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Home > Business > Columnists > Guest Column > M R Venkatesh

The genesis of corruption in India

June 25, 2007

They laugh at [Railway Minister] Lalu Prasad. They mock [Uttar Pradesh Chief Minister] Mayawati. They heckle [former chief minister of Tamil Nadu] Jayalalithaa. They taunt virtually every politician in India; for that matter every institution, secular or sacred. They have nothing but unadulterated scorn reserved for our leaders in public life.

Before the reader come to any other conclusion, let me hasten to add that this article is not about politician-bashing, or, indeed, supporting the politico.

Rather, this piece in is all about the declining morality of the elite Indian (not all, but a significant number of them) -- comprising lawyers, chartered accountants, doctors, management graduates and, of course, the media. In short, it is about all those who make, mend and mar every public debate, discourse and decision in India.

They usually have a view -- a lowly view on everyone -- except on others of their ilk for whom they reserve a holy view. Being rich, articulate and connected, they virtually terrorize everyone in public. They would always point at the problem in our systems, never to offer any solution. And precisely for that reason you can never argue with them, nor can you reason with them.

Naturally, when it suits them they would point out to the excellent traffic management abroad and when it doesn't suit them they would simply jump traffic signals in India. If caught they would flaunt their purse. If the policeman is unimpressed, they would flaunt their connections. Morality is always for others, for them it is flexible morality.

What is startling about them is the fact that the stench would be overwhelming should you dare to have a mere peek into their functioning. A former chief vigilance commissioner once remarked that corruption is respectful in India because people in respectable professions indulge in it. Despite their lack of morality, strangely, their opinion matters -- from Marx to markets -- in every public domain.

Consider the following:

  • The Supreme Court Bar Association (SCBA) in the first week of June suspended senior advocates R K Anand and I U Khan, days after a sting operation by a news channel showed them purportedly colluding to influence a witness in the sensational BMW hit-and-run trial.
  • The SCBA had also issued show-cause notices then to the two criminal lawyers asking them to respond by July 20.
  • On June 19, the SCBA revoked the suspension of these two senior advocates. The suspension was revoked by its Executive Committee after considering a report by a three-member subcommittee, which said that "prima facie" it did "not find anything corrupt and/or offensive" against both the advocates.

Strangely everyone has greeted this development, including the television channel that originally exposed the two lawyers through a sting operation, with a thundering silence. If instead of lawyers the chief protagonists were MPs, would our reactions been as muted as it is now?

Did we not as one man seek suspensions for our MPs based on similar circumstances and evidences in a scam recently? Is it because of the fact that those MPs were not as educated or articulate as these gentlemen are that our decisions were swayed? Do we expect only our MPs to be punished based on such evidences while we extend the benefit of the doubt to others in similar circumstances? Or is our bias against the polity blinding us to the morality of the elite?

At an abstract level, Caesar's wife is above suspicion

What is amusing to note here is that professional bodies such as the Bar repeatedly harp on the maxim that Caesar's wife must be above suspicion. But that is at the abstract level, where everyone pontificates perfectly. However, when such majestic positioning is put to the simplest of tests, as in the present case, we have seen arguments getting stretched, technicalities invoked and benefit of the doubt getting extended to the maximum.

In such circumstances what is often forgotten is the 'fundamental requirement' from Caesar's wife.

This instance merely provides the contextual reference to a larger debate. What has been outlined through the revocation of these suspensions merely foretells the fate of the show-cause notices issued and the action that would follow by the SCBA.

Banks go belly up, yet no one is punished

The decision of the SCBA merely reflects the national character of compromise, especially when the elite of the country are involved.

As a case in point, let me highlight yet another classical instance of how morality becomes flexible in cases concerning the elite in my profession (i.e. accounting), too.

Readers may be aware of the disciplinary mechanism of the Institute of Chartered Accountants of India (ICAI) to ensure complete compliance of the professional ethics and Code of Conduct prescribed by it.

The provisions contained therein are one of the most stringent when compared to any other in the world. Naturally, actions taken by the ICAI against errant members have also been on similar lines. There have hardly been any cases where Indian courts have prescribed a tougher punishment against such members than what was originally proposed by the ICAI. On the other hand, there are a number of cases where the courts have reduced the punishment prescribed by the ICAI.

But this fact hides something more than what it reveals. In a report published in December 2004 by the World Bank, titled 'India Report on Observance of Standards and Codes (ROSC) - Accounting and Auditing,' it is mentioned: 'In one case, a private bank that failed in July 2004 was accused by the Reserve Bank of India [Get Quote] of misreporting its net worth and assets in 2001-02 and 2002-03. The RBI accused the auditor of providing an inappropriate auditor's report and referred the case to the ICAI disciplinary committee.'

Obviously, the World Bank was referring to the collapse of the Global Trust Bank (GTB) that went belly up then. Poor World Bank, even in December 2004 it was unaware of the constraints with which institutions in India operate -- especially when it involves the elite of this country. The obfuscation had begun immediately as the bank collapsed.

When institutions begin to protect the elite

According to a Hindu Business Line report, dated July 29, 2004, even the RBI's letter alleging 'misconduct' by statutory auditors of GTB did not constitute a formal complaint as far as the ICAI was concerned. "We have received the letter from RBI stating that there has been misconduct by auditors in the GTB case. The letter is not a complaint as far as the institute is concerned. But we will act on this information from the central bank and seek information from all relevant parties," the then ICAI president told the media.

Nevertheless, he also pointed out that the Chartered Accountant Act and Regulations requires a form (Form-8) to be filled along with the requisite fees and evidence to support the complaint.

"There is a procedure for complaint against a member. Even if such a procedure is not adhered to, we can act on information provided to us," he is reported to have said.

While one is not sure (the disciplinary proceedings of ICAI are confidential) as to whether and how this complaint of RBI was registered by ICAI or if RBI was forced by ICAI to resubmit its complaint in the prescribed forms, one is yet to hear the final word on this issue even three years after the bank had collapsed.

But a simple reading of the statement of the then president clearly indicates how the ICAI reacts to cases involving the elite.

Another fatal flaw in the systemic functioning of ICAI is that one of the partners of the firm accused of alleged misconduct in the above-mentioned case is an elected Council member -- the apex body that governs the ICAI functioning. While one does not wish to speculate the ability of a Council member in influencing his colleagues in the Council on the case involving his firm, the fact of the matter is that even after three years of the bank going belly-up, things remain gloomy.

Crucially, look at the duplicity of our elite. While we expect our MPs and MLAs to resign when they are charge-sheeted by the courts, on a similar footing, we do not expect our elite to be penalised when confronted with similar charges.

Readers may recall as to how more than 100 senior audit firms were blacklisted by ICAI in the aftermath of the financial sector scam that rocked the country in early 1990s. A senior chartered accountant and a former Council member tells me that virtually all those auditors were exonerated as no case was made out against them as 'appropriate evidences were not forthcoming from other institutions.'

Simply put, ask ICAI and it would blame RBI. Ask RBI and it would blame ICAI. And jointly both of them would blame the system -- a euphemism for the lack of will to nail the culprits. And in all such circumstances, the beneficiaries are the elite who escape scot-free. Obviously, the losers are you and me.

The (Im)-Moral of the story

According to Indian scriptures, we sacrifice the goat, but never the horse or an elephant and definitely not the tiger. Paraphrasing the same, the former chief vigilance commissioner remarked that it is always the small fry who is sacrificed in any scam, the elite are never caught.

Indian democracy is fast turning into by the elite, for the elite and of the elite.

The author is a Chennai-based chartered accountant. Comments can be made at

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