Daily Excelsior... Editorial

Unwholesome reasons
to transfer CJ
Men, Matters, Memories
By: M.L. Kotru

The presidential ordinance al-lowing companies to buyback their shares upto 25 per cent of paid-up capital and free reserves has been received with a mixed feeling in the corporate circle.. ......more

EDITORIAL

NAYA KASHMIR

As the State and its children of all ages pay rich tributes to the tallest personality of Sheikh Sahib on his 94th Birth Anniversary today, it is apt to recall the concept of ‘Naya Kashmir’ initiated by him. A closer study of the situation then and now is quite revealing. It indicates that howsoever noble and ideal the initiation of Naya Kashmir with massive people-oriented policies was during his stewardship, the direction appears to have been totally lost in frivolities. The farmers of this State became the landowners with massive land reforms. To be precise, this was the first State in India to follow the principle of ‘land for the tillers’. Other States followed it subsequently and that too lukewarmly. Successor Governments however failed to consolidate the position to make the new ‘landowners’ self reliant in the real sense. If that had happened the State would have been self sufficient in food production and not importer of almost all agricultural commodities. One indeed begins to feel if at all Indus Water Treaty would have ever got his nod because it was grossly tilted against the interests of the State.

The second noble concept was free education for all upto not only post-graduation level but also professional courses for which students were deputed to other universities/institutions. He wanted well trained and the best men to take this backward State forward. Liberal loans/grants and other expenses were freely available to all undergoing any professional course including animal husbandry, sciences, engineering or medical pursuits. He wanted J&K to become independent of such deputation to other States which explains creation of Kashmir University and other insitutions of professional excellence. Himself an educationist, he had the first hand feel of the problems of the teachers and the taught. And the best part of this policy was so tailor-made that provided full employment to all those professionally trained. But today the scenario is just the reverse. Education is no more free. It is burdened with many ifs and buts. Copying and tempering with even the competitive exam papers and results is a way of life. Government schools have earned the ignominy of being the worst giving rise to mushroom growth of academies and private institutions. The tragedy gets compounded because Government finds it very difficult to undo the damage that has been done to the cause of academics and the students. So the malaise defies solution. Such is the messy situation.

Sheikh Sahib was dead against corruption. In fact, corruption was quite unheard of during those good old days. Now it is so deep rooted that even Chief Minister some time expresses his helplessness. All successive regimes contributed to its aggravation. That was definitely not the concept of ‘Naya Kashmir’ of Sheikh Sahib's conceptualisation. Today corruption is a way of life right from the top rung to the lowest ones. Tha explains why hapless citizens remain deprived and disenchanted. Even alienation is attributed to it.

Sheikh Sahib rejected two-nation theory and was strong advocate of secular entity in its truest sense. What a sorry spectacle to see ethnic cleansing taking a heavy toll of his secular concepts. Who facilitated it and what factors contributed to it is not that important. The fact is that it is there which shall ever remain an affront to the ‘Naya Kashmir’ concepts. He very much wanted every Kashmiri to be self-reliant and not remain subservient to others. So much so he went full throttle in abolishing subsidy on supply of cheap foodgrains as he did not desire to see Kashmiri in such poor light. The money thus saved was spent on many productive projects which also includes the present Tawi bridge. Living on doles was a hateful thought for him and it went against the self-respect of Kashmiris. Definitely not so now when doles are sought for each and everything.

Sheikh Sahib during his second stint in 1975 had the smallest cabinet ever and yet it was the one that delivered maximum. Today unwieldly and large cabinets in the State are a rule while the system remains short on delivery on every front. The meaning of compactness has been lost sight of and extraneous aspects outplay need-based dispensation. No wonder this State today has the highest per capita employees strength and of course highest per capita cops which is sure indication of the dismal law and order situation when compared to the good old days when some odd policemen here and there were very harsh on crimes of all hues.

