Public opinion and the law: a long standing tension

Published on 3rd January 2013, BUSINESS STANDARD “Character is not homogeneous, like a quart of milk. It is sectional, like a grapefruit. Everyone has good sections and bad. One person may be strongly loyal to the boss

Published on 3rd January 2013, BUSINESS STANDARD

“Character is not homogeneous, like a quart of milk. It is sectional, like a grapefruit. Everyone has good sections and bad. One person may be strongly loyal to the boss, for example, but irresponsible in the job. Another person may be loyal and responsible until he gets a chance to enhance his ego. Ego will weaken character as much as anything I know. Willie Sutton, the bank robber, loved his work but cried when he had to lie to his mother about where he had been. You can’t say he had a totally bad character; you can only say some sections were bad. As a manager you must evaluate all the sections, build on the good ones, and avoid the weak ones.” Fred Smith Sr (1915-2007)

As we leave 2012 behind, we can recall many issues in which an action does not seem right to many but which the law has thus far not held to be wrong; for example, a person holding public office but stands accused of a criminal act, or the holding of public office by a person whose organisation has indulged in significant unethical practices. In India the matter is further complicated by the perception that autonomous public institutions may be manipulated to serve political ends.

In public discourse as well as in editorial commentary, we often debate the ethical versus the legal aspects of an issue. The former is influenced by social mores and standards while the latter is the subject of legal process. Ideally they should support each other, but quite often they may not. This is a long standing tension that allows suspect, and even guilty, individuals to continue to do whatever they are doing.

In his scintillating book Macaulay, historian Zareer Masani recalls how the court system was used by the British to delay justice in litigation with Indian merchants in the 1800s. The East India Company had a high court called Sadar Dewani Adalat, to judge commercial disputes. The Indians had to use this court compulsorily. However a British litigant could take his or her case directly to a Crown-appointed Supreme Court at Calcutta, a route unavailable to the natives. Macaulay was appalled by the racial discrimination, particularly because the Indian litigant could be faced with an expensive and prolonged litigation at the Supreme Court. Macaulay argued that “the reputation of the Supreme Court was so dreadful that the mere threat of appealing to it was used by British debtors to intimidate Indian claimants.”

An incident occurred half a century ago when the Indian business community faced such a moral hazard. In 1962-63, the Vivian Bose Enquiry Commission submitted its report on financial irregularities and stock market manipulations after it was appointed by the Nehru government. After the TTK-Haridas Mundra scam of the late 1950s, the private sector image was low. The case was unravelled when Ramkrishna Dalmia, then chairman of Dalmia Jain Airways and the owner of Bharat Insurance Company, admitted in a written confession, a bit like the Satyam chief Raju, that he had embezzled funds (Rs 2.2 crores!) from his insurance company. Dalmia faced trial and was jailed for two years. Shriyans Prasad Jain, an owner and director of the Dalmia Jain companies, had been elected as the President of FICCI in the same year. A debate arose whether Mr Shriyans Prasad Jain should step down from FICCI presidency or not.

Discrete meetings were held among members to discuss whether Shriyans Prasad Jain should cease to be an office bearer of FICCI until he had cleared himself of the charges made in the Vivian Bose Enquiry Report. Some members felt that such a hasty and extreme decision would damage the prestige of FICCI. Others differed (for example, Mafatlal and Tata) and expressed their view that Mr Jain should resign voluntarily. If he did not do so, then FICCI should have asked him to resign. They expressed the view that “at all times, and particularly at the present time when the private sector in under attack from more than one quarter, the conduct of the representative bodies and the chosen office bearers, should be above reproach.”

The divergence of views continued; Tata companies resigned from FICCI on 5th March, 1963 and their resignation was accepted on 9th April, 1963. Mafatlal also did so. Until the business group was reorganised twenty years later, no Mafatlal company returned to FICCI.

While recalling this incident one should take care not to judge the individual. Shriyans Prasad Jain was a respected and prominent member of his community. Even before the controversy, in 1952-58, he had been a member of the Rajya Sabha. He was great philanthropist; he endowed the S.P. Jain Institute of Management and Research, a prominent contemporary institution. In 1988 the government decorated him with the Padma Bhushan.

The incident needs to be viewed on its own merits and within the context of those times. At a time when private sector scams bothered the public consciousness, did the head of an institution have to be, like Caesar’s wife, beyond reproach? Or was it alright if his company had been indicted in a formal commission of enquiry report? As late as in 2012, Chief Justice Kapadia struck down the appointment of the Chief Vigilance Commissioner on the ground of maintaining “institutional integrity.”

I recall another incident from the 1970s involving a moral hazard. At that time live-in relationships were not accepted anywhere, and certainly not in India. An international corporation had seconded an expatriate director to its Indian subsidiary. The expatriate stayed at a hotel before moving into his flat, but with a
woman who was not his wife. This subsidiary had recently sacked a long-serving, senior Indian executive for charging expenses of his official travel while accompanied by a woman who was not his wife. The Indian CEO of that company felt that an expatriate should not be treated differently. He summarily instructed the expatriate director and his lady to take the next plane out of India. That was in the 1970s!

Thirty years later, the global CEO of the same global company visited the Indian subsidiary with his partner and the Indian subsidiary paid all the hotel bills without any questions. The act was the same but the context in which the act was viewed had changed!

In the final analysis it comes down to introspection on whether an ethical value should prevail or whether one should wait for a ‘final’ legal view, which, regrettably, sometimes never arrives! All our institutions, public and private, would gain from such introspection.