill to replace an earlier Ordinance, he thundered: “Why should my party support this law, this loot? It stinks”.

He elaborated at great length on why he considered it a “loot that stinks”. He said: “This is a clear case of crony capitalism and loot of public money. It is bad in law. Anything that is against public good is bad in law. I am against the introduction of this amendment Bill”.

According to him, “Just to help one industry, an Ordinance was promulgated by this Government. Now, an Amendment Bill is being introduced”. 

He had much more to say on the matter - “Only one or two months ago, Bhushan Steel was sold to Tata Steel - 65 per cent of the loan was recovered and 35 per cent was written off. The Steel sector is booming now but nobody in the government is willing to say who is responsible for the 35 per cent loss or haircut?”.

Moreover, in the case of Alok Industries, a Textile company, the debts owed to banks was Rs.296 million. But the bidding was only about Rs.50 million, of which lenders would get around Rs.47 million.  

“Can one believe that a company worth Rs.296 million is being sold at Rs.50 million?

“The State Bank of India, Corporation Bank, UCO Bank, Bank of Maharashtra, LIC, Allahabad Bank, Union Bank, Dena Bank, Oriental Bank of Commerce and United Bank of India plus Axis Bank are the lenders, who have taken a massive haircut of almost 84 per cent.

“All this has happened because of the connivance and complicity of this Government.

“There was only one bidder, which was a strange consortium of Reliance Industries Ltd. and JM Financial Asset Reconstruction Company. Reliance Industries has enough money of its own, while JM cannot run a textile mill. Why they have got together is a mystery.

“All that we have been told is that the sole bidder offered Rs.50 million of which the lenders would get about Rs.47 million.

The outstanding parliamentarian that he is, Bhartruhari Mahtab went deeper into the matter - Last April, he said, the Committee of Creditors failed to gather enough votes to act on the Resolution Plan -  this was the crux of the problem and that is the reason why an Ordinance was issued.

“But, the facts show that the Resolution Plan proposal actually got 70 per cent of the votes whereas 75 per cent were needed. That is the prevalent law today.

However, the Government stepped in. An Ordinance amending the Insolvency and Bankruptcy Code was suddenly issued. The minimum vote needed for passing a Resolution Plan was lowered from 75 per cent to 66 per cent.

Now they are attempting to make it legitimate by bringing a Bill to replace the Ordinance – which can only benefit the corporate interests involved. That is why I am saying it is crony capitalism. 

He said: “While going through this thick Bill, in Clause 25, Section 33, sub-section (ii) of the principal Act, I find that after the words ‘decision of the Committee of Creditors’ the words ‘approved by not less than 66 per cent of voting share’ shall be inserted. This is the amendment to which I am opposed.

“In clause 25 of the Explanatory Note, the Bill seeks to amend Section 33 of the Code to provide a reduced threshold from 75 per cent of voting share for obtaining the approval of the Committee of Creditors for making an application to the adjudicating authority to pass a liquidation order.

“Even that is the reason why I say that this is nothing but a fixed match. Bad loan resolution is becoming deep rooted nexus between the bankers, auditors and promoters, which is undermining serious recovery.

Turning to his other example, Mahtab sais: “Alok Industries is another glaring example. Should the law be bent like this? Should we be the party to this law, this loot? It stinks. This is a clear case of crony capitalism and loot of public money. It is bad in law. I oppose its introduction. Just to help one industry, an Ordinance was issued and an Amendment Bill is being introduced in Parliament.

He concluded by saying: “Whatever may be the temptations, whatever may be the pressure, at least the Government should stand up and do away with this type of crony capitalism and should stop the loot of money. I hope good sense will prevail”.

As it happened, Minister Piyush Goyal went ahead with tabling and introducing the Bill for consideration and eventual passing. He denied wrong-doing and termed Bhartruhari Mahtab contentions as “baseless” - this is just “fine-tuning” the existing provisions of the law and are not intended to benefits any particular company or industry. Clearly, despite Bhartruhari Mahtab’s best efforts, good sense did not prevail.

Jul 25, 2018

Raman Swamy [email protected]

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