If only 'Naya Kashmir' concept, ideals and prescriptions had been followed in letter and spirit there would not have been any scope for Pak inspired insurgency and alienation of the people. It is total drift from such ideals enunciated by Sheikh Sahib that has brought the State to its present sorry pass. The remedy lies in self-introspection and the key to people-friendly dispensation with people-oriented policies lies in Sheikh Sahib's ideals of Naya Kashmir being revived and pursued with honesty and sincerity. That shall be the greatest tribute to the tallest personality who even opted to retain Central laws extended to the State as they were considered beneficial for the people and the State.

SHARIF'S WASHINGTON VISIT

The much hyped Pak Prime Minister's visit to USA for talks with American President Bill Clinton has not fetched any worthwhile dividend for Pakistan. Itemwise, it appears to be total failure. First, Nawaz Sharif drifted from his earlier commitment and now links signing of CTBT to resolve of Kashmir problem. Unless that happens, no signing of CTBT. The whole idea appears to keep the Kashmir issue on the boil so that it remains on international agenda. Second, Bill Clinton is not ready to allow any further economic aid to Pakistan unless she fulfills all the stipulations laid down by the IMF to improve Pak economy. The one-time sanction of 5.5 billion dollar loan is an exception so that Pakistan's economy does not collapse totally. Out of this 4.33 billion dollars are debt-repayments and net amount available to Pakistan is only 1.17 billion. Third, America has refused to concede Pak demand for augmenting its conventional military power by allowing free flow of military aid. Clinton makes it amply clear that any further flow is conditional to scrupulous follow up by Pakistan on addressing to the non-proliferation concerns often repeated by Washington i.e. signing of CTBT, NPT, non-export of fissile material or missile technologies, non-deployment of nuclear weapons or fighters fitted with nuclear warheads etc. etc. Pakistan wants the toast buttered on both sides which Clinton refuses. Fourth, America has asked Pakistan to help contain terrorism and fundamentalism of the Taliban style. Pakistan has been put on acid test to prove its honesty in this case by facilitating nabbing of Osama Bin Laden so that he can be punished for the heinous crimes executed by him. It is possible that while rejecting most of points and demands raised by Pakistan including rejection of mediation on Kashmir, Clinton has in mind the Taliban style of Government being mooted by Pak Prime Minister which has been opposed tooth and nail by all progressive and liberal Pakistanis including Benazir Bhutto. Even Amnesty International has taken strong note of it and asked America to put pressure on Pakistan to improve human rights being openly violated in Karachi and Sindh Province of Pakistan with most brutal law of the jungle let loose on hapless citizens. And surest rebuff and rebuke lies in US based Pakistani citizens shouting slogans like 'Crime Minister of Pakistan' and not Prime Minister of Pakistan.

Unwholesome reasons to transfer CJ
Men, Matters, Memories
By: M.L. Kotru

Within 24 hours of the publication of a report suggesting the transfer of Chief Justice M.S. Liberhan from Tamil Nadu to the Andhra High Court, for reasons which apparently are unwholesome, the Home Ministry has rushed with the clarification that no extraneous considerations have influenced the proposed move. What makes one doubt the truth of the clarification is the significant addition that "no political pressure'' has prompted the transfer. The Home Ministry also assures that the prescribed procedure of consultation had been followed and the consent of Justice Liberhan obtained., The proposal had been vetted by the Department of Justice, the Law Ministry and the Prime Minister.

While the Home Ministry may be hoping to wash its hand off an impending controversy with its clarification, the truth is that the proposed transfer seems to be steeped in controversy. For one thing it is doubtful whether Chief Justice Liberhan has at all given his consent to the move. As a distinguished member of the Judiciary it is unlikely though, that the Chief Justice would say no to a transfer since, one assumes, it has already been approved by the Chief Justice of the Supreme Court Justice A.S. Anand. Or it may even be that the transfer was approved by Justice Anand's predecessor, the controversial former Chief, Justice Punchhi.

