Story of Doubting Thomas: Wrong side of trust divide

The biblical story of Doubting Thomas (one of the Twelve Apostles of Jesus) narrates that Thomas doubted about the resurrection of Jesus when other Apostles told him that they have seen the Lord. He continued to be in state of habitual disbelief even after Jesus appears in front of him after few days – till he puts his fingers in the wounds of Jesus to feel it himself. In the backdrop of Hindenburg report of January 2023 (by a dubious short-seller) and subsequent OCCRP report of August 2023 (by investigative journalists of a specific creed!), tumultuous uproar created by motivated activists to cast aspersions with broad-brush insinuations on the functioning of regulatory and corporate supervisory mechanism in India signified more than characteristic pattern of Doubting Thomas.

The Supreme Court order of 3 Jan 2024, in the matter of Vishal Tiwari Versus Union of India and others, unambiguously pronounced – “… The court must refrain from substituting its own wisdom over the regulatory policies of SEBI……” https://shorturl.at/avwG5

Upholding of institutional mechanism of regulatory and governance systems

The SC’s order is historic in a sense of upholding the sanctity of institutional mechanism of regulatory and governance systems in the country in general, and preserving the institutional trust for SEBI in particular. The SC order is almost a slap on the face of all such protagonists (self-acclaimed crusaders of all hues, with or without sponsored by dubious entities and organizations), who possibly found their salvation in making hue and cry and raising questions about integrity, competence and willingness of SEBI. Interestingly, in context of SEBI, it is the second time that the SC came out with its judicial decree showing respect for the institutional competence and domain expertise of SEBI by preserving its mandated regulatory jurisdiction and supervisory framework within the securities markets. The previous instance being 31 Aug 2012 - the SC upholding SEBI's directions asking the two of Sahara firms to refund the money collected from investors with due interest.

Certainly, it does not imply that India’s regulatory and corporate supervisory mechanism are flawless and our systems are impervious to the possibilities of amendment and advancements. Disregard of complexities of cross-border firewalls and cumbersome to extract information from opaque tax-haven connections, investigation on specific or sweeping allegations undoubtedly falls under the regulatory remit of SEBI. It leaves no confusion that SEBI has necessary wherewithal to conduct the investigation on charges and enforcement actions to be addressed by the companies concerned.

Blackhole of global tax-havens: The Wonderland

In context of related party transactions, Foreign Portfolio Investment (FPI) and Acquisitions & Takeovers provisions, it is important that people be better informed about Participatory Notes (P-Notes) under FII/FPI structure in Indian markets has been running for more than 2 decades. It is very much legal and widely accepted practice in Indian markets – though in slightly reduced scale now. Some estimates suggest that it accounted for more than 50% of total foreign inflow to Indian markets at early stages of its introduction. Thankfully, persisting regulatory concerns about endless capital round-tripping (including flipping and reverse flipping) as well misuse by promotors, their families and investors led to restriction in 2007 (the decision to be reversed after 8% fall in market barometers) and restrained for derivatives segments subsequently in 2017.

Per different estimates of ill-gotten money in global tax havens, individuals have stashed anything between USD 8.7 trillion to USD 36 trillion (that is almost combined GDP of USA and China together). Ironically, many of these tax havens prosper in the jurisdictional backyard of the rich nations - for obvious reasons. It would be curious to see if the ilk of OCCRP and their poor Indian cousins have temerity and professional ethics to launch a project on unravelling the Wonderland of Tax havens.

India moves on

At a time, India emerges as the bright spot of stability and growth amid torrid world affairs, its social and economic well-being become more vulnerable than ever. It is not just overbearing and patronizing charade in the name of democratic value and justice, brazen games of mischief and malice by known and unknown adversaries are bound to intensify in near future. The benevolent intent behind a desperate propaganda campaign focused on a corporate group - as a soft proxy to heckle the government, regulatory and judicial institutions- is to create confusion and self-doubt about reliability and resilience of our financial markets and innate governance systems.

Can the national spirit of India get bullied by hurdles and fictious narratives created by these adversaries? India’s economic resurgence is not tied to the fate or fortune of an individual company or a particular business group. The spirit of renaissance is all encompassing and transcendental. Knocked sideways, let activists and adversaries of all stripes relish some glum moments to reflect over their grudge for everything is going wrong in India, and their favorite indulgence to vehemently contest and frustrate by all means.. Meanwhile, India moves on.