When you think about it, it is scarcely believable. A large, scandal-hit company has found a buyer without presenting up-to-date accounts, and despite the fact that its previous accounting statements were largely fiction. It has been sold at a respectable price although it has unknowable liabilities from law suits in the US. A board of directors, acting pro bono and without any personal interest in the company, has been able to do this because the directors are all men with good reputations for business knowledge and integrity, and because they were suitably empowered by the government (legal immunity included). The end result is that a large company which employs some 50,000 people has been saved from bankruptcy; and what began as the biggest scandal in India’s corporate history has ended up barely 100 days later as a case study on how to deal with scam-caused crisis. Best of all, no public money has been spent.
The law will take its course, in dealing with the people who perpetrated the scandal. Some of them are still in jail, having been denied bail, the Central Bureau of Investigation has filed a voluminous charge sheet, and given the way our judicial processes work, the case will drag on for years. But the important thing is that Satyam has been separated from all this, and is now off on its own trajectory.
The question naturally poses itself — could previous scandals have been dealt with in the same way? The Harshad Mehta scandal of the early 1990s, for instance. The size of that scam (said to be Rs 4,000 crore) crashed the stock market and sucked in banks (State Bank of India and ANZ Grindlays, but also smaller ones), merchant banks (Standard Chartered’s), public sector bodies like National Housing Bank, and a varied cast of characters (like Bhupen Dalal and Hiten Dalal). Mehta kept saying that he had the shares and other assets to pay off his debts; no one knows whether he did, because that was not the focus of government action. If the Satyam example had been there (where one key objective was to save the company), all that the government had to do was separate the assets from the man, put people in charge as was done with the Satyam board, charge them with selling the shares at the best price, and repay the banks and other creditors, while prosecuting Mehta for all his sins (several hundred criminal and civil cases were filed, hardly any of which were settled when he died in jail a decade later). Within the government system, there were one or two people who argued at the time that the government should focus on getting the money back, and deal with the criminality separately; but in the general baying for blood, their voices were drowned out and we had instead the high drama of a joint parliamentary committee.
Some lessons were learnt. When Unit Trust of India was going belly up a decade later, the government moved quickly to separate the “good” UTI from the “bad” UTI (what some American banks have done now), allowed the first to continue functioning and took charge of the “bad” UTI. This raised a now familiar question (asked by this newspaper, among others), of losses being socialised while profits are privatised. But because of the stock market boom that followed, even the “bad” UTI has been able to make money, repay everyone, and end up with a positive net worth. Win-win all round, in sharp contrast to the Harshad Mehta case where the money proved elusive, quite a few people paid with their lives for getting involved, and it was lose-lose in any direction you looked.