What should cause worry to everyone interested in the independence of the judiciary is that the transfer may have had something to do with the judgment delivered by Justice Liberhan and Justice E. Padmanabhan in the special courts case'' which went against the former Tamil Nadu Chief Minister, J Jayalalitha whose party happens to be represented in the coalition ruling at the Centre. And J. Jayalalitha has not been an ideal partner of the 18-party conglomerate presided over by Prime Minister Atal Behari Vajpayee. After all it is not very long ago that Jayalalitha had forced the Centre to nominate her men, some of them party workers as well, as the Stancing Counsel for the Union government in Tamil Nadu interestingly, when approached by J. Jayalalitha, the Supreme Court to stay the order given by the Tamil Nadu High Court. In other words it upheld the judgment delivered by Justice Liberhan, at least for the moment.

Another interesting aspect of the case is that Justice Liberhan was considered for a transfer to the Guwahati High court after he and Justice D. Raju had reserved the orders in the 'special courts'' case. Protests, including a fast undertaken by a lawyer, resulted in the transfer not being effected. But then strange things do happen in our country when it comes to dealing with cases involving the political bigwigs. I don't know how the authorities came to know about the thinking of the Liberhan-Raju bench concerning the "special courts'' case but oddly, even before the reserved judgment of the bench could be delivered Justice Raju was elevated to the Chief Justiceship of the Himachal High Court. The deft move by the powers that be forced Justice Liberhan to hear the case all over again with Brother Judge Padmanaban taking Justice Raju's place on the bench. The not so clever ruse to prevent Justice Liberhan from delivering the judgment came to a nought on November 3 when the bench headed by him upheld the validity of constituting special courts to try various pending cases against Jayalalitha and her associates.

The proposed transfer now of Justice Liberhan to Rajasthan High Court has aroused suspicions in the legal community as a whole-not at all a surprise-that the transfer was an act of vendetta. There are chances that J. Jayalalitha and her lawyers may go in for an appeal before the Tamil Nadu High Court in which case the absence of Justice Liberhan is seen as a plus for her. Since Jayalalitha's primary aim is to gain time, hopefully till such time as the Karunanidhi Government falls, an appeal would suit her purposes, causing the special courts to sit by idly.

Since the transfer appears to have kicked up a controversy already, one wonders whether Justice Liberhan should be asked to move to Andhra. It would certainly affect the morale of other judges elsewhere. For, all that it would achieve is to revive the memories of the Emergency era when judges were transferred almost at will. That was the time when Mrs Indira Gandhi's Minister Mohan Kumaramangalam fathered the concept of a "committed judiciary.'' At the time many upright judges were transferred, superseded in quick succession. The supersession of Justice H.R. Khanna by Justice Beg, the circular issued by the then law Minister Shiv Shankar to the Chief Justices asking them to obtain the consent of additional judges to transfer to any other court on confirmation. Those were dark days indeed as is evidenced by the letter written by the Chief Justice of a High Court about the extension of a judge which he did not want to be shown to the Chief Justice of India. And the Law Minister on that occasion obliged him. Then there was the case of the former Chief Justice of the Jammu and Kashmir Mufti Bahauddin Farooqi alleging that the Indira regime had wanted him to strike down the Jammu and Kashmir Anti-Defection Act and being given to understand, through an emissary, that if he did so he would be confirmed as Chief Justice along with other "advantages desired by me.'' Farooqi failed to deliver and was promptly transferred to Sikkim.

It requires boldness to admit the failure of a stated policy, but a Government claiming to bring cleanliness in administration should not be lacking in it. There have been instances in the past, long before the Vajpayee Governmemt came into existence, when Chief Justices not having more than a year and a half to retire were transferred to other States. How exactly would such a short stint in another State help the transferred Chief Justice to further the cause of administering justice. Luckily for the nation the executives wings have been sufficiently clipped recently in the matter of appointing High Court and Supreme Court judges. The Chief Justice of the Supreme Court, in consultation with some four senior judges, is, under the new dispensation, required to make the initial choice which is a great advance from the days of "committed judiciary.'' In recent times we have indeed seen the courts assuming a more activist, pro-citizen role, never mind the former Chief Justice J.S. Verma's strange admission in full court during the Hawala case hearing that he had been threatened. Justice Verma, one of our abler judges, did no service to himself or the judiciary by not naming who exactly was issuing threats to him. Justice Punchhi, his successor in office, a different kettle of fish and a man of strong "commitments.'' The present Chief Justice, Justice A S Anand has come to his office with a great reputation for uprightness and it remains to be seen how he will handle the Liberhan episode.

