The credibility of CBI is at stake in HZL privatisation probe

That Mehta had represented the CBI earlier and, therefore, the Central Leather Research Institute might take a scientific interest in the quality of Mehta’s skin should not distract us from more important matters. There are three inter-related, but separate issues at stake here. One is the credibility of the central government’s premier investigative agency. If what it submits to the apex court can be “false or wrong" in one case, what is the guarantee that its submissions on other occasions are free from such flaws? A second issue is the infinitely malleable and ductile nature of the judicial-investigative process that allows an inquiry into allegations of impropriety first raised in 2002, then dismissed, only to be resurrected, to carry on for two decades, without closure beyond final legal appeal. The third is the uncertainty that attends on commercial decisions in this country, which would be unnerving to all investors, except for native Indian entrepreneurs who learned the ropes of ‘managing the environment’ walking the corridors of power in district headquarters, wheedling favours in state capitals and lobbying powerbrokers in Lutyens’ Delhi.

While former Chief Justice R.M. Lodha’s caustic description of the CBI as a captive parrot had, arguably, garroted the agency’s reputation, there was widespread acceptance that it could still act professionally in all circumstances where the Centre did not have an axe to grind. Now, the Centre has told the Supreme Court that what the CBI has told the Court about the Centre’s own conduct cannot be relied upon. That is to say, the parrot squawks with a forked tongue.

India has always ranked close to the bottom in the World Bank’s Ease of Doing Business rankings, on the count of contract enforcement. A judicial system that permits questions of legal validity and propriety to drag on for decades is a positive obstacle to an efficient economy. The disinvestment of HZL in 2002 had taken place after going through a well-publicized process of open bidding and, prior to that, a structured decision-making process in the government. It is vital that impropriety if any, be established and penalized in a matter of months, rather than decades. That undertrials account for the bulk of prison inmates in India, rather than those tried and found guilty of a crime, is itself a damning indictment of judicial delay and the entire criminal justice system. But when it brings uncertainty to commercial decisions, the harm it does is general, to society at large, eroding faith in the finality of decisions and the validity of contracts, resulting in lost investment, slower growth, forgone jobs and avoidable economic misery.

After HZL was bought by Sterlite, now a division of Vedanta, the company has acquired non-government and non-Vedanta investors to the tune of 5% of its issued shares. They invested on the assumption that the company is owned and managed by the Vedanta group. Banks gave the company credit, it raised money by issuing bonds and vendors made supplies on the understanding that the company is a Vedanta subsidiary. Now, it turns out that such an assumption could be tenuous, that a full-fledged inquiry might, in theory, reverse the decision that made it a Vedanta company. Time travel might look great in the metaverse but would be a nightmare for real-world investors.

We need credible investigative agencies, speedy judicial processes and finality to commercial decisions. Should these remain great expectations forever for Indians?