Rajat Gupta may never have got convicted in India
If Rajat Gupta has committed his crime in India, he would never have gone to prison. He would have died of old age fighting his never-ending case.
Rajat Gupta will be spending two years in prison, which will be followed by one year of supervised release (The supervised release starts after a person is released from prison. The individual goes through a period of supervision in the community. You can read the complete definition here). Gupta will also have to pay a fine of $5 million.
Gupta, a former Managing Director of management consultancy McKinsey & Company, who happened to marry the only girl in his IIT, Delhi, batch, and a member of the boards of Goldman Sachs and Proctor and Gamble, had been accused of passing on sensitive board room information to hedge fund manager Raj Rajaratnam. The information leaked by Gupta turned out to be enormously profitable stock tips for Rajaratnam. Rajaratnam is currently serving 11 years in jail for securities fraud.
The Securities and Exchange Commission (the stock market regulator in the United States) had filed an administrative civil complaint on 1 March 2011 against Gupta for insider trading with Rajaratnam who ran the Galleon Group of hedge funds. The case from start to finish lasted for around 20 months. The dispensation of justice was fast and quick and it did not take a lifetime as it does in India.
Take the case of Lalit Narayan Mishra who was the Cabinet Minister for Railways in Indira Gandhi's government. On 2 January 1975, Mishra was in Samastipur to declare open the broad gauge railway line between Samstipur and Muzaffarpur. A bomb exploded and he was seriously injured. He died the next day.
The case against the accused is still on, 37 years later. Eight people were accused in the case. One has of them has since died. As Gurcharan Das writes in India Grows At Night-A Liberal Case for a Strong State: "The case against the accused dragged on for 37 years...Meanwhile, 31 of the 39 witnesses for the defence had died gravely prejudging the case...No less than 22 different judges had heard the case over the years. The trial was still going in 2012."
And there are other cases in which justice is delivered after a generation has passed in the meanwhile. In 1992, four teams of government officials landed up in the Adivasi village of Vachathi in search of the sandalwood smuggler Veerappan. On not finding him there the government officials accused the villagers of harbouring the smuggler. The officials took 18 teenage girls from the village into the forest where they were stripped and raped. 133 villagers were arrested and put in jail as well.
Justice was delivered only 19 years later. As Das writes, "On the sweltering afternoon of 29 September 2011, principal district judge S Kumarguru began to hand out sentences. There was a hushed silence in the packed courtroom in Dharmapuri, Tamil Nadu. He began at 3.30pm but could not finish until 4.40pm because he had to read aloud punishments awarded to 215 government officials. Among those convicted were 126 forest officials, 84 policemen and five revenue officials. Seventeen were convicted of rape and they received prison sentences from seven to 17 years; others received from one to three years on counts of torture, unlawful restraint, looting and misuse of office." Fifty-four accused had died in the meanwhile.
Since delivery of justice takes so long, frivolous cases are filed to cut short promising careers. S Nambi Narayanan's case is a very good example of the same. Narayanan was a senior official in charge of the cryogenics division of the Indian Space Research Organisation. In 1994, he was accused of espionage. The Central Bureau of Investigation (CBI) concluded as early as 1996 that the entire case was a fabrication. The National Human Rights Commission ordered an interim compensation of Rs 10 lakh for Narayanan in 2001. The Kerala government got a stay against this order. The stay was finally vacated by the high court on 7 September 2012. In the meanwhile a lifetime had passed. (You can read the complete details of the case here).
The system is also used to their advantage by those who do not like the idea of working. The famous case of Uttam Nakate, a helper at Bharat Forge, illustrates this point. Nakate was found sleeping at the workplace at 11.40 am in the morning in early 1984. This was the fourth occasion this had happened. The company started proceedings against him under the Industrial Employment Act, 1946, found him guilty and dismissed him.
Nakate then appealed to the Maharashtra labour court and challenged his dismissal under the category of an unfair trade practice. The labour court directed that Nakate be taken back and at the same time also be given 50 percent of his wages. The company then appealed to an industrial tribunal which struck down the decision of the labour court. Nakate then went to the Bombay High Court which decided in his favour and also directed the company to pay him Rs 2.5 lakh. The case finally made its way to the Supreme Court which ruled in the company's favour.