In a democracy, the debate on the role and function of judges will always go on. There will always be strict constructionists and liberal ones, of those who view the role of judiciary as a limited one, and those who are ever ready to expand it to diverse fields. Like any other institution, the judiciary has a right to evolve and learn from past mistakes. As a guardian of citizens rights, and final interpreter of the Constitution, its role is assigned and it would be a sad day if it were at any time to be restructured in the Government's image.

Much as I would hate to mention that word "sycophancy in relation to judges, we have the word of a very eminent former judge of the Supreme Court, Justice Tulzpurkar to indicate that the phenomenon exists. He once spoke publicly of a judge sending fawning and flattering congratulatory messages to political leaders, of judges going to airports and railway stations with boquets to receive or see off the Prime Minister and other Ministers, of their seeking favours for themselves or for their children from any quarters-official, business or otherwise. So far as I am concerned there is little we, or Individual judges, can do about such people, but then it should be the concern of the judiciary itself to see that such blackguards do not get into their ranks.

Hey! What about a few apologies to India!!...
Yours Randomly,
By: Dr. R.L. Bhat

During the World War II Japan had occupied China, Japan, thus, owes China a wholesome apology. In this fag end of the twentieth century, the nations of the world seem to be anxious to clear their consciences and are apologising among themselves for the "wrongs'' they may have done to each other. Early this year, when Clinton visited Japan he tendered his nations apology for bombing Japan. Earlier, Bill Clinton had apologised to the Black population of his own country for the wrongs done to them by Americans. Of course, by now Bill Clinton is an experienced apologiser, a part master in the fine art of apologising for in-appropriate acts, historical and non-historical. The stiff-lipped Brits too, have made a few apologies. Why, even the Japanese apologised to the Koreans, for using them for comfort during the world war. So, last week when the Chinese president went visiting Japan, getting an apology from them for the world war wrongs was foremost upon his mind. Japan is a harrassed nation, today. It duly apologised to Jiang Zemin and his China. But China as Bill Clinton told the world this summer, is now, an Asian power. Zemin wanted the Japan to apologise in writing, and when they refused left the country indignantly. Probably, it never occured to Jiang Zemin that before going about collecting apologies, his country owes quite a few apologies, ! Foremost to India!!

Now, India deserves apologies from many nations, many peoples. China without reason, without provocation, invaded India in 1962, even as Indians were harping upon that Bhai-Bhai line. That invasion broke the world's faith in oriental sincerity. It also killed Nehru's hope and dealt him a fatal blow, physically. If anything in the world calls for an apology, that betrayal of trust by the China, calls for it. An India that willfully neglected defence to focus on development, was deeply burt by Chinese aggression and turned into a defence conscious nation. In a way, that October China forced India on the road to Pokhran. Yet, China has never thought of making amends, or correcting the wrongs it has done to India. The Japanese occupation, after all came in a course of a war.

Pakistan, during the last fifty years has clearly invaded India, thrice. Pakistan has had no reason, no rationale, for its belligerence, except the circumstance that a Muslim majority state chose to accede to India in the aftermath of partition. For the last ten years Pakistan has been waging a war of against India, upon Indian soil. That was has already killed four times the number of BSF personnel killed during the 1971 war. But probably, apology is not due here because Pakistan sees it as a jihad, a religious duty, to keep India engaged in bloody conflicts. Would Pakistan think of an apology to Islam, whose stated messages of love and peace it is subverting for very puerile ends?

