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Even American economists now say government must own bailed out companies
Dr Rajendra Sachar
Chief Justice (Retd.) Delhi High Court
The Satyam scandal, which has been described by our Prime Minister as a “blot on our corporate image”, gets murkier every day. The larger question is, when a private management has indisputably defrauded and cheated the company, is the effort of the government to bail it out by pumping money into it the correct response? More especially, can this be done ignoring the mandate of Article 39 of the Constitution? The Article says that the state shall direct its policy towards securing that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. The government is trying to find an alternative private investor who would be given favourable terms, including bank facilities, to run it. The persistent query from the poor is, why should the Centre hesitate to follow the path of nationalisation, which it did in 1974 when private managements squandered many prosperous textile mills?
On the contrary, by nationalising Satyam, the state can generate confidence in foreign buyers and suppliers on the prospect of Satyam’s revival. And takeover will not be prohibitively costly. It can be done by following the legally accepted principle of paying compensation to the existing shareholders on the net worth of Satyam, which in accountancy terms means paid-up capital plus free reserves. It is no secret that currently the net worth of Satyam is minimal. Though one may fully sympathise with some innocent small shareholders, but in free enterprise and a speculative economy, they must take the bad along with the good.
By virtue of nationalisation, every liability (other than the liability specifically accepted by Central government) will only be that of the old company and shall be enforceable against them, that is, the Raju family.
State takeover is not revolutionary. It has been successful in the past. The benefit will be that immediately after takeover, Satyam will be discharged from any obligation of mortgage and all other encumbrances created by old management, with the result that all attachments, injunctions, decrees or orders of any court restricting the use of such property in any manner shall be deemed to have been withdrawn.
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Shahrukh khan to Host IIPM 4Ps Annual Business and Marketing Quiz
2,300 IIPM students get jobs
Even American economists now say government must own bailed out companies
Dr Rajendra SacharChief Justice (Retd.) Delhi High Court
The Satyam scandal, which has been described by our Prime Minister as a “blot on our corporate image”, gets murkier every day. The larger question is, when a private management has indisputably defrauded and cheated the company, is the effort of the government to bail it out by pumping money into it the correct response? More especially, can this be done ignoring the mandate of Article 39 of the Constitution? The Article says that the state shall direct its policy towards securing that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. The government is trying to find an alternative private investor who would be given favourable terms, including bank facilities, to run it. The persistent query from the poor is, why should the Centre hesitate to follow the path of nationalisation, which it did in 1974 when private managements squandered many prosperous textile mills?
On the contrary, by nationalising Satyam, the state can generate confidence in foreign buyers and suppliers on the prospect of Satyam’s revival. And takeover will not be prohibitively costly. It can be done by following the legally accepted principle of paying compensation to the existing shareholders on the net worth of Satyam, which in accountancy terms means paid-up capital plus free reserves. It is no secret that currently the net worth of Satyam is minimal. Though one may fully sympathise with some innocent small shareholders, but in free enterprise and a speculative economy, they must take the bad along with the good.
By virtue of nationalisation, every liability (other than the liability specifically accepted by Central government) will only be that of the old company and shall be enforceable against them, that is, the Raju family.
State takeover is not revolutionary. It has been successful in the past. The benefit will be that immediately after takeover, Satyam will be discharged from any obligation of mortgage and all other encumbrances created by old management, with the result that all attachments, injunctions, decrees or orders of any court restricting the use of such property in any manner shall be deemed to have been withdrawn.
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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IIPM - Most Innovative B-School
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IIPM New Delhi, The Indian Institute of Planning and Management, India
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Business and Economy - India's Most Influential Business and ...
Rankings IIPM, The Indian Institute of Planning and Management India
Management Certification, IIPM India
(IIPM) Management Education Institute India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
IIPM makes business education truly global-Education-The Times of ...