The two judges on the case said "we cannot say the quantum of punishment imposed was wholly disproportionate to his act of misconduct". If all this would have happened in a period of 20 months or so, as it did in Gupta's case in the US, things would have been fine. By the time the Supreme Court decision came in 2005, two decades had passed.
But the people who gain the most from the way our judicial system has evolved are the politicians. Take the case of former Telecom Minister Sukh Ram. In 1996, the CBI had seized Rs 3.6 crore from his official residence which he had collected as a bribe in awarding a telecom contract. The case dragged on for years and Sukh Ram was finally found guilty in late 2011, nearly a decade and a half later. By this time Sukh Ram was 85 years old and in hospital.
"If this happened in the case of Cabinet ministers, where was the hope of justice for an ordinary person? But former chief justice of the Supreme Court JS Verma had a different take. He claimed that although Article 21 of the Constitution guaranteed a speedy trial to every citizen, in reality the status of the person did matter. A powerful person with connections or money could speed up or delay the justice system to suit his needs," writes Das.
Look at what happened to the Ruchika Girhotra case. The accused, SPS Rathore, got out of the courtroom smiling in December 2009, after a six months sentence was announced and he got bail immediately.
The late Harshad Mehta is another brilliant example of a system gone wrong. The scam he was running on the Bombay Stock Exchange was revealed in 1992. He died of a heart attack in a Thane jail on the last day of 2001. When he died Mehta was facing trial in 28 cases but had been convicted only in one case which involved the use of funds to the tune of Rs 30 crore belonging to Maruti Udyog which had been deployed in the stock market. All the other cases were pending.
The economist Bibek Debroy carried out a project for the government in the 1990s and found out that nearly 2.5 crore cases were pending in Indian courts. This number has gone up to 3.2 crore since then. Debroy found that it takes up to 20 years to settle a dispute. And it would take nearly 324 years to settle all the cases. Debroy further suggested that a major reason for the huge number of cases was the fact that a large number of laws were simply obsolete. As Das writes, "He also concluded that 500 out of the 3,500 central laws were obsolete and needed to be scrapped, and half of the 30,000 state laws as well."
But this was not a major reason for the large number of cases in the Indian court. "The main culprit of the judicial delay was the government, which appealed all judgements automatically and proceeded to lose them again in the higher courts. This crowded out the private individual. The problem lay in the fact that the decision to litigate was made at the lowest level in the bureaucracy but the decision not to litigate was made at the highest level. If this process were simply reversed, government litigation would come down," writes Das.
So for the burden on the Indian judicial system to come down, the tendency of the government to litigate left, right and centre, also needs to come down.
Now let's get back to Rajat Gupta. What would have happened to Rajat Gupta if he was accused of a similar wrong doing in India? Being at the position that he is he could have easily influenced the judicial system. The case would have dragged on for 20 years. And by the time it would have reached the Supreme Court, Rajat Gupta, like Sukh Ram now, would have been 85 years old and more or less lived his life. Gupta is around 64 years old now.
Of course, all this would have happened only assuming that Gupta would have been taken to court for what he did. Passing on stock tips to fund managers isn't really a big deal in an Indian context. Harshad Mehta, who carried out a far bigger scam than what Gupta has been accused of in the United States (actually it's not even a comparison), got convicted in only one case between 1992 and 2001. And even that wasn't one of the main cases. And whatever happened to Ketan Parekh and his scams?
Look at Sahara and the excuses it keeps coming up with for not paying back the Rs 24,000 crore it owes to its 3 crore investors, the latest one being that 90 percent of its investors do not have bank accounts. This, despite being directed by the Supreme Court to pay back its investors. Even their latest excuse doesn't quite work. When Sahara collected the money even then their investors mustn't have had bank accounts? So if it could collect the money, it should also be able to return it.
What all this tell us is that India is a weak state which cannot enforce things. Das summarises it best when he writes "Weak enforcement is at the heart of a weak state in which the most vulnerable and the weakest are its chief victims."
Vivek Kaul is a writer. He can be reached at email@example.com
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Former Goldman Sachs director Rajat Gupta will seek overturning of his insider trading conviction in a US court today by arguing that the case rested exclusively on circumstantial evidence that relied on wiretap statements that did not involve him.