Britishers are good trades-people. They are also good in the craft of political manoeuvring. With these two good gifts they subjugated India and kept her a colony for two centuries. The atrocities of British Raj ranged from severing the thumbs of Indian craftsmen, to hanging of Bhagat Singh, to the trial of Netaji's comrades. That Raj broke the self sufficiency that was the Indian way of living. That Raj fattened the British on goods and wealth looted from Indian prices and commoners. The wrongs that India suffered during two centuries of British Raj would never be redressed. But a token apology is the least that the British could offer to India if only to make peace with their own conscience. So, the French! So, the Portugese! But no apologies would be offered here. Last year the queen of England almost cancelled her visit, on completion of 50 British-less years, when Gujral hinted at an apology for the 1919 Jalianwala massacre. Far-sighted Gujral quickly retracted, his words.

Farsight is probably the reason why no Indian worth his salt has thought of confronting Madeliene Albright, the US Secretary of State for drubbing Indians "immature''. For that matter, the whole American attitude to India is one big insult to the Indian nation. So is their turning out innocous Indian scientists. Equally insulting is their blacklisting Indian companies. Does contemporary wisdom say that businessmen in a country should obey the dictats of foreign powers? India may or may not have a bomb, but America has no right, no locus standi, to dictate this choice. The very presumption is an insult to Indian sovereignty, yet no Indian has condemned this patent intransigence of America, much less demand an apology for the insult. Instead, many Indians are unhappy that the American president has not sub-peonaed the Indian PM to appear before him, like he has the Pak PM! With that mind-set, no apologies are deserved even when they are emminently due.

Insults yes, but no apologies. In any case, only those as can summon indignation, deserve to be apologised to.

Buyback: For whose benefit?
By Navin Chandra Joshi

The presidential ordinance al-lowing companies to buyback their shares upto 25 per cent of paid-up capital and free reserves has been received with a mixed feeling in the corporate circle.

It is now provided that the articles of association should authorise the company for repurchase of shares and a special resolution has to be passed in the general body meeting for the buyback. Also, the company should not have defaulted in repayment of deposits, redemption of debentures/preference shares and repayment to financial institutions.

Other important conditions are that the buyback process should be completed within a year from the date of passing the resolution and the bought back shares would have to be extinguished and physically destroyed within seven days from the date of buyback. This implies that the companies cannot buyback shares for treasury operations and can do so only to reduce the number of shareholders.

It has also been stipulated that companies would not be allowed to make any further issue of securities within a period of 24 months from the date they complete the process of buyback, except by way of bonus issue, conversion of warrants or preference shares or debentures.

In a bid to revive the capital market, the union cabinet on October 26, this year approved amendments in the Companies Act 1956 to allow companies to buy back their shares. Due to the continuing decline in share prices, promoters are now going to play in the stock markets by using substantial company funds at their disposal and possibly also to manipulate the share prices.

With the re-purchase of shares, companies can reduce the number of shareholders and thereby distribute higher dividends among the smaller number of shareholders. This could improve the earnings per share and thus build up some investor sentiments.

Though the paid-up capital of the companies would go down, they would probably have the facility to issue fresh capital in case of future projects. However, if this does not happen, then a situation of oligarchic management could also be put in place, making a mockery of democratic functioning of companies.

But there are not many companies in India with sufficient liquid capital to indulge in buy-back. If repurchase of shares is adopted in a large way by many companies then surely our banks and financial institutions will be left with extra funds to invest in priority sectors. It is hoped that companies would not indulge in buyback of shares with funds from these sources.

On balance, however, it can be said that if companies repurchase their own shares, that would be the most desirable way to retain surplus cash within the company for its growth and diversification programmes.

For some time, companies flush with funds have been waiting for their most beneficial deployment. As such, in a competitive environment, a company should be enabled to bring down the cost of capital through repurchase of its own shares with its own surplus funds. Such as step should be welcomed by the investing community, particularly when they apprehend under valuation of their shares.

