Current Public Administration Magazine (January - 2017) - Necessary Amendments to the Prevention of Corruption Act

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Polity, Constitution & Governance

Necessary Amendments to the Prevention of Corruption Act

The arrests by the Central Bureau of Investigation of former IDBI officials are worth noting for timing, intent and implications. The agency is investigating these officials, who had been at the helm of the public sector bank’s affairs eight years ago, on charges of facilitating a ₹900-crore loan to the now-defunct Kingfisher Airlines without due diligence. Two days after the arrests, a list that included former IDBI Chairman Yogesh Aggarwal, the Securities Exchange Board of India barred Kingfisher promoter Vijay Mallya and senior officials of group firm United Spirits Ltd. from securities dealings, and restrained them from holding directorial positions in listed companies. Mr. Mallya owes banks close to ₹9,000 crore and has been in exile in the U.K. for nearly a year, even as his lenders have scrambled to recover their dues, with little success. Last week, after a three-year-long trial, the Debt Recovery Tribunal allowed a consortium of 17 banks to recover from Mr. Mallya and his companies outstanding dues of ₹6,200-odd crore plus interest related to the airline’s operations. For the Central government, Mr. Mallya’s flight to London has been a source of much embarrassment, with Finance Minister Arun Jaitley terming the bad loans a legacy from the UPA days.

Amidst the rising pile of non-performing assets in government-owned banks, wilful defaulters were said to be responsible for around ₹77,000 crore of bad debts by last July, but the Kingfisher baron has emerged as the poster boy of the problem. Therefore the flurry of action on his bad loans, however belated, could help counter perceptions of a passive approach towards the well-heeled. Breaking the banker-borrower nexus is just as critical for safeguarding public money as is acting against corrupt administrators, but a timely and transparent system is needed to ensure that bankers don’t turn wary of extending credit at the slightest hint of risk.

The fear of investigative agencies and adverse audit reports was blamed for the so-called policy paralysis in the UPA’s second term. Prime Minister Narendra Modi had, early in his term, urged officers to take bold decisions without fear of retribution and promised to stand by them for decisions taken in good earnest. That promise requires making some necessary amendments to the Prevention of Corruption Act, particularly the much-too-broad and subjective Section 13(1)(d) that has resulted in many an honest officer being chargesheeted for the corruption of others. If there is malfeasance involved in the IDBI loan, action must be swift and exemplary — but to ensure circulation of credit, systems must also be put in place to reassure bankers against random witch-hunts.

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