Will the Supreme Court quashing telecom licences affect FDI in India
The Supreme Court has declared that the122 telecom licenses granted in 2008 were illegal and have to be cancelled.
International players like Telenor have got hit by the ruling. The government says that it welcomes the court decision and the resulting policy clarity that this brings...if anyone has been aggrieved they can go back to the court for compensation. However the courts would never compensate anyone for lost opportunities...
The fact is that the licenses were given away cheap and profits were made by those who sold the licenses to investors like Telenor. By cancelling the licenses, the beneficiaries retain their ill gotten profits and good faith investors like Telenor lose the licenses....
Natural justice would suggest that those who were wrongly benefited should regurgitate the money and pure good faith investors should be adequately compensated for their investment and efforts...but apparently there is no way to make it work that way...
The broader issue here is that an organization has many stakeholders...not just the shareholders...there are the customers, suppliers, employees and the proximate society...when the courts discontinue a company's operations, they are punishing the other stakeholders for the crimes of the shareholders who are in management...an example is a hospital or education college....if the management of a college does something illegal closing the college hurts the students more than anyone else...
In the telecom case, the best way would be to confiscate the shares of those shareholders who were in management at the time the crime was committed and auction these shares to the highest bidder with proceeds of the auction going to the public exchequer....but let the company business continue...this way the government would recoup a significant part of the loss from giving away spectrum cheap and good faith investors who came to the scene later would not lose out entirely...
We have seen such examples before. In the deemed University case, the previous HRD ministry probably took bribes from 42 institutes to grant them deemed University status. When UPA-II came they reversed the decision throwing the careers of lacs of students into uncertainty....the Supreme Court stayed the decision, but some uncertainty remains....here too going by first principles, the solution would be to punish the HRD politicians and officials for taking bribes, confiscating the ownership shares of the deemed University managements, auction these ownership shares to other qualified interested parties and let the deemed University status continue with clear upgrade path for infrastructure and processes with government aid funded from the revenues collected from auctions.
Same steps can be improvised for the Kolkata hospital that lost its license for inadequate fire protection infrastructure leading to tragedy recently...instead of shutting down the hospital, the municipal officials and politicians involved need to be punished first for giving fire clearances. Then the owners need to forfeit their interest in the hospital and the same can be auctioned to qualified interested parties. The auction money collected by the government can be used to upgrade the fire fighting facilities and processes to the required level...
What can be the obstacles to this approach....may be the criminal and company laws need to be changed allowing government to confiscate shares of the management group. For this the shareholders appointing the board of directors need to be clearly identified at the time of such appointments at the Shareholder meetings.
International players like Telenor have got hit by the ruling. The government says that it welcomes the court decision and the resulting policy clarity that this brings...if anyone has been aggrieved they can go back to the court for compensation. However the courts would never compensate anyone for lost opportunities...
The fact is that the licenses were given away cheap and profits were made by those who sold the licenses to investors like Telenor. By cancelling the licenses, the beneficiaries retain their ill gotten profits and good faith investors like Telenor lose the licenses....
Natural justice would suggest that those who were wrongly benefited should regurgitate the money and pure good faith investors should be adequately compensated for their investment and efforts...but apparently there is no way to make it work that way...
The broader issue here is that an organization has many stakeholders...not just the shareholders...there are the customers, suppliers, employees and the proximate society...when the courts discontinue a company's operations, they are punishing the other stakeholders for the crimes of the shareholders who are in management...an example is a hospital or education college....if the management of a college does something illegal closing the college hurts the students more than anyone else...
In the telecom case, the best way would be to confiscate the shares of those shareholders who were in management at the time the crime was committed and auction these shares to the highest bidder with proceeds of the auction going to the public exchequer....but let the company business continue...this way the government would recoup a significant part of the loss from giving away spectrum cheap and good faith investors who came to the scene later would not lose out entirely...
We have seen such examples before. In the deemed University case, the previous HRD ministry probably took bribes from 42 institutes to grant them deemed University status. When UPA-II came they reversed the decision throwing the careers of lacs of students into uncertainty....the Supreme Court stayed the decision, but some uncertainty remains....here too going by first principles, the solution would be to punish the HRD politicians and officials for taking bribes, confiscating the ownership shares of the deemed University managements, auction these ownership shares to other qualified interested parties and let the deemed University status continue with clear upgrade path for infrastructure and processes with government aid funded from the revenues collected from auctions.
Same steps can be improvised for the Kolkata hospital that lost its license for inadequate fire protection infrastructure leading to tragedy recently...instead of shutting down the hospital, the municipal officials and politicians involved need to be punished first for giving fire clearances. Then the owners need to forfeit their interest in the hospital and the same can be auctioned to qualified interested parties. The auction money collected by the government can be used to upgrade the fire fighting facilities and processes to the required level...
What can be the obstacles to this approach....may be the criminal and company laws need to be changed allowing government to confiscate shares of the management group. For this the shareholders appointing the board of directors need to be clearly identified at the time of such appointments at the Shareholder meetings.
posted by Unknown at 8:31 PM
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