It is also expected that the bulk of small investors, saddled with ‘junk’ shares -- that is, shares which are hardly traded -- could finally be able to offload their stocks. This is because some of the companies whose shares are actively traded might want to take advantage of the new scrip values and reduce the number of their shareholders.

At the same time, the shareholders could finally make their (depleted) repurchase liquid and hopefully get back to stock markets once again.

For the corporate sector, the permission to use company funds to buy back own shares could also provide hedge against hostile takeover threats. Corporate observers refer to the famous case of the takeover threat to Escorts Limited in 1984 by London-based industrialist Swaraj Paul when the promoter HP Nanda had to mobilise personal funds from friends and relatives to try and increase his shareholding in the company.

However, much would depend on the prudential guidelines that the government may announce is this regard to know how much the corporates would benefit on this count.

While corporates do not have adequate defence mechanism to tackle the threat of a takeover, yet, however, corporates do need takeovers to ginger up slack management in order to replace the non-performing ones. There is also need for a defence mechanism to enable good managements to put up an adequate alternative against predators who tend to acquire war-chests through dubious means.

As non-voting shares may soon become a reality, the buy-back of shares would be applicable to such non-voting shares as well. Companies will have to create a special reserve for buyback of shares so that the difference between purchase price and nominal value of shares is debited to such a reserve or alternative to the share premium reserve.

Another method would be to treat the difference as a capital expenditure to be written off over a period of time.

It is also necessary that shares should be purchased by a company only from the open market and not by the promoters i.e. their associates, directors and so on while a buyback should not be allowed in case there is going to be a friendly or hostile takeover.

Reduction of capital also take place without going through court formalities as required under the Companies Act.

Nevertheless, as things stand, the special resolution for capital reduction is possible only with the approval of the court and the creditors. With all the safeguards provided under the act, there can yet be misuse of the buyback facility.

For instance, when a company is performing poorly, promoters may buy back their shares, reduce their holdings and may move out of the company. Moreover, in case a company has surplus cash, it could invest it is its own companies instead of in instruments elsewhere.

In such a situation, buyback would mean more returns to shareholders as earnings per share would go up. In a way, increased earnings per share and lower price to earnings ratio would make investment in the company attractive.

There is a view that buyback of shares amounts to trafficking in one's own shares to enable company to influence the price of its shares in the share market. This is unfair and prejudicial to the interest of shareholders and investors at large. It would also be a negation of the SEBI (Insider Trading Regulations), 1992 and SEBI (Substantial Acquisition of Shares and Takeovers) Reglations, 1994.

It has, therefore, to be ensured that the promoter is not made the exclusive owner of the shares of his company. That is why countries like France and Netherlands have stipulated limits beyond which buyback cannot be undertaken and have deprived the boughtback shares of their voting rights.

Such limitations are an insurance against misuse. The simple fact is that if a company can increase its capital it must also have the freedom to reduce it. That imparts flexibility to business and enables the company to manage any change in a better way.

Hence, the important consideration is that such reduction should be in the interest of the shareholders.

The flip side of the buyback scheme is that the company becomes its own shareholder. This is inconsistent with the legal position of a company as a corporate entity. It is also likely that unscrupulous promoters may deliberately keep the market depressed with a view to buy back the shares at a low price.

A company buying its own shares would be giving unfair advantage to the promoters in the same manner as the preferential allotment of shares confers on the promoters at the time of new issues. What is worse is that promoters can divest their shareholding by fixing prices liberally and derive unfair advantage, leaving heavy liabilities to be borne by other shareholders.

In the ultimate analysis we have to see if the buyback scheme becomes beneficial for the economy as a whole in terms of capital formation, economic growth and protecting shareholders' interest in general and strengthening democratic functioning of the corporate sector.

A scheme like this should encourage healthy practices in companies functioning but if it encourages misuse, it is better not to introduce it or if once introduced, to scrap it sooner than later.

---- PTI Feature